The concept of Forex trading • Directional Forex Trading is the art of using price movements in interbank Foreign Exchange or capital markets to make profit. Traders may be involved in a trade for 1 second or 1 decade (10 years), depending on their trading method and trading plan. • Our focus is the short-term view of price movement from point X to point Y. By ‘short-term’, I don’t mean ‘day-trading’ or ‘scalping’, as that is not our focus at all here. When I say “short-term view”, I mean we are holding trades anywhere from a few hours to a few days on average, possibly a week or two if we hit upon a very strong trending market. • To profit from market movements, we must predict price direction correctly, execute a trade entry, and then manage the position between our predetermined stop loss level and desired take profit level. • To win over the long-run, traders must develop a trading plan with a statistical edge. Price action, market trends, and support / resistance become our trading primary tools in creating this edge. • Every trade setup carries a unique degree of risk versus reward. The cliché – “Make your winners larger than your losers” is the most obvious road to wealth. However, traders often lose focus, and they forget what each trade can realistically offer them in terms of profit. Markets do not move in straight lines, yet traders hold on to winners way too long, expecting some giant winner on every trade, but soon they see these profits evaporate faster than they came.
You must lose your greedy attitude and set your trading guidelines! My trading setups aim to deliver approximately 2 to 4 times risk, and I am happy to take that kind of profit on any trade. This means I can win 1 in every 3 or 4 trades and still make decent profits over a sample of trades. • When trading Forex (or any market), we are effectively running a company. Trading Losses are the cost of business, wins are our revenue, and our profit is the difference between our winners and losers, as well as any fees such as spreads and commissions. Worst case scenario, on a $10,000 size account, we have to run this company at 500% per annum just to make a living! Difficult you ask? YES! Initiation Comes Through Experience • Becoming a great trader is like playing a difficult sport, such examples would be tennis, soccer or basketball. Learning the rules is easy, but as we all know, playing the game to win is difficult and requires training and experience to develop skills and intuition over time. The common element in most successful athletes, is that they start out very early in life, and the blue print for success slowly plants itself in he/she’s brain over time. Some train hard for years to master a sport, many fail, and a small percentage will progress to some advanced level, some will even turn pro. Those that fail simply don’t have what it takes, they find other dreams and aspirations and move on with their lives. The exact same logic applies to trading. Some make it, some don’t, some private traders earn $1000 to $100,000 per week, and some may even earn $100 million per year from this business. Some lose money for years on end and finally give up, which is a wise choice for them. • I am one of the lucky ones, I started early on at 15 years of age, and whilst I don’t make millions of dollars per year (yet), I do make a very good living. I make money because I can read price action and read the charts correctly, and I am very patient and disciplined. I truly believe this is a measure of experience and intuition. I was taught the basic strategies, but the way I can filter trades and understand what’s happening in front of me is something I learned from the ‘school of hard knocks’, and this is something that comes only through experience and screen time. • There are obviously some very basic strategies to help play this game we call trading. Some will play it socially, some will move on to an advanced level, some will perfect the art and turn into professional traders. • Remember, a solid trading judgment is the sum of years of screen time and trading experiences. Most of our subconscious learning is taught to us by trading live price action, listening to trading mentors, or reading about various trading concepts like the ones you are about to learn in this course.