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How to catch better entries with the Head and Shoulders Pattern? In this series of articles learn the different ways you can trade the head and shoulders chart pattern. The first part of this article deals with setting more realistic target levels on the head and shoulders pattern.

Among chart watchers and technical analysts, the head and shoulders pattern ranks among one of the top chart patterns that indicates a reversal (or rare cases a continuation) to the previous trend.

Any trader who has done a bit of studying of chart patterns would have no doubt been drawn to the allure of the head and shoulders pattern. The importance of this pattern is further accentuated by the fact that many analysts in the financial media often refer to this pattern.

The reliability of the head and shoulders pattern (which is bearish) and the bullish inverse head and shoulders pattern is further validated by Tom Bulkowski of the famed thepatternsite.com. It is not surprising therefore to note that the Head and Shoulders top is ranked 1 out of 21, meaning 'the best.' Bulkowski further goes on giving more stats such as a 4% break even failure rate and a 55% probability of price meeting its target.

You can read Bulkowski's deeper analysis on the head and shoulders pattern (along with tons of other patterns).

Anatomy of the Head and Shoulders Pattern

The Head and Shoulders pattern is very easy to spot and can be a caution for traders especially when the pattern occurs at the top end of a rally or its bearish counterpart, the inverse head and shoulders that occurs at the trough of a downtrend.

H&S and Inverse H&S Pattern Basic Structure

In the chart above, you can see the basic structure and the set up of the head and shoulders pattern (bullish and bearish). The neckline support (or resistance) is the key as a breakout from this level indicates a shift in the trend.

The most basic way to trade the head and shoulders pattern is to wait for the breakout from the neckline. Some traders prefer to wait for a retest back to the neckline while others simply buy or sell on the breakout. The target is set to a measured move, measured from the head (high or low) to the neckline (support or resistance) and projected from there on.

Drawback of the Head and Shoulders pattern

The head and shoulders pattern is more ideally suited to trade stocks or assets where volume is reliable. Typically, low volume during the formation of the right shoulder is used as one of the markers and prepares traders for the impending breakout. Volume in forex is not as reliable compared to stocks due to the OTC nature. Even if volume were to be used somehow, there is no guarantee that price will reach the target (despite more than 50% probability according to stats).

So how can a trader effectively position themselves to better make use of this reversal pattern? The following ideas can help traders.

Using a 161.8% Fibonacci Extension as the first target

Instead of a full projection in the head and shoulders, using a 161.8% Fibonacci extension as the first target, measured from the head (high or low) to the neckline (support or resistance) can beneficial for traders. The chance of price reaching the 161.8% target is much higher than the full measured move (which is basically a 200% extension). So after the first target is reached, your trade has already taken the reward off the table while leaving the remainder of the position to trade risk-free at the very least.

Example:

In the chart below you can see the relative ease at which the 161.8% Fib extension level of the head and shoulders pattern was reached. In comparison, you can notice that the full measured move of the head and shoulders pattern, prices consolidated briefly and reversed back higher.

If you account for spreads and other factors, there is a very good chance of price falling short of the full measured move target and instead of reversing.

You can also gauge that by setting the price target to 161.8% Fib extension, the initial probability of 55% can be further improved.

Head and Shoulders Example (161.8% and 200% Fib extension levels)

In the next article, we take a look at how to anticipate the head and shoulders pattern in advance before the pattern is formed.

Operating in the financial markets will forever be a learning process.

Even for the most experienced traders, the above is still true. For that reason, memorizing the subtle nuances of each trade is of the utmost importance, as this is how we recognize mistakes and ultimately mature as traders. How we do this is simple: keep a trading journal.

Keeping a trading journal is, if you think about it, akin to an athlete reviewing previous competitions. Too often, small, yet crucial, details are missed when trying to recall from memory. Therefore, recording your trades in a systematic fashion may reveal strategies or tendencies that can lead to improvements.

The workings of a trading journal

Unfortunately, there is no 'one size fits all' here. Some prefer to journal their trades by simply jotting a few important notes down; others, however, take it much, much further.

While there's absolutely nothing wrong with a minimalist approach here, we personally favour a more in depth profile which includes, but is certainly not limited to, the following:

• Pre-trade analysis (supported with images).
• Trade management analysis (supported with images).
• Post-trade analysis with images (supported with images).

