Ways to Become a Successful Trader
A beginner forex trader who is just starting out on the forex market is often not ready to face what’s ahead. They end up living the same life cycle. First they jump in the head first, usually they will lose the first account. After that they give up, or they take a step back and do a little more research and open a demo account to practice. Those who often do this will open other live accounts, and experience little success even to reverse profits.
Why Medium Term?
So, why do we focus on medium-term forex trading? Why not a long-term or short-term strategy? To answer this question, let’s look at the following comparison table
|Type of Trader||Explanation||Good Points||Bad Points|
Short Term (Scalper)
|A trader who is seen opening and closing trades in minutes, often takes advantage of small price movements with large amounts of leverage.||Rapid realization of profits or losses due to the fast nature of this type of trading.||Large capital and / or risk requirements because of the large amount of leverage needed to benefit from these small movements.|
|These traders usually want to hold positions for one or several days, often utilizing opportunistic technical situations.||The lowest capital requirements of all three because the leverage needed is only to boost profits.||Fewer opportunities because this type of trade is more difficult to find and execute.|
|A trader wants to hold positions for months or years, often basing decisions on long-term fundamental factors.||Long-term profits are more reliable because this depends on reliable fundamental factors.||Large capital requirements to cover volatile movements against open positions.|
Now, you will see that both short and long-term traders need a large amount of capital. The first type needs it to produce enough leverage, and the other covers volatility. Although both types of traders are on the market, they are often held by high-value individuals or larger funds. For this reason, retail traders are most likely to succeed in using a medium-term strategy.
The strategic framework covered in this article will focus on one main concept, namely trading with possibilities. To do this, we will look at various techniques in a number of time frames to determine whether a trade is feasible. Keep in mind, however, this is not a mechanical / automatic trading system. Instead, this is a system where you will receive technical input and make decisions based on it. The key is to find a situation where all (or most) technical signals point in the same direction. This high probability trading situation, in turn, will generally be profitable.
Making Charts and Markups
Choosing a Trading Program
We will use a free program called MetaTrader to describe this trading strategy. However, many other similar programs can also be used to produce the same results. There are two basic things a trading program must have :
- The ability to display three different time frames simultaneously
- Ability to plan technical indicator techniques, such as moving averages (EMA and SMA), relative strength index (RSI), stochastics and moving average convergence divergence (MACD)
Setting up indicators
Now we will see how to organize this strategy in your chosen trading program. We will also determine the collection of indicator techniques with the rules associated with them. This indicator technique is used as a filter for your trade.
If you choose to use more indicators than shown here, you will create a more reliable system that will produce fewer trade opportunities. Conversely, if you choose to use fewer indicators than shown here, you will create a less reliable system that will produce more trading opportunities. Here are the settings that we will use for this article:
- Minute-by-minute candlestick chart
- RSI (15)
- stochastics (15,3,3)
- MACD (Default)
- Hourly candlestick chart
- EMA (100 , 10, 5)
- MACD (Default)
- Daily candlestick chart
- High school (100)
Adding in Other Studies
Now you want to combine several subjective studies, such as the following:
- The significant trendlines that you see in one time frame
- Fibonacci retracements, bows or fans that you see on hourly or daily charts
- The support or rejection that you see in one time frame
- Pivot points are calculated from the previous day’s chart to the chart per hour and per minute carefully
- The chart chart that you see in one time frame
In the end, your chart will look like this:
Image: screen forex trading program
Find Points Enter and Exit
The key to finding an entry point is to find the time in which all indicators point in the same direction. In addition, signals from each time frame must support the time and direction of trading. There are some special examples that you should look for:
Bullish / Increase
- Bullish candlestick engulfings or other formations
- Trend line / channel breakouts up
- Divergent is positive at RSI, stochastics and MACD
- Move the average crossover (shorter shorter intersections)
- Strong, close and weak support, far resistance
Bearish / Decline
- Bearish candlestick engulfings or other formations
- Trend line or channel breakouts down
- Negative divergences at RSI, stochastics and MACD
- Average movement of displacement (shorter intersections below longer)
- Strong, close and weak resistance, far support
It is a good idea to place an exit point (both stop loss and take profit) even before placing a trade. These points must be placed at the key level, and modified only if there is a change in the premise for your trade (often due to the fundamentals that come into play). You can place these exit points at the key level, including:
- Right before a strong support area or resistance
- At Fibonacci key levels (retracements, fans or bows)
- Only in the trend line or channel
Money and Risk Management
Money management is the key to success in any market, especially in the forex market, which is one of the most volatile markets to trade. Often fundamental factors can send currency rates swinging in one direction, only to have whipsaw rates in the other direction in just minutes. So, it’s important to limit your weaknesses by always utilizing stop-loss points and trading only if there are good opportunities.
Here are some specific ways to limit risk:
- Increase the number of indicators you use. This will produce a harder filter through your trade. Note that this will result in fewer opportunities.
- Place the stop-loss point at the closest resistance level. Note that this can result in forfeited profits.
- Use trailing stop losses to lock in profits and limit losses when your trade changes profitably. However, note that this might also result in charred profits.
Anyone can make money on the forex market, but this requires patience and is followed by a well-defined strategy. However, if you approach forex trading through a careful medium-term strategy, you can avoid being a victim of this market.