Fusion Markets

Hi Traders,

By popular demand, we wanted to share our top five most used tools and features that are provided to you for free in our client area.

These are a bit like my Top Five Tools for Traders, but these are a little different as they're all internal rather than other websites or companies. 

Here are 5 of the most popular tools (in order) our clients are loving:

#1 - Analyst Views by Trading Central. This is my personal favourite. You can view it in the hub now, download it and use it as an indicator on MT4 desktop (in "Downloads on Hub) or visit your "News" tab in MT4 where it's constantly updated too.

#2 - The Economic Calendar is a must too. Are you using this already? If you're trading and don't know what announcements are coming up, you could easily be blown away by a big move and have no idea why. My favourite is that it will show you the historical price impact of previous announcements. You can even save the future events as a calendar invite!

#3 - News Tab - Knowledge is power. You know that already. You might already have your own news sources which are cool, but with Fusion's news tab, you can create a personalised feed (e.g. only show me EURUSD) or see what's most popular for others. Don't be an uninformed trader.

#4 - Sentiment - I love the idea of knowing what the crowd is bullish or bearish on. What are people talking about? Why are they talking about it? Check out our post on why this is important.

#5 - Technical insight is excellent if you'd like to go into a deeper dive on technical analysis on Forex and Indices. I prefer these charts over MT4 truth be told and want to know short, medium and long term outlook for each trade I'm considering.

That's it for now. We've built these for you and believe they'll truly help you excel as a trader.

#6 – Historical and Live Spreads Tool - with this tool, you can see how spreads have fluctuated over time, as well as the current live spreads. This information can be incredibly valuable in helping you make informed decisions about when to enter and exit trades. No more surprises, no more hidden fees – just transparent, competitive pricing. Read our blog post to learn how spreads actually affect your trading costs. 

Much of what we write about in these articles is about the mindset and behaviour of traders and trading. The reason for this is quite straight forward; it's because it's the decisions that we make and take that will ultimately determine how we perform as traders.

Yes, of course, price changes in the markets will play their part but, in the end, it's our decision whether to get involved or not and that determines how much capital we commit to trade, how long we hold the position for, and what the ultimate outcome of the trade will be.

Hidden costs

When we examine the costs of trading, we tend to focus on commissions and spreads and our PnL, but there are other costs, costs that we don't consider when really, we should.

These are the costs of inactivity and indecision, the costs of listening to outside influences more than to your own inner feelings and intuition. They are the costs of missing out, what economists call "opportunity costs".

Self-doubt among traders is not unusual, and in truth, it's better to exercise a degree of caution than to be 100% confident about everything you do. Hubris has been the downfall of many traders, and we certainly advocate being prudent with your risk. That said, It's always worth testing your thinking and assumptions and checking that they are still valid before you trade.

The problem comes when you start to talk yourself out of the trade entirely. After all, trading is a risk and reward business. There can be no profit without the possibility of loss.

A trader's job is to try and ensure that the risk that they take is in proportion to the potential rewards they could make. Not taking that risk could be limiting your potential as a trader which in turn may be limiting your rewards or returns.

Moments of clarity

Sometimes as a trader or investor, you will enjoy a moment of clarity, a moment of pure thought and insight, in which you can see exactly how a market setup or situation will playout. Moments when you just know you are right

If that moment of clarity coincides with significant moves in the markets, then that can be a very valuable situation indeed. But only if you act on it.

Allow me to tell you a personal story. During the great 2020 downturn in oil (where a Saudi/Russia price war caused prices to go NEGATIVE), I found myself holding oil from $30 a barrel and riding it all the way down watching in sheer horror. I kept buying the dip. How much lower could it go, I thought? I ignored every rule and everything I've written in the past about this. I didn't put a stop loss on. I told myself it was a long-term trade that I would stay in forever. Prices surely couldn't go below $20. That's madness. Then… The unthinkable happened in the futures price – it went negative.

Thankfully, Fusion's price didn't go negative (we use Spot Crude oil) but with spot prices at $15, I was sitting watching Netflix on my couch, and my heart raced as I saw it go down like World War III just started. The news sites told me nothing new had happened (funny how we search for any narrative to make sense of it all). Here it went. $14. $12. $11. Back to $12. Back to $11. $10. $9. Thoughtful me knew these prices were unsustainable. I told myself I would hold until it hit $0 if it had to. My account was down 70%. I'd never suffered such steep losses. I felt sick. I then couldn't sleep. I woke up, and it was still down a lot but had recovered from $7.

