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Key Points:

• Price action appears ready to recommence a move towards the channel bottom.
• RSI Oscillator rising within neutral territory.
• Watch for an upside move by the metal in the week ahead

Precious metals markets have seen some relatively strong swings in the past few months as the market continues to come to terms with the changing battleground which is monetary policy. Subsequently, gold's directional bias has been a little difficult to predict as it has regularly changed in response to the level of rhetoric emanating from the FOMC. However, some interesting technical and fundamental factors have appeared which could pave the way for a change in the metal's direction.

Fundamentally, Gold's price movements have been tightly connected with the Fed's monetary policy and the past few months have proved relatively negative as the central bank uses the expectation channel to hammer home their desire to raise interest rates. However, the past week has seen much of the speculation of a cycle of tightening start to reverse as the Fed Chair, Janet Yellen, is seemingly backing away from her relatively hawkish rhetoric. In fact, the central banker has been at pains to suggest that she remains ‘Cautiously Optimistic' whilst at the same time suggesting the Fed is now nearing a neutral interest rate. Subsequently, there is little prospect of successive tightening in the remainder of 2017.

The technical aspects of the precious metal are also suggestive that there is likely to be a change in directional bias in the coming days. In particular, price action has recently fallen out of the bottom of an Andrews pitchfork and was trending lower until the recent spate of Fed dovishness. Since that point, the RSI Oscillator appears to have started trending higher, within neutral territory, whilst price action appears to be consolidating. Subsequently, there is a technical view that, as the sentiment continues to build, that Gold will continue to rise back towards the pitchfork channel.

Subsequently, there are plenty of reasons to see some bullishness for the metal in the week ahead given both the aforementioned fundamental and technical factors. However, at the point where price action returns to the pitchfork, the medium term view becomes significantly hazier with plenty of doubt as to whether the metal will recommence its bullish march towards $1300 an ounce.

Ultimately, the short term is likely to be relatively beneficial to gold prices and the most likely scenario is one where price action trends towards the bottom of the channel at $1239 before further consolidation is seen. At that point, it would be prudent to take a wait and see approach as to whether gold remains upwardly biased

STOCKS

Dow (21553.09, +0.10%) is trading below crucial resistance near 21600 and while that holds, a small dip back to levels near 21500-21400 is possible in the medium term. Only on a sustained rise above 21600, would we negate the immediate fall and shift our focus on higher levels. Till then we wait and watch for price confirmation.

Dax (12641.33, +0.12%) could move higher and face an initial rejection from levels near 12800 before pausing for sometime. Overall near to medium term looks bullish. A rise towards 12800 is expected in the coming sessions.

Shanghai (3214.25,-0.12%) is trading slightly lower today but while above 3190, near term looks bullish towards 3240-3250 levels.

Nikkei (20122.34, +0.11%) is almost stable and is trading above immediate support near 20100. A rise from here is expected in the coming sessions. The fall in USDJPY in the last few sessions is keeping the Nikkei stable. In case the Nikkei bounces back from current levels, it could pull the currency pair also with itself to higher levels.

Nifty (9891.70, +0.77%) opened with a gap up yesterday and kept moving up to test 9900 much faster than we had expected. The rally to 10000 could be achieved possibly by the next week itself if the current momentum continues to play out.

COMMODITIES

The recent trading ranges for Gold (1215) and Silver (15.60) could be 1188-1231 and 15.20-16.10 respectively. Both of them are in a neutral trading zone and we will be assured of strength in Gold and Silver only when a firm and sustainable closing above 1231 and 16.50 are made by both of them. Otherwise a failure to close above those levels may push them towards 1200 and 15.20 levels respectively.

Muted price action had been seen in Copper (2.66), trading within the same range of 2.66-2.78. Only above 2.78 higher resistances of 2.85 can come into consideration. In the medium term 2.55-57 are going to be a strong support and we will remain bullish while it is trading above those levels.

