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.

Joshua M. Kunken is Currency Analyst for ForeignMarketWatch.com. His articles may also be found at ForexTrack.com.

In The News:


pen paper and inkwell


cat break through


FOREX - Where Fortunes Are Made Everyday

The Foreign Exchange Market ? better known as FOREX -... Read More

Forex Broker

A broker is any person or firm that charges a... Read More

Forex Broker Involvement Optional

To trade on the forex market, the largest financial market... Read More

Crisis of Confidence in the EU

The European Union (EU) constitution was dealt a double blow,... Read More

Money Management, Part 1

There are some common mistakes I've seen traders make in... Read More

Two Timeless Rules in FOREX Investing

RULE #1) ~ Cut your losers; let your winners ride.One... Read More

How To Handle A String Of Losses

Everybody hates to lose and unfortunately no one is blessed... Read More

The Basics of Forex

Foreign exchange market is also known as Forex or FX... Read More

Facts of Day Trading

Are you thinking of entering the fast-paced world of day... Read More

Intrenet Marketing VS Forex Currency Trading

Have you noticed that when someone's trying to sell you... Read More

Forex2u Forex Strategy On Successful Forex Trading

The essence of the FX2u Forex strategy is that it... Read More

Forex Profits

The Forex Market-What, When and Why?Forex, FX and the Forex... Read More

Hedging Foreign Exchange Risks

The exchange rate of the Macedonian Denar against the major... Read More

Forex Signal, Forex Signals Advice

There are lot's of Forex signals providers out there. New... Read More

Dont Deny Reality

If you want to be a successful trader, you must... Read More

Forex Trading

Foreign exchange market, or better known as FOREX, is the... Read More

Learn Forex Trading - a Guide for Beginners

One can learn forex trading as easily as one would... Read More

Forex Trading Systems

The foreign exchange currency market is the largest market in... Read More

Trading Profitably on the Foreign Exchange Market

You may be asking yourself "how does one begin to... Read More

Disgruntled

The following situation happens quite often to many traders. Look... Read More

Day Trading the Index Futures - How to Judge Good Entries

QUESTION: If the SP futures fall through support and go... Read More

FOREX Trading Philosophy

Keen on starting FOREX trading? Why would you not be?... Read More

The Major Players in the Foreign Currency Exchange Market - FOREX

Since the US dollar is the centerpiece of the market,... Read More

Day Trading Course or Day Trading Technique Seminar: Learn Day Trading Education

Profitable day traders recognize that momentum trading is among the... Read More

Where to Get Forex Training

For those of you who are interested in forex trading,... Read More

Writing A Trading Plan

All professional traders have a trading plan. Trading futures is... Read More

Online Futures Trading - Advantages and Disadvantages

What Is Online Futures Trading?A futures contract is an agreement... Read More

Business and the Forex

The business world is a complex web of supply and... Read More

10 Steps To Professional Day Trading

Everyone trades a little differently. The trading method outlined below... Read More

Risk and Stock Trading Fees: The Two Barriers To Overcome If You Want A Successful Trading Career.

You know the old joke:"How do you make a million... Read More

Why Forex Traders Plan To Fail Before They Even Place Their First Trade & How You Can Know It & ...

Have you heard the wise saying that a trader who... Read More

Momentum Trading: A Practical Day Trading Strategy to Get Profits from Hot Stocks

Momentum day trading can be extremely profitable when done correctly...Day... Read More

The Miracle of Forex

My father, who owns a small parts store and garage... Read More