The mindset of winners is the same everywhere. Psychology has to do with a specific set of thinking patterns that can be analyzed and used to determine expected outcomes in particular settings. There are set patterns in human behavior that confirm the predictability of events outcome particularly where human beings are the constant factors.
Winning trade setups in foreign exchange trading has much to do with the ability to pick important fundamental, technical and sentiment data for analysis. Hindsight, foresight and insight are required to interpret a set of given data in order to be able to identify reoccurring patterns that can be profitable trade setups. This has to do with the trader’s ability to identify currency pairs known to show certain characteristics in the market given the same conditions. The trading strategy we are looking into works on the basic knowledge that the following currencies are the majors; GBP, EUR, CHF, JPY and commodity currencies are CAD, AUD and NZD.
This trading system is in several steps and we shall follow through each step and suggest what we need to do in each step to be better prepared for a winning outcome as we trade on the foreign exchange market.
Prepare: This involves gathering data on particular currencies, looking at upcoming and present economic indicators involving the chosen countries or currencies. It also involves checking out weekly currency forecasts and daily trading ideas. In preparation to take advantage of the various trading sessions of the day, it is good to also take note of certain currencies and the times of the day that is best to trade them. We can prepare to trade currencies for the short, medium and long term, depending on our risk appetite and our strategic investment objectives: either safety of capital (conservative style) and capital appreciation (aggressive) approach to investing and trading.
Analyze: In this step we begin to compare data and make meaning of it. This is so we can take calculated risks and stand better chances as we trade. We interpret fundamental and technical data and also measure the weakness or strength of bearish or bullish sentiments on a given currency pair. Strong bullish sentiments encourage us to enter buying positions, while strong bearish sentiments encourage us to enter selling positions in the market.
Execute: We take actions according to the decisions that we have arrived at because we have successfully gone through the previous stages of our trading strategy or system. In order words, we act out our plan and monitor the plan to ensure it is working out according to our intended targets. The MT4 trading platform gives opportunities for traders to modify or adjust the settings of open trades to match their expectations for a given trade. We can also modify our trades due to expected changes in the market. One of the strongest factors that can affect the direction of the market significantly is strong economic news or fundamental data. Examples are changes in interest rates, changes in nonfarm payrolls, gross domestic product, federal open market committee rate announcements, employment report, consumer price indices, consumer confidence indices and others.
Document: It is recommended that we maintain trade journals; keeping records can help us in the future. This information can help us recognize details that we have hitherto left out as we make trading decisions on currency pairs. It has been said that history repeats itself and proactive traders prepare to take advantage of this pattern of behavior in the markets. We can also document very important support and resistance price zones of particular currency pairs to help guide our trading decisions in the foreign exchange market. If a strong support zone is broken, it therefore means a strong bearish sentiment will continue for a while, and vice versa for the bulls.
Document: We also need to take time out to review our trading history. What are the details we should look out for as we carry out the review? We should check for factors responsible for making us big gains or losses, such as lot size, currency pair, time of the day the trade was executed, and any other fundamental economic indicators that moved the market for the period concerned.
Learn from experiences: The goal of any business is to make adequate profit to sustain itself, pay workers and fund development. It is the same scenario when a trader chooses to trade currencies. We learn from the lessons learned from our previous trading events and adjust our tools and mindset to ensure we succeed in the business of foreign exchange trading. According to Socrates, the unexamined life is not worth living. Therefore, the unexamined business is not worth the effort of our time and resources.
Keep it up: We can make sure that every effort we take is made at a hundred percent. It is important that our strategy for trading helps us identify short, medium and long term trends; so we end up with more winning trades than losses. Prepare for every trade idea you get as if it were an event you cannot afford to mess up. It is good that as a trader you minimize your risk to its minimum because we cannot remove all the risk involved in trading currencies. When we make losses we can ensure that we live to fight another day. Do not give up, keep it up.
Good luck to you and happy trading.