In fact, a broker told us off the record that it is more like 90% of people losing 90% of their trading accounts in 90 days. How do you feel about this?

Now, it would be convenient to blame the broker for this (…and yes, this is tempting!), but that would not tackle the cause of why so many people do this and would simply serve as being a denial of the underlying problem: the majority of people who lose money do so because they do not have an edge or trading strategy.

So, why do so many people trade without even bothering to follow or even learn a strategy? If you wanted to learn how to drive you would do it in a car (preferably not an old banger with 3 wheels) with a driving instructor (a sober one). If you wanted to learn heart surgery then you would take a step in the right direction and go to medical school.

So to be a profitable financial markets trader and enjoy the long-term success, consistency and trading can give you, it makes sense to learn and implement a profitable strategy from those who are already trading it and have a proven track-record of results to go with it.

So here’s the question: What is your trading edge in the market?

According to Investopedia, an edge or strategy is: “A set of objective rules designating the conditions that must be met for trade entries and exits to occur.”

Having an this will set you apart from the losing majority. Markets are random – they can do anything at anytime and it is our jobs as traders to establish order within the chaos by effectively using  technical analysis to identify trades with profit potential through weighing up probabilities that stack in their favour.

Professional traders stay in the game by sitting out of the market unless their very specific rules and conditions have been met. That’s right – you did read it right. They simply sit out of the market if there is no reason based on their strategy for them to be in, leaving the amateurs to place their boredom, frustration and revenge trades.

All too often, the rookie will be putting too much time and attention feverishly looking for opportunities, falling into the trap of even second guessing their rules for entry simply because they do not have an excuse to enter the market. So they then typically bend the rules and enter anyway.

But following a simple set of rules for entry is only that is only 20% of having a strategy, leaving the remaining 80% to the trade’s management and profit targeting.

Now as you may have guessed, a trading strategy or edge also includes rules for its management and exit just as we entered the market based in a set of rules.

Strategies consist of three components:

Timing:

It is crucial to have a fixed idea of which time frame you intend to trade and when do you plan to trade it…and even more important to be consistent in your approach in executing this. Deviating from this will cost you.

Are you an early-bird intra-day trader who likes the cut and thrust of entering and exiting the market in the London session or are you more of a night owl, end-of-day trading type who likes to set their orders up on the daily chart in the evening and walk away for 24 hours?

Regardless of what style of trader you are it is crucial that you trade your set-up at the same time on a daily basis in order to take advantage of the flow of opportunity. Markets are random and so too are wins and losses. The one slot in your trading routine you decide to take off will, sods law, be the time when you miss out on a string of winning trades.

Trade selection

So you have turned on your computer at the time you usually trade but the battle is not won yet. Markets do not owe anyone a living just because they have turned up on time…unless you have a very specific idea as to what your trading strategy is and the market gives you an opportunity which fulfils your trading edge’s criteria/rules for entry.

It is crucial that you only trade as and when the rules of your trading strategy or trading edge in the market are fulfilled. I repeat, it is crucial that you only trade as and when the rules of your trading strategy or trading edge in the market are fulfilled. I’ve said it before and I will shout it from the rooftops as this is the main reason why so many people start off their trading “journey” with honourable intentions and end up flunk out all the poorer for doing so. Many simply just trade for trades sake. They think more trades and more time trading equals more money. This is just not the case.

Trade management

As a money manager of Your Trading Account Ltd, your first objective for any trade is to break even and then your second objective is to make a profit. Every strategy should have rules for management so that you have a very clear picture of what to do in any instance…even if things do not quite go to plan.

While you may have your trading plan etched in stone and a very fixed set of rules which will (or should) qualify or disqualify a set-up in the market but how do you plan to do once the set-up has passed?

What will you do if you are not triggered into the trade? What will you do if it moves against you? What will you do if it moves in your favour? Will you trail your stoploss? Will you scale out half way to profit target? Will you add to the position?

I may give the appearance of jesting but I’m serious! The above questions are certainly considerations as to what I want you to at least consider.

Summary

If do not yet have a strategy, then it is high time you think about using one and sticking to it. But do not just fall for any old strategy!

Choose a timeframe which suits your personality and a strategy which you understand and has the results to give you the full confidence in it.

If you do not do this then you will be inconsistent in your approach to trading financial markets and it will most likely cost you long term.

In a scenario where there is a 50/50 chance of the news either agreeing with their trade or going against it, end-of-day traders can manipulate things to their advantage to have logic in their favour rather than “gut feeling”.

By keeping the risk per trade to a minimum of 1% and by using a stop loss which will automatically exit them from the trade if it does go against them, they already have a powerful edge providing they are sure to use both. This, combined with only trading trades with good reward potential (ie: 3:1) will ensure that if news goes against them, they only stand to lose 1% of their account but if news does go in their favour they stand to make a minimum of 3%.

Playing the odds

If news goes against them then the worst possible thing that can happen is that they lose 1% but if news happens to be in their favour, the best possible thing that can happen is that they could potentially make 3% or at least have their target further within their sights.

