Strategi trading untuk mendukung pengambilan keputusan Anda

It's well-known that many discretionary traders struggle with discipline, emotional control, and other psychological hurdles that can impact their decision-making process, particularly when it comes to entering and exiting trades. One of the widely recognized benefits of automated trading models, however, is the belief that these psychological barriers are removed or significantly reduced. Automation, after all, is designed to eliminate human emotion from trading decisions.

However, the assumption that psychological challenges vanish with automated trading is far from reality. As you delve into the exciting world of creating and trading “Expert Advisors” (EAs), it is crucial to understand that psychological challenges still exist, albeit in a different form. You must be prepared to face various mindset issues during the EA development and trading process.

This article outlines and aims to inform on nine key potential psychological challenges traders might encounter when working with EAs and offers guidance on how to navigate them effectively. Use this checklist to develop an awareness of potential issues and take meaningful action to enhance your trading performance. 1. Over-Optimization and Curve Fitting One of the most common challenges traders face when developing EAs is the temptation to over-optimize their algorithms.

This refers to tweaking the EA to perform perfectly in historical backtests but at the expense of real-world effectiveness. While an over-optimized EA may show stellar performance on past data, it often falters when faced with live market conditions, leading to frustration and self-doubt. To mitigate this, it is vital to stay focused on each stage of the EA creation process and avoid the trap of endless refinement.

Always keep in mind two fundamental principles: The purpose of an EA is to reliably generate profits. Once this is achieved, the next step is simply scaling the strategy. The purpose of backtesting is not just to validate that the settings work but to justify moving to a forward test. 2.

Fear of Loss Fear and anxiety can emerge when transitioning from testing to live trading, especially when real money is involved. Traders may worry about losing their capital or encountering a significant drawdown that tests their emotional resilience. This fear can act as a barrier, preventing traders from taking their EAs live or increasing trade sizes, even when results suggest it is the right time to scale up.

Developing confidence in your EA through thorough backtesting and forward testing is key to overcoming this fear. 3. Lack of Control Another psychological hurdle is the feeling of losing control when relying on an automated system. With discretionary trading, traders are actively involved in every decision, whereas, with an EA, the algorithm executes trades without human intervention.

This can lead to feelings of helplessness, especially if the EA doesn’t perform as expected. Watching trades unfold on your account without direct involvement can be unnerving, tempting traders to interfere prematurely. Resisting the urge to manually override the EA is crucial.

Trust the system you’ve created, as long as it is backed by solid logic and testing. 4. Confirmation Bias Traders may fall into the trap of confirmation bias, where they only acknowledge the positive aspects of their EA’s performance while overlooking warning signs or evidence of flaws. This bias can be dangerous, as it blinds traders to potential weaknesses that may lead to significant losses over time.

Creating a set of objective performance measures, such as maximum drawdowns and key profit metrics, can help maintain a clear and rational perspective on the EA’s success. Emotional attachment to an EA that has taken considerable effort to build can cloud judgment, so it’s important to remain objective, especially when difficult decisions arise. 5. Overconfidence Success with one or more EAs can lead to overconfidence, which is a major psychological pitfall.

Traders may begin to overlook necessary refinements, substitutions, or additional testing. Early successes might lead them to believe they can expedite the process of moving an EA to live trading and scaling it, without taking the time to gather sufficient data from a large enough sample of trades. Patience is essential when transitioning to live trading.

Ensure that a critical mass of data is available before making decisions about scaling or altering your approach. 6. Impatience Many traders expect immediate results from their EAs, which can lead to impatience. This impatience often results in premature modifications or abandonment of strategies that could have been profitable over a longer time horizon.

There are no shortcuts in trading. Allow time for your EA to demonstrate its potential over a defined period, rather than making snap judgments based on short-term performance. Regularly comparing live results to backtests over a reasonable timeframe can provide the necessary context to assess whether an EA is working as intended. 7.

Adaptability Market conditions change, and EAs that perform well in one environment may struggle in another. The psychological challenge here lies in being open to the necessity of adaptation. Some traders may hesitate to make changes or replace an EA, fearing the effort it took to develop the original model.

Consistent monitoring and having clear criteria for when adjustments are needed are vital to long-term success. Embrace the process of refinement, knowing that adaptability is essential for keeping your EA portfolio profitable in different market conditions. 8. Social Comparison Comparing your EA’s performance to others can lead to feelings of inadequacy, envy, or frustration, especially if you perceive that your system isn’t performing as well as someone else’s.

Social comparison is common among traders, but it can lead to unnecessary emotional strain unless checked. It’s important to remember that traders are often more vocal about their successes than their losses. Maintain a focus on your own progress and the unique journey of developing a system that works for you. 9.

