In
Currency Trading there are a multitude of strategies that can be profitable. I
don’t care which strategy you use but if you don’t overlay your strategy with
the 5 points below then I believe that the probability of success will be
really low.
1. Always Use Stop Losses – I cannot stress this enough. To be
able to use stop losses you have to accept them as a cost of doing
business. The same way a shopkeeper has to pay for rent or electricity,
the trader has to pay for Stop losses. Usually new traders do not like to
use Stop Losses because many times the price returns towards their initial
entry and they end up being in the money. So in their mind, using a stop loss
would only create an unnecessary red spot in their account. But you might
find yourself in a scenario where the price does not return to your entry and
your account gets wiped out.
Remember,
trading is a marathon and not a sprint. You have to survive for a while until
you learn how to trade. And the only way to survive is by using stop losses!
2. Multi-Timeframe Analysis – You might have a favourite time frame to
trade. If you don’t then you should. Choose one so you learn the ins and outs
of trading within that timeframe. But always look out on the next
timeframe to make sure you are on the correct side of the trend and that you
are not selling into bigger timeframe support or buying into bigger timeframe
resistance. For example, I always trade on the 15 minute chart but always
consult the 1H timeframe.
3. Keep it Simple but not too simple – Trading should be simple enough so that
decision making is clear and not complicated but you should keep in mind that
confluence is important as well. Confluence means that more than one
indicators/price action characteristics support a trading decision. For example
I might buy a pair if it bounces over its upward sloping trend line and also
bouncing of a support level in addition to forming a rejection candle.
4. Learn the signal frequency of your
method – You have to learn
your method/strategy like the palm of your hand. I know how many signals
my strategy usually generates throughout every trading session. And I know
this, because I am ‘connected’ with my strategy. This means that I do not over
trade. I trade the 2-3 signals a day my strategy generates and that’s it.
If I start entering into more trades than what my strategy usually generates
then I know I am overtrading. Over trading can kill an account,
since every new trade brings new risk on the table. And as traders we hate
risk!
5. Concentrate on the risk and
not the profit –
When you equate trading to risk management that’s when you will see your
account grow. Trading is all about managing your risk. So cut your losses
short. Winning trades are usually winning from the get-go. Be quick to protect
your account. Personally I move my SL to entry as soon as a trade goes 15 pips
in my favour. That’s a method that suits my strategy. You should protect your
account as well with a method that suits your strategy.
source : HotForex
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