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If you are new in the forex trading market then there are various things that you should take into consideration. Many new traders don’t do certain things that they could actually do just and due to this reason they fail to perform well. One of these things include following the right time to trade.

Importance of Trading in Right Time Frame

If you do not trade in a proper and right time frame then you are doing mistake. Trading in an inappropriate time frame will not produce desired results in any case. It will only bring more and more losses to your trading profile.

Time Frame and New Traders

 New traders do not show patience and try to make profits and get rich overnight; however, this is a total wrong approach. For everything you do you need to be patient. To make quick profits, new traders start trading small time frames such as they trade the 1 minute or 5 minute charts. This practice leads to nothing but frustration because that small time frame does not suit their personality. When they see failure they lose heart and give up trading, instead of correcting their mistakes.

Types of Time Frame for Trading

There are different time frames in which traders can trade. Most traders feel themselves comfortable with 1 hour charts. However, this time frame seems to be a longer time frame, still it is not too long and it has fewer trade signals. When you trade in a 1 hour time frame you actually give yourself more time to analyze the trading market and you don’t feel hasty to take nay step.

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To place orders with a forex broker you must be aware of how you should place orders in an appropriate manner. It is because order placement must be based on how you trade, for example, how you want to enter and exit the market. If you don’t know how to place orders appropriately then it will impact your entry and exit points.

Understanding Types of Orders

There are various types of orders that you should be aware of. Following are some important forex order types that you should be apprised of in order to place your orders appropriately.

Stop Order

It is a type of order that becomes a market order when a specified price is reached. This type of order can be utilized to enter a fresh position or also to exit an already existing position.

Sub-types of Stop Order

There are two different subtypes of stop orders which include buy-stop order and sell-stop order.

Buy-stop Order

It is actually an instruction to purchase a currency pair at its market price once you see that the price of that currency pair has reached your specified price or it has gone higher than the current market price.

Sell-stop Order

It is also an instruction to sell currency pairs at the market rate when the market reaches your specified rate or lower than the current market rate.

Where Stop Orders Can Be Used?

Now it is important to you to understand where you can use stop orders in the forex market. Following are the simple explanation of where you can use stop orders.

• You can use stop orders to enter into the market when you trade breakouts.
•  You can also use stop orders to cut down on your losses.
• Another great use of stop orders is to increase your profits.

Market Order

Market order is the commonest type of order. It is utilized when you look for executing an order on immediate basis at the market price. That market price is either the displayed ask price or the bid on your screen. You can use market order either for entering a new position (buy or sell) or for existing an already existing position (buy or sell).

Limit Order

You place limit order when you only want to enter a new position or exit an existing position at a particular price or a better price.

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To understand the futures market you have to understand the groups of people that are making the shots in forex trading. These are the real people that are driving the futures market. These people are basically divided into three main groups. These groups are as follows:

• Commercial traders that are also known as Hedgers
• Non-commercial traders that are also called as large speculators
• Retail traders that are also known as small speculators

Commercial Traders

Commercial traders or hedgers are those players in the futures market that want to keep themselves protected against any type of unexpected movements of price. The major part of this group includes farmers or agriculture producers who want to minimize the risk in changing the prices of commodity. Other people that are considered to be the part of commercial traders include banks or corporations that are looking to get protection against sudden price movements in currencies or in other assets.

Key Characteristic of Hedgers

The key attribute of commercial traders is that they are very strong at market bottoms and most rough at market tops.

Real Life Example of Hedgers

Let suppose Apple needs a Japanese expert to develop an application and that expert demands to get paid in Japanese yen after finishing developing that application in three months. Apple is aware of the risk that if the USD/JPY drops then it will cost Apple more to pay the expert in yen after three months.

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Tailoring an effective trading system must be your first priority while considering achieving a long lasting trading career. You should bear in mind that making a trading system doesn’t take long time, but testing the same system takes a good amount of time. You are advised to be patient because in the long run you are going to have a consistent source to generate real profits.

Important Steps in Tailoring Trading System

There are various important steps that you should take to tailor your trading system. These important steps are as follows:

Determining the Right Time Frame

The first step that you need to take is to find out what type of forex trader you are. Are you a swing trader or a day trader? How often do you go through your charts, everyday, every week, or every month? And how long you like holding on to your positions? All these things are very important to be answered in order to find out the right time frame for your trade.

Identify New Trends Through Indicators

Indicators play very important role when it comes to identify new trends. One of the most popular indicators includes moving averages. Most traders use moving averages to identify the new trends. Moving average crossovers are the fastest indicators to identify new trends and also the easiest. There are many other indicators available to spot the trend.

Avoid False Trends

Your next step in tailoring a trading system is to find those indicators that can help you avoiding false trends. It is actually done by ensuring that when you see a signal for a new trend, you use other indicators to confirm it.

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Your first step prior to opening a forex trading account is to find out the right broker for you. Once you have found the right broker, your next step should be opening a trading account. There are various ways to open a trading account. You can open an online trading account that is quite simple to open within only 3 steps.

3 Steps to Open a New Online Trading Account

A new online trading account can be opened in 3 easy steps. These steps include following:

• Selection of the type of account
• Account Registration
• Activation of your trading account

Demo Account

Before opening a real forex trading account to make profits you are advised to open a demo account. There is no fee for opening a demo account, so you can open even two or three demo accounts. You should also try several different brokers to find out which one is the best broker for you.

Selecting the Type of Account

When you feel ready to open a new forex trading account, you have to select an appropriate account type for trading account. There are basically two main options, these are personal and business account. In the past, at the time of opening a forex trading account, individuals had to choose whether they wanted to open a standard, a mini or a micro account. Now days, this is no more a problem because brokers allow traders to trade custom lots. This is a great facility for new traders who only come up with small investments. This facility enables traders to trade with the amount they are comfortable with.

