#306: Should you follow Trader’s Sentiment?

01/27/19 • 4 min

Podcast: Should you follow Trader’s Sentiment? In this weekly video: 00:24 – Trader’s question from Norway 00:41 - Sentiment is hard to measure in the FX market 01:42 – Do you follow other traders? 02:04 – Why I use price action 02:50 – Trading against the sentiment 03:50 – Continuation patterns 04:39 – Send me your trading questions Should you follow sentiment from other traders when making your trading decisions? Let's talk about that and more right now. Hey, traders. It's Andrew Mitchem here from the The Forex Trading Coach with video and podcast number 306. Trader’s question from Norway Now I've received an email just this morning from a trader called Simon over in Norway. Simon said, "Hey Andrew, love your podcast, but can you chat about sentiment on a future podcast? Should we be following traders or should we go against them?" Sentiment is hard to measure in the FX market Simon, it's a really interesting question, because sentiment is quite difficult to measure in the Forex market. It depends where you get your information from. Are you looking at different websites? Are you looking at something like Reuters possibly? Are you looking at something like Forex Factory or FXStreet? They all show where traders are long or short on different currencies and where people are placing their positions right now. The problem is is they can only show the data that they can measure, so it's not uniform. It's not the same depending on where you get that data source from. When you think about it, in the Forex market, it's very difficult to measure, a little bit like volume. Go and have a look at the volume indicator on, say, your broker's platform, and then open up a different broker. The volume levels that you see are vastly different, and I supposed it depends on where the broker gets their data from. Is it just from their traders? Is it from their entire price feed? Where does it come from? Sentiment, very, very similar, can be the same issue. Do you follow other traders? If you are simply just following other people or you think, "I'm just going to do the opposite," because 95% of traders all lose, then it becomes quite dangerous in some ways. Although I like the idea, Simon, and I like what you're saying, I think there's a better way to do a similar type of thing. Why I use price action That's the way that I trade, which is why I use price action. You see, I'm looking at price action to give me an idea of where the big players in the market are moving the market, where they're placing their orders. That's why I also look at round numbers, like numbers, price levels ending in 00 or 50, because they're strong psychological levels. The price is likely to move up close to a 00 and then it's probably going to bounce back down again, or if it's heading back down to that level, it's going to bounce and then pull back again. A lot of orders are placed out, a lot of stop orders, a lot of stop losses, a lot of profit targets, et cetera, round numbers. So combining price action and candle formations with round numbers and support and resistance, et cetera, is the main part of how I trade. But coming back to the sentiment question, if we were to say trade against the traders, the vast majority, that's kind of like I'm use as a reversal pattern. Just last week, on last week's video and podcast, I said, "Should you trade reversals or only continuations?" Reversals are going against the trend in some ways, but I only take a reversal signal once I have confirmation from the price action that the price is turning down. I'm not seeing the price going up and up and up and just simply taking sell crates just because I want to. I'm waiting for that price to go up and up and I'm looking for it to start to tip over, some indecision, some confirmation it's about to go the other way. So Simon, to answer your question with the sentiment and trading against traders, yes, you can do that.

