Today we’ll show you some tricks so you can trade in Forex. These tricks are great to instantly improve your results. Let’s start.
One of the first tricks is, do not use some indicators!
We do not recommend you using overbought and oversold indicators. Most people teach some kind of strategy where you can just set it up and use an RSI or something like a stochastic indicator. But the big problem with these overbought and oversold indicators is that you are constantly trying to catch the tips and trying to catch the bottom of the market. This means you are most likely trading against the trend, which is one of the biggest pitfalls among retail traders.
You need to understand that everyone is looking at these indicators. That is why you so often see these indicators being overbought and oversold not really doing anything to tell us about future price. These indicators simply tell us what happened, they are lagging indicators that tell us what happened in the past. If you would stop using these indicators, you are going to be much more successful. So, follow this trick.
Trade with the trend!
Tip number 6 is to simply trade with the trend. You’ve probably heard this a million times, why don’t people do it? We can give you proof that most Forex traders don’t. Well, this maybe because it’s hard to tell, is there a trend or something? So we have made it really simple, there is a tool called bank secrecy indicator. Which basically makes it very easy to see the timelines and see what’s going on. If the bars are blue, this means that it is an uptrend. If, on the contrary, they are red, it means that it is a downtrend. These indicators make it really easy. Another of the great tricks we have for you is this one!
Change time frames. One of our great tricks!
Tip number 5 is to change the time frame one up. Why are we telling you to do this? Because this is what smart money does. Retail traders are the so-called herd or uninformed, they like to trade the lower timeframes like they are trying to use the M1, M5 or M15, Actually, if you are trading these timeframes it’s going to be stressful, it’s hectic, your emotions get too involved in these lower time frames. You make emotional decisions.
Risk reward ratio 1 to 1
Tip number 4 is to use at least a one-to-one risk-reward ratio. This is a major flaw among so many Forex traders who use biased risk to reward ratios. We will give an example of data that was drawn from over 43 million trades from different retail Forex traders, the data is Euro vs. US Dollar. The herd was able to predict a winning trade 61% of the time, which it’s great.
So, since people are able to predict winning trades most of the time, how come they are not really profitable? We know that the herd is 95% unprofitable or losers, if they predict it more than half the time, how come they are true losers? And the answer is because the losses were 70% greater than their gains. The average losing trade was 83 pips, and the average winning trade was 48 pips on this 43 million simulation trade. By simply using a one-to-one risk reward, the ratio has a greater advantage. Based on this data, it shows that 53% of all accounts trading at least a one-to-one risk, reward ratio resulted in a net profit in this 12-month sample period. For those trading on a one-to-one risk-reward ratio, only 17% of those accounts were profitable. So just using a 1 to 1 risk reward ratio.
Trade with small losses is one of our best tricks!
Another of the great tricks is to trade with small losses, but with big profits. This falls into the same vein as what we talked about earlier about using a favorable risk-reward ratio. But the big problem is that people will essentially wait for your tail risk, but cut your fast tail rewards. And a plot shows what actually happens, most people think that their trade falls on a normal bell curve.
Virtually everything in life follows a normal curve, but market trading does not. There are what are called fat tails where there is a chance that you might like to have a big fat tail bounty going for you. These fat tails exist and people tend to ignore this, so the problem is that people when they are trading allow these tail risks to be there, but they will cut their rewards.
So again the key here is to keep your losses small and make your wins big. You will be able to do this by trading with the trend, having a favorable risk-reward ratio and actually using stop losses. If you use a trailing stop loss, this allows you to track if the market is actually going in your favor on these trends.
Buy low and sell high!
Tip number 1 is simply not to try to catch tops and bottoms. And this is so aggravating because this is what the vast majority of people or teachers teach you, to buy low and sell high. Worse the problem is that we don’t know how low the lows will be and how high the highs will be, therefore trying to time it can be disastrous for your Forex trading. Funds are an amazing idea because it keeps you trading with the trend, allows you to have a favorable risk-reward ratio, and this will align you with smart money.
So these are the tricks that we wanted to share with you. We hope that you put them into practice and you will really see the interesting changes that you will have when trading Forex.