Forex Trading Strategy

Time to get more Serious

2009-08-28T06:10:00.001-07:00

I didn't expect that this forex trading strategy blog are receiving a few visitors despite of the fact that I haven't maintain it for a long period of time.

For the first time visitors, don't you worry because I intend to provide an update of at least every once in a week to provide my insight about the best FX Strategies that I've encountered. However, I couldn't make a promise or commitment to carry out the task as I stated but I'll be putting some time and effort just for the benefit of you my dear readers.

To tell you something about me being unable to maintain this blog is that I'm a busy person. I'm always in the verge of cracking possible ways to generate profit from the currency exchange market. These includes several trials and errors on different systems while making the necessary changes. You will soon realize what I mean as we proceed along with our discussion.

It's time to get more serious and we need to start on the basics once again. If you think that you already have the knowledge on what I am about to discuss then you may skip this post and proceed to the next discussion.

Why does a FX Trader needs a Forex Trading Strategy?

The FX market is one of the largest currency exchange market in the world. You should be surprise to know about it because there's an estimate value of around 3 trillion dollars that are being exchange daily! Knowing all about this should encourage you to learn more about FX to be able to acquire a piece of share on the said amount.

Don't get fooled by the large amount of money where you think that it will be easy enough to take a part of it. Beware that the F X market is a silent beast that could suddenly attack you unexpectedly. What I'm trying to say is that trading F X involves a very high risk that you could lose all your investment in just a matter of time.

In case that you don't know, currency trading could actually kill and as a proof there are already several individuals who are fallen as victims by the savage beast (I'm referring to the M arket as the savage beast). Most people with a heart problem should always be warned how high the risk is truly involve. Heart attack is the main cause of several deaths due to sudden and unexpected turn of events. This kind of situation commonly happens for newbies who tried to invest a large amount of their hard earned money in the expectation that FX doesn't involve any risk. The beast can totally wipe out their investment with either a single large swing or some unknown erratic behavior. Then the result? don't ask, you probably already know what I'm trying to tell you.

If you are familiar about gambling then you should probably know about this common phrase, "Do Not Spend What You Can Not Afford To Lose". In FX, we can relate this phrase as having a good money management plan. Although, there are conflicting issues regarding about gambling and FX but it would be much better if I will create a topic on a separate post.

The purpose of having a forex trading strategy is for you to be able to have a better guidance towards your analysis. Without a strategy to help you out, you can be compared to a blind person who's trying hard enough to cross a busy intersection. You don't have any idea and guidance as to where the price will going to trend. Such situation is dangerous and it results on betting with your chances against your luck.

I hope that you already got the picture about what I'm trying to pertain but If you're not, then please keep on reading.

It will going to provide you an analysis as to where the future price direction are going to trend

What is the first thing that you have to do after waking up in an early morning?

I think some of you will say, Exercise.

If you are having a daily routine of exercising every morning then we can also tell that you have a consistent daily exercise. One of the most important part to become a successful trader is to be consistent. Imagine that you've been an unable to perform an exercise on one morning due to some reasons. You'll feel about your self that your day seems to be incomplete and your body badly needs it in order to get going with lively charged energy. This situation is the same as having a routine on your forex trading strategy that you need to strictly follow. One of these routine should involve your plan for the rest of your trading day. Such plan on how much profit or losses are you willing to take and then you are out of the market. Carrying out this simple task will going to help you measure your achievement and improvement at the end of very trading day.

Without having a good routine, it can be compared as having a bad day due to some incomplete satisfaction that you most likely needed. You do not have a straight set of mind to target your goals and you can't even track your success. While having a good strategy proves professionalism and treating FX as a serious business. You have an upgraded mind set trying to achieve the odds of true success.

Minimizes the number of your losses against the number of your winnings

I bet that you already experienced some frustration because of your incapability to generate constant profit from your investment. What you really need is a good forex trading strategy that will going to filter out bad trades and takes only those high probability trades. If you have a system that fails, don't get discourage to trade blindly because it will going to end up your dreams in hoping to earn millions. Always stay focus on your strategy and conduct some further test development and improvement.

You will gain more experience and enhance your trading skills

As for newbies, it is advise that you should only invest an amount that you can afford to lose since your chances of committing errors and mistakes are extremely high. Better yet, try to stick on a demo account for awhile.

For those pro-traders, they are most likely managing a large amount of investment capital where they have a very little room for committing mistakes. Putting a pressure on your self could actually boost your skill development but it involves tremendous loss on your part.

How to determine a Good Strategy

All of those that I mentioned above are the importance of a forex trading strategy that you need to understand to achieve great success.

