The Forex market has five different trading sessions; it operates 24 hours a day, five
days a week. The market opens on Monday and closes on Friday. On weekends the
market is closed. The five trading sessions are Sydney, Tokyo, Frankfurt, London,
and New York.
MARKET SESSION:
The London, New York, and Tokyo sessions are favored amongst traders. To become
a part of trading it is very wise for the trader to understand the global Forex market
hours and their impact on the market although the Fx market allows one the
flexibility to choose the time zone does not provide one with enough information
regarding the market volume, liquidity, and volatility which are very important parts
of a trading strategy.
BEST TIME TO TRADE:
Forex has to be between 12:00 pm (UTC+5) to 1:00 am(UTC+5) and the worst time
is between 2:00 am to 10:00 am (UTC+5) due to the inactivity of two major markets
i.e. USD or GBP. The major overlap that occurs in the market has to be of
U.S/LONDON. The period for SYDNEY/TOKYO is not as volatile as the latter but it
offers a high pip fluctuation. Between the three overlaps, the least action involves
LONDON/TOKYO is due to time concerns.
When you’re choosing your strategy it is very important to find the right trading
style. The one that is easy for you to understand and operate.
DAY TRADING:
The buying and selling of securities throughout the day refer to day trading. When
you buy a currency pair, and the value appreciates you make a profit out of the
difference and it’s exactly the opposite of when you sell a currency pair, the value
deprecates again you make a profit out of the difference.
All beginners need a lot of figuring out, you have to decide how much capital you
would need, what you will trade, and what other equipment you require in terms of
software, and then comes when to trade and how to manage risk exposure.
Day traders are least bothered by the overall market going up or down they are
mostly concerned about the assets they are dealing with in a single day. Day
trading requires a lot of activeness if you want to earn maximum profit, you can
make a dozen of trades within a day by actively buying and selling securities but
traders are making one trade a day too. You have to choose what your goals are
and how far you want to go.
The overall trading depends on two main factors
How prices are moving that day
Trading strategy
WHEN TO ENTER TRADE – DAY TRADER:
Day traders usually open up positions at the start of the day and manage that
trade throughout the day.
It is not necessary to start open positions at the start of the day. You can
open up positions in the middle of the day depending on the market
conditions.
WHEN TO EXIT TRADE-DAY TRADER:
You set up a take profit or you are bound to close your trade in the day
irrespective of profit or loss in the trade.
POSITION TRADING:
As the name tells itself, a position is held for a longer period of time I.e. weeks,
months, and even years depending upon the target. A position trader has long-term
plans for his/her trades. The positions could constitute selling the asset first or
buying the asset first, it varies on the trend following and most traders use long-
term charts to initiate trading positions. Due to significant changes in the underlying
fundaments, a price movement is observed which helps the position traders to
capture the juicy part of assets.
WHEN TO ENTER TRADE-POSITION TRADER:
TRADE WITH TRENDS:
Knowing/identifying the trend at the right time or beforehand changes the whole
trade trend. So if you’re looking for a long or short trade it is important to grasp the
trend and trade accordingly to get the maximum profit on price movements.
KNOWING THE FUNDAMENTAL ANALYSIS:
For a position trader, it is recommended to know the fundamental analysis so
those could be used as technical tools in his/her trade. These analyses
depend on several factors. Fundamental analyses include all the external
information that can influence or has an influence on the trade and the
market.
WHEN TO EXIT TRADE-POSITION TRADER:
MARKET EXIT:
The movement the conditions change in the market, one should exit his/her trade.
When once the fundamentals are not applicable or valid for the trades it is better to
exit the premises. All you have to do is monitor the market closely for any change
or movement.
TRAILING STOP:
At times you might still want to stay in the trade irrespective of that the prices have
gone your way what you can do is set a stop order which is adjusted according to
your required profit. All you have to do is move your trailing stop with the price
actions rather than opposing it. One should not misuse the trailing stop when the
prices don’t go your way.
SWING TRADING:
The trading style is in which the trader buys the currency pair or other assets and
keeps it for a small time period for the purpose of earning a profit out of it through
the price swings. It does require patience as the trade could be held for several
days or weeks depending upon the trend. It is also known as the medium-term
trading style.
