Friday, December 19, 2008

FOREX Trading Strategy

This strategy is used by one of the forex trader.


He ventured into the Forex market almost 2 years ago. He have tried and tested many different types of trading techniques and styles. Most were failures and some were successful. From his experience, traders making money in Forex will not reveal their trading system, simply because somebody has to lose money in order for you to make money.

He have two strategies. The first one, he started with a demo account a more than 2 years ago and used the common techniques such as technical analysis and fundamentals. Technical analysis seemed to be the easiest method for an inexperienced trader since it only required looking at charts as opposed to watching the news. He used some indicators such as MACD, Fibonacci, and RSI to help assess the market and make a prediction on price movements. He was successful in demo account, however when He went live, fear set in and he could not trade using the same techniques he had developed over several months of trading with a demo account.

The stress was too much and like a lot of people, He started looking for a Forex signals provider to minimize the time spent and stress. After some due diligence on quite a few Forex signals providers, He did find a reliable Forex charting software package that provided excellent signals. The signals worked. After all, the company He choose had a winning track record for 3 consecutive years.

Now that he had a positive flow of income from a Forex signals provider, he decided to open a second account using my own trading system. This is where he discovered a full proof system when it comes to making a fast 30 to 50 pips in Forex.

He noticed that the market moved on speculation. Speculation based on fear and news events, such as the CPI and retail sales.He noticed that between the times of 4:30 am eastern and 8:30 am there was a lot of critical news in majors such as the Euro and the British Pound. The market would move at the exact moment these major news events were released. If a news event was due out at 4:30 am on the British Pound, more than likely the market spiked at that exact moment 30 to sometimes 50 pips up or down. What he started to do was trade on these news events. I would wait until that exact moment the news was due out and execute a trade when the market moved more than 7 pips from its current price 15 seconds before the news is released. A stop-loss should be set at 10 pips above or below the current price.

The trick to this method is executing the trade at the right time and discipline yourself to keep your stop-loss very tight, setting it to no more than 10 pips after you got into the trade. The reason being, this works all of the time, but if you click too soon or too late you could fail to predict the direction of the market. However, when you are right, your winning trades will outweigh your losing traders significantly since you are looking to make a gain of 30-50 pips and if you a wrong a loss of only 10 pips. He have used this method for 5 months and it works.

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