Day trading forex appears a lot more difficult than it is with things such as moving average, pivot point, support line, MACDs, Fibonacci, RSI, channels and so on. Where in fact trading the forex market is pretty straightforward, with common sense and a few indicators you can easily acquire a full time income. The problem is many traders assume the more difficult a method is, the better it will be, which is total rubbish. I have been using a simple trading plan for several years and it provides me with a 60 to 75 pecent success rate, which is excellent for a trading plan.
When day trading it is essential to determine what the current trend is for your selected market(s). When I was learning to trade the forex markets my tutor told me to remember that the trend is your friend. The trend is commonly used as a confirmation signal for a trade, but should never be utilized as a standalone signal for trading. There are a lot of methods to identify the trend like moving averages, MACDs and so on. The method I prefer to determine the trend is by using the Thirty minute chart and then having a look at the most recent highs and lows to determine if the highs are getting higher or the lows are getting lower. When the highs are getting higher and the lows are getting higher this suggests the market is in an uptrend or if the lows are getting lower and the highs are getting lower this means the market is in a downtrend.
Greed is one of the largest killers of traders trading banks, greed results in trades that should not of been traded, stakes that shouldn’t have been used, emotions that should not be let into a traders thoughts and broken traders when it all falls apart.
Part of your trading plan ought to detail your daily profit targets, the amount of your bank you are willing to risk per trade and at what stages you will increase your stake.
Serious traders include this information to stop them from becoming greedy, so how can greed be dangerous? Here is a little story; A trader starts with a £500 betting bank using £1 stakes, by the end of the first week their bank stands at £600, then greed shows up stating ‘This is great however, if you utilize bigger stakes we will be financially secure a whole lot quicker’. On the following trade the trader increases their stake to £10 a pip, the market whipsaws and the trader loses 50% of their betting bank and believe me it’s not a good place to be, i know as I was that trader, don’t be greedy and follow your trading plan.
Losing trades are a a natural part of trading, it is impossible to win each and every trade you place, this is why it’s important to understand that losing trades are a part of trading. My monthly trade success rate is between 60 to 75 percent, my trading plan takes this into account with a 1:2 risk to reward ratio, what? Basically implies if I using a 15 pip stop lose for a trade I’ll aim to make 30 pips plus from the trade. By using this method I’m in profit at the conclusion of every month. The hardest element of a losing trade for novices is coping with their emotions, when they let their emotions take control their trading plan goes out of the window and they begin chasing trades and all that happens is they lose more funds. A solid trading plan will take into consideration loses which will help you handle loses and will remove emotions from your trading, since it is not possible to remove loses from your trading.