In this episode of Truth About FX, Walter dives into the fear of missing out and where it is coming from. He talks about the psychology behind this and why most traders get lured into this trap. He also shares a good reference to combat this and how traders are lions.
Download (Duration: 06:21 / 15.3 MB)
In This Episode:
00:34 – fear of missing out
02:12 – the seed
03:15 – two critical pieces
04:17 – really sweet
05:35 – where I get satisfaction
Announcer: Sometimes, forex trading is a wild and wooly place to be. That’s why Hugh is here, to post your questions to Walter, the naked forex guy. Hugh’s got questions and Walter’s got the answers. Here at the Truth About FX Podcast.
Hugh: Hi, Walter. Somebody asked: What if a signal or a pattern is not on a support and resistance zones and I still want to take the trade anyway?
Walter: Fear of missing out, anyone.
Walter: Totally. Look, this is pretty common. It’s helpful to ask yourself “why”. Why do I want to take this? If you have all your rules written out, you’ve backtested all your rules through Forex Tester or whatever and it’s not really working, then you see the chart and you want to do something different. Why is it that you had the system that you’ve defined, that you’ve backtested, that you have your stats for and yet you want to do something different?
You can go down that rabbit hole. Why are you wanting to do this? Where is this coming from? But, the other part of it is you’re probably wanting to take more trades, you’re probably getting a bit antsy and you haven’t traded for a while so you want to take it.
I found in my testing — because I looked at this — that in most cases, you’re going to run into a really bad win rate if you just take every single kangaroo tail on the chart. That’s why I like to take kangaroo tails as an example on support and resistance.
Here’s the thing. My whole philosophy is this: the market remembers where it’s returned, where it bounced off of in the future. It will likely bounce off of that again in the future. The other thing it’ll do is it’ll go up to that level, it’ll kind of slow down and get really quiet and then it’ll break through it.
When I see the market get to these support and resistance zones, my question is this: Is it going to breakthrough the zone or is it going to reverse at this zone? And that’s basically it.
And so, I had these patterns. These patterns I found to test, I’ve tested it and I found it to be reliable. A lot of these I’ve learned from Thomas Bulkowski, that was kind of the seed for a lot of stuff I did. We’ll link that up in the show notes. The“Encyclopedia of Chart Patterns” by Thomas N. Bulkowski