Imagine betting on the turn of a dime, safe in the knowing that, despite the 50% chance it has on landing on ‘heads’ or ‘tails’ and subsequently having a 50/50 chance of being ‘right’ or ‘wrong’, you would win seriously more if you were right than you would lose if you were wrong.

It is exactly this logic which will help them use news to your advantage. Rather than trying to guess what the news will be (this is what amateurs do and yes, many end up as long-term losing luddites) they accept it as a vehicle or catalyst to either helping them achieve their trading outcome faster – safe in the knowledge that if they are ‘right’ they are rewarded infinitely more than if they are ‘wrong’.

It shouldn’t happen to a Lazy Trader

Imagine entertaining a hunch and going long on Cable (GBPUSD) on the hourly chart just in advance of the biggest economic data release in the calendar, Non-Farm Payrolls, getting stopped out and losing money as a result of some unexplained spike that sends your trade against you and, to your disgust, seeing the raging bull sending your trade to dizzy new heights…without you.

Meh! Such a scenario could and has sent even the most moderate, meek and mild trader into a feckless fit of spitting rage. But this happens all too often. For many new traders who gravitate to intra-day trading, news trading will serve as nothing more than a loss-making jaunt into the wilderness where money is lost and expectations…dashed.

Except you may be surprised to learn the irony that to profit from the news, we do not need to know anything about it! In fact, the less we know about it – the better. After all, we trade what we see on the charts and not what we think.

Why it’s better to have your head in the sand

With this method you will win some of the time – but not all of the time. However, if news is in your favour you will undoubtedly win far more than you will lose than if you were proved “wrong” and news thus went against you. Getting it wrong and losing trades are all part and parcel of trading financial markets and you should celebrate them as a necessary “business expense” prior to a string of winners.

As technical traders who trade what we see on the charts as opposed to what extent we think news will impact a particular currency at any given time, it is important to rationalise the impact of news and to address how we can best take advantage of it. Certainly, there is no way of correctly guessing the news release in advance – traders who do this based on the crunching of reams of fundamental data tend to get it right some of the time, but are never right the whole time.

NFP today? Who cares!

Many of our clients struggle to accept that fact that we don’t even know what the news is on any given day, look, or frankly even give a damn. The honest trust is, we don’t! News is simply tameable noise. If we see a price-action set-up with a reward to risk profile of 3:1, we simply place the trade with complete disregard for what the news is or who is saying it…and yes, that includes Ben Benanke (sorry Ben!).

After all, if the trade goes in favour – and there is a 50% chance this will happen – we can be rest assured that the news will help perpetuate a winning outcome faster. On the flip side of the coin if the news announcement (whatever it may be) happens to goes against the trade, we can be secure in the knowledge that we have not risked and therefore lost 1% of our account and our protective stop loss would have exited us from the trade at a point where it would have become invalided.

Take CHFJPY for example. This trade was placed on the daily timeframe on the 5th September 2011 based on the fact that we had a false breakout above a key level of resistance and an inside high test bar to signify that the bears were coming back into the market to send this pair short. Unbeknown to us, the Swiss National Bank made an announcement which sent the pair crashing far beyond our target. A gain of 9% was made on our capital. Had the trade gone against us, only 1% would have been lost.

None the wiser: CHFJPY before the news announcement

We had a sell order at the break of the low of the inside high test with our stop loss above the high and a target at the previous swing low.

The pay-off: CHFJPY after the news announcement

The news could have gone either way but this time it went in our favour. Just as well we did not set a limit order as the news caused this trade to run in excess of twice our target! This example demonstrates how we can really use news to reward us by keeping the reward potential high but the risk to a minimum.

Blissfully unaware about what news announcements were being made, who by and where, we had the odds stacked our favour nonetheless.

However this method is only really suitable for trading the higher timeframes as you will typically, by default, have a bigger difference between your entry point and stop loss and more collateral compared to if you were trading in the way of news intra-day. If you are entertaining the latter, you could very easily find that, to your exasperation, spiked into the trade, stopped out and then it goes to hit what would have been your target without you!

Conclusion

Trying and guess what the news is when trading with low reward potential is a recipe for disaster. Nobody can tell what the news will be– some get it right some of the time but nobody gets it right the whole time.

So simply leave the market to decide what it will decide off the back of news, leaving us technical traders to play with the odds and simply trade what we see and not what we think… using the news as a mere catalyst to either agree with our trade and for us to ride that wave and reward us handsomely, or to go against us losing us only a small percentage of our capital.

As end of day traders, by virtue of trading the daily chart, have a bigger distance between their entry and stoploss, they will be able to keep in the game for longer and avoid being stopped out by intra-day news spikes.

Do you have to know anything about the news in order to do this? The less you know the better! Take the above as a logical concept to let your winning trades run.

Quote 1: “The stock market is a no-called strike game. You don’t have to swing at everything – you can wait for your pitch. The problem when you’re a money manager is that your fans keep yelling, ‘swing, you bum!”

Quote 2: “Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.”

Quote 3: “Price is what you pay. Value is what you get”.

Quote 4: “The business schools reward difficult complex behaviour more than simple behaviour, but simply behaviour is more effective”.

