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 hits two-day highs near 1.1820
EUR/USD picks up pace and reaches two-day tops around 1.1820 at the end of the week. The pair’s move higher comes on the back of renewed weakness in the US Dollar amid growing talk that the Fed could deliver an interest rate cut as early as March. On the docket, the flash US Consumer Sentiment improves to 57.3 in February.
GBP/USD reclaims 1.3600 and above
GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.
USD/JPY drops back below 157.00, as focus shifts to Japan snap election
USD/JPY is back in the red below 157.00 in the Asian session on Friday. The Japanese Yen recovers ground against the US Dollar amid some profit-taking ahead of Japan's snap general election on Sunday. The preliminary reading of the Michigan Consumer Sentiment Index report for February will be released later on Friday.
Editors’ Picks
EUR/USD: US Dollar to remain pressured until uncertainty fog dissipates Premium
The EUR/USD pair lost additional ground in the first week of February, settling at around 1.1820. The reversal lost momentum after the pair peaked at 1.2082 in January, its highest since mid-2021.
Gold: Volatility persists in commodity space Premium
After losing more than 8% to end the previous week, Gold (XAU/USD) remained under heavy selling pressure on Monday and dropped toward $4,400. Although XAU/USD staged a decisive rebound afterward, it failed to stabilize above $5,000.
GBP/USD: Pound Sterling tests key support ahead of a big week Premium
The Pound Sterling (GBP) changed course against the US Dollar (USD), with GBP/USD giving up nearly 200 pips in a dramatic correction.
Bitcoin: The worst may be behind us
Bitcoin (BTC) price recovers slightly, trading at $65,000 at the time of writing on Friday, after reaching a low of $60,000 during the early Asian trading session. The Crypto King remained under pressure so far this week, posting three consecutive weeks of losses exceeding 30%.
Three scenarios for Japanese Yen ahead of snap election Premium
The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.
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