Pre-trade report:

This section should clearly detail your reasoning BEFORE you enter into a trade. In addition, instead of just blindly writing what the market conditions were at the time, why not consider adding a chart or two to complement this, as they do say, 'a picture is worth a thousand words.' This should not really be a big deal since the chart(s) should have already been marked up.

Also just as important in this section is to determine one's exit strategy. Will you trail the position, is the risk/reward ratio favourable, are there levels of significance nearby etc.? Basically, you want to try and avoid surprise and have a plan in place for every eventuality that the market may throw your way, which includes noting any scheduled news events.

Trade management:

It is here that you have the opportunity to note your emotional state during the course of a trade. It is also recommended to supplement this section with in-trade images, as even with notes it's sometimes difficult to picture the scenario from memory.

Was the trade executed in accordance with the pre-trade report? Over and over again, we hear about traders 'jumping the gun' and entering a trade before the entry level is in play. Generally, traders enter the market too soon for fear of missing a move. Not only does this distort the initial risk/reward ratio, but it's also bad practice. Recording timing, therefore, is important to track your patience.

Other than prematurely entering a trade, do you consider deviating from the initial plan once the trade is in motion, or ever think of adding additional risk or take profits before your designated target levels? The information gleaned from trades will help provide an accurate illustration of the strengths and weaknesses of both the trader and trader's methodology. Descriptions of errors and recurring mistakes highlight the areas you need to pay heed to.

The best trading gift you can give to yourself in this section (all three sections actually) is HONESTY.

Post-trade report:

Following trade completion, it's advisable to log the outcome, win or lose. Also, as with the two sections above, adding chart images of the completed trade is beneficial to create a before-and-after scenario.

Was the trading plan followed? If it was not, dig in and find out what the reason was for abandoning your trading rules. If you committed a recurring mistake, note what your thoughts were and how you can improve on the next trade.

In closing:

At the end of each trade, save and file it. Once that is completed you can review the notes at your convenience.

Why is it that so many traders do not bother with trading journals, and likewise so many do not reach consistency in this business? Is that a coincidence? We think not! Without the historical data taken from past trades, how can one expect to grow and improve? We would say it is nearly an impossible feat as our brains can only remember so much! Therefore, do yourself a big favour today and begin a trading journal today.

The above information is, of course, not the be-all and end-all. There are likely other things one can add to their journals that may prove beneficial. It's all down to personal preference.

'But out of limitations comes creativity'. Debbie Allen.

Every endeavour has its own set of difficulties, with trading being no different! Trading the markets, even if only on a part-time basis, is incredibly challenging, and will, despite what your favourite guru may claim, take time and require a great deal of dedication.

However, the good news is that trading part time is possible!

Once you have a strategy in place as well as a written trading plan, all one then needs is a little creative planning and the discipline to follow your schedule and rules or engagement. Unfortunately, research shows that a lot of traders enter the markets with unrealistic expectations and little preparation.

Don't confuse part-time trading with 'hobby' trading!

A lot of traders, particularly those who are new to the business, mistakenly view trading as a hobby. Trading is a serious business and should always be treated as such, be it as a part-time venture or as one's day job. If you intend on using the markets as a place for amusement or somewhere to have a bet every now and then, you may as well chuck whatever funds you have in your account in the garbage. Better still, send it to a noteworthy charity!

Part-time trading, in our humble view, is not so different to many other businesses in terms of the preparation and planning required. If we think about it rationally for a minute, can you imagine a part-time doctor, lawyer or businessman approaching their business as a hobby? Highly unlikely! So, why should it be any different for trading?

How do I approach part-time trading?

For those with limited time and resources due to work or life commitments, you're going to need to develop a trading schedule that fits your lifestyle. Obviously, each trader has different time constraints, so we felt it'd be best to look at three individual traders to help illustrate how one could look to schedule their trading days:

Trader A has a full-time job and absolutely despises the lower timeframes. He believes, rightly or wrongly, that the lower timeframes are nothing more than noise and should be avoided at all costs.

His job involves him being away from the screen for most of the day (8am-6pm). Thus, he focuses his efforts on the H4 charts and above. An hour before work, he sits down and analyses his chosen markets, altering any positions he may have on, and placing new orders. Upon returning home, he'll scan the market once again for any developments for an hour or so before dinner, and then call it a day. So, all in all, he spends approximately two hours a day behind the screens.

