How Successful Forex Traders Manage Profits
From the time they execute that first trade to the time they have accumulated decades of experience under their belts, many investors ask, what is the right balance between executing trades based on anticipation versus trades based on confirmation? Our suggestion: tackle this question head-on.
The most successful forex traders are usually great planners and great anticipators. They align support and resistance levels, indicators, structures, patterns, probabilities (the list goes on), in order to place trades that yield positive results.
This does not in any way mean that they have to be right all of the time and neither do you. In fact, you can experience some amazing profits by initially being wrong with your first setup and entry, but with time, the market will, in fact, follow suit with the original analysis and provide the needed direction. At that point, it is all a matter of how well our profits can be managed.
This is a fantastic problem to have as an investor. “How well can I manage my profits?” is a far better issue than “how can I discover winning trades?”
The markets will move to their respective waves, rhythms, and trends. We as traders or investors notice that certain instruments have their own characteristics and tendencies. Certain markets break-dance, while others waltz and some might even mosh. If one of those styles fit your particular trading strategy, you could be profitable. Better yet, maybe you have trading plans and strategies that will humble your most diverse wedding DJ.
It is good to exploit market behaviors that are conducive to our trading style and strategies. It will take your time and effort to identify these attributes. This may not be in every financial instrument or market, but it is enough to trade repetitive traits and patterns in order to only take the trades that set up according to your plan.
Knowing when to anticipate or confirm
So how does an investor know when it is time to anticipate and time to confirm? Well, in all honesty, it is completely up to you.
Anticipation is good when you are planning trades; confirmation is necessary when you are executing trades. A trade is just a trade in a sample of many trades of varying scope, size, and difficulty.
Sometimes after fighting some anticipation trades that went awry or that you had to work through, you have a spell of only trading confirmation. Then, you crazy bored by taking so few trades that you feel like you are foregoing opportunities because of your commitment to confirmation. Other times, you are very pleased you passed on the anticipation trade and waited for confirmation, particularly when a stubborn move would have caused some uneasiness and stress.
Plan your trade and trade your plan
When traders or investors are preparing for a setup, the self-talk is either confident or fearful. If you have logged your trades and witnessed the market’s tendencies and traits, you have a history with the market that has exhibited what it likes to do. It does not mean the market will always do this or that it will never fail you on some occasion, but it will produce repetitive setups that significantly tip the probabilities in your favor. This allows you to trade with some confidence, knowing you have seen the trade work before so it would not surprise you to see it work in the same pattern again. If this trade does not work to your plans, there will be other trades that will do.
You have probably heard the following adage several times: It goes, “plan your trade and trade your plan.” In theory, it is true, but in reality, sometimes you need to have plans (plural) and have a PLAN A/B/C/D in other cases. If you have one plan and it is working perfectly, by all means, stick to it and do not deviate from something that is working excellently.
Evaluating Successful Forex Traders
In your journey as a trader or investor, once you realized the dabbling with the trading plan was not helping you see higher returns, you should begin searching for commonalities with you worst and best trades. This assessment is no different than evaluating pros and cons. The pros should be the winning trades, the cons should be the losing trades or less enjoyable trades. You strategic list may have received a little face-lift, but you should go easy on the BOTOX because the fundamental principles are the same and the setups are similar. Be careful not to develop a strategy monster that will send conflicting signals leaving you directionless and paralyzed. If you find yourself dabbling, remember, you can always go back to the drawing board and focus on a simple foundation and strategy.
We all want the market to move in our direction with utmost precision, but the truth of the matter is that we are not market makers to any degree. In fact, if our planning was so great, why are we not calling the perfect bottoms and tops or lows and highs? Hindsight is 20/20 and trading is certainly a lot easier after the fact, but in order to trust the right side of the trading chart (i.e. future price action), we need to have tested and/or experienced the repetition necessary to give us the needed confidence to take the setup and the trade.
This is the place anticipation meets confirmation. Trading certainly is not about hitting home runs, hole-in-ones, or bull’s-eyes, but it is successful enough for base hits, greens in regulation, or consistent marks.
The Bottom Line
If we are not among the market makers, we are merely the remora on the shark or the plover bird on the crocodile. Why use those specific animals? Because too many investors feel the market is too dangerous and deadly. Although the market is certainly capable of causing stress and grief and has taken its fair share of victims, as long as you respect its ferocity, we can still survive its bad moods and find some profitable crumbs (trades) in the process. In fact, it is quite possible to be incredibly profitable during these times of tantrum. In order to be like successful forex traders it is recommended you find your balance between anticipation and confirmation and arm yourself with strategies and plans that you trust and have seen work time and again.