THE ART OF CONVERGING
Haven’t you played with a magnifying glass and paper in your childhood? Sure, you have! It was pure fun to burn the paper by using the magnifying glass alone, wasn’t it? As science students, we knew why it worked, the principle behind it, but seldom did we recognize the profound management philosophy that came with it. A philosophy that could make our lives easier and effortless. Any guesses?
As traders, businessmen, managers, let us look at it from a different angle. Let us answer some basic questions to understand this:
1. Did the magnifying glass emit any heat other than that of the sun’s? No, the glass is not the source of heat.
2. Did the paper burn just by placing it under the sun? The answer again is a ‘no’.
3. So, what was the role of the magnifying glass? It converged the sun’s rays.
It makes the light rays come together, giving a powerful impact. Similarly, we all have different intellectual resources available within us that we gained after years of learning and experience. To get maximum advantage of these resources, we need to converge them. We need to bring them together and focus on a single point in order to yield outstanding results.
So, how does it apply for stock investors and forex traders? As aspiring traders, we all enroll for different courses to learn various trading strategies. We follow the advice of successful traders. We keep a close eye on what is happening in the global markets, yet we are not able to yield outstanding or at least consistent results. What do you think is the hindrance? Is it because we do not use what we learn? Not at all! We are using them one after the other. It is because we are not combining them in the right manner.
The biggest mistake that even experienced traders make is that they use their strategies individually and not as a combo. They may try different strategies for different trades in the same day itself, but they seldom make the right blend of strategies.
How do you blend trading strategies? What are the combinations that work well in general? Out of several factors that influence the price of stocks or currencies in the market, international news is considered the most influential and most significant for any aspiring trader.
News about consumer price index, non-farm payrolls, and other economic data are significant catalysts for price movement. These news releases may initiate a trend in the market. Smart traders look for these trends and in its early stages, resort to breakout trading. In order to confirm the breakout, they resort to price chart interpretations and would look for a candle close beyond the level of support or resistance.
Once the direction of the breakout is identified, they would enter a trade in that same direction. In this manner, if you blend price action strategies and news releases, then it is possible to identify trading opportunities in a better and rewarding manner. However, you cannot do this blindly, as these strategies come with their own flip sides. For instance, if you are not thorough with interpreting candle stick patterns, then you may get confused with a true breakout and a false breakout. Similarly, news releases also carry with it its own risks – volatility. It is essential for the market to have enough momentum to sustain the move, or else your decision to trade in a particular direction may not yield consistent results.
To get outstanding results, you should do the following steps:
1. Develop good knowledge of various trading strategies
2. Develop the skill to combine different strategies
3. Execute the combinations with precision
Try this method from today, and take your performance to the next level!