STEP NUMBER ONE in any trader’s journey should be…to find a trading edge in trading. This is true regardless of whether you are trading forex, equities or commodities. A trading edge is a set of behavioural guidelines in the market that, followed properly, will result in profitability.
Finding this technical trading edge (especially in choppy forex markets) is a very personal journey. Everyone has a different view of the market and this results in many different approaches. However, the good news is that ultimately, regardless of what technical tools you use, you should be able to develop a strategy around a few key factors.
KEY INGREDIENTS FOR YOUR TRADING SUCCESS RECIPE
The good news is that as far as technical analysis is concerned, we are really only concerned with several edges, however expressed:
3. Cycle Analysis
4. Trigger/Entry Methodology
As we consider these factors, there are two “secret”, OFTEN IGNORED key considerations that will make or break a trading entry strategy. No, they are not trade and risk-reward ratio management, although those are also absolutely vital ingredients.
The key issue with most entry strategies is that they do not consider
(a) Possibility thinking i.e. having a strategy that accounts for whatever will happen next regardless of trend, range or choppy conditions. Most strategies only rely on trending conditions, and then people wonder why they lose money when the market condition changes.
(b) Complete response method i.e. having a response to those conditions that will allow you to interact with price movement regardless of what happens.
In my experience training traders worldwide, these two stumbling blocks will be more likely to cause more problems than anything else. If you can account for all of these factors, you will certainly be able to come up with a solid trading entry strategy.
HOWEVER, most good forex trading entry strategies are completely missed by the strategy hunters because they are too busy searching for the Holy Grail, or they fail to understand good exits. If you do not consider exit methodology in your trading style, you will not be able to find a good strategy, because you will have no way to determine what you actually made when you backtest it.
With best wishes for your trading,
Private Fund Trader/Head Trader Consultant
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