Forex Trading Tips – 2


2.1. Is our asset sufficiently liquid for a normal development of the price?

In most cases we will operate assets such as EURUSD, GBPUSD, S & P500, Dax , etc. They are very liquid and there is not much problem of entry or exit. What it happens in many cases is that we hear about the benefits or how easy which is to beat a certain asset that, although it is not very liquid, the movements are very clear.

Yes, it is true that there are assets with less liquidity that offer high returns but at the cost of a large spread or a lack of real information about the instrument. The most logical thing is that it is easy to beat said asset, but the period of investment is much greater, either because of the spread due to illiquidity or because of the lack of dynamism of the asset. An example of this operation is at the crossroads of the Euro against the Romanian Lei, it is a very clear asset and well defined by its tendency but that the entrance cost is very high, and the movements are very slow.

If our operations are intraday or one week operations, we have to understand that we want it to move to the side that is but that moves and in said illiquid assets we can spend a week looking at the price without move not the least. Caution with trying new assets with little liquidity and few information.

2.2. Are we entering longs at maximums or short at minimums?

For those who are starting out in this world, it will happen day after day. Is very normal that without knowledge you want to bet on winning horse and in this world that move comes out but that very expensive. At the beginning when the price is falling hard and we see it when it has already happened we think that the movement will continue and that Even going into bad point the price will continue. Only in 1 out of 10 operations that maximum will be fulfilled, and the rest will turn the price and make us jump the stop.

We have remembered it before, patience will be the definitive element to be profitable and just being patient, we will get good entry points and good market conditions. In trading we have waves every school day of the year and do not rush to try to catch them all. It’s like surfing, we know that come series of about 7 waves, so you have to wait to see what is the good knowing that, after those series of 7 waves a series of waves will come a little later and so on. We have to understand that not a single trading day is the last, so we have to think more about a marathon than a 100-meter race.

As soon as we stop entering the last ones when the movement has passed, and we do just the opposite we start to get the feeling of the market. Not only for entering fatal we deal with this issue but because the placement of the stop when we go long in maximum is at a distance that we can break the risk management. For this same reason we deal with this topic.

There are in many operations that even though the analysis is good our management monetary policy does not allow us to enter the market because we must place a stop at a distance too long. We have to keep in mind what the stop will be who in many of the cases tell us if we can afford to enter the market with certain odds of success. We must be alert all day to where we can stir up and where are the biggest positions for a faster exit or entry and clean.

I do not think you have to remember the ruin percentages or the average duration of a trader novel in its beginnings. Therefore, it should be noted that this activity does not allow many errors and less of the serious ones, so all precaution is little. Is usually say that Trading is the most expensive university or hobby on earth.

2.3. Is the daily range of the asset I am trading exhausted?

All assets have a daily range of motion that is usually an average of X periods, this does not mean that this range can be doubled or tripled as we have seen lately. Usually in almost all assets there are some hands strong that negotiate the range of the day on a certain asset.

Taking the EURUSD as an example, the average range of this asset is about 150 pips under normal conditions. Nothing removes that after the systemic danger of the system any good news make the price jump more than 300 pips, but that’s not what normal.

Therefore, one of the things to consider when operating is the number of points that remain to meet the daily range, it is simply to put another argument more in the balance of probabilities of success. It is also very common that when that average is exceeded or falls short, it is adjusted over the days to compensate. We can see a clear example if we use the Bollinger Bands.

It is common sense that after a strong movement the side price remains, consolidating the new zones that it has opened. You can do all kinds of studies that are more than advisable about the range of an asset but only doing the simplest thing the simplest thing is to measure the historical series and its standard deviation if there is a bias towards a certain pattern and similar calculations of very easy access to through Excel for example.

2.4 Is there an event of relevance that could shake prices?

In these days in which the financial stability of a whole continent is being putting into question, it is very normal that there are interventions by surprise of not few leaders affirming facts and data that tend to be unsustainable.

Therefore, we must be aware of each one of the news that affect our particular asset and does not mean this that all the possible information is read but that is selective in the reading of data and available information.

