Many traders try and make as much money as possible, and therefore always want to be in the market, but this is hard work, and inevitably leads to you taking a few dubious trading decisions which can often prove costly.
The fact is that you can make just as much money as short-term traders and scalpers by looking for just 1 excellent trade per week which has the perfect set-up. By that I mean taking a position where all your favoured technical indicators are in harmony and indicate that a strong movement either up or down is highly likely.
If you've been trading for any length of time you should have noticed that every so often you get what appears to be the perfect set-up. More often than not these positions can play out and can yield several hundred points profit, which has to be better than constantly scalping all day for a few points here and there.
Just 1 of these per week can be enough to make an excellent living from forex trading, and you may even find that you get several of these ideal set-ups per week, depending on how many currencies you track and what time frame you are using.
There are many traders who try to trade almost everyday but the mistakes will also increase. The probabilities of winning will decrease because he try to take on the forex market even when it's going against him.
The main point I want to get across is that you just need a few of these high probability positions every so often in order to make some excellent returns.
Wednesday, March 3, 2010
How Can Forex Profits Be Repetitive?
It can be argued that profitable forex trading is tedious and repetitive. Why? Well look at many of the most successful traders and you will find that they have one thing in common - they all have a proven profitable method of trading that they use over and over again day in day out. And they are very focus. You can go to forums and feel their determination.
Many people try and over complicate their trading strategies. They use many different technical indicators, they have many different ways of trading, and in general their whole approach to trading is just too disorganized.
To be successful you just need to find one trading method that produces regular profits and stick to this method for every single trade you make.
It doesn't have to be a super system that produces 50-100 points a day either. You can make excellent profits with a system that produces 5-10 points a day or even just 20 points a week, for example, depending on your stake.
Many people new to forex look for the holy grail forex system that's going to make them a millionaire, but it simply doesn't exist. The truth is that there are plenty of trading systems out there that produce regular profits. The trick is to find one and stick with it.
It could be a breakout strategy, a trend following strategy or a very quick scalping strategy, it doesn't matter. As long as it's proven to be profitable and it works for you, stay with it and continue to trade using this method all the time.
Yes it's boring and tedious but if you want to be a profitable forex trader then this is what's called for. It surely has to be better doing this than using a more haphazard and unpredictable method of trading.
Once you lose the mindset that you always have to be in the market and therefore are constantly looking for positions to enter, then you will become a more profitable trader. The key to success is to find a system that works for you and then just sit back and wait for potentially profitable set-ups to occur which meet your trading criteria.
Many people try and over complicate their trading strategies. They use many different technical indicators, they have many different ways of trading, and in general their whole approach to trading is just too disorganized.
To be successful you just need to find one trading method that produces regular profits and stick to this method for every single trade you make.
It doesn't have to be a super system that produces 50-100 points a day either. You can make excellent profits with a system that produces 5-10 points a day or even just 20 points a week, for example, depending on your stake.
Many people new to forex look for the holy grail forex system that's going to make them a millionaire, but it simply doesn't exist. The truth is that there are plenty of trading systems out there that produce regular profits. The trick is to find one and stick with it.
It could be a breakout strategy, a trend following strategy or a very quick scalping strategy, it doesn't matter. As long as it's proven to be profitable and it works for you, stay with it and continue to trade using this method all the time.
Yes it's boring and tedious but if you want to be a profitable forex trader then this is what's called for. It surely has to be better doing this than using a more haphazard and unpredictable method of trading.
Once you lose the mindset that you always have to be in the market and therefore are constantly looking for positions to enter, then you will become a more profitable trader. The key to success is to find a system that works for you and then just sit back and wait for potentially profitable set-ups to occur which meet your trading criteria.
How To Determine Stop Losses?
If you want to become a successful forex trader then it's imperative that you develop your own stop loss strategy. Stop losses are incredibly important because they protect your trading capital and limit your losses.
A profitable trader's account will either contain lots of small losses but plenty of bigger gains which more than compensate for the losses, or they will have similar sized gains as the stop losses but more of them so they are in profit overall.