Emotional Resilience The ability to stay emotionally resilient during drawdowns or periods of underperformance is critical. Fear, anger, frustration, and impatience can cloud your judgment and negatively impact decision-making, including premature withdrawal of an EA. With any strategy there will be periods of under and over performance.

Accepting this is critical for good long-term decision making. Obviously, time is a great “calmer” in terms of developing not only confidence but also this acceptance. Anecdotally, new automated trades are most at risk until there is a “record of achievement”.

This is one of the key reasons why trading any new EA at minimum volume as you discover how it performs under live market conditions is vital. In Summary Addressing these psychological challenges is essential for success in the world of automated trading. Taking these points on board and stepping back to review where you are as many of these may creep in insidiously over time would seem prudent.

Practical steps you can take may include: Developing a deep understanding of your EA’s logic and parameters, so you trust the system you’ve built. Setting clear performance expectations and avoiding comparisons with others. Developing self-awareness and emotional regulation to stay calm during turbulent times.

Regularly reviewing and updating their trading strategy on which the EA is based, including sighting charts of trades taken and refinement of risk management strategies are always worthwhile. Consistent monitoring is vital. Taking breaks to avoid burnout and maintaining a healthy work-life balance.

Trading EAs do create an interesting set of challenges but as stated previously, awareness that these challenges may exist is the first step to be able to take meaningful action and continue the work on yourself. Whether you ae a discretionary or automated trader, this rule is unquestionable and always the start point of long term improvement in trading decision making. If you are interested in the GO Markets automated trading platform and strategy tester, and the education we can provide relating to this topic, please feel free to connect at [email protected] at any time.

Achieving long-term success in trading requires more than just knowledge and technical skills. It depends on building a foundation of mindset, behaviours, and self-awareness. This foundation is built on three critical drivers: Trading Confidence and Reliability, Trading Self-Relevance, and Trading Locus of Control.

These drivers work together to create a framework for sustainable growth and success in the market. However, failing to implement these drivers can lead to frustration, inconsistency, stagnation, and trading outcomes that fall short of what may be possible for you. In this article we explore these drivers in detail, enriched with definitions, examples, and insights into the consequences of neglecting them. 1.

Trading Confidence and Discipline Definition: Confidence is the belief in your ability to succeed and overcome challenges, while reliability is about creating consistent, dependable outcomes through your actions and systems. Confidence is the psychological pillar that allows traders to operate with clarity and conviction, even in volatile markets. This IS the KEY ISSUE in trading discipline.

Confident traders invariably are disciplined traders. This attribute needs work, being cultivated through deliberate practice and the accumulation of small wins over time. Core Concepts: Confidence in Your Ability to Take Action: What it means: This is about trusting in your capability to take the necessary steps, no matter how small or challenging, to achieve positive outcomes.

It requires the ability to see yourself as an active participant in your success, rather than a passive observer. This confidence grows through persistence and a willingness to learn from setbacks. You need to believe that even if you don’t have all the answers today, you are equipped to figure things out over time.

Example: A trader analyses their losses to identify mistakes and refine their approach, developing resilience to re-enter the market with improved strategies. Consequences of Neglect: Without confidence, traders may hesitate to take action or abandon trades prematurely, missing out on potential gains and learning opportunities. Confidence in the Importance of Taking Action and then Testing: What it means: Recognizing the value of consistent effort and the power of experimentation is essential in trading.

Small, deliberate actions, such as testing new strategies or refining old ones, provide insights that build trust in your systems. Testing allows you to bridge the gap between theory and application, proving to yourself that what you do matters and can lead to improved results. Example: A trader refines a new risk management rule on a demo account, building trust in its reliability.

Consequences of Neglect: Neglecting testing can lead to impulsive decisions based on unverified strategies, increasing the likelihood of inconsistent or poor outcomes. Confidence in Your Trading Systems: What it means: Believing in your system means trusting the process you’ve developed, knowing it has been built on solid foundations, and understanding that, over time, it is capable of delivering reliable results. This confidence doesn’t mean blind faith—it’s about the discipline to stick to your system because you’ve put in the work to validate it.

Example: A trader follows a trend-following system backed by thorough back testing and evidence in live markets of positive outcomes. Consequences of Neglect: Without trust in your system, you may second-guess trades, frequently change strategies, or fail to commit to a plan, resulting in erratic performance. The link between this and the ability to be disciplined is undeniable.

Believing in the Impact of Learning and Action: What it means: Understanding that your effort to grow and take deliberate action is the engine that drives success. This belief empowers you to view setbacks as opportunities for growth, rather than roadblocks. It shifts your focus from outcomes solely to recognising the important processes, enabling you to learn and improve continually.

Example: A trader uses mindfulness techniques to reduce emotional errors, significantly improving decision-making. Consequences of Neglect: Failing to learn from mistakes or take deliberate action can result in repeated errors and a lack of meaningful progress. Key Takeaway: Confidence and, subsequently, discipline are essential for building consistency.

