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Forex Trading Essentials that can
Improve Your Trading Immediately
Compare your trading style against this
list and if you are struggling to make
profits, try these suggestions...
Increase your time perspective - If
you are not a well seasoned Forex
trader, you shouldn't even look at a price
chart of less than 60 minutes. The
randomness of the "normal" transactions
which occur in Forex will distort your
judgment of the "true picture." Use longer
time frames, such as 60 minute, 4 hour and
daily charts when planning your trades.
Reduce your position size to 5%
Maximum - Having more than 3 to 5
percent of your trading capital "on the
table" is a major "no no". High leverage
makes it so easy to get in, way over your
head. This combination snares many traders
and can rapidly destroy your account. You
need to have the ability to ride the
volatility waves common in Forex.
Give your trade time to work - You
can only use this option effectively if your
position is sized safely... as above. Prices
will fluctuate dramatically in Forex, and
you need to be sure that a "loss really is a
loss" before you close a trade that is
moving against your plan. A 30 pip stop loss
will often kick you out of a trade, just as
it's about to turn in your direction. You
need to allow for larger price swings... if
you have determined the major price trend,
be patient and let the odds work in your
favor.
Reduce your dependence on technical
indicators - Due to the fact that
technical indicators get their data from
past events, the reality is they have no
ability to predict the future. Traders that
enjoy success using these indicators, often
profit from the knowledge of how "the
masses" are likely to react to this data,
rather than the information itself. You need
to determine the major trend (a simple
moving average will show you this) and hop
aboard. Use a longer time frame, as in the
first point. The largest players in Forex,
rely about 25% on technical indicators when
making their trading decisions.
Trade only one or two currency pairs -
And stick to the majors... not the crosses.
Currency prices are driven primarily by
fundamental data. In order to anticipate
what is likely "coming down the road", you
need to follow some basic data for each of
the countries involved. Trading too many
currencies will make it difficult to keep up
to date. There is equal opportunity to
profit from each of the pairs, so wait until
your experience level has matured and the
information tends to "sink in" without as
much effort on your part before you start to
trade more currencies.
Average in and out of your trades -
If your trading account is less than $10,000
have your broker enable mini-lots for your
account. This will allow you to average in
and out of your trades... a real "plus" as
you will see on the Forex Strategy page. If
this applies to you and your broker doesn't
offer mini lots, find a new broker... this
is an important "need to do".
Follow the data for your currency pair(s)
- Know what data is pending for release.
Volatility often increases dramatically when
these releases occur. The safe strategy is
to exit your positions prior to major
releases... this is the way many of the
larger accounts handle these situations.
Data releases can often cause a change to
the trend. Take them seriously.
Determine the trend and get aboard -
As with any type of trading, the safest bet
is to determine which way prices are
trending, and then trade in that direction.
You don't need anything fancy... a simple
moving average on your candlestick chart is
sufficient. Zoom your chart out to be sure
you have the "big picture". Compare where
the price is now, relative to where is has
been for a significant amount of time (at
least a month). Use caution if the current
price is near upper or lower extremes, as
there may be a trend change once that
extreme is reached.
Know when to take a profit - A
winning position can quickly turn into a
loser if you set your sights too high. Don't
be afraid to take your profit - or a part of
your profit at 20 or 30 pips. The price
waves in Forex make it ideally suited to
averaging into and out of positions by using
multiple entry and exit points for each
position. The benefit of spreading out your
position is that your overall risk is
reduced. See the strategy pages for more on
this one.
Stop listening to "Gurus" -
Don't fall into the trap of believing
everything, or even "most" things, you hear.
The trading world is overflowing with gurus
only too willing to offer their opinion on
the future. It will only be an opinion,
nothing more. They may seem to have
convincing data, but trust your own brain.
You need to weigh the economic data from
"your" countries... that is what drives
currency prices. The enormous size and
nature of Forex ensure there is no "insider
information". You have access to the same
data as everyone else in the game. In time,
your own instinct will guide you to your
goals, and that is what you need to trust.
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Current Forex Data
Using
current Forex data is critical to your success.
Here is how to get the good stuff...
Click Here to
go to the next page [Current
Forex Data]
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Forex Trading
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