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Monthly Archives: November 2012

Trading The News Is Not High Probability Trading

We don’t trade the news as i am sure you know, but we did manage to get one trade in before the UK rates decision came out.

We took 2 trades in total today.

The first trade of the day was Cable long at 15932 up to 15954 for 22 pips. We are not in the business of gambling, we are in the business of high probability trading, so we closed our trade and banked the pips before the news came out. Had we have held we would have made at least another 30 pips, as Cable spiked very nicely after the news to keep rates on hold was announced.

Second trade was EJ long at 10165 up to 10190 for 25 pips.

2 high probability trades for a total of 47 pips.

Looking forward to tomorrow, as Fridays have been pretty good trading days over the last few weeks, so we are hoping for some nice price action set ups.

I Told You We Would See Fireworks

Fireworks I promised and fireworks we got.

Yesterday was a lovely day for trading. Obama got re elected as i expected, and the dollar weakened as i expected, but then strengthened again. So we had some good trading opportunities.

First trade of the day was Cable short at 16034 down to 16010 for 24 pips.

Second trade of the day was Euro short at 12851 down to 12822 for 29 pips.

Third trade of the day was AUD short at 10463 down to 10421 for 42 pips.

Fourth trade of the day was EJ long at 10193 up to 10216 for 23 pips.

We could have had a lot more pips if we had held our short trades, but as i always say we enter and exit our trades with high probability, and take what the market gives us. Our trading style is all about logical entries and exits. If we get another opportunity to get back into a move we have exited we will take it.

Four trades 4 winners 118 pips. 🙂

If you want to learn how to trade please consider my Forex training and mentoring program here.

Strange Old Day Today.

Strange old day today. Nothing much happened until the US session kicked off.

We had a few decent trades though. First trade of the day was Cable long at 15967 up to 16000 for 33 pips.

We also took EJ long at 10228 up to 10276 for 48 pips.

We have just taken an EJ short at 10311 which is currently in profit by 14 pips.

The US elections are taking place today, so we should see some fireworks tomorrow.

Best just to sit it out until everything calms down. I will be closing this EJ trade at 10288 for 23 pips.

Have a good day. 🙂

Risk Reward In Forex Trading

What is risk reward in Forex trading and how can it help you become a more profitable trader?

Well first off i will explain what is meant by risk reward.

When you are looking for trading opportunities it is important to calculate your potential risk against your potential reward. For example if you are entering a trade with a 20 pip stop loss on a risk reward of 2 to 1, your profit target should be at least 40 pips. If you are entering on a 3 to 1 risk reward ratio your profit target should be at least 60 pips, and so on.

Now if you are using a min risk reward ratio of 2 to 1, you can lose 50% of your trades and still be a profitable trader. If you are on 3 to 1 risk reward ratio you can lose 70% of your trades and still be a profitable trader. If you are losing 70% of your trades though you are doing something wrong, but i am just giving you an example of how risk reward can help in making you a more profitable trader.

Now that is what the books and all the other so called Forex experts say regarding risk reward. What do i say about risk reward? I say its a good method in theory, and you can use it if you are comfortable trading that way, but i look at risk reward in a slightly different way.

If i enter a trade and my logical exit gives me 10 pips i will take them. I will not say, well my stop loss is 20 pips so i need to get at least 40 from this trade because i am trading on a risk reward of 2 to 1. It makes no difference to me about a 2 to 1 or a 3 to 1. Pips are pips at the end of the day, profit is profit. If the market gives me 10 pips i will take them, if the market gives me 20 i will take them, if the market gives me 22.6 i will take them. I enter a trade logically and i exit a trade logically. Whats the point in waiting for 40 pips if you get to 20 and the market turns around and stops you out? You have just let a nice winning trade turn into a losing one. Who wants to use a 2 to 1 risk reward strategy, and feel good about losing 50% of your trades? I certainly don’t. I want all my trades to be winners. I don’t want any losers thank you very much.

Some traders say that losing is all part of Forex trading and you should not feel bad about losing. Well i do feel bad about losing. If i lose a trade its my fault, i have done something wrong, i have made a mistake. I have been too greedy, or i have entered a trade at the wrong point. Or my stop loss has been in the wrong place etc etc. I agree that you should not feel bad to the point where you revenge trade, but you should not feel good about losing trades. All losing trades are losers because of something you have done wrong. Occasionally you will get some unexpected news come out that will kill a trade, but more often than not you lose a trade because you have done something wrong, and you should be able to recognize what you have done wrong, and try not do it again.

I am a perfectionist, and my ultimate goal is to have trading perfection. 100% win rate all of the time. I firmly believe that this is possible, if you have a complete understanding of what the chart is telling you, and you are patient enough to wait for the high probability trades. This is what i do. I trade high probability set ups. Risk reward does not play a significant part in my trading. I understand risk reward completely, but i also understand price action and i can enter and exit the market with precision. I take what i am given and i look for another trading opportunity. This in my opinion is the way you should trade Forex. You enter with high probability, you take your pips and you exit, and move on to the next trade. I certainly do not want to be babysitting a trade all day long waiting for my risk reward to get hit. 🙂

If you want to learn how to trade Forex like the pros, please consider my Forex training and mentoring program here.