Okay, so you’ve decided on which currency pairs you feel
comfortable trading and when you
want to trade them, now what do you do?
The majority of beginners will be so eager to trade that
they will simply rush into opening a
position based on last night’s news. In our view, this is
the fastest way to lose your money.
Consistently profitable traders have a strategy and we’re
going to share a simple yet effective
trading strategy to get you started.
This strategy is based on technical analysis, which is the
study of price behaviour as opposed to
fundamental analysis, which looks at the underlying
political and economic factors which move
currencies.
The ‘wave rider’ strategy
It’s called ‘wave rider’ because it’s a lot like surfing.
Surfing actually has a lot of parallels to
trading.
A surfer lies ready on his board and waits for a wave to
come along. When the wave starts to
form, he paddles in the direction of wave. A surfer then
rides the wave as long as possible. The
surfer hops off when the wave runs out of momentum.
A trader waits for a trade set-up (visible pattern) to come
along. He then takes a position in the
direction of the trend and rides that trend. When the
momentum of the trend starts to fizzle
out, the trader closes the position.
A decent surfer knows there’s no point trying to catch a
wave too early, because it needs to
build up enough energy to carry you along. Nor can he try
and surf every wave, just the ones
that look easy to catch and worth the effort. If he misses a
wave, another one will come along
soon.
The ocean is powerful. Don’t fight it. Go with it. The forex
markets are just as powerful. So go
with the flow.
The flow of water is like the flow of money.
In order to understand the flow of money we follow the
‘price action’. Thanks to modern day
technology, the price action can be easily observed on a
price chart. Charts are the lifeblood of
forex traders. And every chart tells a story.
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