What is forex trading and how it works forex trading for beginners#trendy tech

The best traders hone their skills through practice and discipline. They also perform self-analysis to see what drives their trades and learn how to keep fear and greed out of the equation. These are the skills any forex trader should practice.

Key Takeaways

  • Trading forex can be a great way to diversify a broader portfolio or to profit from specific FX strategies.
  • Beginners and experienced forex traders alike must keep in mind that practice, knowledge, and discipline are key to getting and staying ahead.
  • Here we bring up 9 tips to keep in mind when thinking about trading currencies.

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8 Tricks Of The Successful Forex Trader

Define Goals and Trading Style

Before you set out on any journey, it is imperative to have some idea of your destination and how you will get there. Consequently, it is imperative to have clear goals in mind, then ensure your trading method is capable of achieving these goals. Each trading style has a different risk profile, which requires a certain attitude and approach to trade successfully.

For example, if you cannot stomach going to sleep with an open position in the market, then you might consider day trading. On the other hand, if you have funds you think will benefit from the appreciation of a trade over a period of some months, you may be more of a position trader. Just be sure your personality fits the style of trading you undertake. A personality mismatch will lead to stress and certain losses.

The Broker and Trading Platform

Choosing a reputable broker is of paramount importance, and spending time researching the differences between brokers will be very helpful. You must know each broker’s policies and how they go about making a market. For example, trading in the over-the-counter market or spot market is different from trading the exchange-driven markets.

Also, make sure your broker’s trading platform is suitable for the analysis you want to do. For example, if you like to trade off Fibonacci numbers, be sure the broker’s platform can draw Fibonacci lines. A good broker with a poor platform, or a good platform with a poor broker, can be a problem. Make sure you get the best of both.

A Consistent Methodology

Before you enter any market as a trader, you need to know how you will make decisions to execute your trades. You must understand what information you will need to make the appropriate decision on entering or exiting a trade. Some traders choose to monitor the economy’s underlying fundamentals and charts to determine the best time to execute the trade. Others use only technical analysis.

Whichever methodology you choose, be consistent and be sure your methodology is adaptive. Your system should keep up with the changing dynamics of a market.

Determine Entry and Exit Points

Many traders get confused by conflicting information that occurs when looking at charts in different timeframes. What shows up as a buying opportunity on a weekly chart could show up as a sell signal on an intraday chart.

Therefore, if you are taking your basic trading direction from a weekly chart and using a daily chart to time entry, be sure to synchronize the two. In other words, if the weekly chart is giving you a buy signal, wait until the daily chart also confirms a buy signal. Keep your timing in sync.

Calculate Your Expectancy

Expectancy is the formula you use to determine how reliable your system is. You should go back in time and measure all your trades that were winners versus losers, then determine how profitable your winning trades were versus how much your losing trades lost.

Take a look at your last ten trades. If you haven’t made actual trades yet, go back on your chart to where your system would have indicated that you should enter and exit a trade. Determine if you would have made a profit or a loss. Write these results down.

Although there are a few ways to calculate the percentage profit earned to gauge a successful trading plan, there is no guarantee that you’ll earn that amount each day you trade since market conditions can change. However, here’s an example of how to calculate expectancy:

Formula for Expectancy

Expectancy = (% Won * Average Win) – (% Loss * Average Loss)

Example of Expectancy

If you made ten trades, six of which were winning trades and four of which were losing trades, your percentage win ratio would be 6/10 or 60%.

  • If your six trades made $2,400, then your average win would be $400 ($2,400/6).
  • If your losses were $1,200, then your average loss would be $300 ($1,200/4).

Expectancy = (% Won * Average Win) – (% Loss * Average Loss)

  • Expectancy: (.60 * $400) – (.40 * $300) = $120

In other words, on average, a trader could expect to earn $120 per trade.

Risk:Reward Ratio

Before trading, it’s important to determine the level of risk that you’re comfortable taking on each trade and how much can realistically be earned. A risk-reward ratio helps traders identify whether they have a chance to earn a profit over the long term.

For example, if the potential loss per trade is $200 and the potential profit per trade equals $600, the risk-reward ratio would equal 1:2.

  • If ten trades were placed and a profit was earned on just four of the ten trades, the total profit would equal $2,400 ($600*4).
  • As a result, six of the ten trades would’ve lost money at $200 each, which equals $1,200 in total losses ($200*6).
  • In other words, a trader would earn a profit on the ten trades, despite being correct only 40% of the time.

Stop-Loss Orders

Risk can be mitigated through stop-loss orders, which exit the position at a specific exchange rate. Stop-loss orders are an essential forex risk management tool since they can help traders cap their risk per trade, preventing significant losses.

Using the example above, imagine the trader had a very wide stop-loss order for each trade, meaning they were willing to risk losing $1,200 per trade but still made $600 per winning trade. One loss could wipe out two winning trades. If the trader experienced a series of losses due to being stopped out from adverse market moves, a far higher and unrealistic winning percentage would be needed to make up for the losses.

Although it’s important to have a winning trading strategy on a percentage basis, managing risk and the potential losses are also critical so that they don’t wipe out your brokerage account.

