Sample Strategy 1 - Simple Moving Average

Sample Strategy 1 - Simple Moving Average
Successful trading is often described as optimizing your risk with respect to your reward, or upside.  Any trading strategy should have a disciplined method of limiting risk while making the most out of favorable market moves.  We will illustrate one decision making model which uses a Simple Moving Average ("SMA") technical study, based on a 12-period SMA, where each period is 15 minutes.  This type of study is available in the CFX trading charts. This is one example of a trading decision making strategy, and we encourage any trader to research other strategies as thoroughly as possible.
We will use a simple algorithm: when the price of the currency crosses above the 12-period SMA, it will be taken as a signal to buy at the market.  When the currency price crosses below the 12-period SMA, it will be a signal to "Stop and Reverse" ("SAR").  In other words, a long position will be liquidated and a short position will be established, both with market orders.  Thus this system will keep the traders "always in" the market - he will always have either a long or short position after the first signal.  In the chart below, the white line represents the price of USDJPY, the purple line represents the 12-period SMA of USDJPY, and the red line indicates where USDJPY crosses above the SMA, generating a buy signal at approximately 129.90:

This is a simple example of technical analysis applied to trading.  Many strategies used by professional traders make use of moving averages along with other indicators or "filters".  Note that the moving average method has an element of risk control built in: a long position will be stopped out fairly quickly in a falling market because the price will drop below the SMA, generating a stop-and-reverse signal.  The same holds true for a sell signal in a rising market.  Note that the SMA is generated automatically by CFX's integrated charting application.

Sample Strategy 2 - Support and Resistance Levels

Another of technical analysis, apart from technical studies, is in deriving "support" and "resistance" levels.  The concept here is that the market will tend to trade above its support levels and trade below its resistance levels.  If a support or resistance level is broken, the market is then expected to follow through in that direction.  These levels are determined by analyzing the chart and assessing where the market has encountered unbroken support or resistance in the past.

For example, in chart below EURUSD has established a resistance level at approximately .9015.  In other words, EURUSD has risen up to .9015 repeatedly, but has been unable to move beyond that point:

The trading strategy would then be to sell EURUSD the next time it gets close to .9015, with a stop placed just above .9015, say at .9025.  This would have indeed been a good trade as EURUSD proceeded to fall sharply, without breaking the .9015 resistance.  Hence a substantial upside can be achieved while only risking 10 or 15 pips (.0010 or .0015 in EURUSD).

News from Spain at the end of the week supported gold

On the last day of the week gold rose after four stable sessions on the weakening dollar and the strengthening of the euro. Euro on Friday strengthened the U.S. dollar and other world currencies following the increase in the prices of government bonds in Spain.
Support the European currency and securities in Spain had the newspaper Financial Times that the European authorities are involved in the development of new economic program the Spanish government, which should be released next week.
According to sources, the newspapers, the parties focused on measures that may be required from Spain's foreign creditors, if Madrid officially turn to them for help. This should provide the opportunity to harmonize these measures in advance.
The government's plan is to focus on structural measures on which long insisted Brussels, not in new spending cuts and tax increases.
Yield on 10-year benchmark government bonds in Spain fell in the course of trading on Friday, up 5.7%.
On Thursday, gold has risen in price to a maximum of 6.5 months after the announcement of the Bank of Japan to expand the program purchase of government bonds.
The sharp rise in prices, which began last week, was caused by the resumption of incentive programs of the European Central Bank and the U.S. Federal Reserve. On Wednesday, they were joined by the Bank of Japan expanded the asset purchase program to 10 trillion yen ($ 127 billion) to 80 trillion yen.
Stocks of gold-ETFs this week rose to a historic high 73.681 million ounces.
Experts link the return to power of gold to last year's absolute record $ 1.920,30 per ounce in the first place with the state of the U.S. economy.

