OBJECTIVE The purpose of this study was to summarize published articles of trading in Dukascopy Contest Articles.
DATA SOURCES Articles were identified by searches of Dukascopy archives of published contest articles. All articles were reviewed by the author of this study. After eliminating overlap, 100 studies were retained for analysis.
1.The most important trading skill is-effective, disciplined and excellent money management. This includes the prudent use of stop-loss to manage risk of loss. The key management rules are: preserve account equity, never risk more than 2% of capital on any one trade and move your protective stop to break-even as soon as possible.
2. Stay with a trend because the probabilities of success are far greater when trading with a definable trend. When researching a market bring up monthly and weekly chart to see if there is a long term trend. Elliot wave theory should be used to identify a five-wave motion which goes in the direction of the major trend and the “correction” in three waves. Fibonacci levels should be used to identify support, resistance and turning points. When Fibonacci levels are combined with candle charts this will help you enter and exit the market with better timing.
3.The daily chart is important to take a closer look and to confirm the trade.
4.Use the intra-day chart for the right entry point. The 60 minute chart can give you great entry points.
5. A trend line is one of the most commonly used tools in technical analysis. They can be used to project futures trading zones and to pinpoint exact entry and exit prices.
6. Supports and resistance are important trading tool. A support levels represent a zone at which a currency pair often stops falling or bounces, while resistance zone is a price ceiling which currency pair has difficulty breaking through. If a price breaks down through a support level, it often becomes a resistance level and vice versa.
7. Trading is a game of probabilities. If the probabilities are in your favor more the 51% of the time, enter the trade, allow the winners to run and cut the losers short.
8. Have a trading plan and trade your plan. Get to know some things that work and fit your trading style and stick with them.
8. Do not get emotional about trading. Be unemotional and calm. Each trade is the only one of a long series of trades. You must see yourself as a professional trader and the payoff will be excellent. Know your limitations.
9.You are the one in charge of your trading. You alone are responsible for the success or failures of the trading - not the market.
10. One trading tool that will really improve your performance more than anything else is a trading diary. Having a trading diary you can identify the problem and the solution then becomes obvious. The key to your success is self-education. Document well and document everything. Reassess, reassess and reassess your trades.
11. Demo trading is important because the rules of the currency trading system are tried out with actual live data. However, you places trades with no actual money at risk.
12. Buying on dips and selling on rallies is the old-fashioned but time-proven strategy that should be implemented.
13. For the best chart analysis use indicators, Bollinger bands and moving averages based on your trading style and the market conditions.Common indicator types include: Oscillator indicators for overbought and oversold conditions, convergences and divergences of price or volume, indicating a change of trend direction, accumulation and distribution indicators which expose the buying and selling habits of large lot institutional traders and compression or expansion of patterns of price and/ or volume in cyclical patterns.
One of the strengths of this study is the large sample size and number of studies included, which make the findings robust to the effects of any single study. The importance of this study may help to inform decision making in the trading environment. Trading is complex and there is no simple or easy approach to trading. Subscribing to a trader journals, internet forums and reading current literature also can be of help. However, the complexities of trading cannot be minimalized, and when executing trades must take these complexities into account.
PS. Writing this article is my continuing forex education (CFE). How many CFE hours will I get from the readers and the professors from Dukascopy Forex University?