How to Make Money From Forex
I have been sufficiently lucky to make some extremely nice profits from currency trading in 2010, but you can't be utterly assured in your own capabilities because market conditions can swiftly change.
Well first of all if you're a day trader or an early morning trader, for instance, you should be aware of the average daily trading range for each of the major currency pairs. In the last few months many of the leading pairs have seen their averages fall quite considerably, as indicated by the Average True Range indicator.
So therefore if this trend continues into 2011 and we see a relatively small trading range each day, you have to take this into consideration. There is no point targeting big points gains that are well in excess of the latest ATR figure.
To give you an example, the average true range of the GBP/USD pair is currently 135 points at the time of writing (December 29th 2010). So if you are like me and enjoy trading early morning breakouts, you would have to be cautious about trading any breakouts early in the day if the overnight trading range is already in excess of 100 points, for instance.
However if the range so far is just 30 or 40 points and a breakout occurs when the London market opens, then there is much more room for the price to move strongly in the same direction for the rest of the day. This is in stark contrast to earlier in the year when the trading range was in excess of 200 points and you could be a lot more confident about the price continuing to move in the desired direction.
So if you're like me and enjoy trading early morning breakouts, you would be careful about trading any breakouts early in the day if the overnight trading range is already higher than a hundred points, for example.
An alternative way to earn cash in 2011 is by focusing on long term trades. Lots of folk attempt to make fast profits, but as I have already indicated, the trading ranges are quite little now for the major pairs and this will continue into next year. You are better off trading the four hour and daily charts.
My main currency exchange trading program uses the daily chart for highlighting the trend, and the four hour chart for pinpointing exit and entry points. This has worked extremely well for one or two years now, and there isn't any reason that explains why this should not remain worthwhile in 2011. The major pairs will always conform very well to technical research on these longer time frames, and overall it's a lot less complicated to earn income. You just need to come up with a straight-forward trading methodology that's in a position to perceive 1 or 2 high chance trading opportunities each week. The point is that if prior years are anything to go by, there should be lots of opportunities to earn income from foreign exchange trading in 2011.
This is especially true if you lengthen your time frames and trade the long term charts. However it still is possible to earn income from short term trading as well in spite of the narrow trading ranges. You only need to find the correct trading methodology.
Article Source: FxTradingStock.com
About the Author
Eric C. Herndon is a blogger and amateur cartoonist. Eric spends his time between playing Tom and Jerry Games and crating cartoons for his family.
by: Eric C. Herndon
Total views: 8
Word Count: 552
Date: Tue, 25 Jan 2011
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