AVOID PREDICTING THE MARKETS, RATHER BE REACTIVE
When we all first begin trading, we learn some basic strategies and pair patterns but usually continue to lose more than what we can make. This can only change once you shift your perspective; instead of trying to predict the market – which can be considered high risk – you should become reactive in your methods. Firstly, you must keep emotions away from losses. Look to learn how to markets move and have a systematic approach to finding trades when they meet your list of market entry requirements.
It is also important to know a large majority of traders lose in this market so knowing and recognising basic traps and manipulation can give an extra reactive edge in the market. Manipulation can occur many times per day in the market and trying to predict every small movement will be extremely difficult.
To succeed in the forex market, try not to make predictions about it. It is always changing rapidly, so you need to be flexible and adaptable to every new turn of events. When you react, that means you are going with what is expected from the market trends. You’ll aim to trade with large institutions like hedge funds and banks, which can be seen by analysing the way the instruments move on the higher timeframes. In these cases, you’ll see trends when it comes to trading – one approach might be if it’s bullish then wait for an area of support before entering the market looking for a continuation of that larger trend. It’s always best to follow the current trend is on the daily/weekly timeframes because the fundamental and technical analysis does work together effectively.
Build a long-term plan to help become a reactive and disciplined trader
Follow these steps: Understand the current market condition, stay updated with major economic events, set your risk-reward ratio, and check for an appropriate entry point. Set stop loss and take profit levels; then place the trade. Then we need to get some trading volume in to study and back test a strategy. When you react to the market to find trades you should try to repeat what works for over and over. Constantly changing your trading style will not only leave you confused but it will mean you are predicting movements rather than reactive to what you see and then anticipating a continuation in the overall trend that you can see.
Trade what you see with pattern recognition
You may have heard the term before, ‘trade what you see, not what you think’. It’s a very true statement and its simple to understand but not easy to implement. A lot of trader will either listen to other traders or get caught up in a fixed idea and try to catch a movement. Whilst we are all speculating when trading, it can lead some traders to overtrade or enter one more position if a trade doesn’t go their way initially. The risk to reward ratio may look even more profitable which may lead to chasing bigger losses and so on.
Always be ready to step back and evaluate the patterns you see occurring in the market and document them. Try to replicate other trades in the same style if it worked for you. Or look to adapt if it didn’t.