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Too often I see traders getting wrapped up in how to make money trading Forex before they even know why they're trying to make money trading Forex. In this article I'm going to address one of the most overlooked keys to success as a Forex trader. I'll also share with you some insights into my own journey as a Forex trader including how I learned to control my emotions before taking a trade. What if I told you that in order to be profitable you first have to know why you want to be profitable? It's not enough to say, "I want to be rich". There's more to it, and it all starts with a simple question... Why are you trading Forex? Is it to go on vacations with your family, become a prop trader, or maybe you want to teach others how to trade someday? Regardless of your reason, if you want to be a profitable Forex trader, you need to ask yourself this question and be honest with yourself when you answer. Just as you need to answer certain whys to enter a trade, called price action confluence, you also need to answer one BIG why before you can become profitable - why am I trading? The way you answer this question is important because it's going to help keep you focused and disciplined throughout your journey to profitability. The answer to this question is also what drives your emotional tendencies as a Forex trader.Therefore knowing and understanding the answer is critical to your success. Before we get into answering the question and learning to control emotional tendencies, let's find out why the Forex market has such a strong effect on our emotions in the first place. The Forex Market is an Open Playing Field For most of us, the unlimited freedom and creative expression that Forex trading offers is all but unknown. We tend to grow up in societies with rules and boundaries. If you cross a boundary, someone is usually there to put you back on the “right” course. When you were a child, it was your parents. Now that you’re an adult, it might be your boss. The point is that your entire life has been guided by society in some way, shape or form. Trading Forex has no limits or boundaries. Think about it. With the exception of abiding by regulatory rules, the Forex market is a “boundary-less” playing field. You open a position when you want, close a position when you want and hold a position for as long as you want. There’s no limit to how much money you can make, just as there’s no limit to how much money you can lose. All of this sounds great, and these are all reasons that lure most of us into the world of trading in the first place. But what happens when there’s no longer someone around to tell us “No”? Most of us don’t like to create rules for ourselves, especially when it was the lack of rules that lured us to trade Forex in the first place. It’s rare to meet a trader who didn't suffer considerably before realizing that more structure was necessary. Sometimes this suffering goes on for months, sometimes years. But I’m here to tell you that it doesn't have to be this way. This section was sourced from and dedicated to Trading in the Zone. If you haven't read this book yet, I highly recommend it. So how do we begin to take control? It all starts with your intentions; your why. Have You Updated Your Intentions? Do you remember putting on your first trade in the Forex market? Even though it was on a demo account (I hope) you still had certain intentions. You had obviously heard about Forex and were intrigued enough to open a demo account. So your intention was to see how it all worked. To see if you really can make money at this Forex thing. If that was your only intention when you opened the demo account, that's okay! That's what demo accounts are for. But the fact that you're here reading this tells me that you want more. So the next question you should ask yourself is, what are my new intentions? When you placed that first trade in your shiny new demo account you were just testing the waters, right? So your intention was to find out if you'd like to pursue Forex trading further. For some of us it may have been love at first site (myself included) but the fact is that we still knew nothing about trading at the time. The demo account was our risk-free way of testing the waters. Fast forward to today... You obviously liked it enough to pursue it further. So then I have to ask, why are you here? A logical answer might be, "because I want to learn more about trading Forex". And I applaud you for that. But why do you want to learn more? Do you see what I'm doing here? If you keep asking yourself the question, "why do I..." enough times you'll eventually end up at the root of why you want something. The answer to that root question is the one you'll want to focus on. So have your intentions changed, or are you still just testing the waters? You may think your intentions have changed because you've given thought to trading full time. Or maybe you've thought about those amazing vacations you could take as a profitable Forex trader. But have you defined what you want out of Forex? It's critical to your success as a Forex trader that you mentally update your intentions by defining what you want. I've never met a profitable trader whose mental attitude was, "I'm still trying to decide what trading Forex has to offer". Every profitable Forex trader knows exactly what they want to get out of the market. And it's not just money. There's more to it! So how can you start to mentally update your intentions? It All Comes Down to Two Questions I always like to keep things simple. So when I started to think about updating my intentions years ago, it began with two basic questions. What am I passionate about? What kind of lifestyle do I want? Both of these questions are very personal, so I can't answer them for you. What I can do is tell you how I answered them. What am I Passionate About? I'm passionate about being self-sufficient. I don't want to rely on a boss for a paycheck, nor do I want to be told what to do every day. I've worked in an office environment