Without them, traders are likely to operate reactively, undermining their potential for long-term success. 2. Trading Self-Relevance Definition: Trading self-relevance is the alignment of your trading activities with your values, goals, and purpose. It ensures that trading is not just an activity, but a meaningful pursuit tied to your identity and aspirations.

Core Concepts: Purpose: What it means: Having a clear “why” behind your trading journey is about understanding the deeper motivation that drives your actions. Purpose provides the emotional anchor that keeps you steady, even when the market becomes unpredictable. It transforms trading from a task into a mission, connecting it to something personally significant.

Example: A trader pursuing financial independence views trading as a means to an end, which keeps them motivated. Consequences of Neglect: Without a strong purpose, trading can feel aimless, leading to a lack of discipline, motivation, and ultimately, poor results. Level of Importance: What it means: Treating trading as a priority requires committing the time, energy, and focus necessary for improvement.

It involves recognizing the importance of consistent effort and giving trading the same respect as any other profession or life goal. Example: A trader allocates specific hours for market analysis, reflecting their commitment. Consequences of Neglect: Treating trading as a low priority can lead to inconsistent effort, incomplete preparation, and missed opportunities.

Developmental Evidence: What it means: Monitoring your progress and recognizing improvement is key to maintaining motivation. Evidence of growth reinforces that your actions are effective, encouraging you to stay the course. It creates a feedback loop where success builds confidence and confidence drives further effort.

Example: A trader reviews their journal weekly to identify profitable patterns. Consequences of Neglect: Without tracking progress, traders may lose confidence, fail to learn from their experiences, and struggle to refine their approach. Key Takeaway: Self-relevance connects your trading to your identity and goals.

Neglecting this alignment can lead to a lack of direction and reduced motivation to improve. 3. Trading Locus of Control Definition: Locus of control refers to your belief about whether outcomes are determined by your own actions (internal) or by external factors (external). Core Concepts: Internal Locus of Control (ILOC): What it means: Believing that your outcomes are shaped by your decisions, behaviours, and preparation.

This mindset puts you in the driver’s seat, enabling you to take responsibility for your actions and their consequences. It empowers you to adapt, improve, and proactively address challenges. Example: A trader reviews losses to identify mistakes and improve, rather than blaming external factors.

Consequences of Neglect: Without an ILOC, traders may externalize blame, failing to take responsibility for their growth and repeating the same mistakes. External Locus of Control (ELOC): What it means: Attributing outcomes to luck, market conditions, or other external influences. This mindset often leads to feelings of helplessness, as you perceive success as being outside of your control.

Example: A trader blames sudden news events for losses without analysing their own decisions. Consequences of Neglect: An ELOC mindset often results in a lack of accountability, leaving traders feeling powerless and unmotivated. Take charge of what you can control!

Here are the actionable aspects within your control to make sure that your locus of control remains primarily internal: What You Learn: Continuously improving knowledge through deliberate effort. Your Systems: Refining strategies with evidence and adapting to market changes. Your Trading Time: Managing when and how much you trade.

Performance Measurement: Evaluating progress using clear metrics. Execution: Maintaining discipline in trade management. Permission Not to Trade: Knowing when to step back.

Consequences of Neglect: Failing to focus on what you can control leads to frustration, emotional decisions, and a reactive mindset. Key Takeaway: An internal locus of control empowers you to take responsibility for your outcomes, fostering resilience and proactive growth. Summary - Bringing It All Together Ultimately, these three drivers— Trading Confidence and Reliability, Trading Self-Relevance, and Trading Locus of Control —must work in harmony to achieve lasting success.

They create a foundation for continuous growth, adaptability, and resilience. Neglecting these principles often results in frustration, stagnation, and missed opportunities. By adopting these drivers, you align your trading journey with a mindset built for success.

One of the biggest indicators confounding markets, economists, and commentators over the past six months in particular, is the strength of the employment market. Not only are they stable, they are moving at rates outside historical ten year norms. Just have a look at Australia at the moment, unemployment at 4% averaging 35 to 40,000 jobs per month and participation in the employment market at or near record all-time highs.

This is not just an Australia story, have a look at the US where the non-farm payroll figures continue to run ahead of our expectations and forecasts. Yes it is eased from its peak in 2023/2024 but overall The US employment market is really solid. This is despite the fact that the cost of living crisis is entering its 28th month and according to all media factions is still ‘ending the world’.

The thing is - employment stability produces stronger than anticipated consumer spending. And we believe that this is what's being missed by traders and investors alike as the stability has directly supported stronger-than-anticipated consumer spending. Which in turn for western developed markets underscores why there has been resilience of the economy.

