Simple Thoughts on ForexTrading
1. Background
I would like to start with an apology that I am not an expert on the very intricate business of FOREX Trading. I am an ordinary man who got interested in this field a few years back and started with DEMO accounts and am still continuing with demo accounts because my country does not allow people to deposit international currency account in this area which they consider (rightly) as a loss making area. However getting involved in this field has enabled me to use my intellect and thus avoid falling into the vicious field of Dementia. Probably I may be the oldest person actively participating in this field at the age of 93 years.
Writing is a very good method of expressing your thoughts in the field. I am not an expert discussing and looking for technical words. Though technical analysis is good to guide you, I believe that world news is what really guides the Forex market.
Winning prices in competition was never my good fortune though I have come several times to the top rank of number one but in the end slid back to oblivion.
1. Why we Go to ForexTrading – use of Trends
Obviously winning trades and adding to your balance funds is the main objective of ForexTrading. How do you achieve this objective? Go along with the market. Simplest terms open a long trade when the price is low and take profit when it is high or in the reverse sell a trade when the price is high and buy a trade when the price is low. The million dollar question is how you know when the price is going up or going down. Here almost all traders depend upon the technical advisers like indicators etc. Looking a little deeper you will find that most of these indicators are calculated using price variation or trends.
3.Trend Reversal
So trend is the basic factor that helps you to open a trade. But when do you close it or insert a take profit point. It is obvious that for whatever reason the trend is not going to be forever and will stop at some point. The success comes to those who can correctly estimate when this reversal will take place. If you are able to insert a T P point at this point you gain the maximum and lose the lowest.
But please also beware that all such points do not finally lead to reversal. There is what is known as Pull Back. This is when the reversal is short lived and the trend goes back to original.
The next point is that when the trend reversal (actual and not pull back) then to make more profits you have also to reverse your trading from long to short. Similarly when the short trade reaches the maximum you again put a take profit and do the reversal again.
This would be the ideal way to make maximum profits in the field of ForexTrading.
4.How to Make Maximum Profits
How do you achieve these trading strategies in practice? If you are making a strategy (Expert advisor) then the first part is based on opening the trade when the trend is starting and stop the trade when it has reached the top of the trend and open a reverse trade when the trend reverses.
Generally these operations are manipulated by open trade and take profit settings. (Open trade and T P)
But life is not always smooth and many times the T P is not hit and the trade reverses. So what do you do? This is when the Stop Loss point comes handy. Here you sacrifice some of your profit to prevent greater loss.
What is normally observed in trade is to set the T P at a reasonable small value 0f say 10 Pips and set the Stop Loss( S L ) at a very high figure of 200 to prevent accidental hitting the SL .many a times this setting are the reason for losing the whole trade.
I have found that setting the T P to 10 or 15 pips and setting the S L at 15 to 20 pips gives a very good trading pattern in most of the cases. You have to lose something to gain more things. Once the stop loss is hit then automatically the reverse trade is opened if your strategy is based on RSI. I use the indicator R S I for showing the trend and adjust the values that work well.
5.When to enter a trade
Another important observation that I have made is that the point of your entry into the trading is very important. If you plan to enter the trading when many people are active and trading volume is large it is the best time as then going by the trend you are likely to hit many T Ps and increase your balance. On the other hand if you enter the trading at any odd time hoping that the trend will be in your favor then in most cases you will end in loss.
5. Summary
To sum up my experience is
Go with the trend
Open trade when the volume (active trading) is high
Keep a low T P as well as a low S L to help reversal trades.
Keep your trade volumes low and within your money managing calculations?
If you follow these guidelines there is a better than average chance that you will profit in ForexTrading.
Good Luck to you.
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