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Posted on Nov 19, 2021 at 10:48 AM
Trading with no defined plan or strategy is a disaster and will most likely end in 'premium tears'! Like a football match, you need a set of carefully rehearsed tactics to succeed. No shortcuts! Follow the article carefully as I unravel the top five questions you need to answer before hitting the BUY/SELL button!
Forex Trading is like a Football game.
To WIN, you need a well-rehearsed tactic and a strategic game plan.
Play with no proper tactic and strategy, and all you get is trashing upon trashing!
Each time you sit in front of your MT4 Terminal and stare at the charts, it's 'you' versus 'the markets' and nobody else!
You're your own Coach, Captain, Goalie and Spectator. No one to ginger your morale or cheer you on from the sidelines.
In short, no messiah to deliver you!
It's all you and your kaya (your strategy and tactics), and the popular saying: "...it's how you lay your bed that you lie on it..." suddenly holds true. Your strategy and tactics either become your saving grace or your errrhm... DOOM!
That being said, it's time to pop the two multibillion Dollar questions:
- What are your rehearsed tactics?
- What is your strategic game plan?
Oh wow, I bet you're bubbling with a thousand and one answers, and can't wait to share the answers to the two multibillion Dollar questions already.
Right before we get in, permit me to quickly share this beautiful quote by the intelligent Ray Dalio:
"In trading, you have to be defensive and aggressive at the same time. If you are not aggressive, you are not going to make money, and if you are not defensive, you are not going to keep the money."
Well said, huh? I just cannot agree with this quote enough!
Now to the main course!
So, my dear Forex Trader friend, right before you hit that BUY/SELL button, here are 5 IMPORTANT QUESTIONS you need to answer to keep you several steps ahead of the Forex Market:
1. WHAT IS MY PREFERRED PAIR?
You can’t trade all the instruments on your trading terminal - except if you're vying for a spot in the Guinness World Record sha.
If you're not hoping to smash any record and just want to make money, then it's best to have just a few pairs under focus (e.g Forex Majors).
This will significantly increase your probability of success, as you tend to be less overwhelmed.
2. WHERE IS THE TREND?
Since the price of an instrument will always move in a particular direction, it's wise to identify the direction first and ride along for profits!
If 'Trading with the Trend' is to 'Profit', how about 'Trading against the Trend'? Losses right? Can't be more accurate!
3. WHICH TRADING STYLE ARE YOU USING?
Everyone has a style. It could be in the area of fashion, football, nutrition, or name it!
When it comes to Forex trading, having a style is not enough.
You have to identify your style, decide if you'll like to stick with it, and maintain the discipline associated with that style.
The major Forex Trading styles include Scalping, Day Trading and Swing Trading.
You have to decide and maintain the disciplines that make a successful scalping style or otherwise.
The 'Scalping' style of trading involves trading for quick wins and short counter-attacks/reverse trades.
On the other hand, the 'Swing' style of trading is a trade involving an entire week or more.
4. WHICH IS THE STRONGER VERSUS WEAKER PAIR?
Ascertaining the strength of a pair is super important and cannot be emphasized well enough.
A positive NFP data will favour the USD pair over a flat AUD or NZD at noon.
Therefore, trading the AUD/USD and NZD/USD pairs at that particular time is a 'hotcake' because the stronger currency (in this case, the USD) will definitely push/drawback at the weaker pair.
5. WHAT IS MY RISK-TO-REWARD RATIO?
Can you guess what happens when a team concedes a goal in a football match?
The players, coach and spectators of the losing team immediately do one thing - quick math of the number of goals required to 'zero' the loss and WIN!
The first important step is determining the position of your 'Goal-Posts' (i.e., your exit points) whether they are profits/losses.
Think in terms of ratios; 10 pips Stop Loss versus 20 pips Take Profit, or even a 15 pips Stop Loss versus 30pips Take Profit.
You can then proceed to work along with these ratios depending on your trading style - Scalping, Day trading or Swing Trading.
Keep these 5 questions close to your heart, and answer them religiously right before you place your next trade!
Got questions, comments or additions? Do well to drop them, as I'll love to learn from you!
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