How big should your position be? This is the easy one. You must decide, based on your risk management rules in your forex trading plan, what your position size will be. This allows you to know your maximum risk. How much are you willing to risk per trade? 1%? 2%? 5%? 10%?! 20%?!!!! Or are you going to bet the…
The entry trigger tells you when to “fire!” Your entry trigger tells you that once you’re in the potential trade area when to actually enter the trade. This is your specific entry technique. Now that you’ve decided on where you’re looking to enter a trade, now you have to decide how to actually enter…
You need to have a valid reason for every trade you enter. This is also known as logic or rationale. You are not a caveman. Nor are you a gambler, right? Why are you looking at this area to enter? Where are you looking to pull the trigger? This area is determined by whatever setup…
The answer to that question is simple…Everything!!! You record everything you feel and do before the trade, during the trade, and after the trade has been completed. Trading is a performance skill, regardless of your trading style or method. Your outcome is determined by how well you analyze the market environment, your ability to create a plan or…
Okay, enough with the doom and gloom. Let’s just say that most expert traders keep a trading journal and review their trades consistently. And you know what most expert forex traders are? Even though some won’t admit it… They are BALLERS! They got the money. They got the cars. They got the clothes. They got the…
You need to keep a trading journal. Journaling?!? Isn’t that only for silly high school girls who write about their silly crushes on silly high school boys? Heck ya! Ok, not really… high school girls keep DIARIES. Boys also (we don’t discriminate). Forex traders keep trading JOURNALS. Two entirely different things! Get it right! Geez! Keeping a…
There are many systems out there that work, but many forex traders lack the discipline to follow the rules and as a result, still end up losing money. Your mechanical trading system should attempt to accomplish two goals: Be able to identify a trend as early as possible. Be able to find ways to avoid…
As you can see, we have all the components of a good forex trading system. First, we’ve decided that this is a swing trading system and that we will trade on a daily chart. Next, we use simple moving averages to help us identify a new trend as early as possible. The Stochastic helps us determine if it’s still ok for us to…
What time frame should you trade your system on? The smaller the timeframe, the more difficult it is to develop a successful system. In other words, developing a system to trade on a 5-minute chart is more difficult than developing a system that trades on a daily chart. There is a lot more noise on…
Now that you’ve learned the basics of technical analysis. Let’s now combine all this information and build a simple trading system. This should give you an idea of what you should be looking for when you develop your own forex trading system. This system is a moving average crossover system, which uses moving averages to determine…