Trader B also has a full-time job, but is lucky enough to be an I.T engineer. This enables him to have the trading platform running in the background. Although he is not at his desk all of the time, he is able to comfortably watch the H1 timeframes (and above) regularly throughout the day.

However, his schedule involves him analysing the charts an hour before work, as well. The reason being is that he likes peace and quiet when exploring the markets for opportunities. Once his levels are marked for the day, he can simply monitor the market using trade alerts from his work station.

Trader C works a part-time job and favours the M15 charts and lower i.e. the lower timeframes. She lives in Asia and finishes her morning shift two hours prior to the London open. Fortunately, she is able to be at the screen for the entire London segment and usually finishes trading by London's lunchtime.

As you can see from the above examples, it's important to select which timeframe(s) to trade and organise a time to analyse the markets when trading part time. You may have also noticed that all three traders use a manual trading methodology, but there are some that focus on automated trading. As far as we're aware, there's a variety of automated trading programs with a full spectrum of functions available on the market. Some may be able to monitor currency prices in real time, place market orders, recognize spreads and automatically place the trade. So, this could be an avenue you may want to investigate if automation is what you're seeking.

Finding the right markets to trade

In addition to arranging a time to be at the screens and choosing the timeframes to base your trades from, appointing which markets to focus on is just as important.

For instance, Trader C only trades the GBP/USD and the EUR/USD pairs as they not only have tight spreads, but also tend to be most active during the London segment. Trader A on the other hand, watches ten currency pairs and also the US dollar index for correlation purposes. Given that he trades much slower timeframes, this enables him to watch more markets. Trader B, nevertheless, chooses to focus on only four currency pairs. He could watch more pairs, but prefers it this way as he also likes to keep up with the fundamental influences surrounding the currencies he trades.

Final word…

Having a full or part-time job, we believe, helps alleviate the stresses that come with trading full time. Not having to rely on your trading profits lessens the psychological impact which is an aspect a great deal of traders struggle with. So, with that being said, does trading part time, with the safety net of a full-time salary, give one a greater chance of success? Certainly something to think about!

GDP or Gross Domestic Product represents the total monetary value of goods and services produced over a specified period of time in a country. In other words, GDP measures the overall productivity of a country's economy and is used to measure the level of growth and the economy's health in general.

The GDP report is one of the many macroeconomic indicators which are used to measure the performance of a country's economy. In the forex markets, there are many GDP reports released which measure the GDP at different time periods. The most common of GDP reports are:

• GDP m/m or month over month: This report measures the GDP performance in comparison to the previous month
• GDP q/q or quarter over quarter: This report measures the GDP performance on a quarterly (3 months) period
• GDP y/y or year over year: This report measures the GDP performance on a yearly basis, comparing to the previous year

Most GDP reports are released during the first week of the month if they are measured on a month over month basis. The most common GDP reports are however quarterly, which is released after the end of a quarter. Quarterly GDP reports are usually subjected to three revisions:

• Quarterly GDP Preliminary estimates
• Quarterly GDP 2nd estimates
• Quarterly GDP 3 estimates

Generally, there is a considerable change between the first and second revisions as more data is accounted for. The third GDP revision is very rarely revised, and the deviations aren't as much significant. Also, by the time the third GDP revision is released, the markets would have very well gauged the health of the economy.

Most important GDP reports for the forex markets

• US, Australia, New Zealand quarterly GDP reports tend to affect their respective currencies
• Canada releases GDP data on a monthly basis as well as quarterly and annualized basis
• Eurozone releases GDP data on a quarterly basis and also includes GDP flash estimates which is same as the initial or preliminary GDP release

Impact of the GDP reports on the forex markets

The GDP report is considered a Tier 1 report, meaning it is a high impact release. Markets tend to move strongly when the report is released, and the volatility surges depending on how strong the actual result comes in from the forecasted estimates.

The impact a GDP report has on currency, or a currency pair depends on a lot of factors. Therefore, more often than not, do not expect markets to behave in a similar fashion every time a GDP report beats or falls below estimates.