before, and I just don't believe I'm supposed to live that way. I'm sure many of you can relate to at least one of those statements. Most of all, I'm passionate about sharing my Forex experiences, both good and bad, with others who share the same passion. I want to leave a mark on this world, and what better way than through selfless giving? Before we move on, let me be very clear about something. My statements about working in an office environment are strictly my own perspective. I worked in that environment for a long time and had a lot of fun while I was there. My parents, the two most influential people in my life worked in an office environment their entire lives. There's nothing wrong with it, it just isn't for me. What Kind of Lifestyle Do I Want? When I first asked myself this question years ago I really had no idea. I had never sat down to think about the lifestyle I wanted in detail and how trading Forex could help me achieve it. I finally came up with one word that could define my image... "ability". I wanted the ability to travel the world and live life to the fullest. I wanted the ability to provide for my family - to give them everything they deserve and more. In talking with others, I've found that many people never do this exercise because they're afraid of the "what if". What if I don't achieve it? What if I fail? In most cases they don't even realize they're avoiding the exercise for this reason. That's the power of the subconscious mind at work - protecting us when it thinks we need protection. If you're part of this group that has put off answering this question, trust me when I tell you that you're not alone. But you do need to act on it and decide for yourself what kind of lifestyle you want and how Forex trading is going to help you achieve it. The longer you wait, the longer it's going to take for you to be able to control your emotions and become profitable. Bringing it All Together So why does all of this matter? It matters because in order to set out on the journey of becoming a profitable Forex trader, you first have to know the destination. The best example I can give is using GPS in a car. When you set out on a 1,000 mile road trip, it's best to know the destination address and enter it in your GPS. This way you get to your destination faster and without the stress of getting lost. Without knowing the exact address, you'll most likely make some wrong turns, deal with the stress of getting lost and it'll take you longer to get to your destination. Trading Forex is no different. You have to know the destination address (your "why") in order to get to your destination (becoming profitable). But it's not good enough to just know it; you have to see it. Your why has to be so clear in your mind that you can reach out and touch it. Sure, you can figure out your why along the way. But just like not knowing the destination address for your GPS, it's going to take you longer to get where you want to go and you'll experience more stress along the way. In closing, your answer (and vision) to why you're trading Forex is what's going to guide you in the right direction. When your emotions start to get the best of you, all you have to do is think about your why and let it correct your course. Before every trade setup you should be asking yourself, "is this trade setup good enough to get me where I want to go"? But in order to answer this question, you first have to know where you want to go... If you ask yourself this one question before every trade, you'll be one giant step closer to becoming a profitable Forex trader. Your Turn Why are you trading Forex? What kind of lifestyle do you want and how can trading Forex help you achieve it? Stay Diligent, Justin Bennett Daily Price Action
Why Use Price Action Analysis to Trade Forex? Below Nial Fuller Talks About Why Traders Should Use Price Action Analysis to Trade Forex. Trading Forex successfully is both art and skill. You need to learn to read the natural ebb and flow of the market if you want to truly understand the price dynamics that occur within it. Trading based off rigid rule-based systems, or black-box systems is a thing of the past that is quickly losing popularity amongst savvy Forex traders. You have probably already experienced the mess and frustration that comes with using numerous indicators on your charts or with trying to trade solely off software trading programs. The core problem with such approaches to trading is that they are not natural. If I may, I would like to make an analogy with food here; when you eat unhealthy food that is not natural, your body suffers, and everyone knows this. Similarly, in Forex trading, when you try to use unnatural trading strategies that are not based off the ‘pure’ price data of a market, you end up polluting your mind and as a result your trading results will be poor. You see, to trade successfully you need a clean and calm mind, just like you need a clean body if you want to live healthily. You get a clean body from eating natural foods, and you get a clean and calm trading mindset from trading natural price action based trading strategies. Price action trading allows you to ‘resonate’ with the market by being as in-sync with it as possible, just like eating natural foods will work to keep you healthy because they are what your body needs and they ‘resonate’ better with your body’s cells than do unnatural or highly-processed foods. Why price action trading is effective in the Forex market I have used about every trading strategy available, because when I first started out in the markets I was stuck in the cycle of analysis-paralysis that so many traders get stuck in, jumping from one strategy or system to the next and trying to analyze as many economic news reports as I could get my hands on. Eventually, I realized that the most efficient and effective way to trade is to simply learn to analyze a ‘naked’ price-only chart. My unique way of trading with price action strategies is the result of many hours of time spent analyzing price movement on price