Most Effective Ways To Trade forex in a tight position with simplicity ?

Unlike most other markets out there, Forex is a 24/5 operation - meaning that from Monday to Friday, you can trade at any time of the day or night. This is perfect if you are one of those people wanting complete flexibility as to the times you trade. However, it can also be a bit of a nightmare for those who are followers of the news.

Fundamental trading strategies (or news trading) is basically the basis on which people use the news to base their trading decisions. For example, any of the following events might trigger a trade if someone was carefully following the news.

SURPRISE INTEREST RATE INCREASE OR DECREASE.

SURPRISE ECONOMIC DATA.

NEWS THAT A CURRENCY IS BEING ARTIFICIALLY TAMPERED WITH BY AUTHORITIES.

This is just a selection of the possible news stories which could turn a relaxed, off duty Forex trader in to a raging financial mogul in a matter of seconds.

WHY THE FOREX MARKET GETS TIGHT ?

When we talk about a "tight Forex market" we are usually referring to a lack of trading on a particular currency pair, and therefore a very small amount of price movement over a given period.

For example, if we said that the USD/JPY was trading "tightly", it would imply that the daily range of the currency pair was extremely small - perhaps a matter of 30 to 50 pips.

There are other times when we would say that the market is tight also. In some cases, we might refer to the entire market as being "tight". This usually happens on a select few occasions at about the same time each year - with one of these periods of course being: summer.

Summer Trading is Tight Trading

Even though the Forex market is still open each week day during summer, because many finance companies and banks choose to send their employees on holiday during these times - the liquidity of the entire market is often low. In other words, it's not just one single currency pair which is affected, but all the currency pairs.

If you are trading during summer or if the American summer happens to be your winter - you need to adjust your trading strategy to incorporate this decrease in liquidity. Perhaps consider more position trades, rather than swing or scalp trades, to attempt to mitigate the additional risk of the low liquidity during the major holiday breaks.

KNOW WHEN TO TAKE A BREAK

Finally, the last mistake I see traders make on a regular basis is refusing to take a break when their trading is really suffering. I think this applies to discretionary traders more often than system traders. If you are a system trader, you probably understand your trading system’s average drawdown and might not feel personally attached to each trading decision. 

Discretionary traders, on the other hand, often select trades without the aid of system-based rules and might feel personally invested in each trading decision they make, whether they should or not.

Regardless of your trading style, every trader will go through a period of time when his trading really suffers. Losing multiple trades in a row is a tough blow to overcome and can shake the confidence of many traders. Sometimes all that is needed is a short break from trading to clear your mind; take a walk and come back in a better mood. Trading when you are angry can lead to taking trades simply because you want to get back at the market. 

You might feel cheated, and you might be looking for revenge. This is a bad mental state to be in when you are planning a trade, because the market doesn’t care about you or whether you win or lose. Trading when you are stressed, angry, or looking for revenge against the market will only cloud your judgment and lead to more bad decisions. I’ve even seen traders become so angry with losing money that they mentally give up and open positions for no reason other than gambling and continue to trade until their account is margin called.

Include some guidelines in the risk management section of your trading plan to remind yourself to take a break from trading when things are not going well. Perhaps it is a limit of 10 losing trades in a row; perhaps it is a certain percentage loss of your capital. Some managed funds use a rule stating that if the client account loses more than 20 percent, trading must halt and the client must be consulted before trading continues; 20 percent seems like a decent number to me. Know when to take a break, and never try to trade when you feel like the market owes you a win. It doesn’t.

C L O S I N G B E L L

Managing risk through stop placement and position sizing is a critical skill every trader should master. If you are unable to consistently manage risk, you will not last long as a trader. Successful traders know that when risk is managed appropriately, profits will appear over the long run; no single losing trade matters to them. This chapter walked you through the components of risk management techniques and pointed out common mistakes traders make managing risk.

The following list summarizes the key points from this post:

• Always use a stop loss.
• Avoid overtrading.
• Think of risk in terms of percent loss, not pips.
• Control risk through position sizing.
• Keep risk consistent for every trade.
• Do not trail stops too closely.
• Focus on trades with a good risk-to-reward ratio.
• Know when to take a break.

The final point to remember is that risk management is no good unless you are able to select good trades. Plenty of traders have blown out their accounts by practicing good risk management but selecting horrible trades. If you can’t consistently pick a good trade, risking 10 percent or 0.01 percent of your account won’t matter; ultimately you will blow out your account. 

Before you put your faith in risk-to-reward ratios and limited risk with live money, ensure that you have developed a consistent and profitable track record using a demo account. Finally, when things get ugly and you have taken a few losses, know when to take a break. The worst thing a trader can do is try to take revenge on the market after a series of losing trades.

SWING TRADING - Concepts to Understand to deal in tight situations...

Before you get into swing trading, or any type of FOREX trading for that matter, there are some key terms you need to understand to take your level of knowledge to the next level. The first terms you need to understand are uptrend and downtrend, which signify that the value of a currency is showing provable signs of either increasing or decreasing in value respectively. 

You also need to form a basic understanding of support and resistance lines. Support lines are like the foundation of the trend’s chart where prices never seem to get lower than. This will be used to help you determine how cheaply you can buy in. Resistance lines are like the ceiling, and they essentially dictate the highest the price trend is going. This will give you an idea of when you might want to consider selling your currency before prices begin to fall back towards the support line.

Swing Trading Advantages

While swing trading is something that is not ideal for everyone, such as those who are fortunate and experienced enough to be day traders earning a full-time income, it does have some advantages. First of all, you do not have to sit at home on your computer all day waiting to determine what your next move will be. Not only is this something that is best left to professional investors, but it is also extremely tedious work trying to make a hypothesis regarding what the value of a currency will increase or decrease to within the given 24-hour timeframe. 

On the contrary, some investors participate in what is commonly referred to as trend trading, which can go on for a month or longer where they hold on to the same currency and hope that it follows the expected trend. With swing trading, on the other hand, you are talking about trading in a format that most closely resembles that of trend trading, but you typically only invest in the same currency for less than two weeks. 

This is considered to be a great option for beginners learning the FOREX investing practices because it is enough time to get a preview of how trends work without having to stress out for a month about how your investments are performing.

How to Swing Trade

Swing trading, as previously mentioned, is a close relative to trend trading in that you are sticking with a current investment for a period of time that is longer than 24 hours. Essentially, you will pick a currency to buy and sell, and you will stick with it for a time frame ranging anywhere from a couple of days until two weeks. 

Of course, just as you would with trend trading, you will still want to look at trend charts, so you can get an idea of how your investment will likely perform based on its current price. You can determine this by looking at the support and resistance on the charts as previously discussed.

In the FOREX market, there are several ways to trade, but day trading, trend trading and swing trading are three of the more common options. You will find that many professionals like the day trading option because of the amount of money they have to invest and the very minimal amount of risk, but they also receive a lower return with a higher volume. 

Most experts suggest that beginners, and investors with just a modest amount of experience, should consider swing trading because it offers an experience similar to trend trading, but it's shorter term involves less risk.