blog13

How To Develop Your First Forex Trading Plan

by with No Comment Forex

The ability to create and follow a forex trading plan is one of the most important things a forex trader must learn. Many new forex traders fall into the trap of either not creating a plan or failing to stick to the ones they do create. Doing either is a big mistake and leads to irrational, hasty, and emotional decision-making (very bad things when it comes to forex).

The process of creating a forex trading plan will help you understand your trading strategy thoroughly and serve as a blueprint for making trading decisions. If you design your trading plan correctly, the unexpected should not be an issue  – you should have already thought out and have a course of action for just about anything that might occur.

So how do you create a plan? In this post, we’ll take you through it from start to finish.

Oh, one thing to note before we go any further:  

Having a trading plan alone is not enough. You should also be keeping a detailed trading journal to help you keep track of how consistently you are following your trading plan. In the following article, we’ll take you through the steps of creating your first plan.

1. Determine What Kind Of Trader You Are – And How Many Trades You Should Make

The first step to creating a forex trading plan is to determine what kind of trader you are based on the frequency of your trades and the duration over which your trades run. If you are a day trader whose trading style revolves around scalping, then you should plot your trading plan with a 24-hour timeframe. On the other hand, if you are a swing trader whose trades usually span several days, you should use a week as your planning horizon. To determine the number of trades that you should make within your trading horizon, you should add up all your winning trades  over your chosen time period and then multiply them by 1.2. For example, if you make 15 trades a week and only five are winning trades, you should not make more than six or seven trades each week. The idea is to increase your win rate and your chances of being an effective forex trader.

2. Maximize Your Opportunities

By limiting the number of trades that you make on a daily basis you limit your opportunities in the markets. This is not a bad thing. Limiting the number of trades you make on a daily basis should allow you to focus on finding the best trade setups that match your trading plan. By making fewer trades, you will be able to focus more on analyzing your trades and on making trades that have a beneficial risk/reward ratio.

 

3. Eliminate Emotional Trading

As a beginner forex trader, you should strive to avoid making trades based on your emotions by always sticking to your predetermined trading parameters. By limiting the number of trades you make each day, you can more easily avoid making ‘revenge’ trades. This can happen after you make a bad trade when you make further trades in an attempt to make up your losses. Many new traders succumb to the urge to make emotional rebalancing trades in order to make up for their losing trades. Most emotional trades usually carry higher risk because their main objective is to recoup the losses on a previous trade, which might be significant.

4. Set Entry Rules

Most beginner traders start out being very excited about the movements of the currency pairs they want to trade and will typically open new trades based on an instinct alone. This is not the best way to trade as, in many cases, traders end up with open positions that they have not fully thought through or researched. Your trading plan should clearly describe the signals that you will look for before opening a trade. You should include the different parameters that the indicators you are using must meet in order for you to enter into a trade. The more detailed your plan is, the better your results will be. Having a clearly defined entry rules will ensure that you remain disciplined in all your trading activities.

 

5. Set Exit Rules

Having exit rules is just as important as having entry rules because having predetermined exit signals helps you maximize the potential gains on your trades while limiting your losses. Your exit rules should be aligned with the maximum risk you are willing to take on each trade as well as the profit potential of each trade. For example, a trader with a 1:3 risk/reward ratio would be willing to risk USD 50 dollars for a profit of USD 150 on each trade. This means that the trader should exit a losing trade once their losses reach USD 50 and should look to exit a profitable trade with a  USD 150 profit.

6. Set Stop-Loss And Take-Profit Levels

 

Now that you know the importance of setting entry and exit rules, stop-loss and take-profit levels are  next. It is crucial that you set a stop-loss level on every trade that you make in order to limit your potential losses one every trade. You should think this through ahead of time and should tie your stop loss to the percentage of your trading account that you are willing to risk.

 

Conclusion

Now that you have a good understanding of how to create your trading plan, you should get to work creating one using a free Demo trading account The Demo account will allow you to test and refine your current trading plan on either our MT4 of MT5 platforms and will enable you to pinpoint weaknesses in your plan. Once you are satisfied that your plan works in you Demo account, you can consider using it in you live account. 

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blog12

Trading Strategy: Forget Price, Try Trading Volume

by with No Comment Forex

Are you ignoring the volume bars at the bottom of your price chart? It’s not unusual. Loads of traders prefer to track prices or

f

s when choosing a currency pair. At first glance, volume doesn’t seem to be the most powerful indicator, but there’s more to trading volume than meets the eye.

 

The volume section of your trading platform shows the total lots of the selected currency pair being bought or sold. For example, whenever heavyweight investors start opening huge trading contracts, trading volume quickly rises. Moreover, if the world’s media channels suddenly popularize a particular currency pair, trading volume tends to rise shortly after as thousands of traders open orders. In other words, trading volume is—among other things—a popularity meter. But how is that useful to you?