Focus and Small Losses

Once you have funded your account, the most important thing to remember is your money is at risk. Therefore, your money should not be needed for regular living expenses. Think of your trading money like vacation money. Once the vacation is over, your money is spent. Have the same attitude toward trading. This will psychologically prepare you to accept small losses, which is key to managing your risk. By focusing on your trades and accepting small losses rather than constantly counting your equity, you will be much more successful.

Positive Feedback Loops

A positive feedback loop is created as a result of a well-executed trade in accordance with your plan. When you plan a trade and execute it well, you form a positive feedback pattern. Success breeds success, which in turn breeds confidence, especially if the trade is profitable. Even if you take a small loss but do so in accordance with a planned trade, then you will be building a positive feedback loop.

Perform Weekend Analysis

On the weekend, when the markets are closed, study weekly charts to look for patterns or news that could affect your trade. Perhaps a pattern is making a double top, and the pundits and the news are suggesting a market reversal. This is a kind of reflexivity where the pattern could be prompting the pundits, who then reinforce the pattern. In the cool light of objectivity, you will make your best plans. Wait for your setups and learn to be patient.

Keep a Printed Record

A printed record is a great learning tool. Print out a chart and list all the reasons for the trade, including the fundamentals that sway your decisions. Mark the chart with your entry and your exit points. Make any relevant comments on the chart, including emotional reasons for taking action. Did you panic? Were you too greedy? Were you full of anxiety? It is only when you can objectify your trades that you will develop the mental control and discipline to execute according to your system instead of your habits or emotions.

The Bottom Line

The steps above will lead you to a structured approach to trading and should help you become a more refined trader. Trading is an art, and the only way to become increasingly proficient is through consistent and disciplined practice.

2021-10-07 2021-10-07

Three most effective trading indicators for Forex traders

Artem Parshin

https://www.litefinance.org/blog/authors/artem-parshin/

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2021-10-072021-10-07

Mathematical indicators were invented at the very beginning of technical analysis, long before the creation of computer charts. The first indicators were just a mathematical formula according to which the price average values were calculated, next, they were plotted as dots in paper price charts and connected with lines. Modern indicators are not very different from those early tools. A modern indicator is also a mathematical formula presented by the software shell that is automatically plotted on the computer price chart. 

It is a bit more complex than the calculation of the support and resistance levels, isn’t it? 

This article describes forex online charts with the attached indicators. I will explain how to employ technical indicators to make money on trading Forex. As of now, all indicators are grouped into two major types, based on the principle of its use. 

  1. Trend indicators are tools aiming at defining the ongoing trend and how long this trend should continue;
  2. Oscillators are the indicators used not only to define the trend itself but also to identify the trend stage and to receive the trading signals to buy or sell in the trend. 

The above chart displays both types of indicators. Trend indicators are always directly in the working space. It is natural as they must be following the trend (the price chart). The oscillator is in the separate window below the chart. The price chart is not so important for its work. The trend indicator in this chart is Bollinger Bands, and the oscillators are presented here by the MACD histogram indicator. Among the common indicators widely used, these two are worth paying attention to, they are more effective in practice than other indicators. 

Well, let’s get down to business and find out the best indicators to trade forex. THere is  the top chart of three best Forex trading indicators 

Number 3. Momentum 

Momentum is one of the oldest oscillators. It had been first mentioned before the computer analysis was introduced. That is why it is very simple. This is a forex price prediction indicator.

  1. To start working, you need to sign in your client profile and click on the Trade tab on the left panel. There is a huge choice of trading instruments, ranging from currency pairs to stocks or metals CFDs. 
  2. As all indicators perform quite well in trading high-liquid trading instruments which a represented in the list of currency pairs, let’s select of them. For example, it can be the major currency pair, the EURUSD. To open the chart of this pair, you click on its card on the Trade menu. 
  3. To attach the indicator to the price chart, you need to click on the Indicators tab at the top menu of the price chart. 
  4. Now, we select the needed indicator from quite a huge list of indicators. We will make a profit from Forex trading using the Momentum oscillator, a very popular forex market sentiment indicator mt4. 

5. After you click on the indicator, it will appear in the separate window, below the price chart. Before you get started, you need to custom the indicator. Click on the small arrow on the right side of the indicator name;

6. There will open the settings window, where you can format the period of time over which the price movements are averaged (the MA length) and the source type (close, it means the closing prices are analyzed). You shouldn’t change the Source box, and the length will be 35. 

7. Click on the OK button. 

8. Now, the forex predictor indicator is set, let’s custom its visualization. The most important in our indicator is the zero line which is intersected from time to time by the curve line of the indicator, this will be moving average convergence divergence. If the curve line breaks the zero line upside, this is a buy signal, if it breaks downside, it is a sell signal. This is very simple. In the default setting the zero line is not visible, so we need to attach it to the chart using a simple horizontal line you will find on the drawing panel on the left;

9. The zero line is now visible, and the signals will be clearer;

10. When the indicator is under the zero line, there is likely to be delivered a buy signal. You should prepare the trade panel for opening a position. First, you need to select the position type. 