For example, a trader may have a stop loss placed at 10 points away from entry each time, but has much bigger targets of 20+ points, for instance, or he may even let his winners run for as long as possible.
Alternatively he may have a stop loss of 30 points but also looks for 30 points profit from each trade, so in this case he needs a win ratio of over 50% to be profitable.
You also need to first of all be making some decent profits from forex trading. This way you can really analyze your trading and scrutinize your exit points and stop loss limits.
The perfect stop loss strategy should basically be at the point where you can admit that your initial trade was wrong, and the criteria that made you enter the trade no longer apply.
An example of this would be if you were going long on a rising moving average. A good stop loss here would be at a point just below the rising moving average because if this subsequently occurred then it is evident that the rising trend has come to an end and your reasons for entering the position no longer apply.
Your optimum stop loss level should be at a point where you can safely say that your initial entry has gone against you and it's time to get out, without being too close, but it should also be at a point where it's statistically unlikely to turn around and bounce back into profitability.
For example, a while back I used a stop loss of 20 points when trading GBP/USD (including the spread so the price would have to move 17 points to trigger my stop loss) with target profits of 10-60 points each time. However after analyzing my records I discovered that this stop loss was slightly too far away because it hardly ever bounced back from 14+ points away so why have a stop loss of 20 points?
This was just throwing money away so I reduced my stop loss to 14 points and noticed a significant increase in my profits and have stuck with it ever since (although I am constantly tweaking my trading strategies).
One final point I want to make is that you should study the behaviour of the different currency pairs you are trading because you will often find that you need slightly different stop loss levels for different pairs in order to make maximum profits, as they all behave differently.
The key point is that you have to find your ideal stop loss strategy because trading with random stop loss levels or worst still no stop losses at all will really hold you back and will make it extremely difficult to make consistent profits from forex trading.
A profitable trader's account will either contain lots of small losses but plenty of bigger gains which more than compensate for the losses, or they will have similar sized gains as the stop losses but more of them so they are in profit overall.
For example, a trader may have a stop loss placed at 10 points away from entry each time, but has much bigger targets of 20+ points, for instance, or he may even let his winners run for as long as possible.
Alternatively he may have a stop loss of 30 points but also looks for 30 points profit from each trade, so in this case he needs a win ratio of over 50% to be profitable.
You also need to first of all be making some decent profits from forex trading. This way you can really analyze your trading and scrutinize your exit points and stop loss limits.
The perfect stop loss strategy should basically be at the point where you can admit that your initial trade was wrong, and the criteria that made you enter the trade no longer apply.
An example of this would be if you were going long on a rising moving average. A good stop loss here would be at a point just below the rising moving average because if this subsequently occurred then it is evident that the rising trend has come to an end and your reasons for entering the position no longer apply.
Your optimum stop loss level should be at a point where you can safely say that your initial entry has gone against you and it's time to get out, without being too close, but it should also be at a point where it's statistically unlikely to turn around and bounce back into profitability.
For example, a while back I used a stop loss of 20 points when trading GBP/USD (including the spread so the price would have to move 17 points to trigger my stop loss) with target profits of 10-60 points each time. However after analyzing my records I discovered that this stop loss was slightly too far away because it hardly ever bounced back from 14+ points away so why have a stop loss of 20 points?
This was just throwing money away so I reduced my stop loss to 14 points and noticed a significant increase in my profits and have stuck with it ever since (although I am constantly tweaking my trading strategies).
One final point I want to make is that you should study the behaviour of the different currency pairs you are trading because you will often find that you need slightly different stop loss levels for different pairs in order to make maximum profits, as they all behave differently.
The key point is that you have to find your ideal stop loss strategy because trading with random stop loss levels or worst still no stop losses at all will really hold you back and will make it extremely difficult to make consistent profits from forex trading.
6 Ways To Stop Trading From Going Insane
Trading forex for a living from the comfort of your own home can be extremely profitable, but it can also drive you insane at times, so for today's post I thought I'd offer my 6 top tips for keeping yourself sane when trading.
