2Bull Forex Blog

Many beginners start out their Forex training by gradually building up a plethora of indicators with charts obliterated with every signal imaginable. No wonder such new traders often freeze with indecision as one signal seems to contradict another.

There is however a very simple indicator, that when fully understood, forms the backbone of all future Forex training and trading! What is it?

Before revealing it, guard against a typical reaction such as: “Is that it? I know all about that!”

This indicator, due to its simplicity, is often under-valued and insufficient time is spent by new traders in their Forex training sessions really getting to grips with it.

Probably The Most Powerful Indicator Of All

Now, what is it?

Support and Resistance!

To state it clearly, your Forex training will only start to really move ahead when you fully understand the impact that support and resistance have on market action. Here is a key principle to understand:

Support becomes resistance. Resistance becomes support.

Why is understanding this so crucial?

Because the thousands of traders in the global market place, handling billions of dollars for the big institutions, are constantly monitoring where price has been before.

If price reached a peak some days ago and has since retraced, that level that was reached becomes a key level of resistance. If you enter a trade anywhere near that level, understand that it will take major buying pressure to get price above that level.

Conversely, if price fell to a deep low within the last week or few days, for price to continue on down there is going to have to be intense selling pressure to pass that level which has now become support.

An Interesting Market Behavior Pattern

But now here is an interesting market behavior pattern you must drill into your brain as part of your Forex training:

Once price does break through that key level of resistance, it now becomes a level of support. If it is a key level of resistance that is broken, once price has moved on through by 20, 30 or 40 pips, it can become major support. What does that mean for the trader?

It is often possible to enter a trade at an optimal point by simply waiting for price to come back to test that strategic level that was broken.

So rather than chasing price and hastily putting a trade in once the market has started to move in a certain direction, wait for price to pull back to that key level that was broken. Put an entry order in at the level and wait for price to pull you in to the trade.

It may continue in the direction for 5-10 pips putting you in deficit but if you have done your research properly and identified this as a key level using other indicators such as Fibonacci or pivot levels, you need not fear. Price will quickly pull back, cover your dealing spread, and from there on you can enjoy the satisfaction of seeing price move toward your price target.

Time and time and time again the market behaves in this pattern. Exercising patience while you undergo your Forex training, and looking out for this particular market pattern can yield huge results.

Understanding support and resistance will give you an unbelievable edge on understanding how the market works. This in turn will help you enter and manage your trades to a highly accurate degree with minimal stops and reasonable, reachable targets.

Rather than trying to hit the home run, by looking at the next key level of support or resistance where price is likely to stall, you can walk away with a reasonable profit by setting your price target accordingly.

Look Under Your Feet

Rather than searching for some complicated, ‘advanced’ trading system, why not concentrate on what is right under your feet.

Get to grips with support and resistance, learn to quickly identify these levels once you open a chart, draw lines where you can see major support and resistance, especially on the higher time frames, and everything else you learn during your Forex training will fall into place.

In forex trading many traders think because they are clever or smart, that they have more chance of winning, but the EXACT opposite is true. There are many clever traders, yet they lose because being clever and making money are NOT compatible.

Let’s look at this in more detail.

The Work Ethic Does Not Apply

In many jobs the more hours you put in the more you get out, but the normal work ethic simply does not apply in forex trading – you get your reward from being right about market price and not the effort you have put in to generate your trading signals.

If you took ten minutes to place your trading signal or 10 hours, the only thing that matters is the result of your action.

In society of course, we are taught knowledge is power and many clever traders think the more the better.

They feel they have a right or deserve profits, because they are cleverer than others.

This is a dangerous assumption!

Most clever traders tend to come to the market with an ego and an ego is one of the worst traits you can have when currency trading.

Below are some common errors that clever forex traders make, in addition to working to long on their forex trading strategy.

1. They construct clever complicated trading systems thinking the more complicated they are, the more their chances of success.

The reality is that simple systems work best, as they are more robust in the face of brutal market conditions.

2. They see the market as they want to see it and not as it is.

There is only one price that is right – the market price. Many clever traders can’t take this, they think the price should be what they have decided and they hold and justify losing positions because of it. They then get frustrated when the gains are not what they expect. Of course, they are making the critical error of letting their emotions get involved -his means discipline goes out the window and their forex trading system disintegrates.

Work Smart – Keep It Simple – Accept The Reality!

There are many traders who never went to college, who use simple systems and have a humble approach to forex trading, yet they make huge sums of money. They often beat traders who would seem to have more advantages than them, but as we have seen, it is the simple trader who has the edge.

They realize knowledge for the sake of it is no use and that simple systems work better than complicated ones – they are accepting the reality of trading:

The market is all powerful over them and they need to accept it.

This doesn’t mean you can’t make money – just like the sea captain knows the ocean is more powerful he can make a living from it providing he obeys its rules.

This attitude means that humble traders can take losses easily, maintain discipline and when the markets gives them an opportunity they can take it.

Keep It Simple

A simple forex trading strategy can be learned in about 2 weeks and it can be applied in less than an hour a day yet, this will not prevent the trader making huge capital gains.

In forex trading keep it simple work smart not hard and adopt a humble attitude and you can make a lot of money, it really is that simple.

Fifty years ago, the average worker didn’t need to worry about saving for his retirement. If he stayed with the same company for 20, 25 or 30 years, he was guaranteed a pension, in addition to a monthly social security check form the United States government, and medical benefits under Medicare. Still, those same workers generally saved about 10% of their paychecks for a rainy day, leaving many with a tidy retirement fund.

Today’s workers aren’t offered those same retirement benefits, yet, many fail to put even 5% of their annual salary into a 401K retirement plan, let alone save additional funds on top of that. Today’s worker, (no matter how much, or how little they make), must become a savvy investor in order to guarantee a comfortable future.

Whether you can put aside $50 a month, or $500, learning a few investment basics is crucial in order to get the best future bang for your current buck. Here are a few of the most common investment opportunities available to both the high and low-end investor:

Stocks

Stocks, or equities, are a way to invest a small portion of ownership in a specific company. The number of shares that you buy, in proportion to the number available, determines how much of the company you actually own. Known as the best opportunity for long-range growth, stocks can be a risky short-term investment.

There are three types of stocks available for purchase:
-Large-cap stocks, from well-established companies
-Small-Cap stocks, represent lesser-known companies with fast-growth potential
-Mid-Cap stocks, lie between the large-cap and small-cap risk range

Bonds

Basically an IOU from a company or government, bonds are a relatively safe investment. Bonds are issued as a way for corporations and government agencies to raise money quickly. Bonds come with a guarantee that the purchaser will get back their original investment, with a set amount of interest at a specific date. These fixed-income investments come in several categories, or grades:

-AAA, AA or A offers relatively low risk
-BBB, are medium grade
-Bonds lower than BBB have higher risk of default
-Junk Bonds, offer the highest risk, and are often worth nothing by their maturation date

Cash Equivalents

This is a type of short-term investment that is easily converted into cash, such as Treasury or T-Bills ( a government note offering low interest) and money market accounts, Although a safe investment, their return can be rather low.

Mutual Funds

This popular investment is a simple way to expand your investment portfolio, by allowing investors to pool their money in a collection of stocks, bonds, and cash equivalents, in order to make the most profit at the least risk. The rationality with this type of investment is, if one fund does poorly, another will make up for the loss.

Investing money wisely takes a little research and experience, but today’s options make investing an option for just about everyone - no matter how much or how little they have to invest.