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Recommendations that change your life
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Little known or applied Forex trading principles
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Some interesting Forex Trading principles have been extracted from interviews
with experienced successful traders and are listed below. These are bound to
surprise many traders and may explain why 95% of Forex traders fail and only
5% succeed.
1.You DON'T need to know the direction the price is going to go to trade the
Forex market. The straddle trading techniques will help you to have
successful trades even when you are unsure of the direction the price will
move.
2 The probability of a transaction being successful is dependent on the
potential volatility behind the transaction. The amount of PUSH behind the
move is more important. Most traders spend 90% of their energy trying to find
the direction on a move and only 10% on volatility. What's the use of getting
the direction 100% right when the move only goes for 15 pips.
3. Trade ahead of the market. Anticipate the transaction before it happens.
High probability trades with appropriate entry points can normally be
anticipated well in advance and programmed trades using entry orders (waiting
orders) with targets and stops can be used.
4. Knowing the rhythm and nature of the market allows you to trade
appropriately.Learn how to read the trading conditions of the FOREX market
and how to take advantage of natural movement (Waves and channels) of the
market. Also know when not to trade. Most Traders ignore this and try to
impose a technical analysis technique on inappropriate market conditions.
This is probably the biggest cause of beginner trader frustrations.
5. Have a simple trigger that will get you into the market. Firstly know
which are trading signals and what is a trading trigger. In the end the
simpler you can make your trading techniques the better. Having hundreds of
indicators makes trading complicated and confusing. Having simple but
effective signals makes easy to make trading decisions (Pull the Trigger)
6 Use leading indicators to warn you about a potential transaction well in
advance. Most indicators are lagging and give late signals. The Forex market
is faster than other markets and you need as much advanced warning about
potential moves as what you can get. Learn about leading indicators that
give signals well in advance of the more traditional indicators.
7 Keep Emotions out of the trade as much as possible. There are many ways of
automating all the elements of a trade so that you don't have to watch the
screen all day long and become emotional about the outcome of the transaction
(using entry orders etc.)
8 Before you trade live thoroughly back test and demo trade your technique.
Properly test and improve your strategies before going live. 90% of new
traders start trading a technique that they have not personally tested. They
go on the trust of what they have been told. Testing a technique ensures that
you can apply it under any conditions and that you understand it. It also
gives you an opportunity to add improvements.
9 Keep your safety stops out of the traffic. In appropriate placement of
stops is a mjor cause of trading failure. In many cases an unsuccessful
technique can become successful by just increasing the stop levels. Spend
time finding your personal comfort level in this area. There are a number of
techniques to not use stops at all.
10 Successful traders find the exit of a successful transaction is the most
difficult part of trading. Exiting transactions optimally takes experience.
11 Assume that the market will trend in the direction that it is currently
going until you see conclusive proof of a possible reversal The objective of
trading is to enter a new trend and stick with it until it is over.
12 Money and risk management is essential to a long term relationship with
the Forex Market Many methods used by successful traders are presented for
your consideration. I don't make recommendations or give advice in this area
but knowing the alternatives enable you consider am appropriate one your way
of trading
13 Technical Analysis techniques have strengths and weaknesses. Know both.
Know then to use Technical Analysis and when not. Certain indicators only
work in trending markets and others in trading markets. Some trades can be
done without charts. learn as much as you can about trading.
14 A trading strategy contains the time frame traded, warning signals,
trigger signals, ways of managing the transaction, way of exiting the
transaction, money management approach and risk management. It is not only
about the entry Find a personal trading strategy that takes your personal
circumstance into account.
15 The trading process consists of doing an environmental scan, identifying
possible future transactions, entering the transaction, managing the
transaction, exiting the transaction, doing a post mortem and reviewing your
trading strategy. Build competency in all these areas.
16 In general the longer term charts (Daily, 4 Hr and 1 Hr) give more
reliable signals than the shorter term ones (30min, 15 min, 5 min and 1 min)
which are subject to noise. Be aware of the many scalping (short term) and
position trading (longer term) strategies available to trade the Forex market.
Knowing the alternatives will help you develop a personal strategy.
These principles have been extracted for information contained on the Forex
blog Forextradeoftheday which is sponsored by Expert-4x and submitted by
Chris Doyle.
Please submit any feedback or comments to chrisdoyle@expert4x.com
Little known or applied Forex trading principles by Chris Doyle
Chris Doyle is an experienced Forex Trader who uses mainly technical analysis to
to day trade the Forex market. He writes regular artilces for the forex trading blog
www.forextradeoftheday.com, www.expert-4x.com and
www.forextradersupportservices.com. He also reviews trading techniques used by
highly successful Forex traders.