You can search the Internet, or go to your local library, and find a plethora of information on complicated, hard to understand, currency trading strategies. Though Forex education is important, there are many simple, time-tested Forex trading strategies that can be used immediately and give you profitable results. Profits are, as we all know, the bottom line.
Profiting from Gap Trading
Gap trading is not a new strategy. It's been used in all investment markets for a very long time. To learn this Forex trading technique is relatively easy. Gap trading in an attempt to take advantage of the difference, or "gap," in price between the close of the previous day with the open of the following day. If the open is above the previous day's close, this is commonly referred to as "gapping up.If the open price is below the previous day's close price, this is called "gapping down.If the open is at the same price level, then there was no gap.
Forex Trading and Gaps
Generally, in Forex trading this strategy tends to be ignored; most people feel that as currencies are traded 24 hours a day, there is no true opening or closing prices. That being said, some people maintain that gap trading in Forex trading can be successful 85% of the time. If this is the case, there is money to be made. The question becomes: How can you trade gaps in the Forex market?"
If you ignore the 24-hour time frame associated with Forex trading, and set up an opening and closing time to create an artificial market, you can provide yourself with an open high low close data range. Based on that data range, you would be able to trade gaps. Another Forex trading strategy is basically to ignore trading on Saturday and Sunday, when volume is thin and most of the world is not working. Under this scenario, you establish a closing time on Friday and an opening time on Monday. Based on the gap, you take the appropriate position.
Unlike what you might think, the Forex currency trading strategy for gaps is contrary by nature. That is to say, you do the opposite of what's intuitive. If the price gaps up, you sell. If the price gaps down, you buy.
This forex currency trading strategy works more often than not, and thus, it's a simple process that can generate great profits.
Saturday, December 20, 2008
Easy Steps For Developing A Forex Strategy
There is no successful forex trader out there that hasn't got to where they are without developing their own long term strategy and system for making profits day after day. All businesses work that way, and forex is not an exception. Here are some steps that you need to take to develop a long term strategy.
The time frame of trading: There are a lot of different things you can trade, but what is often overlooked, is how long you hold onto a trade. You could simply be a day trader, or you can hold onto currency for the long term. You need to really sit down and think about what has really worked for you.
Identifying indicators of trends: This is a very nice thing to understand. Being able to see where a currency is going before it is there gives you a tremendous advantage to making a nice profit. I use Forex Killer software to help me identify these trends.
How much are you willing to lose: You need to understand that you're not going to make 100% profitable trades. Some trades will be losers. The key to long term success is maximizing your successes and minimizing your failures. You could make 10 profitable trades and 1 gigantic loss, and you're down in money. You need to assess how much you're willing to lose, so your profitable trades will keep you in the black.
Set an exit after you buy: You need to know when you're going to sell. There's no need to buy and not know when you're going to sell. Setting an exit helps eliminate emotion from a trade. Most people like to ride the wave to see how high the currency can go, but act smart get out at your exit point.
Get yourself forex software: Don't underestimate the power of automated forex software like Forex Killer. This software will analyze all the currency charts and identify profitable trends for you. This is a significant tool help you make profit. Use it.
The time frame of trading: There are a lot of different things you can trade, but what is often overlooked, is how long you hold onto a trade. You could simply be a day trader, or you can hold onto currency for the long term. You need to really sit down and think about what has really worked for you.
Identifying indicators of trends: This is a very nice thing to understand. Being able to see where a currency is going before it is there gives you a tremendous advantage to making a nice profit. I use Forex Killer software to help me identify these trends.
How much are you willing to lose: You need to understand that you're not going to make 100% profitable trades. Some trades will be losers. The key to long term success is maximizing your successes and minimizing your failures. You could make 10 profitable trades and 1 gigantic loss, and you're down in money. You need to assess how much you're willing to lose, so your profitable trades will keep you in the black.
Set an exit after you buy: You need to know when you're going to sell. There's no need to buy and not know when you're going to sell. Setting an exit helps eliminate emotion from a trade. Most people like to ride the wave to see how high the currency can go, but act smart get out at your exit point.
Get yourself forex software: Don't underestimate the power of automated forex software like Forex Killer. This software will analyze all the currency charts and identify profitable trends for you. This is a significant tool help you make profit. Use it.
Choosing The Right Forex Strategy
It is important to choose your Forex trading strategy. Two basic areas of strategy are fundamental analysis and technical analysis. This is the same in the equity market as it is the Forex market. For most Forex traders, the most widely used strategy is technical analysis. The following article is explains how each strategy basically works and how they are used in Forex trading:
Technical Analysis
Since technical analysis is the most common, we’ll start with it. Technical analysts in the Forex market analyze price trends, exactly like in the equity market. There is only one real difference between using it in the equity market and using it in Forex. This difference is that the Forex market is open 24 hours a day, changing the time frame.
On account of this, your technical analysis has to be changed a bit so it can function in the 24 hour Forex market. Generally, the forms of technical analysis used in Forex are:
- The Elliott Waves
- Fibonacci studies
- Parabolic SAR
- Pivot points
To make more accurate predictions, a lot of technical analysts will combine these studies. The most popular combination is Elliott Waves and Fibonacci studies. However, others do choose to create trading systems in an attempt to continually locate related buying and selling conditions.
Fundamental Analysis
Valuing one company is difficulty enough. Imagine valuing an entire country. Because it is often very challenging, fundamental analysis in the Forex market is normally just used to make long-term predictions of trends. Some traders do use it to trade short term, though. There is quite a variety of fundamental indicators of currency value. Some of them are:
- Retail Sales
- Purchasing Managers Index (PMI)
- Non-farm Payrolls
- Consumer Price Index (CPI)
- Durable goods
However, there are more fundamental factors that you have to keep an eye on than just these. A lot of different meetings are available where you can get quotes and commentaries that sometimes affect the markets just as much as the reports. In these meetings, you can discuss inflation, interest rates, and other matters that can have an influence on the Forex market.
