Trading the Odds

If you want to enjoy forex trading success, you need to know how to trade the odds and this means taking calculated risks, when high odds trades present themselves.

Your aim is to try and lock into these BIG Profitable trends and hold them until there are signs of a reversal. In addition, you need to employ strict money management principles to protect your equity.

There is an old poker players saying and it’s very applicable to forex trading:

“There’s a time to hold them, a time to fold them and a time to get out of town fast”

Anon Gamblers saying

A good poker player doesn’t play a hand unless he thinks the odds are in his favour. He’s not afraid to fold, when he feels the odds are against him and it’s the same in forex trading.

You don’t want to trade for the sake of trading. Sure prices are moving all the time but that doesn’t mean the odds are in your favour.

You need to have the right set ups on your forex charts, that are historically reliable and will put the odds in your favour. When these set ups present themselves you trade.

You then need to follow the trade and when you no longer feel the odds are in your favour, you will exit and move to the sidelines, whether your in profit or in loss.

All forex traders need a get out point and this is very similar to: “get out of town fast” In card playing terms in the old west it meant, if your life is in danger run!

In forex trading it means when your stop loss is hit don’t let your loss get any bigger cut it while it’s small and protect your stake. You should always have a pre-defined exist point if the trade goes wrong and you should enter your stop as you enter the trade.

Just like the good card player, you will know that preserving your equity is vital and that means taking small losses. You need to keep your losses small so when the big profitable trades come around you can run them.

Most successful forex traders know that there going to have far more losses than profits - but if they keep their losses small then a big profitable trade will cover them.

Fact:

It’s not uncommon for forex trend followers to lose 70% of the time or more but end up making huge annualized gains, as there profitable trades are so much bigger than their losses.

Another Key Variable

Is to play your winning trade for all its worth.

Forget about diluting your profits by diversifying and just like the successful poker player, play your trade for as much as you can afford, in terms of how good the odds look.

The real variable that separates the big winners in forex trading from the traders who make marginal profits and losers is - the ability to increase their stake at the right time, to maximize profits.

Your aim is to take calculated risks at the right time. This is quite different from being trading in a rash manner. 

Trade is a Game of Odds NOT Certainties

Many traders make the mistake of believing those gurus who say that as human nature is constant, so there is a scientific law of market movement. Of course if there were a scientific theory of human nature, we would all know the price in advance and there would be no market!

Common sense really - but its surprising how many intelligent people fall for the myth of a scientific law of market movement and base their forex trading strategy upon it. 

Just because there is no scientific theory of market movement, doesn’t mean you won’t make a lot of money trading. If you get the right forex education and employ a simple forex trading system with robust money management, you can make huge gains.

A Simple Route to Longer Term Wealth

If you trade forex the right way and keep all the above points in mind, you can catch the big trends, spot important market reversals and trade them for huge profits, by putting the immense leverage that forex trading gives you to work when the odds are in your favour.