How To Win The Game Of Forex Trading (Like You Play Chess)

Forex trading is like a game of chess – it has a beginning, middle and end game. To win the game of forex is similar to winning a game of chess – you need the strategy and tactics and good dose of psychology. Here are some top trading tips with regards to the 3 games in forex trading you must master to win:

1. Opening Game

Like chess, there are certain trading rules you must adhere to, just like the basic rules in playing chess. One important rule is called the opening gambits. Regardless of how smart you are and how well you understand the game, you will lose if you don’t follow these opening rules. What are these opening rules? They are low gearing, never trade against the fundamental and forex trading is all about probabilities, not certainties.

2. Middle Game

If you have successfully passed the opening game by knowing the basic rules, you have to rely on strategies and tactics for the middle game. This is where you make you move and enter the your positions. Like chess, you need to ensure your defence is secured, then you attack your opponent’s weak spots. In other words, you must do everything you can to give you the edge. Here’s how you play the middle game in forex trading:

a. Use multiple entries, each with low gearing.

b. Trade currency in one direction, based on the current trend.

c. Use leading indicators and price action for real time analysis

d. Use multiple time frames for relational analysis e.g. if the trend is up on 4 Hourly, switch to Hourly chart to enter based on retracement to a support level or fibonacci level.

These will give you an advantage as you move to enter your end game for your forex positions. You need to use a forex strategy that can consistently work for you.

3. End Game

If you’ve come this far, you’re now ready to close the deal with a profit. Just like chess, the end game is to finish off your opponent. If you don’t know yet, forex trading is a zero sum game. This means that your loss and your opponent’s gain and vice versa. The end game can be trickly because if you’re not careful, you can turn your winning position to a losing one. The key to ending the game well is to set a profit target and moving your stop loss to protect your profits.

Great chess players always think a few steps ahead. They have a good game plan, prepare well, respect their opponent (in forex trading, the opponent is the Market) and takes nothing for granted. They rely on their own skill and knowledge they’ve built over many years of experience. Similar, good forex traders rely on their forex trading systems and knowledge about the currency market to make profits. This requires constant practice.

Eventually, once you have reduced forex trading to like playing a game of chess like great chess players, you may not win  them all, but at least you can win enough to make good money.

 

(From http://www.toptradingsutra.com/top-trading-tips/how-to-win-the-game-of-forex-trading-like-you-play-chess)