Watch out for the narratives.

I started to read more about what others were saying. What the hell was going on? Would this happen again? Yes, there was nowhere to store the oil (so the narrative went) but surely rationality would prevail. Seriously, how could you have negative prices? It was impossible to find anyone bullish in the media or otherwise. People assume if something just happened, it will occur again Goldman came out and said to expect more negative pricing. But I just couldn't believe it was so cheap. I knew it was time to buy more!

But then I didn't buy it. I waited for another opportunity for when I knew "the worst was over" I was so sure things would bounce back, but I didn't have the guts to buy one more time, and the opportunity passed me by forever. I let the external narrative cloud my previous judgement. But I was just so worried I couldn't think properly. Within days, it had doubled back to $15 a barrel. Then it was $20 a week later. At the time of writing it is $40 a barrel. By the time you read this, it might be $60 a barrel. Who knows? All I knew was fear and too much outside influence completely warped my view, and I failed. I just wanted to survive the calamity. While I survived to write you this, I did not do as well as I could have.

Self-belief

People often talk about having the courage of their convictions, but in trading, it's not really about courage, it's about belief, belief in yourself and your ideas and be prepared to back them, rather than talking yourself out of them, or allowing yourself to be talked out of them by others.

We all like to take advice and read and hear the opinions of so-called experts. But the absolute truth is that nobody really knows what going to happen next in the markets.

For example, nobody was predicting that an 11-year bull market in equities was going to end and end so abruptly in Q1 2020. Or that US unemployment would spiral to +14.7% in a single month.

Do not get me started on the rebound from the lows in March. To be bullish on the markets in April and May of 2020 was to look like you had lost your mind given the narratives surrounding COVID.

So-called "market legends" like Druckenmiller and Buffett told everyone it was not the time to buy. Sadly, so many would have listened.

Let's not forget Yogi Berra's famous saying "It's hard to make predictions, especially about the future" which is why it's best to take these so-called forecasts with a grain of salt. The best that any expert can do is to make a prediction or forecast about the future. And the longer the time frame that the forecast is over, or the more unusual the circumstances under which it is made, then the more significant the room for error and the higher the chance that they are simply wrong.

Loss aversion

As humans, we are subject to subconscious emotional biases that can cloud our decision making. One such bias is loss aversion.

Loss aversion can hamper a trader in two distinct ways. It's most commonly associated with the practice of running losses, ignoring stops and breaking money management rules when a trader can't or won't accept that they were wrong and refused to close a losing position.

The other way that loss aversion can muddy the waters is in our initial decision making. You see as species we are poor judges of risk and reward; we don't calculate probabilities very well, and the upshot of this is that we do not like uncertainty.

To the extent that when we are faced with situations that have a series of potential outcomes, we tend to favour the outcome with the highest degree of certainty. Even if that outcome is the least beneficial to us financially. Which, of course, is the exact opposite of the risk versus reward culture that we spoke about earlier.

Fortune favours the bold.

Though we might not like to admit it, our subconscious is often trying to talk us out of taking risks. Outside influences from the media, fear, our aversion to loss and a preference for certainty may often be our worst enemy as traders.

As Howard Marks said, "If you're doing the same thing as everyone else, how do you expect to outperform them"?

There have been several once in a generation trading opportunities over the last six months. I wonder how many of us were bold enough to seize the day and take advantage?

We believe that wherever possible, we should remove emotions from our trading psychology and try to act logically and systematically when making trading decisions. That’s because there are facets of our emotional selves that are just no good when it comes to making money. Impulses that encourage us to snatch at profits, make rash trades and run losses can be detrimental to our wealth in the same way that running out into a stream of moving traffic could be very detrimental to our health. We could go so far as to say that there is no room for sentiment at all in trading, but if we said that we wouldn’t be entirely correct. Because while it’s true that we want to remove sentiment and emotion from our own trading, we should be quite happy to take advantage of other people’s sentiments.

Picking the right wave

Trading is effectively a three-way competition. First, you compete with yourself and your psyche, of course, you also compete with the market in the same way that a surfer competes with the ocean. That is reading the changes in the swell and the wind in order to pick to the right waves. However, you are also competing with other traders, because in forex for every winner there is a loser, and to make money, you need to try to ensure that other traders and not you are on the losing side, more often than not. To succeed, we need to follow a rules-based trading strategy that helps us back only the best trading opportunities that the market presents to us. We also need to try and develop an edge over our competition, that is other traders.

