My education as a Forex Trader took a positive step forward this past week with my first week of live, manual trading. I didn't make a lot of money, but the results were positive and I think I am finally on track with my Forex trading.
There are probably at least 137 ways to lose money trading Forex. I have wiped a few Forex accounts to make it to this point, and this year's results are a case in point. But I suspect you are reading this blog to find out what works with Forex trading. So here are the basics of what I have found:
- Don't trade all the time! Trade only during active, prime-time hours for your pairs. For me, that means about 6 AM to 12 Noon EST for my favorite 4 pairs. Don't trade during semi-holidays or any other time when all the players are not on the field.
- Review each pair from higher to lower time frames. Get the feeling whether they are going up or down. Stick the day's directional bias into your head for each of the 4 pairs.
- Go to the M5 and overlay the Triple-MA template and the MA-Clusters indicator I uploaded in last week's post. These 3 moving averages bring a world of clarity to just about every chart.
- Avoid spiking, ranging or otherwise uncommitted markets. If its not clear to you what direction the pair is taking, just avoid it and wait for clarity.
Those 4 items alone will eliminate a huge amount of bad trades and reduce the failure space from say 137 down to about 63. If the price bar is not straddling all 3 MA's or at least 2 of the 3, don't consider entry. The arrows in the MA-Clusters indicator will only draw when the price bar straddles all 3 MA's. I've also found that once a good trend is going straddling just the 5 and the 20 can yield some pretty good results. Case in point in the chart of the left of AUD/USD which showed a good pullback to the 20-bar MA with a good, solid entry bar in the middle which straddles the 5-bar and 20- bar MA. Note how price found support at the 20-bar MA and continued in its prior direction.Once you get a signal bar, you have another 5 minute bar to decide whether to take the trade. Once you enter, place your stop loss a few ticks on the opposite side of the signal bar. For good entries, your stop should be not too far away, certainly less than 10 pips but typically closer to 5 pips. Once the stop loss is in place, walk away for a few minutes and just let things play out.
If you have done everything properly up to now, you just need to wait to make the spread and for it come into profit. When to take profit is the hardest part and I need to learn patience. Generally speaking we are going for a profit 4 to 5 times the range of the signal bar. I need to learn patience and learn its okay to take a losing trade and be able hang on long enough to let a big winner develop.
Following this method this past week, I took 3 trades and won on 2 of the 3 and took home about 8 pips or about 88 cents trading 0.01 lots. It's just a small start and you can follow the results in my Sunqu Live account link found in the upper right hand page of the blog.
One last thing about this method that works for me is that I don't have to spend my evening and weekends trying to program a winning Forex system. Instead, I can worry about trading during trading hours and live my life on the weekends. So it makes for a better work-life balance.
That's all, enjoy your weekend.
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