You may think it’s an odd statement, as all traders want to make big gains and yes they do but in most instances they can’t accept them and that’s what this article is all about, showing the key error these traders make and showing you how to catch and hold the mega trends for huge profits.
When a trader gets into a trend and he starts to make money, he’s of course happy and the bigger the profit becomes, the better he feels but then, normal retracements come against his positions and these eat into his profit, he wants to snatch it before it gets away.
The bigger the profit becomes, the more he is tempted to take it. What normally happens is he either takes it or puts his stop, within normal volatility and gets taken out the market. The trader then watches, as the trend continues and the trade makes thousands of dollars and he’s not in it! He is a minor profit and failed to hold, for the mega profit, because he simply didn’t have the confidence or courage to do so.
If you look at any currency chart, you will see trends which last for weeks or months and there always there so if you want to catch and hold these trends do the following:
1. Accept that you are going to have dips in open equity and focus on the long term, this means being prepared to hold a big trend for weeks
2. Keep your stop, out of the way of the market noise and trail it behind a key support level or a good moving average and a good one to use is the 40 day MA.
If you do the above, you will stay in the big trends for weeks or months and while you may give a bit back at the end of the trend no one knows when a trend will end, so that’s OK and always remember, If you caught 50% of every major trend, you would be very rich!
Another way which makes it easier to stay with long term trends is to do a 50 – 50 split.
Hold a core position of 50% and bank 50% on a move to over bought in a bullish trend and wait for a retracement to put it back in. This will help you be active in the trend and allow you to bank profits as you go.
When putting back your 50% in a bullish trend watch for a dip to the 18 day Moving Average. This is a great area to get long again in strong trends and if you overlay it on your charts you will see how effective this is as an entry method.
Not having the mindset to run big profits, is a common error novice traders make and always remember, you need to run your profits and milk them for all there worth, to cover your inevitable losses.
So have the courage to run the big trends and use the tips above and you will make more money and have to spend less time on your trading and that’s a combination of advantages, all FX traders will like.