FOREX review 08,10,2012

EURUSD
The risky purchase at 1.2898 reached its target 1.3000 and even it gave a chance to earn more than 100 pips.
The pair rebounded from the four-hourly middle uptrend and it goes down again, it has 2 supports on its way, from which you can try to buy: the 1st is the breached resistance 1.3172 - 1.2968, + level 1.2900 , +76.4% Fib from the growth 1.2041 - 1.3171, 1.2255 + support - 1.2804, and 2n - support uptrend H4 1.2041 - 1.3170, + 61th of the Fib level of the same growth, +76th level from the weekly fall 1.4939 - 1.2041, and if you shift downtrend to the new points 1.3172 - 1.3072 - 1.2803, there is support of this downtrend. So, the 1st buy limit 1.2910 (sl 1.2860 / tp 1.3150), the 2nd is less risky buy limit 1.2750 (sl 1.2690 / tp 1.3030 or 1.3150).
It is the same for sales, I have 2 options: the 1st is riskier - from the resistance 1.3172 - 1.3072, but I will not set the limit, at first the price should go a bit down, for drawing a wave, and then we have a chance to rebound from this line, and use it after the formation confirming signals, the 2nd limit has set previously on sale at the daily resistance, just shift it lower - sell limit 1.3165 (sl 1.3230 / tp 1.2828).
But if the pair does not reach the sales and the level of 1.2800 will not stand, it will be possible to sell it on the roll back a long time.

GBPUSD
The purchase at 1.6105 brought 100 pips, but it didn’t reach to the profit 20pips, I closed the deal before the weekend. The pair breaks down support at the H4 1.5489 - 1.6066, but it hasn’t consolidated three candlesticks under the line yet, so the continuation of the movement will count in a couple of four-hourly candlesticks. And if you set it on sale so at the level of 1.6100, and higher limit is on sale at the resistance 1,6308 - 1,6271, sell limit 1.6100 (sl 1.6150 / tp 1.5910), and sell limit 1.6185 (sl 1.6235 / tp 1.5910).

USDCHF
There is downtrend on the H4 0.9972 - 0.9798 - 0.9246, there is younger corrective uptrend 0.9244 - 0.9334 - 0.9391, which has already broken down, and which the price roll back to, at the intersection of these lines, and I plan the sale, sell limit 0.9405 (sl 0.9455 / tp 0.9275), and in the area of profit, on the third point of uptrend 0,9244 - 0,9274 buy limit 0.9284 (sl 0.9235 / tp 0.9450).

Oil fell below $ 90

Oil showed a second weekly decline on concern that slowing economic growth will reduce demand.
The protests in Spain against austerity measures have increased fears of a three-year extension of the debt crisis in the euro zone. In addition, a number of U.S. companies reported a reduction of profit despite the global slowdown.
Investors also remain concerned about weak demand in China, which is the second largest oil consumer in the world, as small firms, which are the main driving force of economic growth, the lack of money.
Despite the drop in oil prices supported the growth of tension in Iran and the rumors about the possible reduction of supply from key vendors of oil to Asia. Prices rose after Iran's state news agency reported that Iran had fired four missiles in the Persian Gulf, but said of the military exercises. Iranian President Mahmoud Ahmadinejad said in an interview with U.S. television that his country would defend itself if attacked by Israel. It is learned that the military exercises in the Strait of Hormuz last until the end of the Iranian calendar year, i.e. by March 20.
In response, on Thursday, Israeli Prime Minister Benjamin Netanyahu called on the international community to close the Iranian nuclear program.
Crude oil prices also rose after the price of gasoline has risen to its highest level in nearly five months on concern that stopping oil platform in the Atlantic basin will further reduce inventories on the East Coast of the U.S.
OPEC Secretary General El-Badri said on Friday that "OPEC spare capacity and commercial inventories of common enough. The market is currently well supplied, and we see no deficit. "