Of course, we don’t and can’t know who these other traders are, and even if we did it wouldn’t do us much good, because there are millions of them spread out across the globe trading away at any one time. However, the fact that there are so many competitors out there can work in our favour. Why? Because a crowd that big leaves a trail that we can follow and that can provide us with an edge.

Tracking the markets thinking

One of the methods that we can use to gauge what the rest of the market is thinking and doing is to look at what they are buying, selling and saying. That is measuring the sentiment towards the markets, and doing that in aggregate.

There are several ways in which we can do this. For example, we could study the weekly Commitment of Traders reports that are produced by the US CFTC which track changes in positioning in listed futures contracts (including FX majors) among key investor and trading groups. However, these reports are released three days in arrears, late on Friday afternoon in the USA. What’s more, they are not exactly user friendly in terms of their layout or the way that the data is presented or in the ease of interpretation (the CFTC is not known for its beautiful charts!).

Perhaps a more simplistic way to track trader sentiment is to look at what’s happening to the prices of safe-haven assets such as gold, the Japanese yen and Swiss franc and government bonds. If these instruments are rising in price, then that’s a sign of Risk-Off sentiment among traders.

If those safe-haven assets are strengthening when risk assets such as equities and Emerging Market currencies like the South African rand, Brazilian real and Turkish lira etc. are weakening, then you will know it’s risk-off. Of course, if we see risk assets appreciating while safe-havens are falling in price, that’s an indicator of Risk-On sentiment among market participants.

However, there are quite a few items to monitor the strategy outlined above. Since we are trying to gauge the aggregate sentiment of the crowd, it would be good if we had an indicator to gauge sentiment across a wide range of assets as well.

True we could try to use the VIX and other volatility indices, volatility is a measure of the rate and severity of price changes within an instrument or market. It tends to rise sharply as markets become fearful and trend lower when fear subsides and greed re-asserts itself. But once again, this would mean monitoring multiple items from different sources, to which we may have varying degrees of access.

A single gauge of sentiment?

Instead, what if we had one indicator that could tell us what others in the markets were thinking?

Fusion Markets has partnered up with some very talented engineers to simplify this even further.

Using cutting-edge artificial intelligence techniques known as Natural Language Processing (NLP), we can use machines to take in hundreds of thousands of data points across the web to gauge sentiment.

Are people talking about the Aussie dollar? What are they saying exactly? Are they positive or negative?

What about Gold? Is the crowd bullish or bearish?

To do this, yourself (e.g. scour hundreds of thousands of sources across the web) would be impossible. That’s why we always say there’s never been a more exciting time to be a trader (at least with Fusion anyway) and have these tools available that were previously only available to the world’s best hedge funds and asset managers.

We’ll leave it to you as to whether or not the crowd thinking it is highly bullish is a good signal to trade or a bad one and the strategy here (if you’ve read our views previously, you will know the answer!). Still, while it is not the holy grail as a single strategy, we believe this is a handy weapon to add to your arsenal to get an edge over others.

New and novice traders spend a lot of their time worrying about how they will recognise and spot trading opportunities as they occur, and what will be the best way to exploit them when they do. They can spend hours researching and reading, looking at charts and trying to apply technical or fundamental analysis to the current market setups.

That investment of time and effort on their part is commendable, but all too often it's time and effort wasted!

It may seem harsh to say that, but here at Fusion Markets, we believe in telling it like it is.

We say that it's time and effort wasted because, despite all the research, reading and studying of charts, many newbie traders will still put the wrong trade on and more to the point not realise they are doing so.

Driven by sentiment

Financial markets are primarily driven by sentiment and momentum, which itself is created by crowd behaviour. That's something that was identified and put into print as long ago as 1841 and though the technology of trading has changed considerably in the intervening 179 years, the psychology of trading hasn't. 

We could go as far as to argue that while there is no longer a physical crowd on a trading floor or exchange these days, there is, in fact, a much bigger crowd whose voice and actions are amplified by modern communications. Real-time information through social media, for example, can enable the instantaneous exchange of information, prices and views across the globe.

The transfer of information 

There have always been communication channels between markets and their end customers, of course. But it is the speed of modern networks that differentiates today's trading from what went before.

Flags and telescopes on high towers, carrier pigeons and messengers all played their part in the transfer of information. Those methods were superseded by the telegraph, which in turn was replaced, at least partly by the telephone. The internet, the world wide web and the rise of mobile telecoms have ushered in a new age of high-speed data that can reach almost any corner of the globe, at the same time.