The first factor to consider when trading the GDP report is whether the markets have already priced in a better or a worse number. In most cases, the sub-components that feed into the GDP such as the Manufacturing, Construction and Services PMI tend to reflect on what the GDP outlook might be. The way the markets behave on the GDP release eventually comes down to how strongly the actual number has deviated.

Seasonality also plays a big role in shaping the GDP reports. For example, in the US the first quarter GDP often tends to be the weakest, with the second and third quarter GDP usually the strongest. Especially harsh winter periods tends to drag down the Q1 GDP data even more.

Example of trading the GDP report

US Q4 2015 GDP - 2nd estimates

• The fourth quarter 2015 GDP report from the US was released on 26/02/2016
• This was the second revision to the report
• The first GDP estimates was at 0.70%
• Estimates for the 2nd GDP revision was 0.40%
• Actual data released showed a revised quarterly US GDP at 1.0%, beating the forecasts and rising above the first estimates

EURUSD - Price Action on the GDP release

EURUSD Price Action on US Q4 GDP (2nd estimate release)

To conclude, the GDP reports are one of the high impact economic indicators/reports which have the likelihood to shape not just the exchange rates but also holds sway over monetary policy decisions.

Traders should not view the GDP numbers in isolation but consider how the report will impact the broader market context such as monetary policy expectations.

Consumer Price Index, CPI for short is a measure of the change in the weighted average of prices from a basket of consumer goods and services considered essential.

CPI is calculated by tracking the price changes for each of the items in the basket of goods and weighted in importance.

Inflation data is primarily comprised of two measures:

• Headline inflation: This inflation reading tracks the overall changes and includes energy prices which are volatile
• Core inflation: This inflation reading strips out the volatile energy prices and food and gives a clearer picture of the price changes in the basket of goods

The headline inflation data is usually more volatile compared to the Core inflation rate and has the ability to predict core inflation. The headline inflation is designed to be a best measure of inflation and it is this headline inflation which is usually targeted by Central Bankers.

CPI or inflation data is an important economic release which has the potential to move the short term markets as well as shape monetary policy decisions. After all most central banks have an inflation-targeting mandate.

CPI or Inflation data is released on a monthly basis with some countries releasing flash or preliminary inflation data ahead (EU) of their time.

Typically CPI data released is for the month gone by and is also measured annually for both the core and the headline inflation data.

Countries such as New Zealand and Australia prefer to keep the inflation data on a quarterly basis which offers a less volatile and clearer view on changes in consumer prices.

Some countries also tend to use their own measure of inflation. For example in the Eurozone, HICP or Harmonized Index of Consumer Prices is used, while the US besides the CPI, PCE or Personal Consumption Expenditure data is also used.

Although the terms may sound different, they track the same underlying changes in consumer prices with differences in the way the prices are measured.

Why is Consumer Price Index an important economic report?

The CPI or consumer price index report is an important economic indicator as it signals how quickly prices are rising or falling. When consumer prices rise, it signals inflation, but when prices fail to rise or drop, it signals a period of deflation.

Central bankers use consumer inflation as a gauge to raise/cut/hold interest rates, which acts as a lever to stimulate or hold back consumer spending which in turn influences inflation.

As a result, CPI data is closed watched as strong or prolonged increase or decline in inflation usually results in some Central Bank acting on monetary policy.

Most central banks today build their monetary policy around inflation targeting. This means that the Central Banks have a specific target inflation rate to achieve, which is usually 2%, or in some cases, within a band of 2% – 3%.

Interest rates and monetary policy tools are used in accordance with maintaining the price stability.

Impact of CPI data release on the forex markets

In the currency or forex markets, CPI data is closed watched. This report has gained a lot more significance ever since oil prices started a steady decline making it more difficult for Central Banks to target the 2.0% mandated inflation growth.

Many banks have had to cut interest rates, some into negative as well as having to use other tools such as quantitative easing in efforts to stoke consumer spending and thus push inflation higher.

A good example of the importance of inflation data can be the Bank of Japan and the European Central Bank, which struggled to push inflation back to the mandated target.

When monthly a quarterly inflation report shows a spike or declines further, the markets are quick to speculate what policy action the Central Banks could take based on the information available.