We have consecutive shortage of 7.3, 3.2 and 6.3 M B in U.S oil inventories for last three weeks and at last, the movement in Brent (48.40) and WTI (46.03) during yesterday has been comparatively in line with that.From the previous week’s low of 46.28 (Brent) and 46.38 (WTI), both of them rallied to 48.40 and 46.03 respectively. Despite the lack of momentum, with the higher lows formation in the last few days, bulls are slowly gathering momentum. As discussed earlier, the upside possibilities remain open till the supports of 47.75 (Brent) and 45.60 (WTI) holds.

FOREX

Lots of data today. US CPI and Retail Sales at 12:30 GMT (18:00 IST) and US Industrial Production at 13:15 GMT (18:45 IST). Currencies might be quiet till then, as the EU Trade Balance during the day might not move the market.

Dollar-Yen (113.40) dipped to 112.65 overnight, but has bounced well from there and may try to move higher towards 114.00. If successful, it would open up chances of 116 later in the month. Failure to move up today could pull Dollar-Yen down towards 112.50 and lower next week.

The Euro-Yen (129.31) had seen a sharp decline to 128.50 yesterday and has bounced well from there. But, it has to rise past 130 today in order to make further headway next week. Else, there might be chances of seeing a fall towards 127 as well.

In this context, the Euro (1.1405) perhaps depends a lot on Euro-Yen. Euro has seen good profit-taking on Longs near 1.1480 this week and trades at a crucial juncture just now. Failure to move up past 1.1440 today would make it vulnerable to a dip towards 1.1350-00 next week.

Perhaps the biggest thing in favor of the Euro is that the German 30 Yr has broken well above a long-term declining trendline Resistance coming down from level near 3.9% in 2011.

Dollar Index (95.75) remains weak below 96.00 and the major support at 95.50-40 is back in focus now. To confirm the bullishness of Euro, Dollar Index needs a breakdown below 95.50-40. In case, 96.50 holds, the Dollar bulls can attempt a rise above 96.00. Keep an eye on the direction of the break.

Aussie (0.7735) is trading at a 4-month high as it tests the long term resistance zone of 0.7700-75 above which comes 0.7830-50. The resistance of 0.7700-75 may hold for now and trigger a correction. Caution warranted for the bulls.

Contrary to our expectation, Dollar-Rupee (64.45) dipped to 64.35 at the Open itself, perhaps adjusting for expectations of an interest rate cut on 2nd August, on the heel of the 1.54% CPI release on the previous day. The price action further reduces the chances of upside beyond 64.70-80 and increases the chances of eventual dip below 64.40-35 to target 64.15 initially.

INTEREST RATES

The US yields are trying to consolidate at lower levels. The 5YR (1.89%), 10YR (2.35%) and the 30Yr (2.91%) are all trading marginally higher and if these levels hold them we might see some reversal during next week.

The softness on PPI data overnight sugests a top has been seen, which doesn;t bode well for CPI data or Fed tightening in H2. 

Producer prices softened in June, with the broad PPI read falling to 2% YoY from 2.4% in May, although slightly above expectations of 1.9%. Core PPI disappointed by missing exactions of 2% and falling from 2.1% in May to 1.9% in June. As the monthly reads for both have declined since April the we can expect further softness in July unless we are treated to a spike higher. We don’t see this as a likely occurrence when we consider that both reads have edged lower from prior levels of resistance and our assessment of commodity prices. This is an important point which we’ll cover in greater detail shortly, especially as inflation data is out tonight for the US.

Yellen appeared before the Senate again last night, in what could be her last testimony if Trump replaces her next year. The sentiment surrounding the economy was mostly a repeat of the prior session, of a cautiously optimistic view and talk of slight balance sheet reduction. However, about President Trump’s 3% growth target Lady Yellen deemed it to be 'quite challenging'. Acknowledging it would be a wonderful target to achieve she went on to say it would require a broad set of changes form tax reforms and improved education. With all the controversy surrounding the Whitehouse and failure to reform the health care system, tax reforms currently look dead in the water so perhaps ‘challenging’ would be an understatement.

