Everyone is looking for that special combination of parameters that will make them rich. Don’t over complicate the issue at hand. There is only one rule to being a successful trader. It has nothing to do with how smart you are or what kind of spread you have or leverage on your account. You can have zero spread, 1000:1 leverage, 1 million in funds and the latest greatest indicators and tools but, it is all for nothing if you do not do one seemingly simple thing.
It’s the same thing that you have to do if you want to make money in any kind of business. Whether you are Exxon Mobil or Sears or Allstate Insurance. You have to sell your product for more than what you paid for it. This is an inescapable fact of being successful.
It’s not simply a rule that you need to try and include in your plans. It is not a rule at all. It IS what trading successfully is. A successful trade is one in which you made money. The ONLY way that happens is when you are able to sell it for more than you paid for it.
So the next time you ask someone what is the secret to being a successful trader and they answer, “Buy Low, Sell High” …… They have not answered your question. What you really have just asked them is ….”What is the secret to buying low and selling high?”. Because those words are synonymous with “successful trading”.
I know what your next question is. How do you know when it’s high? How high is high? It’s funny that when it comes to forex we seem to lose all our sense when it comes to deciding what something is worth. You know if I heard on the radio that they had a sale on the latest hex core laptop computers for $50.00 a piece at the local computer store. None of us would have any problem realizing that that is a low price and would be standing in line to get one. However if we heard that they were $5000.00, would we be anxious to run and buy one? .
If gasoline suddenly dropped to 1.00 a gallon we would be filling up every can we had because we know that demand for gasoline is about to go way up as people buy up all they can afford. At the same time the supply is going to go down. With the $5000.00 laptops the supply would be much greater than the demand.
It is no different when it comes to currency exchange rates. Look at this picture.
Now …. is it low or is it high? Low right? It’s definitely low….. right?
What about this picture?
Looks high to me. What do you think? What is missing?
What is missing is an important piece of information. What time frame are these charts? Well I will tell you … One chart is a 1 Hour chart and the other is a Weekly Chart. Which one is which? The first one is merely showing the last two days of the Eurusd while the second one is showing the entire year. The weekly one that looks so high gives us a clue to the fact that just because the hourly chart looks like it’s low, in the big picture it is not.
Trying to make a decision on a 5m chart is like trying to identify which way an elephant is facing by looking at 1 square inch of the elephant. Back off. Get the big picture. That’s why we have maps to help us when we are lost, to give us the big picture.
Ok Jim, so how do we use this knowledge in our Ea writing? NEXT