Gold prices held near an eight-month high

Gold quarterly gain in more than two years, and has grown more than 10% after the Federal Reserve announced the third round of quantitative easing earlier this month.
At the end of the week gold was down against the strengthening dollar after U.S. data released showed that the purchasing managers index and the index of consumer sentiment fell more than expected, increasing the demand for riskier assets. The U.S. currency strengthened after the purchasing managers' index fell to Chicago for the first time in three years below 50, indicating contraction.
Reserves of gold in exchange-traded funds, which issue securities backed by physical metal, fell from record highs, which were recorded by nearly 340,000 ounces.
Demand in India, which is a major consumer of gold, remains weak, as higher interest rates reduce the metal.
Data from the International Monetary Fund showed that South Korea has increased its gold reserves by almost 16 metric tons (17.63 tons) in July, along with Paraguay, which has increased its reserves in July, from a few ounces to more than 8 tons.
So far this year, central banks have increased their holdings to 262.1 tons, compared to 203.39 tonnes in the first eight months of 2011.
At the same time, Turkey raised its reserves to 100.2 tonnes in the first eight months of the year, and Russia at 53.75 tons.
Private investors also added to their gold reserves through exchange-traded funds, with the support of physical metal to a record 74.06 million ounces.

Gold approached the 11-month high

Last week, gold hit a 10-month high on speculation that the incentive program in the U.S., Europe and Japan will increase the appeal of the precious metal as an alternative to currencies.
Last month, gold price rose by 5.1%, after the Federal Reserve announced the launch of a third round of quantitative easing. In addition, the European Central Bank, which has pledged to buy bonds of troubled countries, and the Bank of Japan to expand the fund asset purchases, also had a positive impact on the growth of gold.
The price of gold rose in the week against the outcome of the Bank of England and the ECB. On Thursday, the Bank of England did not extend the incentive program, fearing inflation, and left the rate unchanged at 0.5%, and the size of the program QE - at 275 billion pounds. In turn, the ECB kept rates unchanged at 0.75%. Central Bank head Mario Draghi during a press conference, explained the motives of the decision. According to him, during the 2012 inflation will be kept above 2% and only in 2013 it is expected to fall below this mark. Consequently, the jump in inflationary pressures will be characterized as temporary. Draghi also said that the rate of economic growth are weak, and the recovery is very slow, because the mood of the players negatively affected by problems of financial markets. Draghi comments strengthened the euro and weakened the dollar, which, in turn, led to a rise in gold prices.
In India - the world's largest consumer of gold - an increased demand in the physical market by strengthening rupee, which caused lower domestic prices to a minimum of five weeks. Stocks of gold-ETFs on Thursday rose by 418,611 ounces, and the stocks of the largest ETF SPDR Gold Trust rose to a record level 1.333,44 tons.

European stocks close

European stocks declined for a third day as investors speculated that economic fundamentals don’t justify current stock valuations and Alcoa Inc. (AA) cut its forecast for global aluminum demand.

Anheuser-Busch InBev NV slipped 1.2 percent after a report that the U.S. may block its $20 billion takeover of Grupo Modelo SAB. BAE Systems Plc (BA/) fell after abandoning plans to merge with European Aeronautic, Defence & Space Co. Imagination Technologies Group Plc (IMG) lost 9.4 percent as analysts recommended selling the shares.

The Stoxx Europe 600 Index (SXXP) dropped 0.6 percent to 268.71 at the close of trading, the lowest level since Sept. 28.

Alcoa, the largest American aluminum producer, kicked off the U.S. earnings season by cutting its forecast for global consumption of the metal by 1 percentage point on slowing Chinese demand. The company reported third-quarter profit and sales that exceeded estimates.

The International Monetary Fund yesterday cut its global growth forecasts and warned of even slower expansion if European officials don’t address threats to their economies.

National benchmark indexes fell in all 18 western European markets.

FTSE 100 5,787.21 -23.04 -0.40% CAC 40 3,369.79 -12.99 -0.38% DAX 7,212.46 -22.07 -0.31%

AB InBev (ABI) dropped 1.2 percent to 67.31 euros after The Capitol Forum reported that the U.S. Department of Justice may want to block the company’s purchase of Mexico’s Modelo, which brews Corona beer. The department may not approve the deal in its current form, the news service that tracks antitrust events said.