Now to have a brief summary, we can determine a good strategy through the following;

1. You should have a plan with a proper set of target goals which must be strictly implemented.

2. Schedule a time to properly analyze the market chart and other factors that will help you out in guiding your decisions.

3. Money management also plays a very important role where you have to set a fixed percentage on the amount that you are willing to risk for each transaction. Don't ever use a martingale system where you are going to double your lot sizes each time you are going to lose. This system is very famous as a killer account.

4. The number of orders, lots or trades that you are going to execute for a certain period of time must also be well planned. Let's say that you planned to only execute 5 order for the rest of your day and you are out of the market. You should try to stick for the plan regardless of weather you are on the losing side. Don't ever have a second thought of going for the sixth because you could end up for more losses.

Searching for the best forex trading strategy

I've been on several paths in the search for the best system around. I spent almost two years upon trying to learn and understand others method. As a result, I failed in my quest and I have to conclude that there are no single best method or system that exist. Most of my observation on each different system that I studied is that one strategy perfectly works well when the market is on a trending condition. But most likely, it will certainly going to fail when the price action changes in another different direction.

I spent most of my time monitoring my own charts and another observation about that, I usually see a certain trend for long periods that last for more than a weeks or even months and for some instances, even for a year. Try and open you platform and check the higher time frame of your chart to see what I mean.

Try to look for a currency charts with a major bullish trend. Look closely and try to observe carefully that each of the breakout that occurs on the previous high will most likely continue to create a new higher highs.

Due to my observation regarding this behavior of the market. I concluded that to get into a bigger trends, the best possible way is entry upon the breakout on a support or resistance levels. However, the problem that I mostly encountered are false breakouts and it occurs too often. I asked the opinion of a FX expert on How to filter False Breakouts and the answer that I got is "Not Possible". He further advised me not to trade on breakouts because it requires tremendous logical thinking analysis.

Some possible reasons about breakouts is that, I'm having some trouble on trying to predict on either you are on the correct bottom or top of the trend. I've experienced this kind of situation several times and it gives you the feeling that you aren't on the exact level to open a position. Thus, I have to wait some further pullback that most likely not going to happen and the trend will just continue to move further away.

Since I don't have any possible means to signal my entry order, I'm in the verge of trying to predict the trend weather it's a total breakout or not. I have to say that what I've been doing is like placing a bet. But not until I came to realize about proper timing and the reality of the breaks.

Since there are numerous false breaks, you have to be filter out only the option that would provide high probability trades. One important part to look out is to check on the number of test that occurred on the support or resistance level before the break penetrates the S/R level. Under my observation, the more number of test being held on the S/R level, the outcome would be a good one.

You may consider this as one of the best forex trading strategy analysis that you can implement on your current system. Newbies can also start out with this simple method but you must have some basic knowledge on how to determine your support and resistances levels. (Note for Newbies: Please be patient, I'll be providing a good discussion about determining your support and resistance on your charts on the up coming post.)

Regardless of what forex trading strategy that you use, you have to consider every aspect that I mentioned on this discussion. However, simply knowing about them wont do you any good unless you have to carry out the process into an actual practice and in real life situation.

Trying Out Other System

2009-08-15T20:14:00.000-07:00

I have been previous discussing about the hedging strategy a while back on my previous posts.

I also wanted to tell you that I am using this system profitably and I am earning some continuous amount of profit. However, there's a requirement for those newbie traders who wish to use hedging strategies. You need a large amount of investment capital to gain a good profit but if you have a small amount then it would take a long period of time before you could double your investment.

What I have been doing awhile back is that, I was searching for some other system. I went to join some active forums that discusses unique system and a lot of traders claiming to gain good profit from using the system. Most of the system from forum threads reached several numbers of post to read. It really takes time to read each post and you can never find a good summary of the entire system.

I found one good system and studied every detail that the author emphasized on his methods. I tried the system and it is proven to be profitable. Yet, I'm still in the process of testing this system for almost three months now and it is indeed profitable. However, they require to test this strategy for at least six months period of time to test if it would work in the long run. It's would really be a trouble if it will fail a large draw down unexpectedly.

I would like to share this system here on my blog but let's do it step by step to have a better understanding about it. I will be starting the discussion about this strategy on my next post.

