How Do I Hone My Craft As a Forex Trader?

Hello and welcome to another edition of the bulls vs the bears. Today  we are going to ask a simple question. “How Do I Hone My Craft As A Forex Trader?” Yea I know it’s a loaded question that could take all day to answer. Not to worry! We’re going not going to take all day answering this question. Do you know why so many people fail to prosper  as forex traders. Very simple. They just do not have the patience and discipline to succeed as forex traders.

Even worse, they don’t have the mental fortitude to prosper as a forex trader. They  keep on blowing their trading accounts to smithereens on a regular basis . Then they  come up with all kinds of excuses ranging from being born in the wrong family to the global  credit crunch of 2009. I wont surprised if they add metal handicaps as well. So if you want to be the best forex trader that you can be, here is what you need to do.

First:

Don’t Be In A Hurry To Get Out Of Trades

Yes,Don’t  Be in A Hurry To Get Out Of Trades. Even better make sure the traders are high probability trades. They should be the type of trades that can run for weeks and months and get you substantial profits. Just set and forget them and smell the roses while the market executes on your behalf. By the time you check  your balance you’ll find a nice healthy balance staring you in the face.

Make full use of the time frames in the forex markets. Don’t be anxious to hit the exit button too soon. Let the trades ride for as long as possible so as to give you a chance to ride the big waves and net some huge profits in the process. That’s how the top traders  become prosperous.

Be Smart Placing Your Stop Losses and Don’t Be Greedy

If you want to be the best forex trader you want to be, then be smart placing your stop losses and don’t get greedy. Being smart with your stop losses could be the difference between prosperity and poverty. Ever heard pf the line “Greed is Good” in the popular movie “Wall Street”? Well greed can also detonate your trading account if you decide to gamble with your money. I strongly suggest you use a wide stop as part of your trading strategy.  Why? Because the last thing you want is to place a tight stop and then your trading suffers a nuclear-sized hit in the process, throwing your whole strategy out of joint. Your best option is to place your wide stop outside of price ranges and beyond key levels. This way you save your trading position from taking a major hit.

Keep Your Price Action Charts Clean

The main feature of price action trading is clean price action charts.  With that in mind you need to keep your price action charts clean and devoid of all those indicators. Why? because you want a clear and accurate view of the forex market. Even more important, focus on end of day data. The best way  to do this is to zone in on higher time frame charts.

That’s where most of the action takes place and you will have your best chances of success trading this time period. If you’re thinking of scalping, you will be digging your own grave. Not only will these short term frames  cause you to lose all your money, but they will also you enough stress to last you a life time. And they will also lower your chances of regular long term trading success.

Develop Clear Trading Strategies

If you want to prosper as a forex trader then you need clearly defined trading strategies. It’s like going to war, if you have a plan to win the war you will lose terribly. You need a set of trading setups and then you wait patiently for your trading edge to line up  for your trading signal to form.

You most certainly need a trading plan consisting of   the most effective trade setups that you hope to find on the price charts. So for instance if you are a pin bar enthusiast, you’d be on the look out for the pin bar and its different variations among other price action signals. It’s an absolute must that you have a checklist of some sorts before doing your analysis and then putting in your trade.

Understand How Risk/Reward Works

Ask the most successful forex  traders and they will tell you this:”Understand How Risk/Reward Works.”  And they are absolutely right. Because you need to understand the calculations behind risk reward and how to make it work by placing your stops and profit targets at the right places. For risk/reward to work for you, do ABSOLUTELY NOTHING. Yes!ABSOLUTELY NOTHING!  Because hitting the exit button when trouble looms will cause you to leave potential profits on the table. So to help contain your emotions and fears just apply the set and forget strategy and head for the beach. By the time you get back from smelling the roses, you should see profits in your forex trading account.

Look Out For Factors of Confluence

One of the biggest indicators you should look out for on the charts are factors of confluence. Now in case some of you have forgotten factors of confluence are coming together or intersection of two or more key levels. The intersection of these levels  creates a hot point or point of confluence in the forex market. Part of looking for factors of confluence is knowing what constitutes confluence. Examples of factors  confluence you  should be looking out for are : uptrend/downtrend, Exponential Moving Averages(Look up Moving Averages 1 and II), and static support and resistance levels. You need to find as much evidence as possible on the charts to support your trade. For more information on factors of confluence look  up  Something Called Confluence.

Your Thoughts and Your Actions Must Be On The Same Page On The Forex Market

Make sure your thoughts and your actions are on the same page on the forex market. If these two things are not in sync, your chances of  prospering on the forex market are very minimal. There is something crucial you need to understand. You cannot afford to trade like a gambler nor should you allow previous bad trades to affect you too much. Just be cool calm and collected,  even if  those voices in your head try to force you to jump into the market.

You need to get your thoughts and actions on the same page such that you develop a sixth sense about the intentions of the forex market. Once you are able to get your thoughts and actions to work in tandem, your ability to navigate the forex markets will be less problematic.

Treat Forex Trading Like A Business

You need to treat forex trading like a business. If you think about it, forex trading is a business. Just like any other business it has costs/expenses(losses). It also involves the use of external equipment such as internet connectivity, computers, e.t.c. And  you make revenues(winning trades). You make profit when your revenues outstrip your losses. So now that you have that in mind, here is what you need to do. Try not to risk too much on your trades or else you will cause your trading account to hemorrhage.  Even more important you need to know what you are doing. You cannot be winging it like a Las Vegas gambler.

That’s a wrap for “How Do I Hone My Craft As a Forex Trader?” You need to work on yourself before you can perfect trading on the forex markets. When you accomplish this feat then you your trading will improve. Some of  you are probably like “How Do I Work On Myself?” First learn as much as you can about forex trading. Keep an open mind and do not make failure part of your vocabulary. And remember, there is no “Silver Bullet” strategy to trading success. Just work on yourself, stick to your trading plan, and keep your eye on the prize. Til next time  take care.

