There are several technical Indicators used in Forex trading. Here is a quick video explaining how some of these Indicators work and which you can consider using in your trading system. Indicators are best used together where you only take trades when all Indicators agree to buy or sell.
Price tends to revisit historical price levels. These levels are known as support and resistance which are used by many traders to determine future price movement. These are best used with a combination of other Indicators.
In this video, you will see a trade I took and my thought process behind this trade. I do a thorough Technical Analysis on TradingView chart software.
As mentioned in our Forex Basics section, you should NEVER risk more money than you cannot afford to lose. Be smart and only trade with an amount you are comfortable with.
That being said, how much should you be risking per trade? Some prefer only 0.5% of their account. The answer for our team is 1-2%. This means our Stop Loss is set at a 1-2% loss of our total account value. If you have an account with $10,000, this means your Stop Loss should be set to lose no more than $100-$200 per trade. This remains the same if your Stop Loss is 20 Pips away or 100 Pips away, it still needs to be set to only lose $100-$200 if the trade goes against you.
Your Take Profit level gets more complicated. For most, a 2:1 risk to reward ratio works well. This means if your Stop Loss is set to 2% with a $10,000 account, your Take Profit level should be 4% or $400. As you develop in your trading career you will learn strategies on how to scale out of positions slowly and move your Stop Loss level to maximize profits and limit losing trades.
What determines our risk per trade? Foxx Forex takes a few things into consideration before determining a risk tolerance for each trade. On Mondays and Fridays, the market has typically less volume, therefore we do not risk more than 1% on those days. Tuesday-Thursday we wait for only the best trading setups that we feel comfortable risking 2% on.
Trades take time to reach target levels. When the trade is going against you, it is important to be patient and wait for things to turn into profits.
Constantly learning to enhance your knowledge in all areas of trading is crucial. You must always strive to further your education in Forex.
Risking too much or risking different amounts in trades will lead to a decline in your profits. Have a universal plan with set targets and stick to it.
Many traders enter into too many trades at once, overexposing their account to more risk. Quality over quantity wins in the Forex market.
Trading psychology is vital. You need to keep emotions out of trading. Trade with amounts you are comfortable with and follow your plan, period.
You will have losers in Forex. This is part of your plan. Do not let this upset you and cause you to start risking more after losing trades.
Your Broker in trading allows you to enter large positions in Forex with little money down (known as margin), which gives you leverage to hopefully make more money. As part of this deal, your Broker will require that you keep a certain amount of free cash available in your account when you are in trades. If you violate these levels they will notify you first, then if your trades reach a certain point you will be Stopped Out. This means your trades will be automatically closed.
Example: Let's say you have an account with $10,000 and you enter several trades which overall cost you $9,500, leaving you with $500 of cash in your account. These trades start going against you, and is approaching a loss of $500. When it reaches a loss of $500, your Broker will close your positions automatically. This is because you only have enough money to settle the positions ($10,000 - $9,500 = $500). This is useful to know because if you have an account with $10,000 and you are in for $9,500 on your trades, you can only lose $500 before they automatically close you out of these positions.
You need to grasp this concept and understand it. Basically, you want to normally keep around 20% of your account's cash (aka margin) available in your account at all times. This means for a $10,000 account you never want to enter positions that all together exceed $8,000.
Trading foreign exchange on margin involves high risk and may not be suitable for all investors. High leverage can work for you as well as against you. Before deciding to trade the foreign exchange market you should take special consideration of your objectives, experience, and risk appetite. As with all investing, there is a possibility that you could sustain a loss of some or all of your investments. Therefore, you should not trade with money that you cannot afford to lose. You should be aware of these risks and seek advice from an independent financial advisor if you have any doubts. All analyses, opinions, news, research, or other information contained within any of Foxx Forex media, is provided as general commentary and does not constitute investment advice. Foxx Forex, or any of its constituents, will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.
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