If you want to make money from forex trading and achieve currency trading success you need to make sure your forex trading strategy is objective as possible and keeps subjectivity out.
Many traders make the mistake of including to much subjectivity in their trading plan and lose; lets look at why this can be fatal.
Why Subjectivity will ensure you lose.
Many traders need to make a lot of subjective judgements about their trading signals before executing them â€“ The problem is, the subjectivity that they have in their judgements sees their emotions come into play and they lose.
Letâ€™s look at an example.
Elliot wave and cycles are supposed to objective yet you have to spot the set ups and make subjective judgements.
This means that you can be tempted to over ride signals, take signals you shouldnâ€™t and generally let your emotions dictate your forex trading strategy.
The same goes for those traders who want to trade by following online news wires.
They need to decide how much the news has been discounted and how valid it is â€“ this is difficult or near impossible and again, emotions come into play and the trader losses.
Be objective! and Create Rules
A better way to trade is to create a set of objective rules for your currency trading system, which mean you do NOT have to make subjective judgements â€“ you simply follow the rules.
This keeps you focused and disciplined and keeps your emotions out of trading.
Here us a simple system that is an objective set of rules and consist of three main components.
1. Look For Valid Support or Resistance
This is support and resistance tested several times, that line up on the weekly and daily charts at the same critical levels.
2. Look For Tests of the Above
When the price moves towards the support and resistance â€“ You should then have a timing indicator to either indicate it will hold or fail.
3. Timing a Trade
If price momentum falls into the levels using the stochastic and Relative strength Index (RSI) a short trade is taken.
If the support or resistance is broken and confirmed by the previous two indicators then a long trade on the breakout is taken.
Thatâ€™s it no guessing or subjective judgement used, this currency trading strategy is a simple set of rules that are followed
Trading signals are executed in line with the trading rules.
It is! Most traders canâ€™t do this they want to subjectively decide if the trade looks good and impose their own judgements upon the trade – in forex trading this is fatal!
Discipline goes out the window and emotions dictate the trading strategy and trading equity is lost.
The enemy of any trader is his or her emotions. This is why most novice traders lose, they canâ€™t get an objective plan and set of rules they can follow with discipline.
If you want to achieve currency trading success, make sure your currency trading system is objective as possible and keeps subjective judgements and emotions out or you will lose to.
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