2.5. Are we operating impulsively?

As we have discussed before, impulses must be given in the markets not in the person. The type of behaviour we must carry is not too far away in our life that has to be carried in the bag. The behaviours impulsive are in many cases only impulsive without there having been reflection expected and meditation on a certain action.

It is true that certain impulses will make us earn money but, in most cases, that kind of behaviour will lead us to make decisions based on the pulse of market more than a refined technique.

I’m not saying that you should not pay attention to the subconscious when you have a hunch with arguments but do not enter the market because of the virulence of certain fact published or news.

Does the market meet the necessary price or indicator conditions to enter the market? It’s a very personal question because the rules are still fixed, the appreciation of the market always has subjective tints. I do not think any opinion of any analyst is exactly the same for a given case so neither what will be the market conditions to enter.

We must start from the base that although the movements can be measured, calculated and transported by those technical analysts, the figures that mark the price never are the same, but they are similar. Therefore, we must understand that we must comply with the less 80% of our rules to be able to make an orderly entry to the market and that yes, not yet having that 80%, we decided to enter with very little load thus making a premature entry that may even make us take the first step for the construction of a position.

To start thinking like a professional you have to be fair to yourself and not cheating, neither about risk management nor about the market nor the rules that We must comply. Every time we skip one of the rules we will see a decrease in our professionalism and in our portfolio. This is because, when a moment, we will know perfectly how much it costs us an error of a type and how much it costs us another error of a different type.

The basic consideration on any activity that has to do with trading is rigid, or you meet the rules, or you can suffer a great loss in your capital. It is not a world easy to make friends, so the personal war becomes more evident and not only that internal war but the frustration of still doing things well what, for Certain factors do not turn out well in the end.

The following will have happened to many people, we analyse the market and see that we can have an opportunity and we put the limits on the stops and leave everything tightly closed to let the market run. We are going to eat thinking that our operation will be successful and when we return we see that the market has made just what we thought and that we have obtained a good performance because the operation is no longer alive. What is our surprise when we see that it has He skipped the stop by 3 pips and turned violently towards us we wanted This type of situation is common to all traders but there is no need get frustrated but take action and know that our stop was wrong for very Shortly before I started thinking that the broker was chasing my operations. You have to be realistic trading and very hard and very suffered and who does not understand this is that trading will not be a hobby or a small vice.

2.6. Have I calculated the probability of success and its risk / return ratio?

This point can border the boundary between limit your losses and let the earnings. Nowadays the markets in many cases have no direction so letting the benefits run may mean that we do not finally get those Benefits. Therefore, it is recommended to place the take profit at some realistic level and knowing that we will have time to leave open positions.

The calculation of probabilities is based in many cases on previous experiences in similar entries. Do not think that only the market repeats the movements, but that the human being always an animal of habit usually repeats the entries and with a same pattern, right or wrong. That is why there will come a time in the time when let’s know how much it will cost us a premature or late entry into a volatile market. It is a simple measure of the risks that one is willing to behave based on a daily practice.

Then we write reduced to the folio that should be in front of your table to be able to fill each time you enter the market.

Form of configuration of our operations

The configurations of our operations are the necessary arguments and our rules to enter the market with minimum guarantees. We will have to analyse each Once we enter the market this series of questions to argue each and every one of our tickets. In the first weeks it is convenient to have this document in sight but later it will be a mental process. Answer positively you to these questions.

  1. Are we in trend?
  2. Is it a good time to enter the market?
  3. Is our position correct?
  4. Is our stop well located?
  5. Are we doing overtrading?
  6. Is the asset we operate sufficiently liquid?
  7. Are we entering longs at maximums or shorts at minimums?
  8. Is the average range of the asset we are trading exhausted?
  9. Is there any data to be published nearby that may make us jump the stop?
  10. Are we operating impulsively?
  11. Does the market meet our price conditions or indicators to enter market?
  12. Have I calculated the probability of success and its risk / return ratio?

To know more about it read: Forex Tips 1

Forex managed accountsForex Trading Tips – 2

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