FX Traders Should Start Their Forex Trading Day Like This

FX Traders Should Start Their Trading Day explained by professional forex trading experts the “ForexSQ” FX trading team, All you need to know about How FX Traders Should Start Their Forex Trading Day.

How FX Traders Should Start Their Forex Trading Day

Trading Forex or any other market is easier with a plan. Without a plan you’re likely to fall prey to chasing price moves.

Chasing price happens when you finally enter at the end of a move and you’re often caught holding onto a trade that is retracing against you.

While no amount of preparation can prevent you from placing a losing trade, being prepared can help you spot early on when a mistake has been made or a simple trade idea is not working out as you intended so that you can exit early and without hesitation. Many experienced traders (including yours truly) firmly believe that the sooner you exit a lower probability trade, the better.

Step 1: Know What News Can & Will Move Markets

I often look to an Economic Calendar to make sure I’m not caught off guard. At first, I want to see what are the major news releases such as interest rate announcements, inflation numbers, or employment reports, or consumer confidence. This allows me to get ready for entering a new positions or managing an already open trade.

You can benefit by looking to the current week and the upcoming week’s news events. When you have a trade open on a currency like the US Dollar before an Interest Rate announcement, you should know what type of news print would cause you to hold or exit your position. The key thing to prevent is being unprepared for the news event by not looking at the calendar and worse holding a losing position that looks continually less attractive due to a news trend.

Step 2: Define What Currencies Are Strong & Which Are Weak

Many traders can benefit right away from clearly determining which currencies are relatively weak to other currencies and which are relatively strong. One common factor being relatively strong is a widening interest rate differential. Interest rates are often seen as a great gauge for how an economy is progressing.

Therefore, a country like the United States through 2013 with interest rates near zero is seen as unable to be economically strong enough to withstand high interest rates. However, when a strong trend of economic data starts to surface and the Central Bank behind a currency begins to hint at raising interest rates, a currency will begin to strengthen.

A simple way to determine strength and weakness on a relative scale is to pull up a chart on medium-term time frame like a 4-hour or Daily chart and apply a simple moving average. If you find that one currency like the Euro is consistently above the moving average of your choosing against other currencies like the Japanese Yen, US Dollar, British Pound, Australian Dollar then the Euro would be Strong and it could be a risky move to sell and would likely be better to buy.

A lot of people in the market prefer the 200-day moving average because a 200-day moving average is composed of nearly a year of trading activity.

Step 3: Define What Trade Size You’ll Trade Before Hand

We want to make sure you know the risks of trading FX and you’re welcome to reach out to me if you have any questions. Of course it’s true that every market has risk, but due to the use of leverage, Forex can appear riskier than other markets. The use of excessive leverage when you trade forex can easily magnify the effect that a losing trade has on your account.

Leverage is determined by the trade size that you open in relation to your account balance. Therefore, if you have a $10,000 trading account and open up a Buy – USDJPY (US Dollar bought against the Japanese Yen) for $1,000,000 (yes, it’s possible), you’d be utilizing 20:1 leverage.

One of the best ways to avoid trading too large which can quickly diminish account is to commit ahead of the trade what size you’ll open.

FX Traders Should Start Their Forex Trading Day Conclusion

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