Volume and leverage

Before we even think about placing an order, we should first consider how volume relates to leverage. “Why leverage?” you may ask. What could volume and leverage have in common? Leverage is an important choice when you first go through the signup process. With Exness, you can open and manage multiple trading accounts from one convenient Personal Area. Each account can have a different leverage setting, which is very useful if you wish to trade both high volatility and low volatility pairs. The rule of leverage is simple and will give your trading strategy a solid foundation. low trading volume = low liquidity = high volatility = lower leverage

high trading volume = high liquidity = low volatility = higher leverage

A highly volatile currency pair could create huge profits when combined with high leverage, but such fragile orders tend to ‘Stop Out’ underfunded trading accounts in minutes when massive price fluctuations occur. Not recommended! Instead, try comparing the trading volumes of your favorite pairs with the major and minor currencies. If your pair is experiencing lower volume, then you might want to use a trading account with a lower leverage setting. Checking the volume of your preferred currency pairs could save you a lot of disappointment.

Strong price vs high price

Volume can be used to measure the ‘strength’ of a price shift, which answers a common question every trader asks themselves on a daily basis. “Is this price shift a coming reversal or just another bump in the road?”

Let’s consider a currency in a long-term downtrend. One day, the price begins to rise. Is this a breakout in the making, or just another fluctuation? A change in trend depends on many factors, but the first place to start checking is the trading volume. If the trading volume is low at the time of a price increase, then the market move is probably just a hiccup and the downtrend will return with a vengeance.

On the other hand, if the volume has been higher than usual, then you might be seeing the early stages of a price reversal. In a nutshell, low volume direction changes don’t stick. There are always exceptions to every trading strategy, but spotting a weak reversal is a very strong indicator.

How to test the trading strategy

Try opening up your trading platform and targeting a currency pair on the Market Watch list. Look back over the last few weeks until you find a significant fall in the trading volume, then check what happened to the price shortly after. Match your leverage to the average volume, then wait for the next possible breakout. If the price is reversing and the volume is rising, then the pair could be an attractive trading opportunity that deserves investigation or investment.

 

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blog9

3 Ways MetaTrader 5 Has Improved On MetaTrader 4

by with No Comment Forex

How can you take something beloved by a global community and make it better? With MetaTrader4, MetaQuotes built a trading platform that has become the standard of retail forex traders around the world.

With the global trading community demanding more customization, greater control, and more capabilities, MetaTrader have gone one better and created a next-generation platform called MetaTrader 5.  

Available with Exness on Demo accounts, we wanted to give you a sneak peek at the features that make MetaTrader 5 special.

Customizable Approach To Trading: New Features In MT5

There’s nothing more frustrating than not being able to get your chart set up the way you want it, or not being able to place your order exactly the way you want it to be placed.

With MT5 a lot of these frustrations have been eliminated.

Timeframes. MetaTrader 5 offers 21 different timeframes, vs just nine in MetaTrader 4. This means you can get exactly the right chart for your trading strategy, rather than having to make do on MetaTrader 4.

Order types. In MetaTrader 5, you can access two additional pending order types, “buy stop limit” and “sell stop limit”. You can find out more about these in our blog post specifically on the subject of pending order types.

What’s more, with MetaTrader 5 subtle changes in the “navigator” pane mean that you can find what you want, when you want, at a far greater speed.

Analysis

The changes to MetaTrader 5 go beyond simple user experience. Improvements to analytics, testing, and tool building demonstrate how much MetaTrader 5 has been created with the experienced trader in mind.

Fundamental analysis. With MetaTrader 5, traders can benefit from access to economic and industrial news right within their terminal, as well as enjoying a economic calendar highlighting upcoming announcements from around the world. These new tools come bundled with MetaTrader 5 right from launch.Technical analysis. With MetaTrader 5, right out of the box traders get access to 38 indicators and 44 analytical objects, versus 30 indicators and 33 analytical objects in MT4, with a vast number of additional solutions available for free via Code Base or for a price from the new Market feature.

Expert Advisors

EAs were always remarkably valuable in MT4 because they allowed traders to automate some or all of their decision-making to a complex algorithm that could analyse trends and place orders.

In MT5 this functionality is further increased, made possible by the highly advanced MQL5 programming language.

Programming. MT5 is designed from the ground up to empower experienced traders to build powerful EAs themselves. With a programming language similar to C++, it is easy for traders to get their heads around the process and start building. At the same time, less experienced will benefit from access to better quality EAs, which they can test and apply.Market. Even more exciting for experienced traders is the new Market feature, which allows traders who have programmed EAs themselves to make money by selling them to the community, right from the terminal.

