Developing and sticking to your trading strategy is crucial if you trade CFDs on forex, commodities, indices and shares. Simply put, veering from your trading strategy is a risky move that could see you lose funds, and that’s something that no trader wants to happen!
The fact is though that many traders slip into negative trading habits such as trading intra-day price variations or withdrawing a cost-effective trade simply because the market started retracing against a position. These kinds of trading habits are counterproductive to your success result as you are overreacting to normal price variations in a market.
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Why Less is More
Less is definitely more when it comes to trading the world’s markets – it really is crucial! To hammer this point home, we’ll look at 3 key points: market dynamics, price action and how not to react to every market fluctuation.
Can you stop a freight train?
In trading “a freight train” refers to trends with tonnes of momentum behind them. If you look at the charts, you’ll soon realise that EURUSD, USDJPY and AUDUSD, to name a few, have long multi-month trends. These trends, just like real freight trains, don’t alter direction quickly or easily. Our freight train analogy brings us neatly to my 3 tips to ensure that you instill Less is More in your trading strategy. Here goes:
1. Don’t go against the trend
Reacting to each and every market movement is pointless. Make the trend your friend by not going against it with every time market fluctuation. Let’s revisit the “freight train” analogy: just like a freight train, huge markets like forex can crush you if you get in the way. So don’t! Ride the trend to stay safe.
2. Be patient with your trades
The next key point is actually a fact, and it’s that losing money SUCKS. Now obviously if you ask anyone, “Do you like losing your money?” their reply would be a resounding “NO”. Yet, if you put 10 people in front of a trading setup and teach them a little about trading, 9 of those 10 people will sit there and track every single market fluctuation, no matter how small. Worse still is that they’ll continue to do this EVEN if you tell them that it will lose them money. Ironic right? They don’t want to lose their money, but they trade in a way that shows that they do!
The best way to NOT lose your money is by being patient with your trades. Once you enter the market, let the trade play for you. You cannot trade all those little movements in the market because all they are going to do is make you lose your money in the end.
3. The long-term dictates the short-term
The last thing you need to remember is that the long-term dictates the short-term. For example, if you have the EURUSD downtrend, short-term fluctuations to the upside are unlikely to stay very long. Hence, the long-term trend dictates the short-term fluctuations. Most traders try to trade every single movement in the market, simply because they are overconfident about their abilities and they think that they can trade every single counter-trade retracement, but sadly, they are likely to lose money.
more detail : Why Less is More in Forex Trading
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