Hello everyone, I am glad that you all joined me for my Forex Patience Strategy. I am Steve and a full-time forex portfolio manager for over six years now. Before that I was working as a math teacher and I was a part-time forex traders for almost ten years. I will skip through all the talk about what it takes to be a successful forex traders. I believe there are plenty of great articles written on the topic and most of you may already be familiar with them. I also don’t believe there is one right way to trade forex profitably and that each trader will over time figure out what works best for them.
I do believe that there are some key characteristics which need to be in place in order to have a successful outcome, not just as a forex trader but in life on general. Psychology is the most important one in my opinion so I do recommend that you read up on that topic. Other key topics which I recommend for you to master are discipline and patience. Those three in combination will allow you to achieve anything you want. Finally, never have a get-rich-quick mindset as this will only cause losses. Once you understand the psychology of trading, become disciplined and patient, you will no longer seek to make profits quick but rather consistent.
A lot of people love to talk about profits they make from their trading strategies. Everyone who is trading in a professional capacity understands that it is not about how much money you make, but about how much money you keep. What I mean is that a lot of traders will have a great run, earn great profits and then lose all of them as their approach was working for only a few weeks or month in a certain market environment. My time horizon is yearly, I don’t concern myself with daily or weekly profits. Once you do that, you apply a lot of pressure on your trades which may result on lack of discipline or patience.
Losses are as much part of trading as are profits. Those who focus on daily or weekly profits often see their results get a lot worse after one or two trading losses. Since they have a certain target in mind, following a loss they often want to make up for it quickly as time is running out. This, more often than not, results in trades taken which violate many trading principles and result in more bad losses. It turns into a downward spiral and the losses get bigger as many traders increase their lot sizes in order to cover the previous loss. Therefore I am against setting short-term profit expectations.
When it comes to trading forex, many approach it with a static profit figure. For example they say that they want to earn 250 pips per week. Then they deploy their strategy with this target in mind. Forex trading doesn’t work like that. The forex market is most liquid financial market in the world and very dynamic. Looking for daily, weekly or monthly profits is very counter-productive. Even my annualized profit target, which is 30% per year, is more of a guideline than a set goal. I think once should try to earn as much as possible and don’t confine yourself to static targets.
Another important fact about forex trading which is generally ignored by the retail market is that it is impossible to earn the same amount of money every week or month. There will be times when you earn a lot and there will be a lot more times where you may be very idle. A lot of factors move currency pairs and this will be reflected in your trades, no matter which strategy you use. I have noticed that from my yearly earnings, over 70% were generated in a three to four month period. The rest of the year contribute the remaining 30%. You can see that having a certain short-term target doesn’t apply.
Since I am very patient, love math and have a strong interest in economics, I prefer to run my analysis on the weekly charts. I do trade fundamentals, but not individual economic indicators. In order for me to generate a sound trading signal, I will look for the a series of data points in the same indicator. I like to take at least six months worth of data and average it out. I also don’t compare one month’s data with the previous month, but rather with the same month a year ago which creates a better comparison. Those who trade fundamentals, I can only recommend that you get as much past data as possible, sort through it and understand what the latest data point really means.
Looking at technical indicators on a weekly chart filters out plenty of noise, but the drawback is that less signals are generated. In order to counter that, I look for a trading signal on the W1 chart and then for an entry on the H1. I will keep trading in that direction, whenever a signal is generated on the H1 chart, until the trend will change on the W1 chart. I usually add a few trades per currency pair per week to my portfolio this way. In the end, it really pays to be patient and I invite you now to try this at PaxForex, where you get to enjoy professional trading conditions with tight spreads which means you earn a lot more over time.
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