Once you are in a certain position, the market will decide whether you are right or wrong.
The only way to know if you are in the right place in the market is to prove it with profit and loss.
The success or failure of a trade is as simple and crude as the logic of the trade: the ultimate simplicity.
For most people, the complexity of the foreign exchange market makes it difficult to keep things simple and achieve steady profits. Instead, it is more about the painful costs of excessive trading and frequent stop-losses.
At the end of the day, the core of trading stability comes from your view of the market pattern and trading logic, and trading logic is the most direct reflection of the pattern view.
This article collects the experience of more than 20 overseas trading masters to learn the thinking of trading masters, smooth the trading logic, establish a larger view of trading pattern, so that you can avoid 10 years of detours in the foreign exchange market.
There is too much uncertainty in forex trading and past performance does not guarantee future profitability.
For sustainability, experienced traders see risk management as an important part of their trading plan.
An overseas institute conducted a test that analyzed the trading strategies and results of 12 million traders.
It has been observed that traders with a win rate of more than 50% use a risk-reward ratio.
For example, a risk-return ratio of 1:2 means that the distance between the buy point and the limit point is twice the distance between the buy point and the stop point.
This is a kind of evaluation and measurement that must be done before the transaction.
Many traders would think that the higher the risk-return, the better, but it is not.
In real trading, the risk-return setting is based on the trading style and trading strategy of the traders.
Veteran traders suggest that short-term traders should set the risk-return ratio at 1:1 or lower;
Midline traders settle in the middle level, usually 1:2 or 1:3;
And long-term traders, holding positions for a long time, trading frequency is low, can set a higher level, generally more than 1:5 level.
We can see from the survey that the winning rate of seven common currency pairs in the world is all above 50%, and AUD/USD is close to 66%, that is, two out of every three transactions are profitable.
But the average loss per order was much higher than the gain.
Note: Data source David Rodriguez, James Stanley So traders should set their own level of risk before entering the market.
Once a trader loses 50%, the next trade must make a 100% profit to recover.
If the loss is 80% or 90%, the corresponding gain of 400 or 900% can be devastating to the trader’s assets.
Before you start trading forex, you must know the following table: Risk Management Rule #1: When you open a position, place a stop loss. When you trade, consider the worst case scenario.
If the price breaks out, you can close your position in time by executing a stop loss, so you can re-enter the trade at any time, rather than hoping for a trend reversal without warning.
Risk Management Rule #2: Setting a risk-to-return ratio of at least 1:1 Traders can offset most cases of mis-opening by setting a risk-to-return ratio of 1:1.
In other words, if you’re going to risk $200, make sure you make at least $200 so that the deal you’re making is worth it.
Risk Management Rule #3: Don’t Overleverage Overleverage is one of the most dangerous ways to make money faster.
Highly leveraged trading is like driving on the highway, where even small mistakes or errors can have serious consequences.
It may be your best friend during a winning streak, but it can be your worst enemy when the trend changes.
Expert advice: Traders can slowly increase the “speed” of trading, the amount of leverage used.
Start with a 2-to-1 leverage ratio, or open a 10k position in a $5,000 account.
If you do that well, you can go 3 to 1;
As you become more familiar with managing leveraged trades, the transaction size can increase gradually.
Risk Management Rule #4: Diversify Your trading assets Trading is based on market fluctuations to generate returns.
It is very difficult to make money if the market moves little or sideways, especially if you focus on just one asset group.
For example, if the dollar is range-bound, the best way to avoid market stagnation during this period of trading is to look for markets that are moving.
May include commodity, stock, stock index futures and other contracts for difference trading.
When choosing brokers, traders can consider the diversification of trading assets, market timing and risk hedging.
Higher time frames Overseas hedge funds and large institutional traders tend to choose higher time frames to make their judgments.
A higher time frame allows for more “normalisation” of price action throughout the trading day, creating a flatter, more consistent market than a lower time frame.
Compared to traders with lower time frames, they are able to make trend directionals on a larger scale, identify valid support and resistance levels, and naturally filter out irrelevant news.
In general, the more frequent and set the trades, the higher the percentage of false signals.
The higher time frame allows traders not to rush in, but to wait for corrections or more clarity to make bigger bets.
Expert tip: Avoid time ranges of less than 1 hour. The most commonly used time frames are daily charts and 4-hour charts.
You need to look for important points in the higher time frame and the confluence of price actions.
For example, before entering the market, you need to know the key positions (the main support, resistance levels for daily trading) and look for when price action confirms.
Before you can build a timing framework, you need to find a strong and simple trading platform and learn to use the charts and technical analysis tools, news presentations, trading signals, etc.
A good forex platform can package a range of features and tools into a simplified user experience while maintaining standards of technology and up-to-date support.
Although the foreign exchange market is open all day, price behavior varies depending on the liquidity at different times of the day.
Asian time (Tokyo), for example, prices move more slowly in the market and it is often easier to find strong support and resistance levels.
According to some veteran traders, the FX market’s “core”, or liquidity, starts at 3AM ET London time (4pm Winter time/daylight Saving Time)
