Forex Trading : Maximize Your Profit Potential

February 23, 2008 | posted in | 0 comments

Forex trend following can be very profitable and you can pile up huge gains - but you need to have the mental discipline and confidence to follow the trends. While you would think most traders could do this - they can't.

It's a fact that long term trends exist in forex trading and they last for months, or even years yet, most traders simply cannot make profits from them. This is not because they don't have the right forex trading system -but because they don't have the right mindset.

We all want to make big profits don't we?

Yes we do, but that's very different to accepting them. Let's look at a typical scenario.

A common scenario is:

A trader spots a trend and gets into it, the trend is still going his way but there are swings back into his open equity, reducing his profit. As his profit gets bigger, the more tempted he is to take it before it gets away and the more the price swings, the more the temptation to bank it.

In the end the trader snatches the profit, or moves his stop too quickly - he is out and the trend continues in the direction he thought but hes not in it

Forex trends always seem to last longer than most traders expect and if you get into one, you need to hold it and this means keeping 3 key points in mind:

1. If the trend is strong and you're confident it will continue, hold you stop back and trail it outside of normal volatility. 2. Accept that you are going to have short term price swings against you, that's simply the nature of trading - so get used to losing short term open equity and keep your eyes on the bigger prize.

3. You need to accept that when the trend does change you are going to give back a big chunk as it turns, because you are trailing a wide stop. Keep in mind you are not after perfection, you want to make money. Keep in mind if you caught just 50% of every major forex trend, you would make a lot of money.

Long term trends are always there because they reflect the underlying economic health of a country and these economic cycles last for many months or even years. If you spot and hold long term trends, you could make big profits and only trade a few times a year!

Many traders make the mistake of trading too frequently and protecting their positions so much with tight or close trailing stops that they end up making no money.

By trying to reduce risk they actually create it.

Don't make the same mistake - big profits are made trend following the currencies and if you learn to have the discipline to hold trends, take dips in open equity and take calculated risks at the right time, you will enjoy currency trading success and have the opportunity to enjoy some great profit potential.

0 Responses So far

Post a Comment