BAE fell 1.4 percent to 320.9 pence after the arms company and EADS confirmed they are no longer pursuing a merger. It had become clear that the interests of the “government stakeholders” could not be adequately reconciled, the two companies said. EADS jumped 5.3 percent to 27.48 euros.

Imagination Technologies tumbled 9.4 percent to 455.5 pence for the biggest decline in the Stoxx 600. Credit Suisse Group AG started coverage of the U.K. chip designer with an underperform rating, similar to a sell recommendation.

Elsewhere, Publicis Groupe SA (PUB), the world’s third-largest advertising company, declined 2.6 percent to 43.16 euros after Exane BNP Paribas said third-quarter revenue growth may miss forecasts as the advertisement market worsened since July.

Capita Plc (CPI) fell 1.8 percent to 727 pence. RBC Capital Markets downgraded the supplier of services for the British army to sector perform, a recommendation similar to hold, from outperform, a rating equivalent to buy.

Bankia SA (BKIA) paced advancing shares, climbing 4 percent to 1.02 euros, the first advance in 13 days. Bankia said it sold 126 million euros of written-off car loans to Norway’s Aktiv Kapital. Since July, the bank has sold 926 million euros of soured loans.

Man Group Plc (EMG) rose 3.8 percent to 93.4 pence, the highest price in five months, after the Daily Mail reported BlackRock Inc. may buy the company. The firm may head a group of bidders in a 140 pence-a-share offer, the Daily Mail reported, without saying where it got the information.

Royal Bank of Scotland Group Plc advanced 2.1 percent to 262.7 pence after agreeing to sell two buildings in Frankfurt and Berlin to Axa Investment Managers SA in the biggest German commercial real estate transaction this year, according to two people with knowledge of the matter.

Lloyds Banking Group Plc (LLOY), the U.K.’s second-biggest government-aided bank, gained 4 percent to 38.48 pence.

American focus: the dollar fell

The euro rose to one-week low against the U.S. dollar after failing to fall below a key technical level.

The single currency fell to near its 200-day moving average before cutting losses. Earlier, the euro was down, as European finance ministers this week failed to reassure investors as to the eurozone sovereign debt crisis is close to resolution.

As European finance ministers meeting in Luxembourg this week welcomed the determination of Greece to trim its deficit to your budget.

The Canadian dollar fell against most of its most traded currencies against the fact that the concerns about slowing growth in China will have a negative impact on demand for commodities such as oil and gold.

Also, the Canadian dollar fell after it was reported that car sales in China unexpectedly fell, it was the first time in eight months. Also today, the company Alcoa Inc (AA) said that the slowdown in growth in the country will lead to a global reduction in demand for aluminum. Note that raw materials account for about half of Canada's export revenue, and China, which is the world's largest consumer of metals and energy.

Pound broke his three-day losing streak against the dollar, up from its lowest level in four weeks after the National Institute of Economic and Social Research said the UK economy expanded in the third quarter by 0.8%, registering with the highest rates growth over the past five years. Bond yields fell after the governor of the Bank of England Governor Mervyn King said yesterday that inflation targeting should remain the focus of monetary policy.

The Australian dollar rose on the third day after the country sold its most long-term debt over the past thirty years, while increasing demand for assets of the country.

Also, the currency rose against the fact that the price of iron ore, which is the largest export product in Australia, rose to two-month high. Demand for currency was reduced in anticipation of tomorrow's report on the unemployment rate, which is expected to have grown to a three-month high.

