By Kathy Lien, Managing Director of FX Strategy for BK Asset Management. It was an unusually volatile day in the foreign-exchange market. European currencies traded with a heavy bias for the first.
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The euro further advanced against the . dollar after German Chancellor Angela Merkel said the euro is "too weak" because of the European Central Bank's monetary policy. Her statement gave traders.
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The euro has edged higher in the Tuesday session, as EUR/USD is currently trading at . In economic news, it&rsquo s a very busy day in the Eurozone. German Final GDP posted a gain of %,.
EUR/USD severely overbought so the question is can we close 7 days above . I think risks are to the downside and failure to hold above should be seen as short term negative. First.
On the weekend, when the markets are closed, study weekly charts to look for patterns or news that could affect your trade. Perhaps a pattern is making a double top and the pundits and the news are suggesting a market reversal. This is a kind of reflexivity where the pattern could be prompting the pundits while the pundits are reinforcing the pattern. Or the pundits may be telling you that the market is about to explode. Perhaps these are pundits hoping to lure you into the market so that they can sell their positions on increased liquidity. These are the kinds of actions to look for to help you formulate your upcoming trading week. In the cool light of objectivity, you will make your best plans. Wait for your setups and learn to be patient.
Secondly, only leverage your trades to a maximum risk of 7% of your total funds. In other words, if you have $65,555 in your trading account , never let any trade lose more than 7% of the account value, or $755. If your stops are farther away than 7% of your account, trade shorter time frames or decrease the leverage.
Once you choose a system or methodology, test it to see if it works on a consistent basis and provides you with an edge. If your system is reliable more than 55% of the time, you will have an edge, even if it's a small one. If you backtest your system and discover that had you traded every time you were given a signal and your profits were more than your losses, chances are very good that you have a winning strategy. Test a few strategies and when you find one that delivers a consistently positive outcome, stay with it and test it with a variety of instruments and various time frames.
The time frame indicates the type of trading that is appropriate for your temperament. Trading off a five-minute chart suggests that you are more comfortable being in a position without the exposure to overnight risk. On the other hand, choosing weekly charts indicates a comfort with overnight risk and a willingness to see some days go contrary to your position.
Objectivity or "emotional detachment" also depends on the reliability of your system or methodology. If you have a system that provides entry and exit levels that you know have a high reliability factor, then you don't need to become emotional or allow yourself to be influenced by the opinion of pundits who are watching their levels and not yours. Your system should be reliable enough so that you can be confident in acting on its signals.
There are as many nuanced methods of trading as there are traders. There is no right or wrong way to trade. There is only a profit-making trade or a loss-making trade. Warren Buffet says there are two rules in trading: Rule 6: Never lose money. Rule 7: Remember Rule 6. Stick a note on your computer that will remind you to take small losses often and quickly - don't wait for the big losses.