Simple Steps to Catching Big Forex Profits
Posted: Fri Nov 21, 2008 3:01 pm
If your goal is to catch the big profits in the forex-trading arena you will need to trend follow forex trends which are longer term. Here is a simple method. If used correctly it will help you catch major forex trends. This will lead you to a long-term currency trading success. The methods that we will be discussing are, breakouts, confirmation and stops and targets.
Most novice forex traders don’t bother trying to trend following forex longer term. They enter the market as day trading or forex scalping. These methods focus the trades on small moves and hopes of catching small profits. However as most short-term moves are random, this leads to equity wipe out.
There are other choices for trading in the forex market which are swing trading and long term forex trend following. This article is about is about long-term forex trend following. If you look at any forex chart, you will see long term trends that last for months or years. These moves can and do yield big profits. Read on for a simple method on how to catch a big profit in the forex market.
Breakouts
Trading forex breakouts is one of the more basic trading strategies, but nevertheless it can deliver excellent profits. A breakout is simply a move on a forex chart where a new high or low is made and resistance of support is broken. It is a fact that most major moves start from new highs or lows. Just because a system is easy to follow does not mean it cannot produce consistent profits. As breakout trading is a method used by some of the most successful forex traders around.
It's based around the whole premise that if a currency pair is trading in a very tight range for a sustained period of time, then eventually it will break out of that range. And more often than not it will continue moving in the direction of the breakout.
This means that to make consistent profits you need to firstly identify instances where a currency pair is trading in a narrow range, and then place buy and sell orders at or slightly outside the current range to catch the breakout when it happens.
Most traders don’t buy or sell breakouts and that’s exactly why it’s such a powerful method.
Confirmation
Of course not every breakout continues and some reverse, these are false and can cause losses. You will need to confirm each move. To achieve this you will need to put a few momentum indicators in your forex trading system to confirm your trading signal.
These indicators give an idea of the strength and velocity of price and there are many to choose from. Two of the best are stochastic and relative strength index (RSI).
Stops and Targets
Use the current trading range to determine where to place the stops so if you go long at the top of the range, then your stop loss will be at the bottom of the range. This is only really an emergency stop as most of the time the breakout will follow through and not go anywhere near this stop loss. Target prices can be the same number of points away as the stop at the very least.
You have to keep in mind that when the trend does eventually turn you are going to give some profit back. You don’t know when the trend is going to end, so don’t predict.
The best thing about this system is that it works pretty well across many different time frames, plus not only does it work well for trading forex markets but it's also an equally good system for trading other financial instruments as well.
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Most novice forex traders don’t bother trying to trend following forex longer term. They enter the market as day trading or forex scalping. These methods focus the trades on small moves and hopes of catching small profits. However as most short-term moves are random, this leads to equity wipe out.
There are other choices for trading in the forex market which are swing trading and long term forex trend following. This article is about is about long-term forex trend following. If you look at any forex chart, you will see long term trends that last for months or years. These moves can and do yield big profits. Read on for a simple method on how to catch a big profit in the forex market.
Breakouts
Trading forex breakouts is one of the more basic trading strategies, but nevertheless it can deliver excellent profits. A breakout is simply a move on a forex chart where a new high or low is made and resistance of support is broken. It is a fact that most major moves start from new highs or lows. Just because a system is easy to follow does not mean it cannot produce consistent profits. As breakout trading is a method used by some of the most successful forex traders around.
It's based around the whole premise that if a currency pair is trading in a very tight range for a sustained period of time, then eventually it will break out of that range. And more often than not it will continue moving in the direction of the breakout.
This means that to make consistent profits you need to firstly identify instances where a currency pair is trading in a narrow range, and then place buy and sell orders at or slightly outside the current range to catch the breakout when it happens.
Most traders don’t buy or sell breakouts and that’s exactly why it’s such a powerful method.
Confirmation
Of course not every breakout continues and some reverse, these are false and can cause losses. You will need to confirm each move. To achieve this you will need to put a few momentum indicators in your forex trading system to confirm your trading signal.
These indicators give an idea of the strength and velocity of price and there are many to choose from. Two of the best are stochastic and relative strength index (RSI).
Stops and Targets
Use the current trading range to determine where to place the stops so if you go long at the top of the range, then your stop loss will be at the bottom of the range. This is only really an emergency stop as most of the time the breakout will follow through and not go anywhere near this stop loss. Target prices can be the same number of points away as the stop at the very least.
You have to keep in mind that when the trend does eventually turn you are going to give some profit back. You don’t know when the trend is going to end, so don’t predict.
The best thing about this system is that it works pretty well across many different time frames, plus not only does it work well for trading forex markets but it's also an equally good system for trading other financial instruments as well.
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