That's not to say a slowdown in economic growth is off the cards, more that the trajectory looks less steep and more delayed than previously forecasted. Retail sales data for December showed a solid 0.7% month-on-month (MoM) increase. Which suggests real consumption growth for the final quarter of 2024 was a year on year (YoY) 3%.

As long as the labour market remains resilient and equity prices avoid a sharp downturn, consumer spending should continue to hold up. Caveat is US savings rates, they are now at the lowest level in over 6 years so expect spending growth to moderate in the coming months. Something that was seen in 23/24 was weaker retail sales in Q1 of last year after a bumper December print - could repeat in 2025 following the strong December retail performance?

But you are probably thinking “who cares” what does this mean for my trades and what does this mean for my positioning? Well as explained in last week’s 5 thematics of 2025 - nationalism versus global trade supply is one area we need to look at. Because it will feed directly into the theme that has been going on now for 18 months which is the consumer price conundrum.

Why this matters markets have put so much money behind the rate cut trade impacts both positively and negatively to inflation will still be one of the biggest impactors to your trades. So looking to the US let's break down the December CPI data – there was a modest 0.23% MoM increase, for a YoY rate of 2.7%. Aligning with the 0.17% MoM rise in core Personal Consumption Expenditures (PCE), which and a YoY rate of 2.1%.

This effectively confirms the Fed’s inflation target has been hit. Think about that for one moment and the initial reactions in the market to start 2025. It was rift with bets that the Fed could be done, and that inflation would remain stubbornly high.

There is justification for this idea and more on that below. The December CPI suggests US core inflation to trend down to about 2% by mid-year. Secondly the trend is there as well - three-month core inflation has slowed to 2.2%, and six-month core inflation has eased to 2.3%.

These figures point to a clear and sustained moderation in price pressures. Going deeper – the biggest factor that is likely to drive US inflation lower is signs shelter costs have peaked and are beginning to ease. Owner’s Equivalent Rent rose just 0.23% in November and 0.31% in December.

These increases are much slower than the 0.4-0.5% monthly jumps seen in late 2023 and are more in line with pre-pandemic norms. Of course, there are caveats to this narrative. Residual seasonality in the data could skew the inflation readings.

For example, in both 2023 and 2024, softer inflation in the latter half of the year was followed by a sharp 0.5% MoM spike in core PCE inflation in January. But – if the November December trend in PCE inflation was to continue in February and March it would reinforce confidence among both the Fed and markets that inflation is on a sustainable path back to the central bank’s 2% target – and that should equal more rate cuts in the Federal Funds Rate. All things being equal - by the time the Federal Open Market Committee (FOMC) meets in May, there would likely be enough evidence to justify this move, especially to prevent real policy rates from rising unintentionally as nominal rates hold steady.

However – there are input costs coming from the newly installed Trump administration. Changes to immigration policy is likely to drive up wage and input cost on sectors such as agriculture and personal services. Then there are possible tariffs and other trade sanction issues that will also impact global supply and ultimately price.

If we look at the chatter from Fed officials, opinions vary on the implications of broader policy shifts. Hawkish members of the Fed expect these policies to exert upward pressure on inflation, while dovish officials, argue that any price increases stemming from these factors would likely be temporary and wouldn’t necessitate a monetary policy response. Either way – they are unknown knowns, and explains the flow of funds to the USD, CHF and gold.

It also probably explains further excitement in crypto. So – who is right and who is wrong? If we take the movement in the USD and bond markets as ‘right’ – inflation is going to move higher from here and the Fed is done.

Traders only now have moved from possible rate hike(s) – (yes higher) to a mild chance of a single rate cut in 2025. The Fed’s December dot plots – only has 50 basis points – so two cuts, which is not huge and explains the shifts. On the counter – if the current market trend is wrong we need to look at the economist forecast.

Most have 3 rate cuts in 2025 some have as much as 5 (so 125 basis points). If that was to be the case the speed and change in positioning will be rapid and the strength in the USD would need to be evaluated. That scenario, if it eventuates, would likely begin in May, there is plenty of time to reposition.

But risks remain, particularly around seasonality and policy uncertainties. In the interim, watch for fiscal policy around nationalism then look for changes in inflation and labour that lead to monetary policy changes in the coming months to maintain balance in the economy.

Welcome to 2025, a year that will be shaped by macro thematic events that were put in place at the end of 2024. Why we need to prioritise thematic analysis is that if we look at 2023 and 2024 indices and FX markets that were tied to the thematics of those two years outperformed peers and similar tools. Considering the S&P 500 returned a whopping 25 percent in 2024, starting the new year around the event that will shape the trading world is prudent.

So what will be the big thematics of 2025? Here are the five themes shaping the year ahead, each refined to align with evolving market dynamics: 1. The nationalisation of globalism Tricky title yes, but we are going to see a return to nationalistic policies from all walks of government.