Example of trading the CPI release

Eurozone CPI (2014 & 2015)

The Eurozone's annual inflation rate was in a steady decline for most of 2014, at one point falling below zero. The ECB vowed to bring inflation back to its 2.0% target and prepared the markets thereafter that it would consider cutting interest rates to historic lows, cut rates on bank deposit rates and purchase sovereign bonds via the QE program to spur lending.

The chart below shows the Eurozone inflation rate between 2014 January and 2015 December. It was in January 2015 that the ECB announced a massive €60 billion monthly bond purchase program to stoke inflation.

Eurozone Inflation Rate 2014 – 2015

The Euro fell sharply since the ECB announced its intentions, falling from highs of $1.39 to hit $1.12 before the ECB officially announced the dovish monetary policy decision.

To summarize the key points about CPI and how to trade the report:

• Inflation is a measure of the price change in a basket of goods. Inflation is measured as a headline and core inflation which strips the volatile food and energy components
• CPI is released on a monthly and quarterly basis, in some cases as a preliminary estimate. The data is released for the previous month
• While monthly dispersions occur, the annualized inflation rate is what matters
• CPI might have strong or negligible impact depending on the monetary policy conditions
• On the very short term, a surprise in inflation can lead to some intraday trading opportunities

No matter how hard you try, it will be impossible for you to climb up the trading ladder until you've learned how to risk live money.

Trading in the live market draws in psychological elements that are generally not experienced in a simulated environment. This, as you'll see throughout the article, is the key difference…

Demo trading - to trade or not to trade?

As a new trader entering into the wonderful world of currency trading, you will have undoubtedly come across several traders promoting the benefits of using a demo account before transitioning over to a live account. We happen to agree with this, and believe that trading a demo account is incredibly helpful.

Although a practice account typically mitigates the psychological side of things, simulated trading provides a stage in which to develop and hone your trading method, begin creating a trading journal and familiarise yourself with how a platform functions.

It is often recommended that once you are recording consistent profits on demo, you can then begin thinking about taking the leap over to a live account. To begin with, we would not advise opening a live account with a huge sum of money. Why? Well, although you're able to pin down consistent profits on demo, live trading is a completely different animal altogether! Think lion and tame house cat - that's how much of a difference there is, traders!

Why is demo and live trading so different then?

Switching over from demo to live is often an exciting, yet slightly daunting, prospect for most. The typical trader often sees no reason why their demo results cannot be replicated on a live account. The trouble with this is that having your hard-earned money on the line will cause stronger emotions to materialize, which were masked when trading simulated funds. Sweaty palms, a dry mouth, a pounding heart beat and a swarm of butterflies in your stomach are common symptoms when one first experiences live trading. After all, it is never easy, especially in the earlier stages, watching real money fluctuate from positive to negative.

Live trading will also teach you things about yourself that you never knew existed! You may believe that you are a disciplined patient person now (and you may well have been on demo), but wait until there is real money on the line. This changes a lot of people!

In addition to the above, you may find yourself breaking trading rules once live money enters the equation. Things like moving stop losses, prematurely taking profits before the target is achieved and revenge trading are just some of the trading sins you may commit. Furthermore, in an attempt to prove that you can replicate your demo results, this could lead to overtrading, and sometimes even ignoring your trading plan altogether.

Ultimately, the method that you used to successfully trade on demo should not change. It's the psychological side of things that will require work in live trading.

Ways of making the transition from demo to live easier

While there is never a guarantee that you'll mirror your demo results, the following points should make the transition easier:

• Resist the urge to rush in and prove yourself! Take your time and trade according to your plan.
• Begin trading with a small amount that you would be happy to lose. Familiarise yourself with the new risk profile and demonstrate competence at this level, before considering moving up the ladder. Only add new funds to your account once you've achieved some level of consistency.
• Money management is crucial at this stage. For example, set maximum daily losses and do not deviate.
• Do not panic if your first, second or even third trade is a disaster. Losses happen - it's simply the cost of doing business. Thinking in probabilities will help alleviate this: Thinking in Probabilities.
• Keep a log of all trades so that you can review any mistakes.
• Trade the plan. Without a plan you're effectively going to be trading from a reactionary state i.e. emotional trading.

The above, of course, is not the be-all and end-all, but each point should help avoid emotionally-driven mistakes linked with live trading.

