Forex trading is now quite an acceptable occupation for private individuals. It used to be only available to top financial institutions, but the internet has enabled everyone, even people with a low starting capital, to trade the forex markets. So what makes forex trading so attractive?
Well the most obvious attraction is the earning potential. The amount of money you can make from forex trading is unlimited. The sky really is the limit. If you have a consistently profitable strategy, then you can use leverage to multiply your earnings. For example, if a forex broker offers 1:100 leverage, this means you can trade a $100,000 position with just $1000 and a $10,000 position with just $100.
This means that if you are successful your earnings will grow rapidly. Compare this with traditional share trading where if you wanted to buy $100,000 worth of shares, then you would have to have $100,000 in capital.
Another huge draw is the fact that the forex markets are open 24 hours a day during the week. So you can therefore trade during the hours that suit you. Plus there's the fact that liquidity is always high as currencies are traded in countries all around the world, which means that you will generally not have any trouble getting a large position filled at any time of the day.
Another advantage of forex trading is that it is very easy to open an account with a broker and start trading shortly afterwards. There are many top forex brokers nowadays and a lot of them have excellent trading platforms as well as top of the range charting software that you can use to make your trading decisions.
Charts are one of the key tools for any trader as they are invaluable in helping you to find possible trades. They are useful when trading any financial instrument, but they are particularly useful when trading forex because the price, particularly of the major currency pairs, generally conforms extremely well to technical analysis.
So overall there any many reasons why forex trading is becoming so popular. Of course it's very easy to start trading forex, but it's a lot harder to actually make money consistently from forex trading. This is why I recommend starting off by using a free demo account as this will enable you to become familiar with trading, without risking any of your own money. There is a steep learning curve and it's always best to come up with some form of trading system before trading for real.
James Woolley runs a forex blog where you will find free forex tips and strategies and a review of Zulu Trade, the revolutionary forex signals service.
Tuesday 12 August 2008
Monday 4 August 2008
3 Simple Forex Breakout Strategies
Trading breakouts is one of the most popular methods of trading the forex markets because you often get large moves after a period of consolidation. So with that in mind, I've listed below three basic strategies you can use to trade these breakouts.
The first of which is based on technical analysis, and in particular the Bollinger Bands indicator. Bollinger Bands are envelopes based on a moving average and a standard deviation and are most useful in showing areas of support and resistance through the two outer lines of the envelope.
Therefore when the price breaks out of either the upper or lower limit, this very often is a strong indication that a breakout is about to take place in the same direction. It's particularly the case after a period of consolidation where the bandwidth of the Bollinger Bands has narrowed out. For greater success you can use the breaching of one of the outer lines to gain your attention, and then wait for a pullback to either the EMA (5) or EMA (20), for example, for a good entry point.
The second method you can use to trade breakouts is also based on technical analysis and involves various Exponential Moving Averages, or EMA's for short. This is a method I have developed over the years that makes use of the 5, 20 and 50 period EMA's (you can also use the 100 or 200 period EMA as well).
What you do is wait until the price, along with the 5, 20 and 50 period EMA's have all flattened out and are all very close to each other. Then you simply wait for a strong breakout from this narrow range and take a position close to the EMA (5) when the breakout takes place. This can be very rewarding when you catch a good breakout, particular when you use longer time frames.
The final method is based entirely on price and uses no technical indicators at all. It's based on the fact that the price does not stay in the same range forever and will at some point break out of the current trading range.
I have to admit I don't use this method myself but there are various ways you can trade this way. Some traders like to use the previous day's upper and lower price range, and trade any breakouts of this range the following day. Similarly some traders wait until a very narrow price range has formed and then wait for a breakout to occur.
So overall there are various different ways you can trade breakouts, all of which have their merits. Despite being quite basic methods, they can be extremely lucrative because the price often moves strongly in one direction or the other after a sustained period of consolidation.
Click here to read a review of ZuluTrade, the revolutionary forex signals service, and to discover why ZuluTrade is arguably the best forex signals service.
You can also click here for more forex trading tips.
The first of which is based on technical analysis, and in particular the Bollinger Bands indicator. Bollinger Bands are envelopes based on a moving average and a standard deviation and are most useful in showing areas of support and resistance through the two outer lines of the envelope.
Therefore when the price breaks out of either the upper or lower limit, this very often is a strong indication that a breakout is about to take place in the same direction. It's particularly the case after a period of consolidation where the bandwidth of the Bollinger Bands has narrowed out. For greater success you can use the breaching of one of the outer lines to gain your attention, and then wait for a pullback to either the EMA (5) or EMA (20), for example, for a good entry point.
The second method you can use to trade breakouts is also based on technical analysis and involves various Exponential Moving Averages, or EMA's for short. This is a method I have developed over the years that makes use of the 5, 20 and 50 period EMA's (you can also use the 100 or 200 period EMA as well).
What you do is wait until the price, along with the 5, 20 and 50 period EMA's have all flattened out and are all very close to each other. Then you simply wait for a strong breakout from this narrow range and take a position close to the EMA (5) when the breakout takes place. This can be very rewarding when you catch a good breakout, particular when you use longer time frames.
The final method is based entirely on price and uses no technical indicators at all. It's based on the fact that the price does not stay in the same range forever and will at some point break out of the current trading range.
I have to admit I don't use this method myself but there are various ways you can trade this way. Some traders like to use the previous day's upper and lower price range, and trade any breakouts of this range the following day. Similarly some traders wait until a very narrow price range has formed and then wait for a breakout to occur.
So overall there are various different ways you can trade breakouts, all of which have their merits. Despite being quite basic methods, they can be extremely lucrative because the price often moves strongly in one direction or the other after a sustained period of consolidation.
Click here to read a review of ZuluTrade, the revolutionary forex signals service, and to discover why ZuluTrade is arguably the best forex signals service.
You can also click here for more forex trading tips.
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