This theme is likely to make a strong return in 2025 after pausing from about mid 2023. It will be driven by shifting global trade particularly the US and China and policy priorities of populist governments that are popping up all over the world. The push pull of nationalism versus globalism has rapidly swung back to nationalism since COVID.

Policymakers are consistently banging the drum that reducing reliance on globalised supply chains in favour of localised production and economic security. Just take a look at the policy ‘Future made in Australia’. This is a policy that is picking winners directly targeting manufacturing and a technology space that is already saturated with global supply.

The question we as traders and investors have to ask is will national policy supporting inefficient industry win out over global supply into the future? Theory would suggest not investment however follows the money and governments are piling money in. Again that's not to say it's right, it's just the flow.

With the return of a Trump administration to the White House not only is nationalistic policies going to be front and centre for investment tariffs and trade impacts will also be a major theme for 2025 and beyond. The playbook here is to review Trump 1.0 and look at the impacts on trade from 2017 to 2020. More on that below.

What is clear is the current populist shift to nationalism in global supply chains marks the biggest swing in trade systems since the 1960s. What we need to realise as investors is which multinationals and trading firms can adjust to the new reality and which will face the challenges that they are unable to survive. Identifying these changes will be key to investing going forward. 2.

China sandbagging One of the fastest developing thematics of 2025 is signs that Beijing it's starting to sandbag itself against future incoming tariffs from the West, specifically the US. Already we're seeing changes to liquidity ratios, policy and local government that haven't been in place since 2017 and 18. We're also starting to see policies around employment, aged care, and other social services that have not been enacted or tweaked in over half a decade.

Couple this with signs of increased infrastructure spending changes to manufacturing orders and a shift in direction to internal purchases. Shows Beijing really does mean business And is preparing to fight fire with fire. Most notably that ‘fire’ power is the tweaks that's happening to the renminbi.

The depreciation that has been allowed by the Peoples Bank of China (PBoC) shows very clearly that if tariffs are to be placed on Chinese exports the appearance at the import docks will be one of negligent, even better off positioning in price. It is a very, very savvy way of countering arbitrary cost increases from its biggest market, that of the US. How Washington responds to this change is likely to be just less dramatic.

Be prepared for a full blown currency trade war over the next four years as Beijing and Washington trade economic barbs. The winners and losers are already starting to present, case in point is the impact and slide in price of the Aussie dollar (AUD). Currently sitting at a 5 year low to start 2025 against the US dollar and having seen a 10 per cent decline against the JPY, and 8 per cent decline against the CHF, EUR and even a 5 per cent decline against the GBP.

The AUD’s China proxy thematic is well and truly kicking and the Aussie will be a key part of the China sandbagging thematic trade of 2025. 3. Meaningful living Do not underestimate the change in social structures around ‘meaningful living’. With aging populations across the developed world more and more societies are shifting to pursue healthier and more meaningful lives.

This is the rise of online and AI driven programming health treatments, new age drug consumption and a concentration on preventative medicine and health products. Meaningful living is moving the dial in policy, economies, and businesses. You only have to look at Apple's investment in its fitness app or the rise and rise of wearables.

Increase content on social media and the impact that AI is now having on medical and health related industries. On this point look to healthcare, particularly AI-driven advancements and obesity treatments to continue to be the stand out areas. Then there will be the changes to consumption behaviours, nutrition and affordable foods, ‘core value’ items over mass consumption as well as demand for more sustainable consumption practices.

The advantage of the meaningful living thematic is that it will likely be fairly isolated to the issues that will present from thematic 1 and 2. You will also be fairly insulated from changes of things like inflation, interest rates and politics. 4. Energy Thirst The thirst for energy supply coupled with decarbonisation is going to be a thematic not just of 2025 but over the next decade.

What will be different in 2025 is a short- and long-term supply change. Once again, nationalism will play a part here – the Trump administration has made it a cornerstone of its re-election pitch that oil will be front and centre in the US’s energy supply. However at the same time Elon Musk’s presence makes the outlook for battery storage and Electric Vehicles (EVs) also very interesting.

Longer term – energy will also face the ultimate question of 100 per cent renewables, a hybrid model that includes fossil fuels and/or a model that involves yellow cake. Uranium is facing an interesting period, the demand from China, France, the US and the like for nuclear energy is growing by the year. We are also now seeing nations that have never entertained nuclear having a debate on it as well (Australia is case in point).

Thus from a trade and investment point of view – we need to consider three points here: Supply - who are the suppliers that will benefit short term who benefits long term? And are there players that will benefit over the entire period? Demand – As stated in thematic 1,2 and 3 energy demand is only going to increase and if we include thematic 5 – not only will demand increase it could move almost exponentially.