The strategy of "Free Candle"

The strategy of "Free Candle"
In this article we will look at forex trading strategy for intraday work "free candle". This trading strategy is designed to operate on 15-minute charts and is quite a handy tool for working in the currency market, which can effectively make decisions and close deals with a good positive mathematical ozhidaniem.Osnovoy this trading strategy is the concept of "free candles." For the definition of "free" spark we need exponential moving average with a period of 9 superimposed on the 15 minute chart. In the description of this trading strategy we will use the 15-minute chart of the EUR / JPY forex. So, what is a "free" candle:

    body and the shadows of the candles do not touch the middle
    closing price of the candle should be higher than the previous high (for bullish) or below the previous low (for a bearish trend)
Watching the 15-minute chart, the first thing we determine the current trend of the slope of the moving average. After that define candles, body and which do not relate to the shadow moving average. This so-called "free" candle (free candle).
We define "free" candle can begin preparations for a sdelki.V our trading strategy to go long (buy) on forex, we need a free white candle, which is above average. If the closing price of the candle is higher than the maximum price (high) the previous candle, at the opening of the next bar, you can open a long position.
For a short position (sell), we need a free black candle, which is below average. If the closing price of the candle is lower than the minimum price of the previous candle - at the opening, you can open a short position.
Manage your
Once we opened the position we need to put a stop loss and take profit. For a long position we put the stop loss to the minimum free candles. Further monitor the situation and, if the floating profit on the position reaches about 70% of the initial risk can be transferred to the stop loss to breakeven. For a short position doing the same thing. Stop-loss set at a maximum of free candles and, as soon as the floating profit is 70% of the initial risk, we will move the stop to breakeven.

Strategy B. Barishpoltsa "Break average"

Strategy B. Barishpoltsa "Break average"

    All actions of this strategy make to close the specified trading day!

    * Inside the trading day nothing else to do.
    * Opening and closing trading positions are only pending orders.
    * Signal line strategy - eksponentsilnaya average period of 3 and shift forward (in the future) - 3.
    * The intersection of the candlestick body exponential average - set pending orders to buy H 5 item (if the candle is closed as a rising), or to sell L -5 n (if the candle closed as falling).
    * Touching the lower shadow candle moving average - is placed pending order to buy H 5 §
    * Touching the upper shadow candle moving average - a pending order is placed for sale L -5 n
    * Pending order is only canceled when a signal on the chart opposite.
    * Transferring the order if there is a signal in the same direction (buy or sell), but a more favorable (higher for sales or lower for purchase).
    * When you open a trading position a stop-loss is placed on the opposite end of the candle - (+) 5 n then the stop loss or transferred to "zero" (lossless), or rearranged closer to the minimum of the last two candles closed the purchase of two or a maximum of the last closed candles for sale. This must be done on each new candle to close before the trading position.
    * When the trading position is open, the new signals will not respond and additional items should not be open. (Opening on each trading signals, with the already open trade positions, quite tempting, but this option was not investigated by V. Barishpoltsom).

    And a few more rules for Strategy "Break the middle":

    1. Stop-loss is upwards never tolerated.
    2. Order must be placed only on the breakdown of the exponential average of the body candles. That is: the rising candle set a buy order at its masimum when descending put a pending order to a minimum.
    3. If, after the conclusion of the transaction, the position can not tuck into the black, and the next two for the spark plug opening end worse prices at the opening position, set the take item 5
    4. If the position is closed bezubytke or take-profit, not for the next candle exponential average but goes in the same direction (higher or lower than the previous 3 candles) - put a pending order to its end in the direction of movement (closing).
    5. If the candle rests in the middle with a strong slope intersects with only the tail, and the body has not been able to cross, and it is clear that the next candle will begin at the middle - to place an order on the tail of the candles behind the line judge. average.
    6. Closer than 10 paragraph from the end of the trading day breakeven put unnecessary.

BBMA Forex Strategy

BBMA or Bolinger Band + Moving Average forex system is a pretty popular strategy these days. Many traders use this strategy and they find it’s quite helpful to predict the price movements. Mainly to predict the big trend and find where and to where prices will move.

