Many traders try and make as much money as possible, and therefore always want to be in the market, but this is hard work, and inevitably leads to you taking a few dubious trading decisions which can often prove costly.
The fact is that you can make just as much money as short-term traders and scalpers by looking for just 1 excellent trade per week which has the perfect set-up. By that I mean taking a position where all your favoured technical indicators are in harmony and indicate that a strong movement either up or down is highly likely.
If you've been trading for any length of time you should have noticed that every so often you get what appears to be the perfect set-up. More often than not these positions can play out and can yield several hundred points profit, which has to be better than constantly scalping all day for a few points here and there.
Just 1 of these per week can be enough to make an excellent living from forex trading, and you may even find that you get several of these ideal set-ups per week, depending on how many currencies you track and what time frame you are using.
There are many traders who try to trade almost everyday but the mistakes will also increase. The probabilities of winning will decrease because he try to take on the forex market even when it's going against him.
The main point I want to get across is that you just need a few of these high probability positions every so often in order to make some excellent returns.
Wednesday, March 3, 2010
How Can Forex Profits Be Repetitive?
It can be argued that profitable forex trading is tedious and repetitive. Why? Well look at many of the most successful traders and you will find that they have one thing in common - they all have a proven profitable method of trading that they use over and over again day in day out. And they are very focus. You can go to forums and feel their determination.
Many people try and over complicate their trading strategies. They use many different technical indicators, they have many different ways of trading, and in general their whole approach to trading is just too disorganized.
To be successful you just need to find one trading method that produces regular profits and stick to this method for every single trade you make.
It doesn't have to be a super system that produces 50-100 points a day either. You can make excellent profits with a system that produces 5-10 points a day or even just 20 points a week, for example, depending on your stake.
Many people new to forex look for the holy grail forex system that's going to make them a millionaire, but it simply doesn't exist. The truth is that there are plenty of trading systems out there that produce regular profits. The trick is to find one and stick with it.
It could be a breakout strategy, a trend following strategy or a very quick scalping strategy, it doesn't matter. As long as it's proven to be profitable and it works for you, stay with it and continue to trade using this method all the time.
Yes it's boring and tedious but if you want to be a profitable forex trader then this is what's called for. It surely has to be better doing this than using a more haphazard and unpredictable method of trading.
Once you lose the mindset that you always have to be in the market and therefore are constantly looking for positions to enter, then you will become a more profitable trader. The key to success is to find a system that works for you and then just sit back and wait for potentially profitable set-ups to occur which meet your trading criteria.
Many people try and over complicate their trading strategies. They use many different technical indicators, they have many different ways of trading, and in general their whole approach to trading is just too disorganized.
To be successful you just need to find one trading method that produces regular profits and stick to this method for every single trade you make.
It doesn't have to be a super system that produces 50-100 points a day either. You can make excellent profits with a system that produces 5-10 points a day or even just 20 points a week, for example, depending on your stake.
Many people new to forex look for the holy grail forex system that's going to make them a millionaire, but it simply doesn't exist. The truth is that there are plenty of trading systems out there that produce regular profits. The trick is to find one and stick with it.
It could be a breakout strategy, a trend following strategy or a very quick scalping strategy, it doesn't matter. As long as it's proven to be profitable and it works for you, stay with it and continue to trade using this method all the time.
Yes it's boring and tedious but if you want to be a profitable forex trader then this is what's called for. It surely has to be better doing this than using a more haphazard and unpredictable method of trading.
Once you lose the mindset that you always have to be in the market and therefore are constantly looking for positions to enter, then you will become a more profitable trader. The key to success is to find a system that works for you and then just sit back and wait for potentially profitable set-ups to occur which meet your trading criteria.
How To Determine Stop Losses?
If you want to become a successful forex trader then it's imperative that you develop your own stop loss strategy. Stop losses are incredibly important because they protect your trading capital and limit your losses.
A profitable trader's account will either contain lots of small losses but plenty of bigger gains which more than compensate for the losses, or they will have similar sized gains as the stop losses but more of them so they are in profit overall.
