As a beginner trader it can be difficult to know which are the best currency pairs to trade. To help identify the best currency pairs to trade you need to understand that different markets have different behaviors. Some currency pairs tend to be highly volatile while others have low volatility. The volatility of the currency pair is important because it indicates the risk associate with that pair. Pairs with higher volatility are associated with high risk while pairs with low volatility are typically less risky.
Often times, new traders gravitate to high volatility markets like gold because they seem more exciting. However, these are not the best currency pairs to trade and can be very dangerous for new traders. Traders who trade with high volatility can make a lot of money in a short period of time. But, just as you can make a lot of money trading with these currency pairs, you can also lose money just as fast (or even faster). Because of this, many new traders who attempt to trade with these currency pairs quickly drain their account.
As a new trader, we suggest avoiding these pairs altogether until you are confident in your strategy. There are a lot of things that could go wrong when you're learning how to trade and you want to avoid making mistakes on highly volatile currency pairs. Remember, our first goal as a trader is to protect our capital, don't risk draining your account trying to make money fast.
Popular High Volatility Pairs:
Currency pairs with low volatility are pairs that move less aggressively and are more forgiving. These types of currency pairs are much more suitable for newer traders. This is because when a new trader makes a mistake, which will inevitably happen throughout the learning process, it will not drain their account. For example, a trade on a currency pair like EURUSD which goes against you may put you down 30 pips in a span of 5 hours. While in that same time frame, a GBPJPY trade that goes against you may put you down 120 pips.
Popular Low Volatility Pairs:
We recommend that newer traders should stick with low volatility pairs like EURUSD, USDCHF, AUDUSD, and AUDCHF. Use these pairs to help get your feet wet and test your strategy before jumping into higher volatile markets. To be even more cautious, we recommend starting on a demo account and not to put your hard earned money on the line until you have a strategy behind what you are doing.
Trend trading is perhaps one of the most commonly used strategies in the forex world. In this article we will be sharing tips on how to determine the end of one forex trend and the potential start of a new one. We will share 3 specific clues that you should be looking for when trend trading that will help improve your entries and exits.
One of the first indicators that a forex trend is ending is a trend line break. Taking a look at the chart below, you can see that there are multiple points throughout this bullish trend where price was supported by the bulls. Throughout this trend, the pair continued to form higher highs and higher lows which proves price to be strong. However, at some point this forex market was ready to start heading south. At this point, circled in the image below, buyers were no longer able to buy this market higher. This was the first time throughout this trend we see a pullback which is not supported by the bulls, showing that the market is likely ready to reverse.
After a trend line break, the first sign that a forex trend is ending, we see a bullish push back that fails to meet higher highs. Throughout the bullish trend price continued to reach higher highs. However, after the initial trend line break we seelower highs beginning to form. Thus, indicating that bears are pushing the market back down.
Finally, we see this level of support, which has held for many weeks get violated and broken beneath. Price eventually dropped below a significant level of support showing that sellers have control of this market.
Looking back, we had 3 major clues that this trend may be headed to the downside. these clues are possible things you can look for to potentially find the start of new trends or the end of a trend. We had a bullish structure and when we saw this structure break it gave us a clear indication that sellers may have some room to run. Our second indication was the forming of a lower high. Finally, there was a break of structural support.With this information about trend trading, we could have identified the series of lower highs and potentially taken a short position.
Trading doesn't have to be complex. In fact, in all of my trading experience, almost all of the money I have made has come from the simplest market approaches. In this post, I'm going to share with you one of my best trades for the month of March, 2021, and the entry style I used to make almost 3 grand in just a few short days.
The month of March started out slow. I had some winners, some losers, but by the end of the month I was just slightly negative for the month. To anyone who's been trading for a while, you know negative months happen. But no matter how long you've been trading, they can still be quite frustrating - especially when you're sticking to the plan but nothing seems to be playing out right.
In the last week of the month however, a setup I had been waiting for on NZD/JPY finally started to poke its head up. This setup is one of my favorites, and often has the potential to produce some great risk to reward opportunities. So I took the trade...
If you're looking to see all of my trades in real time, I share all of them in our private discord server. If you'd like to join, you can use code READER to get 25% OFF. Click HERE to sign up!
So what's the setup?
Well let's rewind and take a closer look.
My main reasons for taking the trade, as mentioned in the trade alert sent to members:
- Bought NZD/JPY at a key demand zone where buyers were strong historically
- Risked 50 pips initially on the trade in case I was wrong
- Bullish on NZDJPY due to a continued recovery environment, favoring the faster growing economy (NZD)
- Planned to trail stops if price went in my favor
At first the trade moved slow, but once it started running, it really kept going. From there I trailed my stop loss using price action and key zones to protect the trade from sudden reversals. Ultimately, price kept running and I ended up stopping out for a profit of over $2700.00!
