I come to a conclusion that it's always the basic principles that prevail. This is just a game of probability and proper risk management.
The bare candlesticks of the weekly, daily, 4 hourly and hourly movement are always the best things to study and analyse, plus some Fibonacci levels to watch, moving averages, market volume as well as RSI and Stochastics (and some others as you wish to use) that really serve as road signs on where are the likelihood of these bulls and bears could be running.
Initially, back in January 2008, I thought trading was indeed simple. I can always make money simply by using a 97 dollar robot or system that later proven to be otherwise.
Then I made it into a complicated beast by really studying every single thing that I could, buying every forex book available at amazon.com, reading every single article that I could find from google, and participate in forums that I thought could give me some edge with my trading decision. In the end, I still lose money along the way, as 90% of traders always do. Sounds common and pathetic right?
So, where is this going? I knew by heart that most (if not all) traders felt the same way as I did and 90% of them either keep on losing money or totally pull themselves out of this trading arena.
To me, the key is always about learning. Learning is a must and a continuous process. But not many, and I mean most traders forget about the basic principle of achieving success in whatever they do.
It's all about hard work and perseverance on top of their learning efforts. Nothing comes easy guys...
Something that I learned from golf, life is full of hazards and risk that you have to face. It's always there. It's either you embrace them or stay away from them. You have the options and you got to take it accordingly to your capability rather than emotional basis.
So when I look back at trading, I always see the hazards and risk involved whenever I start planning to open a position in the market. It is a direct equation of my own action and decision.
What I meant by direct equation is really simple...
1. BIG RISK = BIG REWARD
2. SMALL RISK = SMALL REWARD
3. CALCULATED RISK = LONG TERM REWARD
So, which one do you prefer? For No 1, you all knew the consequences. The aftermath of such risk taking attitude is normally, short and painful.
So, stay out from No 1.
For No 2, small risk could result in long term survival but chances are, you may not make it to the top. Base on research and analysis, small businesses could only prosper if and only if you have the consistent volumes. In this case, unless you have a 100,000 dollar account, then keeping your position small would not be very wise as it could take 100 years for you to build up a strong account. Even that, if you keep on losing on small risk, the final numbers would still be big and equivalent to No 1, considering that you keep on losing, which to me, could and had happened occasionally.
So, use No 2 only on highly uncertain situations. Or best still, don't take risk at all in such condition.
Hence, now it comes No 3 which is calculated risk. This is the risk that you have to embrace accordingly to your capability and calculative skills. The big question is on when and how to take calculated risk accordingly.
This is the secret that i wish to share with you guys... it works very well...
1. Stay out from the market as long as possible... don't even bother to watch... pretend that you are not interested... just do something else...
2. Watch the market without any interest and make your own analysis base on the movement that had happened... treat yourself as a currency analyst and produce an opinion...
3. Factorised both the technical and fundamental aspect of the market and emphatized on what is really going on... still... stay out...
4. Read action forex, check the economic calendar and browse through bloomberg in order to see whether there is any key geo-political news that you may miss out (ie tsunami and nucklear issue of Japan).
5. Last but not least, look at the charts and ask yourself whether is there any reason for you not to enter the market at this point of time? If yes, stay out and wait for the next day...
Those written above may sound conservative at first... but trust me guys... try it and you'll see... Base on the 5 elements, then take risk accordingly to your account size... perhaps 3% to 5% of your account size should be good enough. Sometimes, I do risk up to 10% when the situation is really favorable.
So, in conclusion, risk accordingly and embrace them... you can't get it right all the time anyway. But one thing for sure, if you're wrong... just get out and raise the white flag... don't ever fight the market force.
Fighting the market is like you alone fighting your own government... there's no way you can win.
Till then... take care and have a nice day.
