Every time before I get into a trade, I would analyze the market using my own mental checklist, and #1 item on that list is just a simple question:
REAL REASON FOR THIS TRADE?
Far too many times Forex trader get into the market without the right reason, or for that matter, without a right enough reason. Usually the emotional factor is driving the trade, such as greed or fear of missing out on a potential profitable trade… And I have to confess to this as well, as I remember the days when I used to spend 16 hours a day doing over 24 to 40 trades a day, and when you narrow down all of the BS and technical mambo jumbos, the only reason that compelled me to take those trades was, I wanted to make more money…
They say that to sell to a man you need to give him 2 reasons, the real reason and the reason he tells his wife why he bought it. Most of us traders tell ourselves the wife-reason, but the real reason is that we wanted to make more, faster, and that we are just too greedy…
Fundamentally there is nothing wrong with being greedy or wanting to make money, or we wouldn’t be in this business in the first place. However, we have to be smart greedy, not stupid greedy and get our hands caught in the cookie jar. That’s why it is so important to pick the right time to trade, or pick your battles wisely, while avoiding unnecessary risks.
In a fair game, as defined by 2 players with the same odds, or neither one has an advantage over the other; it is proven that the one with the biggest purse will eventually win the game, as a certainty, not a theory. In the Forex market, it is NOT a fair game to begin with, and as retail traders we enter a trade at an immediate loss due to spreads, our margin account is miniscule compared to our broker’s, our methods are well-known and studied by traders all over the world, and there are so many underlying factors that move the market we just can’t be certain at times… all of these put us at a great disadvantage in our trading, and no wonder why most traders hit or miss with their trades all the time…
That is why we need to pick our battles wisely. We need to trade during the time where odds are stacked with us, not against us, so that we can turn the table on them! That’s why it is so important to be trading when there are high impact news events with predictable market reaction, it is the reason why I trade the news, and not during other times… When a high impact news moves the market, the entire market is focusing on the news, you can then focus on analyzing that news and take advantage of it… Plus, the market will surely move, giving you a great opportunity to make some pips.
Since we get about 30 high impact tradable news a month, and a possibility to make 20 ~50 pips a trade, you are looking at a potentially 600~1500 pips a month of gain, with only about 30 hours of work, or roughly 7.5 hours a week; even if you were to cut that by half, or only 300 pips of gain, you are still looking at a great way to make a living while building your own retirement fund.
I hope this article will put some perspective in your trading. It is totally unnecessary to be trading more than a few hours a day, and the more you trade equals more risk. If you just follow high impact news releases, you not only save time, but also from many costly mistakes…
One last thing that I want to share is the compounding factor. I am assuming many traders do not have consistent track records in their trading; typically a week or two of win followed by a week or two of losses? But once you realize that making a little bit every news release can really add up by the end of the month, sometimes 25% to 125% per month, you’d give up the excessive trading habit and pick the right battle to fight… It only takes 100 trades or so to take $10,000 to $1,000,000, making just a little bit each trade. So leverage on that, instead of your time and money.
Henry Liu
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{ 19 comments… read them below or add one }
Hello Henry, I am from Central America, and I can tell you, your advices are one of the bests, not to mention that are a few outhere. That’s why I enter in the Forex market, It is interesting to find out that I am a news trader, and only high impact news, and inside those high impact news, not every one, maybe the 60%. The point is that I find out my self as a consevative amateur trader. Thanks for all…
See you later…….
Hi henry, i sent you a couple of mails over the last months but i havent recieved a reply from you. I also sent to kc@newsprofiteer.com and its the same thing. I couldnt make the mastermind and will like to purchase your E-book but i do not posses your mastercard and applying to get it will take me about 2 months process. Please, can you accept payments from liberty reserve? Please what do you say? I humbly await your reply. Thanks!
Hello Henry,
You are really doing a nice job. Thanks for that. Your predictions are always on the right track. But the problem I have is that during news release, brokers normally freeze their platform thereby preventing me from entering/going out on time. Most times I place order during news release and the platform will keep on saying “Trade Context is Busy, please wait”, until the execution will come after the news thereby making me loose OR even when I succeed entering the market on time, to close the order is always a problem during news – the platform will refuse to close the order until market reverses. What do I do on this?
Ani
Ani:
You can stop spike trading, wait a little bit after the news then enter… or change broker.
Henry
Dear friend,
Your brocker is simply alien! Go pay the spread to a serious broker.
Regards
Hi Henry, I stopped trading the news because I lost more than made. Is there a way to hop on the right trend? Thanks I enjoy your blog.
Henry,
You are one from among thousands. Why we must follow your instruction is because you are successful, and we want to be successful.
Thanks Henry.
Great article. Have to be reminded of this from time to time.
Henry,
well i really thank God for your life. you are such a real nice man. honestly it been long i have been recieving your tradable news i have even bought your e-book but when i lost my labtop i lost everything.
well… right now my equity is zero due to bad trade i made often.
Today insight from you has really change inside me… i have learnt in a had way.
i will not miss to follow your advice if i really succed and recover all i have lost .
Thanks very much.
Smart.
John right, we’ll be waiting for this service
I have turned from a shark trying to devour all the baitfish in the ocean, to a woodpecker pip pecking on a specific tree on a specific spot. Thanks Henry…
Henry
When will start your own service when traders can join you live and see what you at a particular point in time?
Traders are waiting for you.
Thanks
Hi Henry,
It is so true about your insight. Newbie trader often thinks that the more you trade, the more money you can make. They often pay little attention to the risk factor until they learn at a cost. As an experienced trader like yourself pointed out, it is the quality of trade which counts not the quantity. However, to trade the news is not easy either. One needs to get the market reaction pretty right or else you would be chewed up by the fast market action created by the news. Before attempting to trade the news, it may be wiser to be guided by someone like you who have spent much time in observing and studying of the forex market and thus can anticipate the market reaction and profit from it.
Great advise Henry. I am guilty of being greedy, staying up late nights, waiting for the big trade, only to go to work half asleep. Your methode makes alot of sence, Thank You for sharing.
hello
Where can i find those live audio new releases you listen to prior to an announcement.
I use a service called tradethenews.com, its about $175 per month and it is great.
Whoa,.. wife reason thats realy me..
smart greedy.. hmm nice
Henry u mention all my trading style and how bad is it..
Thank You Very Much for ur enlightning..
i ll begin pick the battle (i remember Sun Tzu)
Upi Payun
srry my engglish
Thankyou very much for giving such details about Forex.
Basically everyline is important and worth reading.
While appreciating your Blog which is too good as well.
I know one thing that your market directions as per my experience is 90 percent correct. Here is a suggestion also that the traders like myself will definetely appreciate
if you could offer market directions on cell phones as well and offcourse with some charges what you think is appropriate. I thankyou once again for your abovementioned comments on Forex and your own personal experience which i found a must read article.