3 Technical Keys EVERY Forex Trader Needs
As a trader, there aren’t going to be too many things you have in common with other traders because everyone is different right? Trading is one of the few things in this world that rewards using the ideologies of others.
Keeping that in mind, it is also true that most successful traders can be trading in completely different ways but are still applying the SAME principles, principles that have stood the test of time.
Whether they are conscious of these principles or not, whether a mentor taught them these principles or they simply discovered them and found them to be true, they apply them consistently and make money consistently. I think, technically speaking, the following 3 aspects are key to consistent trading and a positive expectancy…
Being able to identify TREND
You must be able to identify the TREND! (On ANY timeframe). Even as a reversal trader! You have to identify the trend…so you can trade against it! Why? Well, this is actually that THING you’ve been looking for that can give you a positive expectancy.
Trading with the trend means when the market is trending, you will be right more times than not. For those of you struggling with getting your win rate up, this is what you need to work on. Improve your ability to identify trend.
The characteristics of a trend are simple. A DOWNTREND is when the market makes Lower Highs and Lower Lows. An UPTREND is when the market makes Higher Highs and Higher Lows.
Most Traders get caught out and lose a lot of money when the market is said to be RANGING, and before I go into this further, I want to be clear that I don’t believe that the market is ever completely RANGEBOUND (failing to break Highs as well as Lows). It may seem Range-bound on YOUR timeframe! But on lower timeframes, trends are still taking place.
The market only ever moves up or down, but if your try and trade a trend strategy on a timeframe where price is not making higher highs or lower lows, you will struggle to make money in those conditions.
So assess your market environment and once you have identified the trend, trade accordingly. Answer these questions…
- Is the market trending on this timeframe? If not, go to a lower timeframe or another pair or another stock.
- Is the market making Higher Highs? (In which case, you should be buying) or is the market making Lower Lows? (In which case, you should be selling).
- Am I able to enter a trade in the direction of the trend that has a good R:R (Risk vs Reward)? Which brings me to my next point below.
Consistent Method of Entry
This one is a technical aspect that most traders have down pat. The problem is the CONSISTENCY of it. To be honest, it isn’t easy to achieve consistency or consistent results if you are not doing the same thing every trade, every day.
The hard truth is that even if you make money entering a trade 10 different ways. When you lose money, you won’t know how to fix it because you did not enter in a consistent manner.
Also, you may become attached to the results you got when rolling the dice and will find it difficult to follow a system.
Sticking to a preset method of entry (that means you knew what you were going to do BEFORE the setup came and not as the setup is appearing), allows you to learn from it.
Are you entering too early or too late? Study! You can’t come up with a conclusive answer if you’re constantly changing your approach from trade to trade. At first, yes, trading will be about trial and error.
Even if you have a mentor, you still need to learn your habits, good and bad. Know them, and you can learn to apply yourself through good and consistent trading. That’s all any of us try to do. Try to learn and improve yourself, mentally, and emotionally.
Check out our article on journaling to learn how you can track yourself objectively.
Consistent Method of Exit
Exiting trades in the same way, I would say, is more important than entering them in the same way because the exit can be more emotionally volatile. Don’t worry, I won’t leave you hanging.
Let me explain, anyone can enter a trade. There are (excluding breakeven) two outcomes when you enter a trade. You are going to make money, or you’re going to lose money. The exit of the trade is where Men and Women are separated from Boys and Girls.
Your exit determines HOW MUCH money you’ve made or how much money you’ve lost. A consistent trade exit could be the difference between leaving money on the table, an excruciating loss, giving back profits, or getting stopped out too soon.
The things I’ve just mentioned are the pitfalls that have eliminated many traders trying to make money trading Forex or even the Stock market. You need to know when the party is over.
For some, its candlestick reversal patterns, others may wait for Moving Averages to cross over before they decide to close out their positions, some traders trail their stop-loss to recent swing points.
There a thousand ways to exit a trade, so it is difficult for me to give a consistent exit methodology without knowing how you trade. Study your strategy and experiment with different methods of exit.
Once you find something that works for you and something you are comfortable executing. STICK TO IT. The easiest way to invite your emotions to your trading is by not following your plan.
Don’t bet the farm.
Don’t lose your shirt.
Cut the L.
Keep the W.