Guide:
1. Simple and correct things can be successful if repeated.
2. The same source of profit and loss. How much money do you want to make and how much risk do you want to take. There will be no pie in the sky, the market does not create money, always remember this.
3. The taste of faith is sweet, which means you have to build your own faith.
4. A verified and effective system that can stabilize profits, coupled with your own trading rules that suit you, coupled with fund management, and then diversifying risks with multiple varieties, you can make money in the long run.
After long-term practice, research, and analysis, every foreign exchange trader will form his own fixed trading method, which is a trading method suitable for his own personality established by traders after long-term market practice.
But not every trader can quickly find a trading method that suits them. Therefore, traders continue to try various trading methods, hoping to find the one that suits them, so as to embark on the road to profitability.
Today, I will share with you the top 10 trading methods summed up by a trading master who has been in the foreign exchange market for 13 years. Let's see if there is one that suits you!
01
My understanding of foreign exchange
First of all, let me share what is foreign exchange, that is, my understanding of foreign exchange. All wealth comes from a clear and correct understanding of a thing.
So what is the nature of the foreign exchange market? What is foreign exchange trading? What is the key to success?
What is the essence of foreign exchange?
I think the essence of the foreign exchange market is a game.
It is a game between people, a game of mentality, a game between big funds and small funds, and a game between professional fund institutions and ordinary investors.
What is foreign exchange trading?
I think what I trade is one of our thoughts, one emotion.
Many people think that the foreign exchange market trades currency pairs such as the US dollar, the euro, and gold. In fact, those who trade for speculation are not currency pairs but thoughts and emotions.
What is the key to success?
Based on the collected information or the conclusions drawn from the analysis, if you think that gold will rise or the euro will rise, you will go long.
After entering the market, you will feel happy when you make money, and then you may take profit and leave the market or continue to hold positions.
After entering the market, if you lose money, you will feel unhappy and depressed, and you may stop the loss or increase your position afterwards.
This emotion will guide you to make decisions, so how to control your thoughts and emotions is the key to successful trading. In other words, "you" is the key to success, not the information in the market.
Your thoughts and emotions form your entire trading process, and you are the core part of the entire transaction.
Maybe what you are doing, you have a lot of research on fundamental research and a favorable understanding of the macro, but the real core elements of success still rest on you.
There is a saying in coaching techniques: I am the root of everything, and what to do depends on myself.
In other words, if you want to be a winner in investment, you must first have the qualities of a winner.
02
The stages to go through to become a qualified trader
People are divided into two sides, internal and external, one is internal strength, and the other is external attack skills, which may be some moves. A qualified trader has to go through three stages (which are further divided into 5 sub-stages):
1. Primary stage: Mainly learn technology and capital management.
Technology is mainly a set of methods for opening and closing positions, that is, based on what to open and close positions; such as moving averages, go long when crossing the 20-day moving average, and short when crossing the 20-day moving average.
Basic techniques and strategies must be mastered, which is the foundation and premise of survival in the market.
Fund management emphasizes positions and risk control.
Position: It means to try to lose as little as possible when losing, and to earn as much as possible when earning, that is, the position can be heavier when earning;
Risk control: It is to control the withdrawal of funds, so that funds cannot be withdrawn sharply due to a single mistake.
2. Intermediate stage: Mainly learn trading concepts and trading psychology.
Trading concepts refer to the integration of concepts in technology; such as the concept of trend following, arbitrage, and intraday trading.
The concept of trend following is: use small to gain big, the winning rate is not high, the stop loss is small, and the profit and loss are relatively large.
The short-term concept of the day is: to win by the number of times, that is, to win the market with a large number of transactions and a high winning rate.
A set of methods corresponding to a set of core concepts is a complete set of strategies, plus fund management.
Every idea is like a human soul. You have a concept, you want to do long-term value investment, do you have the mentality to withstand the fluctuation of this market?
3. Advanced stage: mainly actual combat, to cultivate comprehensive quality.
03
My Forex Growth Path
1
One line decides the world
I started to do foreign exchange in 2006, and I lost a lot of money at the beginning. After less than half a year of doing it, the loss was almost the same. I started to summarize, reflect and learn, and it was at this time that I concluded.
At that time, it was also a reference moving average, such as the 5th, 10th, 20th, and 60th. There are too many moving averages for reference, so that I don't know which one to look at.
Later, I simply only looked at one moving average, that is, the 20-day moving average, and I went long when it crossed upwards, and shorted when it crossed below.
Market trends are generally divided into three types: rising, falling and sideways. Different trends correspond to different strategies. The manifestations of the market can also be further classified:
Such as the out-of-control market, that is, the rise and fall are very fast, almost rising or falling along an angle of 80 or 90 degrees. Another kind is to rise or fall along the angle of 60 or 70 degrees.