11. Next, we set the volume of the trade, it is 0.5 lots;

12. Well, we only need to expect a buy signal. There it is! The indicator curve breaks through the zero line upside, so, we open a buy position;

13. We click on the buy button in the trade panel; 

14. The intermediate result of the trade is immediately indicated in the asset panel at the bottom. It is initially negative due to the commission charged for executing the trade.

15. We now expect the signal to exit the trade. The exit signal is the one opposite our buy signal (the curve breaks through the zero line downside);

16. The signal is delivered, and we can now look at the trade result. The yield is excellent +18.50 USD. We can take the profit and exit the trade;

17. We open our trade in the panel and click on the Close button. That’s all, the profit is taken. We can repeat our success and open some more winning trades with our excellent forex time indicator. You can even base your trading strategy on this indicator alone. And until you haven’t started making money yourself, I will describe another best indicator!

Number 2. Alligator 

This is also a trend indicator, so, it is located directly in the price chart. The indicator is quite simple compared to other forex market sentiment indicators; it was designed by Bill Williams based on the combined signal of the three simple Moving Averages, it can be a trading system as well. Well, that will do for the theory of the forex swing trading indicator, let’s start making money. 

1. Enter the Trade tab.

2. This time, let’s take the USDJPY currency pair;

3.Click on the Indicators menu;

4. Choose the Williams Alligator 

5. Just like with any other indicator, we need to format it before we start working. Like we did with the previous indicator, we enter the settings and set the values for the periods of the indicator lines of 21, 13, 8. In general, these are the default values, but if they for some reason are different, correct them;

6. Now, we can expect an entry signal. The trading signals delivered by the indicator are the following. We enter a buy trade if the red and the green lines break through the blue one upside; we enter a sell trade is the green and the red lines break through the blue one downside;

7. Select the trade type, it is sell; 

8. Set already known trade volume of 0.5 lots;

9. Click on the sell button;

10. Expect an opposite signal when the green and the red lines break through the blue line upside, as it is displayed in our chart;

11. We already have a profit by this time, so we take it;

12. Click on the Close button in the panel of trades;

13.Another profit is taken, and our deposit continues increasing. If you already have trades entered according to the previous indicator, this is the right time to add another couple of trades entered according to the Alligator indicator, as the more trades you enter the higher is the total profit. 

Number 1. Awesome Oscillator (AO)

This forex prediction indicator MT4 is one of the best to be used in the forex indicator strategy. This oscillator is designed to deliver trading signals of the divergence which is the strongest sign of a soon trend reversal and trend pivot level in technical analysis. Well, let us start spotting divergence and make profits! 

1. Open the Trade panel in the trading platform;

2. Select another currency pair, let it be the USDCAD;

3. Click on the Indicator menu;

4. And chose the needed indicator, now, it is forex time indicator, the Awesome Oscillator. This technical tool was also designed by Bill Williams, an unrivaled expert in the forex technical analysis indicators. Most of his original trading indicators are the best in their group; 

5. Now, custom the indicator settings before you start trading. We will need the trend line from the drawing panel on the left; it will run along with the highs of the ongoing uptrend. 

6. Draw the line according to the trend highs on the chart

7. We draw the same line along with the highs of the corresponding trend on the indicator, and it happens so that the tool indicates a downtrend, unlike the price chart where the trend is up. This is called divergence when the trend on the indicator is opposite to the trend on the price chart;

8. As the Awesome Oscillator indicates a downtrend, we expect a sell signal to enter a position to sell. We set the familiar trend volume of 0.5 lots;

9. The sell signal is delivered. The trading signal to sell is when the red bar on the indicator is below a zero level. 

10. Now, we can enter a trade and we click on the Sell button; 

11. As usual, our trade yields a loss at first due to the commission for the transaction; 

12. This is written in the Assets Total box

13. We expect the price to move down;

14. The Current Change indicates a profit; 

15.The indicator delivers a signal to close the position. The exit signal is when the first green bar is painted below a zero level after the position is opened; 

16. It is time to take the profit in the section of current trades;

17. Click on the Close button.

So, now you are familiar with three different indicators that yield the same real-time result, you make money trading forex online. Use these tools in the forex indicator strategies, and do not forget to read new articles in the LiteFinance trader blog. You will learn far more different ways to make profits from Forex trading. 

P.S. Did you like my article? Share it in social networks: it will be the best “thank you” 🙂

Ask me questions and comment below. I’ll be glad to answer your questions and give necessary explanations.

Useful links:

  • I recommend trying to trade with a reliable broker here. The system allows you to trade by yourself or copy successful traders from all across the globe.
  • Use my promo-code BLOG for getting deposit bonus 50% on LiteFinance platform. Just enter this code in the appropriate field while depositing your trading account.
  • Telegram chat for traders: https://t.me/liteforexengchat. We are sharing the signals and trading experience
  • Telegram channel with high-quality analytics, Forex reviews, training articles, and other useful things for traders https://t.me/liteforex

Price chart of EURUSD in real time mode

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteFinance. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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Written by Jane