So I have to add some context here. I'm trading with a larger trading account than most newer traders, so not everyone is going to be able to make those sort of gains. But - the point is that regardless of account size, some of the best gains come from the simplest approaches.
I had a plan in case I was wrong, I had a strong reason for entering long, and I had a plan to let the trade run if it went in my favor. Finally, keeping a journal is a key for holding yourself accountable!
I share my trades inside of our private discord for members, and spend a lot of time answering questions and explaining my trades fully. If you have any interest in joining our community, you get access to a whole bunch of cool stuff like trade alerts, chatroom access, and live coaching webinars. If you'd like to join, you can use code READER to get 25% OFF. Click HERE to sign up!
Thanks for reading, and maybe I'll see you inside the private group!
- Nick Syiek, Founder & Market Analyst at LINDEX
We now live in a world where everything is connected. Communication, businesses and even markets rely and react to each other on a daily basis, and little to none behave on their own. Global markets are probably the most intertwined entities in the world. You can watch as multiple pairs move with each other on good or bad news.
How to Spot Correlation
There is a tool that traders can use called the correlation coefficient which measures how correlated the behavior of a pair is to another source. For example, if you wanted to know the correlation between GBP/USD and Bitcoin, you can set the filter to compare them.
The chart above is showing the differences in correlation between the pairs AUD/USD and GBP/USD. The correlation coefficient underneath the price shows a chart from -1 to +1. -1 would be a perfect negative correlation, meaning that whenever the price of one pair goes up, the price of the other is going down. A +1 correlation means that the prices of both pairs behave the same way. A value of 0 means that there is no correlation between the two pairs. On this chart above, GU and AU are strongly correlated. A perfect correlation is not common, in fact it almost never happens. But here, you can come to the conclusion that for the most part, the two pairs will move in the same direction. There were a few short lengths of time where the correlation was not there and one time in December of 2019 where the correlation was a strong negative. Within this month, GU and AU have a nearly-perfect correlation. This doesn't mean the charts will look the same, but when AU moves in one direction, GU follows and vice versa.
Why Are Correlations Important?
Usually in times of market crashes, stocks and currencies move in unison. It's the same case during the recovery phase as well. According to Investopedia, the S&P 500 and crude oil were at a 97% positive correlation in January 2016. In times of great volatility, most stocks/currencies will move in positive correlations. This is important to note because once you've realized correlation between lots of different companies regardless of what sector they're in, you can adjust your bets and try to diversify. You probably don't want every stock/currency you own to move together in the same direction. You want diversification and options. If one trade is affected, you don't want the trades your investing in to also be affected in the same way. That's why some investors move their money trading between the US stock market and precious metals. There are strong positive and negative correlations between the two. In all, low correlation means less risk, and risk management is essential to trading.
Featured Photo: https://www.quora.com/Is-the-Crypto-Price-correlation-the-result-of-FOMO-or-market-manipulation
Thanks for reading! If you are interested in joining our trading community, we have chat rooms, trade alerts from our top traders, and educational content. You can join using the link below, and get a discount on your membership.
Disclaimer:
Please note that this email is my personal opinion only. I am not a licensed financial advisor, and any information shared or discussed is not to be construed as investment advice. Trading and investing involves a degree of risk, and is not suitable to all investors. Please consult with your financial advisor before making any sort of investment decisions.
As a trader, you may see some analysts use lots of indicators in their trading. Sometimes, it's hard to follow because the charts are unreadable from of all the indicators they put in. In a sense, lots of tools are helpful, but they are not always helpful when they are all clumped on a single chart. In fact, the more indicators traders use when drawing up charts causes confusion and are mostly unsuccessful.
Common Indicators
Some very common tools that traders like to use include moving averages, stochastic oscillators, bollinger bands, relative strength index, or Fibonacci retracements. These are just a few of the most common things we see on charts, but what is the most useful and how many should we use to optimize our win rate as traders?
The answer may sound cliché, but it all depends on you. Yes, technicals are important in trading, but they don't always work. I've been in countless trades where my technical barriers were broken, resulting in a loss on the trade. Trading is not a perfect game, and more often than not, technical analysis will not be completely accurate. This is due to momentum, greed, fear, news and other things. If you were to follow a SL/TP ratio of 1:3, you're only giving your stop loss a third of what your take profit would be. In some cases, the trade may not be able to run its course. You may be right about the overall call, but you got stopped out because of the ratio. One thing beginner traders like to think is that you need to work out everything beforehand and make sure it's perfect. In my opinion, that's not true. I thought it was true when I first started, but I found out that the markets don't work like that.