For example, a trader may have a stop loss placed at 10 points away from entry each time, but has much bigger targets of 20+ points, for instance, or he may even let his winners run for as long as possible.
Alternatively he may have a stop loss of 30 points but also looks for 30 points profit from each trade, so in this case he needs a win ratio of over 50% to be profitable.
You also need to first of all be making some decent profits from forex trading. This way you can really analyze your trading and scrutinize your exit points and stop loss limits.
The perfect stop loss strategy should basically be at the point where you can admit that your initial trade was wrong, and the criteria that made you enter the trade no longer apply.
An example of this would be if you were going long on a rising moving average. A good stop loss here would be at a point just below the rising moving average because if this subsequently occurred then it is evident that the rising trend has come to an end and your reasons for entering the position no longer apply.
Your optimum stop loss level should be at a point where you can safely say that your initial entry has gone against you and it's time to get out, without being too close, but it should also be at a point where it's statistically unlikely to turn around and bounce back into profitability.
For example, a while back I used a stop loss of 20 points when trading GBP/USD (including the spread so the price would have to move 17 points to trigger my stop loss) with target profits of 10-60 points each time. However after analyzing my records I discovered that this stop loss was slightly too far away because it hardly ever bounced back from 14+ points away so why have a stop loss of 20 points?
This was just throwing money away so I reduced my stop loss to 14 points and noticed a significant increase in my profits and have stuck with it ever since (although I am constantly tweaking my trading strategies).
One final point I want to make is that you should study the behaviour of the different currency pairs you are trading because you will often find that you need slightly different stop loss levels for different pairs in order to make maximum profits, as they all behave differently.
The key point is that you have to find your ideal stop loss strategy because trading with random stop loss levels or worst still no stop losses at all will really hold you back and will make it extremely difficult to make consistent profits from forex trading.
A profitable trader's account will either contain lots of small losses but plenty of bigger gains which more than compensate for the losses, or they will have similar sized gains as the stop losses but more of them so they are in profit overall.
For example, a trader may have a stop loss placed at 10 points away from entry each time, but has much bigger targets of 20+ points, for instance, or he may even let his winners run for as long as possible.
Alternatively he may have a stop loss of 30 points but also looks for 30 points profit from each trade, so in this case he needs a win ratio of over 50% to be profitable.
You also need to first of all be making some decent profits from forex trading. This way you can really analyze your trading and scrutinize your exit points and stop loss limits.
The perfect stop loss strategy should basically be at the point where you can admit that your initial trade was wrong, and the criteria that made you enter the trade no longer apply.
An example of this would be if you were going long on a rising moving average. A good stop loss here would be at a point just below the rising moving average because if this subsequently occurred then it is evident that the rising trend has come to an end and your reasons for entering the position no longer apply.
Your optimum stop loss level should be at a point where you can safely say that your initial entry has gone against you and it's time to get out, without being too close, but it should also be at a point where it's statistically unlikely to turn around and bounce back into profitability.
For example, a while back I used a stop loss of 20 points when trading GBP/USD (including the spread so the price would have to move 17 points to trigger my stop loss) with target profits of 10-60 points each time. However after analyzing my records I discovered that this stop loss was slightly too far away because it hardly ever bounced back from 14+ points away so why have a stop loss of 20 points?
This was just throwing money away so I reduced my stop loss to 14 points and noticed a significant increase in my profits and have stuck with it ever since (although I am constantly tweaking my trading strategies).
One final point I want to make is that you should study the behaviour of the different currency pairs you are trading because you will often find that you need slightly different stop loss levels for different pairs in order to make maximum profits, as they all behave differently.
The key point is that you have to find your ideal stop loss strategy because trading with random stop loss levels or worst still no stop losses at all will really hold you back and will make it extremely difficult to make consistent profits from forex trading.
6 Ways To Stop Trading From Going Insane
Trading forex for a living from the comfort of your own home can be extremely profitable, but it can also drive you insane at times, so for today's post I thought I'd offer my 6 top tips for keeping yourself sane when trading.