Forex Strategy for Hedging or Arbitrage

2009-06-19T16:54:00.000-07:00

I had discussed on my previous post about hedging where it is the process of placing an order opposite with one another. There are two types of hedging, the first type of hedging is called the "perfect hedge". The "Perfect hedge" is placing a BUY and SELL at the same price level on the same currency pair. This strategy is commonly used in taking advantage of the interest and non interest forex broker. Let's say that the currency pair GBP/USD pays an interest when you place a BUY order while deduct an interest from you when you make a SELL order. The perfect hedge can be used by having two account with two different forex brokers. The first forex broker should be paying high interest rate while the other forex broker is a free interest rate or does not pay or deduct interest. You are going to place a BUY order at the interest paying broker and a SELL order on the non interest broker. All you have to do in this forex strategy is to transfer and balance your account between your two forex brokers to maintain margin call. Your profit on this forex trading training strategy comes from the interest paid by the interest paying forex broker.

Another type of forex hedging strategy or commonly known as the arbitrage is by looking at a currency pair that is closely correlated with one another. One good example is the EUR/USD and USD/CHF. This two currency pairs are exactly correlated with one another and the perfect choice for the arbitrage strategy. The profit is taken on this arbitrage strategy when one currency pair earns a higher pips than the other with a lower amount of loss pips. As an example, when EUR/USD reaches a worth of +126 pips while the USD/CHF losses a worth of -50. You can close both currency pairs and you have successfully earned a worth of +76 pips. This arbitrage system has been tested by many forex traders and proven to be profitable. The only important aspect needed for this forex strategy is to maintain proper money management. The only next thing for you to do is to test this forex strategy on your virtual forex account and watch you forex investment grows.

A Forex Strategy known as Hedging

2009-06-10T23:43:00.000-07:00

There are several types of hedging the currencies of the forex market. Lets define first what a forex hedging means. Forex Hedging is the process of opening two orders with the same correlation. This means that when the first currency is moving up then the other should be going down.

If you open two orders with a SHORT or SELL entry and a LONG or a BUY entry then this is what they call a perfect correlation. You won't be able anything to profit on this type of forex hedging because of its perfect correlation. Most forex traders that use forex hedging strategy are looking for a pair of currency that doesn't perfectly correlate with one another. The slight uncorrelated prices between those currency pair is where the profit of the forex trader will come from.

There are a lot of successful forex trader using forex hedging as their strategy but there are also who complained that hedging is not a good forex strategy. The problem for this forex strategy is that you need to have sufficient balance in your account to sustain margin call.

Forex Strategies that are Revealed

2009-06-07T23:36:00.000-07:00

You must be asking about yourself, Why do they have to reveal their Forex Strategies?. They should just keep it for themselves and don't share with others.

Actually no body are going to reveal their Forex Trading Strategy especially if they are generating a large income from it. I think it would be too dumb enough if a Forex Trader discovered a strategy that perfectly works and share or sell it to others.

I talk and exchange conversation among different professional traders and they said that there is no perfect or Holy grail strategy that will work for all the time. Most Strategies around that you can find are still undeveloped and on the testing process while others are commercial forex Strategy products.

This concludes that there is nothing to be Revealed in Trading the forex market. What is truly needed is to acquire a lot of information and do some experimental test.

The Forex Grid Trading Method

2009-03-14T09:29:00.000-07:00

The Grid trading method is a Forex Strategy that does not require you to use any kinds of indicator. All you have to do is open a multiple of BUY and SELL orders. An example is shown below;

1.2000 Place a Stop Order BUY and SELL
1.2020 Place a Stop Order BUY and SELL
1.2040 Place a Stop Order BUY and SELL
1.2080 Place a Stop Order BUY and SELL
1.2100 Place a Stop Order BUY and SELL
1.2120 Place a Stop Order BUY and SELL
1.2140 Place a Stop Order BUY and SELL
1.2160 Place a Stop Order BUY and SELL
1.2180 Place a Stop Order BUY and SELL
1.2200 Place a Stop Order BUY and SELL
.
.
.
.
and so on.

The 20 pip distance is what they call the leg size. You can use any kind of leg sizes for the currency you wish to trade for this system. However, it is advisable for those volatile currency pair such as the GBP/JPY to use bigger leg sizes such as 100 or more.

Its a very simple Forex Strategy but it requires you to observe proper money management. If you wish to try this system, it is advisable to use your Virtual Forex Account.

Automated Forex Trading Strategy

2008-07-27T23:24:00.000-07:00

The use of Automated Forex trading tools is not considered a Forex strategy. It is because Automated Forex Trading is the use of a certain program or script to automatically do the trading for you. You can easily find a lot of automated script out there especially if you are using the Meta Trader Platform. Most of this script has bugs and most likely not advisable to be used.

Automated Forex trading tools will take control of doing the trades for you. They are programmed to automatically place an order in case of an entry signal alert. Further functions includes Money management wherein it decides the amount to take for profit or loss.

