In this week’s Forex video I will be discussing how to structure your trades before you enter a trade. As traders, we sometimes place trades out of greed or fear. Both are terrible habits and can be detrimental to our trading accounts. You may ask yourself how does a person place a trade out of fear? A fear-based trade can be placed when the trader is scared that he/she may miss out on the upcoming move in the market. Another fear-based trade can be when you exit a trade too early in fear of losing money. I’ll be honest and tell you that I have been guilty of both in the past.
Before I place a Forex trade, I always have a plan. My plans are set-up the evening before I plan to trade. By doing this, I can reduce stress and think clearly about how I want to engage in the Forex markets. Recently I also started to trade using a semi-automated trading strategy. I have found this helps in multiple ways. First, I know the computer has no emotions so therefore I know the rules will always be followed. Secondly, the semi-automated strategy can also be used to check against the trades that I may have placed manually to see if I followed the rules.
In my opinion, rules-based trading is how all traders should engage in the markets. What I mean by this is that everyone should have an if-then thought process. An example of this would be if price touches your level and you get a bullish candle and a 2:1 reward-risk ratio then you would buy this currency pair. Once you buy this currency pair, then place a stop loss and take profit order. These are all steps that seem simple yet when applied they can positively affect your trading results.
How To Structure A Forex Trades