TRADING PRINCIPLES THAT EVERYONE SHOULD KNOW. PART 1.

2021년 12월 2일

Hello traders!

For a long time, the Forex market has created a large number of trading methods.
Finding your strategy that suits you specifically is one of the main steps in achieving success in the Forex market.
And it is worth remembering that successful traders do not use anything magical in their trading. Everything has been invented for a long time for both a novice trader and a successful trader.
The main task of beginners is to choose a fairly easy strategy and strictly follow its principles and rules.
So what does a beginner need to know in order to trade profitably?

Price levels.

It is difficult for a beginner to determine price levels and trade them correctly.
There are no specific rules in this topic, since the price does not draw clear points, but forms zones.
Many traders use support and resistance levels in their trading and for beginners, the main task at the beginning of the journey will be the concept of selling from resistance and buying from support.

There are three types of trading systems based on price levels.
1. If the price moves within the framework of a sideways movement, the trader can sell from resistance and buy from support.
2. If there is a prevailing trend in the market, for example, bearish, a trader can sell from resistance and expect support to break through.
3. The same rules work in the bull market, only in a different direction. If the price breaks through the resistance, then this zone becomes a support from which you can buy.

Consider the principles of trading from price levels.

#1 Understanding the market context.

The key to profitable trading from the levels is the ability to correctly understand the market context.
Bearish pressure leads the market movement through an impulse movement that breaks through support and creates new lows – in this context, selling strategies will not work well.
That is why it is so important to follow the concept of the market context:
When the market falls, creating new highs and lows, we are talking about an impulsive bearish context.
The correction is created by an impulse that is weaker than the main trend.
A sideways movement occurs when both demand and supply are approximately equal and the price cannot move in a certain direction.
As soon as the bulls or bears take over, the price will make an impulse in the direction of the strong side.

#2 Top-Down Analysis

The market is ruled by big money, which pays great importance to large timelines.
And it is vital for an ordinary trader to know where smart money is pushing the market.
To do this, it is worth noting strong levels on the monthly-weekly-daily timeframes in order to know exactly where the price is most likely to rebound.
On the other hand, if the price is above the key levels, then the market is bullish.

#3 Candlestick Patterns

Almost every trader uses candlestick patterns in his analysis, which are a very strong analysis tool.
Reversal candlestick patterns create an excellent opportunity to enter a trend reversal.
The higher the timeframe on which the pattern was formed, the stronger its signal will be.
Knowing candlestick formations is a very important part of a trader's professional growth.

#4 Risk Management

Any trader should be aware of the risks and be able to control them.
Although this topic goes beyond the definition of the market context, it is still very important.
There are many ways to control risks.
An important rule is to set a stop loss and risk in each position, as recommended, no more than 2% percent.
Hedge fund managers risk an even smaller percentage in each transaction, sometimes 1% or even lower.
It is better to grow slowly than to fall quickly.
If you lose 2% of the capital, in the next transaction, in order to get your money back, you will already need to make 4%, which in general is not difficult to do.
But if you lose 50%, you will need to make 100% profit already, which is almost unrealistic.

Conclusions

Summarizing the above, you can make the following sequence of actions:
Identify the key support and resistance levels.
Wait for the candle to form in the desired direction.
Stop loss above or below the candlestick pattern.
Take profit is placed at the following support or resistance levels.
Always make sure to use proper money management for each trade, and never take on a risk that exceeds the return.


Traders, if you liked this idea or if you have your own opinion about it, write in the comments. I will be glad 👩‍💻