 

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How To Carve Out Support and Resistance Levels On Price Action Charts Before Trading On The Forex Market

Hello and welcome to another edition of the bulls and the bears. A long while back we learnt How to Identify Support and Resistance Levels. What we failed to learn was how to draw support and resistance levels on the price action charts before trading on the forex market.  Basically we are going to learn how to carve out support and resistance levels on the price action charts before trading on the market. This is something you should do at least the day before you trade on the forex market

.You want to identify potential trading zones among these key levels before placing your trades Before we start today’s lesson let  me sound a cautionary note to you all . Drawing support and resistance levels is not magic. It’s not a situation where price automatically hits a support or resistance level and then breaks out. Sometimes the levels that you draw may turn out to be the wrong ones as you trade live. The actual levels may be above or below the levels that you drew. And  that could cost you dearly in your trading account.

You may struggle with drawing these levels at the beginning but once you get the hang of it, drawing these levels will be second nature for you. So basically we are going to learn how to draw support and resistance levels properly before you trade. This is the surest way of avoiding tsunami -sized craters in your account.

First:

Look For the Next Significant Support and Resistance Levels

Your first task at hand is to look for the next significant support and resistance levels.  Let me sound another  cautionary note. Just because you are drawing support and resistance levels does not mean you draw all support and resistance levels that you set you eyes on. That  will cause you to pull your hair out. Even worse, you may miss out on some hot trades. Just draw a few lines  that clarify things as to what’s happening on the charts.

How Do We Do This?

Just draw one support level below the current price and one resistance level above the current price. Don’t worry too much about pinpoint accuracy. Just draw it at a place that makes sense to you. We’ll deal with accuracy later, Let’s look at an example using the EUR/USD pair S/R example 1 Ladies and gentlemen, here is an illustration of drawing a key support line and a key resistance line. Now the shaded price at the key support line represents the current price and the shaded price at the resistance level represents the current price at that level, Like I said don’t worry about accuracy. Just make sure it the logic behind your selection makes sense. I can hear you asking”Now How Do I Know It’s A Major Level?”

Check If There Is Enough Price Rotation Around That Level

Yes you need to examine whether there is enough price rotation around that key level. The best way to find out is to check how many times price has touched that level. You may have to tweak your key level slightly to accommodate as many  hit as possible from price both above and below the line. Now let’s take a look at the above graphic again S/R example 1 As you can see both lines are nicely drawn. Price  attacked these two lines several times and they rarely flinched. This means both lines are significant levels and they have serious backbone. Now price might hit your lines more than you are willing to accommodate. Occasionally price might break out just to take care of pending market orders.

However,  There is one breakout formation you need to keep an eye on. And the name is of this formation is simply called :

The Elbow

I can  hear someone  asking”Does it look like the human elbow?” Sorry! You got it wrong. Basically it’s a rotation point where a key level resists price’s onslaught such that price falls on its back. Now it will be ill-advised to trade elbows by themselves. But if  your drawn lines fall on these elbows, that’s your green light to put in your market order. Now let’s take a look at what the elbow looks like Elbow formations Here the elbows are shaded green. And they are located in two places. The first is in an uptrend and the second is in a range. And like I said, earlier they also act as support and resistance levels- assuming your lines falls on these levels. Let’s take a look at another elbow Elbow formations Here keep an eye on the full body and long skinny wicks  of the candlesticks. The lines seem to be  cutting through more wicks than full bodies. But I suggest you give more weight to the bodies than the wicks for purposes of peace of mind later on.  If you want to brush up on your candlesticks look up Fundamentals of Reading Candlestick Patterns. Next up is:

Examine Previous Price Action

You absolutely need to examine previous price action to see whether  those key levels make sense. Now when we say previous price action we are referring to historical price action in the past. Now I’m not saying scroll all the way back to price action of twenty years ago to do your analysis(That’ll take you the rest of your life). Just go back to price action  ranging from a week to a month previously. The price action data should be fresh enough for you decide whether the current key levels still  make sense. Let’s take another  look at the price action of the EUR/USD pair Historical data The data for from August to September seems pretty solid, Consequently it means the support and resistance lines pass the test. It also give you confidence to know that you’ve the right support/resistance lines at the right places. However, price  changes with time. Consequently your  historical data may be out of sync with your support and resistance levels. But with practice and a little practice you should be able to recognize the key levels like the back of your hand.

Use The Same Process To Find  the Next Set of Support and Resistance Levels

Now we’re going to use the same process  to find the next of support and resistance levels. They will definitely come in handy when you are looking for solid profit targets or stop loss levels. Now let’s look at the new levels in the EUR/USD  graphic. Second set of S/R levels This is what the next support/resistance levels look like. However, the next major levels are fairly close. There is not  room for maneuver. So you may have to sit tight and  wait for price to react on the outer lines rather than the inner lines before you put in your trade entry.

That’s a wrap for “How To Carve Out Support and Resistance Levels On Price Action Charts Before Trading On The Forex Market.” I assume everybody has gotten the hang of drawing support and resistance levels. The only way to perfect this is in live trading conditions. Practice till it becomes second nature to you . Then you can predict where price will hit at that level. Support and resistance levels can be  reliable places to enter trades and set awesome trade profits.

So long as you draw the key levels properly, you’ll accrue huge profits beyond your wildest dreams However drawing key levels is not an exact science. What you need to look for is your trading edge. Support and resistance levels help you give you that edge. If you want to watch price action run at the speed of light look up  Identifying Dynamic Support and Resistance Levels. Til next time  take care.

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