There are a lot of tweaks to old Stock trading sayings when you retail trade Forex. In stock trading you want to trade with the trend and use stocks. In my experience when you trade Forex you want to trade with the trend but don’t put in stops. If you read that last sentence you’d think I’m bonkers and dangerous, and I’d say you’re right.
It’s been my experience that price volatility and stop hunting in Forex always blows you out of a position right before the price action goes back into your favor. I’ve seen this happen time and time again and it’s frustrating. How do I get around it? I position size and limit the number of trades. So far, this method has yielded me positive Forex Trading Performance.
The past year I saw my account go up almost 11% and my win rate is 78%. Those are very good numbers. My risk to reward ratio is a bit low, I like it 1:2 (or 2:1) but I’m ok with making an average of $1.71 for every $1 I risk. I also let my winners run and cut losers quickly with such a high disposition of 8.65. I hold my winners almost 9 times longer than I do my losers.
Granted, I only have $262 in my Forex Trading account right now and I’ve been playing around, but for me to make this into a viable trading business I’d need to do a few things like open up a business account and deposit more cash.
I use zero technical analysis trading the way I do. I just look at the price action and which way the overall trend is going. I like long trends and a good carry trade in favor of the trend. As of this date, the EURUSD is the only pair I like to trade that is in a long term downtrend, and shorting it gives me a positive return to offset any margin costs.
I mostly look at the daily charts but use the 15-minute charts to find a good entry. Before I enter a trade, I use a position sizing calculator set for a 200pip stop with 1% account risk. That gives me a very small position size and a rough exit point of 200 pips in case the trend does change.
The only weakness in this method is NOT setting a stop and despite my successes here, I’ve seen massive swings in the EURUSD that go beyond 200 pips and I DIDN’T EXECUTE it. I think I need to ponder this more and come up with maybe a 2 or 3 standard deviation stop. This way I can have a stop and still risk 1% of my trade and give me enough room to maneuver.
I wanted to write a long review of Alex Nekritin’s book titled Naked Forex, but the short of it was that it did help me work through a lot of issues with trading Forex. He was able to put into words what I was observing and provide me some clues on how to develop my strategy going forward.
I have such a love/hate relationship with trading and Forex in general. In the early 2000s and then up to 2008 I did well ‘day trading’ stocks and Forex that I deluded myself into thinking I was awesome when I was just lucky. Trading is damn hard, whether you do it in stocks and/or Forex, you have to be clinical about it.
You ultimately can’t control the market. You can spot trends and enter a trade right as the trend changes. You can use indicators but hopefully will realize that all the indicators confirm what has happened in the past, it doesn’t tell you the current market conditions. You can use candlesticks in Forex but they don’t work so well as they do in the stock market. Only price action can.
This image from r/Forex hit home for me and it should for you too.
From my experience, I’ve messed up trade entries and exits and I need to work on them better. However, the most important thing you should do is focus on risk, position-sizing, and trade journaling. That’s it. Then it becomes a numbers game. You have to document your trades and evaluate your strategy to see if you’re making money or losing money, that’s it. Managing Risk, Position Sizing, and Trade Journaling.
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