Trick #1: Verify First, Then Trade

Most people totally ignore me when I talk about testing. When I train people to trade, I focus most of the training on helping them do their testing. I have developed spreadsheets, methodologies, statistical models – all designed to help traders realize that they must verify that a system works before they commit to trading the system with real money. Don’t ever trade anything you’ve not tested first. What does it mean to test? It means that you propose some simple rules for trading.

Then you go back in time, manually or mechanically, and you find out how those proposed rules would operate over the course of hundreds of trades. That’s right: hundreds of trades. Think about it for a moment: if you are not confident about your trading, it’s most likely because you have doubts about the outcome of the trades you are taking. And if you are doubtful about the outcome, then you need to do more testing until you have a better sense for what’s going to happen when you open a trade.

Trick #2: Become Obsessed with One Area of Focus.

Discipline yourself to focus to forex. Diversification is good for your portfolio. It is not good for your career. Let’s look at some examples. Think of the very best attorney or doctor that you know. Does that person specialize in one area, or does she practice law or medicine across a

huge subject area? My guess is that she is known for one type of legal specialty, or as a doctor, she is a cardiologist (hearts), radiologist (treating cancer), or something else.

The highest paid professionals are specialists. Why should that be any different for you? You are wise to diversify the investments that you can’t watch closely. You don’t want to commit your entire life savings to forex. You might have money saved in the equity in

your home, some in a retirement account, some money in a bank savings account, and then some in a forex trading account. But if you are going to be a forex trader for a living, then it makes sense – with respect to your currency trading, to focus on a currency pair, a system for trading that pair, and a time frame for watching that pair. If you focus on one currency pair to start, you can become as much of an expert as possible in that one area.

Trick #3: Different Trends on Different Time Frames

The EUR/USD can be trending upwards on the daily chart, but on the 5 minute, it can be trending downward. Really? Is that possible? Absolutely! Think about it for a moment – if you have a long term, daily, dominant move upwards on the EUR/USD, it’s possible that in the shorter term we could see a movement in the opposite direction. So remember, if you want to be a trend trader, you can choose to follow the trend on a variety of different time frames. If you have a full time job, you might look at trends on the daily and weekly charts.

These trends take much longer to start and finish – but they are worth a lot of pips – even more than 1,000 pips. If you are able to trade during the day, you might look at the very short term charts. I have been testing a new trend following system that works even on the 1 minute charts. I don’t trade from the 1 minute charts (at least right now) but I would be willing to follow a trend on just about any time frame. The point is that each time frame can have its own trend.