Imagine for a moment that you're a newly appointed trainee chef. Eager, excited and ready to get in the kitchen, the head chef unexpectedly throws you a curve ball. He asks that you begin preparations to cook five-star meals at their finest restaurant in town that evening. We'd be surprised if this didn't raise an eyebrow, or two! A trainee chef, especially one that's new to the industry, would surely need time to hone his/her skills before being let loose in a restaurant kitchen! Not knowing how to properly slice an onion or even read a recipe would, as you can imagine, likely end in a culinary catastrophe.

Just like our trainee chef, a trader needs time to develop and mature. Fortunately, a simulated practice account offers one the opportunity to experience the market before placing your hard-earned money on the line. So, without further ado let's look at how one can take advantage of their demo account.

Risk free

This is perhaps the most appealing feature of a demo account: it is risk free!

Traders, especially those new to the business, often rush into live trading longing for riches. Unfortunately, many of these traders end up paying the price! Unlike doctors or lawyers, who have to go through rigorous training before considered a competent specialist, a trader, with a few clicks of a mouse button, can trade using real money. The barriers to entry are incredibly (some would say dangerously) low!

A demo account provides one entry to the live market at no cost. This allows the trader to become familiar with the platform's features in a risk-free environment. Determining lot sizes, knowing how an order is placed, how to close a position and how to alter stop-loss and take-profit orders are things best learnt on a demo account, as mistakes will happen.

An additional point to consider is the testing capability a demo account offers, WITHOUT the fear of losing real money if the method turns out to be a flop. A great deal of traders open live accounts without fully testing the strength of a method. Without knowing the historical statistics, it'll be difficult not to panic when a string of losses occur.

Another feature, which is often overlooked, is how receptive the support team is. The last thing you want is an uncooperative support team when you need them most. Therefore, testing the response with a demo account before considering a live platform is important.

A trading journal

Trading the financial markets will forever be a learning process. Even for the most experienced traders, a trading journal is crucial. Memorizing the subtle nuances of each trade is of the utmost importance. It is how we recognize mistakes and ultimately mature as traders. By keeping a journal, it'll enable you to identify mistakes and weaknesses made in demo trading account before transitioning over to live trading.

Also, in order to keep a trading journal realistic, we'd advise starting with an account balance similar to what you intend to begin with in live trading. There's little point in trading a $100,000 account, if you're planning to trade with only $1,000. The goal is to keep it as real as possible.

Fortunately, IC markets allow you to select the opening balance. What's more, there's no expiry date on the account, thus making it easy to track your progress.

The psychological aspect

The main difference in demo trading and live trading is that the latter has more pain involved when one suffers a loss. Not only was you wrong in your trading outlook/idea, but you also lost money in the process.

While you'll never effectively feel the psychological stress of trading a live account in a simulated environment, there are two methods which may help.

The first is to think of demo trading as a license needed to trade live funds. In order to receive this license, you need to maintain a certain consistency using demo dollars. By design, this places you in a setting in which you need to respect risk and money management principles.

The second method is simply setting real-life penalties for when you lose a trade. For instance, you place a dollar in a jar following a losing trade. You could even donate this money to a charity as this will help remind you that a trade has a real money aspect to it.

Final word...

Other than diminishing the psychological aspect, trades take on a demo platform will also not be subject to slippage. This is something that can occur in the live trading environment, so do take this into account.

Opening a demo account with IC markets couldn't be easier. What's more, we have MT4, MT5 and cTrader platforms available to choose from, as well as a wide range of currency pairs, metals and CFDs, all trading with attractive spreads. To get started click here: IC Markets Demo Account.

Once you're familiar with the platform functions and have a tested method in hand, you will likely be looking to open a live account. With IC markets, you can open an account with as little as $200 (Open a Live Account). That way, assuming you risk no more than 2% on each trade, making your very first live trade need not break the bank should you make a mistake.

For optimal performance, it is important to learn the top emotions to expect from forex trading. By becoming familiar with these emotions, forex traders can better equip themselves with the right strategy and the most suitable mindset. Whether you are experiencing stress or excitement, emotions can greatly influence forex trading results. For continued profitability and strong mental health, take control of your well being and become aware of the inevitable emotions of forex trading.

Emotions play a great role in forex trading performance, mindset and results.

