Monday, 3 June 2013

Advanced Techniques for Forex Trading Success

Once you have the basics down, your learning about Forex should not stop. You need to continue learning more advanced techniques for bettering your skills. That means finding expert content which tells you how full-time traders are turning their strategies into successful trades. This article will walk you through a few strategies which can help you build your profits and avoid catastrophic losses.

When you have a spot Forex trading position chosen, you need to set its stop order. If you are using slow moving pairs such as the Euro versus the Canadian dollar, your stop order should be about 20 pips. For more volatile pairs, 40 pips is good. Use a bar chart, available from your broker, and then determine where the pair traded at before the current trend began. You can also use trend indicator websites online as they offer a great deal of free data which is reliable. Your buy stop needs to be placed right below the most recent lows. Your sell stop just above the recent highs.

You must calculate the risk:reward ratio before you make a trade. For example, if you think the potential is 100 pips and your stop is 30 pips, that means your ratio is 100:3, which breaks down to 3.3:1 in the positive. A high ratio is what you are going for, so look for trades where the number in front in your ratio is higher than the latter number. The higher that number is in comparison to the stop number, the better the trade will be. That means a 15:1 ratio is far superior to a 5:1, for example. In fact, anything below 3:1 is likely not even worth trading on.

Remember that losses will happen, even big ones, no matter how hard you try to negate your risk. As long as you have at least a fifty percent rate of success, you should be able to grow your capital. Look for money management ratios which exceed 15 or even 20:1 for the greatest returns and lowest risk. Try to focus on short-term trades when the market is favorable and you think the trends are in your favor.

It is important that you use software to give you automatic alarms when certain criteria are met. For example, when the currency pair hits a level which is within a range you set, you will be alerted and can make the trade. You will find there are websites which provide you with this tool or you can download an app to your phone to automate the process. Even if you are only using a demo account, make use of this process so that you can learn how to correctly set the limits and turn the data into profits.

Forex trading isn't simple, but the more you learn, the better you will be at it. Making the right decisions is all that lies between you and great success. Take the time to continue reading and learning, building your knowledge into your strategies. Soon enough, profits will increase and losses will be minimal.

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