This forex strategy can be used on any time frame but It’s recommended used on timeframe H4 and H1 to know the big trend anda use M15 for make entry decision. On pair EURUSD, GBPUSD or USDCHF.

Setup the Indicators on your chart 

1. Add Bolinger Band Period 20, Deviation 2 
2. Add Bolinger Band Period 20, Deviation 1 
3. Add Moving Average Period 5, MA method : Linear Weighted, Color : RED, Apply to : High 
4. Add Moving Average Period 5, MA method : Linear Weighted, Color : PURPLE, Apply to : Low 
5. Add Moving Average Period 55, MA method : Expotinential, Color : Aqua, Apply to : Close 

How to trade 

1. Determine the big trend by looking the Moving Average (MA 55) on timeframe H4 and H1, look if the candel prices is below candlestick or above. If they're below of MA 55 then we are going to find any chance to sell on TF M15. And vice versa if they're above of MA 55 then we're going to find any chance to buy on TF M15. 
2. In time frame M15 the best signal for entry when the candlestick touch upper or lower bollingger band, Especially when you see good signs for candel reverse like doji or long shadow. 

It’s very recommended to use this forex strategy using your demo account until you familiar with it at least 3 months. After that you can go with your live account. Happy trading…!

Top 10 Forex Exit Signals

In the previous article, we pointed out that one might regard forex as being somewhat simple: you just need to know which pair to trade, when to get in, and when to get out. (An exception to this is with carry trading, where you also need to pay attention to a few other factors). Of course, all of the challenge is in those three little decisions. Here we discuss some of the major signals for knowing when to exit a trade.
For starters, the basic set of tools is almost identical to the entry signals. With entry, you look for a trend and jump in just before it starts. With exits, you simply look for the end of a trend or the beginning of a new one, and jump out before it's too late.
The big difference is that you are not usually looking for a new trend. By the time you can identify that a new trend has begun and is measurably significant, it's already too late-you're losing money. Instead, you should exit the market as soon as it is clear that the trend you bought on has ended.
So you could start with crossovers in the moving average. If you used that to identify an uptrend, now you're looking for a reversal with crossover from above. But hopefully you won't get that far. Instead, you should watch the percentage of change in the short term moving average. If the short term average remains unchanged over a period of time, the trend has probably ended.
Of course, this means that the average directional index (ADX) or moving average convergence/divergence (MACD) both become more significant for you. Look for stabilization or stagnation in these indicators as a signal for the end of a trend. Some of the most helpful forex exit signals are the momentum indicators such as TRIX, smoothed rate of change, or relative strength.
It is also easy to draw a trend line based on Fibonacci pivot points. When prices begin to fall below the original trend line and you see a new pattern of pivot points, the trend has ended. Look for resistance or support that offers any type of pattern. You can also rely on exponential moving average (200 EMA). The problem here is that it is often hard to know if you are dealing with a new trend or just with retracement. This is where price candles can be helpful in some cases. Since the end of a trend is often more analytically complex than the beginning, knowing your analysis well is very important.
News shocks are generally a bad way to make exit decisions, since your response will be too late, anyway. However, if you do have reason to suspect an event and you are more accurate than the market, this might be useful. Generally, your stop loss order will kick in before you can.
And this is where the most important exit signal comes in. You should always have stop-losses in place for every trade you make. Quite simply, you've found an exit signal when your stop-loss kicks in and ends the trade for you!
This also relates to the biggest value in automated systems: rely on your software to free you from a position before you lose too much. You can set this up in complex ways to help you even with profitable trades. If more traders relied on their own analysis to get them into the market and software as one of several signals to get them out, they would significantly improve their profits.

How to Become a Forex Trader - The Simple Three Step Guide

Forex is one of the most volatile type of investment markets and one of the most exhilarating experiences in the world. Forex, in it's nebulous form, is simply trading currencies-buying and selling, betting for and against the various currencies of nations. With great liquidity and immense margins, it is one of the most effective ways to make money in a market, and easily the quickest way to throw money away.
Still interested? Here is a simple, three-step guide on how to become a forex trader.

