Trading is one of the most challenging undertakings I have ever encountered. It requires an analytical mind and mental strength. It is a zero-sum game and to succeed we need to outsmart the sharpest brains in the business. After a decade of trading stocks, futures and intense R&D, I settled on the Foreign Exchange market, focusing primarily on the Cable (GBP/USD). I call my strategy "Cable Ambush", as I prey on the market's inefficiency, typically taking a contrarian view on the market.
I start my analysis by reviewing the economic indicators. Then I assess the direction of the market and review support and resistance zones. I don't use fancy indicators, as most of them show us what the crowd have done already. Some wise guy said it is rather difficult to drive a car forward, while continuously looking at a rear view mirror. It is the same in the market. By the time indicator(s) give us a signal, the professionals are already offloading the inventory.
I consider myself a position-trader, i.e. I typically hold positions from 1 to 30 days. It allows me to hold a full time job and trade in my spare time. I trade ForEx because it has relatively low transaction costs and it is open 24/5. This market also suits my lifestyle. When I get home, London market is closed already and New York traders are wrapping their positions in their afternoon session. That is when I normally adjust my positions.
Considering that only 5% of retail investors succeed in the financial markets, it is fair to assume that the market is designed for the benefit of the few (read: professionals), at the expense of many (the retail investors). Over the years I concluded that most of fancy chart formations are for show, to lure unsuspecting retail investors into the market. They give us a false sense of order and security and many traders fall into this trap, because our brains are wired to seek order (read: patterns) in a chaotic market. As soon as we get a signal confirmation and we get in, the professionals reverse the market, run our stops (collect our money) and let the market resume its direction. Markets are driven by human behaviour -- mostly greed and fear -- and that is exactly why my method works.
Most of us (humans) don't know what the future holds. Therefore, trading or investing by its nature is a risky proposition. So, we have to focus on the few variables that we can understand and control, i.e. economical indicators, position sizing and risk management.
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