Trading Strategies Archives - Currency Trading Success

The Trend Is Your Friend?

We all have heard the cliché: “The trend is your friend”. As a matter of fact it must be one of the best known trading phrases. Identifying emerging trends in the early stages is considered one of the best ways to profit from forex trading or trading other markets.

Beginning traders frequently are advised to stick with the trend since trading in the direction of the trend is “easier” than trading counter trend. While catching the trend may sound simple in reality it is not always that easy. Just like trading in general, trading with the trend is “simple, but not easy”!

One Problem with Trends:

Trends are easy to identify after the fact but not so easy while they are forming. It’s difficult to know at the time if price moving up and down will turn out to be a solid trend or just a consolidation pattern. You just won’t know conclusively until after the fact!

That’s why traders use different indicators and parameters on their charts to help them identify a trending market. For example traders might use upward or downward sloping trend lines and moving averages or look for the stochastic oscillator displaying gap and angle to help identify a trend.

Other traders might use price alone, perhaps they are looking for price to form higher highs and higher lows or lower highs and lower lows to help them identify a trend. Whatever indicator or patterns are used to identify a trend, it’s just one part of the equation.

The other part of the “trend equation” is your time frame. What time frame are you trading? If you day trade, moving in and out of trades on the 15 minute chart, the monthly trend is of minimal significance to you.

This is not to say that you won’t look at the monthly chart, perhaps observing levels of support and resistance that might impact your trade. However, the trend on the daily, 4hour and 1hour chart will be of great importance to you and therefore you want to know the price trend on these time frames.

While trading with the trend, or trading with momentum, is a good strategy regardless where you are in your trading, it may not always be the best thing to do.

For example, there are times in the markets, where trading with the trend may not offer any or only few trade setups. Also, you may trade certain times of the day when counter trend strategies offer fairly reliable setups and momentum trades generally have been exhausted for the trading session.

Looking back, it’s always easy to see when the trend began. Unfortunately, most of us don’t have a crystal ball to tell us what will happen next in the market (or anywhere else for that matter!).

It’s easy to read into price what we want to see. But two higher highs or lower lows don’t necessarily make a trend. To identify trends we must look to the higher time frames, even if we trade short term. Additionally we must be aware of market dynamics when we trade.

Forex Trend Scanners

This is where trend trading software can help you, by taking out the human element and producing signals only when all of the right conditions are in place. Trading on the right side of the market, aka with the trend or being aware of the trend, will proof to be most beneficial to your successful trading.

What’s the Best Time to Trade Forex?

By Jack Leave a Comment

Even though the forex market virtually trades around the clock, certain trading hours offer better trading opportunities than others. This is particularly true if your trading approach includes scalping and/or day trading strategies.

Different Market Hours offer Different Levels of Volatility.

Volatility in the market is crucial to your trading success. Ultimately you need price to move to make a profit. It can be difficult to trade in a choppy market.

A choppy market is when price moves up and down, typically in a small range and traders are waiting for price to move out of the range. Choppy markets are most often the result of uncertainty in the market and traders waiting for scheduled news to be released.

Which Market Hours offer The Best Trading Opportunities?

Overall, the best trading opportunities are found when the major trading centers open and close for business because forex market hours mirror human behavior.

I know earlier I said that the forex virtually trades 24/7. Don’t let me confuse you!

While the previous statement is correct, traders working in the major trading centers come to work, leave to go to lunch and finally go home in the evening. These relatively “predictable” patterns are reflected in the markets with increasing and decreasing volatility during certain trading hours. While trading outside of those optimal times still goes on, it happens with less volatility and liquidity.

Let’s take a closer look at the three major trading centers for the Forex: Asia, Britain and the USA.

The “trading day” starts in Asia with New Zealand, Sydney, Tokyo and Singapore; most of Asia trades between the hours of 7PM and 3AM EST.

Asia accounts for the smallest percentage of all forex transactions. Typical volatility during Asia trading hours is low and price often moves in ranges.

The next major trading center to open is London, UK. London is the biggest player and offers great volatility for traders. The London market trades between the hours of 3AM and 11AM EST.

Most of the major players participate in the London session. Typically you see the biggest price moves during the London forex market hours, representing great trading opportunities.

Last, but not least, is New York, USA. The US market comes on board around 8AM EST and trades to approximately 5Pm EST. Even though New York is not the biggest trading center, the New York trading hours still offer great opportunities. For one, we have shifts in volatility when economic news is released in the early trading hours and when the New York stock market opens.

Look for Market Overlap During certain Forex Market Hours!

Being aware of these market hours alone, let’s you structure your trading so you too can profit from market moves. But there is another, even more powerful, piece of the puzzle: market hour overlap!

Go back and look at the trading hours of the major trading centers and notice the overlap between markets closing and opening. This overlap can create another great opportunity for the astute trader and many trading strategies center around the closing of one and the opening of another market.

But check for yourself if this overlap creates trading opportunities. Commit to study a currency pair to see how it moves during hours of market overlap.

The most active market overlap takes place during the early morning New York trading session and the London late afternoon or closing session. This is where you will find the greatest volatility and therefore fantastic trading opportunities.

Trading Strategy: Forex Scalping

By Jack Leave a Comment

Forex scalping as a trading approach can be very rewarding however it can also be very risky. Many new traders are drawn to scalping strategies promising big and fast rewards.

While experienced traders are successful and can make a lot of money when scalping the forex, beginners often get burned. Scalping the forex requires focus, attention, fast response and a solid trading plan and can be viewed as a more advanced trading style.