1. Visit trading forums.
Trading from home is a lonely profession, and the frustrating thing is that you have no-one to share trading ideas with, so forums and trading rooms are great for this. Obviously you don't want to spend too much time doing this otherwise you might miss some great opportunities, but they're worth visiting during quiet periods, of which there are many during the day.
2. Check the day's economic calendar.
There's nothing more infuriating than taking the time to find a good position which goes nicely into profit, before suddenly turning into a losing position due to economic data releases or Ben Bernanke opening his big mouth, for example, which you'd completely forgotten about. So always check the scheduled announcements for the day before you do anything else, and make a note of them so you're never caught out. (The best site for this, in my opinion, is http://www.forexfactory.com).
3. Leave the house and speak to people.
Following on from the last point, the loneliness factor is a very real one and for that reason I always say that you should make a point of going out and mixing with people as much as possible when you're not trading. If you're not careful, after long periods of time it's very easy to go out less and less and find yourself becoming more and more introverted, so try not to fall into this trap.
4. Take plenty of exercise.
It's an old saying, “a healthy body is a healthy mind”, but it's completely true. Apart from the fact that you need to be completely switched on when making trading decisions, sitting down staring at a computer screen for hours on end is really not good for your eyes, your back or your health in general. Therefore you should take plenty of exercise during the day and in your spare time to keep yourself healthy.
5. Take regular breaks and reward yourself occasionally.
As well as exercising, it's also a good idea to take regular breaks during the day just to relax and chill out. Trading can really get the pulse racing at times, and can be very stressful, so take a break occasionally. Also if you've made a highly profitable trade and achieved your daily target, if you have one, why not reward yourself with a DVD or a shopping spree, for example.
6. Invest your profits into other areas.
Trading forex is great, but why spend all your time busting a gut trying to make more and more money. If you do become a successful trader, invest some of it into stocks and property and make your money work for you. This way you will take some of the pressure off of yourself and you can become a more relaxed trader knowing you have other sources of income.
1. Visit trading forums.
Trading from home is a lonely profession, and the frustrating thing is that you have no-one to share trading ideas with, so forums and trading rooms are great for this. Obviously you don't want to spend too much time doing this otherwise you might miss some great opportunities, but they're worth visiting during quiet periods, of which there are many during the day.
2. Check the day's economic calendar.
There's nothing more infuriating than taking the time to find a good position which goes nicely into profit, before suddenly turning into a losing position due to economic data releases or Ben Bernanke opening his big mouth, for example, which you'd completely forgotten about. So always check the scheduled announcements for the day before you do anything else, and make a note of them so you're never caught out. (The best site for this, in my opinion, is http://www.forexfactory.com).
3. Leave the house and speak to people.
Following on from the last point, the loneliness factor is a very real one and for that reason I always say that you should make a point of going out and mixing with people as much as possible when you're not trading. If you're not careful, after long periods of time it's very easy to go out less and less and find yourself becoming more and more introverted, so try not to fall into this trap.
4. Take plenty of exercise.
It's an old saying, “a healthy body is a healthy mind”, but it's completely true. Apart from the fact that you need to be completely switched on when making trading decisions, sitting down staring at a computer screen for hours on end is really not good for your eyes, your back or your health in general. Therefore you should take plenty of exercise during the day and in your spare time to keep yourself healthy.
5. Take regular breaks and reward yourself occasionally.
As well as exercising, it's also a good idea to take regular breaks during the day just to relax and chill out. Trading can really get the pulse racing at times, and can be very stressful, so take a break occasionally. Also if you've made a highly profitable trade and achieved your daily target, if you have one, why not reward yourself with a DVD or a shopping spree, for example.
6. Invest your profits into other areas.
Trading forex is great, but why spend all your time busting a gut trying to make more and more money. If you do become a successful trader, invest some of it into stocks and property and make your money work for you. This way you will take some of the pressure off of yourself and you can become a more relaxed trader knowing you have other sources of income.
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