What Is a Managed Account?

Bear in mind that some brokers provide “managed account” facility in the application form of trading account. It means that if you want your broker to trade your account on your behalf then you can choose it. However, it is not advised to you to choose this because it has some setbacks.

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Trading journal is an important tool for trading effectively. You can keep a regular record of your trading in your trading journal. After doing a considerable number of trades, you will be having a good amount of useful data and observations that you have collected by yourself and on the market. Now it’s the time to analyze this data.

Analyzing Data

You can easily analyze data by following two things, these include finding out what works best and keep using it, and finding out what does not work at all and stop doing it. The second strategy involves keen observation and asking the right questions at the right time. You can refine your trading results analysis by separating them into different smaller categories like specific currency pairs or day of the week.

Questions to Ask While Reviewing Your Journal

Following are important questions that you should ask yourself while reviewing your trading journal.

Patterns or Tools

You should ask yourself about which tools or patterns work out best when you trade and which are not feasible.

Adjustment of Indicators

You should ask yourself about how you can make adjustments for your indicators to get you in trades earlier, or help you to avoid fake outs and whipsaws.

Time of Closing Winning Trades

You should find out if you are closing your winning trades too early. If you are doing it then is it necessary to adjust your potential profits or you are doing it just because you are afraid of losing unrealized profits?

Stop-Loss Processes

You should find out if you hold onto losing your trades for a longer time period than you should. You should also find out how you can make improvements in your stop-loss process.

Trading Plans

It is another important question that you must ask yourself and it is if you are religiously following your trading plans or not.

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There is a plethora of trading systems that work best for different traders, but the main problem is that many traders don’t follow trading system strictly. As a result they lose money. It is very important to you as a trader to strictly follow your trading system.

2 Important Goals of Trading System

Your trading system helps you achieving various goals in trading. But there are two main goals which your trading system must be able to accomplish. These two goals include:

• Identification of a trend as soon as possible
• Confirmation of good trend to avoid whipsaws

Demo Trading Account

If you think you are working with the right trading system, then you should first test it on a demo trading account for at least 2 months. A Demo account can provide you great help regarding your trading system. You can figure out how trade system would work when the market is showing movements. Once you have tested your trading system on a demo account and you have found out that you are still making profits, now it’s the time to trade your system live with real capital. However, never forget to follow your rules strictly.

Six Important Steps to Design a  Trading System

There are six important steps that you must follow to develop an effective trading system. These steps include following:

• Finding the right time frame
• Finding the indicators that help you spotting trends early
• Finding indicators that help you confirming good trends and avoiding whipsaws
• Defining your risk that how much amount of money you are willing to lose in a trade
• Defining your entry and exit in a trade
• Writing down the rules of your trading system and strictly follow these rules

The most important step is to strictly follow the rules because you are not going to make profits if you don’t follow your trading system rules.

Test Your Trading System

Creating a trading system doesn’t take a long time, but testing it takes a long time. It is very important to test your trading system before you put it live.

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In a war, foolish people always take blind steps in the battlefield and fight without a proper plan. Such people get nothing but a shameful defeat. On the other hand, wise people always get a situation report first to figure out their surrounding conditions to prepare their winning strategy and always leave battlefield with a winning flag. Just like the wise people in the warfare, you should also get a situation report first on the trading market.  In simpler words, it indicates that you need to be aware of the kind of market environment you are trading in. In other words, getting knowledge about market environment is referred to as trendspotting.

System Vs Trading Environment

Some traders complain about their system failure.  However, it is a fact that sometimes system fails to work. Many other times, the system is good enough to generate potential profits but it is not utilized in a suitable environment that leads to failure of the system. Expert traders always try to figure out the workable strategy for the current market environment in which they are trading. Using a feasible system in a feasible market environment enables you to make real profits.

Prepare an Appropriate Strategy

You must come up with a fool proof strategy that you can use in accordance with the market environment. It is just like if you are playing a sport and come up with different strategies according to the situation to defeat your opponent.

Trend-based Strategy

If you know the environment of trading market, then you will be able to come up with a trend-based strategy in a trending market.

Range-based Strategy

By knowing the market environment of the trading, you can also choose a range-based strategy in a ranging market.

Strategy According to Time Frames

If you think that you are not making use of your range-based strategy then you should worry about it.

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There are different of types of forex brokers that are offering their services. The selection of broker depends on the type of trade you are doing. It also depends on whether you want to have tighter spreads with commission per trade or you want wider spreads without commission.

Day Traders and Scalpers

The selection of brokers also depends on what type of trader you are. Usually, scalpers and day traders opt for tighter spreads as it is easy to take small profits due to the less need of ground of the market to cover the transaction costs. During the same time, wider spreads are not always significant to position traders or longer term swing.

Types of Brokers

Following are the three distinct types of brokers; these include Market Makers, STP, and STP+ECN. In order to select an appropriate broker for your trade, it is very important to you understand the differences between these brokers.

Market Makers or Dealing Desk Brokers

These brokers have fixed spreads. These brokers work with the opposite side of your trade. They propose artificial quotes to you. You can get your ordered filled by broker on the basis of discretion.

STP or No Dealing Desk Brokers

Most of STPs have variable spreads i.e., spreads can be wider or tighter. These brokers play the role of a bridge or a lesion between a client and liquidity provider. Liquidity provider provides the price. With these brokers, execution of trade is done on automated basis without re-quotes. Like desk dealing brokers, these brokers also don’t provide liquidity information.

STP+ECN or No Desk Dealing

To some extent, these brokers share the same attributes as the STP brokers have. These brokers offer variable spreads or they take commission fees per trade.  These brokers play the role of a liaison between client and liquidity provider and other participants of the trade.

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