Strategy For Profitable Forex Trading

What is required of you to be a profitable trader?

There are more than one answer to this question. One answer is given in this article based on the experience of the several successful traders of forex and other instruments…

There are only two questions a forex trader has to ask him or herself. If the affirmative can be answered to both questions, the forex trader is a professional .If the trader can not be answered to either or both questions; the trader could continue to wipe out profits, possibly ending up in substantial and permanent losses.

1) Do you know how to identify trades that 4/5 trades at the least will get you on target for a business plan that covers the short, medium and long term?

2) Can you apply your trading methodology under different market conditions over the short, medium and long term and turn your trading plan into reality

There is convincing evidence that to become proficient at the number one criterion, there is no substitute for spending time listening to and watching the market over a consistent period, at least of months. There is no “get rich quick” strategy that has been invented, except that of gamblers luck.

Secondarily to that first point, a foundation in technical analysis is required and a pretty thorough knowledge of fundamentals, including forex jargon is a good footing. This does not need to be learned theoretically in parrot fashion, but needs to be applied in conjunction with the previous paragraph. Only then will the necessary belief in certain technical strategies be referenced sufficiently for “natural” talent & skill to be cultivated.

Risk tolerance needs to be established at an early stage so that losses can be protected using a stop-loss. Profit targets for certain trades can also be drawn up as part of the trading plans rules. If your intraday trading risk tolerance is for example 15 points, then profit target trades of 15-30 point trades need to be sought out and discovered. The opportunities await each day.

Testing, back-testing and forward-testing of methodology is an evolutionary process. It is ok to make mistakes, so long as they are learned from and keep within the boundaries of the current rules. It is therefore also going to be the case that non-stop improvement of the strategy and the skill of the trader will take place, and the strategy, even the instrument traded may change dramatically over time as more information is gathered and the trader becomes more familiar with their trading style and themselves.

Trading can be considered an “inside game.” The more one knows themselves, the more likely they are going to have the discipline, patience and awareness required to spot opportunities and seek out the correct research in order to plan and execute trades make the difference between a professional investor and an emotion driven gambler.

Research into the brain shows there are two kinds of thinking. There is the primitive type of thinking built on biochemical and emotional reaction. The trader in the state of arousal with adrenalin before the trade may be leaving themselves open to danger, because this is a primitive fear/flight or flight mechanism, requiring a reactive response.

However, when the mind thinks using the cortical part of the brain, more of the neurons are incorporated into the thinking process and therefore a more balanced and effective decision will be made.

A constant and rigorous monitoring of trading performance is required therefore from the outset so that the mind knows what is required to be on track with the trading plan and adjustments can be made to the strategy so that the purpose of the plan is fulfilled. Testing and tweaking under forward conditions allow the trader to hone in on areas of weakness and root them out, making the results more pronounced.

Howto Achieve Perfection in Trading ?

Achieving Perfection in daily Trade Market - Achieve Trade quality, Not quantity . Take the best of the best advice, get the big picture on trading.

Trade selection and adequate planning go hand in hand. This is where most would-be professional traders miss the boat.

Much more money is made as a result of proper planning than from sitting and trading everything that comes along or “looks” good.

It’s difficult to fully understand why people think they have to trade so much. It’s difficult to truly grasp why people think that they have to take as many trades as they do.
Just the opposite is true. There is a correct approach to each and every trade. That is what achieving perfection is all about.

It all starts with proper management: planning, organizing, delegating, directing, and controlling.These facets of management must be woven together into your trading; they do overlap.

Although planning is the major management function involved in achieving perfection, you can’t possibly plan well unless you are organized to do so.

You must have your tools at hand: your trading software, your data, the proper equipment. All of the rudiments for planning must be in place, which in itself is a part of organizing.

You must be physically fit when you plan: well nourished, properly exercised, well rested and mentally alert - all part of having your life organized, all part of achieving perfection as a trader.

To be a winning trader, you have to be among the best. There can be no middle ground. There are only winners and losers, and to be a winner you have to be a champion. And, just like any champion, you must have discipline, self-control, and a willingness to train, train, train.

There are no runners-up in trading, you either get the gold or you give the gold. Often, while others are busy going to parties or watching sports events, you are busy poring over charts, studying, thinking, planning. When others are listening to music or watching TV, you are busy practicing your trading, practicing trade selection, working hard to become a more astute trader.

Part of achieving perfection involves the diligent study of charts. The data, as presented on your screen and preserved as charts, are, for the most part, all you have for making trading decisions. They are a picture, a visualization of what is taking place in the reality of the forex market. Your job in achieving perfection and becoming an adequate trader is to picture and imagine in your mind what makes prices move and form the way they do.