Quote 5: “You do things when the opportunities come along. I’ve had periods in my life when I’ve had a bundle of ideas come along, and I’ve had long dry spells. If I get an idea next week, I’ll do something. If not, I won’t do a damn thing”.

Quote 6: “You only have to do a very few things right in your life so long as you don’t do too many things wrong”.

Quote 7: “It’s far better to buy a wonderful company at a fair price than buy a fair company at a wonderful price”.

Quote 8: “We simply attempt to be fearful when others are greedy and to be greedy when others are fearful”.

Quote 9: “Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks”.

Quote 10: “We believe that according the name ‘investors’ to institutions that trade actively is like calling someone who repeatedly engages in a one-night stand as a ‘romantic’.

Quote 11: “Let blockheads read what blockheads wrote”.

Quote 12: “Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down”.

Quote 13: “I don’t look to jump over 7-foot bars: I look around for 1-foot bars that I can step over”.

Quote 14: “If a business does well, the stock eventually follows”.

Quote 15: “Look at market fluctuations as your friend rather than your enemy profit from folly rather than participate in it”.

Quote 16: “Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can’t buy what is popular and do well”.

Quote 17: “Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good results”.

Quote 18: “I like to go for cinches. I like to shoot a fish in a barrel. But I like to do it after the water has run out”.

Quote 19: “Wide diversification is only required when investors do not understand what they are doing”.

Quote 20: “There seems to be some perverse human characteristic that likes to make easy things difficult”.

But you do not have to quit your day job or make any sacrifices to your existing lifestyle if you did want to try your hand at trading fulltime because the good news is that, as you will discover in this article, people, just like you can and are making fantastic returns trading fulltime, but spending only minutes a day doing so.

Time does not equal money in trading

The cliché “time equals money,” may be ubiquitous in the workplace, or at least, as an expression hot pressed on the lips of any boss who is worth their salt. However, when it comes to financial markets trading this cannot be further from the truth.

Many trading newbies who have often come from fulltime jobs are often under the illusion that the more time that is time spent sitting and salivating over the charts equals more money and percentage gain. This is most definitely not the case! It is the opposite, in fact.

It is a question of opportunity flow. Opportunities are like busses; they can all arrive at the same time as winning or losing trades, or not at all. If the rules for your trading strategy are met then you do not know if it will be a winner, loser or a breakeven trade unless you take it and wait for the outcome. But the trick is always to be in it and this depends on the timeframe which you trade in anticipation of a string of winning trades.

Opportunity knocks

So, if you trade the 5 minute chart on, say, GBPUSD, does this mean that you have to spend all day and night in front of the screen scanning the markets every five minutes? Or, if you trade the four hour chart, does this mean that you have to return back to the charts every four hours to see if there is a tradable opportunity? Quite possibly.

It therefore makes abundant sense to be in the opportunity flow according to our chosen timeframe – granted that our trade-set up can manifest itself at any time when the markets are open.

Imagine trading your chosen strategy on the 15 minute chart in the London session in the morning and enduring 3 consecutive losses only to go and walk the metaphorical dog, return to your screen an hour later and find that, to your disgust, that your strategy had yielded 3 further opportunities in your absence – all of which went on to hit what would have been your profit target. If a prospect like this leaves a sour taste in your mouth then in may be worth considering how you are going to deal with ‘opportunity flow’.

With forex trading, this could be at any point from Monday to Friday, day or night (as forex markets are open on weekdays, 24 hours a day). But what does not make sense is the making trading a big part of your life when it does not have to be – especially when profitable trades are never guaranteed.

Unless you automate your strategy with an EA or robot then this is a necessary evil and is the ‘ball and chain’ effect that many newbies inadvertently fall into where they end up “working” for longer hours in pursuit of trading profits which are not guaranteed. After all, markets do not care who you are, what you do or who you worship – they will do their thing regardless.

Financial markets are random. They can do anything at any time and, as technical traders, it is our job to objectively execute our edge in the form of a strategy and take advantage of reoccurring nuances in the market which have probabilities stacked in our favour.

The winning approach

So, what is there was a way where you can be in the opportunity flow and potentially profit from every opportunity that comes your way where you can spend little or virtually no time watching the screen?

This is possible with trading the daily chart. After all, unlike the 5 minute chart which has a new bar form every 5 minutes, or the hourly chart which has a new bar form every hour, the daily chart forms…you’ve guessed it: once a day! So to be in the opportunity flow on the daily chart, you only need to look at the chart once a day, as opposed to once every five minutes or for every hour.

This approach will free up plenty your time – a luxury that many intra-day traders cannot boast so that you can enjoy more lifestyle whilst reaping the benefits of your money working harder for you, passively.

Once you have adopted a trading strategy which resonates with your personality and thus have a very fixed idea as to what price action set-up you should be looking for, then you can very happily flick through the charts at the end of the day before you go to bed (if your time-zone is GMT), after the Daily bar representing that’s day’s price movement and underlying sentiment has closed. The opportunity will either be there or not.

If the market does not give it to you then you do not trade it – if it is, and it fits your rules, you do. Imagine waiting all day for the trade-set up to manifest itself and it simply does not. Or, worse still, you sustain a loss or a number of losses as a result of your labours – even if you execute what is a profitable strategy according to its rules. That would suck, wouldn’t it?

