Currency trading strategy

Strategy

Forex trading is all about controlling risk, patience, discipline, correlation and emotions.

Risk Management.

This is what will keep you in the business, of trading forex. Risk management in forex trading is all about controlling our position size, which is due to leverage and the volatile nature of the market.

Points to note. Keep this in mind.

1. Risk a maximum of 10% of your capital on all total open positions, because it will help you with 90% remaining capital to test the next support level in case you are wrong.

2. Take smaller position size, for example 10000 aud/usd that way you are not being stop out all the time.

3. Place a wide stop loss a way from the support line. As soon as the support line is

broken your are stop out, and it also means that the trade is going in a wrong direction. Remember that wide stop loss should go along with smaller position size.

Patience and Discipline.

Patience and discipline are important for your trading success, this is because the chart (price) has to move for us to make any money. Hence give time to your trade to develop the profit we need. At least 3 weeks or so.

Another thing you should also remember is, wait patiently on the support line so that you buy at, cheap price and it also helps you to risk little amount, because the price is in the support line with your stop behind it.

Currency correlation.

Currency correlation is very important in trading forex. Correlation is a relationship between two trading securities, in these case currencies pairs. Note that aud/usd, eur/usd, Gbp/usd, all these currencies pairs move together.

This means that if one goes up, then all of them will also go up. usd/jpy, usd/chf also moves in the same direction . Also some currencies moves in opposite

direction for example, eur/usd and usd/chf , if eur/usd goes up then usd/chf will go down.

How to used it. DO NOT PLACE THE SAME CURRENCY PAIRS WHICH

MOVE TOGETHER AT THE SAME TIME BECAUSE YOU WILL BE DOUBLING YOUR RISK (TOO MUCH RISK).

IF ONE IS WRONG THE OTHER WILL BE ALSO. DO NOT PLACE OPPOSITELY MOVING CURRENCIES PAIRS AT THE SAME TIME, BECAUSE IF ONE PAIR GOES UP THE OTHER AS A MUST WILL COME DOWN EXAMPLE EUR/USD AND USD/CHF.

Emotions.

With proper risk management above and patience, controlling your emotions is now easy because you are in full control of your trading. Just relax and enjoy the bus journey.


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