The acronym K.I.S.S. stands for Keep It Simple Stupid. It is something that works for several things including your forex trading strategy. ‘Keeping it simple” in the context of forex trading means simplifying the different aspects of your trades right from the way you approach price movement to the way you carry out your trades. Most trusted brokers
Simplicity is generally easy to ignore when we think about earning profit in the long run in any financial market. You might have already tried to use twisted and pricey trading methods in your trading journey only to realize that things don’t work the way you’d like them to. In this piece, you will understand why you don’t need to complicate things and well, try to K.I.S.S.
THE FOREX SUPERSTAR
So this is what goes on– a trader gets into the forex market with a lot of hope and very little knowledge. They put in the effort and invest their time as well as energy to get a hang of the basics. In some time, they begin to equate themselves to a forex expert or come across some promotion about a great trading method that brings guaranteed results. That’s when they start going over complex tools, methods, and techniques. In a few months, they realize that they no longer have the energy or funds to thrive and end up feeling like they don’t have what it takes to survive the market.
Of course, sophisticated tools or trading methods aren’t wrong or bad. Most technical indicators bring good and accurate insights that have real analytical value. If there was a trading method that did not work, it would never be known as a trading strategy.
KEY TO FOREX KISS
The secret lies in holding on to the fundamentals. Just like how things are in the stock market, traders are free to keep making as many guesses as they’d like as long as their price is aligned with the underlying value of the security. The ones who fail to take this into consideration are speculators and are also the ones who often lose money.
Similarly, it is great for a forex trader to work with sophisticated tools of technical analysis, as long as they find their way back to the basic, fundamental realities.
WHAT TO FOCUS ON WITH FOREX KISS?
First, never forget that you’re dealing with real fiat currencies that are used in real nations. Whatever can affect a certain nation’s economy will also have an impact on its currency. Avoid trading a forex pair without understanding the economics and the events at play in the two corresponding nations. You must even be aware of international ties as well as the roads for trade revenue.
Second, have a good and rational trading strategy in place while also sticking to it religiously. If you’re unable to spell out your strategy in a sensible way, you’re not quite there yet. Make sure you’re backtesting and forward-testing your trading strategy before putting your money on the line. It is important to build some confidence in the strategy first before implementing it.
Most importantly, be disciplined enough to know that you have to work within certain limits of reasonable risk management. You need to have stop-loss orders in place for all trades and keep your leverage in check. You must also clearly outline how much money you’re comfortable losing and put this against your overall liability.
CLEAN vs MESSY
Through this article, we aim to make it easier for you to understand that you should be able to use simple price action setups to be able to trade well in the forex market. Expert forex traders have one common trade–their trades are as simple as one can expect since they are aware of how important a calm and clear mindset is to make money. But, there are so many amateur traders as well as experienced but not-so-successful traders who do exactly the opposite by complicating things.
The K.I.S.S method in forex trading is based on the idea that the easiest and the best way to find your way in the market is to know how to interpret and trade the raw price action signals in the market. When you try to force a series of solid indicator-based trading rules in the wide world of financial markets, several traders tend to complicate trading more than required.
Human beings have an inherent tendency to complicate the easiest part of trading which is chart trading. You must accept the fact that chart analysis need not be so hard and that is when you’ll be able to lay more emphasis on the hard parts of trading such as being disciplined or having proper risk management practices in place.
HOW DO YOU KNOW HOW MUCH YOU ARE RISKING?
For every trade you take, you should monitor the difference between your opening trade and your stop loss. Your overall risk exposure can be calculated by multiplying this number by the leverage and then adding the result to every open trade. The final number must not be more than the liability you started with, that is the amount you were willing to lose. To put it simply fx empire, don’t put yourself in a place where you lose more than you can afford to if things don’t go as planned.
Conclusion: Hoping that by the end of this article, you’re now better informed about the KISS method so you can start figuring out ways to implement it in your trading plan. Begin by practicing trading particular price action strategies along with support and resistance levels for a minimum of three months on a demo account. You can even go on for longer until you’re maintaining a steady profit before trying this out with real funds. Do remember that trading can be very risky. Hence, it is best to practice the KISS forex trading method until you ace the concepts we spoke about in this piece to see that you can in fact, keep trading simple.