Why you are better off with the Daily timeframe

However, if you trade the daily timeframe, at least you can achieve a far better monetary gain for the reduced time spent in front of the screen in a month of gain. In addition, if you sustain a drawdown for the month then at least, thanks to the hands-free nature of trading the daily chart, you would have spent less of your time enduring this drawdown!

Take Jack and John for example. They both achieve an 8% gain for the month, yet Jack trades end of day for no more than 30 minutes an evening as an end-of-day trader who is relatively new to it all, and John spends four hours a morning trading as an intra-day trader.

Consider there are on average 22 trading days in the month and Jack has a total of 11 hours spent glued to the screen while John has a total of 88 hours!

Who makes the better return on their money for the time spent “working” for it? You may have guessed it, Jack Even if both traders had made a % loss, Jack would still be better off granted he has made the same amount as John but has spent infinitely less time labouring for it.

Summary

Trading the daily chart enables you to be in the flow of opportunity from only minutes a day.

Providing you know your strategy and are prepared to follow its rules meticulously, there is no reason why you cannot do the same and enjoy the benefits of lifestyle trading, and the expanses of free time trading the daily chart can give you.

When people ask me whether I trade fulltime, I respond with an enthusiastic “yes”. Even though I trade for ten to fifteen minutes an evening I am always able to benefit from being in the opportunity flow “fulltime”, safe in the knowledge that my money is working overtime for me while I go about my merry day doing, often, more interesting things than watching a bunch of moving bars on a chart in a darkened room!

It is the one thing that will set you head and shoulders above from the majority of ‘have-a-go-heroes’ in an industry where 92% of participants are ultimately doomed to failure.
If you have your hopes set on joining the winning elite by making consistent profits from trading in any market, employing effective risk management is a great start.
But the good news is that it is neither complex nor tedious.

It is straight forward and the only bit of maths you really have to do in trading. The following rules will give you a lucid insight into how to use risk management to enjoy long-term prosperity in the financial markets by keeping losses to the minimum and profits, maximised.

Keep the risk low

Ever heard the old adage in investing: “never risk more than you can afford to lose”? Trading the forex market – or any financial market for that matter – is no exception to the rule. Never risk more than 1% of your account’s value per trade when placing the order, no matter how good the set-up looks.

So if you have a $1000 account, you risk no more than $10 per trade (risking a conservative yet wise 1%). If you have a $10,000 account, you risk no more than $100 per trade. If you have a $50, 000 per trade, you risk no more than $500 per trade. One per cent is one percent – nothing more, nothing less.

Never, ever risk more than 1% of any trade unless you have has 3 months consistency under your belt. By that time, you can scale up to risking 2% per trade. However, it is strongly unadvisable to risk more than 1% until you reach this level.

Failure to keep the risk low in trading will have dire consequence and it is one of the main reasons why many amateurs simply wipe out their account, choke on their corn flakes, kick the cat and….give up.

Markets are random. They are chaotic mess and can do anything at any time. Great looking tradable opportunities can sometimes crash and burn at the turn of a dime. So by risking only 1% per trade you are able to accept that the worst possible thing that could happen to you if the trade goes against you is that we lose 1% of your account…which is a damn side better blowing the whole account.

Always use a stop loss

For every trade you place with your broker, you should always apply a protective stop-loss to it so that if the market does move against your trade (remember, markets can do anything at any time), you can automatically exit the market without taking an unnecessary hit.

Gone are the days of feverishly watching the screen wondering whether you should exit or not in the heat of the moment. The great thing about a stop loss is that it that your broker will automatically exit you from the trade if the market does move against you…providing you place the stop-loss order in the first place.

While brokers have a vested interest in you entering the market, they do not have a duty of care towards you when trading the markets – your losses, after all, are their wins, and in most cases, they will not make using a stop-loss a mandatory requirement. The onus is on you to do make sure the stop-loss order is placed.

A stop-loss should be placed at a point where if price goes against you and it hits it, then the original set-up is then completely invalid.

You should get into the habit of placing the order for a mandatory stop-loss for every trade you place as there is nothing more emotionally jarring than diving straight into the market without a stop-loss and telling yourself that you will manually exit if price reaches a certain point against you. Often, doing this will cause you to move the goal posts and deviate from the original plan, which is a big no no (this is where many traders lose more than what they bargained for!).

Make high reward trades a must

Ever found yourself trading your chosen trading strategy just because you have your trade set-up? That’s good enough. Face it, most amateur traders don’t bother to even do this.
However, it will be worth your while question how much profit potential you have from the trade and to only trade the set-up if a minimum reward threshold has been met.
You will almost certainly trade less, but the quality will be higher.

If, say, you have a difference of 45 pips difference between your entry point and stop-loss but a profit potential of 243 pips difference between your entry point and your profit target, then you have a reward/risk profile of 5.4:1. So if the trade goes on to hit your profit target, the best thing can happen is that you make a 5.4% gain on your trading account. However, if the trade goes against you then you know that, as you have only risked 1%, the worst possible thing that can happen is that you lose 1%.