Ask yourself, “How does what I see in front of me relate to the supply and demand for the underlying?”

Ask yourself, “Is what I am seeing on the chart even related to supply and demand, or is what I am seeing related to an engineered move by some insider or market mover?”

Supply and demand are not what makes prices move or fail to move most of the time. The sooner you realize that fact, the better off you will be. Markets are engineered, manipulated? You need to know that.

But there’s more to a chart than merely price patterns. Reflected in the chart are the emotional reactions of human beings. Reactions to rumors and news; to national and world events; to government reports - these, too, are on the charts.

You might say that price movement, or the lack thereof, is the net effect of all the perceptions of all the traders who are participating in the market for a particular futures.

There is something else on the charts, something that too few take into account. That something is the manipulations from and by the insiders, the market movers, and by commercials holding large inventories of the underlying you are attempting to trade.

In achieving perfection as a trader, you must train yourself to look for evidence of any and all of these things as you study your charts. It is the cumulative action of all perceptions which causes patterns to form on a price chart.

You must learn to look for the truths in the markets. There are certain truths which are self-evident; they are always true. For instance, take the phenomenon of a breakout. When prices break out, no one can change the fact that they did break out. It is a fact and it is true. The breakout may turn out to be a “false” breakout, but nevertheless it is a breakout. As part of achieving perfection in your trade selection skills, you have to learn to tell which breakouts are most likely true breakouts, and which ones are most likely false. How can you know? By the price patterns on the chart.

And what about trend? Your job in achieving perfection as a trader is to master how to trade a trend. A trend is a trend, is a trend. It is a trend until the end, and part of your job is to know when a market is not trending.

The trend is the trend while it lasts. While a market is trending it is telling the truth. The trend can change, but the truth is the truth. If prices are rising, the trend is up. If prices are falling, the trend is down. The truth can be found in the trend. It is an immutable fact. You are to learn to make my money by trading with the trend. You are to learn what constitutes a trend. You have to learn to spot trends early so that you can make the most out of the market while it is trending. Your job in achieving perfection as a trader is to learn to recognize when a trend will most likely begin, and just as important, to learn to be even more adept at deciphering when a trend is ending.

In achieving perfection, you must learn to recognize “your” trade(s), and to take only “your” trades. Trade the formations and patterns that you can easily recognize and identify.

You must learn to trade using tips and tricks that you are shown and to accumulate and keep a collection of techniques that result in the selection of high probability trades.

How are you to do all this? Practice, practice, PRACTICE. Practice recognition of congestion areas. Practice recognition of high probability breakouts. Practice trend recognition. Practice and more practice. Just like anyone who wants to achieve perfection at anything, there must be total dedication, study, practice and more practice. You are to become a trading virtuoso. You are to practice, yet always realizing that you will never attain true perfection, that there is always room for improvement. There is usually a way to refine: ways that you can do things better, more efficiently, and with greater speed and finesse.

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What is Forex (Foreign Exchange) ?

Foreign Exchange (FOREX) is the arena where a nation's currency is exchanged for that of another. The foreign exchange market is the largest financial market in the world, with the equivalent of over $1.9 trillion changing hands daily; more than three times the aggregate amount of the US Equity and Treasury markets combined. Unlike other financial markets, the Forex market has no physical location and no central exchange. It operates through a global network of banks, corporations and individuals trading one currency for another. The lack of a physical exchange enables the Forex market to operate on a 24-hour basis, spanning from one zone to another in all the major financial centers.

Traditionally, retail investors' only means of gaining access to the foreign exchange market was through banks that transacted large amounts of currencies for commercial and investment purposes. Trading volume has increased rapidly over time, especially after exchange rates were allowed to float freely in 1971. Today, importers and exporters, international portfolio managers, multinational corporations, speculators, day traders, long-term holders and hedge funds all use the FOREX market to pay for goods and services, transact in financial assets or to reduce the risk of currency movements by hedging their exposure in other markets.

Most forex trading is speculative, with only a few percent of market activity representing governments' and companies' fundamental currency conversion needs.
Unlike trading on the stock market, the forex market is not conducted by a central exchange, but on the “interbank” market, which is thought of as an OTC (over the counter) market. Trading takes place directly between the two counterparts necessary to make a trade, whether over the telephone or on electronic networks all over the world. The main centres for trading are Sydney, Tokyo, London, Frankfurt and New York. This worldwide distribution of trading centres means that the forex market is a 24-hour market.

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