market, take a step back and think about how you want
to approach the market. There is more to currency trading
than meets the eye, and we think the trading style you choose
is one of the most important determinants of overall trading
success.
There are few points to consider as you define your own approach to trading currencies.
I review the characteristics of some of the most commonly
applied trading styles and discuss what they mean in concrete terms.
I also run you through the essential elements of developing and sticking to a trading plan.applied trading styles and discuss what they mean in concrete terms.
Finding the Right Trading Style for You
I'm frequently asked, “What’s the best way to trade the forex market?”
That’s a loaded question that seems to imply
there’s a right way and a wrong way to trade currencies.
Unfortunately, there is no easy answer.
there’s a right way and a wrong way to trade currencies.
Unfortunately, there is no easy answer.
There is no standard answer — one that applies to everyone.
The forex market’s trading characteristics have something to
offer every trading style (long-term, medium-term, or shortterm)
and approach (technical, fundamental, or a blend). So in terms of deciding what style or approach is best suited to currencies, the starting point is not the forex market itself,
offer every trading style (long-term, medium-term, or shortterm)
and approach (technical, fundamental, or a blend). So in terms of deciding what style or approach is best suited to currencies, the starting point is not the forex market itself,
but your own individual circumstances and way of thinking.
Real-world and lifestyle considerations
Before you can begin to identify the trading style and approach
that works best for you, give some serious thought to what
resources you have available to support your trading. As with
many of life’s endeavors, when it comes to financial-market
trading, there are two main resources that people never seem to have enough of:
Real-world and lifestyle considerations
Before you can begin to identify the trading style and approach
that works best for you, give some serious thought to what
resources you have available to support your trading. As with
many of life’s endeavors, when it comes to financial-market
trading, there are two main resources that people never seem to have enough of:
Time and money. Deciding how much of each
you can devote to currency trading helps to establish how you pursue your trading goals.
If you’re a full-time trader, you have lots of time to devote to
market analysis and actually trading the market. But because
currencies trade around the clock, you still have to be mindful
of which session you’re trading, and of the daily peaks and
troughs of activity and liquidity.
you can devote to currency trading helps to establish how you pursue your trading goals.
If you’re a full-time trader, you have lots of time to devote to
market analysis and actually trading the market. But because
currencies trade around the clock, you still have to be mindful
of which session you’re trading, and of the daily peaks and
troughs of activity and liquidity.
Just because the market is always open doesn’t mean it’s necessarily always a good time to trade.
If you have a full-time job, your boss may not appreciate your taking time to catch up on the charts or economic data reports while you’re at work.
If you have a full-time job, your boss may not appreciate your taking time to catch up on the charts or economic data reports while you’re at work.
That means you’ll have to use your free time to do your market research.
Be realistic when you think about how much time you’ll be able to devote on a regular basis, keeping in mind family obligations and other personal circumstances.
When it comes to money, we can’t stress enough that trading
capital has to be risk capital and that you should never risk any money that you can’t afford to lose. The standard definition of risk capital is:
When it comes to money, we can’t stress enough that trading
capital has to be risk capital and that you should never risk any money that you can’t afford to lose. The standard definition of risk capital is:
money that, if lost, will not materially affect your standard of living.
It goes without saying that borrowed money is not risk capital .
You should never use borrowed money for speculative trading.
When you determine how much risk capital you have available for trading, you’ll have a better idea of what size account you can trade and what position size you can handle. Most online trading platforms typically offer generous leverage ratios that allow you to control a larger position with less required margin.
But just because they offer high leverage doesn’t mean you have to fully utilize it.
Making time for market analysisSo how can an individual trader possibly keep up with all the
data and news?
The key is to develop an efficient daily routine of market analysis.
Thanks to the Internet and online currency brokerages,
independent traders can access a variety of information.
Your daily regimen of market analysis should focus on:
Your daily regimen of market analysis should focus on:
Overnight forex market developments: Who said what, which data came out,
And how the currency pairs reacted.
Daily updates of other major market movements over the prior 24 hours and the stories behind them: If oil prices or U.S. Treasury yields rose or fell substantially,find out why.
Data releases and market events
(for example, the retail sales report, Fed speeches, central bank rate announcements)
expected for that day: Ideally, you’ll monitor data and event calendars one week in advance,so you can be anticipating the outcomes along with the rest of the market.
Multiple-time-frame technical analysis of major currency pairs: There is nothing like the visual image of price action to fill in the blanks of how data and news affected individual currency pairs.
Current events and geopolitical themes: Stay abreast on issues of major elections,
political scandals, military conflicts,and policy initiatives in the major currency nations.
