Physics. That haunt of the nerd and the may be occasional weirdo?
Well, have I got news for you! If you are a trader, physics could make you a lot of money and you do not have to study black holes and string theory to reach your goal.
Just think Time and Gravity.
Let these be your friend. Study these two and you are home free. What does time and gravity have to do with trading you say? Have you ever heard of “the trend is your friend until it ends”? To use physics, you have to then apply one of Newton’s Law of Motion – the one that says, an object remains in motion until it is stopped by a greater opposing force.
Then if the trend is up, you have to keep buying until you can no longer buy. And if the trend is down, you have to keep on selling until you can no longer sell. To be successful at trading forex, you have to then know the trend and trade accordingly. When you trade with the trend, Time then becomes your ally. You can enter at a crappy price and time will probably bail you out and make you profitable if you understood how it works.
First of all, many traders jump in the market regardless of the conditions. They enter a dead market with no volatility and enter a volatile market against the trend; big mistake!
A bigger mistake is that they often set tight stops that are sure to be taken out!
This is the lesson to take out of this article. Be slow to take profits when you trade with the trend and be fast to take profits when you trade against the trend.
The reason? Time.
The passage of time is favorable to the trend trader and a killer to the counter-trend trader.
Take the following steps:
1. Plot a Simple Moving average 49 on your chart
2. When price crosses it to the upside, trend is up and to the downside, down
3. Buy when the trend is up. No sells
4. Sell when the trend is down. No buys
5. Attempt counter-trend trades only after price has made a considerable run away from the 49 MA.
In the GBP/USD I wait for about 100-120 pips before attempting a counter-trend trade.
The 49 MA is a special MA with a peculiar behavior that you can learn to exploit.
To learn more about my techniques, please visit [http://learnforexoption.com] and go to the Sample Lesson tab.
Olumuyiwa Ojo is a full-time spot forex and forex options trader. He writes about and researches techniques to make better trades. Ojo lives in the Midwest.
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