Emotions and forex trading

The psychology of forex trading has much to do with a trader's instinctual reaction to the market. In a changeable trading environment, uncontrollable emotions are possible especially during market movement. Oftentimes, the emotions that go unchecked can lead to unpredictable results. Whether your strategy dictates you to hold on or close a trade, emotions can trigger different reactions that might affect output. With plenty of information coming in, forex traders must master how to manage emotions especially when challenged.

To stay focused on your trades and learn how to manage emotions, track and apply good emotional management. By being conscious of your reactions and applying a stable mindset, you can execute strategies while overseeing emotions. Eventually, this will lead to disciplined trading and higher efficiency. One of the best ways to become aware of your emotions is to take advantage of a forex trading journal. This will not only help you with emotional management, but also for tracking results from trades.

Master and manage expected emotions

Traders can greatly benefit from foreseeing the emotions that can boost performance or jeopardize trades. By learning your reactions to different trading scenarios, you can efficiently manage emotions. To successfully deliver great trades, learn the top emotions to expect out of forex trading and how to manage them:

Forex trading jitters

Nervousness is a common feeling when being a forex trader. Even if you have a great strategy, the idea of risking capital in forex trading can oftentimes be nerve-racking. During these times, it is important to remain confident and disciplined until you close a trade. Make sure to back any decision with a reliable trading system and a positive mental attitude for whatever the result may be. To overcome feeling nervous when trading, here are the most effective ways you can conquer forex trading jitters:

• Always optimize your trading systems to gain trust in yourself and your strategy.
• Remain highly disciplined to achieve a conscious effort for efficiency and minimize nerves.
• Do not focus too much every trade. Learn to see the bigger picture for your trading journey.
• Practice your strategy and refine your skills with a demo account.
• Be mindful of your mental well being. Doing this can allow you to plan a healthy outlet for uncontrollable nerves.

Market excitement

Excitement is a common emotion experienced by most new traders. With infinite ways to succeed from trading, excitement can inspire traders to take advantage of the potential to earn from the forex market. This is a great emotion to experience when planning a strategy or especially when going through challenges. Market excitement can motivate traders to do well and enjoy the journey. In the end, the possibilities of the forex market should stimulate both excitement and ambition for success.

Be sure steer market excitement for motivation and efficiency. But sometimes, excitement can also distract traders from sticking to the planned strategy. If excitement overpowers the strategy, you may get into a risky trade. To ensure that market excitement does not disrupt your trading systems, practice disciplined trading. One of the things you can do is to approach every trade by using business disciplines. Find out how to achieve this by applying business disciplines into your trading strategy.

Do not trade with your emotions. Be aware of the top emotions of forex trading.

A Rush of Anxiety

Anxiety can be a weakening emotion for some forex traders. Whether you are a beginner or an expert, anxiety is a common emotion triggered by the nature of the forex market. According to A to Z Forex, the possibility of loss when trading will always part of the journey. The best way to prepare is to plan ways to overcome anxiety and direct it in a more productive way.

How to manage anxiety

Anxiety is a emotion familiar to most traders. To fight anxiety in a forex trading career, try these simple solutions:

1. Make sure to develop a reliable strategy and practice!
2. Focus on a market analysis that works for you. This helps you gather information to positively make decisions without added stress.
3. Keep track and stay updated with your trades, news or analysis.
4. Go into trades with confidence and complete knowledge. Avoid treading in "unfamiliar territory".
5. Reach out to other traders for support and further knowledge.

Regret from past trades

Regret in forex trading describes feelings of guilt or disappointment from previous trades. Because trading exposes you to losses, the aspiration to continuously do well can often lead to regret. This can be from personal impression of under performance, missed opportunities or trading losses. To an extent, the feeling of regret can hinder traders from moving forward. But when viewed in a more positive light, regret can greatly inspire traders to optimize. This is what differentiates successful trades from mediocre results. When forex traders look at emotions like regret in a more positive outlook, the drive to do better can powerfully influence both performance and profit.

The desire for more

Once traders profit from a trade, it is easy to desire for more the next time around. In a market full of possibilities, greed can oftentimes go unnoticed. Without the right information to back up your decisions, the desire for profit more can lead to misleading and risky trades.

In any trading scenario, the drive to profit more from a trade should be backed up with a calculated strategy and discipline. Do not trade larger volumes if you do not have enough market analysis or experience to support it. When you feel that a trade can profit more than your expected target, make sure this is supported by correct statistics or data.

