Important rules

These blog is a further elaboration of my previous blog-post on "Rules upon entries".  I always believe that to win a game, you must first study the rules well.  By understanding it then you will be able to increase your stake of winning!  In forex market, it works in the same way as like in any other games, or even in a war, our career and our daily lives.  Five simple rules to take note of, and they are:-

a. Choose your market wisely.
b. Know the stage of your entry.
c. Ability to analyst information correctly.
d. Ability to use indicator tools.
e. Ability to identify risks.

a. Choose your market wisely

Which currency pairs you decided to trade will affect your profit margin at the end of the day.  Most retail traders will choose those that are most volatile and are enable to generate profit within the frame that they are looking at.  Couple of things to watch out for would be:-

1. Studying of chart by using technical indicator tools.
2. To study and analyse news and data which will have the most  impact on the currency pairs which will also create a trend on that particular day or week.
3. Timing of your entry.        

It'll definitely need some time to prepare such information.  But if you plan to succeed in forex trading, these steps are essential.  Just like planning for a war, there must have a proper preparation.  If not, heavy casualties will be unavoidable!  No one want to get themselves trap in a trading or worst, injured!  And it can be prevented if you have done enough research for it!

b. Know the stage of your entry

I had mention it before at my previous blog-post, difference stages will have difference profit margin that can be generated.  If you are able to identify if the trend are at its ending stage, then you are able to avoid losses.  A lot of retail traders try to enter their position as early as possible at the early stage of the trend, but very often it turn out to be the mid-trend level when they spotted it.  The reason is pretty simple, no trader  want to expose themselves to danger by be the first one to enter position.  Especially at the early stage of the formation of trend, where things don't normally present itself so clearly.  So, smart traders rather wait for price to settle at one clear direction through the help of the indicators and place their entry and earn less rather to expose themselves to a higher risks.  There are nothing wrong with these tactic, but your timing of entry must be right!  As there are always a retracement when prices reach a certain level, without knowing where its retracement level is, you will get freak-out even if you are right about the trend. 
In any war, the general don't get his soldiers just charge straight ahead to attack their enemy.  They will pause, retreat if necessary to lure their enemy.  Whatever tactics that are use, very much depends on the stage of war they are in.  Same thing for forex trading, knowing different stages you are in will help you to decide what are the cause of action to take to minimize risks and maximize profits! (to know more, please refer to my previous blog-post on Rules upon entry or visit http://forexoceanview.blogspot.com/ for more technical info)

c. Ability to analyst information correctly

Got to confess, sometimes it is quite difficult for me to get it correct too.  Very often the market may not react according to how you and your team analyst it, even if the data or reports that can be very positive or negative.  Unless you are very well verse at macro-economic, if not, to get a 100% correct on analyzing the information can be a very difficult task! (on saying that, sometimes experts can get it interpreted wrongly too!)  Therefore, the best thing to do is to wait for the market to react first upon the news or data that is release if you are not sure about your analysis.  It is usually very tough when it comes to analyst too many data announce on the same day! 

d. Ability to use indicator tools   

All these tools that helps to analyst chart pattern at different stages are important.  Use it correctly it will help you in your trading.  If you can use all these tools like an army that is well trained, chances of winning the war will be very much higher.  
Just like in a war, the leader will have to know the different characters of his generals in order to gain victory at different situation!  Same thing goes for forex trading, knowing different characteristic of different indicators for different stages will increase your chances to profits from the market!  For more details on usage of indicators, please visit http://forexoceanview.blogspot.com/ 

e. Ability to identify risks

Before any news or reports release, many retail traders will tend to anticipating the result and place their entry to the direction that they think it should be heading.  No doubts that it's going to be a lucrative profits if you are right, but on other hand, the impact can be disastrous if you are wrong!  If your trading is only base on assumption of what you think without a concrete base of evidence, then the risks of your entry will be very high!  By identify these risks, you are not just able to safe guard your capital but also ensuring your profit that you are going to generate.  Try to avoid those timing when reports or data that are going to release, especially when you have no idea what the figures are going to be.  Let the market makes it crazy move within that seconds, wait and observe.  Enter your position when you know your risks are at the minimum. (by then, most indicators are able to provide a more firm direction indication.) Beside entry of position, exit of your position are equally important!  Do not hold your position if your are not sure if price are still heading your direction upon data release.  Minimize your risks are always the priority.

Do remember that trading currency are like fighting a war, only when you know the rules well, then it can ensure you your victory!  Enjoy trading!