The 7 Pillars of Forex Trading, Part One
The 7 Pillars of Forex Trading, Part One
I started the positive leg of my trading journey the minute I walked into my local Online Trading Academy center. Just like numerous other graduates of Online Trading Academy, I sat through a Power Trading Workshop and listened intently about the true nature of Global Markets and how the professional traders of this world adapt and weave their way through with consistent profits and few headaches. Looking back, it shocks me when I think about just how much I thought I knew about the markets! My perception of trading back then was so very different to the reality I was introduced to and now know of so very well. I was no different from any other hungry novice trader and it was so refreshing to have my eyes opened to a whole new logical approach to trading. One of the key aspects of the presentation which I could really relate to was after our lunch break when we were introduced to the Online Trading Academy's powerful structure of education, called The 7 Pillars of Trading. The 7 Pillars is a unique summary of the tried and tested skill sets which any rookie speculator needs to learn from in order to get the results they are looking for. For this week's article, I would like to run through each of these 7 Pillars making them specific to the world of Forex trading, so we can all fully understand the main requirements and skill sets necessary to make it as a consistently profitable trader in today's financial arena. Let's begin...
PILLAR 1: MACRO FUNDAMENTALS
It all starts here for any trader, investor or market speculator, no matter what asset you choose to work with. Understanding the main aspects of the Fundamentals will help us to gain a bigger picture understanding of how these factors shape and influence the actions of willing buyers and sellers. Personally, I do not base my trading decisions on the economic factors alone, but that does not mean that I choose to ignore the fundamentals altogether either. It can be of great benefit to any market professional to understand such things and why certain markets have positive and negative correlations with others and why certain news releases have a greater impact on prices than others. I would say that one particular benefit of Forex trading is that it is by far easier to follow the fundamentals as we are focusing more on specific national economies as opposed to a whole variety of individual companies like in stocks. Always use some kind of economic calendar before placing your trades ñ I call this looking left and right before you cross the street. By far, it's better to be safe than sorry.
PILLAR 2: TECHNICAL ANALYSIS
Trading Forex without charts is like driving blindfolded. Even if you are the world's greatest fundamental analyst, you still need entry and exit prices when taking positions and this fact alone means that any serious-minded individual needs to understand how to read a basic price and time chart to keep things planned and precise. Taking charting a little deeper we can then start to recognize repeatable patterns in behavior, and as my own mentor Sam Seiden has always said, the chart, in essence, shows us the footprints of the buyers and sellers. The footprints then offer us objective areas for buy and sell opportunities. The art in charting is to develop a simplistic and coherent ability to read the charts without confusion and bias, allowing us be drawn to only the lowest risk and highest potential reward trades available. Think of technical analysis as a means to plan your move ahead of time, rather than as a means to react to the movements of price as and when they are happening. Less is more in charting and don't be baffled into thinking that there is any system which works all of the time as you will be greatly disappointed. Pick your technical tools, get familiar with them and be consistent. In time, the charts will show you the entry points instead of you staring so intently that you create a high risk trade for yourself which often results in yet another loss.
PILLAR 3: EXECUTION
Execution is always intrinsic in the grander scheme of things and a trader should be confident and competent in their ability to place orders in real-time and manage their trade. Your broker should offer you a whole plethora of orders like Limits, Market and Stop Limits and especially if you are looking to place longer term set and forget setups, you will need to have access to OCO (Order Cancels Order) and OSO (Order Sends Order) orders, in which you can create multi-bracket orders to not only enter the position and place a stop loss, but also set up profit targets and final exits all ahead of time. This way you are fully protected in your trade at all times, even if the PC breaks down, or should you experience an internet access failure. You should be trading through a Forex dealer who gives you the fastest fills and with a fully-automated execution desk to boot.
To be continued in part two.
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