The net effect of all this is that the trading crowd is much larger, better informed and able to act and react much quicker than ever before.

Weight of money 

In trading, the majority rules, in that markets move in the direction that has the most impetus. If most of the crowd is bullish, then demand outweighs supply and prices will rise until fresh supply (sellers) are attracted into the market. This is why people go on about what the “Smart money” is doing. While we don’t necessarily agree with them being “smarter”, they certainly have more capital!

Conversely, if supply outweighs demand, that is there are more sellers than buyers to satisfy them, then prices will fall as new buyers are drawn into the market.

If these price changes persist for any length of time, they form what is known as a trend which is nothing more than a series of continuous, repetitive movements in price.

It's not only modern communications that have amplified crowd behaviour and sentiment.

The rise of tracker funds, ETFs and other passive investment vehicles have also played a role. These types of investment don't try to beat the market. Instead, they aim to match it.

Trillions of dollars have flowed into these trackers over the last decade and a half, and indeed you could argue that they have become so successful and so large that ETFs are now capable of creating the market's trends rather than just following them.

In fact, the world's largest fund manager is also one of the world's biggest passive investors (Blackrock).

Passive FX trading  

The influence of tracker funds is not as prominent in FX, as it is in say, equities or bonds; however, the principles are the same. The crowd dictates the trends in the markets and those trends tend to stay in place until new information emerges and cause a change in sentiment, which in turn can cause a change in those market trends.

Now the big mistake on the part of newbie traders that we mentioned at the start of the article was putting on the wrong trade, typically by opposing the prevailing trends in the markets.

The more entrenched the trend, the more likely new traders, are to try and oppose it. Ever heard the saying “trying to catch a falling knife”?

How can we become passive traders?

The most obvious way to be a passive trader is to follow the existing trends in the FX market, which occur in even the most widely traded pairs. Nevertheless, here's a few ways you can become more passive. 

For example, EURUSD trended lower for almost two years between February 2018 and February 2020. You didn't have to stay short of the rate (that is, have sold the Euro and bought the Dollar) for two years to benefit from that move. As long as that downtrend was in place, it was pointing you in the direction of least resistance and with that being the case why would you oppose it?

1) Check your charts.

Sometimes you will be able to follow existing trends, but there will be other times when individual instruments or markets are ranging or moving sideways, checking your charts and knowing your levels can aid you here.

A chart can speak a thousand words. It contains loads of useful information that's conveyed visually to the viewer. Get to know where the key support and resistances (watch for breakouts too) are situated over daily or weekly timescales; shorter-term charts are too noisy (I’m looking at you, 5-minute chart!).

2) Know where key levels and moving averages are.

The way that price reacts when it meets moving averages, or support and resistance can dictate the direction of the next trend. Knowing when and where this can happen will put you on alert to "jump" in once a new trend is confirmed. Fusion puts out trade ideas and analysis on Telegram and Facebook.

3) Look for clues about trends in sentiment tools

Tools that track what traders are thinking and doing are incredibly useful.

Given what we said above about retail traders opposing market trends, the passive FX trader uses these sentiment reports as reverse indicators.

We quite like FX Blue’s sentiment indicators which you can find here

The rule of thumb is that the more biased retail trader sentiment is in an instrument, the more likely that the market will move in the opposite direction.

A passive trader wouldn't preempt that move, but they would be prepared for it when it happens, or join it if it's already begun. 

After all, one of the most famous quotes in the markets is "the trend is your friend"... So don't fight it.  

When you start to learn about trading, you'll come across plenty of material about minimising risk and money management, because they're two of the most critical areas of the business. 

Learning to manage risk and preserve trading capital is fundamental to a successful trading journey. 

One area the literature focuses on is the use of stop losses. A stop loss is simply a price level beyond which you choose not to run an unprofitable or losing trade.

But for me, stop losses are one of the most misunderstood tools in a trader's arsenal, and I wanted to offer a different perspective than what is usually found in the research.  

I'll give you a hint; it's in the name!

Knowing your risk

It's important to know the risk you are taking on any given trade, this can be calculated by multiplying the distance of your stop loss, from the entry-level of your trade, by the notional size of your trade.  

In theory, this simple calculation determines the maximum risk or loss that you face on a given trade. I say in theory because that risk figure is not cast in stone.  

Firstly, if the stop loss you use on a trade is just a mental one, i.e. a figure that you have chosen, (but will watch rather than attach to an order), then it will be down to you to monitor price action and trade it. That's a sure recipe for looking like a maniac checking your platform or mobile app every second you get.

