One of our fundamental principles in trading is Market Analysis. This breaks down into 3 rules. Or the three reasons why trades lose. These are in order of importance
1) Wrong direction- The individual has the wrong short-term direction of the market. This is most important because if this is the case nothing else matters. You cannot place a winning trade unless you can accurately predict the short term direction of the market based on your analysis.
2) Bad entry. Once you have the accurate direction of the market, You need to nail down your entries. Getting the best entries involves a combination of factors but all of these factors are essentially based on your market analysis. Ideally your entries is a balancing of Probability of the trade being triggered (As in stop and limit orders) and a perceived margin of safety (Apparent risk). Great entries could be considered an art form as the better your entry, the better your risk to reward ratio and the more money you'll make on average. Great entries are how you debunk the "Efficient Market Hypothesis".
3) Too tight a stoploss. At a glance this may seem contrary to the principle of finding great entries for your trade. Point 2 and Point 3 work together and against each other, where each opportunity must be analysed individually in order to reconcile these two points. There's nothing more annoying than missing a great opportunity because you were stopped out by a pip or two.
Upon analysis of these points and practical application and observation we can see that an individual following these points could still encounter losing streaks. The reason why for this was unknown, until recently.
Another Axiom of retail trading is this: Market Analysis can become out-dated and out-moded. Failure to recognize this fact leads an individual to operate on sub-par data and achieve sub-par results.
Individuals need to clean thier analaysis charts regularly. Analysis (And the ability to observe)is the basis of our entire Ideology . We make decisions based on our analysis and what we can see in the markets. If what your seeing is the "old" and irreverent data and making decisions based on old irreverant data then you will be spinning your wheels and consistently losing without the ability to accurately identify the cause.
Trading will cease to make sense and become the equivalent of slots where each all profits are a result of luck.
A trader trading off old, irreverant or out-moded analysis is the equvilant of a doctor using the medical practices of 1600s blood letting to cure a patient of what ails him.
The markets evolve, You need to evolve with them. By clearing your charts you look at the market with a new perspective and fresh eyes. That need perspective could be what you need to get your "edge" back.
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