Delivery – what form of apparatus is needed to deliver the energy nations need? That means everything from renewables to nuclear, micro units (household solar) to macro units (power plants). As well as energy storage, carbon capture and grid optimisation. 5.

AI the third digital revolution It’s been two years since ChatGPT’s debut – and in those 24 months more value has been created than in the 65 years from 1945 to 2010 and we are still early in AI’s widespread adoption. AI is being called the third digital revolution after the invention of the computer and the internet. The difference in 2025 from 23 and 24 is we are moving from “infrastructure” and “enablers” to applications.

Those programs that will drive efficiency and market leadership. Already the fight is on to be the “it” provider here as the likes of Alphabet, Meta, Microsoft and Amazon continue to redefine their individual offering. The trends here that will matter in 2025 are things like enterprise adoption of AI, which firms are adopting AI and its positive impacts?

Rapid increases in AI capabilities, surprising even the most optimistic expectations and how fast can it move? Expanded profit opportunities, reducing debates over AI’s return on investment. The faster we can understand the pace of these changes the more investors can capitalise on AI’s transformative potential.

In short, with these five thematics as our basis for 2025, it will be an exciting and transformative year.

For traders, the motivation to explore additional technical indicators often stems from a desire to enhance trading results and refine their existing system. With the abundance of information available about technical indicators, it can be tempting to incorporate new tools into your strategy. However, as the decision-maker in your trading journey, it is crucial to approach this process with a structured mindset.

The first step is to ask yourself a fundamental question: “Is it the right time to explore the use of another indicator?” This article outlines four critical questions you should consider before introducing new technical indicators into your trading system. 1) Am I Fully Actioning my Existing System? The primary motivation for adding a new indicator is often to improve the results of your current trading system. However, such improvements can only be measured if you have a well-defined system and are consistently trading it as designed.

A comprehensive system should at least include rules for entry, exit, and position sizing. Key Considerations: Are you faithfully following your current trading plan? Are you journaling your trades to track adherence and outcomes?

For many traders, the root issue lies in either an incomplete system or inconsistent execution. Honest self-assessment, backed by evidence from a trading journal, will help identify gaps in your current approach. Addressing these gaps should be your priority before adding another layer of complexity with a new indicator.

Action Steps: Review your trading journal to ensure you are consistently following your existing plan. Focus on refining your discipline and execution rather than prematurely seeking additional tools. 2) Is Adding Another Indicator the Most Impactful Change I Can Make Right Now to my trading? Improving your trading outcomes involves prioritizing actions that offer the highest potential for positive change.

While adding an indicator may seem appealing, there are other critical areas to address first: Trading Plan and Discipline: Ensure your existing plan is robust and that you are adhering to it consistently. Journaling: Regularly document your trades to provide a foundation for evaluating performance. Knowledge Development: Deepen your understanding of the indicators you already use.

Recognize what they reveal about market conditions and their limitations. Expanding your knowledge not only helps you maximize the effectiveness of your current tools but also enables you to make informed decisions about integrating new ones. In many cases, these priorities may outweigh the benefits of adding another indicator at this stage.

Action Steps: Evaluate whether enhancing your plan, discipline, or learning offers more immediate value than exploring new indicators. Commit time to mastering your existing tools before seeking additional complexity. 3) Do I Have Clarity on What any New Indicator Should Achieve? Before introducing a new indicator, you must clearly define its intended purpose.

Start by identifying whether your focus is on improving entries, exits, or another specific aspect of your trading system. Once you’ve pinpointed the objective, consider whether adjustments to your current indicators might achieve the same goal. Example: If you use a 10-period EMA as an exit signal but find it too sensitive to market noise, you could test a simple adjustment, such as switching to a 20-period EMA, before adding a new indicator.

Action Steps: Identify the specific gap in your system that a new indicator would address. Evaluate whether tweaking the parameters of your current tools could achieve the desired improvement. Test adjustments thoroughly before implementation. 4) Do I Have a Formal Testing Process in place for an evaluation of a New Indicator?

Introducing a new indicator requires a structured testing process to evaluate its impact on your trading outcomes. This process ensures that any changes to your system are based on evidence, not speculation. Testing Framework: Back-Test: Analyze past trades to determine how the new indicator would have influenced outcomes.

The goal is to justify the need for a forward test. Forward Test: Use a demo account to test the indicator in real-time market conditions. Maintain all other aspects of your trading plan to isolate the indicator’s impact.

Trading Plan Integration: If testing yields positive results, document how the indicator will be used within your trading plan. Be specific about its role and under what conditions it will be applied. Review Period: Set a timeline (e.g., three months) to assess the indicator’s performance and its contribution to your overall strategy.

