Be a Smarter FOREX Currency Trader: Three Basic
Principles
Below I will describe three basic principles that may come in
handy for currency traders. They are very easy to implement and
potentially take advantage of as you will see.
Principle 1
Some currency traders find that it is useful to always trade a
given currency pair at the very same time every day. The
reasoning for this is that most of the other traders buying or
selling that currency pair may also trade at the same time. Major
trading pits may also be working the exact same shift every day.
This technique may be especially useful for currency traders who
exploit technical analysis. Again, the reasoning for this is that
it may be possible to standardize the trading conditions if one
trades during the same time frame every day, if only for a very
little bit. However, that small bit of standardization may yield
several pips worth of profit. Nevertheless, it is readily obvious
that the foreign exchange market can be very volatile and
random.
Principle 2
Certain currencies trade with a certain volatility at a
certain time. Once you've finished practicing your trading skills
on a demo account and you decide to test the waters using your
own investment capital, you may want to minimize the amount of
liquidity and volatility to hedge your risk. Alternatively, you
may want to increase the risk involved, and potentially increase
your profit potential. (It should be noted that very heavy risk
is involved under any circumstances.)
The foreign exchange market follows the sun around the world
moving from the United States to Australia and New Zealand to the
Far East, to Europe and finally back to the United States.
Overall foreign currency trading volume is determined by which
markets are open and the overlap in the times that these markets
are open. Currency trading volume is relatively high 24 hours a
day, but there are considerable peaks in activity when the
British, European, and US markets are open simultaneously, which
is from 1 pm GMT to 4 pm GMT. Pacific Rim markets, such as Japan
and Hong Kong, show a dip in their trading volume while there is
extensive volume in the US market at the very same time.
Nevertheless, it is still possible to perform technical analysis
on Pacific Rim currencies. By trading during a certain time
frame, one may be able to either minimize or maximize the level
of volatility (and risk) for a given currency pair.
Principle 3
Although the above is a general statement about the activity
volume for certain currencies, it may be a good idea to attempt
to capture the level of volatility for given currency pairs. You
can potentially use Bollinger bands, a tool used by technical
analysts, to quantify volatility. Bollinger bands compare
volatility and relative price levels over time. Some currency
traders cannot trade a day in their life without using Bollinger
bands, while others may not find any use for them; it is really
up to you to decide whether Bollinger bands are of any use to
your specific situation.
I have described three basic principles that may potentially
come in handy for currency traders in the foreign exchange
market. They are very easy to implement and may reap rewards (or
lack thereof) depending on market conditions. Hopefully these
principles will help you come up with your own successful
strategies for trading currencies in the foreign exchange
market.
Argentina Sends Tax Agents to Control Currency Trading Wall Street Journal Afip said that one well-known currency trading business, Banco Piano, refused to let inspectors do their job. As a result, Afip officials interviewed Banco Piano customers outside three of the company's branches. The government will fine Banco Piano ...
FOCUS: Technology Buoys Retail Currency Trading, Reshapes Old Models Wall Street Journal By Eva Szalay Of DOW JONES NEWSWIRES LONDON (Dow Jones)--Retail foreign-exchange trading is emerging as one of the biggest growth areas in the currencies space, and some of the trading firms that facilitate these flows are building up a whole new ...
Morgan Stanley Currency-Trading Head Stephen Mettler Leaves Bank BusinessWeek By Michael J. Moore Jan. 26 (Bloomberg) -- Stephen Mettler, who oversaw Morgan Stanley's interest rates and foreign-exchange trading businesses, has left the bank. Mettler, who joined the firm in 1997, retired, according to an internal memo obtained by ...
Weighing currency trading options Daily Monitor The use of leverage in currency trading is perhaps the biggest source of opportunity and stunning returns but also a significant source of investment risk that traders must know about. The commonly presented picture of glowing investment performance is ...
Currency trading mystery unearthed Daily Monitor Sometimes, however, the opportunities are about obscure pursuits like mining, oil exploration, or in this case currency trading. Over the last year or so, currency trading with the promise of lucrative returns has taken Kampalans by the storm.
When Will The Kiwi's Remarkable Run End? Now. TheStreet.com CV DailyFX is the forex news and research arm of FXCM, Inc (NYSE: FXCM), which provides currency trading and brokerage services and is an advertiser on TheStreet websites. Any opinions, news, research, analyses, prices, or other information is provided ...
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MORE RESOURCES updated Sat. February / 04 / 2012
