Having in the forex market for years, it's like a war-game to me.Rules to follow, if not your army (capital) will be seriously injured! Had been learning from my best & closer friend, who happens to be my husband. He had taught me what the rules are and to be followed strictly!
First he taught me the ancient Chinese SUN TZE ART-OF-WAR & how it can be related in currency market like forex. "WHAT THE HECK"! It is going to take me years to figure out how to connect the two. So he summarized into points which make life easier for me. It works for me, and really help in growing my army as well as minimize casualty. Hope it helps those in same field or intent to join-in the game. >_<
RULES:
- Know your strength! Which means you know how to use indicators to help identify if the currencies pair is in over bought or oversold stage.(It's a basic thing that will help you to decide your entry and exit position.)
- Understand your opponent! Knowing the currency pairs that you are trading is very important. For example, AUD/USD (Aussie/ Us Dollar), Aussie is a commodity dollar like NZD (New Zealand Dollar). It is greatly related to commodities.Any increase or reduce in demand of commodities will have an impact on it. You can't expect a change of policy in Singapore to have impact on Aussie, right?
- Know your terrain! Without knowing whether it's a trend or non-trend market condition can be deadly. By understanding it, you'll know where to position your army and when and where to retreat! (It's not difficult to identify, really! Can visit http://forexoceanview.blogspot.com/
- Calculation of risk! Before any entry, do some calculation on anticipated damage you can adsorb! (Which means where is your stop loss level!) If the entry after calculated proved too much of a risk, then think thrice before you declare war! (Calculate where the support & resistance are, and how far are the price is away from it.)
- Discipline! Have you ever seen an ill-discipline army win any war? It's the same thing in forex war-game. By following the rules mentioned above is discipline! Never hesitate to retreat if the damage had reached your calculated level. By holding your position and in hope of miracle will create more damage. That's why they discipline is very important.
- Logistic! It's a very simple rule to understand. It's about how much you want to invest as capital! So say a standard account for AUD/ USD is $2500.00 for one lot & mini account is $250.00/ lot. How much are you willing to use as capital for investment, and not to forget to add the percentage of risk you are willing take. Secondly, you need to learn how to manage your profits. (Always remember, you are not suppose to risk your initial capital. As long as there's still capital in your account, you'll be able to go back to forex field and declare WAR!)
If you find it interesting, I'll go into detail on the strategies next week. Hope these will help those having bitter war in forex and those who are interested coming into it. (Those mentioned above are to prepare you psychologically! For more tactical analysis, please refer to http://forexoceanview.blogspot.com/