1. Visit trading forums.
Trading from home is a lonely profession, and the frustrating thing is that you have no-one to share trading ideas with, so forums and trading rooms are great for this. Obviously you don't want to spend too much time doing this otherwise you might miss some great opportunities, but they're worth visiting during quiet periods, of which there are many during the day.
2. Check the day's economic calendar.
There's nothing more infuriating than taking the time to find a good position which goes nicely into profit, before suddenly turning into a losing position due to economic data releases or Ben Bernanke opening his big mouth, for example, which you'd completely forgotten about. So always check the scheduled announcements for the day before you do anything else, and make a note of them so you're never caught out. (The best site for this, in my opinion, is http://www.forexfactory.com).
3. Leave the house and speak to people.
Following on from the last point, the loneliness factor is a very real one and for that reason I always say that you should make a point of going out and mixing with people as much as possible when you're not trading. If you're not careful, after long periods of time it's very easy to go out less and less and find yourself becoming more and more introverted, so try not to fall into this trap.
4. Take plenty of exercise.
It's an old saying, “a healthy body is a healthy mind”, but it's completely true. Apart from the fact that you need to be completely switched on when making trading decisions, sitting down staring at a computer screen for hours on end is really not good for your eyes, your back or your health in general. Therefore you should take plenty of exercise during the day and in your spare time to keep yourself healthy.
5. Take regular breaks and reward yourself occasionally.
As well as exercising, it's also a good idea to take regular breaks during the day just to relax and chill out. Trading can really get the pulse racing at times, and can be very stressful, so take a break occasionally. Also if you've made a highly profitable trade and achieved your daily target, if you have one, why not reward yourself with a DVD or a shopping spree, for example.
6. Invest your profits into other areas.
Trading forex is great, but why spend all your time busting a gut trying to make more and more money. If you do become a successful trader, invest some of it into stocks and property and make your money work for you. This way you will take some of the pressure off of yourself and you can become a more relaxed trader knowing you have other sources of income.
1. Visit trading forums.
Trading from home is a lonely profession, and the frustrating thing is that you have no-one to share trading ideas with, so forums and trading rooms are great for this. Obviously you don't want to spend too much time doing this otherwise you might miss some great opportunities, but they're worth visiting during quiet periods, of which there are many during the day.
2. Check the day's economic calendar.
There's nothing more infuriating than taking the time to find a good position which goes nicely into profit, before suddenly turning into a losing position due to economic data releases or Ben Bernanke opening his big mouth, for example, which you'd completely forgotten about. So always check the scheduled announcements for the day before you do anything else, and make a note of them so you're never caught out. (The best site for this, in my opinion, is http://www.forexfactory.com).
3. Leave the house and speak to people.
Following on from the last point, the loneliness factor is a very real one and for that reason I always say that you should make a point of going out and mixing with people as much as possible when you're not trading. If you're not careful, after long periods of time it's very easy to go out less and less and find yourself becoming more and more introverted, so try not to fall into this trap.
4. Take plenty of exercise.
It's an old saying, “a healthy body is a healthy mind”, but it's completely true. Apart from the fact that you need to be completely switched on when making trading decisions, sitting down staring at a computer screen for hours on end is really not good for your eyes, your back or your health in general. Therefore you should take plenty of exercise during the day and in your spare time to keep yourself healthy.
5. Take regular breaks and reward yourself occasionally.
As well as exercising, it's also a good idea to take regular breaks during the day just to relax and chill out. Trading can really get the pulse racing at times, and can be very stressful, so take a break occasionally. Also if you've made a highly profitable trade and achieved your daily target, if you have one, why not reward yourself with a DVD or a shopping spree, for example.
6. Invest your profits into other areas.
Trading forex is great, but why spend all your time busting a gut trying to make more and more money. If you do become a successful trader, invest some of it into stocks and property and make your money work for you. This way you will take some of the pressure off of yourself and you can become a more relaxed trader knowing you have other sources of income.
Thursday, February 25, 2010
Trading Currency Successfully Is Just About Getting The Probabilities Right...
