Nov 13 2010
As with any kind of trading, whether it be the equity market or the currency trading it is important to have some kind of strategy. As with any type of market strategy, a fair amount of research tempered with an equally fair amount of common sense. Developing a viable currency trading strategy will assist you, making the most out of your currency investment. Some resources will even detail free strategies you can use.
In order to make the most of your currency trading experience and benefit as much as possible, your currency trading strategy will want to make use of a myriad of research services dedicated to
foreign currency trading. It would be impossible to expect every investor of Forex to understand many of the complex factors involved the shifting of currency values.
Fortunately, with the wealth of information obtainable from many different online Forex analyst sites most of the work is already done for you. Often times on these particular sites you will find that recommend certain picks. While this can a very successful, it would be highly inadvisable to base your whole currency trading strategy on the speculation alone.
Some selected to involve themselves in foreign currency trading coursework or process as a way to create a more concrete and successful currency trading strategy. As with Forex analyst web pages, there is also no shortage of foreign currency trading courses and most of them will be found online. These courses usually assist you in understanding the mitigating factor with effect currency value and know what to look for when contemplating, putting in a call or a put.
Another way of going about developing a comprehensive currency trading strategy is basically by leaping with both feet and getting what's called, on the job training. In order to do this it will require a fair dose of common sense also a little knowledge about Forex market. Getting your feet wet does not necessarily mean you must part together with your money right way. Use the resources obtainable to you. Look at the analysts on the Forex sites. Study them, inquire in to why a currency value has changed, learn why it went up or down, in case you see something you do not understand, do not rest until you get a better handle on it. By all means, never invest your money until you are certain.
Another gizmo in developing a lovely currency trading strategy is to take advantage of certain web pages that offer virtual foreign currency trading. this excellent resource lets you take your newly developed currency trading strategy and shake out any bugs you may have in your currency trading strategy. After a timeframe and when you feel you are prepared, you can basically update or account status to active.
Having a
currency trading strategy irrespective of the way you go about developing one is vital in investing success in the Forex market. it is a market that is inherently low on risk and high on return but even with that, an unprepared investor could potentially lose giant.
If you are searching the Internet for more info about the topic of
retirement investing, then please make sure to go to the URL which is quoted right in this paragraph.
Aug 31 2009
If the trade goes wrong, you know exactly how much you are going to lose. The beauty of this trade is that your risk is limited and determined. Remember that money management should always be at the forefront of your trading decisions. Pulling of this trade requires identifying the setup, knowing the forex broker game plan and staying one step ahead of them. First practice on your
forex demo account. Get good
forex training.
How do you identify the setup? Look for one way trending market. Overbought readings and obvious targets of round numbers! Know your forex broker’s game plan. You know that the forex broker wants to trip stop losses above say 1.5000 GBP/USD price level and collect some quick pips. As soon as the stops are tripped the price will quickly drop back to the previous levels. Learn
swing trading.
How are you going to set your orders? Sell order lot#1 at 1.5000. Sell order lot#2 at 1.5005. Sell order lot#3 at 1.5010. Set the stops for all these three lots at 20 pips above the figure or 1.520. Set take profit for 2/3 of these lots at 5 pips below the figure or 1.4995.
You will want to ask at this point what happened to the money management rules that are so important for traders. It is better to take quick profit rather than risk losing it all waiting for a deeper correction because of the high probability of the trade working out in your favor.
Remember you are trying to take advantage of the forex broker’s actions and not predicting the future. The expected price action is a spike meant to trip stops than a quick decline and that is what you are going to exploit.
Now let’s use an example to make clear how the big figure trade works. Suppose the forex broker makes a quick move beyond 1.5000. The stops go off. The price trades briefly over 1.5000, only a couple of pips to print a high of 1.5006. Only two of your orders get filled. The price quickly drops under the big figure.
When the price reaches 1.4995, your profit take order for the two lots is quickly executed. You make a quick sure shot profit of 15 pips. Not bad for ten seconds of work.
Be prepared ahead of time in order to trade the big figure. Get out if the trade does not work out immediately say something like 15 minutes. The price action is telling you that it is being supported by some real money demand rather than a broker in such a case.
Although the moves are similar near most round numbers, this trade works best at the end of an overbought intra day trending move coupled with psychological numbers like 1.2, 1.5, 2.00 etc.
Remember that you are not trying to predict the future like a reversal or continuation. You are only trying to ride the coat tails of your forex broker. The spike might continue higher for another 50 pips. It might top out and collapse.