First, you have to understand how currencies are traded. There are three critical terms to learn: "Exchange rate or quote," "pairs," "pips," and "spread." For starters, let's look at a forex quote:
EUR/USD 1.3325 BUY / 1.3315 SELL
Each quote is composed of two parts, the pair and the rate. Pairs are the "items" traded on the markets, e.g., EUR/USD, USD/JPY, EUR/GBP. Each pair signifies two different currencies.

EUR/USD means "Dollars for Euro;" EUR/GBP, likewise, equals "Pounds for Euro." The rate is what you can buy or sell the pair for. 1.3325 BUY means you can buy 1.3325 dollars for each euro, and 1.3315 SELL means you can sell 1.3315 dollars for each euro.
The second major term is "pip." This word represents the basic unit of profit in forex so it's crucial to understand it. A pip is the smallest increment of a pair. For the EUR/USD or any other pair it's 1/10,000th. The yen is an exception, where the pip is 1/100th.
A final term: you might have noticed that the BUY/SELL rate wasn't the same. That is called the "spread." All forex markets of any liquidity have a spread of some sort, and oftentimes a broker will widen them slightly to make a profit. This is equivalent to a stock broker charging per-trade. So in order to be profitable, you will need to recoup the spread.
The second key to Forex trading is practice, practice, practice. Most forex brokers offer a $50,000 practice account. Set one up, and mess around-watch your money evaporate. After you have played around for a couple days, open another practice account, but this time develop or use a specific trading strategy. Pick a method and stick to it. You may or may not make money this time, but you will start to have a fuller understanding of the inner workings of the market. After a few weeks, try another strategy and get good at two or maybe three.
The third key is to start small. This is where most beginning traders lose the most money. After you have practiced for several months, take the strategy you know best and some money you can afford to lose. It is certainly best to chose a broker based on a comparison list or based on reputable reviews. Open a micro account, start really small, use a disciplined method, and begin trading. Know your own psychology and resist the temptation to be driven by greed or fear.

Risk Statement: Trading Foreign Exchange on margin carries a high level of risk and may not be suitable for all investors. The possibility exists that you could lose more than your initial deposit. The high degree of leverage can work against you as well as for you.

Forex KISS - How Keeping It Simple Can Improve Your Bottom Line

It's a phrase everyone knows - Keep It Simple Stupid [or Keep It Short and Simple]. However, forex KISS is better known than practiced. Part of this is because of marketing, as well as that ever-present "keep up with Mr. Jones" attitude that pervades forex.
Here is what happens: a trader enters the forex market with high hopes and minimal knowledge. He invests time and energy into learning the basics and makes a modest return at the beginning. After a few months he compares himself to a forex superstar or reads an ad for a fantastic trading method with guaranteed results. Off he goes, trying to learn ever more sophisticated techniques, tools, and methods. Several months later he's exhausted and a lot poorer, with the feeling that he just doesn't have the sophistication to be in the forex market.
There is certainly nothing wrong with sophisticated tools or trading methods. Most technical indicators offer genuine insights with real analytical value, and if a trading method never worked, people wouldn't call it a strategy (though maybe that's a bit optimistic). In fact, it's good to grow and become more sophisticated as you gain trading experience.
The key is to never let go of the fundamentals. To make a comparison to a more familiar market, stock traders can make endless guesses and extrapolations. However, at the end of the day, their price should match the underlying value of the security. People who lose sight of that are speculators and lose money on average.
In the same way, it is fine for a forex trader to use sophisticated, tools of technical analysis, but there are always basic, fundamental realities he should come back to. What are the things you should focus on if you want to "keep it simple, stupid."
First, remember that you are trading real currencies in real countries. Anything that influences the economy of that country or makes a difference in how the market regards it will influence the currency as well. You should not be trading a pair without knowing the basic economic data and current events that apply to both countries. You should also know international ties and the paths for trade revenue.
Second, establish a sensible, meaningful strategy and follow it all the time. If you can't clearly express your strategy in a way that makes sense, you haven't achieved this yet. You should also have back tested and forward tested your strategy before risking real money, or you should at least have reason to believe that it will be profitable.
Most importantly, discipline yourself to stay within the confines of reasonable risk management. You should have stop loss orders on every trade you make and always watch your leverage. You should also establish what amount of money you are willing to lose. Then compare this to your total liability.
How do you know how much you are risking? Keep track of the difference between your opening trade and your stop loss on each trade. You can find your total risk exposure by multiplying this number by the leverage and adding the results of this calculation for all of your open trades. The final number should never exceed the liability you started with-what you were willing to lose. In other words, never put yourself in a situation where you could lose more than is acceptable if everything went wrong. As soon as you risk it, everything really will go wrong.
It isn't true that the simplest traders are the most successful; nor is it true that the most sophisticated traders have the most wins. The best traders are the people who can use sophisticated tools without losing sight of the simple realities which drive the forex market.

