Strategy
Written by Danielle Franklin
You have got the basics of trading under your
belt. You even know how to enter a trade in a smartest way with minimum risk.
Now it is time to brainstorm over exit strategies, because without a winning
exit your perfect entry is worthless.
Taking profit (aka exit) strategy is far from simple and is unique from trader to trader. Depending on your trading preferences and time frame, taking profit is a true art form of forex.
Written by Danielle Franklin
Technical analysis allows a trader to examine the market
with support and resistance, moving averages, Fibonacci and many other techniques.
One specific part of analysis that catches a great amount of attention is the
round numbers. How to use round numbers in trading?
What are Round Numbers?
We use round numbers in our daily life all the time.
Just like you round up $9.75 into $10, you can anticipate that most stop losses
in forex trading will be around the nearby round numbers. Why does this happen?
Most traders make their next decision at round numbers:
“As soon as it gets to 4.200 I am out”
“When 3.500 breaks I am going long”
What does it mean to us as traders and how can you use
this? First of all, it means that round numbers are special. In forex market
you can see the pull of the round numbers on daily basis.
People are naturally attracted to the order of round numbers and as a trader you have to be aware of this behavior to use it in making proper decisions.
Written by Danielle Franklin
Carry trade refers to a strategy where a trader sells currency with low interest rate and at the same time buys a different currency with higher interest rate. The idea behind it is to seize the difference between the rates and make profits, based on the leverage used.
What is Carry Trade Strategy?
First you have to figure out the interest rate differential and the forecast for the selected currency pair. Then you basically go long a currency with a high interest rate and short a currency with a low interest rate. Hold the position for a while based on your trading plan to take advantage of the interest rate differential.
Written by Danielle Franklin
Avoiding pitfalls in forex trading is definitely easier said than done. Most beginners know about the possible mistakes, recognize them even but still fall victims of undisciplined trading.
Large Leverage – Plan for Disaster
Using large leverage options (and my large I mean everything that is beyond 1:200) is a dangerous business. Just because there is an option of high leverage, doesn’t necessary mean that you should go for it.
Base you trading decisions on fundamental and technical analysis, instead of potential margin leverage and possible large profits. Profits can indeed turn out to be very rewarding, however so can losses. When things go wrong – with high leverage your trading account goes rotten very fast.
Written by Danielle Franklin
Back-testing via your forex demo account is the way to check whether your trading strategy is successful or not. The general idea behind back-testing is to find an effective strategy that worked well in the past and is most likely to produce the same winning results now.
Written by Danielle Franklin
Forex trading has been increasingly popular among investment seekers and with fame comes gossips and misconceptions. What are most common myths in trading? Which information should be treated with skepticism? What is the hidden agenda behind spreading gossips about trading?
Written by Danielle Franklin
One of the low risk trading strategies is hedging. The technique might give an impression of being too complicated; however when done right, a trader can reduce the overall risks and make profits. What is involved in hedging? How complex is it? What can you expect from this strategy?
Forex Hedging reduces some amount of risk when holding an open position. What kind of risk are we talking about here? How about market falling down unexpectedly leaving you with losses you can’t handle. This is a well-defined reason for using hedging in case you suspect that the currency pair of your choice may reverse against you.
Hedging technique involves holding a trade with one pair and opening another trade (or more) with a different pair, which is related to the first pair. The idea behind it is to reduce the risks involved – in case one trade goes bad, there still might be profit with the other trade.
Written by Danielle Franklin
Every successful forex trader knows that keeping a journal of the trades should be in the trading plan. Why is it important to keep track of all trades you make? What can the analysis of good and bad trades help you with? How can you minimize the risk with a trading journal?
Mistakes
Failure is a scary word for all of us. Ever since you are born, you are taught that mistakes are perceived as bad, embarrassing and should be avoided at all cost. While in fact mistakes are opportunities to learn, truly understand something and improve your chances of success when you try again. The key is, of course, to analyze the mistake and not to make it again.
Forex trading is no different. Mistakes are unavoidable and, instead of crying over the spilled milk, it is important to know when and why did you make it and what can be done to avoid getting into troubles the next time. It doesn’t matter whether a bad trade led to big or small loss – there is always something to learn from it. Mistakes are the perfect tool to give a trader an immediate feedback and encourage finding out why the money were lost.
Written by Danielle Franklin
Successful forex trading has a lot to do with determining the overall trend. Without trend awareness, a trader is most likely to suffer unnecessary losses. The trick is to trade in the same direction as the trend, however in most cases it is easier said than done. What is the best method of determining forex trend?
The trend is very relative and highly dependent on a forex trader’s understanding and a perspective of the market. Every trader has an individual approach to forex, and therefore a time frame in which one trades vary from one person to another.
A trend is a fragile term. With a wrong set of frames, the trend can emerge and disappear within seconds, or what seems to be a trend might quickly surrender to any possible world events.
Written by Danielle Franklin
When you trade forex, it is important to understand how to place orders with a forex broker. Trading orders are chosen according to your trading style and intentions – the way you plan to enter and exit forex market.
Beginners in forex often miss the difference between placing a new buy/sell order with a stop loss and a limit order. What does each term mean? What is the difference between one another? How to use each of the order types in your favor?
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