Your chosen Forex trading strategy will drive the trading decisions that you make in the Forex trading system. If you are new or a novice to Forex trading systems, you will need to develop an appropriate strategy that will evolve over time. The following steps outline the approach to building a Forex trading strategy that may be adapted and tailored to your needs.
Develop a Forex Trading Plan – A Forex trading strategy should never be considered absolute or complete. Part of having a Forex trading strategy is incorporating a plan for making adjustments to the strategy. You will need to be able to make adjustments without completely revamping your strategy. Though you may consider your trading strategy to be more technical than fundamental or vice versa, you should take advantage of any available market data in making your trading decisions regardless of which discipline it falls under.
Initiate a Forex Trade – You must decide on the currency pairs that you which to trade and the number of units to trade. You must establish either a buy or sell position. You are then ready to initiate a trade as either a market order or a limit order. A market order initiates a trade at the current market price while a limit order permits a trade to be executed when the market price reaches a limit that is predetermined by you. As a safeguard for online trading, particularly with limit orders, you should also establish limits to take profits or stop losses. Take profit and stop loss limits become particularly important with online trading when your Internet connection is loss. In the time it will take to reestablish a connection, the market price may change and fall outside of any established limits. Your trading platform may be able to calculate a suitable set of limits. Limits are set as either the percentage of the trading range or as distance from the market entry price. If you have established an open position, you may adjust these calculated values to suit your needs.
Determine When to Exit a Forex Trade – If a trade moves in favor of your established position you must evaluate the move. In a long position, a move is considered significant if it is in the range of 15 to 20 pips. In response to such a move, it would be advantage to raise your stop-loss limit above the market entry price and your take-profit limit by about 20 pips or the number of your choice. If the trade continues to move in your favor you should continue to raise the stop-loss and take-profit limits. This aspect of a trading strategy allows you to continue to generate profits while the market is working in your favor. Unless, for some reason, you feel you need to manually exit the trade, you should not exit the trade until the market reverses to trigger your stop-loss order. A take-profit limit should not be used to signal an exit from the trade.
If a trade moves against your established position, you have two options. You may manually exit the trade before your stop-loss limit is reached or stay in the trade until either the stop-loss or take profit limit triggers an end to the trade. It would not be beneficial to lower the stop-loss limit with the expectation that the market price will reverse for a short period of time. While such a reversal is possible, the odds of this type of market action are low and your Forex trading strategy should not depend on this type of anomaly.
By: Andrew Daigle
Posts Tagged ‘Decisions’
Forex Currency Trading Beginner Strategies
January 3rd, 2009
I wanted to talk to you about forex currency trading beginner strategies that you can use. This is a tough market for most people. That’s not to say it’s hard to learn, but that it can be very unforgiving to new people. While I started out and learned, I lost a lot of my money. I call it my trial and error period where every bad trade taught me a lesson. That was a bit more expensive to learn that I would of ever wanted to pay, but I did learn. Any new person can do great in this market, if they’re willing to learn and that doesn’t mean doing what I did. Being prepared is probably about the best thing you can do, so I’m going to share what I’ve learned over my time that has taught me so much about profitable trading.
Before you can start profiting from this market, I think a good forex currency trading beginner strategy would be to learn how to protect your money. There really is no reason to make profits if you’re just going to lose it because you don’t know how to hold onto it. Cutting your losses is an essential part of trading and you need to be able to act on it. Bad trades have a way of stealing from your other profitable trades.
The next important thing is to learn to control your emotions. These things have a way of making some pretty bad trades look good. This is a business, which means you have to be cold and calculated. You make decisions based just on facts and figures because that is the only way to tell if it is profitable.
By: Tyler Ziggler