Quite often, beginners lose money trying to day trade corrections or simply missing the direction of the main trend. Sometimes the market hits us with a stop loss, after which it goes in the direction we need. All these errors appear because the trader pays too much attention to the daily price fluctuations in the market.
Today we will look at some facts about price movement and market dynamics that will help you understand why a “smaller” price movement is actually “more” important to trading, as well as some ways to avoid succumbing to the temptation to enter the market on any fluctuation.
Fact 1: Attempts to stop a moving train
If you look at the daily charts of the pairs USD/JPY , AUD/USD either EUR/USD , you will notice long trends of several months. Such trends move with a strong momentum, which is similar to a speeding train, and cannot be easily and quickly stopped. A strong trend usually continues until something big happens. That is why intraday fluctuations do not matter, they are just noise and it is very difficult to trade with that noise.
Look at the daily forex charts. Daily trends are like moving trains moving in the direction they need without stopping, and it takes a lot of force and a lot of time to stop the movement.
Everyone has heard the old expression: “the trend is your friend.” It’s true. The trend is your friend as long as you move with it, but as soon as you decide to go against it, it will destroy you, walking over you and not noticing it. Don’t make the typical beginner’s mistake, don’t try to predict a reversal of a strong trend, don’t trade against the trend!
It is trading according to the trend that gives a high probability of winning. Trend trading is the most profitable business, the best time to trade. You need to make sure you trade according to the trend if you don’t want to get hit by a train.
Fact 2: Losses
Nobody wants to lose money. This is a fact. Any sane person would agree with that. But as soon as a person is behind the monitor screen, as soon as he starts trading, he immediately forgets everything and tries to trade on all timeframes, in all known ways, losing all trading rules along the way. and losing money. Some people trade like they want to lose their money!
Losing money is a very unpleasant event. We all don’t like it. Everyone comes to the market to make money, and this desire sometimes blinds us and we forget the most important thing – we don’t want to lose money. That is why the most important and the first goal of any trader should be to preserve his capital. And the easiest way to not lose money in the market is to not try to trade every price move. You will not be able to trade on these fluctuations, because most of them are just noise that defies logic.
By understanding a few key things, you can really reduce or get rid of this temptation:
• The best trading setups are obvious. You don’t have to be a genius to notice them. If you are sitting around hoping to open a position, it means that there is not a single worthwhile opportunity in the market that you can take a risk on. Wow! Save your money! If you value your money, you will not enter the market without thinking. Otherwise, bet strip the money and lose it all if you like.
* By saving your capital (without opening additional positions), when there is no reason to trade, you already make money on the market due to the fact that you will have more money to trade with good trading signals. You need to understand that not all price movements in the market make sense, in fact most of them are nonsense. Learn an effective trading method such as Price Action strategies, master them and then you will know what to look for in the market. And only after that should you have the discipline and patience to act only when your trading strategy shows you to. But if you sit for several hours looking at charts and trying to figure out every little price fluctuation, you will surely lose your money, and we all know that losing money sucks.
Fact 3: A long-term trend causes a short-term price movement
If there is a long and strong trend in the market, the short-term fluctuations of the countertrend will most likely not last long. This means that the main trend will ultimately continue to lead short-term fluctuations in the right direction.
This is a very important concept that helps us look for entry points in the direction of the main trend, thus increasing our chances of winning. Beginners try to take advantage of any movement, experienced players act in the direction of the trend and that is why they win from a distance.
Corrections come out faster and they do so unexpectedly, which makes trading them very dangerous.
Therefore, the facts that a steady trend behaves like a “freight train”, losing money sucks, and a long-term trend causing short-term price movement are the main reasons why fluctuations of the short-term market are practically useless.
Traders, if you liked this idea or if you have your own opinion about it, write in the comments. I’ll be happy