What are the steps to making better trading decisions? Is trading just finding an entry point and then making money? How does one know that the entry point is a good one?
Decision-Making in trading Forex
Many traders have a rough idea of their decision-making process when they trade. Some traders even write down a list of rules to follow. Having a process is a good thing because like a playbook in the NFL, you have thought out what it is you are trying to do and then you are doing your best to execute it.
In Forex trading it is important to have a trading process and that includes some last minute decision-making as to whether a trade should or should not be taken.
The first thing the trader needs to decide is the trade entry. An entire book could be written on this but suffice it to say that much thought should go into the how and why of entry. I have found in my years of trading that locating an entry point based on the 4 RSI Trading Signals is one of the best methods because it involves 3 kinds of Momentum which need to be present in order to trade in a successful manner.
Once an entry is located do we trade?
Here is where I find that traders make a leap to the next level; knowing if they should or should not enter a trade when their trading system alerts them to the trade. To do this I suggest creating a trading map. This is a map divided into quadrants of Good, Better, Best and Worst. Each quadrant defines what makes a trade fall under the specific category so that the trader knows what conditions the trade was taken under.
The RSI PRO Forex Trading System has a map that looks at the type of signal that is given, the position of the signal in a channel, the time of the trade, the likelihood of Momentum 3 as well as a number of other factors. These categories are placed in the different quadrants as a way to review quickly before a trade which quadrant the trade is going to fall into. In this way the trader knows beforehand they type of conditions he is entering on.
To become a top trader in Forex one must not only have a trading system that locates an entry point into the market, they must have a solid decision-making process that improves whether the trade should be taken or not. Develop your Trading Map and you will be on your way to making better decisions.