How to Pick Winning Trades
It’s a sad fact of the Forex trading life.
Newbie traders rush to the market every day with a brand new trading account and the belief they will be able to make millions overnight. They’ve got a fresh trading method found on one of the hundreds of Forex forums and are ready to turn it into a veritable ATM.
After the first few losing trades, they ditch that method and begin chasing after another, and another, and another.
In trading circles, this is called looking for the Holy Grail.
Learn this now and save yourself a lot of heartache.
The Holy Grail does not exist.
However, hard work and dedication are the next best thing. If you’re ready to ditch the Holy Grail search and learn how to pick better trades, keep reading.
Pick One Method
Here’s a dirty little Forex secret.
There are dozens, probably hundreds of different profitable trading strategies. The path to ultimate success lies in choosing one method and sticking with it long enough to learn the ins and outs and make it work for you.
Stop chasing the latest fad indicator. And don’t fall into a bottomless depression when you have three losing trades in a row.
All traders do eventually.
Here’s another dirty little secret.
Everybody has losing trades. Everybody.
Analyze each bad trade to figure out what went wrong. There’s a good chance the problem lies within you. Maybe you didn’t obey the entry or stop loss rules. Maybe you got mad and took a trade out of emotion or because you thought you knew where the market was going.
Trust us, nobody knows where the market is going. Get used to it.
Consider a Higher Time Frame
Short time frames are alluring. Watching price action twitch this way and that offers the illusion that there is money to be made quickly.
The flip side is that there is also money to be lost quickly.
By switching to a higher time frame - we’re talking four hours or higher - you give yourself more information to work with.
Consider a one hour time frame. When a single bar is complete, it contains only a fraction of the information that will be presented throughout the trading day.
When you switch to, say, a daily bar, you know that the bar formation has been through all three market openings around the globe: London, New York, and Tokyo. This is a solid sampling of market sentiment and filters out much of the lower time frame static that goes into making bad trades.
Stop Chart Watching
In our opinion, sitting in front of the computer and watching charts all day is one of the main reasons traders, especially new ones, blow out their accounts.
Greed and panic begins to take over and before long you’re:
- Entering trades you shouldn’t
- Getting out of trades you shouldn’t
- Taking profits too soon
- Moving trailing stops too close
The solution to chronic chart watching is to switch to the daily time frame. You only need to check your charts once daily and that’s it!
Better trades are almost always the result of taking fewer of them.
The Bottom Line
Those unhappy with their Forex trading success rate, give these suggestions a try. If you’re failing already, there’s no downside, right? And it just might turn your trading life around.
Any system you choose should have specific entry and exit points defined beforehand.
As we hinted before in the “too much chart watching” section, human emotions can be the great nemesis of a Forex trader. The less time you give your heart to mess with your head, the better.