Forex Strategy Part 1
All FX traders need a strategy to trade successfully. Once you have your Forex strategy, write out a trading plan. The simple way to find the best trading strategy is to try a number of different forex trading strategies, record why you entered the trade and why you exited it.
Keep you Forex Strategy simple and always follow you trading plan. I will discuss what works for me and my simple strategy later but every one is different and they have different emotions especially when it comes to loosing money.
Before I go much further, I know very few people who have long winning streaks. The best traders are those that accept loses (keep them to the minimum) and move on to the next trade.
It is well known that 95% of all traders fail, most of these fail because they don’t have a strategy and a trading plan. They let loses run and take small profits. There is not point in taking 3 winning trades of 5 pips only to suffer a 20 pip lose. FX beginners can easily win more trades than they lose but still be out of pocket at the end of the day.
Forex Strategy 1. – Why be a Fx Trader?
The first point to think about why do you want to trade the foreign currency market. What is that you want:
- Be a millionaire.
- Earn some extra money for holidays and fun time.
- Maybe to give up your day job and have finical freedom to do what you want.
- Be you own boss and work from home.
- Maybe something else.
For those that have had the opportunity to work from home occasionally, you know the sear amount of work that you can do with out all the distractions and better still you don’t have that hour commute at the beginning and end of the day.
If you haven’t worked from home before you must include in your Forex Trading strategy discipline. Discipline to get up in the morning, have breakfast, some exercise, when and were you are going to trade. Do you have a room that you can make into a trading office?
Even though I’m an introvert, after a few days working from home, I miss talking to people. Going to work isn’t just just about earning money, its the social interaction with real people face to face, talking, joking, sharing ideas.
Working from home you will not have that social interaction.
What ever you want write it down and visualize yourself being happy doing what you want.
Forex Stratgey 2 – When and Where
Trade to Live Not Live to Trade
Being an FX Trader can become very addictive if you are not careful. The most action on the FX market is:
- 7am – 10am GMT – European and UK Openings
- 2pm- 4pm GMT – UK back from lunch and the NY Session opens.
- 12pm to 2am GMT – Tokyo and the Asian Markets.
Did I say that FX trading is addictive well its 2am, I’m writing this and watching the Asain markets and a few good moves on Cable (GBP-USD) 50 plus pip move. I’m not trading because I’m distracted writing this.
So back to our questions.
Where To Trade – If you are a Day Trader, you will be sitting watching your Computer screen for long periods. Trading is long periods of bordem with a few minutes of adrenline. I can not remember the number of times, I’ve been following the rice action for a few hours and just when my entry conditions are met for a high probalility trade the phone rings, I answer the phone and miss the trade. You need to have somewhere to trade and not be distracted.
Ideally you should have access to 24/7 business news. Every country publishes economic news during the month and these news releases can greatly affect the FX market and change the value of any currency in seconds. The release of this data is planned so every one knows when it will be released.
But unexpected things can and do happean that can greatly change the direction of any market. An earth quake in the middle east that cuts a oil pipe line or in Tokyo, North Korea launches a missle which results in every one selling JPY
When To Trade – The time you have to trade can affect the time frames that you trade in. If I’m busy then I will look at trading on a 4hour time frame and have an alarm clock set to go off every four hours, when writing reports I may look at the 1 hour or 30 minute time frames. I really like tranding the 15minute or 5 minute time frames but need to make sure I can concentrate just on trading. My Forex software, strategy and trading plan are the same for each time frame.
Write down in your Forex strategy when and where you will trade.
I have covered a lot and nothing really about the physical act of trading. But these are important issues that any Forex Trader should have considered before they start trading.
Forex Robots.
Forex robots are automatic trading systems. They are mathmatical algolrithyms that try and predict the market and place and close trades automatically 24/7. There are many Forex robots on the market and having a automated Forex system that prints money for you 24/7 is the holy grail of all FX Traders.
Just a thought or two.
If some one actually designd such a system that worked, why would they want to sell it instead of making loads of cash for themselves?
The Forgien Exchange Market is affected by outside events, some which on the face of it have nothing to do with value of a currency but do. How does any robot deal with that?
Once the big banks understand the robot they could “play” the robot and simply take your hard earned cash.
Summary
An Forex strategy and trading plan is required trade successfully. What ever your Forex trading strategy is, you should write it down and review it to make sure that it is still valid. The markets change and if your Forex strategy isn’t working you should change it to work in the current trading conditions