There are three phases that you should know about when you trade on the forex market. These foreign exchange trading phases that you should know about are the down, up and neutral phases. You should consider what these phases mean in foreign exchange trading and how this affects that ways that you trade.
The Down Time of Foreign Exchange Trading
Down time in forex trading is not like down time in other aspects of life. Down time generally brings the image of relaxation, but this is not the case with trading. Trading down time is when you have hit a losing streak or are not making much of a profit. This is where most traders will actually start because they are still getting into trading forex.
When you are in down time you should ask yourself some questions which can help you get out of this phase:
- The first question you should ask is whether your trading plan is complete and works. If you have never tested your plan then you need to get a demo account and test it. You should also make sure you actually have a plan that you are going to trade on.
- The second question you should ask is whether your trading plan suits the market conditions. If you are meant to trade on a trend and the market is ranging you will lose money.
- The third question you should ask is whether your trades are too risky or not. If you have opened a number of high risk trades you are likely to lose more money on a smallest turn.
- The fourth question you should ask is whether or not you have been following your trading plan. The only way to be successful in trading is to follow your trading plan.
The Foreign Exchange Trading Up Time
Up time in forex trading is when you are actually making a profit. This is the best time for traders and you need to ask yourself some questions to ensure that you can replicate this up time in the future:
- The first question you should ask is why your trading plan is work now. You need to consider the market conditions and see what the currency pair is doing. All of these small details build up to create the up time.
- The second question you should ask is whether you are using stops. Stop loss and trailing stops should be employed to ensure you do not hit a down time. These orders limit the losses you face when you trade.
The Neutral Phase
Neutral time is when you should not be trading at all. This phase often comes when you understand what is causing your down time and stop trading. The most successful traders know when to trade and more importantly know when not to trade. By employing neutral time you can protect your trading account balance and stop your trading mentality falling into down time. It is also easier to identify when you up time starts when you are in a neutral phase.
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