In order to become really successful at trading foreign exchange, you are going to have to make a decision about what kind of trader you wish to become. Forex is simply too big and too dynamic for you to be able to “do it all”. So, either decide that the life of “day trader” is for you or go after “trend trading”. Day trading involves making very short-term trades in quick bursts, using a very high leverage ratio (e. g., 100:1 or greater). The idea is to just grab some pips, due to some kind of pricing discrepancy, and get out of the market as quickly as possible. In order to successfully accomplish this, you’re going to have to be in front of your computer constantly, totally aware of all relevant news – all the time.
Or, you can opt for a more mellow lifestyle. Trend trading foreign exchange involves “getting in on the ground floor” and profitably riding a trend on the wings of a leverage ratio no higher than 30:1.
Finding Profitable Opportunities In Foreign Exchange
Successful forex trading strategies are segregated by time period (i. e., short-, medium- and long-term). To a large extent, your background and lifestyle may determine which type of strategy you prefer. For instance, if you’re home-bound, becoming a day trader may be just perfect. On the other hand, if you have a full-time job, you may enjoy long-term trend trading. Once you have decided this issue, you can zero in on which specific trading strategy you want to deploy. Generally, short- and medium-term foreign exchange traders use pairs or a trio of moving averages for trading signals, but long-term foreign exchange traders prefer the use of bands or channels (e. g., “Bollinger Bands®” or “Keltner Channels”) plus a momentum indicator, like a “Stochastic RSI” oscillator.
Use Strategies To Find The Best Foreign Exchange Results
The EUR/AUD weekly chart is sporting a more than 1-year old, very bullish, “inverse head and shoulders”, pattern that you might want to take advantage of. Unfortunately, a long position in this pair is equivalent to shorting the AUD, which can be very expensive (due to the Aussie’s relatively higher interest rates). So, day trading this pair appears to be the most cost effective way to go. Try using a 15-minute chart with a trio of exponential moving averages (inputted at “2, 5 and 10” time periods), using an “Awesome Oscillator” plus a “Know Sure Thing” indicator for trade signal confirmation. Remember that you should only launch a trade if the 2-period line crosses over both the other lines.
How Foreign Exchange Can Also Be Risky
When you are trading on an extremely short-term basis (i. e., using a 5- or 15-minute chart), you can use very high leverage ratios (e. g., 100:1 or more) because you are not exposing yourself to the vagaries of the marketplace for very long. However, all that changes if you are going to get involved in a trade that is going to last more than 15 minutes. For any kind of medium- or long-term trade, you must reduce your leverage ratios or your stop losses will get fried by the first price spike that comes along. For 1- to 4-hour trades, reduce down to 50:1 or lower. For overnight or “trend trades”, drop down to 30:1 or lower. Trade defensively!
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