When you first start to trade forex, it's very easy to test out a technical indicator or two and then apply it to your first few trades, or even just trade based on your gut feelings, but if you are serious about becoming a long-term successful trader then you need a well-thought out strategy. Visit my profile page 1 and profile page 2.
A good forex trading system is one where the probabilities are in your favor for every single trade you make.
For example, I don't believe in entering a position where one single technical indicator provides a good signal, but instead rely on several indicators to all indicate either a buy signal or a sell signal in order to enter a trade with confidence.
Analyzing different time frames as well to show the overall trend is a must. For example, if I'm analyzing a 5-minute chart and all my indicators indicate a buy signal, then I will check the 30-minute chart as well to make sure that we're not in an overbought position or that we are in a strong downwards trend.
To demonstrate with a real-life example, the GBP/USD signalled an outstanding sell signal at around 11.45 this morning (UK time) where all of the signals I use were signaling that a downward move was imminent.
The 10, 50 and 100 EMA's were all trending upwards, the strong trend was currently red, and the MACD was crossing over on both charts. Now I was just waiting to see if the support level on the 5 minute chart of 2.0747, indicated by the parabolic SAR, was going to break before entering.
As it turned out, it did break upwards and I immediately entered my position to go long, and it subsequently dropped 110 points.
As you can see in this instance all my signals were indicating a downwards breakout, and therefore providing it breached this support level, this was a classic example of a high probability trade.
So always try and create a trading system that will provide you with high probability trading positions as this is the key to making long-term profits from forex trading.
A good forex trading system is one where the probabilities are in your favor for every single trade you make.
For example, I don't believe in entering a position where one single technical indicator provides a good signal, but instead rely on several indicators to all indicate either a buy signal or a sell signal in order to enter a trade with confidence.
Analyzing different time frames as well to show the overall trend is a must. For example, if I'm analyzing a 5-minute chart and all my indicators indicate a buy signal, then I will check the 30-minute chart as well to make sure that we're not in an overbought position or that we are in a strong downwards trend.
To demonstrate with a real-life example, the GBP/USD signalled an outstanding sell signal at around 11.45 this morning (UK time) where all of the signals I use were signaling that a downward move was imminent.
The 10, 50 and 100 EMA's were all trending upwards, the strong trend was currently red, and the MACD was crossing over on both charts. Now I was just waiting to see if the support level on the 5 minute chart of 2.0747, indicated by the parabolic SAR, was going to break before entering.
As it turned out, it did break upwards and I immediately entered my position to go long, and it subsequently dropped 110 points.
As you can see in this instance all my signals were indicating a downwards breakout, and therefore providing it breached this support level, this was a classic example of a high probability trade.
So always try and create a trading system that will provide you with high probability trading positions as this is the key to making long-term profits from forex trading.
Is Trading The Forex Really For You?
Profile page 1 and Profile page 2..
The trouble with being a full-time forex trader is that it is a very lonely profession if you're trading at your own computer desk at home.
Everyone thinks it's an exciting, exhilarating profession sitting at your computer in your underwear watching the markets, going long, going short, raking in huge profits, but the reality is somewhat different.
You can sit staring at your computer screen for hours on end waiting for a good set-up to enter a trade, and sometimes you can sit there for the whole day and not enter a trade. And even if you do find a trade, when it goes against you and you have to close out at a loss, then it's a gut-wrenching feeling. You've wasted a whole day, and not only have you not earned any money, but you've actually lost money. You could have made more money working a menial job for the minimum wage that day.
Also in most cases you're all alone and therefore have no work colleagues. You have no social interaction at all during the day except to maybe exchange pleasantries with the postman or to go down to the newsagents for a paper. Over many months and years this lack of social interaction can be quite depressing, especially if you are a naturally social person. Talking to traders on a forum or a load of pretend friends on Facebook is no substitute for real human interaction.
Yes it is very true that the potential profits you can make are almost limitless thanks to leverage and compounding, but it's a very tough, and often very stressful way of making a living. I have tried that before.
Saying all that though, I've been working for myself since 2001, with forex trading contributing greatly to my overall income and I absolutely love it. Admittedly the lack of social interaction isn't really an issue as I don't really like people generally.
