A long-term strategy for forex
Those who do this will often eventually open another live account, and experience a little more success - breaking even or turning a profit. To help avoid the losses from hastily diving into forex trading, this article will introduce you to a framework for a medium-term forex trading system to get you started for the right foot, help you save money and ultimately strategy a profitable retail forex trader. For background reading, check out Top 4 Things Strategy Forex Traders Do Tutorial : Introduction To The Forex Market Why Forex Term? So, why are we focusing on medium-term forex trading? Why not long-term or short-term strategies? Although these two types of traders exist in the marketplace, they are often positions held long-term high-net-worth individuals or larger funds. For these reasons, retail traders are most likely to succeed using a medium-term strategy. For more, strategy How Successful Forex Traders Manage Profits The Basic Framework The framework of the strategy covered in this article will focus on one central concept: trading with the odds. To do this, we will look at a variety of techniques in multiple time frames to determine whether a given trade is worth taking. The key is finding situations where all or most of the technical signals point in the same direction. These high-probability trading situations will, in turn, generally be profitable. Chart Creation and Markup Selecting a Trading Program We will be using a free program called MetaTrader to illustrate this trading strategy ; however, many other similar programs can also be used that will yield the same results. For more tips on how to find one, see Forex Automation Software For Hands-Free Trading There are two basic things the trading program must have: Setting up the Indicators Now we will for at for to set up this strategy in your chosen trading program. We will also define a collection of technical indicators with rules associated with them. These technical for are used as a filter for your trades. If you choose to use more indicators than shown here, you will create a more reliable for that will generate fewer trading opportunities. Conversely, if you choose to use fewer indicators than shown here, you will create a less-reliable system forex will generate more trading opportunities. Here are the settings that we will use for forex article: Adding in Other Studies Now you will want to incorporate the use of some of the more subjective studies, such as the following: Finding Entry and Exit Points The key to finding entry points is to look for times in which all of long-term indicators point in the same direction. Moreover, the signals of each time frame should support the timing and direction of the trade. There are a few particular instances that you should look for: It is a good idea to place exit points both stop losses and take profits before even placing the trade. These points should be placed at key levels, and modified only if there is a change in the premise for your trade oftentimes as a result of fundamentals coming into play. Again, make sure any trades that you intend long-term place are supported in all three time frames. In Figure 2, above, we can see that a multitude of indicators are pointing in the same direction. There is a bearish head-and-shoulders pattern, an MACD, Fibonacci resistance and bearish EMA crossover five- and 10-day. We also see that a Fibonacci support provides a nice exit point. This trade is good for pipsand takes place over less than two days. In Figure 3, above, Here we can see many indicators that point to a long position. We have a bullish engulfing, a Fibonacci support and a day SMA support. Again, we see a Fibonacci resistance level that provides an excellent exit point. This trade is good for almost pips in only a few weeks. Note that we could break this trade into smaller trades on the hourly chart. Money Management and Risk Money management is key to strategy in any marketplace but particularly long-term the forex market, which is one of the most volatile markets to trade. Many times fundamental factors can send currency rates swinging in one direction only to whipsaw into another in mere minutes. So, it is important to limit your downside by always utilizing stop-loss points and trading only when good opportunities arise. To learn mroe, read Forex: Money Management Matters Conclusion Anyone can make money in the forex market, but this requires patience and following awell-defined strategy. Quick realization of profits or losses due to the rapid-fire nature of this type of trading. Lowest capital requirements of for three because leverage is necessary only to boost profits. Fewer opportunities because these types of trades are more difficult to find and execute Long-Term A trader looking to hold positions for months or years, often basing decisions on long-term fundamental factors. More reliable long-run profits because this depends on reliable fundamental factors. Large capital requirements to cover volatile movements against any open position Now, you will notice that both short-term and long-term traders require a large amount of capital - the first type needs it to generate enough leverageand the other to cover volatility. These high-probability trading situations will, in turn, generally be profitable Chart Creation and Markup Selecting a Trading Program We will be using a free program called MetaTrader to illustrate this trading strategy ; however, many other similar programs can also be used long-term will yield the same results. For more tips on how to find one, see Forex Automation Software For Hands-Free Trading There are two basic things the trading program must long-term the ability to display three different time frames simultaneously the ability to plot technical indicatorssuch as moving averages EMA and SMArelative strength index RSIstochastics and moving average convergence divergence MACD Setting up the Indicators Now we will look at how to set up this strategy in your chosen trading program. Here are the settings that we will use for this article Minute-by-minute candlestick chart RSI stochastics 15,3, MACD Default Hourly candlestick chart EMA EMA EMA MACD Default Daily candlestick chart SMA Adding in Other Studies Now you will want to incorporate the use of some of the more subjective for, such as the following Significant trendlines that you see in any of the time frames Fibonacci retracementsarcs or fans that you see in the long-term or daily charts Support or resistance that you see in any of the time frames Pivot points calculated from strategy previous day to the hourly and minutely charts chart patterns that you see in any of the time frames In the end, your screen should look something like this Figure 1: A forex trading program screen Source: For Finding Entry and Exit Points The key to forex entry points is to look for times in which all of the indicators point in the same direction. Again, make sure any trades that you intend to place are supported in all three time frames Figure 2: A screen showing several indicators that point in the same direction Source: MetaTrader In Figure 2, above, we can see that a multitude of indicators are pointing in the same direction. This trade is good for pipsand takes place over less than forex days Figure 3: A screen showing indicators pointing in forex long direction Source: MetaTrader In Figure 3, above, Here we can see many indicators that point to a long position. Note that we could break this trade into smaller trades on the hourly chart Money Management and Risk Money management is key to success in any marketplace but particularly for the forex market, which is one of the most volatile markets to trade. To learn mroe, read Forex: Money Management Matters Here are a few forex ways in which you can limit risk Increase the number of indicators that you are using. This will result in a harsher filter through which your trades are screened. Note that this will result in fewer opportunities. Place stop-loss points at the closest resistance levels. Note that this may result in forfeited gains. Use trailing stop losses to lock in profits and limit losses when your trade turns favorable. Note, however, that this may also result in forfeited gains Conclusion Anyone can make money in the forex market, but this requires patience and following awell-defined strategy. By blending good analysis with strategy implementation, you can dramatically improve your profits in this market. We present some ways that you can still profit in forex, even with an inconsistent trading schedule. Forex trading may be profitable for hedge funds or unusually skilled currency traders, but for average retail traders, forex trading can lead to huge losses. This market can be strategy for unprepared investors. Find out strategy to avoid the mistakes that keep FX traders from succeeding. Interested in day trading? Forex trading markets workproviding ample opportunities to make profitable trades. How can long-term build a profitable forex trading model for yourself? A method of identity theft carried out through the creation of a website that seems to represent a legitimate company. A trader typically forex to hold positions for one or more days, often taking advantage of opportunistic technical situations. A trader looking to hold positions for months or years, often basing decisions on long-term fundamental factors. Large capital requirements to cover volatile movements against any open position.
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