If we assess annual GDP from 1948 we can see the long-term trend points lower and that the long-term average is 3.2%. At 2.1% we are at the lower bound of the top half of the average to -1 standard deviation, which is another sign of weakness. When these long-term stats are working against you it likely requires even more effort to overpower them, let alone sustain growth on average at such a pace. As this is clearly a secular trend we doubt the abilities of any single president or government to turn this one around. So with growth more likely to trend lower than reverse the secular trend, we take a look at the other issue for the Fed; inflation.

The next chart provides a huge problem for the Fed and partially explains why traders remain sanguine about the Fed’s hiking trajectory. The CRB commodity index is a key ingredient for inflation and remains within a secular downtrend. Perhaps the low was seen in Feb 2016, but we would have to see a break above 200 before seriously considering it. By taking the YoY% rate of commode prices we can easily see the close relationship between prices paid by manufacturer’s (taken from the ISM report) and, interestingly, Core PCE inflation. The latter excludes volatile items such as commodities yet the relationship remains clear. If commodity prices are rising then this puts upwards pressure through the supply chain to the consumer and, conversely, they fall in tandem too. With commodity prices currently down -3.1% over the past 12 months and considering the time it takes for the declines deflationary effect to impact inflation, then it is more than likely inflation will remain pressured over the next few months or even the remainder of the year.

GBP/USD likely to test the dynamic resistance

Price increased on Thursday and looks to have enough energy to reach new highs, surges thanks to a weaker dollar. Approaches a major dynamic resistance after the failure to retest the 1.2798 static support.

Continues to move somehow sideways on the short term, maintaining a bullish perspective on the short term as long as the short term uptrend line remains intact. Cable edges higher as the dollar index stay much below the 96.00 psychological level, only a USDX’s rally will force the GBP/USD to turn to the downside again. USDX could move sideways on the short term, but remains to see if this will be an accumulation or a distribution movement.

We may still have a Falling Wedge on the USDX, all he needs is a bullish spark from the United States economy, which could come today if the US data will come in line with expectations or better. I want to remind you that a poor US data will send the greenback tumbling.

GBP/USD could finally reach and retest the upper median line (UML) of the major descending pitchfork, which represents a very strong dynamic obstacle. Is trading within an ascending channel, so the perspective remains bullish.

The failure to reach and retest the 1.2798 static support and the first warning line (wl1) of the ascending pitchfork has signalled that the buyers are still very strong and could drive the rate towards new highs. The behavior has changed on the short term when has started to make higher lows, but the sentiment remains unchanged as long as is trapped within the major descending pitchfork’s body.

GBP/USD signalled an exhaustion when has failed to reach the 1.3047 previous high, but remains bullish as long as is trading above the warning line (wl1), only a drop below this level will confirm an important drop.

USD/JPY undecided

We had some volatility on the USD/JPY on Thursday, right now will be better to stay away from this pair because we don’t have a clear direction on the short term. Continues to move sideways on the short term, was rejected by a resistance area and now is into a corrective phase, but remains to see how long this will be because has touched a dynamic support.

The greenback lost significant ground versus the Yen after the false breakout above the 23.6% retracement level, the current retreat is natural after the failure to reach the warning line (WL3), we’ll have a perfect buying opportunity only if the rate will jump and will stabilize above the WL3 and above the 23.6% retracement level.

Brent Oil poised to approach the $50 / barrel

Brent Oil is trading in the green and tries to take out the major dynamic resistance from the upper median line (UML) of the major descending pitchfork. A further increase will be confirmed only after a valid breakout above the 50% retracement level. Could increase further after the failure to stabilize below the 46.50 psychological level.

'Here is the zone once again. It doesn't really get much clearer that this.'

It really doesn't get much clearer than this indeed. Again.

Resistance turned support and then back to resistance again. A clear zone reactivated again and again by both the bulls and the bears.

Just take a look at the chart inside that old blog I've reposted here:

AUD/JPY Daily:

Now back to the present and take a look at the way price moved down, but also failed to make a new low, before ripping back up to that same resistance zone:

AUD/JPY Daily:

As long as price is within this zone, whichever direction you decide to trade is essentially a guess. You have no confirmation of resistance holding or breaking out and no momentum to jump aboard. All we know is that the level is in play.

