FX TRADING STRATEGy
the volatility of the currency markets these days. Exceptions, like the example above, do come along from time to time and a good trader always takes what the market offers him.
Volatility is generally considered good for traders – up to a point. We love a good level of volatility because of the opportunities
for
profit it provides. However, with rapidly
moving
markets the trader must be prepared to act quickly when a quality trade develops.
PATIENCE QUALITY
+ +
QUICKNESS = PROFIT
Likewise, the exit trade may need to be done with quickness as well to collect maximum profit – or to avoid or mitigate a trading loss.
Profit is the result of minding our Ps and Qs
adaptable to what the market is actually doing.
Tus “QUICKNESS”, our second “Q”, can enhance the level of profit from the trade – sometimes significantly.
In the above trade, the entry had to be made quickly to avoid significant loss of potential profit. Likewise the exit should have been made quickly to maximize profit. Actually, because of our outside appointment, we had to
74 FX TRADER MAGAZINE April - June 2012
Our routine trading method has been changed by the recent increase in market volatility. First, we try to avoid holding positions overnight – except for special situations, such as the trade just discussed. To hold a trade overnight, and sleep well, we would have to have a stop loss in place. Today’s market volatility would dictate a very large stop value, so only trades with a large RRR would be acceptable to hold overnight.
close the trade a bit early – foregoing a bit of profit – but it was still a very good trade.
We should stress again that the above trade involved several unusual factors and we reacted a bit differently from our usual routine. But traders have to be
Secondly, we seldom use hard stop losses – that is a stop loss order placed aſter entering the trade. Tis adds risk to the trade, but we consider it essential due to market volatility. Te good thing about using soſt (mental) stops is that we avoid getting whipsawed out of a trade with a small stop loss value. It is
also good not
have to place a stop loss value of substantial size- it can significantly reduce our RRR.
Te bad thing about using mental stops is that it requires constant attention. We must confess that this method of stop losses has caused us to leave many trades earlier than desired – because, for some reason, we could not
be there to monitor the trade. Good trading techniques seem to frequently require some form of compromise
PATIENCE + QUALITY QUICKNESS = PROFIT
PROFIT is the result of minding our other Ps and Qs. A small PROFIT is preferable to a loss of any size. We love to make a profit – not just because of the money we make – it is succeeding at something that is not easy. We would probably trade even if we did not make
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