Due to the quantity of information available on the internet about forex trading it can easily make the task of figuring out how to trade extremely difficult. To make things worse the forex is a target for marketers attempting to profit from the novices of forex trading, by releasing rehashed systems that did not work in the first place. If you stripped forex trading down to its vital parts it’s quite easy to learn, because the principles behind trading are simple, it’s the system builders and marketers that are making it so complicated.
When day trading it is essential to know what the existing trend is for your chosen market(s). When I was learning to trade the forex markets my coach told me to remember that the trend is your friend. The trend is commonly used as a confirmation signal for a trade, but should not be used as a stand alone signal for trading. There are various ways to figure out the trend such as moving averages, MACDs and so on. The technique I prefer to identify the trend is by using the 30 minute chart and then checking the latest highs and lows to see if the highs are getting higher or the lows are getting lower. When the highs are getting higher and the lows are getting higher this suggests the market is in an uptrend or if the lows are getting lower and the highs are getting lower this suggests the market is in a downtrend.
Greed is one of the greatest killers of traders trading banks, greed leads to trades that shouldn’t of been traded, stakes that shouldn’t have been used, emotions that must not be let into a traders thoughts and broken traders when it all comes apart.
Part of your trading plan should specify your daily income targets, how much of your bank you’re prepared to risk per trade and at which levels you will raise your stake.
Serious traders include this information to prevent them from getting greedy, so how can greed be damaging? Here is a small tale; A trader starts off with a £500 trading bank using £1 stakes, by the end of the first week their bank stands at £600, then greed appears saying ‘This is great however, if you utilize larger stakes we’ll be financially secure a lot quicker’. On the next trade the trader raises their stake size to £10 a pip, the market whipsaws and the trader loses half of their trading bank and trust me it’s not a nice place to be, i know as I was that trader, do not be greedy and stick to your trading plan.
When you’re forming your trading plan one of the biggest decisions to make is at what times will you trade. This will be based on on the trading style you are planning to follow, were on the planet you reside and how much you want to make day trading the forex a success. The forex market runs for 24 hours a day from Monday morning to Friday night and is separated into Four trading periods. You have the London period which is 8am to 4pm (Times in GMT), the New York period which is 1pm to 9pm, the Sydney session which is 10pm to 6am and final the Tokyo period which is 12pm to 8am.
So which is the best to trade? When deciding this you have to reach an equilibrium between when the markets have high liquidity and at an acceptable time for you to trade. Some of the better times to trade are at the beginning of the London period so between 7am to 11am and the overlap time of the London and New York period at 1pm to 5pm.
These times are great for me as I live in the UK but on the west coast of America that’s 11pm to 3am and 5am to 9am which is not so great. Remember at the end of the day it boils down to are you able to live around the trading hours you select? Only you can answer that.