Systemise your process

Rather than rely on them being in front of the screen to close a trade (which in a 24/5 market is not that realistic), many traders will place a stop loss to an open position. This is essentially creating an instruction to close the position should the price of the underlying instrument reach a pre-set level.

In doing so, traders are systemising this part of their trading. On the face of it, that sounds like a good idea doesn't it? 

But what if that automated stop loss level was defining the loss you make on a trade and eating away at your trading capital, not protecting it?  

The use of a stop loss should be what its name suggests – the prevention of a loss, not the realisation of losses as 90% of traders currently use their SL for.  

Crowding together

Here's the thing. Traders of all sizes fall foul of "clustering" which means they place their stop losses in the same areas, at the same time.  

For example, at or around round numbers, (e.g. USDJPY 110) just above or just below a moving average or indeed close by the same support or resistance levels everyone else is keenly watching.  

The market is aware of this behaviour and is often on the lookout for these clusters of stop losses. When they are, it's known as a stop hunt.  

But what exactly does that mean? 

Well, a big bank (a price "Maker") might see on their books that they have a cluster of orders around 1.10 on EURUSD, and then be willing to commit large sums of capital to "hunting down" that stop loss level. They do this by moving the underlying price towards it, in a selfish way, to reward themselves, rather than because of natural order flow (and they wonder why they have bad reputations!).  

As an aside, a broker such as Fusion Markets, that typically services "retail" clients, e.g. mum and dad investors, often get accused of doing the same thing, despite the fact we are a price "Taker" not a price "Maker", and have no control over the prices coming through to you, as a client.  

Think about it if the market can find these groups of stop losses and trigger them, then that's easy money for the banks and traders who have the opposing view and positions.  

Remember that in FX trading there is a winner for every loser and vice versa. A successful trader endeavour's to be on the winning side of that relationship more often than not.

A different approach to stop losses

Are we saying then that you should trade without a stop loss? No, we are not! 

But what if we took a different approach to stop loss placement? Instead of lining up to provide a free lunch for the banks, what if we placed our stop losses above our entry price rather than below it?   

Of course, that means that we'd have to risk-manage our trades in a different way.

For example, employing less leverage and taking smaller positions relative to our account size. But that is really what we should be doing anyway. And of course, we would have to monitor performance closely in a trade's early stages, as we should.  

However, if the trade we have taken is the correct one, then our position will soon be on-side, and once we have a buffer between the current price and our entry-level. Then, our stop loss can be locking in profits rather than minimising (or realisation of) our losses.  

Trailing a stop-loss behind a profitable position is something of a holy grail in trading it's often talked about, but rarely seen in the markets. By not acting like the crowd, maybe we can turn the tables on the stop hunters.  

What are you waiting for? Why not stop your losses in the way they're supposed to be stopped? 

Read Time: 8 Minutes.

Part II – Hidden Biases in your trading

In Part One, we covered Confirmation bias, recency bias, the endowment effect, the groupthink bias and the gambler’s fallacy.

Today we’ll cover our final five, and I’ll provide you with a handy checklist so you can take 60 seconds and potentially stop yourself from rushing into something catastrophic.

6)    Hindsight bias

You could also call this one the “I knew it all along” effect. How many times have you heard someone say those words in life (not to mention in trading)?

I just knew Euro would fall after the ECB meeting.

Argh, I meant to go long on gold but didn’t get time. I knew it was going up.

We tend to believe that (of course much later than the event itself) that the onset of a past event was entirely predictable and obvious, whereas during the event we were not able to predict it.

Due to another bias (which we will not cover today) called “narrative bias” we tend to want to assign a narrative or a “story” to an event that allows us to believe that events are predictable and that we can somewhat predict or control the future. It allows us to try to make sense of the world around us.

How to overcome: Just stop pretending like you knew what was going to happen. If you didn’t put skin in the game, then you didn’t think it was going to happen!

7)    Overconfidence effect

Overconfidence as a trader allows us to believe that we are superior in our trading, which ultimately leads to hubris and poor decision making.

Whether it’s overconfidence on when to trade, what to trade (telling ourselves “sure I could normally trade AUDUSD, but why couldn’t I also be good at trading the South African rand?”) and how to trade a certain product.

We trade larger than we should, hold losers for longer than we should, relax our own risk management policy, become arrogant or complacent in our trading and this all leads to capital losses.