In very much the same way that your trading strategy has a set of rules for entry with each rule or requirement acting as a ‘filter’ preventing you from ultimately getting you into a bad trade, the requirement of a minimum reward/risk profile is a useful addition.

Face it, we have all been there. Why bother trading a higher frequency of trades with smaller profit potential than less trades with higher profit potential? Many traders, particularly those who are new to trading, find it hard to stay out of the market and unwittingly trade a high frequency of trades with for tiny reward at their peril.
But if you adopt the simple rule that you will not place a trade unless you have a potential reward/risk profile of 3:1, you will find yourself trading less but in higher quality trade set-ups.

The great news about high reward to risk trading is that you can afford to have more losing trades than winning trades and enjoy an overall percentage gain. Say, for example, you placed ten trades each risking 1% and went on to incur seven losses, losing you a combined total of 7%. Compared this to the three winning trades which went onto make 3% each (9% in total)…you have an overall profit of 3%.

That’s the power of positive reward/risk!

Conclusion

Is trading forex a risky business? It does not have to be providing you follow the rules for effective risk management.

Risk management is systematic, helps take the emotions out of trading and cuts losses fast while letting your winning trades run.

From using a stop loss you will be able to automatically exit any trade which goes against you without being glued to the screen. By keeping your risk per trade to 1% of your trading account, you will never run the risk of blowing up your account – or taking an unnecessary hit. Lastly, by only selecting trades with a minimum reward/risk profile of 3:1, you will be able to potentially make more from trading less.

By doing this, you will leave the thrill seeking to the feckless gambling types and will have turbo-charged your chances for long-term success in trading.

Trading with the trend is a smart move. By simply buying in an ‘up trend’ (going ‘long’) and selling in a ‘down trend’ (going ‘short’), you will have already dramatically increased your chances of success compared to simply trying to swim upstream by trading against the trend (counter-trend trading).

In order to do this properly, first of all, we need to identify the trend by identifying key swings in the market, known as peaks and troughs. If we have higher peaks and higher troughs (‘higher highs’ and ‘higher lows’) it is considered to be an uptrend.

Conversely, if we can see lower peaks and lower troughs (known as ‘lower highs’ and ‘lower lows’) then we have confirmation that we are in a down-trend

Yes, but how can I profit from the trend?

Every trend flows in two phases: Phase 1 is the extension in the direction of the prevailing trend, extending from a higher low to a higher high (in an up trend) or a the extension from lower high to a lower low in a down-trend.

Phase 2 is the retracement/pullback phase, which occurs after a higher high is formed and price action retraces/ pullback to form a lower high (in an uptrend) or after a lower low is made in a downtrend and price action retraces back to form a lower high.

In an ideal world, we would simply hope to make money by buying in an up-trending market and selling in a down-trending market, very much the same was as we can expect to get a bulls eye by tossing a dart at a darts board blindfolded.

However, it is not that simple as we could find ourselves rapidly offside by getting into the trade just before the ‘phase 2’ retracement occurs as retracements go against the prevailing direction of the trend.

The good news is that it does not have to be much more complicated than that. All price action, like a river, ebbs and flow, extends and retraces, we want to take advantage of both having the certainty of trading in the same direction as the trend and also get into our position at an efficient price point so that we can get the best reward:risk as possible.

The million dollar question is where is the best point or optimal level for us in to go long or short in an up or down trend respectively?

It is imperative that we buy at the most efficient entry point possible and we can do this by simply buying the bounce in an ‘uptrend’ or selling the bounce in a downtrend. We can typically do this after a ‘phase 2’ retracement or pullback has completed itself and has intersected with a technical level, just in advance of a phase 1 extension.

A technical level could be a variety of different things: previous swing high/low, previously respected moving average, a Fibonacci Retracement level, a horizontal level, a big psychological number or a weekly or monthly pivot or trend line.

Often, we are able to discover more than one technical reasons to support our trading decision, long or short, and such confluences give us a higher probability outcome. Suffice to say; the more technical reasons we have in support of our trading decision, the more self-fulfilling the move is likely to be.

Once we have, preferably, a confluence of reasons to buy the bounce after the pullback in an uptrend, or to sell the bounce after a pullback in a downtrend, we need to wait for our ‘activator’ bar which could taken on the form of a pin bar reversal (also known as a test bar) or doji bar. These are specific price action set-ups which give us a powerful edge in the market as we are able to read the sentiment in the market based on the very profile of this type of activator bar.

So, we have identified the trend and an efficient entry point before anticipating an activator bar to serve as our ‘launch pad’ into the trade. What next?

As you have selected the tradable opportunity and waited for the optimal time for entry, it makes sense to set a target which is the point where we can ‘take profit’ and walk away from the trade.

Remember, when selecting a target, you will need to be very sure to select a point at which you wish to exit the trade while ahead and at a profit which is within reason and thus likely to happen rather than at a point which is beyond the realms of probability but more at a place where you would like the market to go ‘in an ideal world’.
Do not fall into this trap! The market will do ‘its thing’ regardless of what we want. As technical traders, we are simply working with probabilities of what is most likely to happen over and above what we want to happen.