In all seriousness though, if you can learn to trade successfully then you will be very well rewarded financially, which will allow you to have a great social life away from your computer screen and you can enjoy the benefits of being your own boss and the maker of your own destiny.
The trouble with being a full-time forex trader is that it is a very lonely profession if you're trading at your own computer desk at home.
Everyone thinks it's an exciting, exhilarating profession sitting at your computer in your underwear watching the markets, going long, going short, raking in huge profits, but the reality is somewhat different.
You can sit staring at your computer screen for hours on end waiting for a good set-up to enter a trade, and sometimes you can sit there for the whole day and not enter a trade. And even if you do find a trade, when it goes against you and you have to close out at a loss, then it's a gut-wrenching feeling. You've wasted a whole day, and not only have you not earned any money, but you've actually lost money. You could have made more money working a menial job for the minimum wage that day.
Also in most cases you're all alone and therefore have no work colleagues. You have no social interaction at all during the day except to maybe exchange pleasantries with the postman or to go down to the newsagents for a paper. Over many months and years this lack of social interaction can be quite depressing, especially if you are a naturally social person. Talking to traders on a forum or a load of pretend friends on Facebook is no substitute for real human interaction.
Yes it is very true that the potential profits you can make are almost limitless thanks to leverage and compounding, but it's a very tough, and often very stressful way of making a living. I have tried that before.
Saying all that though, I've been working for myself since 2001, with forex trading contributing greatly to my overall income and I absolutely love it. Admittedly the lack of social interaction isn't really an issue as I don't really like people generally.
In all seriousness though, if you can learn to trade successfully then you will be very well rewarded financially, which will allow you to have a great social life away from your computer screen and you can enjoy the benefits of being your own boss and the maker of your own destiny.
Tuesday, February 23, 2010
Different types of technical forex indicators
If you open up any charting package and attempt to put some form of technical indicator alongside the price, you will usually be presented with endless different technical indicators to assist you with your trading.
This can be slightly overwhelming when you first start using technical analysis, because you don't know which indicators are best, what information they are conveying, or how to interpret the data. So in today's article I'm going to briefly discuss the different types of technical indicators available to you.
There are basically four different types of technical indicators:
1. Trend indicators.
These indicators are used to indicate the direction of a trend. These are very useful because the basic rule is that you should always trade with a trend and not against it. Some examples of trend following indicators include Parabolic SAR, MACD and Moving Averages.
2. Momentum indicators.
Momentum or strength indicators are used to indicate the speed or strength of a move in price and are best used to determine a change in direction. They tend to be oscillating indicators showing overbought and oversold positions. Examples include CCI, RSI and Stochastics.
3. Volatility indicators.
These indicators, as the name suggests, show a change in volatility, which often leads to a change in price. Examples include ATR, Bollinger Bands and Envelopes.
4. Volume indicators.
Volume indicators are used to show the volume of trading in a particular currency. These are useful to confirm the direction of a trend or to signal a breakout. For example, if the pair trades in a narrow range and then breaks out on high volume, then this is a very bullish signal. Examples of volume indicators include Chaikin Money Flow, Demand Index and OBV.
The ideal charting set-up should have at least one indicator of each kind, but it's also important to remember that technical analysis is not foolproof. It's there to help you make trading decisions, but no indicator or set of indicators will give you a 100% success rate.
I've only touched on some of the technical indicators in this article and will discuss each one in more depth at a later date. See my profile page 1 and profile page 2.
This can be slightly overwhelming when you first start using technical analysis, because you don't know which indicators are best, what information they are conveying, or how to interpret the data. So in today's article I'm going to briefly discuss the different types of technical indicators available to you.
There are basically four different types of technical indicators:
1. Trend indicators.
These indicators are used to indicate the direction of a trend. These are very useful because the basic rule is that you should always trade with a trend and not against it. Some examples of trend following indicators include Parabolic SAR, MACD and Moving Averages.
