Forex - Don't Act, React

By Anil Kumar Raju Addipalli

This is the third and final rule that I want to stress, and probably the most important rule as well. It's Important to have patience and wait for the market to make its move before you make yours.
You, as a trader, must wait for clear signals to establish themselves before you commit yourself to a trade. Even if you see a specific candle pattern forming do not act before the pattern forms. If you are reading this, and you are new to trading then this is a rule that you might pick up with some experience.

I have lost countless thousands in my early days of trading because I would jump into trades because I thought a pattern would form before it actually did, and that same trade would come right back and turn around in my face. I can't even stress this enough. As a beginning trader, you may see a trade forming in front of you and see the currency pair moving in the desired direction.However, not all of your prerequisites have been met for you to take the trade and you may feel tempted to enter the trade anyway.

Under no circumstances should you disregard your original rules and enter a trade early. Don't act... REACT. Wait for the market to form patterns and then act on them. For instance you may think the EUR/USD is about to make a strong rally upwards, however your indicators don't say so. Instead of putting aside your rules, and taking a foolish trade, WAIT. If the market rallies up then you can trade the inevitable pullback which always happens after a strong rally, and we as traders can confidently predict.

In this case we put aside our instincts and if the market moves against us we were wrong, however, if the market does indeed move up we react to the rally upwards and trade the pullback. If we had taken the trade based on instinct, then there is a 50/50 shot... either the market does move our way or it doesn't. If we wait for the market to make it's movement, and then trade on the reaction of that movement then we greatly increase our chances of success to 80-90%. If you can trade with a win rate of 80-90% then you no doubt will be a very successful trader.

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