Forex Traders: The Need to Be objective

Forex Traders: The Need to BeObjectiveIt is difficult for Forex traders to realize that the currency market is extremely unpredictable. Asnew traders spend a long time trying to learn the mechanics of the foreign exchange trade andfocus their time and energy on trying to find a method for predicting movements, they naturallyexpect there to be rules governing the movement of the market. This not being the case, manytraders find themselves at a disadvantage.While Forex traders have a number of tools at their disposal, which allow them to judge the righttime to open or close a position, many prefer to rely mostly on one tool. So, having opened aposition, they watch their favorite indicator and, to a large extent, base their trading decisionssolely on it, ignoring the others.This works well enough until that indicator starts telling them something different from what theothers are. Traders caught in a open position which their favorite tool is telling them to hold, willoften do so, despite the fact that other tools are telling them to close and get off the market, andend up losing money.The basic problem, of course, is that the trader is not looking at the market as is, but through thelenses of his own expectations about it and further using his favorite indicator to reinforce thoseideas instead of looking at the bigger picture. And, encouraged by the fact that his chosenindicator is forecasting the profit he wants, the trader is focusing more on money than on themarket.If the Forex market was not unpredictable, it would collapse because all traders would profit allthe time. There are many tools that can help traders predict the direction of the market and theyusually do an efficient job. But even in the hands of the most experienced traders, the best toolsoccasionally fail to predict the market’s movements correctly.Losing in trade because of predicting the market wrongly is an innate part of Forex trading andtraders need to accept it. Besides, they need to learn to avoid getting in a position where they donot have many choices.For this, the trader needs to accept the fact that the foreign exchange market pretty much has amind of its own and the traders have to follow its movements instead of trying to make it go in thedirection they want it to.
Forex Trading ToolsThere is no one single super smart Forex trading tool which gives you profit, profit and moreprofit. The only possible solution is to use a combination of different tools to identify the favorablemarket forces to get a maximum number of high probability trades over a period of time.Trendlines are the most popular and reliable Forex trading tool which many successful tradersgive their testimonial for.The Three Trend line StrategyTrend Lines are an important tool for trend identification and confirmation in technical analysis. Itis a straight line that connects two or more price points and then extends into the future to guideyou.There will be lines drawn across significant lows in an uptrend, and significant highs in adowntrend. To roughly classify trend lines, we can divide them into three as short term trendlines,medium term trendlines and long term trendlines.1. Short Term TrendlinesDraw these lines across the most recent two lows for an uptrend or across most recenttwo highs for a downtrend. Best observations are found on a smaller time frame such asa 15 minute or 30 minute chart.2. Medium Term TrendlinesThese are best observed on a higher time frame like a 60 minute chart. It either connectsthe nearest significant low to current price action to the previous significant low in anuptrend or the nearest significant high to current price action to the previous significanthigh in a downtrend.3. Long Term TrendlinesIt uses higher time frames such as the 4 hour chart or the daily chart to draw long termtrendlines using the same method of Medium Term Trendlines. The long term trend line isconsidered as an effective Forex trading tool. The daily chart is used mostly by traders ofbig institutions who do not usually engage in small moves on an intra day level.By drawing a trend line on a daily chart you can graphically analyze where price is and where it islikely to bounce. But employ trendlines as a Forex trading tool with caution and discretion.Covering your charts with every trend line possible will result in confusion and blurry analysis.