2. Momentum indicators.
Momentum or strength indicators are used to indicate the speed or strength of a move in price and are best used to determine a change in direction. They tend to be oscillating indicators showing overbought and oversold positions. Examples include CCI, RSI and Stochastics.
3. Volatility indicators.
These indicators, as the name suggests, show a change in volatility, which often leads to a change in price. Examples include ATR, Bollinger Bands and Envelopes.
4. Volume indicators.
Volume indicators are used to show the volume of trading in a particular currency. These are useful to confirm the direction of a trend or to signal a breakout. For example, if the pair trades in a narrow range and then breaks out on high volume, then this is a very bullish signal. Examples of volume indicators include Chaikin Money Flow, Demand Index and OBV.
The ideal charting set-up should have at least one indicator of each kind, but it's also important to remember that technical analysis is not foolproof. It's there to help you make trading decisions, but no indicator or set of indicators will give you a 100% success rate.
I've only touched on some of the technical indicators in this article and will discuss each one in more depth at a later date. See my profile page 1 and profile page 2.
Wednesday, February 17, 2010
How To Use A Breakout System To Trade Forex?
Trading forex breakouts is one of the more basic trading strategies, but nevertheless it can deliver excellent profits. Just because a system is easy to follow does not mean it cannot produce consistent profits as breakout trading is a method used by some of the most successful forex traders around.
It's based around the whole premise that if a currency pair is trading in a very tight range for a sustained period of time, then eventually it will break out of that range and more often than not it will continue moving in the direction of the breakout.
This means that to make consistent profits you need to firstly identify instances where a currency pair is trading in a narrow range, and then place buy and sell orders at or slightly outside the current range to catch the breakout when it happens.
Furthermore if you want to look for the optimum set-up then you can use technical indicators to help you. My own method is to use a weekly 30 minute chart displaying 15, 50 and 100 period exponential moving averages.
When the price starts trading in a narrow range and all three of these EMA's have flattened out and also currently lie within this range, then this to me is the perfect breakout set-up. Why?
Well because with all three EMA's flat, something's got to give. It's like a volcano waiting to erupt. Once the breakout occurs, you could get a very big movement because the longer term EMA (100) can trend for a very long time so you could get a big points haul if this EMA follows the price and moves outside of the current trading range.
As regards targets and stop losses, I personally use the current trading range to determine where I place my stops so if I go long at the top of the range, then my stop loss will be at the bottom of the range. My target price is usually the same number of points away as the stop at the very least.
The best thing about this system is that it works pretty well across many different time frames, plus not only does it work well for trading forex markets but it's also an equally good system for trading other financial instruments as well.
For more information, view my profile here and over here.
It's based around the whole premise that if a currency pair is trading in a very tight range for a sustained period of time, then eventually it will break out of that range and more often than not it will continue moving in the direction of the breakout.
This means that to make consistent profits you need to firstly identify instances where a currency pair is trading in a narrow range, and then place buy and sell orders at or slightly outside the current range to catch the breakout when it happens.
Furthermore if you want to look for the optimum set-up then you can use technical indicators to help you. My own method is to use a weekly 30 minute chart displaying 15, 50 and 100 period exponential moving averages.
When the price starts trading in a narrow range and all three of these EMA's have flattened out and also currently lie within this range, then this to me is the perfect breakout set-up. Why?
Well because with all three EMA's flat, something's got to give. It's like a volcano waiting to erupt. Once the breakout occurs, you could get a very big movement because the longer term EMA (100) can trend for a very long time so you could get a big points haul if this EMA follows the price and moves outside of the current trading range.
As regards targets and stop losses, I personally use the current trading range to determine where I place my stops so if I go long at the top of the range, then my stop loss will be at the bottom of the range. My target price is usually the same number of points away as the stop at the very least.
The best thing about this system is that it works pretty well across many different time frames, plus not only does it work well for trading forex markets but it's also an equally good system for trading other financial instruments as well.
For more information, view my profile here and over here.
Trading Forex With The Best Currency Pairs?
When you first become interested in forex trading it can be difficult deciding which currency pairs you should be trading. Is it best to keep your eye on all of them or focus on just a few pairs?
