The following trade secrets will hopefully make your journey into currency trading a bit easier. Some may sound like common sense and others are just pointers to give you the best possible chance of making some money.
The 10am rule
Although the markets are open for twenty four hours a day, this doesn’t mean that there isn’t a good time for trading. You can only make a profit if the market is going up or down, and at some times of the day the market just doesn’t move. Therefore learning about the times when the Forex market is most active will be to your advantage. There are three main trading sessions – Tokyo, London and US. The first is the London session. This has the greatest movement as it isn’t just the UK that is trading but also other countries in Europe. The next session is when the US market starts trading. There is an overlap between these two times, and this can be the time of the day when there is the greatest movement in the market and therefore the most likely time for making a big profit. The Crossover between Tokyo and London is also a busy time. Therefore the best times are when these crossover points occur.
It is considered that 10am is the best trading time as the London markets are just closing so more buyers are moving onto the US markets. At this time of day buyers and sellers will make last minute bids before the market closes and this movement will result in big profits if you invest wisely.
Trading on the right day of the week
Research has shown that the most movement in the market happens midweek on Tuesday and Wednesday. Friday can be busy as well but only until around noon as after that there can be chaotic movements due to it being the week’s end.
Don’t take too many risks
It is recommended that you limit your risk by only trading 1% of your total account on each trade. This way you won’t lose as much money if you aren’t successful. Also, only trade if you have a good percentage reward. This is called the reward/risk ratio. The way it works is if you could potentially get a 3% reward from a trade you will risk 1% but if it doesn’t then don’t take the risk.
You can purchase Forex software to help you
There is some very good software on the market which will help you trade and make the best possible decisions in order to make more money. Some trading software will be able to help you predict the market trends, however, don’t believe all the claims that the Forex software producers say. Try to choose something that has good reviews and has been proven to work.
Beware of the scams
There are lots of forex books or schemes out there which claim to give you all the secrets of Forex trading and give you foolproof ways to make money. No one can make money all the time, and so you need to steer clear of these scams. Read a few books and come up with your own methods of trading and you are far more likely to make a success of it.
Keep your eye on national events
Changes in things like interest rates, price indexes and reports on unemployment can have a big effect on the trading prices. After watching the markets for a while and looking at the trends you will be able to work out which events make particular changes which will help you trade sensibly and make more money.
Always bet on an up trend
Forex trendsKeep an eye on currency trends. If it has been going down for a long time and suddenly starts to go up this is a good time to take a bet on it. This is particularly true if the country has suddenly changed to having a much more positive economic outlook. Currency pairs follow each other, so you can also look for other currencies that may move up as well.
Put you excess funds into a stable currency
This might seem like common sense, but some Forex day traders will want to take a risk to try to make more money. However, the bigger the risk the more money you could potentially lose as well as gain. Putting your money into a stable market means buy currency from a country that is politically and economically level.