charts. Forex trading is a process of trying different methods and tweaking them and eventually ending up with your own unique trading method. Price action analysis is the art and skill of identifying specific price action patterns in the market you are trading. Forex is an excellent market to use price action analysis in because it is open 24 hours a day 5 and half days a week and this means there are more opportunities for you to take advantage of. All you need to know is how to identify and trade specific price action strategies and you can learn this most effectively from a professional price action trader and by studying the charts. Price action analysis works very well in the Forex market because it is such a dynamic and liquid market. The beauty of price action trading is that it is a naturally flexible method of trading that gives you a perspective on the market that allows you to make sense out of what is happening at any given time. I have been profitable by concentrating on just 2-3 good price action setups that have proved consistently effective for me. If you learn how to read what the chart is telling you and focus on just 1 to 3 setups that you like, eventually you will master these setups / patterns, allowing you to have a better chance of making make money from your trading. Where people go wrong is with using indicators and other overly complicated methods and then constantly jumping from one trading system or strategy to the next. You have to find a truly consistent edge in the market and just concentrate on that until you truly master it, remain in one frame of mind, focus and master those setups first, and then you can add more tools to your arsenal later on. Forex trading is difficult enough without having an overly complicated trading system that tells you to look at numerous indicators when you could just be looking at a simple Forex price chart. Perhaps the best reason to trade Forex using price action is that any indicator you use on your chart to analyze market movement is derived from price and is just showing you in a less vivid format the same thing price is showing you. Some people like indicators because they give you rigid buy and sell signals without you having to think for yourself. The truth is, rigid trading systems and strategies will never stand up over time because the market is not rigid, and you have to trade a strategy that allows you to resonate with the market, not fight it. Just because your charts come with a hundred different indicators doesn’t mean they are going to help your trading or make you money in the markets. Trading success depends mostly on your mindset and your ability to remain disciplined in a realm of constant temptation to over-trade and over-leverage. We are trading currency markets, and the ‘core’ of what we are doing is trying to profit off of price movements. So, why so many traders do not want to make their trading decisions off of pure price action is beyond me. I promise you that if you simplify your trading method and concentrate on using price action strategies you will wonder how you ever traded any other way
Nial Fuller posted a topic in TradingIf you are struggling to find a trading strategy that seems like it is more than just a pre-packaged set of trading rules or a piece of software that teaches you nothing about the market, than what you are about to read in this article will help you get on the right path. The tendency for new and struggling traders to believe that they need a fancy piece of trading software or a complicated indicator based trading system to successfully trade the market is a very common belief but a huge misconception. There are various reasons why lagging indicator based systems and forex trading "robots" never work in the long run, it is important to understand these reasons so that you gain a deeper understanding of why a simple forex trading method can be used to profitably trade the market with. Many traders who make most of their trading decisions off of technical market movements understand that the price chart is the main source of information for what causes them to decide to enter or exit a trade. Where many traders go wrong is in believing that through attempting to analyze and interpret secondary indicators to price movement, like lagging indicators, they will somehow gain an advantage that is not otherwise available to them on a naked price chart. This belief typically arises from reading a website that claims if you learn their "special" combination of indicators you will easily profit in the markets, or from a well-marketed forex trading software program that shows insanely good returns which many beginners do not know are nothing more than a result of back testing the program over the perfect time period that fits the indicator to a T. The issue here is that no two moments in the market are ever exactly the same simply due to the fact that every single thought that every single market participant has about the market is a variable that could affect price movement; therefore, back-testing is essentially pointless. The other issue is that people tend to have an ego-driven fixation on making forex trading more complicated than it needs to be so that they can brag to their friends or family about how they are using all these different fancy sounding indicators to trade with. The fact of the matter is that price action is the best indicator you could ever ask for. This is because price movement generates its own signals about possible impending market direction that once you learn to analyze will allow you to time your entries and exits with as much accuracy as possible. Essentially what is happening when you trade off the raw candlesticks or price bars on your chart, is that you are cutting out the "middle man" so to speak, which would be all the lagging indicators and junk trading robots, and are dealing directly with manufacturer of trading signals: PRICE. Nial Fuller is an expert on price action forex trading strategies, you can visit his website at Learn To Trade The Market