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FOREX Trading – The Secret to Making Profits from the Big
Moves
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Article
FOREX Trading – The Secret to Making Profits
from the Big Moves
In FOREX trading, it’s a fact that many traders simply
can’t let their profits run - they enter trades correctly,
but only ever, bank marginal profits.
“Let your profits run” is accepted market wisdom - but how
do you do it in practice? How do you maximize your profits?
Many FOREX traders get in on a good opportunity, and take
a marginal profit, or are stopped out - they then watch in frustration
as the trade piles up $20,000, $50,000, or more - and they’re
not in the market! This happens all the time, so lets look at
how you can let your FOREX trading profits run.
Statistical Significance
When FOREX Trading, letting your profits run, is the only
way you can cover the cost of your losses - and most traders
don’t understand its significance.
What constitutes a large winner in FOREX trading? - You
need to make ten times or more than your average losing trade.
If you lose $500, you need to make $5000 - but how do you do
this?
The only way to make money in FOREX trading is by letting
your profits run - and this isn’t as easy as it sounds. You
need to let your profits run with a NO profit objective. Of
course, this is hard to do - and most traders don’t do it (and
that’s why they lose).
There are two reasons why traders lose money in the FOREX
market – one’s mental, and the other’s physical:
A Mental Dilemma
Why is it so hard to hold on to winning trades?
The emotion of fear comes into play here - the bigger the
profit becomes, the more a trader wants to take it - before
they lose it.
Watching a trade you are making money in, dip back is hard.
Most traders simply say, any profit is better than no profit
– so they take a small profit and feel happy. However, the profit
isn’t big enough - and their losing trades wipe them out sooner
or later.
Traders want to snatch ANY profit - in case it gets away
- but this is totally wrong.
Physical Reality
The large trends simply do not come around that often.
By using an open profit objective, and a lagging exit, most
of your FOREX trades will lose you money.
Trying to avoid losses by snatching profits, or running
stops to close, will see you lose money in the long run, when
you trade the FOREX markets.
The huge trends don’t come that often - so you need to catch
them.
If you want to catch the big winners, then you need to see
the majority of the trades that you enter, that are in profit,
reverse - and stop you out at a loss
Because FOREX Trading offers traders fantastic long-term
trends - that go on for months, or years - if you can get in
on them, and hold them - you’re all set for huge profits.
Use Lagging Exits
A lagging exit is where you wait for confirmation of a trend
change - before banking your profit.
Many traders try to anticipate a trend change - only to
take profits early, and miss the major move - don’t fall into
this trap!
Here are two exit strategies that will keep you in the trend
for as long possible:
1. To exit a trade, use the 40-day moving average.
If positioned long in an up trend - wait for a close below this
level - and exit the position. In a downtrend, exit a short
on a close above this level.
2. If long from a new 20 day high - hold position
until prices make a new 10-day price low. If short from a 4
week low - hold short until prices make a new 10-day high.
These two lagging exit strategies will ensure that you are
in the big trending moves, for as long as possible. In FOREX
Trading, if you want to run the big winners, then you must use
a lagging exit. If you do this, then you will stay with the
big moves - and pile up huge gains – rather that get stopped
out early.
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