Action Steps: Develop a clear and disciplined testing process. Specify the number of trades you consider sufficient for evaluating the indicator’s effectiveness. Regularly review and refine your approach based on test results.

Conclusion Adding new indicators to your trading system can undoubtedly enhance outcomes, but only when approached strategically. Before making changes, take the time to ask yourself these four critical questions: Am I fully utilizing my existing system? Is adding another indicator the most impactful change I can make right now?

Do I have clarity on what the new indicator should achieve? Do I have a formal testing process in place? By addressing these questions, you can ensure that any decision to incorporate a new indicator is well-informed and aligned with your broader trading goals.

Thoughtful preparation and disciplined execution will ultimately yield the best results for your trading journey.

The Parabolic SAR (Stop and Reverse) is a widely recognised technical indicator that has stood the test of time and is used by many trades to this day. First introduced by J. Welles Wilder in his 1978 book "New Concepts in Technical Trading Systems", the Parabolic SAR gained popularity as a trend-following tool due to its simplicity and visual appeal.

By plotting dots above or below the price, the indicator facilitates traders to identify potential reversal points in the market that can theoretically be used as the basis for long or short strategy entry points and, of course, for exit also. However, like any trading tool, it is worth emphasising that the Parabolic SAR works best when combined with other criteria and considerations and an understanding how it works is necessary prior to developing a trading strategy around this approach to trading reversals. This article explores how to effectively use it for entry and exit points, discusses its advantages and limitations, and introduces refined methods to improve its reliability.

What Is the Parabolic SAR? In simple terms, the Parabolic SAR is a price and time-based indicator designed to highlight potential trend reversals. Its dots appear: Below the price during an uptrend, indicating bullish conditions.

Above the price during a downtrend, indicating bearish conditions. As trends develop, the dots "accelerate" closer to the price, making the SAR more sensitive to price movements. This acceleration is driven by a so-called “ Acceleration Factor (AF)”, a parameter that increases as the trend continues.

Ultimately, and as a sign that a trend may be ending, the dots change from below to above and vice versa depending on trend direction. So, as with any strategy with trend following at its basis this indicator can be used in decision making for such strategies. Before we get into its actual use there are a few noteworthy benefits and limitations worth highlighting.

The chart example below (4-hourly gold CFD) shows the basic concept of SAR dot entry and exit for long and short trades respectively. Advantages of the Parabolic SAR The Parabolic SAR offers a few key benefits that can add to both its ease and method of use, these include: Visual Simplicity: Its dots provide an intuitive, easy-to-read representation of trend direction and potential reversals. Dynamic Trailing Stop: The SAR adapts to price movement, making it a useful tool for managing risk and locking in profits.

Trend Confirmation: It helps traders stay in trending markets by signalling when to hold positions or whether it may be worth considering exit. Versatility: Although originally designed for use on stock charts, calculation of the dots happens automatically irrespective of the chart you are applying it to, thus contributing to its popularity through adapting to any instrument (e.g. Forex, index or commodity CFDs) or timeframes.

Limitations of the Parabolic SAR Despite its advantages, the SAR has notable drawbacks: Choppy Market Signals: In ranging or sideways markets, the SAR often generates false signals, leading to unnecessary trades. Lagging Nature: While the SAR adapts over time, as with the majority of platform based indicators, it can lag during fast-moving trends, resulting in delayed exits. Lack of Context: The SAR does not consider market context, previous support and resistance levels, or external factors like news events.

Explanation of the Parabolic SAR Settings (PSAR) The two key default settings of Step (0.02) and Maximum Step (0.20) that you will see when you open the indicator on your trading platform, aim to strike a balance between sensitivity and stability. These settings are generally designed to work well in trending markets, and although we usually suggest that when first used, you use the default settings, you will discover in time there may be some benefit in adjustment for different trading styles or market conditions. As with all indicators used on your charts, you should not only understand what the indicator is telling you (and what it is not!), but also what settings indicate so that you may adjust to suit your particular trading style and objectives.

Understanding how these settings affect the indicator's responsiveness is key to optimising the potential use of this indicator. Step (Acceleration Factor): Default Value: 0.02 What It Does: The Step determines the rate at which the SAR dots accelerate toward the price as the trend progresses. Each time a new high (in an uptrend) or a new low (in a downtrend) is reached, the SAR calculation becomes more sensitive by increasing the Step value.

The Step starts at the initial value (e.g., 0.02) and increments by the same amount with every new extreme point in the trend. Impact: A smaller Step (e.g., 0.01) results in a slower acceleration, making the SAR less sensitive but more suitable for long-term trends. A larger Step (e.g., 0.03 or 0.05) increases sensitivity, making it more responsive but prone to false signals in choppy markets.

