2 Further Elements to Trading Success
If you are a part time forex trader, and in particular are new to the world of forex, it pays to make sure that you keep up to date with any news announcements that could have a major impact on the currency pair you are working.
I would not say don’t trade during these periods, as not all news data will have much of an impact, but an awareness that they could have an effect is essential, and care needs to taken when trading at these times.
I have been in trades when news has broken – that by rights should have had a negative effect on GBP, only to see it move in the opposite direction, or vice versa. At other times I have been stopped out of a trade because the news data cause a lot of selling or buying activity, thus a spike in the price, only to soon see it return to, or near to the level it had been prior to the data release.
If you are able to sit at your desk and monitor the trade, then this issue isn’t much of a problem, you are on hand to do something about it. As a part time trader with a full time job, it can present a problem, as you will be unable to monitor how the price will react to the news. So it pays to do your homework and see if there is any high impact news due out, before you set your trade on autopilot and go to work. My own particular mantra in my trading activities is. “If in doubt, leave it out.” It is better to protect your account than to risk diminishing it. There are always other trading opportunities that will present themselves. Awareness should be a built in part of your trading strategy.
A lot of people new to trading forex tend to mix up a strategy with a system. To clear this up, a strategy is a policy that is set out to enable you to achieve an objective, a road map if you like. As far as trading goes the strategy will include; working a particular market at a particular time. It will detail a point at which you enter a trade, and when you will exit it. It should also include any contingencies for a ‘what if scenario’.
A system on the other hand, is a set of parts that will work together to form a whole. In trading, these parts can be the use of 3 or 4 indicators that come together to formulate a buy or sell signal. The system you use will help you to define your strategy.
Before you commit to a trade have your strategy in place. Should that trade not work out the way you hoped, with a good strategy, the trade has damage limitation built in. So there we have it, 2 more fundamental elements to achieving success in trading forex. Be aware and define your strategy.