To ensure optimal trading, overcome disrupting emotions through patience and practice.

Fear of the market

Fear is an emotion caused by the unknown. Because trading is a volatile market, fear of the unknown market movement can cause more stress than necessary. In the long run, fear can cause traders to be apprehensive and possibly miss the opportunities of the forex market. Fear can also come from the consequences of past trades. Because of this, it is important for traders to master the ways to emotionally detach from a trade.

Facing your fear of the market is key to a gratifying and successful forex trading career. Learn the 3 best ways to conquer your fears for both work and personal life:

• Know what you can and cannot handle. Once you point these out, you can ease into scenarios with the correct mindset.
• Though fear can initiate a flight response, fear also enables traders to be more cautious and stay away from high risk trades. Make sure to find the right balance between fight and flight.
• Since fear can be caused by past experiences, always look at the positive and never dwell on the negative.

Always see the positive!

It is important for traders to experience the emotions of forex trading to fully enjoy the journey. But no matter what emotions you are feeling, make sure to approach all of them with optimism and mindfulness. Especially for feelings of disappointment or pessimism, forex traders must be mindful of the way they view their emotions. The feeling of anxiety should be addressed with the same mindset as the feeling of excitement or joy. This means traders should not suppress negative emotions. Instead, traders need to confront any pessimism and move forward. By doing this, you are in control of your emotions while being mindful towards your mental health.

Whether you are new to trading or not, it is vital to always manage emotions to avoid risky trades. Doing this will prevent traders from making impulsive choices. To flawlessly execute your trades, practice disciplined trading to control your emotions. To minimize errors made from emotional trading, traders must rely on the calculated strategy while keeping emotions at bay.

EUR/USD 's up trend resumed last week by breaking 1.1908 resistance and reached as high as 1.1941. Initial bias is back on the upside this week. Current rally should target 61.8% projection of 1.1118 to 1.1908 from 1.1661 at 1.2149 first. Break there will target 100% projection at 1.2451 next. On the downside, below 1.1822 minor support will turn intraday bias neutral first. But retreat should be contained above 1.1661 support and bring rise resumption.

In the bigger picture, an important bottom was formed at 1.0339 on bullish convergence condition in weekly MACD. Sustained trading above 55 month EMA (now at 1.1768) will pave the way to key fibonacci level at 38.2% retracement of 1.6039 (2008 high) to 1.0339 (2017 low) at 1.2516. While rise from 1.0339 is strong, there is no confirmation that it's developing into a long term up trend yet. Hence, we'll be cautious on strong resistance from 1.2516 to limit upside. For now, medium term outlook will remain bullish as long as 1.1295 support holds, in case of pull back.

In the long term picture, 1.0339 is now seen as an important bottom as the down trend from 1.6039 (2008 high) could have completed. It's still early to decide whether price action form 1.0339 is developing into a corrective or impulsive move. But in either case, further rally would be seen to 38.2% retracement of 1.6039 to 1.0339 at 1.2516

USD/JPY stayed in consolidation above 108.59 temporary low last week and outlook is unchanged. Initial bias is neutral this week first. Upside of recovery should be limited below 110.94 resistance and bring fall resumption. Break of 108.59 will target a test on 108.12 low. Whole corrective decline from 118.65 is possibly resuming and break of 108.12 will target 61.8% retracement of 98.97 to 118.65 at 106.48. Nonetheless, firm break of 110.94 will indicate short term bottoming and turn bias back to the upside.

In the bigger picture, the corrective structure of the fall from 118.65 suggests that rise from 98.97 is not completed yet. Break of 118.65 will target a test on 125.85 high. At this point, it's uncertain whether rise from 98.97 is resuming the long term up trend from 75.56, or it's a leg in the consolidation from 125.85. Hence, we'll be cautious on topping as it approaches 125.85. If fall from 118.65 extends lower, downside should be contained by 61.8% retracement of 98.97 to 118.65 at 106.48 and bring rebound.

In the long term picture, the rise from 75.56 long term bottom to 125.85 top is viewed as an impulsive move. Price actions from 125.85 are seen as a corrective move which could still extend. But, up trend from 75.56 is expected to resume at a later stage for above 135.20/147.68 resistance zone.