This article written by Gernot Daum was originally published in the April 2014 issue of Traders' Magazine.
What does a trader need to complete his trades in a disciplined way? Confi dence! And how can he get that? By knowing what he is doing and by completely understanding the situation in which he happens to be trading and by executing the very trades that match this understanding. Read here how a retail investor can mentally adjust to the “trading game”, in which he is pitted as a David against the major investor Goliaths. What are the strengths and weaknesses of the Goliaths and what are those of trader David? What is his slingshot and how can he use it best?
Major investors have a number of advantages:
• Well-trained staff: Portfolio managers can be expected to have received the best possible training and to have plenty of work experience.
• Technology: The latest software, good analysts to use it properly, fast computers, high-speed lines.
• Sufficient capacity to conduct fundamental analyses. While good fundamental analyses comes at high cost, large investors can afford to meet them.
• Good contacts: The large investors’ money managers have contacts in all directions of the financial sector, which gives them sources of information that retail investors can only dream of.
• Size: They can move the market.
- Gernot Daum, who is a trained computer scientist, has been a swing trader for 14 years, also focusing in recent years on the intraday trading of futures and stocks.
What does a trader need to complete his trades in a disciplined way? Confi dence! And how can he get that? By knowing what he is doing and by completely understanding the situation in which he happens to be trading and by executing the very trades that match this understanding. Read here how a retail investor can mentally adjust to the “trading game”, in which he is pitted as a David against the major investor Goliaths. What are the strengths and weaknesses of the Goliaths and what are those of trader David? What is his slingshot and how can he use it best?
Amateurs and Professionals
The situation in the trading arena is as follows (and some traders – especially neophytes – are not quite aware of it): Alongside a small number of major investors (equity funds, pension funds, and so on) that can safely be called professionals, there is a large number of so-called retail investors. Of these, most have not progressed beyond the “amateur” status yet. And unlike in sports where professionals and amateurs compete against each other in separate leagues, amateur traders are, of necessity, pitted against the professionals from the very beginning.Major investors have a number of advantages:
• Well-trained staff: Portfolio managers can be expected to have received the best possible training and to have plenty of work experience.
• Technology: The latest software, good analysts to use it properly, fast computers, high-speed lines.
• Sufficient capacity to conduct fundamental analyses. While good fundamental analyses comes at high cost, large investors can afford to meet them.
• Good contacts: The large investors’ money managers have contacts in all directions of the financial sector, which gives them sources of information that retail investors can only dream of.
• Size: They can move the market.
Editors’ Picks
EUR/USD stays weak near 1.1850 after dismal German ZEW data
EUR/USD remains in the red near 1.1850 in the European session on Tuesday. A broad US Dollar bullish consolidation combined with a softer risk tone keep the pair undermined alongside downbeat German ZEW sentiment readings for February.
GBP/USD holds losees near 1.3600 after weak UK jobs report
GBP/USD is holding moderate losses near the 1.3600 level in Tuesday's European trading. The United Kingdom employment data suggested worsening labor market conditions, bolstering bets for a BoE interest rate cut next month. This narrative keeps the Pound Sterling under bearish pressure.
USD/JPY slides further below 153.00; eyes 200-day EMA amid a firmer JPY
The USD/JPY pair meets with a fresh supply on Tuesday and slides further below the 153.00 mark heading into the European session, reversing a major part of the previous day's positive move. Spot prices, however, manage to hold above the 200-day Exponential Moving Average support, around the 152.50 region, preserving a tentative bullish bias despite a shallow cushion.
Editors’ Picks
EUR/USD stays weak near 1.1850 after dismal German ZEW data
EUR/USD remains in the red near 1.1850 in the European session on Tuesday. A broad US Dollar bullish consolidation combined with a softer risk tone keep the pair undermined alongside downbeat German ZEW sentiment readings for February.
GBP/USD holds losees near 1.3600 after weak UK jobs report
GBP/USD is holding moderate losses near the 1.3600 level in Tuesday's European trading. The United Kingdom employment data suggested worsening labor market conditions, bolstering bets for a BoE interest rate cut next month. This narrative keeps the Pound Sterling under bearish pressure.
Gold pares intraday losses; keeps the red above $4,900 amid receding safe-haven demand
Gold (XAU/USD) attracts some follow-through selling for the second straight day and dives to over a one-week low, around the $4,858 area, heading into the European session on Tuesday.
Canada CPI expected to show sticky inflation in January, still above BoC’s target
Economists see the headline CPI rising by 2.4% in a year to January, still above the BoC’s target and matching December’s increase. On a monthly basis, prices are expected to rise by 0.1%.
UK jobs market weakens, bolstering rate cut hopes
In the UK, the latest jobs report made for difficult reading. Nonetheless, this represents yet another reminder for the Bank of England that they need to act swiftly given the collapse in inflation expected over the coming months.
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