1) Don’t read the news —analyze the news.Many times, seemingly straightforward news releases from government agencies are really public relation vehicles to advance a particular point of view or policy. Such “news,” in the forex markets more than any other, is used as a tool to affect the investment psychology of the crowd. Such media manipulation is not inherently a negative. Governments and traders try to do that all the time. The new forex trader must realize that it is important to read the news to assess the message behind the drums.
2) Don’t trade surges. A price surge is a signature of panic or surprise. In these events, professional traders take cover and see what happens. The retail trader also should let the market digest such shocks.Trading during an announcement or right before, or amid some turmoil, minimizes the odds of predicting the probable direction. Technical indicators during surge periods will be distorted. You should wait for a confirmation of the new direction and remember that price action will tend to revert to pre-surge ranges providing nothing fundamental has occurred. An example is the Nov. 12 crash of the airplane in Queens, N.Y. Instantly, all currencies reacted. Butwithin a short period of time, the surge that reflected the tendency to panic retraced.
3) Simple is better. The desire to achieve great gains in forex trading can drive us to keep adding indicators in a never-ending quest for the impossible dream.Similarly, trading with a dozen indicators is not necessary.Many indicators just add redundant information.Indicators should be used that give clues to:
1) trend direction,
2) resistance,
3) support and
4)buying and selling pressure.
2) Don’t trade surges. A price surge is a signature of panic or surprise. In these events, professional traders take cover and see what happens. The retail trader also should let the market digest such shocks.Trading during an announcement or right before, or amid some turmoil, minimizes the odds of predicting the probable direction. Technical indicators during surge periods will be distorted. You should wait for a confirmation of the new direction and remember that price action will tend to revert to pre-surge ranges providing nothing fundamental has occurred. An example is the Nov. 12 crash of the airplane in Queens, N.Y. Instantly, all currencies reacted. Butwithin a short period of time, the surge that reflected the tendency to panic retraced.
3) Simple is better. The desire to achieve great gains in forex trading can drive us to keep adding indicators in a never-ending quest for the impossible dream.Similarly, trading with a dozen indicators is not necessary.Many indicators just add redundant information.Indicators should be used that give clues to:
1) trend direction,
2) resistance,
3) support and
4)buying and selling pressure.
