2Bull Forex Blog

A fatal mistake made by many novice Forex traders is they think they need to predict where prices will go to win in there Forex trading strategy. You don’t have to predict to win and if you try predicting you will lose – let’s examine why in more detail.

If you are predicting the future you are simply hoping or guessing – know one knows what will happen.

Let’s look at a common example in currency trading.

A trader sees a support level and wants to buy a dip into support so he waits for the price to dip to the level and executes his trading signal.

What he is doing is doing what many currency traders do - buying a dip but he is simply hoping the level will hold.

The professional forex trader knows that predicting is a waste of time and money and acts on confirmation only.

Use Momentum To CONFIRM

Rather than buying into a support level and hoping it holds they wait for proof that it has held by watching momentum indicators – when the prices turn up above support they enter.

They are not predicting they are trading the reality of price change and this is what you must do to if you want to win with your forex trading strategy.

Great momentum indicators to put in your Forex trading strategy are: The Relative Strength Index and the Stochastic. If you don’t know how they work look them up.

Scientific Theories

A common myth in currency trading is that you can predict the future. Step forward all the scientific theories that predict such as WD Gann and Elliot wave.

They don’t work and the reason is pretty obvious – if prices could be predicted we would all know the price in advance and there would be no market. It is the uncertainty and different opinions that make a market.

When you are trading currency markets you can’t predict as although human nature is constant it is also un predictable and this makes trading an odds game.

If you are trading the odds then you need to act on the reality of confirmation NOT Hope or guess.

So if you have been simply buying dips to support and not getting proof that it will hold before trading look up how momentum indicators work now!

Here we are going to look at the facts in relation to forex day trading that are essential to learn if you do not want to lose your money. Lets look at forex day trading in more detail and how to make money from it.

You will see more adverts for forex day trading systems than any other method of trading and the headlines are enticing: “scalp 100 pips a day, make a regular income, make 100k per annum” etc

FACT: All Daily Volatility Is Random

The problem is that Forex day trading simply doesn’t work and the above headlines are simply advertising hype. These vendors making money selling systems to naive or greedy traders not trading their systems!

So why doesn’t day trading work?

Well it’s pretty obvious and common sense the time period is to short.

All volatility in daily time frames is random and support and resistance levels are meaningless – you can’t get the odds in your favor so you will lose – PERIOD

If you think about it there are millions of traders trading trillions of dollars each day and to say that you can predict what this diverse mass will do in a few hours is laughable.

If you don’t believe that day trading doesn’t work try this task – Ask any vendor selling a forex day trading course for their real time track record of profits over two years and see if you get one.

Get ready for a long search!

Of course you won’t get one because these systems are never traded by the vendor.

What you will get are testimonials (friends or made up) or a hypothetical track record of outstanding profits which is not worth the paper it’s written on.

For those of you who don’t know what a hypothetical track record is - its one that’s done in hindsight, knowing the closing prices – well that hard!

Let’s see - if I knew the prices in advance I would be a multi millionaire but we don’t know the price in advance and it’s a lot harder in the real world!

The biggest myth in currency trading is that you can make money in Forex day trading – You cant.

The Forex trading strategy we are going to look at here is not complicated and anyone can do it, but if it is executed correctly it can make you triple digit gains or more with very little effort or monitoring.

So here is your simple forex trading strategy for big gains.

Fundamentals

The first place to start is with the fundamental supply and demand situation.

This sets the tone for the longer term trends that last for months or years and these are the trends you want to be in on.

Currencies move in line with these fundamentals longer term and you are really looking for strong GDP growth. If you look at the currencies that did best against the Dollar this year its countries with strong GDP and Australia led the pack against the dollar.

Two Countries that have economies that doing well compared to the US at present are Australia and Canada and these are set for far higher prices into year end.

Getting In on The Action

Currencies trend for years we all know that but its getting in on the trends that is the hard part and your aim is to get in and then simply hold the trend.

Any currency that is bullish will become overbought at some point and break and when these breaks come you buy them

Use Sentiment tools

Always use these two sentiment tools – Net Traders Positions and % Bullish to check that sentiment is not in over bought territory when you enter the trade. Start with your weekly charts and loo k for support and time your entry with your daily charts.

Risk – Reward

Don’t over do the leverage!

You can get 200:1 but on a trade about 10:1 is fine for a buy and hold strategy.

What you are going to do then set a stop and leave the currency alone.

Hopefully it will trend for months and make great gains if you have been careful in your selection.

That’s your Forex trading strategy! It’s extremely simple but it will make money if executed correctly.

The real key is not to overdo leverage have a wide enough stop, so you are not taken out by normal volatility and let the trade run.

There are some excellent trading opportunities around that will enable you to do the above so take a look at them and try it.