Risk Statement: Trading Foreign Exchange on margin carries a high level of risk and may not be suitable for all investors. The possibility exists that you could lose more than your initial deposit. The high degree of leverage can work against you as well as for you.

Getting Involved in Forex Day Trading

Day Trading can offer a very exciting and lucrative way of trading the forex market for those who take the time to prepare appropriately for the endeavor. As the name implies, the basic idea behind day trading is that all transactions happen during the trader's normal business hours. Also, all day-trading positions are typically closed out before the end of the business day.

Advantages and Disadvantages of Day Trading

Day trading has the primary advantage that at the end of the day, the trader goes home with no positions and no overnight market risk. Another advantage of day trading is that the trader tends to be alert and can more easily focus on and take advantage of intra-day market movements.
Nevertheless, people with heart conditions or those overly-sensitive to stress may want to trade other strategies that are not as intensive and short-term in nature. Also, since the big moves in foreign exchange generally happen when the market trends over weeks or even months, day trading strategies may not give you the same sort of returns as successful trend-following trading systems.

Developing a Day Trading Strategy

If you think you might like to try your hand at day trading, the first thing you will need to do is come up with a successful day trading system. You can start this process by reviewing literature and online resources for information that can help you develop an objective trade plan.
The main idea behind having an objective trading plan involves minimizing any emotional interference that might sabotage your forex trading. Also remember to keep your trading system relatively simple and easy to follow so that you can do so quickly and with confidence.
One especially important consideration with day trading strategies is the risk/reward ratio of the strategy employed. For example, a day trader might set a goal of 30 pips of profit per day with a risk level of 20 pips to begin with. As their trading success improves and the equity in their trading account rises, they can also increase the amounts traded.
Many commercial automated trading robots risk hundreds of pips to make just a few and so they seem to trade well for a while before eventually blowing up on a serious adverse move. You will want to make sure that your day trading system avoids this potential pitfall and uses a risk/reward ratio that is conducive to long-term success.

Testing Your Day Trading System

The next step is to test your trading plan. Many day traders opt to first test their day trading strategy over historical data to find a system that has suitable profitability and draw down characteristics that suit their trading goals.
Then, they will want to trade their system on live data to gain experience and confidence in putting the strategy into practice. This process can also suggest refinements to the day trading strategy that can make it more successful.

Using a Forex Broker for Day Trading

Once an aspiring forex day trader has developed a day trading strategy and practiced implementing it, they can usually open up a free forex demo account with a forex broker without risking any money initially.
Doing so can give a trader a good idea of whether the actual work and returns involved in day trading in the forex market might be suitable for them. You can then usually upgrade and fund your account when you feel confident in your ability to day trade profitably on a consistent basis.

Risk Statement: Trading Foreign Exchange on margin carries a high level of risk and may not be suitable for all investors. The possibility exists that you could lose more than your initial deposit. The high degree of leverage can work against you as well as for you.