Golf and trading…

I played my first game of golf at the weekend in over a year. I’ve never been a fanatical payer but I enjoy the walk and conversation that goes with the game, the fact that I’m a pretty poor player doesn’t matter!

Like many sports, it’s easy to draw parallels between golf and trading. The easiest one is the most obvious. Before going out on the course, it’s best to warm up and hit some balls on the driving range. When there, the ball sails into the air, dead straight and it all seems effortless. Isn’t it strange that once we get onto the course and hit that ball off the tee, it rarely feels quite the same?

Once onto the course, other factors come into play such as the pressure to hit a good shot, the natural urge to gain as much distance as possible and so on. Basically, our brains start to get involved and we over-think what we are doing.

It’s the same with trading on a demo account versus a real account. When trading on a demo account, most people have far better results. The main reason for this is because it isn’t real money, they are inclined to trade without the fear of loss. When doing this, we trade much better as we don’t take our profits too soon or use stops that are too tight. Like hitting those balls on the driving range, there’s no pressure until we get onto the fairway.

Then there’s putting on the green. A typical mistake would be to under hit the ball through fear of it going straight past the hole. The problem with this is it means you never actually go for the putt fully committed until the ball is close enough. With trading, the fear of giving back profits can ensure a trader banks the trade too early. This may make them feel good in the short term but in the longer run, it’s affecting their profitability.

Like golf, trading is a mind game. Yes you need to learn the techniques and skill sets, but without a trader mindset, you can only develop so far. As for my golf, I’m just glad I still enjoy the walk…..

Over to the markets, the Non-farm payroll figures disappointed and we saw some large currency moves against the dollar. The dollar index itself is back into a critical support zone so we will see if this holds again or not but I wanted to show a monthly chart of a pair this week. The usd/jpy pair sold off in February and April to bring it down to its 200 month moving average (yellow line). We’ve seen a natural bounce off that support zone but The 50 moving average (black line) is coming into play as it’s still yet to be tested.

I see moving averages like these as like magnets, eventually drawing price towards them. Well that 50 moving average should be tested at some point so if price breaks the most recent lows, that would be the next target.

Have a great week

Charlie Burton, Ezeetrader

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