You must know these SECRETs before you start Trading (Part 2 of 3)
Hello there,
In every journey or adventure that you plan to embark on, I believe that you should at least try to understand what you are in for. Hope you agree with me on this statement
- A business you want to start – got to have a business plan, product, location etc
- A holiday you are going – got to have your itinerary ready
- A 18hole golf game – some golf lessons before that
So how about when you embark on your Forex trading journey? It is critical that you know what you are jumping into. I would like to share this SECRETS that every trader should know before they start trading.
Warm regards,
Boon Hooi
Course Director – Harmonic Trader
Forex100 Academy
https://www.facebook.com/boonhooi.fx
The 3Ms of Forex Trading
In part 1 of the series, we spoke about MONEY as the first important M you must know about trading. Now we move to the second important M which is Method.
Remember, in our training and teaching sessions, it is always about you. The teachings are to help benefit you and your trading. Keep an open mind as you discover these 3Ms.
See how you can relate these 3Ms to yourself, your personality and temperament to decide how you are going to approach your trading journey.
The 2nd of the 3Ms – METHOD
I have met countless newbie traders. They start to trade without any strategies and go more by feeling.
When they “see or feel” that the market is going up, they will take the trade.
This type of traders usually does not have any fixed method or rules to engage & manage their trades.
The danger of this is that when you lose, (or even when you win) you do not know why and you cannot replicate your success stories.
Various Classification of Methods
There are many strategies that you can adopt and they are generally classifies into one of these methods
- Scalping (in and out of the trade within minutes) – 50 trades per day
- Day Trading (Trades are closed within the day) – 10 trades per day
- Swing Trading (Trade usually takes more than a day to two weeks) – 2 trades per day
- Long Term Trading (Trade are held for months at a time) – 2 trades per month
Win-Rate consideration
Another important thing to consider will be the hit rate of the trading method.
“Which is better? A method that has a 40% win-rate or one with a 90% win-rate?”
There is no point if you get 9 of 10 correct but each win is 10pips and the one single loss is 100pips. That one single loss will wipe out the profits that you have accumulated.
Food for thoughts: For each winning trade (say a $100 profits) against each losing trade of $50 (i.e. a 2:1 reward to risk ratio), you only need a 34% win-rate to be profitable. Trading becomes less stressful actually.
Your Temperament
The METHOD you choose to trade is very important. It has to suit your temperament. Just imagine this, if you are a very calm person who likes to take you time to evaluate before jumping into things. Trading on a short-term chart (for example a 5min) will put you in a lot of stress, forcing yourself to make quick decisions.
On the other hand, if you get an impatient guy to trade the daily chart, he will be bored out of his mind. Waiting and waiting for days before he can take a single trade.
Amount of Chart Time
How is your schedule like in the day? Do you have time to check the charts to identify trading opportunities, trigger & manage the trades?
If you have less chart time, you can choose to trade the higher time frame such as the 4-hour charts and Daily charts. You will have more time to react to the movement in prices during the day.
Some people prefer the fast and furious type. Scalping and taking 20 trades in an hour and their trading can be limited to only 2 hours per day and they are done.
Summary
Important thing is to understand your own temperament and your daily schedule. Hen adopt the suitable trading method that suits yourself.
I generally trade the Harmonic Patterns, which can be used on all time frames.
On certain days when I have more time on my hands, I will then tune in to the smaller time frame to trade more. Mostly my trades are swing trades, and I seriously do not need to be staring at the charts all the time.
The rules of identifying trading opportunities, trade engagement and trade management are all the same regardless of the time frame I trade on. I am loving it.
You have seen the MONEY part of the 3Ms of trading,
This is the METHOD section of the 3Ms,
So stay tuned for the 3rd and final part of the 3Ms, which is the most critical of all.
Thank you for reading.
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