If you are new to forex trading you likely have a lot to learn and a great number of techniques to master. Because of the level of competition involved and the vast fortunes that can be made, forex trading is never easy and there are no short cuts to becoming a master.
However, there are right and wrong ways to go about things and choosing the right path is preferable if you want to begin making profits sooner rather than later. This framework should act as a good guide for every fledgling trader.
Timeframes
When you start out in forex, you would be wise not to waste time looking at short term strategies. Intraday trading and scalping is the hardest type of trading since it requires tight spreads, a lot of skill and a lot of leverage. Conversely, long term trading requires bigger capital investments and is out of the reach of most beginners.
Guest post by FXTM
Instead, start off on a medium term horizon. Look for trades that last anything from a day to a couple of weeks. That way you’ll be able to find some nice opportunities and learn as you go along.
Personality
When you start, ask yourself what your strengths and weaknesses are. What strategies do you believe in and how comfortable are you with different levels of risk. These questions will help you decide the kind of strategy and forex pairs you want to focus on.
Choose a currency pair
For now, it’s best to choose just one currency pair with which to focus on. Learn its patterns and characteristics, know what time of the day it is most volatile and how it reacts to other cross pairs and news events. You should strive to become in tune with your chosen pair, building up a level of intuition that will serve you well when you come to trade it. Choose one of the more liquid pairs such as EURUSD, GBPUSD or USDJPY to begin with.
Try a strategy
Now you have chosen your currency pair and timeframe and you are (hopefully) learning as much as you can on the subject , begin trialing some strategies.
Set up a free forex trading platform like MetaTrader and begin watching the market. Open up your chosen pair over several different timeframes. Opening up a minute chart, an hourly chart and a daily chart is a good place to begin; then place on top of each chart several technical indicators.
For the minute chart, insert an RSI (15), stochastic and MACD. For the hourly chart, set up EMA’s for 5, 20, 50 and 100 time periods and on the daily chart set up a Bollinger Band (15, 2) and another 50 period EMA.
Now watch for moments when all of your indicators over every timeframe are pointing in one direction and start to demo trade in that direction. Use stops below key levels and keep an eye out for fundamental news flow that could change the direction of the market.
By keeping a close eye on events and only trading when your currency pair is trending across all timeframes you should be able to get on board some nice trends. And that should be enough to get you going in your forex trading career.
Further reading: 6 Steps to creating a robust forex system
Share
