Why do most traders enter at the wrong price?

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Why do most traders enter at the wrong price?

Postby ivanlim » Sat Jul 24, 2010 1:55 am

Hi all. I was wondering why do so many traders enter at the wrong price,ending up losing money? When they see a strong uptrend,making a new high,many traders buy the currency pair. But why does the price reverse,since there are so many buyers in the market?
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Re: Why do most traders enter at the wrong price?

Postby JimmyMac » Sat Jul 24, 2010 3:31 am

ivanlim wrote:I was wondering why do so many traders enter at the wrong price,ending up losing money?

The "wrong price" for one person obviously represents the "correct price" for another.
I think you'll find the primary reason folks (usually amateurs with no industry training or exposure) lose money is because they're inadequately prepared for the type of endeavor they're undertaking.
In other words, they invest money into an arena where they're totally unprepared & raw both financially & psychologically.

ivanlim wrote:When they see a strong uptrend,making a new high,many traders buy the currency pair.

I guess it all depends on their interpretation, definition & understanding of what constitutes a strong trend?
Also, are you talking about new intraday highs?....or new intra-week highs?...or new intra-month or intra-year highs?
There are very different scenarios & events that will dictate & influence how players view & trade these technical zones.

If folks spent more time investigating & observing the behavior of price as it moved & worked around supply & demand zones, they'd begin to realize that trends really don't carry quite as much clout as they originally thought.

ivanlim wrote:But why does the price reverse,since there are so many buyers in the market?

How do you know so many people are buying the market?
How do you know they're not scaling out into strength? (selling to new & late entrants).

The only reason price reverses is because there are less folks buying & either more folks prepared to "offer" or sell at a specific level, or take profit (which by the very nature of its function, automatically instigates an order in the opposite direction), meaning they cancel out their long order & sell to close out the position.

In other words, supply enters the market to either stall or reverse the price, & more often than not, it enters the market at a zone that previously turned or stopped the price flows :wink:
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Re: Why do most traders enter at the wrong price?

Postby shona123 » Sat Jul 24, 2010 6:56 am

ivanlim wrote:Hi all. I was wondering why do so many traders enter at the wrong price,ending up losing money?

Would you care to define wrong price for me?

If you trade according to a well-drilled, structured template that has proven itself in the types of market conditions you're familiar with, then if the entry goes awry your risk module will take you out safely.
The flip side being, when the entry moves into profit, your trade management module will track the trade & ensure you close it out in accordance with the aims & objectives you set for that specific position.

Obviously, each visit to the market will carry slightly different objectives due to the constantly evolving volatility, market rhythm & bias. You can operate the same set up & trigger combination to get into a trade, but the management (& to a certain degree, the risk) will need to be tailored to the current market rhythm.

As Jimmy say's, the main reason so many rookies consistently lose money in the trading business is because they're usually ill-prepared in the first place, they lack both market & technical awareness & they don't possess a structured plan to take advantage of the differing market conditions.
They try to trade different market rhythms with the same set of tools, aims & objectives & that is a recipe for disappointment & confusion.
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Re: Why do most traders enter at the wrong price?

Postby ivanlim » Mon Jul 26, 2010 5:06 am

Please forgive my inept to absorb such deep information,at least to me. Just to clear things up,a trend or correction runs out of steam when the price has reached the closed many take profit positions,therefore reducing the buyers,and letting the sellers take over?
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Re: Why do most traders enter at the wrong price?

Postby JimmyMac » Mon Jul 26, 2010 2:49 pm

ivanlim wrote:Just to clear things up,a trend or correction runs out of steam when the price has reached the closed many take profit positions,therefore reducing the buyers,and letting the sellers take over?

That's the general gist of it Ivan, yeah.
Prices are influenced by a variety of drivers.
Some of it is event driven, where individual fundamental items or unique economic events spook the market (generally when the actual results are way out of whack from the market expectation) & cause extreme fluctuations & abberations in the price action.

Some of it is order book driven, where Option barrier defenses, large groups of stops & Commercial activity heavily dictate the direction & destination of the order flow.

Some of it is driven by pure profit taking (& technical re-positioning) at key levels & either affected by a kick up or kick down in liquidity, which usually translates to prolonged periods of range consolidation.

But at the end of the day, price pauses & reverses due to the fact supply absorbs & overwhelms demand & vice versa.
You can see where it's likely to occur & the results of when it's taking place by perusing & observing your technical charts.
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Re: Why do most traders enter at the wrong price?

Postby ivanlim » Tue Jul 27, 2010 6:06 pm

Oh,that explains much! Thanks for all your help guys and take care
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Re: Why do most traders enter at the wrong price?

Postby forex_edo » Wed Nov 26, 2014 10:12 am

JimmyMac wrote:
ivanlim wrote:Just to clear things up,a trend or correction runs out of steam when the price has reached the closed many take profit positions,therefore reducing the buyers,and letting the sellers take over?

That's the general gist of it Ivan, yeah.
Prices are influenced by a variety of drivers.
Some of it is event driven, where individual fundamental items or unique economic events spook the market (generally when the actual results are way out of whack from the market expectation) & cause extreme fluctuations & abberations in the price action.

Some of it is order book driven, where Option barrier defenses, large groups of stops & Commercial activity heavily dictate the direction & destination of the order flow.

Some of it is driven by pure profit taking (& technical re-positioning) at key levels & either affected by a kick up or kick down in liquidity, which usually translates to prolonged periods of range consolidation.

But at the end of the day, price pauses & reverses due to the fact supply absorbs & overwhelms demand & vice versa.
You can see where it's likely to occur & the results of when it's taking place by perusing & observing your technical charts.


I think so..
Most of the trader must wrong to predicting the market, its really difficult to make decision where the market will going on..
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Re: Why do most traders enter at the wrong price?

Postby Moreno » Thu Feb 05, 2015 11:35 am

prediction in forex iti not always exactly 100%. sometimes we do not predictions right. therefore we need to continue to learn and practice trading so that the prediction will be more accurate
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Re: Why do most traders enter at the wrong price?

Postby myfxpt » Mon Feb 23, 2015 8:55 pm

darklot wrote:this what I learn while perform scalping strategies with Tickmill account : market are not the only thing to predict, never was, and we never will able to do that! it's a real fact! and the only thing remain is our anticipation called "money management" in real practice it's become sequence of order management.
for now I develop a custom trailing stop, with 0 stop loss order level, and give a flexibility to modify order as near as current market price.


You have hit the nail squarely on its head! The only thing we can predict with 100% accuracy is our stop-loss...the rest is pure speculation. We can anticipate a price direction based on the indicators we use, and use probability based on the previous outcomes of those indicators, but there are no guarantees. As "darklot" states, money management is the only way to anticipate what will happen if things go wrong. It's about keeping losses small (Entry Stop-Loss), and letting profits run (Trailing Stop-Loss).

Take a look at the strategy section of my website, Risk & Trade Management (http://www.myfxpt.com) to see what money management can achieve. You may also be interested in an article I wrote for Myfxbook http://www.myfxbook.com/community/new-traders/risk-management-made-easy/880025,1 which outlines risk management.
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Re: Why do most traders enter at the wrong price?

Postby small_pips » Sun Mar 01, 2015 1:28 pm

But for professional trader they know where will market going on..
They know well about fundamental and technical, so we must learn from professional. Or you can make your money managed in PAMM from liteforex broker. or you can ask any questions in Liteforex's blog, there is many expert about forex there.
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