The Truth Behind Spot Forex

Why you are a loser

Why their are so many traders are blowing up there accounts in ninety day, when there are so many educational content online. There seems to be a gap or gaps between a majority of the information out there and the results traders are getting. It is just as simply as this. We are learning spot forex the opposite way, the way the other side wants you to learn.

What to know about spot forex

The number one strategy in spot forex is to know your enemy. If you are the manager of an newly start up restaurant and you know there’s a popular restaurant in town you are going to complete with, would you not want to know their secret why they are so successful. This must be the same principle you use in spot forex. A lot of those platforms out there are just doing what really matters for the success of there organization, they are behind most of those educational content. You most know that your enemy are what i like called the big banks.

They know how much volume are in the market. For example, if 70% of AUD/USD traders are going long the banks take price short. It just simple as that, the banks just take the other side of the trade. You don’t want to be popular. Stop following the crowd. Lets look at the EUR/CHF crash in 2015. It was said that the EUR/CHF couldn’t drop below 1.2.

So majority of traders was going long and what you think happen? The peg got removed and price began to go short, over 2000 pips in one day. So here we can see the banks take the other side of the trade. You don’t want the go long when the banks is going short or going short when the banks are going long.

Trading the news

Stop trading the news. Most traders love to trade the new and this is were they get it wrong. News events are a time of uncertainty, you most not trade around those times because banks can swing price out of your favor. If the currency you are trading has a news event coming up avoid trading that currency. One of the habit you can develop is to check you news calender on that currency before you trade, most of these platforms we trade on has a news calender section. Interest rates, unemployment figures, GDP, and retail sales are just some of the news events that comes out that can cause an effect on a particular currency you may want to trade.

Reversal trader or trend trader

Trading reversals are for losers. I don’t trade like that, am a trend trader. We should never trade against the trend. Never “buy low and sell high”. This is not the stock market. Most of these indicators are out dated and were develop for trading reversals in the stock market many many years ago. So many of these terms were use in the stock market or for trading commodity.

Stock and currency most be traded differently. Can the US dollar be “overbought or undersold”, the answer is NO. This concept was also developed with the Relative strength Index (RSI) indicator by the American technical analyst J. Welles Wilder Jr, in his book, “New Concepts in Technical Trading Systems,” in 1978. Traditionally, the usage of the RSI would indicate if the values reads is 70 or above it would suggest that a security is overbought and price can pullback. If the RSI reading of 30 or below indicates an oversold stock or assets.

There are so many times the price hit the overbought and undersold levels and price has not pullback, this is were reversal traders get hit out of the game and the big banks love this. It’s the big banks and institutions that set the price and they can decide how high or low they want the currency to go. So if you think price is going to reverse because it hit the overbought or undersold level, the bottom line is this, you will blow up your account in ninety days.

Technical tools you shouldn’t be using

Stop using technical tools that are blowing up your account, like the one i talked about in the previous section. There are several others that doesn’t make any sense either. You will need to find tools that can help you bring the money into your trading account. They are out there you will just need to find them if you are serious about spot forex. The majority of spot forex out there are using the same tools and 99% are losing money.

This is a six trillion dollars market, you think you can become an instant millionaire by put up some Support and Resistance lines or trading Japanese Candlesticks, you must be crazy. You haven’t even started to learn spot forex the right way. The first place i would send you is to babypips.com and learn the basics. Topics that are really important are like margin and leverage. You will need to understand risk. How much of your account you should be risking on a single trade. My top three things you need before ever entering a single trade is Money management, Trading psychology and Trade entries. Learn and let these be your priority and the sky is the limit.

The big three

I called them “The Big Three”. If you are trading and you never come across any of these three, you are in the wrong business. I’ll touch a little on each for the remainder of this blog. Firstly, let look at money management. What is money management in spot forex? Why is it so in important?

Money management- Risk

In spot forex you need to have a good money management system in place and part of that is to understand risk. You need to know how much of your account you are putting on a single trade. It is recommended that you risk only 2% of your account on a single trade. Therefore, if you open an account with 50000, you should only risk a 1000 dollar on that trade with is 2%. Every risk must be calculated properly.

Hence you understand perfectly what you are doing. The next part i want to touch on is how many pips you are risking on that trade. This is where the best MT4 indicator comes in, the ATR indicator. The ATR simply measure how much candles moves on average for the last 14 days. You will need to put your ATR and see how many pips is on the ATR for the daily time frame.

If you see a fig lets see 85 pips. Then you can know your pip value and where to put your stop loss. What you do next is multiple 85 × 1.5 to know your pip risk per trade. Your stop loss should be 1.5 the ATR away from current price. But remember a good exit indicator will get you out of the trade way before price hit your stop loss. Your 2%÷1.5 ATR = your pip value. This is how you take risk. Do not trade the same currency pair more than once at 2% risk.

Trading psychology- discipline

Trading psychology is one of the big three i mention above and under that, discipline is a big advantage in spot forex. If you lack discipline it’s just a matter of time before your account does down.

Trade entries

Forget about all those YouTube videos about making 500 pips a day, with some reversals indicator like parbolic sar. That must be the biggest joke of them all. You are focusing on the wrong things and before you know it your emotions are already in your trades. If you want to be a good trader, you have to resist those temptations out there and build good trading habits. You have to be very very much discipline in the spot forex market if you want to be successful.

You have to learn this market the right way, you have to push your self forward, set clear goals and execute them. Finding those indicators and testing them may take a little a way but you have to take a disciplinary approach to it. It’s for your own good. It will save you thousands of dollars down the road. Take action, stay motivated, you will make it.

Trade entries are very very important. If you do it the right way you can take money off the table. We love technical analysis, more over we love indicators. I trade with an algorithm and one of the indicator i use is my main conformation indicator. If my main conformation indicator gives me a signal to enter a trade, i enter, if it doesn’t give me a signal i do not enter, it’s as simply as that. I don’t have to trade.

Concluding

I just touched on the basics of “The Big Three” in this blog, I’ll go in more details in up coming blog and remember good money management is everything.

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With thanks.