Monday 21 January 2013

Forex Holy Grail


A trading system can also be know as an edge. An edge allows us to trade without fear and uncertainty because it has a higher probability of a decision taken actually happening over the other but within a series of trades. The question now is what happens when you have found your edge like price action trading and you still unable to profit from trading? This article hopefully will give you some insight in how to fine tune your edge.

Over trading could be causing you to fail. Normally over trading can be linked to trading in lower time frames due to the fact we have more entry signals appearing. However trading lower time frames has much more noise and randomness in the market and sometimes may be difficult to identify key support and resistance levels. By changing to a daily time frame is smooths out the noise, giving you a more accurate picture of the marketAnother benefit in trading the daily time frame is due to the fact your edge will appear when the daily candlestick pattern closes and this is when most traders are watching charts planing their next trading day. It's true that you will find less signals on a daily time frame but when they appear it will become a higher probability trade.

As mentioned above I stated that when we identify our edge we should execute our edge without fear and uncertainty. So what are the reasons causing you to doubt your edge? It comes down to how much success you had in executing it. The more we continually execute our edge successfully the more confidence we gain in it, therefor by mastering your edge such as price action trading on a daily timeframe it will help you eliminate confusion and limiting the number of variables in making that essential trading decision.  


Another key area is to keep your trading simple by avoiding hours in analyzing fundamental data, technical data on the erroneously belief it will give you more insight into the future track of the markets. The problem with this thinking is that ALL variables are ultimately reflected via the simple and natural price movement of a price chart.

A good risk / reward ratio is of the utmost importance and should be part of your trading plan. Having this in place allows you to survive and saving you the heart ache of blowing your trading account. One way in achieving this is by making sure your winners are larger than your losers, therefor when your edge appears always try aim for a risk reward of 1:2. In the following diagram we can see that there were 14 trades placed where 8 trades failed and only 6 were winners, however if you add the winners it will be larger than your losers.




Patience and discipline are other tools which must be added to your trading plan. Wait for your edge to appear, dont be in a trade just to be in one. Once again if you trade the daily charts it will allow you to train this mind set due to the fact you will see less signals appearing in comparison to the lower time frames. Please note that I'm not saying that you shouldn't trade lower time frames but you should only look at these once you have the experience and reading the market. I currently trade daily, 4H and H1.

Apologies for using the heading Forex Holy Grail because there are none, but I believe if you use some of my suggestions it can contribute toward your trading success. The internet has made the FX community a lot smaller giving us access to many resources and trading ideas and by learning from one another it may just help your edge to be a little more effective than before.

Happy Pippping!!














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