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.
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