If there is a trending market, the shock market will rise or fall.
2
smart moving average
What impressed me the most in 2007 was that I learned an indicator that year, called the smart moving average. This moving average is when the market direction is clear:
If there is an out-of-control market: it will automatically select fast parameters, such as the 5-day and 10-day moving averages;
If the market enters a period of oscillating consolidation: at this time, the larger the moving average parameter, the better, and you may choose 30 days or 40 days.
This smart moving average will automatically choose to turn the parameter up or down a bit. This smart moving average is just an ordinary moving average plus an adjustment factor.
Of course, it does not mean that this method can guarantee to make money, it can only solve some problems, such as hesitation in the choice of moving average parameters.
Another problem is that the price may repeatedly go above or below the moving average within a day. If you are doing intraday trading, it is too troublesome to go back and forth like this.
Some people may use the closing price as a basis, and if the closing price goes up, they will go long, and if the closing price goes down, they will go short. This is also possible, but there will be problems. Waiting for the closing price, it is easy to miss the opportunity or the profit is taken.
So how to solve this problem?
My approach is to widen this moving average to form upper and lower rails. Go long when the price goes above the upper rail, and go short when it goes below the lower rail. If you don't wear it up and down, just wait and see. This will avoid some intraday noise.
3
Granville's law
In 2008, I read the books recommended by some friends, which inspired me a lot, especially the Grenville Law, which everyone should have heard of. The Grenville Law has 6 buying and selling points. In recent years, it has mainly been based on this law.
The first buying point: After the price falls, it will gradually level off and start to rise. When it crosses the moving average for the first time, it is the first buying point.
The second buying point: After rising, there will be a callback. When the callback is near the moving average, it is the second buying point, and you can buy more or increase your position.
The first selling point: After the price rises, it enters a strike level and starts to fall. When it crosses the moving average for the first time, it is the first selling point for shorting.
The second selling point: After falling, there is a rebound, and the rebound is near the moving average, which is selling point 2.
The third buying point: after a sharp drop, when the stock is far away from the moving average, there will be buying point 3. At this time, it will not be easy to open a new position, but to close the previous empty order.
The third selling point: the corresponding selling point 3, that is, when it is away from the moving average after a big rise. Everyone's standard of distance is different. Generally, buying and selling point 3 is used to reduce positions and protect profits
The strategy is very simple, but in the actual implementation, there are many details. For example, how many points to step back to open a position cannot be judged subjectively, there must be standards.
In addition, how to set the stop profit and stop loss, and how to manage the position. For these questions, I will use the ATR indicator.
4
Turtle Trading Rules (ATR)
The ATR indicator is an indicator of the average volatility, such as:
The daily K-line ATR of EUR/USD is 80 points, so when you open a position and look at the 1-hour K-line chart, you may see the 4-hour ATR, which is 50 points.
Then when you step back on an ATR that is 50 points, you will open a position. The 50 points are dynamic and are defined by ATR.
So how to stop loss and stop profit?
The daily K or 4-hour K-line ATR range can be used, and this standard can be quantified. For example: the ATR of EUR/USD for 4 hours is 50 points, so the stop loss is 50 points.
Position management is to quantify losses. For example, if the capital is 1 million and the stop loss ratio is 1%, then the stop loss is 10,000. Divide 10000 by ATR and contract multiplier, that is, divide by 500 (50*10), that is, open 20 lots.
The ATR method is summarized as follows:
Opening conditions:
Bullish trend: retrace a range of ATR to go long;
Short trend: enter the short market with a rebound range of ATR;
Stop loss and take profit:
Stop loss at half or one time of the daily K-line ATR;
Position management: quantify by loss;
Position = ideal stop loss / ATR * contract multiplier.
5
Triple Screen Trading System
What is a trading system? The trading system is a complete system of trading rules.
A method: refers to a general trading idea.
A technique: refers to an operation skill of buying and selling.
A trading system: it is a combination of methods and techniques, which includes choosing market entry skills and timing, how to determine the size of positions, how to protect funds, how to make profits and stop profits, etc.
The moving average is a trend indicator, which is only suitable for a trending market, and it is invalid when it enters a volatile market. In order to solve this problem, a filter system is needed, adding some conditions.
The triple screen approach analyzes the entire market through several time frames with oscillators and trend indicators. It can effectively resolve conflicts between indicators and during trading weeks.
The first filter: determine the direction on the long-term chart; refer to trend indicators, such as: moving average, trend line, BOLL, etc.
The second filter: select entry and exit points on the middle chart; refer to shock indicators; such as: MACD, KDJ, SAR, CDP, etc.
The third filter: formulate a complete trading plan in conjunction with other entry and exit conditions; generally choose a method that suits you to formulate a trading plan based on experience and personal habits, such as: fund management, breakthrough follow-up, selling high and buying low, etc.