For trading continuation trades in a trending market, it is very probable that price action will make a ‘higher high’ after you have bought the bounce in an uptrend which is already making higher highs and higher lows. It is even more likely to reach the reach the same price point as the previous swing high.

So, for an outcome where you accept a slightly less reward in exchange for more probability then target the previous swing high. Otherwise target a higher high for a trade outcome with higher reward potential but slightly less likely.

In contrast in a downtrend, a target at the previous swing low will give you a heightened probability with less reward whereas targeting a new lower low would be slightly less probable but would give you greater reward potential.

Suffice to say, for trade targeting there is often a trade-off between reward and probability. What would you rather have? A trade outcome higher in probability but lower in reward potential or an outcome which is lower in probability but higher in reward? It is a humdinger of a question but it is one which you can answer.

Summary:

The trend will always be your friend. Buy in an uptrend and sell in a down trend, after a pullback/retracement (‘phase 2’) in anticipation for the continuation of the trend (‘phase 1’). Do not trade against the trend (counter-trend) or in phase 2.

Before taking the trade, make sure that you have several technical reasons to validate your trading decision and set a target according to your appetite for reward Vs probability. If you want an outcome with an increased probability but are happy to accept a lesser reward then a more conservative target will serve you better. However, if you are in pursuit of an outcome with higher reward potential but accept an outcome with less probability then a more aggressive target will work for your personality.

Ever heard the expression: “The trend is your friend until the end when it bends”?

While it may serve to be little more than a cliché in and amongst the more seasoned professional trading circles, it does not take away from the importance of actually putting into practise trading with the trend – especially if you are new to the art of trading financial markets.

Buying or going ‘long’ in an uptrend and selling (‘shorting’) in a down trend is far more likely to contribute to a successful trade outcome, because you are following the overriding sentiment which is governing the movement of price action.

Very much like a river gently ebbing and flowing down the hillside, the market will generally trickle in the pathway of least resistance and trading against the trend is very much like trying to swim up river with the odds being very unlikely to be in your favour.

Suffice to say, in a bullish market, you there will inevitably be an uptrend and, in contrast in a bearish market, a downtrend.

So how do we identify a trending market? Well, all we need to do is identify key swings in the market, also known as ‘peaks’ and ‘troughs’.

Reassuringly enough, you can do this very easily by looking at price action on its own, on any timeframe without having to bother with any indicators or so-called ‘EAs’. After all, indicators often are little more than a false economy as, while many may give the illusion of looking impressive in their complexity on the chart thus serving a ‘greater purpose’. However, most often over complicate the issue and actually cloud the trader’s judgement.

General characteristics of a trend

Trending markets by their very nature make strong moves in a given direction before a period of intermittent consolidation/retracement before continuing in the prevailing direction of the trend. The direction reflects the sentiment felt amongst the market participants – whether it is a market if buyers (a bull market) or one which is dominated by sellers (a bear market).

How to identify an uptrend and a down trend:

In a market dominated by buyers (bulls), the subsequent uptrend will have ‘higher highs’ and ‘higher lows’, also known as higher peaks and higher troughs.

It will be driven by momentum to the upside and will buyers will typically cause price action to extend to a point of perceive value for until profit taking takes place and the price retraces to a price point where ‘good’ value is perceived for buyers to come back into the market and cause price to rise and reach a new high. This is typically how a higher low is formed and, followed by a ‘higher high’.

How to identify a downtrend:

Conversely in a market dominated by bears (sellers) the resulting downtrend will have lower peaks and lower troughs – also known as lower highs and lower lows.

Just like the case with an uptrend, it will be driven by bearish momentum to the downside causing price action to fall to a price of perceived value for the bears to unwind their positions and for buyers to come back into the market and cause price to rise and form a lower high at a price perceived as a good point for the sellers to form a ‘lower high’…just before the sellers come back into cause price to tumble again.

The best trends

The steeper the trend the better.

As traders, our primary objective is to make money and a decent percentage return after we have broken even. Obviously we want the market to prove our trading decision ‘right’ or ‘wrong’ in the shortest possible time rather than being stuck in a lifeless laggard for weeks on end!

Therefore, we want speed and momentum to drive our trade to our target as quickly as possible and steep upward and downward trends will enable us to profit from faster movement, in our favour, quicker.

To objectively see whether we are in a trending market and we have both speed and momentum on side, then we can add the following filters simply add the following requirement:

Uptrend: For the price action to be above the 20ema, and for the 20ema to be above the 50ema…and for the 50ema to be above the 200.

Downtrend: For the price action to be below the 20ema, and for the 20ema to be below the 50ema…and for the 50ema to be below the 200ema.

When the trend starts to bend

It is quite easy to get an objective ‘heads up’ as to whether the trend in question is likely to continue – or not and, from reading price action, we can look out for clues which tell us that the trend is going to break down.
In an uptrend, which is making higher highs and higher lows – all we need is a ‘lower high’ to give us a warning sign that the bullish momentum is starting to slide and that the bears are creeping back into the market. This spells danger as it is more likely to reverse our trend than enable it to continue. It is therefore not advisable not to buy in the direction of the trend.

