The subject of this article is perhaps the most vital ingredient in a recipe for consistently profitable Forex trading: the person.
Despite a deep understanding of price action in the market, awareness of the principles of risk management and the skills of objective technical analysis, every trader must fully recognize that in the end, when all is said and done, they are the true variable in the difference between ongoing trading. success and financial ruin.
A few hours ago, this very morning on the regular XLT, we analyzed the setups and opportunities for low risk, high reward trading in the European Forex session. For me, the most enjoyable aspect of student learning is the interaction in XLT classrooms. My readers may learn that trading can be lonely, as much of the interaction between the trader and the market is one-on-one. The only analysis that counts is your own. Rest assured that it can make you a flexible lifestyle as well as crazy when you only have a schedule and you every day! Contacts and communication with people of similar thinking will help break the isolation from the stock market.
About an hour after the start of this session, there was a conversation between me and the students about different ways to place stop losses due to a recent small loss. The loss was made in a pre-planned NZDUSD trade. Let’s take a look at this trade.
Earlier this week, we scheduled a short position for this pair as the price approached the target delivery area. Notice the last time price moved out of this area? It was also a clear pivot of the high resistance and suggested a low risk entry, low stop loss, and decent reward potential. I took this trade with some of the students and it worked around 3pm GMT while I was sleeping (my favorite way to enter!).
The whole day the market was in a flat, not dropping below my entry, at the end of the day the market made a big wave upwards, knocking out my stop loss. Then it turned around and fell to our first profit target in the 0.6990 area. I didn’t see how it happened, as I have better things to do than sit and watch the price fluctuations. Later I came back and saw what happened, I got a small loss, despite the fact that I correctly determined the direction of movement.
So, what do I want to say to you? I am sure that most of the people reading this article also had a similar situation, their work was interrupted by a few pips and they saw how the price then moved in their direction. As you can see, this also happens to me. However, now I have learned not to let this bother me, because I know that the market will always be full of surprises and will never be under my control. Some of my students have suffered the same fate in this trade as me, however others have been successful in this trade and are still in this position. As you can see, although we all looked at the same trading opportunity, each handled the trade slightly differently. I personally decided to place my stop a few pips above the pivot high of 0.7078, as I believe that the stop loss should always be in the technical location. where the market proves that I was wrong. This is a rule from my trading plan. On the other hand, I have students who like to set stop loss based on volatility using the technical indicator ATR (Average True Range) as a guide. In this particular trade, the students who used this risk management method were not knocked out and are currently enjoying the rewards of price movement.
It was a buy setup and again, as in the previous trade on NZDUSD, I placed my stop loss in the technical area a few pips below the pivot low, where I knew I would be wrong if something happened. Although unlike the other trade, this one rallied slightly after entry, reaching my first profit target, recouping my previous loss, and giving me the freedom to trade USDCAD, giving me hope to continue moving in my direction. I don’t know what will happen next, but the key factor in this equation is that I stuck to my rules and now I can only sit back and let the bell do his thing. I have not changed my trading rules due to a previous losing trade with NZDUSD, because I know that ultimately consistency in any activity comes from doing the same thing over and over again,
You may be wondering if I recommend using a technical stop or an ATR based stop for your trade, which was the discussion on today’s XLT. If you are looking for an answer to this question, then I will be happy to give you the same answer that I gave my students: “It’s up to you!” There is no more correct or incorrect answer to this question, trading offers a large number of tools and methods, with their pros and cons. The individual trader simply has to decide which technique suits him best. If you feel comfortable and confident with your trading style, you will find it easier to analyze, execute and manage your position, giving you the ability to do your job and consistently benefit from your methodology. The worst thing you can do is change your goals and try new things. as this will leave you with little hope of achieving a fundamental balance in your trading career. In conclusion, a simple advice, be objective in your analysis, stop losses quickly, and let your profits grow.