Maximum Step: Default Value: 0.20 What It Does: The Maximum Step is the cap for how far the Step value can increase during a trend. It ensures that the SAR does not become overly sensitive as the trend progresses, which would lead to premature reversals being signalled. Impact: A lower Maximum Step (e.g., 0.10) results in fewer reversals being signalled, making the SAR more stable in strong trends.

A higher Maximum Step (e.g., 0.30) increases sensitivity and may generate earlier exit signals but can also lead to more false positives. How These Settings Work Together The Step and Maximum Step settings control how quickly the SAR dots move closer to the price and how responsive the indicator is: At the start of a trend, the dots are further away from the price. As the trend strengthens, the Step increases, bringing the SAR dots closer to the price.

Once the Step reaches the Maximum Step, no further acceleration occurs, maintaining stability during extended trends. Examples of the Default Settings in Action Slow and Strong Trends With the default Step of 0.02 and Maximum Step of 0.20, the SAR is moderately sensitive: It allows the price some room to fluctuate without immediately signalling a reversal. This is ideal for trending markets where the price steadily moves in one direction.

Use a smaller Step (e.g., 0.01) and Maximum Step (e.g., 0.15) for smoother, less frequent signals that may suit swing or long-term traders. Short-Term, Volatile Markets If you increase the Step to 0.03 or 0.05, the SAR becomes more responsive (and so may suit scalpers or short-term traders): It adjusts faster to price changes, signalling reversals more quickly. However, this can lead to more false signals in sideways or choppy markets.

Use the Parabolic SAR for Entry Using the Parabolic SAR for entries is most effective when combined with other criteria to filter out false signals. Consider the following refined entry criteria: Dot Switching: Look for the SAR dot to switch from above the price to below (for a long entry) or from below to above (for a short entry). Candle Structure: For long entries, an entry candle close in the top 30% of its range, may suggest bullish momentum.

For short entries, an entry candle close in the bottom 30% of its range, may support bearish momentum may be developing. Sequence Length: Confirm that the previous SAR sequence lasted for at least 3 dots. This helps avoid signals caused by short-lived consolidations and retracements.

Volume Confirmation: Look for increasing volume during the breakout or reversal, which strengthens the likelihood of a genuine trend shift. Confluence with Additional Indicators: There may be some benefit in combining the SAR with complementary indicators such as the MACD. Look for MACD line crossovers to confirm the trend and increasing momentum as seen in the histogram bar length.

Proximity of previous key levels: Close proximity of previous resistance levels or swing highs above a potential long trade may be an indication that upside potential may be limited. Therefore, some caution in entry may be prudent, Obviously, the reverse is the case for short trades i.e. watch for close proximity of previous support or swing lows near short entry, Entry Criteria 2: Alternative approaches Although not commonly discussed, in an attempt to avoid the risk of a consolidating market with dots frequently switching above and below price there are a couple of additional approaches that may be worth consideration and testing. Using higher timeframe confirmation of trend: This could be using any presence of trend indicator e.g., a 4-hourly chart when trading an hourly timeframe, Using a breach of the price of the first dot of the previous sequence: This may suggest a move out of any potential sideways trend.

Let’s call this an “A dot” for this explanation. The chart example below (GBPJPY 30min) shows using the A-dot of previous SAR dot sequence a breach of which confirms move above potential sideways trend risk and potentially a higher probability trade opportunity (although lesser return) than standard approach. Exit Criteria: Using the SAR for Reversals The Parabolic SAR excels at signalling trend exits, especially when a trend reversal is imminent.

Here’s how to use it effectively for exits: Dot Switching: A dot switching to the opposite side of the price can serve as an early warning of a potential reversal. Additional Reversal Signs: These can be added to the basic dot switching described above. Candle Structure: Look for candle reversal patterns, such as engulfing candles, Doji formations, or pin bars.

Volume Drop: Declining volume near the end of a trend may signal that momentum is fading. Additionally, when the dots reverse there may be an increase in volume as the reversal is confirmed, Trailing Stop: Use the current SAR dot level as a trailing stop to lock in profits as the trend progresses. Summary The Parabolic SAR is a versatile and visually intuitive tool that can help traders identify trends, manage trades, and spot reversals.

However, it is most effective when combined with other criteria, such as candle structure, volume, and momentum indicators. If one invests time in measurement and testing then alternative settings can be explored that may better suit your desired trading objectives and strategy choice. Using alternative approaches as discussed above, may be also worth testing consideration, as well of course, its inclusion within a defined exit strategy.

As with any indicator, while the SAR alone is insufficient for making trading decisions, it has potential as part of a broader trading strategy. By understanding its strengths, limitations, and applications, traders can better harness the power of this classic indicator to navigate the complexities of the markets and instruments and timeframes of choice. We trust that this article not only adds to your knowledge and trading potential but would be delighted to welcome you to our live events where strategies such as this are discussed and demonstrated live in detail.