Well there isn't really a right and wrong answer. A major factor is your own particular trading style. For example, if you have a very solid trading system based on technical analysis criteria, then you could watch all the currency pairs and wait for the right set-up to occur in any one of them in order to enter a trade.
Most pairs conform very well to technical analysis so this can be a very profitable method if you have a solid reliable trading system in place.
Another approach I would guess the majority of traders use, is to only focus on the major currency pairs – GBP/USD, EUR/USD, USD/JPY and USD/CHF.
These are the most actively traded currencies so it makes sense to only trade these as they conform extremely well to technical analysis. This is because charts are essentially displaying human behaviour and with so many people across the world all looking at the same charts, you can start to understand where people are likely to enter and exit positions.
The major advantage of this method is that these pairs generally have the tightest spreads which is important because over the longer term these wider spreads can really make a dent in your profits.
Another benefit of only watching these pairs is that by concentrating on a fewer number of pairs you can learn the personality of each one and learn how they move, making it easier to identify trends and take a position.
Finally, one other factor is your location and the time of the day when you are available to trade. For example, if you can trade the forex markets between 7.00 GMT and 17.00 GMT, then the GBP/USD or EUR/USD would be a good volatile pair to trade as this is when the London and European markets are open and at their most busiest.
So to sum up, there are not really any best currencies to trade, all can be very profitable. However you should take the tightness of the spreads into consideration and the behaviour of each currency pair, which is why I generally recommend trading just one or more of the four major currency pairs - GBP/USD, EUR/USD, USD/JPY and USD/CHF.
View my profile page 1 and profile page 2.
Well there isn't really a right and wrong answer. A major factor is your own particular trading style. For example, if you have a very solid trading system based on technical analysis criteria, then you could watch all the currency pairs and wait for the right set-up to occur in any one of them in order to enter a trade.
Most pairs conform very well to technical analysis so this can be a very profitable method if you have a solid reliable trading system in place.
Another approach I would guess the majority of traders use, is to only focus on the major currency pairs – GBP/USD, EUR/USD, USD/JPY and USD/CHF.
These are the most actively traded currencies so it makes sense to only trade these as they conform extremely well to technical analysis. This is because charts are essentially displaying human behaviour and with so many people across the world all looking at the same charts, you can start to understand where people are likely to enter and exit positions.
The major advantage of this method is that these pairs generally have the tightest spreads which is important because over the longer term these wider spreads can really make a dent in your profits.
Another benefit of only watching these pairs is that by concentrating on a fewer number of pairs you can learn the personality of each one and learn how they move, making it easier to identify trends and take a position.
Finally, one other factor is your location and the time of the day when you are available to trade. For example, if you can trade the forex markets between 7.00 GMT and 17.00 GMT, then the GBP/USD or EUR/USD would be a good volatile pair to trade as this is when the London and European markets are open and at their most busiest.
So to sum up, there are not really any best currencies to trade, all can be very profitable. However you should take the tightness of the spreads into consideration and the behaviour of each currency pair, which is why I generally recommend trading just one or more of the four major currency pairs - GBP/USD, EUR/USD, USD/JPY and USD/CHF.
View my profile page 1 and profile page 2.
Can You Be Successful With Forex With One Technical Indicator?
My conclusion was that it would be extremely difficult, if not impossible, to make consistent profits, but then I remembered back to when I first started trading forex a few years ago, and realizing that back then I pretty much only used one indicator - the Exponential Moving Average / EMA (15), and did make consistent profits.
Technically speaking I didn't use only one indicator as I also displayed the EMA (25) and EMA (50) on the same chart to help me decide on exit strategies, and nowadays I use a lot more indicators to confirm my positions, but nevertheless I still think this basic approach of using an EMA (15) on a 30-minute chart could still generate regular profits.
The trick is to look for currencies that have been trending strongly in one direction for a few days with a rising or falling EMA (15), and wait until this EMA changes direction and signals a reversal.