Fed's Yellen said one time factors are suppressing US inflation

The Canadian dollar rose on Thursday continuing the trend that started on Wednesday by the Bank of Canada (BoC) raising interest rates by 25 basis points. With few economic indicator released on the calendar the market was focused on the testimony of Fed Chair Janet Yellen to the Senate Banking Committee. The head of the US central bank did not add anything new to the line the Fed has following since March. Rate hikes when appropriate and a soon to start reduction of the balance sheet. Inflation in the US remains low and by her estimate is due to temporary factors. If those factors are not one-time as the Fed economists believe it could mean a less aggressive rate hike path. Inflation expectations are subdued in the US and tomorrow's release of the Consumer Price Index (CPI) will validate those concerns if the core reading is near the forecasted 0.2 percent and adding the volatile food and energy the gains are a mere 0.1 percent.

The loonie rose on a combination of USD weakness due to political uncertainty, Yellen's remarks on inflation and a surge in oil prices following better than expected demand out of China.

The International Monetary Fund (IMF) warned Canada about the housing bubble and NAFTA renegotiation risks even though the economy has shown to be on a recovery track. The IMF suggested the Bank of Canada (BoC) remain on an accommodative track, suggesting the decision to raise rates was premature and urged the central bank to remain cautious and vigilant.

The USD/CAD lost 0.027 on Thursday. The currency pair is trading at 1.2729 while caught in a tight range after the Bank of Canada (BoC) hiked the benchmark rate on Wednesday. The 25 basis point is the follow up to hawkish comments from senior policy makers at the central bank. The BoC cut rates twice in 2015 to proactively prepare the economy to endure the fall in oil prices. Now those cuts are supposed to have done their job and with oil prices stable Governor Stephen Poloz is now expected to raise rates once more before the end of the year with the October meeting being priced in at a 70 percent probability.

The price of oil rose 1.162 percent in the last 24 hours. The West Texas Intermediate is trading at $45.97 following a fourth session of gains. The large drawdown of US crude inventories boosted oil prices while at the same times there were signs of growing demand around the world. Crude stockpiles fell 7.6 million barrels, with the previous report also showing a 6.3 million barrel drop.

The Organization of the Petroleum Exporting Countries (OPEC) deal with other major producers to limit production has been the biggest factor keeping prices stable. There are concerns that compliance with the deal that was near 100 percent this year, has fallen to 78 percent as some producers like Saudi Arabia have seasonal rises this time of year.

Market events to watch this week:

Friday, July 14
8:30am USD CPI m/m
8:30am USD Core CPI m/m
8:30am USD Core Retail Sales m/m
8:30am USD Retail Sales m/m

Fed's Yellen said one time factors are suppressing US inflation

The US dollar is mixed against the majors on Thursday. The greenback has bounced back against the EUR, JPY and CHF but has depreciated against commodity currencies ( NZD, AUD and CAD) and the GBP. With little action on the economic calendar traders focused on Fed Chair Janet Yellen's second day of testimonies. This time the Fed Chair was addressing the Senate Banking Committee, but stuck to the assessment that the economy is on the mend. Focusing on US employment to prove her point and once again dismissing low inflation as the result of temporary factors. Once those one time issues pass low unemployment will push inflation near the 2 percent target.

The release of the Consumer Price Index (CPI) by the Bureau of Labor Statistics on Friday, July 14 at 8:30 am EDT will be the main release with traders hoping to gauge how “temporary” are current inflation issues. Monthly inflation is expected to have gained 0.1 percent and the core reading, excluding food and energy is anticipated to have risen by 0.2 percent. The US Census Bureau will also publish retail sales with similar subdued gains expected as the paradox of confident consumers and lack of spending still plagues the US economy. Appropriately the University of Michigan will release the flash consumer sentiment at 10:00 am with a forecast of the reading matching the revised 95.1, pointing to a high confidence from surveyed consumers.

