Path to Profit
Many of the trading techniques prevalent in the market are well-known, and anyone engaged in trading has likely heard of these market analysis methods.
By summarizing some market analysis videos available online, it’s not hard to find that the same trading techniques can lead some to stable profits while others experience continuous losses. This involves aspects of position control and fund management.
Forex trading is essentially a game of capital. How can one control risk and achieve stable profits in this market? Personally, I believe the key is to survive in the market first.
With the development of the internet, trading techniques that were once considered secrets are no longer mysterious. For example, harmonic theory, trend analysis, and channel analysis have all become systematic and accessible online.
To have a complete trading system, four factors are essential:
Reason for Entry
The reason for entry is to find suitable entry points through some technical analysis methods, meaning where to buy or sell.
Why take a long or short position at this level? Why choose this asset for trading? These questions can be answered through market analysis techniques.
Stop-Loss Position
The second critical factor is the stop-loss position, which is central to the entire trading system.
I have many friends in trading who have experienced this: every time they place an order with a stop-loss, the market hits the stop-loss and then reverses direction.
When this happens multiple times, they stop using stop-loss orders.
This action is extremely dangerous and can lead to a margin call, which is why setting a stop-loss is crucial. It is the most important insurance to protect your account.
Once you place a stop-loss, you have an expectation in your mind. While your profits are uncertain, you are aware of your potential losses.
Many traders feel anxious if they have open positions, frequently checking the trading software to see their positions' status, which is unnecessary.
If you set a stop-loss, any potential loss is within your acceptable range. Therefore, the stop-loss position is crucial.
Exit Position
In the forex trading industry, there's a saying: "The student knows when to enter; the master knows when to exit." In my opinion, there's also: "The grandmaster knows when to stay out."
How can you maximize profits while ensuring minimal drawdown in your account? This involves fund management.
Currently, most forex traders manage accounts below $100,000, with many around a few hundred or thousand dollars. Strict fund management often precludes significant profits unless you have long-term psychological preparation.
So, how do you exit to maximize your account profits? This depends on the capital in your account.
Many traders, especially those with small accounts, approach the market with a gambler's mentality, making it difficult to meet fund management requirements. Small accounts can easily achieve multiple times return.
For those trading with small accounts, I recommend setting a protective stop-loss as soon as the position is profitable. Exit the trade if the profit reaches half or more of your account and avoid frequent trading to rapidly accumulate account funds.
Fund Management
Fund management is the foundation of the entire trading system, and the previous points are all based on it.
Many applicants for trader positions have profitable accounts, but these are often heavily leveraged, which is unacceptable in fund management.
Accounts that seem impressive when shown to fund managers are often rejected. Traders with accounts that have multiplied several times tend to exhibit amplified greed.
Therefore, for independent traders, the most crucial point is to achieve capital accumulation first. I believe fund management is key for those in asset management. Lastly, even when taking a position, always set a stop-loss!
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