6
Panoramic viewing
Three steps to analyze the market in a panoramic way:
1. From the whole to the part
Look at the index first, not just analyze a variety, but comprehensively analyze and judge from the macro to the micro;
From large cycle to small cycle;
Analysis on multiple time frames (weekly, daily and hourly);
Understand the overall situation of the market.
2. Comparing the relationship between the strength and weakness of currencies, the strong bully the weak.
3. Analyze the collected fundamental information combined with technical aspects, and formulate corresponding trading plans.
Analyze three levels of the market:
Look at the macro environment, especially the financial and monetary environment;
Looking at the balance of supply and demand is the fundamentals;
Looking at the attributes of foreign exchange, it is the technical aspect and the game situation of funds.
7
Trading Rules
When you think that your execution ability is not strong, when you think you can’t get off your phone, when you can’t cut a position, or when you can’t open a position, or dare not open a position, what should you do?
You can't solve it on your own, because it's innate. But some powerful short-term masters are naturally suitable for short-term, and they are born with strong execution ability.
So some traders are good because they are born with talent, they are born to be traders, and they are born to be traders.
Most people are not suitable, it can be said that 90% of people are not suitable.
What do you rely on at this time?
You can only rely on rules, discipline, and the team to solve it. If you can’t do it yourself, let others do it for you, right? But if you establish the rules yourself, the pain is still your own, and others are just doing it for you.
A verified and effective system that can stabilize profits, coupled with your own trading rules that suit you, coupled with fund management, and then diversifying risks with multiple varieties, you can make money in the long run.
If you don’t have a set of trading rules that suit you, then follow the editor’s reply: iron rules, and you can fully understand the iron rules of trading that senior foreign exchange market experts with 20 years of experience abide by, each of which is very detailed.
8
belief system
A true master lies not in his moves, but in his internal strength. What is inner strength? It is faith, you have to truly believe in your technique and in your moves.
A mediocre trader trades with technique, and a top trader trades with conviction.
For many foreign exchange masters, his belief is the way of heaven. What I think is right, even if people around me oppose it, I will stick to it, and my belief is very firm.
People with strong beliefs can do amazing things even with the simplest trading system.
How to form a firm belief in your own trading system?
The answer is to be familiar with the system, understand the system, and integrate the system.
Trading techniques are like martial arts moves, don't make them too complicated, practice a simple move repeatedly, and practice it into instinct. Only then can man and sword unite, knowledge and action unite.
Don't put too much energy on technology. In fact, technology is very simple, and the difficulty lies in the unity of knowledge and action.
Don't focus on one or a few transactions, and don't be obsessed with a certain currency pair or a certain trading opportunity.
You should put this dedication on your trading system, not on a certain transaction, but on firmly implementing your own trading system, repeating simple and correct methods, and you will succeed.
9
investment philosophy
Investment philosophy is the highest wisdom about investment, which consists of beliefs and trading rules. Do whatever you believe in! What you believe depends on what you do.
A complete investment philosophy usually includes: views on value, views on human nature, views on the market, views on risk, views on investment itself, and so on.
How you believe, how you live - how you believe, how you invest.
Having a set of core philosophies is fundamental to long-term trading success, without which you will not be able to stick to your position or trading plan during really difficult times.
A trading philosophy cannot be passed from one person to another, you can only get it with your own time and effort.
So trading is an art.
10
cycle theory
This is one of my insights from 18 years to now.
6 to 8 hours a day, 20 three-minute bars per hour, 120 to 180 three-minute bar charts in one day;
There are 20 trading days in a month, and there are 130 to 160 30-minute K-lines in about half a month;
There are 120 to 160 one-hour K lines in one month, and 120 to 160 2-hour K lines in two months;
There are 20 trading days in a month, and there are 126 daily lines in half a year
...
You count the number of K lines, this is a cycle. 120 candlesticks can form a complete cycle. That is to say, how high is the level of the market, and you have to be very clear about how high you can do it.
You can do one-day level, half-month level, one-month level, two-month level, or half-year level. Different levels correspond to different market conditions.
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If you are doing a one-month level, how long should you choose as an entry point?
There are 120 in one hour and one month, which can form a complete cycle. Basically, I can accurately predict that it will rise by 10% in the next month.
If you can accurately judge this kind of market, you can accurately grasp each rhythm.
Why can't you make money? It may be a cycle if the match is wrong.
The premise of these is that you can judge when the market will rise? How long? How much did it go up?
After solving these three problems, you can make money by matching the corresponding strategies, which is exactly what needs to be practiced constantly.
The above are some insights from the summary of 13 years of foreign exchange trading. I hope it will be helpful to your trading!
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I hope this article can make foreign exchange traders get out of the confusion when they are in confusion. Old rules, if you haven't understood it, please bookmark it first! Welcome to leave a message to communicate with the editor!
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