Political risk and lack of data gave investors little guidance on Thursday. Friday's data points will help the market price inflation expectations and the state of consumer spending. Although Fed Chair Janet Yellen stuck to a hawkish rhetoric on rates and balance sheet reduction there were some dovish undertones during her testimony as she doesn't believe the US can reach the 3 percent growth promised by the Trump administration.

The EUR/USD lost 0.148 percent in the last 24 hours. The single currency is trading at 1.1401 after Chair Yellen's testimony in Washington. There was little new from the Head of the Federal reserve that hasn't been said before via a statement or comments from other Federal Open Market Committee (FOMC) members. The central bank will not announce a set schedule for rate hikes as it all depends on the incoming data. Balance sheet reduction could start this year with a gradual cap on reinvesting until holdings are normalized.

The euro has risen this year on the back of rising political stability in the Euro zone after the French elections ended with the victory of Emmanuel Macron while at the same time the Russian probe has rocked the White House. The Trump administration has not been able to gain momentum and is still negotiating the healthcare reform policy that could hold up pro-growth policies from being introduced this year.

The USD/CAD lost 0.027 on Thursday. The currency pair is trading at 1.2729 while caught in a tight range after the Bank of Canada (BoC) hiked the benchmark rate on Wednesday. The 25 basis point is the follow up to hawkish comments from senior policy makers at the central bank. The BoC cut rates twice in 2015 to proactively prepare the economy to endure the fall in oil prices. Now those cuts are supposed to have done their job and with oil prices stable Governor Stephen Poloz is now expected to raise rates once more before the end of the year.

The price of oil rose 1.162 percent in the last 24 hours. The West Texas Intermediate is trading at $45.97 following a fourth session of gains. The large drawdown of US crude inventories boosted oil prices while at the same times there were signs of growing demand around the world. Crude stockpiles fell 7.6 million barrels, with the previous report also showing a 6.3 million barrel drop.

The Organization of the Petroleum Exporting Countries (OPEC) deal with other major producers to limit production has been the biggest factor keeping prices stable. There are concerns that compliance with the deal that was near 100 percent this year, has fallen to 78 percent as some producers like Saudi Arabia have seasonal rises this time of year.

Market events to watch this week:

Friday, July 14
8:30am USD CPI m/m
8:30am USD Core CPI m/m
8:30am USD Core Retail Sales m/m
8:30am USD Retail Sales m/m

Fundamental analysis in forex is one of the ways to analyze the currency markets. As the name suggests, fundamental analysis is completely different to technical analysis.

While technical analysis deals with price and historical price behavior, fundamental analysis focuses on the factors that are driving the prices in the market.

Fundamental analysis is widely used in the stock markets and primarily among investors. But it can also be used in a number of other markets, including forex and futures.

What does fundamental analysis do?

The fundamental analysis aims to look at the underlying factors in the security being analyzed. In the forex markets, fundamentals analysis looks at the effect of the economic indicators which can eventually determine the exchange rate.

There are a number of ways one can analyze the forex markets fundamentally.

Economic factors

The economic indicators play a major role in determining the market sentiment. There are a number of economic reports that are released over the month. Typically, the busiest part of the month is the first two weeks. During this period, key economic indicators are released.

Economic indicators include gross domestic product (GDP), consumer price index (CPI) and the unemployment or jobs report such as the US nonfarm payrolls report.

These three are the top economic indicators that directly have an influence on the currency pair. They are however lagging. During the rest of the month and especially in the last two weeks of the month, most of the economic releases made are based on surveys which are forward-looking indicators.

These types of releases can influence the market sentiment but only to a certain extent.

A fundamental analyst will need to go through the leading and lagging indicators in order to understand what is happening in the markets.

Central bank decisions

The central bank policy meetings are one of the most important events in the forex markets. After all, if you scratch the surface, the forex markets move because of interest rates and interest rate expectations.

The interest rates are set by central bank officials based on the policy-makers assessment of the economy. Most central banks have a mandate which is inflation targeting. (The Federal Reserve has a dual mandate of both unemployment and inflation).

Understanding this will help forex traders to focus on the economic reports that matter or will influence inflation and GDP for example.