Merely taking a look at commentary and reading reports can be very beneficial to Forex fundamental analysts in grasping a better comprehension of the long-term market trends as well as help short-term traders to survive tremendous fluctuations in the market.
Choosing Your Strategy
Choosing a strategy and working on it until it is perfected down to the details is how most successful, experienced traders operate. There are many options for your style and methods. Some traders will concentrate on one certain calculation or study, and others focus on a broader analysis of trends. A combination of technical and fundamental analysis is what most professional Forex traders will advise. But everything is up to your decision and what you think fits your way of trading best.
A great way to develop your individual strategy is to create a demo account and trade “paper money” until you get the hang of it. This way you don’t have to risk your money in an investment until you are absolutely sure that you know what you are doing.
Because the Forex market is the largest in the world and the number of traders keeps increasing, it is crucial that you make sure you know your trading strategy and are ready to execute it.
Technical Analysis
Since technical analysis is the most common, we’ll start with it. Technical analysts in the Forex market analyze price trends, exactly like in the equity market. There is only one real difference between using it in the equity market and using it in Forex. This difference is that the Forex market is open 24 hours a day, changing the time frame.
On account of this, your technical analysis has to be changed a bit so it can function in the 24 hour Forex market. Generally, the forms of technical analysis used in Forex are:
- The Elliott Waves
- Fibonacci studies
- Parabolic SAR
- Pivot points
To make more accurate predictions, a lot of technical analysts will combine these studies. The most popular combination is Elliott Waves and Fibonacci studies. However, others do choose to create trading systems in an attempt to continually locate related buying and selling conditions.
Fundamental Analysis
Valuing one company is difficulty enough. Imagine valuing an entire country. Because it is often very challenging, fundamental analysis in the Forex market is normally just used to make long-term predictions of trends. Some traders do use it to trade short term, though. There is quite a variety of fundamental indicators of currency value. Some of them are:
- Retail Sales
- Purchasing Managers Index (PMI)
- Non-farm Payrolls
- Consumer Price Index (CPI)
- Durable goods
However, there are more fundamental factors that you have to keep an eye on than just these. A lot of different meetings are available where you can get quotes and commentaries that sometimes affect the markets just as much as the reports. In these meetings, you can discuss inflation, interest rates, and other matters that can have an influence on the Forex market.
Merely taking a look at commentary and reading reports can be very beneficial to Forex fundamental analysts in grasping a better comprehension of the long-term market trends as well as help short-term traders to survive tremendous fluctuations in the market.
Choosing Your Strategy
Choosing a strategy and working on it until it is perfected down to the details is how most successful, experienced traders operate. There are many options for your style and methods. Some traders will concentrate on one certain calculation or study, and others focus on a broader analysis of trends. A combination of technical and fundamental analysis is what most professional Forex traders will advise. But everything is up to your decision and what you think fits your way of trading best.
A great way to develop your individual strategy is to create a demo account and trade “paper money” until you get the hang of it. This way you don’t have to risk your money in an investment until you are absolutely sure that you know what you are doing.
Because the Forex market is the largest in the world and the number of traders keeps increasing, it is crucial that you make sure you know your trading strategy and are ready to execute it.
A Forex Strategy That You Must Use
There are numerous strategies available to allow you to trade in the forex exchange. Some of these strategies work well, others not so well. This article details one strategy that works well.
This strategy has to do with following the trends. Professional forex traders say the trend is your friend, until it ends. Here is an extremely short-term trading strategy that follows the trend. This trading strategy usually has profits of about 40 pips per trade.
The foreign currencies often have dynamic price changes immediately after news stories that pertain to those currencies have been released. These news stories report on various economic metrics, such as the CPI, unemployment, etc. There are economic news stories like these released weekly.
How can you capitalize on this news? As I stated above, the forex market often moves significantly after these news stories. This movement can be 30, 40, 50 or even more pips, immediately. This move can be either up or down. So how do you know if you should be long or short on any particular currency for this strategy? A few seconds after the news comes out, determine which way the currency trend is going. If it is trending up, go long that currency. After you establish your position on this currency, set a tight stop-loss of 10 pips below the current price. Soon the currency will likely move 30, 40 or 50 pips. Once it has, close out your position. If conversely, the currency has trended downward more than 5 pips, then short the currency. Follow this strategy and you will be rewarded with controlled risk.
This strategy has to do with following the trends. Professional forex traders say the trend is your friend, until it ends. Here is an extremely short-term trading strategy that follows the trend. This trading strategy usually has profits of about 40 pips per trade.
The foreign currencies often have dynamic price changes immediately after news stories that pertain to those currencies have been released. These news stories report on various economic metrics, such as the CPI, unemployment, etc. There are economic news stories like these released weekly.
How can you capitalize on this news? As I stated above, the forex market often moves significantly after these news stories. This movement can be 30, 40, 50 or even more pips, immediately. This move can be either up or down. So how do you know if you should be long or short on any particular currency for this strategy? A few seconds after the news comes out, determine which way the currency trend is going. If it is trending up, go long that currency. After you establish your position on this currency, set a tight stop-loss of 10 pips below the current price. Soon the currency will likely move 30, 40 or 50 pips. Once it has, close out your position. If conversely, the currency has trended downward more than 5 pips, then short the currency. Follow this strategy and you will be rewarded with controlled risk.
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