For a downtrend, the emergence of a higher low will spell danger for people looking to go short in a market which, until now, has been dominated by sellers and making subsequent lower highs and lower lows. It is a sign that the bears are starting to be superseded by the bulls who have made a return to the market. Again, this spells danger as it is more likely to reverse our trend than enable it to continue. It is therefore not advisable not to sell in the direction of the trend downward trend if higher low manifests itself.

Conclusion

Trading with the trend will arm you a far higher degree of probability than if you are trying to swim upstream and counter-trend trade (by going against the trend).

Trading continuation trades with the trend not only provides you with an outcome with higher probability but also the frequency of opportunities is greater compared to trading key reversals in a range-bound market. That said, the reward risk profile is typically lower when trading with the trend (compared to key reversals) but the trade off is an outcome with heightened probability.

As markets only trend 25% of the time, it makes sense to have a strategy which will enable you to profit from ranging markets also, rather than simply declaring yourself as someone who trades trends only. Ranging markets are often underrated and as traders, we need to be combative and adapt to changing market conditions. There are highly profitable opportunities in both ranging and trending markets – just do not get suckered into choppy conditions.

Doesn’t sound great, does it? But face it, it happens all too often when expectations fall short of the reality of trading…often in epic proportions. Apart from being a far cry from the romanticised imagery of easy money, fast cars, and Bollinger for breakfast, it is an easy misconception to entertain and many people fall for it, including myself once upon a time.

Yes, it is possible to make fantastic gains in trading and yes, you can make these gains from trading only minutes a day – but only if you trade the daily chart on an ‘end-of-day’ basis. So keep your job (and guaranteed pay that comes with it), your hobbies, and social life. Trading does not and should not compromise any of these, providing you reap the benefits of the end-of-day trading style.

After all, many who decide to become a ‘fulltime’ trader end up inadvertently up spending hours on end, trading intra-day under the misconception that the more they trades they trade and the more hours they spend in doing so, will make them more money as a result. This is one of the biggest fallacies in trading. It should not be like this and if you are an end of day trader then trading cannot be more different from this.

With any end-of-day strategy, it only takes minutes to look through your chosen currency pairs or instruments which you trade to see if a trade set-up has manifested itself (based on your trading strategy’s rules), enabling you to blend your trading seamlessly with your lifestyle and job. But end-of-day trading is not just a loose confederation of strategies…it is a mindset too.

Mindset matters

Seasoned end-of-day traders use financial markets trading as a vehicle in pursuit of seriously impressive capital growth. It just happens to be something that they do, often alongside other income streams. For many, it is a lifestyle choice born from the desire to profit from the ebb and flow of financial markets but without the requirement to spend all day babysitting their trades.

They have vision and understand the long-nature behind their ‘end-of-day trading business model’ rather than a fly by night get-rich-quick scheme. Moreover, they understand the frequency of trade set-ups may be far lower than with intra-day trades but are happy with the higher reward potential this style typically brings.

Higher reward potential

Thanks to trading the daily chart only, end-of-day traders are able to capitalize off the back of major swings in the market. Whether they are continuations or key reversals, such trades have a far greater reward potential yet are in lower in frequency compared to the typical profile of intra-day trades which tend to yield a high frequency of trades but at a far lower reward.

Set-and-forget trading

As the frequency of tradable opportunities is typically lower for end of day traders, they are able to quite literally set their orders up (entry price, stop loss level and limit order) and walk away to enjoy time spent elsewhere – a luxury that intra-day traders simply do not have. Their time away from the charts enable them to divorce themselves from the emotional rollercoaster that often comes with watching price action move at every turn in the daytime.

Time V Return Benefits

As big swings in the market yield a far greater reward potential than the high frequency/low reward profile of intra-day trades, end-of-day traders will, if consistent, gain a much better percentage gain on their capital for the time spend in front of the charts. In short, they can make more from doing less. The time = money link (in trading) will have been broken – even though it really did not really exist in the first place!

By the same token, even if the end-of-day trader is in a period of drawdown or is not yet consistent, they can console themselves by the fact that at a comparatively less amount of time was spent enduring the losses than if they were also investing their precious time also into numerous losses.

Opportunity flow

Imagine trading your chosen strategy on the 15 minute chart in the London session in the morning and enduring 3 consecutive losses only to go and walk the metaphorical dog, return to your screen an hour later and find that, to your disgust, that your strategy had yielded 3 further opportunities in your absence – all of which went on to hit what would have been your profit target. If a prospect like this leaves a sour taste in your mouth then in may be worth considering how you are going to deal with ‘opportunity flow’.
All profitable strategies, your trading edge in the market, have a sequence of wins and losses, and our job as financial market traders is to keep in the opportunity flow by trading all of the set-ups that meet our rules so that we can ultimately gain from the net sum of all trades…regardless of the outcome. Doing this intra-day will be a veritable nightmare – unless you can automate the process.

After all, there are so many hours you can spend in front of the computer trading and of course, sleep and having a life will be an inevitable distraction. However, if you trade the daily chart only, then you can be in the opportunity flow on a daily basis from as little as 10 minutes a day. So, end-of-day traders can at least be “full time” traders with being in the flow of opportunity – something intra-day traders cannot boast but only dream of.

