I LEARNT THIS FROM MY TEACHER AS A YOUNG TRADER AND I READ IT DAILY.
WITHOUT CHANGING ANY OF HIS RULES: HERE IT IS...
To Achieve this much success in forex:
- I Picked A Timeframe
The first step was to pick a single time frame. By this time, I had been trading Forex for about 6 months so I knew my way around the markets. I quickly learned that smaller time frame charts are hard to analyse because they are erratic and prone to random movements.
I decided to jump up to the 4 hour charts and I haven't looked back since. I strongly believe that every trader should trade on hourly charts or above.
The point is not so much what timeframe I traded it's the fact that I picked a single time frame, and stuck to it. To me it was all about simplifying trading so I could more efficiently learn to trade.
So looking at a single timeframe had several benefits:
- Allowed me to concentrate on learning one time frame, therefore removing a lot of the confusion you can have when juggling multiple time frames.
- Gave me less charts to look at and allowed me to concentrate more on analysing a single currency pair.
- Stopped me from over analysing my pair. Looking at too many time frames gave me conflicting signals.
Overall having a single time frame keeps it simple.
- I Picked a Pair
This was exactly the same concept as picking a single timeframe. It just simplified my trading concentrating only on a single pair. When you're a professional trader making tons of profit you can trade as many pairs as you want. However as you're learning it's best to concentrate on one pair. Here's why:
- Each Pair is Unique: Trading a single pair allows you to learn how that pair breaths. You will know a lot about a single pair instead of knowing a little about 5 pairs.
- Speeds up Learning: Trading a single pair with a single time frame gives you only 1 chart to look at. This allows you to concentrate all your analysis on a single pair.
The idea behind picking a single pair to trade is a simple one. It is all about simplifying trading so you can learn to become a consistently profitable trader.
- I Set My Targets
This was absolutely essential. I do not mean I set my targets on a per trade basis. I mean I set myself weekly and monthly targets. I have discussed in this previous article how important discipline is. As a newbie, what I needed above all else was discipline and the way I became disciplined was by setting targets.
I looked at my method and I decided it was capable of generating around 50-70 pips per trade, giving me on average two trades per week. So I set my weekly pip goal to 100 pips. When I meet my goal I stopped trading for the week.
Why was this so important?
It was important because
- It gave my trading structure and allowed me to plan ahead, long term.
- It gave me a goal to aim for instead of trading aimlessly.
That's not all it did though. I fought against the biggest psychological pitfalls, which I discussed previously in this article, such as the tendency to overtrade and being undisciplined.
The urge to overtrade is one of the biggest problems a newbie trader faces. If you have a set target once you reach it you can relax, and take it easy for the rest of the week. It removes that pressure traders usually have to make more and more pips. It also keeps you disciplined because it gives you a structured plan that you can stick to.
If you follow these 3 steps I can guarantee you that your trading will improve immensely. It will take time but if you can stick to it you will begin to notice improvements. If you want to succeed you need to simplify your trading and you need to become disciplined. Chaos and complexity will get you nowhere.