The central bank decisions also give out forward guidance. This helps the markets to prepare for any eventual policy action from the central bank.

The forward guidance can play an important role. Markets tend to typically rally or fall based on forward guidance. Sometimes, these strong market moves can come purely based on a misinterpretation of the forward guidance or at times the markets align correctly to the central banker speeches.

Take the example of the EURUSD chart below.

In the above example, you can see the strong rally in EURUSD following the hawkish comments from the ECB president Mario Draghi that monetary policy could be tightened.

This was just a forward guidance from Draghi about what the central bank could do. As a result, traders started to buy the euro as a result in hopes that monetary policy will be tightened.

Such strong moves can often not be explained by technical analysis, and therefore traders also need to focus on the fundamental analysis aspect as well.

How to combine fundamental analysis with technical analysis?

Relying purely on just fundamental analysis or technical analysis can be similar to trading half blind. If you refer back to the above example, the sudden and sharp movements in EURUSD makes more sense when you combine both these aspects of analysis.

When looking to trade a currency pair, the first step is for the trader to build up the technical landscape, including potential target levels and invalidation or stop loss levels. Once this is done, traders need to focus on the fundamental aspects and also make a note of any events or speeches that could impact the markets.

Sometimes, it can be easy, and at times you will find that fundamental and technical analysis does not agree with each other. While it can get a bit complex, the bottom line is the fact that traders need to have a full understanding of the market before they can trade successfully.

Reading up on financial news websites and forums can be a great place to begin understanding how fundamental analysis can fit in with your trading. More importantly, you will then be able to trade with more confidence in the markets.

Financial markets are driven by two powerful emotions - greed and fear'. This is an old Wall Street saying we've heard more times than we care to remember, but still holds true today.

Whether one admits it or not, greed and fear are two drivers that have a big impact on our lives. Unfortunately, these emotions carry over to our trading, which, if not controlled, can have a detrimental effect on your account.

What is greed?

The term 'greedy' has a powerfully negative undertone. As a child, we're sure you've all been called greedy at some point. Keeping one's chocolate-covered fingers out of the cookie jar was just too hard to resist for most children.

Greed, as per The Free Dictoniary, is defined as: an excessive desire to acquire or possess more than what one needs or deserves, especially with respect to material wealth.

A clear-cut example of this was the US subprime mortgage crisis, which eventually led to a financial meltdown. Most of the blame is said to be at the hands of the mortgage lenders. It was these lenders who ultimately approved the mortgage agreements for clients with poor credit history and a high risk of default. An example of greed that doesn't include financial gain or material wealth, however, can be as trivial as a family member who scoffs all the cookies without sharing, even though they know others in the house usually want a cookie or two with desert.

So, is greed ever considered a good thing? From our perspective, yes it can be, as without greed, humans may lack the motivation required to build and achieve new things. A good example of this is when a company puts together an incentivised compensation program for their sales team, allowing sales employees to earn as much money as possible. When the company makes money, the sales executives make money. Good greed at its finest.

What is fear?

Fear, as per Dictionary.com, is defined as a distressing emotion aroused by impending danger, evil, pain etc., whether the threat is real or imagined; the feeling or condition of being afraid.

Fear is an intensely evolutionary characteristic in human beings that triggers us to avoid danger. It's likely that some of our readers here are afraid of heights, the ocean, spiders, snakes etc. Our prehistoric ancestors had the very same fears, and this is the reason we are alive today. Luckily for us, we do not have to deal the threat of being eaten anymore!

Like most things related to emotion and instincts, fear is both good and bad according to the situation. It all depends on how you respond to that fear. If we think about it, the fear itself is just a thought. You have the ultimate deciding power on how you let it affect your actions.

So, when is fear good and when it is bad?

If the fear of failure or rejection holds you back from doing something that could ultimately benefit you (a common fear nowadays), then we'd have to argue that this is considered a 'bad fear'. In this case, you would be letting fear create exactly what you're afraid of.

If the fear of failure pushes you to work harder to avoid failing, nevertheless, then we'd argue that this is a 'good fear'.

