Forex trading is made out to be very complicated with things such as moving average, pivot point, support line, MACDs, Fibonacci, RSI, channels and so forth. Where in reality trading the forex market is relatively straightforward, with some good sense and some indicators it is possible to take home an income. The problem is most traders assume the more complex a system is, the better it will be, which is total rubbish. I’ve been using a straightforward trading plan for a long time and it gives me a 60 to 75 pecent success rate, which is pretty good for a trading plan.
If you are serious about becoming financially secure by day trading the forex you’ll want to take a moment and write down a trading plan. A trading plan could be the different between success and failure, it will make you stay focus while you’re trading, help you control your emotions when trades don’t go as planned and will give you targets and goals to shoot for.
What is a trading plan? A trading plan is a breakdown of how you will trade the forex. The type of details it must include is what kind of indicators you’re going to utilize, what are the situations for you opening a trade, how are you going to decide where your stop-loss is placed, your starting stake and bank, profit goals, what time scales you are going to trade and so on. You must research your trading plan until you are content with it, then you need to test it for a few weeks to see how it measures up against the forex. Then and only then should you contemplate using your trading plan to trade for really.
Greed is one of the biggest killers of traders trading banks, greed will cause trades that should not of been traded, stakes that shouldn’t have been used, emotions that should not be let into a traders mind and broken traders when it all comes apart. A section of your trading plan ought to cover your daily profit goals, how much of your bank you are willing to risk per trade and at which levels you will raise your stake. Serious traders incorporate these details to prevent them from getting greedy, so how can greed be damaging? Here’s a little story; A trader starts off with a £500 trading bank using £1 stakes, by the end of the 1st week their bank is at £600, then greed shows up saying ‘This is nice but if you utilize bigger stakes we’ll be financially safe a lot quicker’. On the next trade the trader increases their stake size to 10 pound a pip, the market whipsaws and the trader loses half of their trading bank and trust me it is not a good place to be, i know as I was that trader, do not be greedy and trust in your trading plan.
When you are building your trading plan one of the most important decisions to make is at what times will you trade. This will depend on the trading style you want to adopt, were in the world you live and just how much you want to make day trading the forex a success.
The forex market runs for 24 hours a day from Monday morning to Friday night and is split into Four trading periods. You have the London period which is 8am to 4pm (Times in GMT), the New York period which is 1pm to 9pm, the Sydney session which is 10pm to 6am and final the Tokyo session which is 12pm to 8am.
So which is the better to trade? When choosing this you must reach an equilibrium between when the markets have high liquidity and at a decent time for you to trade. Some of the best times to trade are at the beginning of the London period so between 7am to 11am and the cross over time of the London and New York session at 1pm to 5pm.
These times are ideal for me as I reside in the UK however on the west coast of America that’s 11pm to 3am and 5am to 9am which isn’t so great. Keep in mind at the end of the day it boils down to can you live around the trading hours you choose? Only you can answer that.