In today forex faq, we have a question from one of our fellow readers here in my blog.
Below is the question:
For me entry is the most crucial part, most of the time I enter only to find the trend going against me. I am either stopped out or panic clicking myself out only to find my original choice of direction was correct after all.
False breakout, beginning and end of trends is something I have been struggling to master. I think I am right but most of the time I am wrong and when I do win, it just a couple of pips and the losses are far greater.
Patience, emotions is another factor. What should I do?
First of all, I must tell you that you are not the only one with this feeling. In fact, I can say that 90% of new traders here have the same feeling as you when they are trading. Actually I have the same feeling as you when I first started trading.
I always find the price moving in my direction for small pips but when it reverses against me, it is so fast. Sometimes, I even think that the market is trying to go against me.
Frankly speaking, this is a sign that you are not trading with a proper strategy. With a properly tested strategy, you will find that your chance of getting into trade with small profits and big losses will be greatly reduced.
In fact, if you have a strategy with good risk reward, you will find that the profits is always much higher than the losses.
As you have stated in your question regarding false breakout, this is one thing that will be greatly reduced if you have a good strategy. If you have been following me, I have written in my previous posts that a good strategy is one which have a trade validation technique to help you filter out some false breakouts or false alarm trades.
As for trend checking, you can make use of the 200 EMA indicator to do it. If your 200 EMA is sloping in a particular direction with good gradient, then it is in a strong trend. If it is flat, it means that the price is moving sideways.
Lastly you talked about discipline and emotion which is one of the important factors to successful trading. Discipline refers to your ability to stick to your strategy 100% of the time which means that you will never enter trades that is not 100% according to your strategy.
Emotion usually refers to revenge trading which is the entering of trades immediately after you have encountered a losing trade. Most of the time, such trade ended up as a loss as well.
The only way to train your discipline and emotion is through demo trading. If you are patient enough to complete 2 months of serious demo trading, I can say that you have a great discipline because most new traders tend to get into live trading straight due to their lack of patience.
When you are doing your demo, you will also hone your trading execution skill as well as your emotion control.
You also talk about you panic clicking out of a trade only to find the price moving in your direction after that. This is because you do not have enough trust in the strategy you are using. This can also be solve by trading demo as you can check if the strategy really works or not in a demo account.
When you have managed to get 2 consecutive profitable months in your demo account with any strategy, you will have enough faith in it to stick to it till the end.
So my personal advice to you is
1) to learn a proper and reliable forex strategy
2) to trade what you have learned on a demo until you can manage 2 consecutive months of profits before you trade live
I hope that I have answered your question and do feel free to email me if you have any question