Is forex trading really possible for everyone who is
interested in the currency market? Yes, it is. But you have to create a
specific trading strategy which is in line with other parts of your life, like
your job, activities and especially your family.
How to deal with forex market as an “ordinary” people
If you are not a professional full-time trader you
have to fulfill your daily work, so your timeframe to act on the forex market
will be relatively short in comparison to a professional trader, because you
are on work for about eight or more hours.
As I was a student, I traded a lot. It doesn’t matter
to me if there was on a daily chart, eight hour or five minutes timeframe. I
was using the “parabolic SAR” to place my stops, this means I had to adjust my
stop-loss every five minutes, half hour or whatever. Now I have to deal with a
job and this strategy isn’t working anymore, because it is impossible for me, to
trail the stops manually to the next point of the SAR.
The magic of trailing-stops
What is the advantage of trailing stops? Of course,
everyone knows that this little function turns your stop-loss-level in
direction of the market, when the market is running in your favour. What you
have to do is to create a strategy (an exit strategy) which will get hand in
hand with your entry and your whole trading strategy.
Subsequently I will tell you how I have mastered this
challenge. I don’t want to tell you factors, numbers or a complete strategy
guide. I will only tell you how you can create an exit strategy with an
underlying money-management system that will work for traders, who can not
watch the forex exchange market the whole day. You will have to spend only a
few minutes or hours a day for placing your orders.
The trading strategy
Before you will step into a trade, think about it.
What do you want to trade and what is your target of this trade? Is it a long
term trend, a range, major breakout or only for scalping the market. This
consideration is elementary for your strategy. If you have chosen your strategy
for the trade, I suggest you to use an indicator for volatility measurement
like “Average True Range” (ATR). You will need such an indicator in your
strategy, because it is important to be save of the normal market volatility.
If you are trading with more timeframes, like I do, I suggest you to use the ATR-value
of your “big chart”.
What you now have to do sounds very easy but it isn’t
as easy. Take the ATR-value and find several factors that are in line with your
trading strategy. I will call the upcoming result x-ATR.
If you like to enter a trade in direction of a trend,
your factor has to be higher than the factor you will need for range trading or
scalping. This is because of the fact that you will stay in a trend-trade for a much
longer time than for scalping or range trading.
When you enter a trade, calculate the entry price
minus/plus (it depends on the direction of your trade, even if you go long or
short) your x-ATR value. This will be your Stop-loss level for the trade. How
you will get the trailing stop? It is very easy, you have to calculate the absolute
value of your entry minus the stop-loss level you have calculated before.
Last but not least, you can and you should add this
strategy to a money management strategy. You have an entry and exit point of
your trade. Use these information and do not risk more than two percent (most common: 1%) of your
capital for each trade and at the end you have the tools to be a successful "ordinary" trader.