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For beginners trading in forex demo account

Posted: 27 Feb 2011 07:36 AM PST

For beginners trading in forex demo account

I have written this article mainly for traders who already know what forex trading is, have opened their forex demo account and have traded for a while. Now the word "a while" has a very relative meaning in forex context. One trader might have traded successfully for a couple of months and with some knowledge and experience developed his own profitable system and forex trading strategy with sound money management. I am not talking here about 20% or even 10% balance risking for one trade.

You have to leave your emotions outside your trading account

Another, less lucky trader, might still be struggling on finding his method of trading. In fact, he might never have the abilities to trade in forex. Yes, you could be the one who should never participate in this particular money making business. Why? Because it's a kind of a psychological game of probabilities. Just because you are never sure, if you loose today, tomorrow or even for the whole month. If it frightens you,I think you would be better off working somewhere, where you know exactly what you will get for your hard work. If you want to be sure, what you will get per hour, per day, per month, etc. - forex trading is not for you. On the other hand, if you are very jumpy, you throb into tears finding out that you lost 100 dollar bill while walking down the street or jump out of joy when you accidentally find a dime - trading forex investment might not work for you as well. You have to leave your emotions outside your trading room. If you can do that - you will succeed.


Posted: 27 Feb 2011 07:35 AM PST

Trend trading in forex

One of the most popular trading method or strategy, or sometimes just a part of strategy is forex trend trading. Why is it so popular, you might ask? Well, trend is a continuous price movement in one direction, when higher highs indicate upward price trending (long) and lower lows indicate the downward price movement or down trend. As the momentum increases, the future movement becomes highly predictable, which makes it so atractive to forex brokers and traders.
The trend trading strategy is the analysis of the price momentum in a particular trend direction and trade entries following that direction. To put it simply – sell when the price is falling and buy when it is rising. The main problem here is identifying the trend in a particular time frame, trade entries and exits and money management.


Posted: 27 Feb 2011 07:34 AM PST

Identifying a forex trend

It's not that hard to do if a trend is already in a halfway. It's much harder to identify it at the very beginning – when the former trend has finished or the price ranging exhausted. There are few things you have to bear in mind:

Moving averages. When 200, 100, 50 or smaller periods' moving averages start to cross and the price movement is already higher or lower than all the moving averages – it's a signal of a new trend, especially in bigger time frames (1 hour, 4 hour or daily chart).

Price channel lines. When the channel lines of old trend are broken, it's a signal that the trend might be exhausting and new price movement is on the way.

Resistance and support. In case of a new downtrend, the highest low of a previous uptrend is broken.

These are one of the basic signals you have to bear in mind when looking for a new forex trend.


Posted: 27 Feb 2011 07:34 AM PST

Time frame

The first thing that we have to do is decide, whether we want to trade in a 5 minutes chart or time frame or in a weekly time frame. Forex trends occur and may last for 5 minutes as well as 1 or more years.
Different chart time frames might show completely different trend patterns. If a weekly chart shows upwards trend, a 4 hour chart might signal for short entries. You have to choose the main trend time frame and select smaller time frame chart for better entries. Do you like forex scalping or long term trend trading?
Anyway, choose your time frame, because the same principles of trend trading apply to all time frames. I personally would rather choose 1 hour and 4 hour charts to trade and smaller time charts for entry signals.


Posted: 27 Feb 2011 07:33 AM PST

So emotions out, and your forex trading system in

So emotions - out, and your forex trading system - in. If you have traded enough or for a while in your forex demo account, you should have developed some kind of profitable forex system. You must already chosen currency pairs to trade with, you know when to place stops, when to close your positions, what profit/risk ratio to choose, what forex indicators to use for entering or exit, when not to trade and when to double your positions and make a pyramid. You should also take into account the use of economical and policial news, because that's what drives the market.


Principles of trade exits

Posted: 27 Feb 2011 07:33 AM PST

 are the same like trade entry, only the opposite. Also, some of your positions will be closed sooner than the trend ends, just to protect your gains in case of some volatile reverse price movements.
What I like in trends is the possibility to increase the number of your profitable positions and the big probability of more future gains if you keep your positions long enough. On the other hand, do not over keep them – this way you will only see the profits disappearing in front of your eyes and losses appearing. And finally - do not play against the trend. It's always better to follow the forex trend, because trend is your friend, after all.


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