Most Automated trading soft wares are based on Forex Strategies that requires a lot of time monitoring the right signal for entry. This is the advantage of using an Automated trading tools wherein you can go to work and check back when you came back.

If you plan on buying such tool or software, you have to make some researches about the product. Ask from different forums if anyone has successfully made profits from it. And before you use such product, its better to try it first in your Virtual Forex Account.

Understanding the Bollinger Band indicator

2008-07-24T02:35:00.000-07:00

Most Forex Strategy doesn't make use of this tool but I will show you how simple and easy to use Bollinger Band indicator.

On the image above, observed those three black lines following the direction of the Forex market. These three black lines are what they call the "Bollinger Band". This is one of the best technical tool that help traders analyze the direction of the market trend. The middle line is called Simple Moving Average and the above and below lines are called Standard Deviation. The Bollinger Band's function is to plot the most high and low of the previous prices. It then creates a pattern which aids Forex traders in helping them to make decisions as to where the direction of the market will flow.

The image sample above is an example about How a Bollinger Band works. I encircled the part where the market bounced back for reversal. You must have noticed that the every time the candle stick reached the upper and lower Band the market trend reversed back.

The Bollinger Band is just a simple tool but it can provide accuracy in determining the direction of the Forex market. You can also combine this tool to any other indicator tools that you have and make your Forex Strategy produce better result.

The Daily20Pip Strategy

2008-07-17T23:01:00.000-07:00

The Daily20pip is a Forex strategy that I had been using for more than six months and it provides me some profitable returns. The one who made this strategy is P. Lopez. He said that the Daily20pip is based on the "Big Ben Strategy" where he modified it to produce a better result in profit.

Daily20pip is very easy and simple to use. The first thing that you need to do is to compute for the "Pivot Point". Convert your chart time into a daily mode and take the previous day's high price, lowest price and the closing price. The formula for a Pivot Point is:

Pivot Point = High Price + Lowest Price + Closing Price / 3

Example, Most High Price = 1.8666, Lowest Price = 1.8452, Closing Price = 1.8505
Pivot Point = 1.8666 + 1.8452 + 1.8505/3
Pivot Point = 1.8541

After computing for the pivot point what we need now are the value for our entry points. If the current market price is higher than the Pivot Point. We need to make a SELL entry and if the market price is lower that the Pivot Point, We need to make a BUY entry.

Supposedly, the current market price is 1.8612. You have to make a SELL entry because the market price is higher than the Pivot Point.

If you are going to make a BUY Entry, simply add 20 pips from the pivot price. While in SELL Entry, you have to subtract 20 pips from the pivot price.

BUY Entry = Pivot Point + 20 pips
SELL Entry = Pivot Point - 20 pips

In this case we need to make a SELL entry thus,

SELL Entry = Pivot Point - 20 pips
SELL Entry = 1.8541 -20 pips
SELL Entry = 1.8521

The suggested Stop Loss is 30 pips,

SELL Entry = 1.8521
SELL Stop Loss = 1.8551
SELL Take Profit = 1.8501

That's how easy to generate your own signal for the Daily20pip Forex Strategy. This Forex Strategy is perfect for those who cannot monitor their chart everyday or spend countless hours in front of their computers.

What is Forex?

2007-10-30T14:56:00.000-07:00

Forex stands for "Foreign Exchange Market" or "Foreign Currency Exchange". The Forex consist of a market where different currencies are being exchange from one another. Forex is also considered as the largest currency markets in the world. It was estimated that an amount of 1.9 million dollars are being exchanged everyday.

The forex market is composed of currency traders that participates in the currency exchanges. This traders predicts the price movements by using some methods of their own or which is known as Forex Strategy. If the trader's analysis was correct, a profit is gained.

You should also know that there are no accurate information that you can find as to where the direction of the market would go. The reason for the market's movement is due to the macroeconomic conditions and actual monetary flows. This are news event that affects the currency rates to fluctuate in a huge movement. However, Technical traders uses gathered data of currency fluctuation though charts. They study this charts because they believe that it reflects the next direction of the market.

Moreover, Forex is the best place for investment since it provides a large returns. What you need to to is learn Forex trading and do the trading yourself. There are a lot of resources including this blog that you can find around. You can also open a Virtual Forex Account to start practice trading in a real fluctuation of the market. Opening a Virtual Forex Account is free and it is offered by most Forex Broker companies.

Before you do some trading, you must have a Forex Strategy. There are a lot of Forex Strategies that can be found especially at the forums. Look for the most discussed and voted Forex Strategy to read and understand.