Using MetaTrader 5 With Exness

It couldn’t be easier to try out the MetaTrader 5 platform for yourself with Exness. Here’s a simple guide the getting started:

Open an MetaTrader 5 trial or MetaTrader 5 real account from your Personal AreaDownload the MetaTrader 5 desktop or mobile terminal from the Exness downloads pageEnter your account details to log in

What’s more, MT5 accounts can now be used with the WebTerminal. Accessible right from your personal area in the left-hand menu, this means you can start trading on MetaTrader 5 without anything to download!

Try it for yourself.

Open an EXNESS MT5 account today.

 

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blog18

Want To Trade Forex Like An Expert? Plan Your Profits

by with No Comment Forex

Why Letting Profits Run Can Sometimes Pay Off

Just as many forex traders are too slow to cut their losses, many are also too quick to close their trades to claim their profits when a trade does go their way. Closing a trade too early prevents you from taking full advantage when, for example, a major market shift occurs in your favor. How do you avoid missing out? First, you can use an analytical tool like average true range (ATR) to predict periods of volatility in the market before they occur. How to recognize this? One sign can be periods of unusually low volatility. These often precede big swings up or down in the price of an item. When this is the case, you can use trailing stops, an automatic stop-out order you set with your broker where the limit follows the price upwards, or you can cash out only partially as your profits mount.

 

Top Tip: Learning when to let profits run takes planning, time, and experience — but is well worth doing

 
 
 

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blog19

Bars, Lines, or Candlesticks? Reading Forex Charts Like a Pro

by with No Comment Forex

Are you struggling to find trading opportunities when you use fundamental analysis? News reports and eco releases can be strong influencers of market price, but sometimes they don’t give a clear enough indication of what to trade, and more investigation is called for. Time to check the forex charts!

Some traders use indicators to make sense of price history, while others prefer to “eyeball” the situation and make their own conclusions. Either way, it comes down to technical analysis and recognizing patterns in the price history, which brings us to the topic of this article. Which forex chart type reveals more? Should you use lines, bars, or candles? Here’s a simple breakdown of those options so you can start using the one that best suits your trading style.

Line charts

Right-click on an open forex chart and you’ll see three viewing options: lines, bars, and candlesticks. Lines display a currency pair’s price history in a much cleaner way. Lines track a simple straight line between the opening price and the closing price. Anything that happens between those two points will not be visible on a line chart. Since line charts don’t show the daily highs and lows, it makes them better suited to long-term analysis offering a wider simplistic overview. If you are planning to keep an order open for more than a week, then lines give a much cleaner picture from which to base forecasts. For short-term orders that present a risk of volatility, a bar chart is much more informative.

 

Bar charts

Like lines, bars also show the opening and closing prices, but bars display price highs and lows. The lowest and highest levels on each bar represent the lows and highs for the selected period. To the left of the bar is the opening price, to the right is the closing price

Most traders find bars harder to read than price lines, but there are certain advantages to using bars when performing technical analysis. When setting ‘Stop Loss’ (SL) and ‘Take Profit’ (TP), it can be useful to indicate just how extreme the lows and highs are compared to the closing prices. If the bars are long, but the opening and closing prices are crammed closer to the middle, it can mean that the selected period is experiencing price volatility. Extreme highs and lows tend to prematurely trigger a tight ‘SL’ or ‘TP’ order. If you’re opening a trade for the day, check the previous candlesticks to see if the wicks were far from the open and close? Set your ‘SL’ or ‘TP’ accordingly.

 

Candlestick charts

Candlesticks are probably the most popular way to view forex charts. This type of chart shows the same trading information as bars, but many traders prefer the style and insist that they are easier to read.

CSimilar to bars, the candlestick body shows the opening and closing prices, and the wicks that are sticking out of the top and/ or bottom represent the highs and lows of the selected period. The direction of the price for the period is shown by the color used. The most popular contrasts being green for a rise and red for a fall, but this is a completely customizable feature.

Just remember that the highs and lows never change, but the opening price on a candlestick switches place whenever the price direction changes. A rising trend opens on the bottom. A declining trend opens on the top. Candlesticks take a little getting used to, but when you do, there are dozens of patterns to watch out for that have a history of indicating rally moves or crashes.

 

So which forex chart is better for forecasting?

 

Take a look at the three forex chart screenshots in this article. Which one seems the easiest to read or analyze? It’s really down to your own personal preference. Lines are great for a quick and easy overview, but they show much less when you’re looking at a one-minute timeframe. Consider using lines for long-term trading analysis or quick checks on how a fundamental release is affecting market prices. If you tend to open and close orders in the same day, candlesticks might be a better choice.

 

Test your analytical eye on the foreign exchange market

 
 

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