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Keeping Forex Trading Simple

  #1 (permalink)

London England
Posts: 7 since Dec 2014

Keeping Forex Trading Simple

Intraday forex trading can get you so absorbed with the minutiae that you miss the point. The danger sitting in front of a screen all day presents is the devil finding work for idle hands. Tweaking and what euphemistically passes for 'fine tuning' will drain your energies, and your capital and leave you with a long and wide trail of discarded methods and systems, a few of which, had you let them do their work, would have provided you with the results you were seeking.

My suggestion is to take a view on expectations of directional price development and stick with it until there is unambiguous indication that view is no longer valid. There is ample advice all over the place recommending trading the counter moves and some of it may be valid, but not often enough to justify the additional risk you assume by taking such a view. Proponents will provide numerous confirmations of trades 'they took earlier' and everyone can look good in retrospect. Always look for the exceptions to the rules: When you 'find' a system that 'works' - spend at least as much time diligently looking for situations where your new found ticket to fame and fortune does not work. You have to take an antipathetic view to all your (and especially others') hypotheses or you'll fool yourself.

Sticking with a directional view over the course of a trading day using devices as simple as moving averages does two things: It stops you taking half the trades you might otherwise take. It stops you taking borderline trades. There is nothing glamorous about moving averages, which is why they are so useful. While I'm not going to suggest you follow my advice blindly, in fact, you should test all advice and opinions, especially those given on the internet where every man and his dog is an 'expert', I am going to suggest you simply look at the following over the course of this coming (presumably low energy given the time of year) day.

Stick a 240 and a 50 and a 10 moving average on your chart. Simple moving average will do. Doesn't matter what timeframe. Only take trades where the three moving averages are in the correct order (10 above 50, 50 above 240 OR 10 below 50, 50 below 240) and the price is above OR below the set of moving averages.

So, price, above 10, 10 above 50, 50 above 240 - take longs.

Price below 10, 10 below 50, 50 below 240 - take shorts.

My own entry setup is a close above the 10 for a long (OR below the 10 for shorts). I'm not suggesting you trade this as I haven't yet given the other factors I use for entry and exit or trade management and risk management, which I will do in due course. But just by way of a starter into keeping things simple perhaps take a look at how simply limiting any trades you take or would have taken today to within the structure supplied by these three moving averages would have impacted your P&L.

If they're not in the correct order or the price is 'tweezered' between them - you simply sit it out.

Last edited by AJStanbridge; December 22nd, 2014 at 12:36 AM.
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