Trading Psychology · 2023-09-05

The Edge in Forex Trading That Not Every Trader Knows — Part 1

In this article I will talk about: THE EDGE in TRADING. This is one of the articles in the series sharing about trading psychology — a topic for which there is very little material and not many traders are willing to share.

And if you are too lazy to read, watch this video to understand more

https://www.youtube.com/watch?v=ZgS505p3YXw

My edge and Forex trading plan

I am an amateur trader and I trade in the Forex market. In another way of putting it, I am a day trader. Besides spending time on trading, I also have a full-time job. Therefore, I have to build a suitable trading plan. One where I can both trade and not affect my current job.

• First: I am a day trader, trading in the Forex market, with my trading timeframe in the evening Vietnam time. Because this is the timeframe when the European and US markets open, and another reason is that I have a full-time job during the day.
• Second: I focus on trading the USDJPY currency pair (Yen & US Dollar). Because this pair has relatively good volatility and high liquidity, slippage is quite low.
• Third: My expectation is to earn 5-15% profit per month. Equivalent to 1-4% profit per week. I do not expect to be able to multiply my account many times over with Forex trading. I find 5-15% is a level I can strive to achieve. And the important thing is to maintain it stably across the months.
• Fourth: Through many trading records, I see that my win rate is about 40% and the remaining 60% are losses. That means I am wrong more than I am right. But when I am right, I earn more money than when I am wrong. And the risk on each of my trades is 0.5% of total capital. Each month I have from 30-40 trades, about 2 trades per day.

Have you had a trading plan of your own yet

The trading plan above is suitable for me personally. Please note that I am a Forex day trader. And I hold my trading positions for short and very short periods of time. It may not be suitable for those of you who trade holding positions for longer.

A trading plan indicates what kind of trader you are, a swing trader or a scalping trader. Which market you trade, how much risk you accept for one trade. And how much profit % you expect per month…

Through many years of trading in the stock market and especially the Forex market, I find that to be able to make money regularly in the market requires many factors. And one indispensable component is the trading method. It is 1 of 3 factors for success; the other 2 factors are trading psychology and capital management.

The trading edge is the core component to build your trading method. The trading edge is not using MA, EMA indicators… or support and resistance, Fibonacci, price action… It is not like that.

Trading is the hardest job you have ever known

You are focusing too much on finding a trading method and forgetting that in Forex, it is only part of the game

We approach the job of trading through tutorial videos about candles, price patterns, indicators… And we take other people's trading methods to use. That is no different from building a column and only applying concrete on the outside. It looks solid, but lacks cohesion on the inside.

Trading methods with indicators and candle patterns are all over the internet. You can find them anywhere. I bet you have also tried many methods. But after a short time you find it ineffective again. And you look for another trading method. Then you hope that is the holy grail to be able to make money in the market.

Why do professional traders use that trading method and still make money! And I do not yet? Because they understand the nature of the trading method they are using. They know what their edge is when using that trading method. And they believe that results come from the long term, not from the 1 to 2 most recent trades.

In business, in life or in any job whatsoever, there are people who are more successful than others. Besides effort, they also have a competitive edge and use it to knock competitors out of their business.

Part 2:

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