Friday, June 21, 2024

Expand your time horizon to increase your chance of success.



Most new traders in any market fancy themselves as day traders, getting in and out of the market multiple times a day.  They are under the impression that this style of trading is less risky because there is no overnight exposure.  They also think that because their   protective stops are close to their entries, they won’t lose as much money.  But they also have something else in common; most of them lose money anyway.

Would you like to increase your chance of success without really trying?  Instead of trading off of the 1-minute or 5-minute chart, move up to the hourly chart to find your trades.  In the FX Power Courses, we recommend traders start with the daily chart to identify the trend and then to move down to the hourly chart to find their entry and exit.  Why?  Technical analysis just works better on the longer-term charts.  Each candle on a 1-minute chart represents the opinion of those few traders who happen to buy or sell in that 60 second time span.

Each candle on a daily chart represents the opinion of traders from around the world who traded within a 24 hour period.  It should come as no surprise that with a bigger sampling on the daily chart, it offers a more accurate feel for the mood of the market.  As you move down to shorter time frames less than the hourly chart (i.e. 15-minute, 5-minute), the signals provided by technical indicators are much less reliable, which can increase the number of losing trades.  So if you are comfortable with your approach or just developing one, try to trade off of the hourly chart.  This one move can make a big difference in your trading results.

Sometimes the best trade is no trade at all.

There are many differences between new traders and professionals.  But many of them have little to do with their expertise of the markets and more to do with their own actions.  As an FX Power Course instructor, I get many emails from students who have had a bad trade and want to know what they did wrong.  As they describe their trade and what they were thinking at the time, I start to hear some hedging in their explanation.

This trade was “almost the setup I look for” or that “the trade was only taken because there was nothing else setting up”.  The problem is that new traders feel they have to be in a trade all the time to be successful.  But in reality it is the other way around.

Professional traders do not mind waiting for the quality setups.  As a matter of fact, this is one of their edges.  They do not trade for the fun or for the excitement, but rather they trade to win.  Having the patience to just sit and watch and not trade is an easy thing to describe, but very hard to do.  It can be very frustrating watching the market move without being in a trade.  This frustration can lead to questionable setups being taken in an attempt to be in on every move.  But entering into or exiting from a trade because of impatience is never the right reason for your action.  Having the patience and discipline to wait for the quality setup is the mark of a confident trader.  They realize that sometimes the best trade is no trade at all.

Currency Regimes May be Tested in the Face of Dollar Weakness

The USD has to some extent lost its safe-haven status in connection with the ongoing financial market turmoil. In part due to the weaker USD and lower interest rates in the US we are probably heading for a period  when currency regimes around the world will be increasingly questioned. Most obvious, of course, will be the countries that fully or partly peg their currencies to the USD – which is primarily a number of countries in Asia and the Middle East. In Asia there has been speculation in recent weeks on a major revaluation of the Chinese funded forex and a widening of the fluctuation band for HKD. Put simply, the costs of maintaining the link to USD have been rising.

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