How to overcome: Ask yourself “What could I be wrong about” or “What makes me think I am far superior to all the others out there with this information”? The market will humble you eventually of course, but why not try to do it yourself before you shoot yourself in the foot?

8)    Anchoring

The first bit of information we hear is what we focus on.

If you ever need to negotiate with someone, you’ll be amazed at the power of anchoring with your first offer (Do try it sometime, just not with your friendly forex broker though ;-))

The same applies to trading. We hear a talking head on TV telling us about how the euro is overvalued and is heading for some drastic number that is streets away from today’s price. We can’t get that number out of our head even if we try.

Or let’s say we buy AUDUSD at .7100, close it at .7300 for a decent profit, happy days! The next week, it’s back at .7100 and we immediately are tempted to do the same again, because why not? It’s cheap again and we can repeat history. We rush into it, ignoring the technical break it’s just had or the negative sentiment on Australian Economic Data. We practically feel it’s a bargain at those levels.  

What do we do? The worst part is that we’re usually not even aware of how strong the influence is.

That’s the power of the anchor. We become attached to that information.  

How to overcome: This one is tough to overcome because studies show it can be so hidden in our subconscious without us knowing. Perhaps add to your trading checklist “Was this trade a result of an unknown anchor that I saw or heard?”

9) Consistency Bias

Like the sunk cost fallacy, we want to be consistent in our actions.

We’d hate for someone to say to us that we weren’t being fair or that last week we had said we’d do X and now had changed our minds.

Politicians do it all the time as they rigidly stick to a poor policy idea. They’d rather go down with the ship.

Traders are worse because our own desire to be consistent costs us money.

If I am known as a USD bear, and it’s rallying hard – I don’t want to look stupid or inconsistent. That’s why I keep staying bearish despite being 1000 pips from being right! It’ll come back we say. Everyone else is being stupid.

In 2009, 2010, 2011 and probably countless years since the financial crisis, people were always calling for the “double-dip” recession. I fell for it myself personally by believing them in 2009 and 2010 and staying too cautious when I should’ve thrown the house at buying stocks!

We want to feel in control. We want people to see our conviction, even if we’re wrong. Because this is a byproduct of confirmation bias, we’re not likely to seek disconfirming evidence of what we believe. We see what we want to see.

Why? Because sadly consistency is often associated with our intellectual and personal strength. Good traders should be seen as flexible. Open to the idea that they are probably wrong. Yet society thinks an inconsistent person is flaky, confused or a ‘flip-flopper’ on issues – even though we could all benefit from being open-minded to new ideas and opinions!

10) The Halo Effect

Last but not least - The halo effect is the final bias we’ll talk about today.

The halo effect means we let our overall impression of someone influence our thinking too greatly.

“But he’s so smart we say”

We idolise the opinions of the legendary hedge fund manager, Ray Dalio or the great investor of our time, Warren Buffet.

We see them on TV or in a Bloomberg article saying now is a buying opportunity or that it’s risk-off and we need to sell.

“If Buffet/Dalio/ is buying/selling now, I’ve gotta too,” we say in our head.

But how smart is that a strategy, really? What might he know that I don’t? What are his investment objectives versus mine? More important – how many times has he said this and actually been wrong?

We don’t know and we shouldn’t try to know. The halo effect blinds to sticking to our own plan and staying in our lane. The more we’re influenced by others, the harder trading becomes.

How to overcome: We must take the opinions of the so-called “Masters of the universe” with a grain of salt. They have different plans than we do. Information that we do or don’t have and so much more. Just because they’ve said this doesn’t make it come true. If only trading were that easy!

What do I do now?

OK, so I might have scared you. You are now jumping at shadows and questioning your own trading decisions, believing you have all these secret, hidden disadvantages that you didn’t have until 10 minutes ago.

Do not worry, biases can never be completely avoided. But we can work hard on challenging our opinions in order to make us more successful. Sometimes it’s just taking the time to stop and think.

To help you along the way, we’ve created a possible checklist for making better decisions in your trading.

So, stop, take a breath and ask yourself these 7 questions before you place your next trade.

What’s the rationale for taking this trade? List 3 for and 3 against.

How strong is the evidence behind my decision to trade?

What are the possible unknown unknowns?

Has the recency of information I’ve learned influenced my decision? If so, how much?

 Is this trade following the consensus of the crowd? If so, is that a good thing?

Did I hear this from a famous market commentator/investor? Why is that important?

 If none of questions 1-6 apply, then could any of the other biases above be at work?