By: Charley Warady
If you're not watching closely, the Forex market is going to get away from you. You have checked your charts. You have done your calculations; you have figured out Fibonacci ratios; you have applied the Elliot Wave theory; you have checked the news and fundamentals; and there are more lines on your chart than an air traffic controller's screen at rush hour. Oh...and you haven't placed a trade.
Forex Technical Analysis
It's great to be a well schooled Forex technical analyst. It makes great conversation at parties, assuming you only go to parties with other well schooled technical analysts. But unless you're going to be a teacher, all that knowledge doesn't mean anything unless you apply it to trading Forex for a living. In this case, a buy or a sell. It takes action. Theories are just that, until they are applied to practical applications. You can view your points of resistance and support all day long but there are very few perfect markets. Sometimes you have to just take a shot if you want to trade Forex for a living
Assuming you're not a scalper, you don't need those razor sharp reflexes of a scalper to get into or out of a Forex market. However, even if you are a Forex day trader, by definition, you are a day trader. Don't be a day dreamer. Your income of trading Forex for a living depends upon you taking action in an actual trading capacity in the Forex market. If you're over-thinking a strategy you'll be, as they say, “caught looking”.
Missing Forex Trades
You'll find yourself staring at the trade you should have made but you were too busy thinking about it, and in the meantime the now fictitious trade you made is making real money for someone who actually executed an order. You don't need the reflexes of a scalper, but you do need the courage to take action. You don't want to be in the “wudda, cudda, shudda” club. These are the people who spend too much time bemoaning the trades they 'would have' traded, the trades 'they could have' traded, and the trades they 'should have' traded. On the upside of this method, they don't lose money. The downside, of course, is that they don't make any money either especially when trading Forex for a living.
Preparation is a key but it is not an end. Your personality will contribute to your Forex trading as much as your technical analysis and fundamental analysis. Don't rely too heavily on one method. You will find yourself overwhelmed with too much information and that leads to being frozen.
Sure, there are Forex traders who don't think enough, and act too much out of impulse. These people are apt to lose money to the same extent as the other extreme. The difference is in the explanation of the loss of money. The Forex trader who acted on impulse will shrug his shoulders and say, “Hey. I took a shot.” Whereas, the Forex trader who over analyzed the market and lost money will point to his charts and give you a hundred different reasons for the loss. The result is the same, and one you don't want to be in.
Look for a balance. Information is a wonderful thing; just don't let it get in your way when trading Forex for a living.