Why do many traders fail at forex trading? Very often we find that common trading strategies have limitations that few understand. Here you have a list of forex educational articles attempts to explain why some of the most popular currency trading techniques fail and, more importantly, how we might fix them.

The New England Patriots win again only this time in historic fashion. By now, you probably know how good the team is and all the records they now hold. How does a team with very few super stars win so often for so many years? The players change, the opposing teams get stronger, the few Patriot stars get older and yet, they still win.

What sets them apart from everyone else is a culture/strategy that delivers consistency. Everyone on the team has a very specific job to do, they check their egos at the door, and focus on working hard. The result is very consistent performance from a strategy that doesn’t change. Whether they win or lose typically depends on how many mistakes the opposing team makes. Brady, the quarterback, is amazing, but what makes him amazing is his consistency.

The goal for traders is consistent profits, life-long income from speculating in markets. The key word in that sentence is “consistent”. Anyone can have profitable trades here and there but do they produce consistent income and profits from trading? I met a student recently who day trades the NASDAQ Futures and has a winning percentage of around 80%. The problem is, he doesn’t make consistent income from trading. Sounds crazy I know, but one loss for him tends to wipe out all the profits. Imagine if your trading results could be as consistent as the Patriots. Like them, you will lose some games, that’s guaranteed. However, in the end, you will win and enjoy success.

In our classes at Online Trading Academy, one of the “Odds Enhancers” we focus on for every trading opportunity is Profit Zone. Without a clear and ideal risk/reward opportunity on the chart, there is no trading opportunity no matter how good your supply and demand zones look. We focus on this one so much because it is at the heart of what delivers consistent profits to the trader. What we are looking for are supply and demand levels that are far apart from each other and VERY open and clear profit zones.

There are many supply and demand levels on a chart. Often, there is a very quality supply and demand level on a chart, the problem is they are too close to each other which means no trade due to a lack of “profit zone”. Typically, we are looking for opportunities on the chart that offer us at least 3:1 reward to risk to the first target. I like to look for more but this is a safe minimum to make a trade acceptable to take.

S&P Feb 1: Shorting Opportunity

 

Let me explain through a trade I took that we found in our live trading rooms, the Extended Learning Track (XLT). This was a trade in the S&P futures market (ES). Notice the supply level (yellow box) and profit zone (circled areas) on the chart, both shaded in yellow. The supply level is the origin of a strong decline in price as seen on the chart. The trade was to sell short at point (A) as price rallied back into the supply level for a move down. To measure risk to reward, we need to do two things. First, we need to compare the distance from entry to protective stop against the distance from entry to the available profit zone. This opportunity offered a little more than 3:1 according to the chart. Second, we have to adjust position size to make sure we are never risking more than we are willing to lose. If I stopped writing about this trade here, most readers this would think to sell short at the supply level like I did and take profits at the demand level. This last part on profit taking is something I never do and is a key edge building consistency tool.

Two Specific Profit Zone Strategies:

  1. If you are looking for trading opportunities that offer you 3:1, make sure the chart is offering you at least 4:1. If you want a 4:1 setup with a much easier time of attaining consistent profitable trades, make sure the chart is offering you at least 5:1 and so on… I think you get the point but said another way, when the chart offers you 3:1, actually getting 2:1 is much easier than if that opportunity offered 2:1 on the chart.
  2. When taking profits at demand from a short position, don’t wait for price to come all the way down to demand to take profit; make sure you take your profit with your buy order just before demand. The reason is that there is competition to buy at demand, that’s why it’s demand. When we are taking profits on a short position, we are buying so why would we want to buy at a price level where there is competition to buy? Why not buy when there is competition to sell, which is right before the demand level, as price is falling? The same but opposite holds true for exiting longs just before supply levels.

Consistent profits for a trader are much easier to attain if you take profits at 4:1 when the chart is offering you 5:1. They are also much easier to attain when you exit positions for profits right before demand levels for shorts and supply levels for longs.

One other item not in this article that also helps me with consistency are limit orders. Like the Patriots, it’s all about following a very specific and proper set of logical rules and executing them proficiently. My hope is that this little nugget of information helps you achieve the consistency you’re looking for whether you’re a short-term trader or longer term investor.

 

Learn to Trade Now

This content is intended to provide educational information only. This information should not be construed as individual or customized legal, tax, financial or investment services. As each individual's situation is unique, a qualified professional should be consulted before making legal, tax, financial and investment decisions. The educational information provided in this article does not comprise any course or a part of any course that may be used as an educational credit for any certification purpose and will not prepare any User to be accredited for any licenses in any industry and will not prepare any User to get a job. Reproduced by permission from OTAcademy.com click here for Terms of Use: https://www.otacademy.com/about/terms

Education feed

Editors’ Picks

EUR/USD bounces after upbeat COVID-19 cure news

EUR/USD is trading above 1.13, rebounding from the lows. Gilead reported that its drug Remdesevir substantially reduces mortality among COVID-19 patients. The news boosted stocks and weighed on the dollar. US coronavirus statistics are due out.

EUR/USD News

GBP/USD recaptures 1.26 as the market mood improves

GBP/USD is trading above 1.26 as the market mood improves and the safe-haven dollar retreats. Investors are shrugging off Brexit concerns and focusing on hopes to cure coronavirus. US COVID-19 statistics are due out.

GBP/USD News

USD/JPY: No sign of a break out just yet

USD/JPY seems stuck in a sideways range. In historical terms, if there was this much uncertainty in the world the yen would be going through the roof.

USD/JPY News

Editors’ Picks

EUR/USD bounces after upbeat COVID-19 cure news

EUR/USD is trading above 1.13, rebounding from the lows. Gilead reported that its drug Remdesevir substantially reduces mortality among COVID-19 patients. The news boosted stocks and weighed on the dollar. US coronavirus statistics are due out.

EUR/USD News

GBP/USD recaptures 1.26 as the market mood improves

GBP/USD is trading above 1.26 as the market mood improves and the safe-haven dollar retreats. Investors are shrugging off Brexit concerns and focusing on hopes to cure coronavirus. US COVID-19 statistics are due out.

GBP/USD News

USD/JPY: No sign of a break out just yet

USD/JPY seems stuck in a sideways range. In historical terms, if there was this much uncertainty in the world the yen would be going through the roof.

USD/JPY News

Breaking: Gold breaks above $1,800, new mutli-year high, next levels eyed

Gold is trading above $1,800, highest since 2012, topping its previous high of $1,797 which now serves as support. The next levels to watch are $1,810 and $1,825. Further out, investors are eyeing $1,911 – the 2011 peak – and $2,000.

Read more

XAU/USD consolidates daily gains above $1,800

After advancing to its highest level since September of 2011 at $1,818 on Wednesday, the XAU/USD pair staged a correction and briefly dropped below $1,800 on Thursday.

Gold News

RECOMMENDED LESSONS

7 Ways to Avoid Forex Scams

The forex industry is recently seeing more and more scams. Here are 7 ways to avoid losing your money in such scams: Forex scams are becoming frequent. Michael Greenberg reports on luxurious expenses, including a submarine bought from the money taken from forex traders. Here’s another report of a forex fraud. So, how can we avoid falling in such forex scams?

What Are the 10 Fatal Mistakes Traders Make

Trading is exciting. Trading is hard. Trading is extremely hard. Some say that it takes more than 10,000 hours to master. Others believe that trading is the way to quick riches. They might be both wrong. What is important to know that no matter how experienced you are, mistakes will be part of the trading process.

Strategy

Money Management

Psychology