Speed when scalping is crucial. You have to be able to recognize your set up fast and be fast to enter the trade. Success depends of fast and exact order entry and exit.

No room for mistakes or hesitation because you’re not very familiar with your platform or not certain about your setup. It is vital you know in advance what you will do when “xyz” happens in the market, with your platform or your broker.

The good news is successful scalping is a skill that can be learned over time, with practice and patience.

Scalping means different things to different people

Scalping as a trading strategy means different things to different traders. You’ll find people trading anything from a 1 minute to a 15 or even 1 hour chart and consider it scalping. At the same time people will refer to scalping when staying in a trade for a few minutes or up to an hour or more.

Scalping strategies vary greatly

Actual scalping strategies also vary from trader to trader. Many trade with the momentum when scalping while others choose to go against the trend, or scalp counter trend. As long as you have a solid trading plan either approach can work.

When scalping with the trend, traders might enter the short term trend on a pull back or based on an indicator signaling to enter. Scalpers then take small chunks out of the market and try to be out of the trade before it can go against them.

For many scalping means repeated entries into the same short term trend while taking small profits from the market. Scalping is considered to be of higher risk because traders take small profits but still need to apply some degree of stop loss. That means risk to reward may not be that great on most trades.

Scalp trend or counter trend

When using counter trend scalping strategies traders may scalp short term trend reversals and pull backs against support or resistance. Some scalping strategies are based on time of day, when markets exhibit certain price behaviors with some degree of predictability.

One of those scalping strategies is the “London Close Trade Strategy” created by Shirley Hudson and Vic Noble. This trade strategy is based on market overlap between the hours of London close and New York open. The strategy has a set time frame and setups occur almost daily.

Shirley Hudson, who created this trade, has been trading this strategy with 93% accuracy for many months now. Unheard of in any type of trading, but it’s true.

Interestingly she combines the time frame of London closing with a unique entry strategy she calls the “Noble entry”. The combination of time frame and entry are brilliant and work like a charm.

The amount of risk required for this trade is small – usually under 18 pips and often even less than that. Shirley has defined targets she uses to take profits. And even though the typical profit targets are smaller than those for a day trade, it is not uncommon at all that you get a day trade like profit from what started out as a scalp.

This forex scalping strategy makes for a great trade: it’s reliable, requires low risk and it sets up almost every single trading day (at least in a few pairs).

Click on the link “London Close Trade Strategy Course” and check it our for yourself. I promise you won’t be disappointed with this forex scalping strategy!

3 Tips To Find The Best Forex Trading Strategy

By Jo Leave a Comment

When you start to look for a viable forex trading strategy, the one that’s right for you, you quickly realize there are so many different choices, that you may not be sure where to begin.

To help you choose from all the forex trading strategies and to find the one that’s right for you, you will need to establish some basic criteria you can use to narrow your options. Here are some suggestions to help you make that choice.

Tip 1 – Trading Schedule and Time Commitment

One of the first things to determine is the amount of focused time you have available to trade and that you can fully commit to. Make sure you take all your obligations and current time commitments into consideration. For most traders time commitments include at minimum their job, family and friends, recreational activities and sleep.

Trading schedule, or when you will trade each day, is the next consideration. You may be retired and time is not a constraint for you as such. However, for most traders time is an issue and hence deciding on a time to trade is of great importance.

When you’re deciding on the best time to trade, consider what goes on in the markets at that time. For example, if you determine that the best time to trade is between 2PM and 4PM EST, late New York, you may want to reconsider, unless you have an ironclad forex trading strategy specifically designed for that time frame.

Late New York trading, in general, has lower volumes and wider spreads. Overall, volatility tends to be low and because of that markets have the potential to be a bit more unpredictable.

Ideally, you want to find a time to trade where you have good volatility in the market. After all, you need price to move to make a profit. And of course this time needs to overlap with the time you have available to trade.

Tip 2 – Trend or Counter Trend

The next question when deciding on a forex trading strategy is that of trend and counter trend. Why would this question even be an issue? Because not everybody is comfortable going against the trend!

Price either moves up, down or sideways. When price is moving sideways, consolidating, there is not much to do. Ideally, we want price to move up or down; trending in one or the other direction. That’s when it’s the easiest to grab some pips.

If you find yourself not comfortable going against the trend, that’s fine. Do what you are comfortable with and don’t fight it.

However, if you’re fine with going against the trend or going counter trend, there are a few things to keep in mind. Counter trend trades typically offer smaller profit potential while risk may not necessarily be smaller. Also, counter trades may last for shorter periods of time.

As long as you are OK with that, a counter trend forex trading strategy, such as scalping, might be just right for you.

Tip 3 – KISS

Remember the old saying: KISS (keep it simple silly). Please remember this when you settle on a forex trading strategy! This is really, really important.

So many traders confuse themselves by having too many indicators on their charts. Traders mix up different trading approaches, don’t follow their trading plan (provided they have one) and don’t stay consistent.

Choose a forex trading strategy that leads to identifiable setups; setups you can see easily. You don’t want to go thru all sorts of complicated analysis to come up with a simple trading decision. Don’t get me wrong you must do your analysis, but it doesn’t have to be rocket science.

So, here you have 3 simple tips to help you find your best trading strategy. Once you find a strategy, you must stick with it and trade it enough times to determine if it’s right for you. Commit to trade your forex trading strategy for a minimum of 20 to 30 trades before you make any changes to it or decide it’s not for you.