TEXT CAFEARTICLE DISTRIBUTION AND SYNDICATION

If you are just starting to learn about the forex markets, and currency trading, then I have no doubt that you may already have come across the terms resistance and support. These two concepts are pivotal to you trading successfully. It is critical that you fully understand what causes them, and how to spot these areas of support and resistance on your currency charts.

In the normal cyclical movement of the market the price is influenced completely by sellers and buyers. If there are more sellers than buyers at any given period then the price action will be moving downwards. Conversely, if there are more buyers than sellers at any given point in time then the price level will be trending upwards.

Knowing when to accept your profits is key to successful day trading. However, many people often think that you can earn more by letting your profits run. This strategy almost always fails, and it is why I find that setting profit targets is one of the few ways to guarantee that you turn a market gain into a monetary gain.

We have all heard plenty of talk, both positive and negative, about the $700 billion bailout plan, and there are now rumors of similar plans in the works. The discussion dominated the recent election, and it continues to be a primary concern both on “Wall Street” and “Main Street.” Many people who have never concerned themselves with high level economic issues are finding themselves writing, or being solicited to write, letters to their congressmen and women in support of or opposition to the plan.

Who knew that “free” really meant “expensive”? That may seem like a contradiction, but day traders can easily find themselves in a situation where it turns out to be true.

I teach a number of strategies that require software that displays tick charts. However I often have students who tell me that they use such-and-such piece of software that will not display them. But they refuse to change because the software they are using was free.

Day trading attracts plenty of hype. Slick vendors want you to believe that you can trade whenever and wherever you want. You could even be on vacation and make money at the same time. They push the image of someone with a laptop on the beach, ticking off profits in between swimming, building castles with the kids, and taking romantic walks with a tanned, beautiful someone by your side.

This dreamlike image is, of course, just a dream. You cannot trade at the beach. And, believe me, I have tried. I have done my best to live up to this dream of making money in luxurious leisure. But there are some serious problems with that image of the laptop at the beach. Three serious problems in fact.

Too often, I hear from traders who insist that they “specialize” in a single market. Although they may feel a sense of comfort and even mastery by trading exclusively in one market, this kind of approach is a serious mistake. As day traders, we are interested in profitable markets. But what defines a profitable market has nothing to do with the kind of market it is; rather, it depends on how it is trending. Consequently, a successful trader should commit him or herself to trading trending markets, no matter what they are.

Day traders cannot avoid losses. If anyone tries to sell you a system that has no losses, or even as little as 10% losses, you can be sure that they are unreliable. The fact is that traders engage in a very risky endeavor, and, even with the best plans, the markets will do unpredictable things.

One point to be careful of when researching strategies is the idea of a “winning percentage.” Many day trading programs will tell you that they have a winning percentage of over 90%. This sounds wonderful, of course, but what does it really mean? Does it mean that they profit from 90% of their trades? Does it mean that they always profit with an additional 90% of what they put in? By itself, this statistic tells you nothing.

We have seen a number of dark days for stock markets all around the world in the past months. But how frightened should we be? Is the next Great Depression upon us? How can we distinguish a small crisis from a huge one? One way to deal with these questions and to calm our feelings of panic is to look closely at a single bad day. When we do that, the details can show us that the bigger picture may not be as bad as we fear, and, hopefully, quell our feelings of panic.

I insist on the power of weekly profit goals in my Day Trading Coaching Program. I help my students determine a goal for each week that is at once attractive and realistic. I insist that sticking with this goal should be a hard and fast rule. So, no matter how confident, or lucky, they may feel, I tell students that the only way to guarantee long term success is to stop trading once they achieve their goal. They should wait until the next week to start trading again, even if they have a hunch that the market will stay in their favor.

I am frequently asked how to use pivot points in day trading. They can certainly be useful tools, but, by themselves, they are not a real trading system or strategy. If you know how to calculate pivot points, however, they can be a helpful source of information.

Pivot points are most commonly used to determine support and resistance levels, which are the prices at which trends will tend to reverse direction. The support level indicates where the price will likely find “support” as it goes down and start to turn back up again. The resistance level is the opposite: the price where a trend tends to stop rising and start dropping.