You are only in the trade for a low risk profit of 10-15 pips that the forex broker is generous enough to cough up for you. Generally try to trade only close to the big figure since that is the one hiding stops.
Aug 30 2009
Retail forex market is different from the forex interbank market. Retail forex market is full of small traders. The trade size is usually so small that the retail forex broker is at a disadvantage. The retail forex broker is forced to act as the retail trader’s sole counterpart. Learn
forex scalping. Get good
forex training. First practice on your
forex demo account.
When the liquidity is good, making artificial market for their clients is not an issue for forex brokers since they simply offset their risk in the interbank market. However, in illiquid times this represents a great problem for the retail forex broker and an opportunity for the small traders.
The Big Figure Trade is an example of how you can take advantage of your retail forex broker limitations. As a trader, we all know every now and then the market will test a critical level.
It can be a Fibonacci level, a trendline or maybe even a big figure. The actual level is not important. The forex market will often reach a critical level where most of the traders believe that it cannot go higher during sharp, one sided intra day price moves.
Traders initiate short positions near that level. Don’t forget price moves in the forex market tend to be self fulfilling. Usually there is a big round number that short sellers set their stops above.
This is the time when the forex dealers mount their attack on the stops. The short sellers are confident that the market is overbought enough and it will not have the energy to push past the psychologically important number.
Now this is what happens when the forex broker mount an attack on the stops. The typical price action is for the price to fail near the figure a couple of times before the forex brokers produce a quick coordinated attack on the number quickly setting off the number lying above.
In an instant the rate is below the big figure. Most traders have this happen to them a number of times. A quick blip and your stops are busted. The price action than promptly crashes in the expected direction immediately!
Nothing is more aggravating to a trader than this setup knowing that your money was quickly taken away. This trade works especially well for the retail forex brokers with their fixed spreads and guarantees force them to make a market where there is none.
When the forex broker pushes the rate higher and trips stops above the big figure, the action is so quick and one sided that in the interbank market virtually no trading is possible at those prices.
Spreads widen, typically only the offer side of the quote runs higher since no forex dealer would want to be long above the figure. Although a true bank dealer may not be able to get the fill at those prices but you can.
As long as the rate traded is there most forex brokers would fill you at those prices just as they would have if they were filling your stops instead. Because of the fixed spreads and the guarantees the forex broker is forced to take the order.
Aug 29 2009
A typical forex pattern that can be exploited by the forex traders is the Friday to Sunday price extension. The simple assumption is that price will open the new trading week Sunday NY time in the same prevailing direction as they closed on the Friday evening.Know the
forex market.Understand
forex charts. Learn about
forex managed accounts.
After the weekend, the Sydney traders generally do not have the oomph or desire to reverse any meaningful decline seen in NY. They are therefore happy to see the prices steadily drift in the direction NY left them until Tokyo comes online.
Just keep this in your mind that don’t expect for a miracle reversal in the direction of the price action on Sunday if you have a losing position. Once Tokyo and London enter the market, the direction may be reversed. But often by then traders nursing losing positions will have already been stopped out.
After a Friday with extreme volatility, however, this typical pattern is enhanced and turns into a low risk trade opportunity for traders. The reason is simple. On economic data heavy Fridays, prices usually end up several hundred pips away from where they started the day.
This leaves the Sydney dealers with a mess on their hands by the time they start trading early Monday morning. As they go through their motions of processing the outstanding orders that the moves in NY have created, this activity shows up as a Sunday morning bump.
Suppose a big economic number is released on Friday morning in NY. It causes the currency prices to jump wildly in both directions. Eventually the market settles for a direction and proceeds to follow it for the rest of the day.
Once European traders go home, liquidity quickly dries up and the NY traders begin to plan their weekends. In this 3-5 pm window, the price will slowly trickle in the same direction until the close of the week.
The market is too thin to stage any kind of meaningful reversal. This window of opportunity enables traders to safely enter the market in anticipation of a Sunday extension.
When Sydney opens the new trading week, the move is quickly extended further for 10-50 pips before settling in for a Tokyo open. By entering yourself in the general direction of the market during the 3-5 PM window, you can position yourself ahead of the market.
Trading the Friday to Sunday extension is simple, yet highly effective. This high probability outcome combined with a limited downside gives this trade great risk-return characteristic.
All that you have to do is to close your eyes, enter in the prevailing direction of the market during the 3-5 PM window and return on Sunday evening NY time to collect your 10-30 pips. Talk about making money while you sleep.
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