Most traders create the error of trading on all market conditions. The reality is that typically it’s wiser to merely not trade. Typically the markets are too inconsistent to trade with any accuracy or effectiveness. It’s these times traders tend to relinquish back all their recent profits (and sometimes more).
I am aiming to allow you to guys in on somewhat ‘secret’ today; the quickest route to creating cash in the forex markets is by capital preservation. You see, most traders don’t preserve their trading capital long enough to create any substantial gains within the market. Instead, they trade it all away in a very flood of emotional trades that reduce their accounts all the way down to nearly nothing. Then, they own very little to trade with once the market conditions change and the trading becomes easier and a lot more profitable.
As a professional trader, a part of your job is to determine market conditions; you want to not solely learn the way to identify high-probability price action setups, but to determine the market context that they evolve in. Meaning, a part of trader is learning to work out the underlying bias of a market, not simply trading any market setup you see. Your goal is to attend for the ‘perfect storm’ of a high-probability trading pattern forming at a merging purpose within the market, and to create certain that the setup ‘makes sense’ in line with the conditions of the market once the setup forms.
Seriously, AVOID trading every week; don’t consider the markets for a week. There are fifty two weeks in a very year; you don’t have to trade each one of them. It’s fairly safe to mention a minimum of two or three of these weeks (probably more) can contain terribly stormy price action that may shred your trading account up if you attempt to trade it. One of your jobs as an advanced trader is to spot once the market is stepping into a consolidation section that’s too stormy to trade. I’ll admit, this can be easier aforesaid than done, however once you pay more time analyzing a market’s price action, it’ll become easier for you.
One issue you’ll do is to easily take your time off once a winning trade. We tend to feel like trading a lot more after a winning trade or a series of winners. Most of the time, these trades are based on emotion and an over-estimation of our own ability to predict the market. In short, once you hit some winners, trading looks plenty easier than it is and we become blind to the very fact that we’ve the potential to lose capital on any trade we take. This causes several traders to relinquish back all their gains.
Taking time off trading on the markets isn’t a foolish idea, particularly after closing a winning trade or once the market is chopping sideways and lacking direction. Several traders give back all the money made when the markets were trending as they go into periods of chop. This behavior cannot be fully avoided no matter how good you are as a trader. However, there are some clear price action based clues that we can use to assist us determine a stormy market so we will then keep out of it.
Many traders trade during times of chop as they feel that urge to be within the forex markets all the time. They assume they’ll miss out on opportunities if they don’t trade all the time. Don’t worry regarding missing out on trade opportunities, the market isn’t going anyplace and it’s wiser to be slow and organized than quick and impulsive once it involves trading your valued capital in the forex markets.