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Kathy Lien - Day Trading The Currency Market. Technical and Fundamental Strategies to Profit from Forex Market Swings | ||||
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books about online stock trading, forex, futures, stock investing, market, trading systems HAVE A TOOLBOX — USE WHAT WORKS FOR THE CURRENT MARKET ENVIRONMENT Once you have created a trading journal, it is time to figure out which indicators to use on your charts. The reason why a lot of traders fail is because they neglect to realize that their favorite indicators are not foolproof. Buying when stochastics are in oversold territory and selling when they are in overbought territory is a strategy that is used quite often by range traders with a great deal of success, but once the market stops range trading and begins trending, then relying on stochastics could lead to a tremendous amount of losses. In order to become consistently profitable, successful traders need to learn how to be adaptable. One of the most important practices that every trader must understand is to be conscious of the environment that they are trading in. Every trader needs to have some sort of checklist that will help them to classify their trading environment so that they can determine whether the market is trending or range-bound. Defining trade parameters is one of the most important disciplines of trading. Too many traders have tried to pick the top within a trend, only to wind up with consistently unprofitable trades. Although defining trade parameters is important to traders in any market (currencies, futures, equities), it is particularly important in the currency market since over 80 percent of the volume is speculative in nature. This means that currencies can spend a very long time in a certain trading environment. Also, the currency market obeys technical analysis particularly well given its large scale and number of participants. There are basically two types of trading environments, which means that at any point in time an instrument is either range trading or trending. The first step every trader needs to take, is to define the current trading environment. The shortest time frame that traders should use in step one is daily charts, even if you are trading on a five-minute time frame.
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