Fear, quite simply, is ubiquitous. And there is very little one can do to avoid it. Of course, we understand that everyone has different opinions on this widely-discussed subject, so do take the above as simply one view.

Does greed and fear have a place in your trading?

Unless you're a robot coated with human-looking skin, dealing with greed and fear is inevitable in trading, as it is in life. Greed, for many, is often actually one of the motivations to initially get involved in trading. Quite frankly, we don't feel there's anything wrong with this, since, as we explained above, without greed little would be accomplished in life.

As trading is a relatively solitary job, especially for the majority of retail traders/investors, we're often left thinking that we're the only ones who experience greed and fear on the charts. This couldn't be further from the truth. Let's remember that large sums of money are filtered through the markets on a daily basis from large commercial banks, mutual funds and pension funds. We're pretty sure that these guys and gals are human too, and, as such, are also susceptible to these emotions. Greed and fear is universal!

Now, let's take this a step further and look at greed and fear through the eyes of a trader named Gary. He has two year's experience in the industry and is relatively content with his trading methodology. However, he admitted that he still struggles with the emotional side of things.

In recent hours, Gary happened to come across a 'bread and butter setup' of his around the London open. He calculated his position size, double checked the setup to make sure it was in line with his trading plan and entered the trade. These trades rarely fail, according to Gary so he was naturally confident it would work out.

Ten minutes later, price was seen within shouting distance of his stop and there was no economic news scheduled on the docket. As his trading psychology books advised, he tried to remain calm and composed, but fear continued to tap away at him. He can felt his heart thud against his chest, as he contemplated moving the stop to avoid a loss. He rationalized that if he gave the trade more room to breathe, it would highly likely work out. The other side of his brain, the logical side, told him to stick to his plan. A loss is a loss, nothing to be concerned about.

If we just pause this scenario here, we're sure that most of us have experienced this: it's the fear of loss and being wrong!

Now let's look at the same trade setup, but assume that Gary's trade rallied in favour.

… Ten minutes later, price is seen within striking distance of the take-profit target. A rush of joy flooded through Gary. It was at this point in the trade, he began thinking what if this trade is a runner. So, he started looking for other places to move his take-profit order to. Meanwhile, price continued to move in his favour. Five pips ahead of the take profit (according to the trading plan), he couldn't resist the urge and moved the order thirty pips above the next resistance.

Was this in the plan? Heck NO! His plan was formed using the logical side of his brain, and by sweeping this logic under the carpet, he left himself in a very awkward position.

His eyes alternated between his profit/loss figure and the candles like his life depended on it - he was engrossed!

Was there a plan for if price did not achieve the new target? No! So, what does Gary do when price begins trading against him? Of course, he panicked.

By not following his plan, he forgot to move his stop-loss order to breakeven when he should have. And due to a recent news event, that was supposed to be low impact, the position is now trading in the red. Gary switches from greed to fear and is cursing himself for not sticking to his plan!

This is a common theme among traders, hence why learning to control one's emotions is paramount.

How does one look at controlling these emotions?

While we feel it is impossible to completely remove greed and fear from trading, here are some methods one can utilize to help minimize the impact.

• Risk what you feel comfortable with. If that is .5% of your account, then so be it. This helps one remain objective.
• We know it's difficult, but try to limit your expectations. What we mean by this is avoid thinking that this trade or that trade should win. An individual trade, if sized correctly, has very little effect on the overall results if one thinks in probabilities.
• Trade with money you can afford to lose. Trading beyond your means is a sure-fire way to make one emotional. Trading with money needed for food or housing is reckless.
• Treat trading as a business. Have a business plan in place with specific goals.
• Consider taking a break after three consecutive wins or losses. A losing streak can make you feel, well, like a loser, which can promote revenge trading. And a consecutive number of wins can make you feel like you're untouchable. Learn to recognise these signs. Take a day or two to gather your thoughts after such an event, as trading to revenge your losses will not likely do your account any favours, and trading when you think you're George Soros could have you over leveraging.
• Try to avoid looking at your profit/loss during the trade. By removing this from view, you're partially eliminating the financial element from the trade. Try to focus on pips/points.

