Forex An IPO?

There are dozens of unique advantages of public Forex trading versus share dealing including reduced gearing, increased Liquidity, longer trading hours, emergence of markets, lier volatility, and the ability to use leverage where applicable. On top of that it is a liquid market where you can sell out or buy into the market just as easily as you can go short or long.

What do you need to know about getting into the market?

First you need to know exactly where the market is going. Currency markets tend to trend very well which is valuable from a traders point of view because you know that there are hundreds of opportunities within the market each day and that relatively small market participants (or players) make a lot of money.

How do you find the trend?

The best way is to identify the trend on a chart and use technical analysis to establish whether or not there is a trend line that can be used to enter the market. One of the most common ways to identify the trend is through technical indicators.

Once you have an established trend line, you want to establish where the reliability of that trend line is. In other words, is it likely to hold if you enter the market? The best way to do this is through forward points.

Forward Points are breaks in the trend that give you the opportunity to enter the market. They should be set up on a daily, weekly, or monthly chart. Before entering the market, you want to make sure the momentum is in your favor. This is done by placing a few momentum indicators on your chart; I am a fan of the 200 day moving average and the RSI which are placed on the 15 minute chart.

Once you have momentum, wait for a pullback. In the best case, you will get in at the bottom of the trend. You may also get in at the top. But, in the worst case, there is a strong downward momentum that will kill the momentum and you are never going to get in.

Next, you need to investigate how big the retracement is. In our case, we will look at 100 pips. Retracement of 100 pips is equal to about 1/2% of your position. Now, 1% of your position means your level of risk is double the amount of your account. So, you risk $20 per pip if you have $10,000.

So, what level of risk do you want to take? This can vary. It depends on your time frame, money management, and tolerance to risk. I usually stay out of the market at stock market bottoms or at the beginning of a major trend. At other times, I like to enter when the price is breaking out. Really, it is up to you.

At this point, you have to decide where you think the market is going to go. Do you think it is going to continue in the same general direction? Or, do you think it is going to deviate?

If you think the market is going to continue in the same direction, then simply place a buy order a few pips above where you think the market will reach the top, and a sell order a few pips below where you think the market will reach the bottom. Your stop loss should be 3 to 5 pips below the current price.

If you think the market is going to deviate, then you need to place a sell order a few pips below where you think the market will bottom out. You should use the same type of stop loss above and below the current price. Your take profit should be 5 pips above the current price.

Regardless of what type of orders you choose, you need to keep them fairly small. I like to have my biggest loss at about half of my max spread. I find that I can only usually lose about half of my max spread.

Using forex is fairly simple once you take out the emotion. Get into the habit of studying the currency pairs you are trading. Get a real time pair chart and have a look at the trends. It is highly critical that you get a feel for the pair you are trading before starting to trade it.

Focus on the trend and do not get caught up in the up and down movements. Understand that there are trends at both ends of the market. Understand how to find the trend and swing trade for a profit.

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