Tim Black — Follow Tim On Twitter
I’m a day trader. Or rather I aspire to be a day trader. Every day I trade the foreign exchange (forex) market, but, until recently, I haven’t had much success. Then I met some folks on Twitter who made all the difference for me.
I’ve spent the last few weeks in a trading room presented by Casey Stubbs (@caseystubbs) of Winner’s Edge Trading and moderated by Michael Storm (@neo761). Michael is a long-time professional trader known as Robin Hood in trading circles (he takes from the rich and gives to the poor.) He taught me these five lessons for successful forex trading:
Support and resistance on a trading chart are not precise numbers, but rather areas. Part of my profitability problem in trading was that I was taking trades based on a bounce from a precise number and placing my stop loss just past this precise number on the chart. Invariably, the market moved just past the precise number, precisely taking out my stop loss and then proceeding to move in the direction I expected without me. I’ve learned to watch for candlestick confirmation of a turn in the market before entering a trade.
Pigs get fed, hogs get slaughtered. When you get some profit on your trade, don’t let it turn and go negative on you. “Peel” some of the profit off by closing a portion of your position. That’s the getting fed part. If you just expect the trade to run and you get greedy, you’re going to get slapped. That’s the slaughtered part. In business school we used to say “the time to get pie is when pie is passed.” Get the pie while it’s in front of you. Don’t let it get away.
Don’t think of the trade in terms of dollars profit or loss, think of it in terms of pips. Thinking in terms of dollars increases the “freak-out” factor of the trade. It’s easier to conquer your emotions and adhere to your rules if you are thinking in terms of pips profit or loss.
Take the high-probability setups and leave the rest. This is something I heard long ago. The trouble was: how do I know what’s a high-probability setup and what isn’t? Well, a high-probability setup is one where the trade signals are apparent on at least three different time-frames and they line up with the general trend. Once that happens, you will need candlestick confirmation. All of these things together constitute a high-probability setup.
Always know your trade limits. You’ll never get anywhere in life without some kind of map or plan. That’s true in trading to the nth degree. Don’t enter a trade without knowing where your stop loss and targets are. That’s how you become a trader and not a gambler.
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