How to Forex Trade
How to Forex Trade – The Forex market comes with its very own set of terms and jargon. So, before you go any deeper into learning how to trade the Fx market.
The currency exchange rate between two currencies, both of which are not the official currencies of the country in which the exchange rate quote is given in.
For example, if an exchange rate between the British pound and the Japanese yen was quoted in an American newspaper, this would be considered a cross rate in this context.
Exchange Rate – The value of one currency expressed in terms of another. For example, if EUR/USD is 1.3211, 1 Euro is worth US$1.3211.
Pip – The smallest increment of price movement a currency can make.
Forex Trading Terminology
Leverage – Leverage is the ability to gear your account into a position greater than your total account margin. For instance, if a trader has $1,000 of margin in his account and he opens a $100,000 position, he leverages his account by 100 times/100:1. If he opens a $200,000 position with $1,000 of margin in his account, his leverage is 200 times, or 200:1.
how does forex trading work
Leverage in Forex – To calculate the leverage used, divide the total value of your open positions by the total margin balance in your account. For example, if you have $10,000 of margin in your account and you open one standard lot of USD/JPY (100,000 units of the base currency) for $100,000, your leverage ratio is 10:1 ($100,000 / $10,000). If you open one standard lot of EUR/USD for $150,000 (100,000 x EURUSD 1.5000) your leverage ratio is 15:1 ($150,000 / $10,000).
Margin – The deposit required to open or maintain a position. Margin is ”used”. Used margin is that amount which is being used to maintain an open position, whereas free margin is the amount available to open new positions. How to Forex Trade .With a $1,000 margin balance in your account and a 1% margin requirement to open a position, you can buy or sell a position worth up to a notional $100,000. This allows a trader to leverage his account by up to 100 times or a leverage ratio of 100:1.
What is forex trading and how does it work
The process of creating a Forex trading plan around an effective trading strategy like price action trading, will work to solidify your understanding of the trading strategy and will also provide you with a blueprint for what you need to do each time you interact with the market.How to Forex Trade
50% entries of signals and swings
I personally LOVE 50% entries both of price action signals (mainly pin bars) and entering after a 50% retrace of a major market swing…
A 50% pin bar entry is something I often call a “pin bar tweaked entry” wherein you typically set a limit order at a pin bar’s 50% level. Often, price will retrace to the pin bar 50% level, especially on longer-tailed pins. This gets you in with a very tight / small stop loss and thus greatly increases the Risk vs. Reward potential of the trade.
How to Make a Forex Trading Plan
The point here is, we want to make our trading decisions on the daily chart time frame and we are only looking at daily bars that have closed out.
We are spending just 30 minutes or less, per day, analyzing the markets and making our trading decisions. This is the basic cornerstone principle, if you will, of my entire trading approach.
Setting and Forgetting
The next part of the 30-minute trading routine is my set and forget trade management method. This approach serves a couple purposes.
Setting and forgetting is about walking away and trying to purposely avoid letting yourself get addicted to watching the charts. This is the second biggest purpose of my set and forget approach; it frees up your time.
The biggest benefits of the 30-minute trading routine…
- The mental state of mind that you will get from focus on end-of-day charts and trading with reduced involvement is the state of mind you need to trade properly. | How to Forex Trade.
- By trading end-of-day and waiting for those obvious daily chart trades, you’re naturally going to get better trades than someone day trading.
- Why MetaTrader 4