FOREX

When we begin our trading journey, we will stumble many times. If we persist, we begin to learn from our mistakes. Our lessons are memorised and knowledge begins to flow into our action plan. We begin to make unconscious trading decisions, based on our past experiences.

Some will call this trading in the moment. Others call it trading in the zone. Whatever you call it, you want to aim for this state. It will take time and patience, so persist, because like expert knowledge any endeavour, it is worth the effort.

As traders we tend to face 4 trading fears. One fear is to lose our money. Another fear is to be proven wrong in our trades. There are two minor fears, which relate to missing out on moves in the market as well as leaving money on the table.

There is no magic cure for any of the ills, but there is a cure. It is called a trading diary. By logging your trades, preferably by taking a snapshot of the chart before and after the trade, you will begin to identify your strengths and your weaknesses. If you persist with this method, you will significantly speed up your learning curve.

So the final lesson is to ride the trend or jump on board a trend, which is already in motion. On the chart below you will see two old familiar concepts. One is the Stochastic Indicator and the other is a moving average on the price chart itself.
The method is simple: you identify the direction of the trend. On this chart we use a 20-period MA on the FTSE 100 (UKX). It is pointing down. So you will be looking for an entry to short sell the market.

On the lower half of the chart I have placed a simple stochastic indicator. I am looking for the stochastic indicator to reach above the horizontal black line, or close to it, and then for the blue line (fast stochastic) to cross over the red line (slow stochastic). I will ignore all the "buy" signals because the trend is pointing down. If the trend was pointing up, I would ignore all the "sell" signals.

This method is simple to use, and it ensures you are trading in the direction of the trend, rather than against it. It also has the advantage that you will most likely not overtrade, as there tend only to be a couple of signals in any given trading day.