Furthermore when this EMA does change direction you ideally want to enter into a position when the price is close to or touching this EMA for maximum value. Place stops about 20 or 25 points below this EMA in the rare instances where you get a false reversal, but in most cases the reversal will happen and you can potentially make 30-200 pips depending on the strength and momentum of the reversal.
Also, you ideally want to trade in the direction of the long-term trend, so let's take a real-life example – the GBP/USD.
The long-term yearly trend has been upwards so we ideally want to find positions where the EMA (15) has been heading downwards for a few days and watch for a change in direction, so we're trading in the direction of the long-term trend.
If you look at a 30 minute chart of this pair for this month (October), you can see three obvious instances of this happening.
The first instance was between 3/10 and 4/10 when the price fell from 2.0440 to 2.0280 before bouncing back and heading upwards again. The EMA (15) started heading upwards as well between 2.0310 and 2.0320 and there were plenty of opportunities to trade close to this EMA to get maximum value (sometimes the price blasts through the EMA without retracing, making it hard to get any value from the trade).
As you can see, this upwards trend continued until the price reached a peak of 2.4030 so you could potentially have made a profit of 100+ pips, but even if you'd held out until the EMA (15) started heading downwards which was confirmed around about the 2.3080 mark on 5/10, you could still have netted about 70 pips profit.
Similar set-ups occurred on 9/10 when there was another 100+ point reversal, and on 12/10 when there was a slightly smaller move, so as you can see there are always good opportunities to trade this one indicator alone and make pretty good profits.
Therefore to answer my original question yes I believe you can make regular profits trading just one indicator, because I myself have done so in the past, but it makes far more sense to use additional indicators as well to confirm your positions, and to find additional positions to take.
For more forex tips and strategies, including full details of my main 4 hour trading strategy, simply sign up to my newsletter by filling in the short form above.
View my profile page one and profile page two.
Technically speaking I didn't use only one indicator as I also displayed the EMA (25) and EMA (50) on the same chart to help me decide on exit strategies, and nowadays I use a lot more indicators to confirm my positions, but nevertheless I still think this basic approach of using an EMA (15) on a 30-minute chart could still generate regular profits.
The trick is to look for currencies that have been trending strongly in one direction for a few days with a rising or falling EMA (15), and wait until this EMA changes direction and signals a reversal.
Furthermore when this EMA does change direction you ideally want to enter into a position when the price is close to or touching this EMA for maximum value. Place stops about 20 or 25 points below this EMA in the rare instances where you get a false reversal, but in most cases the reversal will happen and you can potentially make 30-200 pips depending on the strength and momentum of the reversal.
Also, you ideally want to trade in the direction of the long-term trend, so let's take a real-life example – the GBP/USD.
The long-term yearly trend has been upwards so we ideally want to find positions where the EMA (15) has been heading downwards for a few days and watch for a change in direction, so we're trading in the direction of the long-term trend.
If you look at a 30 minute chart of this pair for this month (October), you can see three obvious instances of this happening.
The first instance was between 3/10 and 4/10 when the price fell from 2.0440 to 2.0280 before bouncing back and heading upwards again. The EMA (15) started heading upwards as well between 2.0310 and 2.0320 and there were plenty of opportunities to trade close to this EMA to get maximum value (sometimes the price blasts through the EMA without retracing, making it hard to get any value from the trade).
As you can see, this upwards trend continued until the price reached a peak of 2.4030 so you could potentially have made a profit of 100+ pips, but even if you'd held out until the EMA (15) started heading downwards which was confirmed around about the 2.3080 mark on 5/10, you could still have netted about 70 pips profit.
Similar set-ups occurred on 9/10 when there was another 100+ point reversal, and on 12/10 when there was a slightly smaller move, so as you can see there are always good opportunities to trade this one indicator alone and make pretty good profits.
Therefore to answer my original question yes I believe you can make regular profits trading just one indicator, because I myself have done so in the past, but it makes far more sense to use additional indicators as well to confirm your positions, and to find additional positions to take.
For more forex tips and strategies, including full details of my main 4 hour trading strategy, simply sign up to my newsletter by filling in the short form above.
View my profile page one and profile page two.
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