Trading, especially to the unaware, is generally intimidating. Some would even go as far to say that it's frightening! Over time we've heard it all: 'participating in the market is a sure-fire way to lose your shirt', 'the market is rigged', 'it's gambling' - the list is endless! So why, if all the above is true, are there traders that seem to almost effortlessly pull money out of the markets on a consistent basis? Is it luck, insider knowledge or were they just born with a trading gift?

Years ago, we had the opportunity to sit down with a successful trader from the UK, England. During our chat, he said something we'll never forget: 'trading, after time, should be as easy as making a good cup of tea'. So, what is it that sets him apart from those who struggle? His response to this question was humble: 'education and psychology'. He spent time learning what makes him tick, and invested 1000s of hours into studying different methods.

In our experience, we believe that there are four core characteristics that make a successful trader: a solid education, patience, discipline and persistence.

Education

This is a crucial element. Without it, you will fail. It is as simple as that. There is a plethora of trading systems to choose from, as well as online trading schools and dedicated forums which can easily overwhelm. If you're looking to join an online trading school, do your research. Does the school back up what it claims, are there results to prove this? Also, what are other students saying about the service. Ultimately, a good school will offer unlimited access and provide continual support through your journey.

A consistently successful trader has paid this price. Some are self-taught, learning from online forums and spending countless hours in front of the charts, while others have paid for a mentor in an attempt to shorten the learning curve. Either way, commitment to learning the art of trading is crucial. Some would even say you need to be obsessed - a 'do or die attitude'.

Tip: if you're in the beginning stages of your journey, you may want to start by studying our educational resources: IC Markets Education for free. In addition to this, consider following our experienced analysts who scour the markets for opportunities on a daily basis: IC Markets Market Analysis

Patience

Patience is one of, if not the most important, trait a trader needs to possess. The majority of traders, especially those new to the industry, are what we like to call: 'eager beavers'. They enter into setups that are not considered valid (according to their trading plan [assuming they have one]) which, quite simply, is reckless. Successful traders wait for the right setup to form before pulling the trigger, exercising patience. This is why trading is, or should be, relatively repetitious once consistency has been achieved.

Tip: We know that trying to avoid taking those mediocre trades is easier said than done, so here's a handy tip that has helped traders over the years. Over the course of your next ten trades, stick to your plan religiously. That's it. Just ten trades! Only trade setups you have recorded in your trading plan. By completing this task, you'll have accomplished far more than most traders have. Try to rinse and repeat this process. Soon it'll become second nature. Trade the plan - plan the trade.

Discipline

There's no two ways about it. You have to be disciplined to be a trader. Building a trading methodology is relatively straightforward, albeit extremely time consuming. Having the discipline to follow and not second guess your method, however, is not.

Having the discipline to honour your stops, to not overtrade and to not use leverage in excess is easy in hindsight, but difficult for a lot of traders in reality. Successful traders recognise that in order to trade well they have to relentlessly follow their rules. Not doing so will likely lead to a faded account!

Tip: Follow your plan and do NOT deviate. Think about it like this... If you were managing a million dollars for a group of investors, would you deviate from your plan that's proven over time to make money? Highly unlikely! Think like a professional and have the discipline to stick to your rules.

Persistence

The definition of persistence is: 'the act of persisting or persevering; continuing or repeating behaviour'. Learning to overcome obstacles is key not only this business, but in any business. A successful trader knows that losses are inevitable. Persevering after a losing streak is difficult, even for the most experienced.

Successful traders also understand that they'll always be students of the game. Persevering to reach new levels of understanding, be it psychologically or technically, should always be a priority. It's said that: 'everything in life that is worth achieving has a price that must be paid'. Consistently successful traders are aware that sometimes they will second-guess their method, get a bad fill, miss trades, undergo losing streaks and suffer power cuts at just the wrong time. All of these, and more, can drain a trader, hence why traders need to possess a healthy dose of perseverance.

Tip: Accepting that there will be pitfalls along the way and overcoming these adversities is key!