Forex Trading Systems and you – The Why and The How?

The Forex trading market is constantly moving. It is the Forex trader’s skill to be able to understand the direction of the Forex market through two types of analysis: technical and fundamental.

This analysis is then linked with a trading strategy, which combined with the analysis form the traders Forex trading system. Although some analysis can be done without a strategy, knowing what strategy you are going to apply before you analyse the charts is more common and makes sense. So how do you know which Forex trading strategy you should use?

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Forex trading systems use indicators to create Forex trading strategies allowing trading opportunities to be identified:

  • In a variety of market conditions.
  • In the time frame you as a trader have to spend trading.

 

Below is an picture of a typical image you will see on the chart. Each bar represents a period of time, and the range the price moved in that same timeframe. Notice that the price always moves in a direction then pulls back before moving again. This first movement is called phase one and the pull back is called phase two. Also notice that it happens very regularly with Forex trading! Forex trading systems leverage this phenomenon called cyclicity.

An uptrend basically means the value of a financial asset is constantly going up. When you have a succession of peaks and troughs on a Forex trading chart that outlines growth higher than previous peaks and troughs, you have an uptrend. If the next peak on the chart is lower than the last one, the uptrend is considered to be broken. See the image below.

When you see consistently higher highs (phase one) and higher lows (phase two) you are in an uptrend.

A downtrend is when the exact opposite to an uptrend is happening. So, the value of a financial asset is constantly going down. When you have a succession of peaks and troughs on a chart that outlines a decline in growth, with peaks and troughs falling lower and lower each time, you have a downtrend. See the image below.

So when you see lower lows (phase one) and lower highs (phase two) you guessed it, you are in a down trend.

While some Forex traders are constantly looking for uptrends and downtrends to identify potential trading opportunities in the Forex trading market, range trading focuses more on the principle that most currencies will always return to their point of origin regardless of what direction they have moved in the past or have been predicted to move in the future. See the image below.

When you see there are price levels that the currency won’t go above or below you are in a range. Notice how there a phase ones and twos within it.

This is a matter of personal preference and trading style and what time you have available.

End-of-day trading involves looking at the Forex market after the New York market closes. Between the time in which it closes and the Asian market opens, there is a period of time when trading is very quiet, making it the ideal time to analyse the market and understand what’s going on. This is after 7 or 9 on the East Coast of Australia (9 am in the summer).

When you are trading end-of-day, you look at trends that are forming over a longer period of time. This means you are only placing trades after identifying clear direction in the currency pair. Essentially, what you are doing is looking at the charts Monday and Tuesday morning and pull out before the weekend. Analysis is used to identify an upward or downward trend that looks consistent for a few days.

Learn to Trade includes the Income Generator strategy as an end-of-day strategy. Although 30 minutes of analysis is ideal in the morning to execute and check for 15 minutes in the evening, the strategy can be implemented anytime of the day.

Intraday trading, unlike end-of-day trading, is all about making quick decisions, over shorter time frames. When it comes to intraday trading you could be looking at 5 minute charts, 15, 30 or 1 hour charts. There’s more data to analyse and things are moving so fast having a sound strategy to help you manage the volatility is important.

Learn to Trade provides the Sniper strategy as a powerful semi-automated strategy that allows you to access these shorter timeframes, intraday by targeting short 20 pip moves.

Remember: trading without a system is tantamount to failure. No strategy = no trade and preservation of capital = good trading.

The reason why many people start off trading end-of-day is because it suits their lifestyle. You don’t really have to change much except forgo an hour of television after work.

Then there are also the long term strategies that run for weeks or months. The type George Soros gets in the news for. These trades are should not be considered by retail trades and require a huge amount of capital to manage.

Learn to Trade provides you, the junior trader, with 4 robust strategies, to guide you through all three conditions and timeframes.

The most important trading system we provide is the ability to sit next to an experienced trader and learn from an expert, hip to hip on a live trading floor. Hands on experience in a real trading environment is the most effective way to get a real feel for how trading works and how professional traders identify opportunities.

The Ultimate Forex Sniper is ideal for intraday traders who are able to manage trades live, providing a powerful strategy that uses the daily, 4 hour, 1 hour and 5 minute charts, snipers use market direction to trigger trading opportunities.

Forex Income Generator, an automated end-of-day trading system

This end-of-day strategy looks specifically at how to identify large movements in the market over longer time frames (2 days or more). Using proprietary Moving Average (ma) envelopes calculated ensures you get into a trade early on without having to worry about over extension. This strategy is ideal for those who don’t have a huge amount of time to dedicate to analysing the market.

Using pivot points to identify support and resistance levels, professional traders are able to identify market changes. This strategy helps intra-day traders identify potential turning points in the Forex market.

When you want to identify trades that exist in a sideways trading market you need to use the Range Bound Strategy which uses analysis to capture profits in a flat or range-Bound market. This strategy is great when used alongside other strategies to find opportunities during all market conditions.

Learn to Trade are a team of successful Forex trading professionals who have the knowledge and actual trading experience to teach you what you need to know to start making money from the Forex market. Call us today and speak to one of our Forex trading education specialists for more information on our workshops and Learn Forex Course.