Price Prediction systems
These are systems which are ofttimes longer term systems, applied to session, day or longer periods. They regard deciding the overall edict of the currency pair over a longer time frame and then trading a simple “buy on dips” or “sell on rallies” approach, depending on the direction you have decided on. There are various tools to help the strategy trader, according to as horizontal lines, trend lines, Fibonacci retracement levels, moving averages and so on. These will help to a ) ascertain the direction of trade, b ) identify a logical auditorium point and c ) identify a logical exit point. These trades can then be programmed enthusiasm the dealing software and left to take care of themselves, allowing the trader spend his time doing other things. This form of trading requires more capability and experience, but this can be plugged in with time and practice.
Essentially, price following systems generally cherish to be shorter title “scalping” type systems, which regard screen watching for a large part of each day. Price prediction systems boost to involve strategies permanent 8 hours advancement to several days and acquiesce the trader to get away from the screen and enjoy more free time.
Everyone has their preference but I have found from my own experience and observations that intense shroud watching cannot be far-off for exact long by most traders, before burning out after sundry weeks or months. You can know these traders right away by their bagged eyes, short tempers and lack of social skills.
2. Managing your resources
Whilst most traders can invent or learn a reasonable trading system to procedure their styles of trading, many cannot manage their report safely enough to prevent big losses and the horrid margin call. Even the some best traders in the World suffer from temporary lack of rationality in this area ( including “yours truly” ). Interesting case histories are described, for precedent, in Jack Schwager’s book “Market Wizards: Interviews with Top Traders”
There are three simple rules which can be applied here:
a ) Never leverage over 10: 1 and as your account grows larger, dilute this to below 5: 1
b ) Never risk more than 5 % of your equity on a addicted day, and as your account grows, reduce this to less than 2 %
c ) Never take a trade where you are risking more than 50 % of the projected gains from the trade with your stop loss. In other exclamation, the Win / Lose dependency ( profit target in pips / stop loss in pips ) should be 2: 1 or higher.
Following these simple rules, even with a half baked trading system, will ensure that you can lose 2 out of every 3 trades and pacific rift even on your account.