Previous Episode

#305: Trading Reversal Patterns

Podcast: Trading Reversal Patterns In this weekly video:00:24 – Are reversal signals too risky?00:58 - Reversal trades look really good on the charts01:23 – An example from the GBP/JPY D1 chart02:38 – Continuation patterns are a higher probability trade setup03:18 – In Summary: Reversals and Continuation trades03:38 – Look for “u” and “n” shapes on the charts04:28 – New look website launched this week Should you trade reversal patterns as a Forex trader or is it too risky? Let's discuss that and more right now. Hey, Forex traders. Andrew Mitchem here from the Forex Trading Coach with video and podcast number 305. Are reversal signals too risky? This video and podcast is all about reversal signals; should you trade them, yes or no? Are they too risky? Basically it's all about helping you decide if they are correct for you or not. We were talking about this with my clients last night on a live two hour webinar. We were showing different reversal signals and continuation patterns. So I trade both of them myself, and they're both very high quality, high probability trade setups that we trade as part of the strategy here at the Forex Trading Coach. Reversal trades look really good on the charts However, the reversal trades, although on the chart they look really dramatic because when you think about it, if you had a large uptrend, you are then taking a sell position based on what you're seeing to ride the market right back the other way. Likewise, if you've had an uptrend you're looking for the downtrend, if you had the downtrend you're then looking for the reversal back up. So, on a chart they look fantastic. An example from the GBP/JPY D1 chart Right behind me here you might be able to see a daily chart of the Pound/Yen. Now, the Pound/Yen up until a few weeks ago has had a massive reversal, 1700 pips downwards, almost in a straight line. You look at that and then a couple of weeks ago, I think it was the 4th of January, we picked a buy trade based off the way that we trade off the daily charts against that 1,700 pip downtrend. It's worked out beautifully. You can go and look on charts, Pound/Yen daily chart 4th January, 2019, you'll see the trade that we took. However, it's definitely a higher risk trade because it's against that massive downtrend. When you look back at the Pound/Yen over say November into December, you'll see lots of opportunities for continuation patterns. That is, the bigger picture downtrend looking for a pullback or a retracement back up and then the opportunity to go down again, to sell short to look for the Pound/Yen to drop. That's exactly what it did. Time after time and time again. Because of course nothing does a straight line; it's goes down, it pulls back, it goes down, it pulls back, all the way through as it steps its way down in that example. Continuation patterns are a higher probability trade setup So, continuation patterns. No one near as dramatic on the charts. They don't look quite so exciting do they? However, higher probability trades definitely if you know how to trade them properly. So we always look for more than just a candle setup; we look for confirmation of the price, what is the price has it bounced there before? What is the level, is it a round number? Is it a support and resistance level? Is it bouncing at like the upper or middle or lower Bollinger band? Do we have divergence positive negative? Hidden standard? All those type of things that we add to the mix to say, number one, this candle pattern looked really good. It's a reversal trade or it's a continuation trade. But then we add things to it. In Summary: Reversals and Continuation trades So, in summary, reversal trades really really dramatic, slightly higher risk because you are trading against the bigger picture. Continuations maybe don't look quite so cool on a chart, but they are certainly higher probability because you're trading with the main direction but after it's had a slight retracement or pullback.

Next Episode

#307: What proportion of your money should you trade?

Podcast: What proportion of your money should you trade? In this weekly video: 00:29 – How much of your savings should you trade? 01:02 – The 2 different options for you 01:45 – Trading example 02:02 – This is a discussion – NOT financial advice 03:00 – Which is the best choice for you? 04:14 – Don’t keep all of your funds with one broker 05:18 – Email me with any questions Should you put all of your money and your savings into your Forex account trade that, yes or no? Let's talk about that and more right now. Hey, traders, Andrew Mitchem here, the Forex trading coach with video and podcast number 307. Now I've got a really interesting topic to discuss today. How much of your savings should you trade? Now it came back from an email here from a client of mine and we talked about this in quite some depth on my latest live Webinar with my clients that I hold each week and it was all about what should we do with our funds. And basically this guy said, "Should I put my savings and take money out of my bank account and put it into my trading account based on the fact that, we trade a strategy that works and based on the fact that we trade low risk per trade?" What should I do? And he said, "Well, basically, really is there any advantage one way or the other what I do?" The 2 different options for you So the two scenarios would be one, I take out a funds and additional savings, put it into my Forex account, trade it really low risk. And probably make way more than the bank are ever going to pay me in a year, I'm probably going to make that in a month and that would be very fair pull. The other thing we discussed was, why don't you maybe look at putting half of that money that you would allocate to your Forex account into your account and half leave with the bank where sure, short may be earning very, very low interest rate but also, I suppose you could say it's secure or secure as you can get. So there's two different options. And if you took that second option, of course you could say, let's pick some numbers. Trading example Let's say I had $100,000 to try up at $50,000 and with my broker, 50,000 in the bank. And I'm assuming when I trade, I'm trading a 100,000, so I'm doubling up on my normal risk. So you've got a couple of options there and you can play around with the numbers as it suits you. This is a discussion – NOT financial advice The important things are this, there's two things really. Number one, I've got to say this is not financial advice. I'm not saying you should go and do this. This was purely a discussion that we had on the live Webinar and I just wanted to share it with you because I think it's something that a lot of people don't give you that normal everyday experience. And this is coming from experience. This is not a suggestions or advice, really important that point. The second point is that I'm assuming that if you're thinking, "Hey Andrew, which way do I go?" That you can actually trade And that's another really important point. The guy that I was talking about, he can trade, he's been in all my course for awhile. He's doing really well, low risk, et cetera. He's not gambling, he's not doing silly things. So there's a couple of assumptions there. I'm assuming that you can trade profitably, consistently and you're taking low risk. So assuming that comes into play, and if you can't do that, then you need to come and see me first of all. But assuming you can then, which way you go? Which is the best choice for you? Well the choice of course is really yours, but just a few things to be aware of, here in New Zealand as a company that I've been using over the last year or so. It's called Halifax and Halifax in Australia had something happened back in around October, November, and as a result of Halifax Australia owning part of Halifax in New Zealand, which by the way, we're a really good broker. Our accounts have been frozen,