Tuesday, April 5, 2011

Figure 5: What to Trad


Understanding the major components of a trading plan is a prerequisite
for successful trading.

All of these factors work together.  Trading a high spread currency using
short interval entry signals and highly leveraged positions will probably be
a failing strategy.  Conversely, trading a tight spread currency using mid-
to long-interval entry signals and little leverage has a better chance of
success.  
In the final analysis, the currency, signals, and money management
approach must all gel together and exist without contradictions.  Novice
investors make critical errors by trying to patch together strategies from
various sources, rather than systematically building, testing, and deploying
a comprehensive trading plan.  The sophisticated investor, who does this
difficult work, operates with a complementary trading plan that creates
consistent profit opportunities.
WHEN
Forex is a 24/7 market – but is the market action the same at all times?  Of
course not, but not many traders stop to consider the impact of this fact on
their trades.  Studying historical price data reaching back to January
2000, the impact is clear, as shown in Figures 6 & 7.


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