12. Forex trading simplified
In the forex trading image to the right, the market begins by down trending. During that time you mainly put (sell). After that it begins up trending.
During that time you mainly call (buy). However, within the down trends, there are mini up trends. So, to start forex trading successfully, you have to look at the other factors below to predict what will happen during those mini trends.
Currency Strength Meter
Look at the Currency Strength Meter. If there is a difference of 2 bars or more, it may be worth trading in that currency pair. GBP has 6 bars and USD has one.
Look at a pair such as GBPUSD. The first currency is the stronger of the two. So, we would buy (call). When the second currency is the stronger one, we put (sell).
During a major down trend, the second currency is very strong.
Forex Trading News
You can go to forex factory to find financial news that affect the forex market. Note that in this image from a Forex Factory page there is a red folder beside GBP.
This means that there is such significant financial news in the UK that you should not trade any currency pair with the GBP in it. This means that after 11 pm in synchronized time the market is too unpredictable to trade any pairs with GBP in it.
The grey folder signifies a bank holiday. You should not trade in a pair that has CNY in it. An orange folder means you should proceed with caution.
SRT stands for “support resistance trend”. That’s important to remember. During a down or up trend there are smaller up and down movements within that trend. Traders look at recent highs and lows.
With most or maybe all forex brokers there is software so that you can draw lines representing recent lows. Those are called Support Lines. Recent highs in the image are represented by the Resistance Line.
A trader may use support and resistance lines to predict a change of direction of the candles.
Investigate many currency pairs
Unless one currency pair movement looks incredibly simple to predict, try looking at more than one pair. One way of deciding which pairs to investigate is to look at the broker’s spread.
When you place an order, the broker enters the trade. Each time you order, you pay your broker a commission (called “the spread“).
We are using binary trading on this website. In binary trading the broker can make a significant commission. The percentage you see after a currency pair in this image is the percentage of your investment that we win or lose at the end of the trade. The difference between 100% and the number you see here is the broker’s commission.
I don’t trade any pair with a payout of less than 70%. Any pairs with a payout of over 69% could be worthwhile investigating as a possible trade.
Trade with an educator
In the online course I’m taking, the teachers (called “educators”) are all very skillful traders. They cannot even get a job as an educator unless they have a track record of trading successfully in at least 70% of their trades.
To teach us, they trade online live and explain their reasoning as they are setting up their trades. For instance, they may tell you to call (buy) if the price gets below 521. That could be shorthand speaking for “buy when the price gets below the recent support line of 1.03521.”
Tomorrow I’m trading live in two different sessions — with Milly & with Matty. This should help me to get some valuable learning and, at the same time, increase the size of my demo account.
- Synchronized time in this case means that your computer has converted the time of the GBP news to your local time zone.