Forex and Middle of the Road Profits

Two things trouble the would be successful forex trader...when to get in, and when to get out. We look at the charts and are tempted to think a certain pair is cheap. But could it get cheaper? Is it cheap just because of the recent downtrend, and is the trend likely to continue when I get on? Should I get on going long, because it is cheap and must turn around soon, or should I get on in the direction of the current trend and ride it lower? These questions plaque a traders entry every day. But if that isn't bad enough, many traders never plan their exits in advance, and so once in, the agonizing starts all over. If it blows through a stop, oh well, just a plain and simple agony there. But what if t starts becoming profitable? Then the pain really begins for some traders. Should I get out now with a small profit? Should I take half of the table and let the other run? What if it runs a long way, and I could've had all that other profit had I left the trade all on? But what if it turns around and reverses and I have left the whole trade on and I lose my profit entirely? It's enough to make a person's head explode (and it will if you let it). This is why it is important to remember that the most important space to conquer, is the space between your ears. The market doesn't even know you exist. Its not out to "get you", though sometimes it seems like it, when it takes out your stops by a couple of pips and then reverses. Or when it just misses exiting you at your profit target only to retrace and give back your trade. The only funky stuff going on in the market is actually in your head. This is why you must get control in there. Set rules. Set targets. Set stops. Realize that when you enter the market, NO ONE knows where it is headed next in the short term. You look for your good entries based on the support and resistance of the trend we talked about yesterday. If your entry is bad and you get stopped, its strictly business. It doesn't mean you're a bad trader. If your system for entries is proven, you just have to know that sometimes you'll take your lumps. Just like that little position we entered in the sterling earlier this week. It was a high probability entry, but the flip side of the coin is that there is some probability it will fail. That one did. But our next one is paying off in spades now.

When I talk about middle of the road profits, or median targets, what I mean is this. All forex currency pairs trade around median ranges over 30-60 day periods. They will overshoot in one direction only to snap back the other way once the market gets too far overextended. When trading for those snap backs, aim for the middle of the price action over the last period. Then get out. Is it likely to continue moving in your direction? Yes. Should you care? No. You have to set boundaries. And learning to set them with profit targets is a real key to maintaining your sanity in this business. Perhaps you prefer using a trailing stop. Great. Then use it, but don't cry over profits lost when the market retraces to take out your stop. Set your goals, and be happy to reach them. Then get out. Leave some profit for somebody else. All traders have to eat. We all have to pay our bills. Once you reach your goal, be satisfied. Remember bulls make money, and bears make money, but pigs get slaughtered. Set your rules, and stick to them!

Happy Trading!

Bill
www.thefxtradingmasters.com
bill@thefxtradingmasters.com