What Makes a Great Trading Mentor? Understanding the Bid and Ask Price in Forex, Understanding the Detrended Price Oscillator (DPO)

Happy Sunday,

Welcome to this week’s edition! We’ve packed it with valuable insights to help you on your trading journey. This week, we’re exploring what makes a great trading mentor and how the right guidance can accelerate your progress. We’re also breaking down the bid and ask price in forex, so you can better understand trade execution costs. Plus, we’re diving into the Detrended Price Oscillator (DPO) to help you identify short-term price cycles and potential reversals. Let’s jump in and take your trading skills to the next level!

This week’s edition:

🧠 What Makes a Great Trading Mentor?

📈 Understanding the Bid and Ask Price in Forex

🚀 Understanding the Detrended Price Oscillator (DPO)

Trading can be a lonely journey, especially for those starting out. Unlike traders working on bank trading desks or investment firms, many independent traders lack direct access to experienced mentors. Instead, they turn to books, forums, and online resources in search of guidance.

A mentor is more than just an instructor; they should be a trusted guide who helps you navigate the challenges of forex trading. Here are key traits to look for in a good trading mentor:

✅ Proven Credibility

A mentor should have a solid track record of success—ideally three years or more—along with detailed records explaining their trading approach. Without evidence of consistent performance, it’s hard to trust their guidance.

✅ Ability to Inspire

A great mentor should motivate and challenge you to grow, not just as a trader but in all aspects of life. Your conversations should go beyond technical strategies and include discussions about goals, discipline, and mindset.

✅ Trust & Transparency

Trust is crucial. You’ll likely be following your mentor’s trading style while receiving honest feedback on your own performance. If you don’t fully trust their judgment, it’ll be difficult to learn and improve.

✅ Realistic & Honest Advice

The forex market is unpredictable. If a mentor promises 100% success, that’s a red flag. A good mentor sets realistic expectations, preparing you for the ups and downs of trading while teaching you how to manage risk.

✅ Encourages Independence

A mentor’s ultimate goal should be to help you become a self-sufficient trader. At the end of the day, you’ll be making the trading decisions—so a mentor should guide you toward building your own strategies and confidence.

Finding the Right Mentor

Good trading mentors are rare, and many charge high fees. However, there are experienced traders who genuinely enjoy helping others without expecting financial gain. If you’re looking for a mentor, consider engaging with trading communities and forums.

Finally, mentorship is a two-way street. A great mentor invests time in those who are committed, disciplined, and willing to put in the effort. Before seeking a mentor, ask yourself: "Am I ready to learn and work hard?"

When trading forex, you’ll always see two prices: the bid and the ask. These prices determine how much you’ll pay when buying or how much you’ll receive when selling a currency pair. Let’s break it down in simple terms!

🛒 Real-World Example

Imagine you're at a farmers' market, eyeing a basket of strawberries. The vendor tells you the price is $5 (ask price), but you offer $4 (bid price). If the vendor doesn’t lower the price, you either accept their ask price or walk away.

This same principle applies in forex!

💰 What Are the Bid and Ask Prices?

A forex quote consists of two numbers:
📌 Bid Price – The price at which you can sell a currency pair.
📌 Ask Price – The price at which you can buy a currency pair.

For example, if EUR/USD is quoted as 1.10252 / 1.10264:
✔ 1.10252 is the bid (sell price).
✔ 1.10264 is the ask (buy price).

If you want to buy, you’ll pay the ask price (1.10264).
If you want to sell, you’ll receive the bid price (1.10252).

📈 What is the Spread?

The spread is the difference between the bid and ask prices. It’s how brokers make money, similar to a store marking up prices for profit.

Example:
🔹 Your broker quotes EUR/USD at 1.10252 / 1.10264.
🔹 The spread is 1.2 pips (1.10264 - 1.10252).
🔹 This small price difference is your trading cost!

Understanding bid, ask, and spreads helps traders manage costs and execute trades effectively. Always check spreads before entering a trade, as they can widen during volatility.

The Detrended Price Oscillator (DPO) is a technical indicator that helps traders analyse short-term price cycles by removing long-term trends. By focusing on short-term fluctuations, the DPO makes it easier to spot potential reversals, peaks, and troughs in price movements.

📉 How Does the DPO Work?

Instead of following the overall trend, the DPO isolates short-term price cycles by eliminating longer trends. This allows traders to see how prices move independently of larger market swings.

Since DPO values are shifted to the left, the indicator aligns with price peaks and troughs rather than predicting future movements.

🛠 How to Use the DPO in Trading

🔹 Identify Price Cycles – Count the periods between peaks or troughs to estimate cycle length.
🔹 Spot Reversals – Large peaks and dips in the DPO can signal potential trend changes.
🔹 Fine-Tune Settings – Adjust the DPO period to match different market conditions.

📊 How to Calculate the DPO

1️⃣ Choose a trend period (e.g., 20 days).
2️⃣ Divide the period by 2 and add 1 (e.g., 20/2 + 1 = 11).
3️⃣ Take the Simple Moving Average (SMA) of the price from n days ago.
4️⃣ Subtract this SMA from the current closing price.

🔹 DPO Formula:
📌 DPO = Closing Price (n/2 + 1 periods ago) - n Period SMA

By using the DPO, traders can focus on short-term price movements without getting distracted by long-term trends. However, it’s best used alongside other indicators for confirmation before making trading decisions.