Techniques for Advanced Forex Trading

[forextrdr]

Forex is a potential platform for earning substantial profit. In fact it is one of the largest trading markets of the world. Featuring an average daily trade of US$ 2 trillion and above, this market is best known for its high scale trading volume and intense liquidity. Find here some advance techniques useful in the forex trading:

Forex Scalping: It is a latest technique of trading where profits are taken after relatively small moves in the forex market. It is a technique where trading is done over small time frames, and smaller profits are taken more frequently. As the position exposed to the market is shorter, it automatically reduces the risk of adverse market events causing the price to go against the trade. It is a different approach to most other forex strategies, but still requires you to analyze the market to ensure that the set up for a trade is present. This type of trading greatly appeals to day traders and those who look to reduce the risk involved in trading currencies.

Forex Hedging: It is a technique that helps in reducing some of the risk involved in holding an open forex position. It decreases the risk by taking both sides of a trade at once. If your broker allows it, a simple way to hedge is just to initiate a long and a short position on the same pair. Advanced traders sometimes use two different pairs to make one hedge, but that can get very complicated.

It is important to understand that much of the risk involved in holding any forex position is market risk; i.e. if the market falls sharply, your losses may escalate dramatically. So if you have an open Forex position with fine projection but you think the currency pair may reverse against you, it is advised to hedge your position.

Forex Position Trading: Forex position trading approach is yet another trouble-free technique to boost your position size without increasing your risk. This trading tactic is very effective with mini lots. The major highlight with this technique is that - with forex position trading your exposure to the market is less and so therefore is no need to monitor the market continuously. Moreover, you may even earn profit with negligible loss that can further boost your trading confidence. For Example- you might make a short trade on EUR/USD at 1.40. If the pair is ultimately trending lower, but happens to retrace up, and you take another short at say 1.42, your average position would be 1.41. Once the EUR/USD drops back below 1.41, you will be back in overall profit.

Today forex trading is all about watching your options when you make a trade. Aside from using effective risk management and extreme vigilance, advanced trading can be an alternate way to make profits and control losses. Nevertheless, these above mentioned advanced trading techniques are more about using the market behavior to your advantage. Utilizing these advanced techniques can give you the edge from other average trader.

[fxtrendline]

good articles...I like scalping for short term trading

[nicesurf]

I remembered a few years ago when the first time I joined forex trading, I read a lot of theory and articles but they don't make me happy...market is running but theory is static..

[AutoTrader2]

Scalping is not a technique but a trading style.

Hedging is not a technique but a way of WASTING MONEY and paying double the spreads. I have not yet seen a single method that uses hedging profitably.

Your definition of Forex Position Trading is actually Averaging. This is also a highly risky technique that usually (almost always) leads to financial destruction.

[johnswhite]

Forex trading can be as simple or as complicated as you want it to be. In the beginning forex trading seems like it is simple. It seems like your only job as a trader is to pick what direction a currency pair is going to go and collect your profit. If only it were that simple all the time.........

[lotsofpips]

Here is what I have learned over the years with my own trading and as a coach working with hundreds of other traders.

Scalping (depending on your definition) is a strategy used by new traders, it is not a good long term ticket to success. I do not know a single Professional trader that uses scalping. But it has a purpose; I encourage my students to start out scalping to help them build experience in their trading. The more trades you place (in a demo account at first) the more you learn how the market moves, and you can get used to watching your trades going up and down, which can take the edge off of the adverse effects of trading psychology issues. The problem with scalping is that you cannot usually plan to have a positive risk:reward ratio. When scalping you are almost always going for fewer pips than you are risking and that means that you have to be right almost all of the time. Too much pressure and when you hid a draw-down period traders tend to panic and do crazy things like Hedging the position to avoid taking the loss.

Direct Hedging (which is not available on most brokers any more since Aug 1st, 09) is really only a way to staunch the bleeding on losing trades. Traders tend to think "I haven't really lost until I actually close the trade" A direct hedge is like hitting the pause button on a losing trade, but you cannot avoid eventually playing it out. Even with a hedge you still have to find the best times to get out of either trade. You still have to determine where the most likely direction the market is probable to go, and if you don't have some proven system with the probabilities on your side, you may be in a world of hurt. The other problem with hedging is you pay twice for the trade on the spreads and you will pay a premium on interest every day you are in the trade (paying even more on Wednesday).

Position trading is actually more of a time frame you plan on being in the trade than a strategy. If you are trading on the daily charts and expect a move to climb for a while, several days, weeks or even months, that is a position trade. AutoTrader1 stated it correctly that what you have described is a form of averaging. It is also known as the Martingale technique. Which can work for a while until it doesn't and then you can get into some serious trouble. Beware there are a lot of automated strategies that use this method.

The best way to trade is to study and recognize patterns in the market that show a higher probability of success, whatever tools you use. Then figure out ways to capture more pips than you are risking on those trades so you don't have to be right so often. Do the math on your tests and determine if each strategy is ultimately profitable. You do have to do a good job of journaling your trades to be able to do this effectively. I have found several of these strategies over the years, but I will save them for a different post in a different section.

Good luck in your trading and be careful of what you read.

[bossxero]

Very nice insight Jared... keep it up... we will benefit from your words hopefully...

[Michael Z]

I also like scalping since I have no job and full time can trade...

I really not into swinging mode...

intra day also will be the best