Originally posted at forexfactory on February 27, 2011
Ohh man.. where do I begin?
Thinking about long term fundamentals is useless unless you you plan on placing a few trades a year and holding through 500-1500 pip drawdowns.
As for USD losing its status as safe heaven/world reserve currency. Currently that is baloney. If people really thought that the USD would be down 1,000 – 2,000 pips and EUR would be pushing 1.50 ++. Cable would be breaking higher as well instead of pulling back.
That doesn’t mean the EUR can’t push higher, it just may push higher for other reasons, or eventually the market may start to temporarily believe in the whole losing the world currency reserve status and cause a shift in sentiment.
I would focus on identifying the intraday, swing trading, and mispricings and place trades with less than a few months months in duration. Once you master intraday, you can move on to swing trade, then you can move on to longer term trades. That is the way I did it.
Why is that a good way? Well I do not know what will work for you but my thinking is as follows. Predicting intraday moves is easier because the inefficiencies occur more often. If they occur more often you can make faster breakthroughs and more progress, at least that is how I did it. Once you master intraday moves you can adjust the order flow and liquidity entry parameters for swing trading. Once you master that you can adjust the criteria again for longer term trading.
You generally start off with a smaller timeframe because the trades happen more often. As you go to higher and higher timeframes there are less number of trades (but larger moves).
The way I thought of it is, in the beginning you want maximum experience and placing trades as often as possible, that still conformed to your order flow rules, so you go intraday. You want the most experience as fast as possible.
If you try doing long term trades that last a few months you may place a few trades a year, but since you placed fewer trades you may gain less experience. You may still be profitable or insanely profitable, but in the beginning I wanted clarity and most experience possible.
Once you learn how to understand the shorter term mispricings, which are easier in my opinion, you can then move on to the longer term mispricings and figure out how to trade those.
Although what will work for you, I have no idea.