Dear INVESTORS (Based on own experiences)

For some time already I have been thinking how to identify my own trading style. Which TF (Time Frame) would be best for me to trade and where do I make most of my mistakes this was two basic questions I could not find good answer for. This time I believe I finally found a solution. And it does not depend on how you use technical/fundamental analysis or if you invest only in one pair or many altogether. The key to everything is to understand whether you are long, medium or short type of investor. In this article I will try to conduct a case study demonstrating that no matter of experience you posses or the investment strategy you use, above all you need to identify your investment goals and TIME in which you want to achieve them. 1. PATIENCE No matter if you invest daily or you leave your trades open for more than a month, you need to be patient. Not always your balance will grow in a pace you would expect. There are hundreds of thousands strategies in the world, well at least as many as traders investing in Forex market. If we divide traders according to TF they use we would end up with three main categories: Long-term investor. Predicts his entry/exit point based on daily/weekly/monthly charts. IMPORTANT: he will never use chart with TF M1/M5 to make analysis of his position from one simple reason technical analysis of lower TFs is just different than big TFs. On M1 chart we will see big sell-off with many support levels being broken but on daily chart none of our major supports will be even in reach of that sell-off. TIP: If you are long term investor NEVER pay attention on M1/M5 moves because there is huge probability that you will see something contrary to what you saw on daily/weekly/monthly chart!. When you learn how to avoid that mistake, chances of you winning are growing a lot! Second of all it is also important from psychological point of view. If you entered LONG EURUSD and you just switched on M1 chart because US unemployment data came out and it indicates sell-off DO NOT ENTER THE MARKET with position greater than 10-20% of your original LONG TERM TRADE. Why? Answer is simple as this: If you enter short you soon start seeing your long term trade as unsuccessful and without potential. Your brain seeing this big drop in price will give you false signal of going short with bigger position (who does not like fast gains) and you will feel uncomfortable with your technically-well-based long term trade. Temptation will be big, believe me, but you need to get rid of that habit if you want to succeed in longer term in this market.

IMPORTANT: For those still not convinced of SL and TP orders You may think in long term if your analysis is good (because neither analysis is perfect) you will not need SL and TP. YOU ARE WRONG. SL and TP are made for your own safety. You do not want to spend 24/7 in front of PC. On the other hand you must decide your exit points. EXAMPLE: To demonstrate what I am talking about I show you some recent graphs. Probably most of you are trading EURUSD. So be it. I have some SHORT LONG TERM trade there still partially opened. Analyze the graph first yourself and later read my explanation below.

EURUSD Daily chart

As you noticed I used ONE TECHNICAL INDICATOR 200 SMA. I like keeping things simple. When you put too many indicators on your chart, you lose the grip of what is most important (IMHO). This is daily chart of EURUSD and dates back to June 6th 2010. Since then we had quite nice uptrend in the euro market. Recovery after 2009/2010 selloff was ongoing but not without problems. Market drew nice trend line. Here comes the LONG TERM TRADE: Sell on break of that trend line around 1.4000. Later on you will notice another important thing Mr. Market likes round digits Breaking of 1.4000 initiated my short long term position on EURUSD. At the very same moment of entering the market I put SL and TP orders. SL 1 at 1.4400 above the downtrend resistance line and also above the light green support uptrend line (partial loss cut) SL 2 at 1.4560 above the last top (position close) TP/TARGET 1 at 1.2874 bottom from January 9th 2011 TP/TARGET 2 at 1.2591 bottom from August 24th 2010 TP/TARGET3 at 1.1878 bottom from June 7th 2010

After that I waited for further market move. We dropped quite fast towards 1.3130 but after that even faster spike up came. Seeing this I started to think if my analysis was really correct. Then I remembered point about PATIENCE. I waited for some sort of sign that could confirm that I was not wrong entering short in EURUSD. That moment came on October 27th 2011 with last EURUSD spike around 1.4250 (just 150 pips from my first SL. I used that very moment to increase my short as I saw that pair came back exactly to trend line. At that I was sure that bottom from October 4th 2011 was valid one and that I can put support trend line through it. In the meanwhile I had TP levels in mind. On December 12th EURUSD broke through that TRENDLINE 2 and at the beginning of January 2012 my trade was partially closed (25%) at 1.2874 and soon after market tried to test 1.2591. Unfortunately for me with no good result. IMPORTANT: My rule for trading in such situation (when first TARGET is reached and we missed second for some 20-30 pips) is this: close 25% on TARGET 1 and another 25% on the comeback to TARGET 1. It worked just fine in that situation. Having reduced position to 50% I waited for more price action. At the end of February EURUSD reached broken support trend line (now resistance) at around 1.3500. This together with proximity of negative SMA 200 gave me good entry point to increase my short. For that one I used: SL 3 at 1.3650 above 200 SMA and above resistance line TP/TARGET 2 at 1.2591 bottom from August 24th 2010 TP/TARGET3 at 1.1878 bottom from June 7th 2010 It has been 7 months already with my EURUSD trade and still I keep it opened waiting for TP 2 or TP 3 to be filled. IMPORTANT: When you decide for such trade make sure your broker DOES NOT CHARGE big SWAP against you or that you keep your position small. TIP: When you trade long term TECHNICAL ANALYSIS itself will not be sufficient. You need to have at least some information on FUNDAMENTAL ANALYSIS (Greece, political turmoil, US budget debate, Iran oil embargo etc.)