How to Overcome Common Trader Mistakes

12/14/2012 7:30 am EST


Andrei Knight

Senior Currency Strategist,

Andrei Knight explains several common trader mistakes and how to overcome them.

My guest today is Andrei Knight and he's been working with a lot of traders and he has an idea about the types of mistakes that newer traders make, so Andrei talk about a common mistake you're seeing these days and how are they overcoming that.

I've seen a lot of mistakes.  I think they have one thing in common and that would be context.  I think no matter which indicator you're using or which kind of system you're using, if the signal that triggers your trade doesn't fit within the bigger context, it doesn't have a lot of merit.  It might go a little bit in your favor, but the move is not going to be very sustained.  I would say it all boils down to context situational awareness.  Why are you getting into his trade?  Do you really believe the markets are going to go up?  What changed fundamentally to make them go up?  If you get a short signal, are you going to take that short signal even still expecting the market's to move up, so it's situational awareness and context.

What about a trader who says, even as a Fibonacci trader, all I need is Fibonacci.  I don't care about the news.  The context is in the chart itself.  What's your answer to that?

Which direction are you going to draw your Fib?  It comes down to context.

Alright, so which high, which low, that sort of thing.  So, even without knowing the news you've got to understand which is the important high or which it the important low.

I think so.  To a certain extent you got to know the move you're expecting.  All the technical indicators that we have out there are ways to confirm what we think is going to happen that it is happening.

Alright, and so this context where do you suggest a trader starts to get context in when you're watching Fibonacci to put context into that.  How do they do that?

Fibonacci, start with the long-term fundamentals.  I find the best way to trade Fibonacci is not so much the short little bursts, but the long-term Fibonacci movements and then everyday intraday carving out small little chunks within that move.  You could very easily within a multi-day uptrend have several good shorting opportunities on retracements, for example. So breaking it down into smaller chunks but within a larger context or a larger trade idea.  One trade idea doesn't necessarily equal one trade.  It could be several smaller trades.  You would get stopped out several times trying to get into one good one, and I think that's another area where traders go wrong.  They assume one analysis, one trade idea, is one trade.  Win or lose once you're out of it you're done with it, and I go for the ideas that tend to generate several trades over a longer period of time.

Over several months you could have several trades out of one idea or one theme that you're working on.

Absolutely, Absolutely.

What do you trade mostly?  What currency pair do you trade? 

I like the euro-dollar.  I like the pound-dollar.  I like the dollar-yen, and I've been trading a lot of gold and oil recently as well.

Okay, talk about that, because for currency traders, they seem, a lot of them get into some of the commodities, as well, because they correlate pretty well.

Oh, they absolutely do.  Gold is an easy one.  You hear quantitative easing, buy more gold. 

Let's talk about that then.  Gold has been in on a big rally here.  Is that only going to continue now because we've had quantitative easing.

It has been.  It's going to hit a pretty serious resistance level just for historical purposes just shy of 1800, but I think long-term it probably has the strength and the fundamental support to break it eventually if not on the first try.

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