Emotion free trading

There is no requirement for an end of day trader to watch or babysit their trades throughout the day, so free themselves from the shackles of temptation. Whether it’s a bad trade decision born from boredom, frustration, anger – or simply, from the fear of missing out, these are all emotions acutely experienced by any trader and varying degrees throughout their trading career so removing the source of such decisions by trading end-of-day in the evening (GMT) when the markets are either closed or quiet is certainly possible.

News resistant

Unlike many shorter-term players who are left with no option but to pontificate, speculate and intellectually masturbate over news announcements and how it could affect their intra-day trades in the moment, end-of-day traders do not have to even have to care – providing they have decent reward to risk on their side.

In fact, even though they are usually completely oblivious to it, higher timeframe traders are even able to used news to our advantage as and when it occurs, based on the simple logic that there is a 50/50 outcome of whether the news goes in favour our not. If the news announcement does go against the trade then they will have a stoploss to automatically exit them from the trade losing them a predetermined percentage they risked on it. If the news happens to go in favour then it will help perpetuate a winning trade with infinitely higher reward than they could have lost.

Imagine betting on the outcome on the flip of a coin (GBP) but knowing that, despite the 50% chance it has on landing on ‘heads’ or ‘tails’ and subsequently having a 50/50 chance of being ‘right’ or ‘wrong’, you would win infinitely more if you were right than you would lose if you were wrong.

It is exactly this logic which will help us use news to your advantage. Rather than trying to guess what the news will be (this is what a lot of intra-day traders cannot help but do) you can accept it as a vehicle to either helping you achieve your trading outcome faster – safe in the knowledge that if you ‘right’ you are rewarded infinitely more than if you are ‘wrong’.

So there are just a handful of reasons why you can benefit more from trading “fulltime” but from minutes a day, without making any sacrifices to your lifestyle, personal life or career.

Conclusion

Often those who are new to trading intuitively feel that the more time spend in front of their charts equates to more percentage and financial gain on their trading accounts so are all too happy to ditch their day job in pursuit of trading “fulltime,” when they can simply be in the opportunity flow fulltime instead from only trading the daily chart for minutes a day.

Often the daily chart is overlooked because it is seen as “the long game” and does not provide people with an instant sense of gratification – something which is very much present in society today with 24 hour grocery stores and restaurants, and 1000 channel cable television.
But the market does not pander to this… or the people who seek it. The market does not owe you and it certainly does not owe me a living. It will do its thing whenever and however it wants.

What is does do is provide us a vehicle to make money off the back of, after we successfully manage our risk and correctly gauge the direction the market is likely to travel and this is based on probabilities which are given to us technical traders from technical analysis.

So what better way is there to find a style of trading that gives us the best profit potential from doing as little as possible, in a market where anything can happen at anytime and no outcome is guaranteed .That’s end-of-day trading!

As with any new venture, most people don’t normally want to read through hundreds of documents and learn strange jargon and analyze charts. If you are doing your own trading on Forex, these Forex currency trading tips will be very useful to ensure that you do not lose a lot of your money.

You need to realize from the beginning that you will not get rich quickly or are you guaranteed to never lose money if you learn Forex currency trading with professional courses and seminars. It will help though. The seminars that you can attend will be implemental in your Forex education since it is interactive and goes into great detail.

So what else can you do? You can learn more about Forex currency trading by buying a study package or guides from different broker companies and Forex itself. These also go into vast detail about every facet of Forex trading. They can be used by the professional trader and by the beginner.

The first thing you will need to understand when you begin learning about Forex trading, is how to read financial currency charts. This is so that after observing the data and trends, you can make a prediction about the next rise or fall of a currency trend. If you can do this effectively you will be able to place your money in the correct market and make a profit for doing essentially nothing.

It seems simple in theory, but there are a lot of other factors that contribute to the end result. When you learn Forex currency trading with a course or through a seminar you will uncover all the tricks and tips of how to become successful when trading online. There are software packages that can help you to anticipate the next trend and keep track of patterns in the foreign exchange rate.

Your Forex trading broker needs to be registered with an agency and have a certificate. A Forex broker should be registered as an FCM or the Future Commission Merchant and a member of the NFA. This guarantees he is a legitimate Forex currency trading broker. There are scammers out there, so you should call the NFA to verify any broker’s status and check their history.

Be leery of Forex currency trading brokers that are never accessible and do not have secure email addresses or land line phone numbers. The world of Forex is perpetually changing. You need to be able to get in touch with your broker at any time in case of rising or falling markets.

What else do you need to know? Be sure to find out what each brokers Forex currency trading tools are. You might see that one technique is not right for your specific needs. In this case you should find another broker whose trading style you agree with. He should be able to tell you precisely how he trades and what he does. It is your money and you have a right to know.

Picking a Forex currency trading broker who offers a low spread means that they are making less off the commissions. This means you make more. The spread is the difference between the bid price and the asking price. This is where the brokers make their commission. To make trading on the Forex more advantageous to you, look for brokers that give a lower spread.

A Forex currency trading broker that has strict margin rules should be avoided. They have more say over your stocks that you do. You won’t see this until you have already signed with a broker. You should speak to other experienced traders and participate in online forums to find out more.