Before I move on, I would like to say that creating a plan is very important, but the plan doesn't have to be perfect. Not every trading set up will look perfect in real time. Setting a pending order doesn't always get reached, stop losses cut off potential winners, and TPs are often missed. What's important to note is that technicals should be used to help gauge entries. I've been in plenty of trades that put me in drawdown in the beginning and ended up being winners. Instead of being perfect in your entry/strategy, let the trade happen, because the markets aren't perfect. There is no such thing as a 100% win rate as everyone deals with losses. You can always adjust your trades to cushion the drawdown. You can also see some winners really run.
Conclusion
One average, I'd say that traders should use only a few indicators in their trading. Indicators are just tools that highlight specific market behavior and allow you to see what you need to see. It's supposed to point out the obvious, it shouldn't be something you have to dig for. Relative Strength Index shows whether something is overbought or oversold. Moving averages will let you see how far the price is deviating from the mean. These tools are very easy to use and see. If indicators are too difficult to see, then the majority of traders will not see it. If traders don't see an obscure support line that somebody draws on their own chart, the odds of other traders picking up on that are very slim. Instead, look for the obvious, and trade what's clear. I can attest to that you won't be second-guessing every move you make. And you will make trading easier.
Featured Photo: https://www.google.com/url?sa=i&url=https%3A%2F%2Fforexobroker.com%2Fkilid-forex-system%2F&psig=AOvVaw2KdsxTKuIop-foLgt7q_54&ust=1592069796232000&source=images&cd=vfe&ved=0CAIQjRxqFwoTCLjlzKno_OkCFQAAAAAdAAAAABAJ
Thanks for reading! If you are interested in joining our trading community, we have chat rooms, trade alerts from our top traders, and educational content. You can join using the link below, and get a discount on your membership.
Disclaimer:
Please note that this email is my personal opinion only. I am not a licensed financial advisor, and any information shared or discussed is not to be construed as investment advice. Trading and investing involves a degree of risk, and is not suitable to all investors. Please consult with your financial advisor before making any sort of investment decisions.
Featured Photo From: https://tradingpsychologyedge.com/trend-trading/
What is trend trading?
One of the most popular strategies that traders use from beginners to experts alike, is trend trading. Trend trading is simply generating position(s) on a currency pair, stock or index based on the overall momentum of the market. If prices consistently move in a single direction over time, then you are looking at a trend.
How to spot a trend
When looking at any trading chart, you'll notice that prices are always moving up and down. But to spot a trend, you will see either higher highs and higher lows or lower highs and lower lows.
On the chart above, notice how each consecutive low is higher than the one before, and it's the same for each high too. In this case, higher lows and higher highs on the SPY indicate that a long term bullish trend is in play.
Popular Trend Trading Methods
The cool thing about this strategy is that it is used by both beginners and veterans in the playing field. That's because it's an easy technique to spot and billionaire investors like CEO of Berkshire Hathaway, Warren Buffett, use to generate billions of dollars. Of course, he has many different methods of trading, but his overall sentiment for stocks is to buy and hold.
Here are some popular methods of trading the trend:
A trader might see the start or continuation of a trend and make a one-time buy at the perceived beginning of a trend. It's difficult to spot the very start of a trend, but if you catch it, you can be holding on to long term profits. Some traders may get anxious after making any sort of profit on the first upswing and want to close early. But as you can see, that would have been a mistake on this CAD/JPY pair.
Here is a similar method, but instead of buying once, the investor puts in several entries on the way up. Accumulating your position size can be way more profitable than buying only once. If this trader bought at all these points and sold reasonably close to the high, all those positions add up over time and can be extremely profitable.
Another technique to trading the trend is by taking trades within the trend. After noticing that trend is in place, a trader might enter a buy on a dip and sell after an upswing. This is where the phrase "The Trend is Your Friend" comes from. Using the momentum of the overall momentum, a trader can enter on a dip and wait for the trend to take over. This way, entries do not have to be exact. Even in drawdown, if your position is pro-trend, traders usually wait in their drawdown anticipating the trend's momentum.
You can think of trends as the tide: Waves wash back and forth on the beach, but at the same time, the tide moves further and further on to land. And then, the tide contracts and moves farther out to sea, all the while the waves are in a constant back-and-forth motion. The waves represent short term swings and the tide is the longer term trend.
Conclusion
Trend trading is one of the most popular strategies out there as it’s one of the easiest techniques that traders can do. If done right, you could be looking at some big winners in the future. The main thing to focus on when trend trading is controlling your patience, letting the trend work itself out. Let your winners run and be patient. After all, the trend is your friend!
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Hope you enjoyed that article! If you are interested in joining our trading community, we have chatrooms, trade alerts from our top traders, and educational content. You can join using the link below, and get a discount on your membership.
Disclaimer:
Please note that this email is my personal opinion only. I am not a licensed financial advisor, and any information shared or discussed is not to be construed as investment advice. Trading and investing involves a degree of risk, and is not suitable to all investors. Please consult with your financial advisor before making any sort of investment decisions.
