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Hirschhorn: Trader Talk with Todd Gordon, Pt. 1

Todd Gordon is a senior technical strategist & trader at Forex.com. In part one of this interview with market coach Doug Hirschhorn, he discusses the approach he's developed in his 10 years of trading. His most important lesson: Learning how to sit on his hands.

When someone sits down to make their first trade, Gordon says, you feel like your job is to start trading. It's a natural inclination.

People tend to feel the need to work all day long. But in the world of trading, that's counterproductive. The first thing you need to learn to do is to watch the market and leave your trading platform alone. Then, when you start to see opportunities that match up with your trading style, you're more inclined to enter the market.

If you're just banging away all day, you're not learning to be selective in your trades.

It's also important to know you're not meant to trade all markets. You need to have the patience, experience and discipline to look at a market and say, 'is this market good enough for my money?' That only comes from experience. So, if you're a new trader, don't get too discouraged if you aren't able to identify your favorable markets. In time, you need to realize there are certain situations where you should be in the market and more situations when you probably shouldn't.

By nature, I'm a technical trader. I favor Elliott Wave analysis. What that's done for me is bring about disciplined pattern recognition. So I know when I should be in a market and when I should be out.

I take it a step further: With pattern recognition, I should be able to see the trade at least three hours before I put the trade in the fund. And it's a rule I have—if I haven't committed my trade to paper, I'm not allowed to trade more than 50 percent of the allowed size of the fund on a particular idea.

Plan your trade, trade your plan literally means see the trade in the future, realize this is a value area where you want to be involved in the market. Then, once you've had time to digest the trade, let it come to you and execute without hesitation.

The world got pretty 'bulled up' on dollars. And then all of a sudden, China was off about 20 percent from its highs, crossed into bear market territory, and the world was buying dollars for the risk aversion trade. Then the oil inventories number on Wednesday just blew the dollar out of the water.

People might be second guessing that game plan, but I'm saying probably another 2 to 3 percent down on the dollar, around 77, 77 ½ on the dollar index, but I'm going to be looking for that value area to start buying dollars again.

Remember, says Gordon, identify value areas based on your style of looking at the markets. And have the patience to let the market come to you. Don't chase a market, there's an opportunity right around the corner if you miss this one.

Think better, invest smarter.

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Doug Hirschhorn is the chief executive officer of Edge Consulting, a firm specializing in “Peak Performance Coaching.” He holds a Ph.D. in Psychology with a specialization in sport psychology, and has offices in New York and South Florida. His client list includes elite athletes as well as many of the largest banks, hedge funds and financial institutions in the world. Doug is presently at work on his new book, 8 Ways to Great (Putnam, 2010).

Have a question for Doug? You can reach him through his Web site, DrDoug.com

Disclaimer: Doug Hirschhorn's expertise is in the psychology of achieving peak performance. He is not a financial advisor and does not make trading or investment recommendations or provide trading or investment advice. He is an expert on the mental game. Although Doug Hirschhorn has a Ph.D. in Psychology with a specialization in sport psychology, he is not a licensed psychologist and does not provide therapeutic, clinical or counseling services.