This trading style works for everyone who is not a fan of monitoring charts and is
not able to read them, what you can do is take out a few hours from your day and
analyses the market, it will give you a framework of what is happening in the market
and will help you trade easily. It suits people who work in the morning or are at
school, college, or university and want to have a passive source of income and are
updated with what is going on in the global forex market.
There would be times when the trade does go against your target while you’re
holding u the position, but you don’t need to panic about that the price does
fluctuate throughout the day so you might as a swing trader observe them more as
you hold the position for a short time period.
The trading pairs that have low liquidity and spare spread might work.
WHEN TO ENTER TRADE-SWING TRADER:
TECHNICAL ANALYSIS:
Before you enter a trade, it is very important for you as a trader to have a look
at the previous data so that it can help you understand the trend the market is
following might follow. So when you enter a swing trade do some research on
the recent data and have a hold on market analysis.
RELATIVE STRENGTH INDEX:
This indicator can be a strategy if understood. It helps you read the charts and
uses figures that lie around 0-100 and helps in recognizing the
oversold/overbought currency pairs in the market. It gives you a map of when to
open and close a trading position.
BOLLINGER BANDS:
It provides the range of the price in the market and tells about the market’s volatility
which ultimately helps a swing trader in trading. It is a quick analysis of how the
market will move before the opening positions.
SCALP TRADING:
Traders buy and sell a large number of small trades to make a small amount of
profit by going in and out of the trade throughout the day. The traders using a scalp
trading style are referred to as scalpers and can place trades for around 10 to 100+
in a day. This is the trade that exposes its scalpers to low risk and with more
opportunities. Hence they are trading small trades the earned profit is small too and
the traders are aware of that which reduces the chances of greed and anxiousness
coming in the way of trade although it looks like a piece of cake it isn’t. To reach the
highest peak in trading, you’ve to hike the whole mountain yourself with lots of hard
work and patience.
WHEN TO ENTER TRADE-SCALP TRADER:
LIQUIDITY:
It is very important to trade in a market that is liquid or has high liquidity. Choose
from the major currency pairs and with the currency pairs the sessions also change
making one market more liquid than the other, even the forex market hours consist
of a whole day yet the volume isn’t the same for 24 hours. So a scalp trader it is
important for you to choose the high-liquid market to earn the maximum profit.
WHEN TO EXIT TRADE-SCALP TRADER:
As this is a small-time trade scalpers usually come in a day and go according to their
desires but their main agenda are to enter a candle when it’s open and close the
trade upon its closure regardless of the time frame in the charts. Scalpers
experience the highest form of dynamic risk assessment as they expose themselves
to higher risks in every trade.
SMALL vs. LARGE TRADE:
Stop at reward strategy/small trade exit:
Once you see a new trade move into action, raise your stop to break even, now
you have free trade. Let it reach 75% of the distance between risk and reward,
given you can either exit all at once or in pieces. This exit strategy depends
entirely on your position size and the main strategy that is employed. For
example, you shouldn’t be breaking a small trade into further smaller segments,
what you need to do is wait for the right time to dump all the stakes at once or
go for the stop-at-reward strategy.
Large trade exit/tiered exit strategy:
If you have a large trade, exit one-third of your trade at 75% of the distance
between risk and reward and the second third at the target. For the third piece, add
a trailing stop to it so that if the situation goes south you have something saved up
and can help generate a good amount of profit.in case the market experienced a
shock that causes a huge gap in your BUY/SELL equation, exit the market
completely, without double thoughts. There is this saying “being safe is better than
being sorry”.
MINIMUM DEPOSIT:
It is not important in day trading, to begin with, for large investments you can start
with a minimum deposit of $100 and so on, and invest the amount that you can
afford to lose in case.
There are chances you might lose in the beginning, so you wouldn’t want to risk it
all. Invest small in the beginning when once you’ve understood the whole dilemma
you can go big. The more you invest in the initial days the more anxious and
stressed you might be and your chances of making rash decisions also rise.
Start small, and limit your loss.
Note:
If you observe or feel your trading isn’t improving or you’re going in loss after you
switched to a live account from the demo account know that it’s okay it happens
just to make sure you stick to your trading strategy and reduce the risk exposure for
your trade and make sure you don’t take decisions under the emotional influence
and eventually, you will see an improvement in your trade. Everything demands
patience
