How To Make Trading Easier
Trading is hard to learn, trading is pressure, trading is risky, trading is stressful, trading is difficult!
I’ve heard all of these things over the years. But is it true?
Is it really? Are all of those things fact? Is trading as difficult as people say it is?
Now I know you didn’t expect that but it’s true.
If everyone could trade then everyone would be doing it! Any time you are using leverage in any kind of market you are taking a risk. Trading is not the same as investing, trading although not a get-rich scheme can indeed make you rich. Where Forex trading does resemble a get-rich-quick scheme is that it can also make you poor! Trading can also put you under a great amount of pressure and stress especially when things aren’t going well. And trust me things don’t always go well when you are using real-world money that belongs to you!
The life of a retail Forex trader is hard, most retail traders have had no formal training, and many in fact haven’t had any kind of training at all. Some have been putting their money into the market after learning barely the basics!
Most of the bad things I’ve heard about Forex trading I was told by losing traders or people who know someone who has lost money!
But there are ways to make things much easier.
Swing Trading
Swing trading is a type of trading that involves holding positions for anywhere between a day to a few weeks. Swing traders typically use technical analysis to identify trading opportunities and aim to profit from short to mid-term price movements.
Swing Trading is easier than day trading because you are trading the overall market rather than the short choppy short-term market. Another good reason to use a Swing Trade approach is most people have a full-time job, school, a family or other commitments and they simply don’t have time to sit at the computer all day. Traders do not need to monitor their positions throughout the day. Swing traders can typically place their trades at the beginning or end of the day and monitor them whenever they have time. Swing trading is a more flexible trading style than day trading because traders can trade from anywhere in the world. They do not need to be near a trading terminal to place their trades or be in the right timezone for the best trading times.
Less risky: Swing trading is a less risky trading style because positions are being held over a longer period of time. The Stop Loss and Take Profit are usually fairly far apart so even if the market does fly off in the wrong direction it doesn’t necessarily mean the trade will result in a loss. Because you are trading less often you are also risking less overall. Although the actual amount risked on one trade is higher than for someone that has a day trading approach the total number of trades is much lower. The short-term volatility of the markets also has less effect upon your risk vs reward.
Trading plan: A trading plan will help you to stay disciplined and make sound trading decisions.
My trading plan is very simple!
It consists of:
Risk!
Risk and account management are the MOST important aspects of any trading system.
Percentage of account risked on each trade at Stop Loss: 3%
Risk Vs Reward: 1:1.5 For every dollar risk I want one and a half back. This gives me a 4.5% minimum return on a trade.
Maximum Leverage: 1:30. I don’t advise using 1:200+ when swing trading the moves are just too big for most accounts. Unless you have a large account and are using a tiny percentage you will have to carefully work out your Risk to make sure you are not using more than 3% at your Stop Loss.
Under my rules Stop Loss and Take Profit is always set! Stop Loss below the support level or above the Resistance level and Take Profit before or the Support or Resistance line.
Technical Analysis
Support and Resistance levels are going to be your main focus points when swing trading. These areas are key to entering and exiting trades.
Draw Support and Resistance lines on the 4hr and 1day charts. Buy on retrace after hitting support or resistance zones*.
Remember that Support and Resistance zones are NOT 100% defined! Just because price breaks through either support or resistance does not mean that it is 100% broken. More so with long term highs or lows. Think of these levels as zones rather than an unbreakable line. Don’t think if the candle breaks 1985 this means the Resistance is broken and I will buy! This is one way to lose a lot of money. It’s called a false breakout and they happen all the time!
As you can see on the Daily chart indeed support at 1985 level has been broken. However this is not a buy signal! If you look carefully the price broke that level the day before and dropped back below. This has created that horn like double top with the two wicks.
I wonder how many day traders bought at that level thinking it was a breakout? This leads me to the next part of my trading plan!
Patience.
Trading is a long-term game. It takes time and patience to develop the skills and experience necessary to be a successful trader. In the above case a Buy trade would need a confirmation candle that finishes the day above the previous break through. A sell trade candle would need to close below 1960. That’s a big distance to cover and could take either a few hours or a few days, maybe even a week or so!
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This is where patience comes in. If you Buy or Sell right now, you are guessing. Gambling and hoping that your 50/50 choice was correct.
I get why, most people think the same. It’s called FOMO the Fear Of Missing Out. You don’t want to miss those few extra points that small percentage between 1985 and 2000 or 1985 and 1960 you want to lock in that profit!
Look at the bigger picture of 2000 up to the next Resistance level at 2040 or even better 1960 down to the major Support at 1820 which is definitely the longer term Swing Trade I am looking for!
Other Factors
Before we enter any trade we have to think about what is going on in the World!
What other things do we have to consider if we were going to trade Gold at this Resistance level? There’s a few factors when trading gold. Not only is Gold involved but so is the US Dollar. So what is going on with the dollar? At this moment in time the USD is fairly strong. A strong dollar usually indicates that Gold is going to fall.
How is the US stock market doing? If the US market is dropping than Gold often rises. If the US stock market is doing well the Gold market is more likely to fall. At this moment in time the US stock market is in a slump.
And there are also two wars going on right now. There’s a war in Europe between Russia and the Ukraine and also another that has started in the Middle East between Israel and Hamas. How do these two conflicts effect the Gold market?
Do all of these cancel each other out? If so than more than likely the Resistance will hold. Do two or more events have a positive or negative impact on Gold?
Is there any big financial news today? For example: is The Federal Reserve report is due out? If so then it’s probably best to let the news event finish before trading anything to do with the USD. Especially something like Gold which is heavily influenced by the US Dollar and the US economy.
What happens if you don’t know?
DO NOT PUT ON THE TRADE!
The last part of my trading plan is simply this.
If I am not sure or if I don’t know then I don’t trade. This is very important when you are trading using S&R if the price is halfway through the chart with no Support or Resistance close, just to leave that instrument and go find a better opportunity.
There are always other opportunities!
Making the learning curve easier
One of the easiest ways to reduce the learning curve is by concentrating on just one to a few instruments.
I started with purely trading Gold, after that I learned about Oil. Moving on I studied and traded the British Pound against the Japanese Yen. GBP/JPY. Then the US tech 500 Indice and many others. I’ve also traded a few other unusual stocks such as the Chinese car company BYD on the Hong Kong stock exchange. This is another asset that I’ve learned about so I am informed about when the stock is close to its S&R.
I still trade mainly Gold and Oil but if both of them are not trading well I will look elsewhere.
Although I am mainly a technical trader using Support and Resistance I do pay attention to what else is going on with whatever I want to trade. I found doing this further reduces the trading risk. This saves me money in the long run.
Conclusion
Pay attention to your risk
Switch to longer term charts such as the Daily or 4hour chart
Keep an eye out for assets being at either Support or Resistance
Be patient
Don’t try to learn about and trade too many instruments at once
Set Stop Loss and Take Profit
Consider other factors
Thanks for reading
Paul
