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
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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
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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
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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
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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.
Aug 18 2009
Forex hedging is a condition where you hold two opposite orders in your account to decrease your risk in the event that things go against you. Many successful traders think that this Forex strategy is the most excellent way to diminish your trading deficiency. It is a situation where we open two positions contrary to the currency and the same number of lots. Forex hedging is a protective stratagem, a security net that they place around their investments to lessen the risks and perhaps even increase their odds of survivability in the market.
Forex hedging is an outstanding risk management tool to keep away from unnecessary foreign currency losses on your foreign currency possessions or liabilities. The cost for forex hedging is pretty towering, and sometimes investors feel it does not actually merit usage, some feel that the cash payout gained is worth it. Forex hedging is not for beginners, nor for those without a substantial pool of risk principal to invest. Forex hedging is an advanced alternative that should be permitted to be used by traders that do understand it. It is hard adequate for the typical investor to forecast short-term movements on every day stocks; but, try doing so on the even more unstable foreign exchange market and you will understand why forex hedging is so chancy. For babypips in forex trading, forex hedging is always a very good tool to be utilized in order to evade from suffering a huge amount of losses in their early stage of investment.
Forex hedging is an highly developed technique which is definitely not suggested for currency trading neophytes or for that substance, anyone who doesn't have a large amount of money which they can afford to lose. When you apply the hedge fund approach to the quick moving world of the forex market, you should see at once why forex hedging is such a perilous thing. Why forex hedging isn't the correct choice for most traders. Forex hedging is a good instrument for the beginners in forex trading, if they wish to avoid incurring huge loss.
Forex has been banned in all USA Forex accounts regulated by NFA. If you want to hedge in Forex you have a choice to open your new account at a UK based brokerage firm or move your existing account to a UK based broker. UK brokers are safer bets than other offshore brokers. There are many new NFA rules this years that has caused mass forex accounts migration to the UK this year besides the new hedging policy. All of were intended to protect traders in the online currency dealing market.
Many pose the question when is the best time to smash a hedge, and the answer is simple. when you first establish a hedge, the most likely reason for your action is that you do not know the market direction, so you make a sell and a buy orders in the same currency pair at the same time. You simply made a decision that you do not want to gain on this trade as long as the hedge is on, since what ever profits made in one trade are offset by the other. You will be able to profit however later on after you shut one of the 2 trades. The correct timing to close one side of the hedge is very much dependant on the term you trade for and how much time you have to study and watch the market. You have to pay a close attention to the market range of the pair you trade and close the winning side of the hedge at the best possible time when there greater chance that the market will go back and decrease your losses you incur in the remaining open trade. You have to be enduring and timely. You do not have to wait until you make profits in the remaining trade but only loss cutback to the stage where your cost of hedging is recovered well. So do not look at your account balance, rather keep a close watch on your account equity. Account equity should be higher than starting balance to justify closing the losing trade at a small loss if no way you can wait until the trade is gainful.
I deem that the option of hedging and the capacity to do it is a must have in any Forex account. Even if not used as a trading tactic, Forex hedging provide defense to any size account at many times of need. My advice to anyone is to have it available in account even if he has to contract with a broker out of the country. For further reading you may visit:
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Jul 15 2009
I got interested in the Forex market because I realized the incredible potential to make money. In this incredible market one can double his account is as little as 5 minutes if he got enough experience and get a bit lucky.
I had it happening to me many times in Practiceaccounts, 7 minutes all I needed to double my account, one day I will do this in real account. I say one day because when I first rushed to Forex I actually lost a couple thousand dollars due to lack of experience and that what made me go back to practice.
I have practiced now for over 9 months for an average of twelve hours per day but I intend to extend my practice time for another year. I believe this is the way to do it. practice until you develop your system and have a
Forex trading ideas that is capable of making you stay in profit.
I worked hard until started to get results, but it is worth it believe me because once you know that you can make money in the Forex market you know that have the opportunity to work from home and this alone is great. There you have it, no commute, no dress code, no leaving home early in the morning, no rushing into traffic jams.
The
Forex System that I developed so far is based on to FX strategies, one for short term scalping and the other for daily patterns where you only have to see the market for as little as 10 minutes per trading day.
The Forex market is very complex but I will emphasize on short term trading, or scalping, basically trades that lasts from few seconds to few minutes, so most of the time you will have no open trades and thus you will have zero exposure to the Currency Trading market. My Idea is to sit back watching the market like a hunter waiting for prey, and knowing that if prey escapes one of your attempts it will cost you , but It will not cost high enough to lose the next hunting opportunity that could come along. Of course this type of FX trading requires constant watch which could be fun to some people but simply a loss of personal freedom to many others, and that is why I have worked hard to find another way to trade currency specially tailored for those of us who can not sit with their eyes blank on a computer monitor, because with this other method they can check upon their trades only once every 12 hours and for no longer than 5 minutes !
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