Forex trading rules

Ricex

Sergeant
Messages
359
Just to add to cowmadagans response about the weak vs strong. As a trader you should be aware on longer term timeframes which currency is doing what, you just need to look at your charts to get an overall picture, a daily or 4hr chart can give you a lot of information. The dollar index chart will also give you an idea if the USD is in a strong or weak phase, knowing interest rates for currencies is also important. Every little retracement is not to be looked at as a major change in the currencys strength.

Currencies tend to stay in the same phase for the duration of a session and then will sometimes reverse going into the next. Nothing is 100%, we are always trying to put the probability of something happening on our side, and going long a strong currency carries a lot more probability of a result than going short. Trading a pair of weak vs strong carries greater probability of a result than trading two strong.

Currency trends rarely just suddenly change direction, it takes time. I think you may be looking to closely at the charts, step back a bit and get a feel for what's happening from larger timeframes. If a currency pair is in a major trend, like for example the AUS/USD pair was last year then yes it can be very easy to make money. As I said before, a retracement of price does not mean that the pair have suddenly changed from bearish to bullish or visa versa.
 

Awais Rasheed

Private, 1st Class
Messages
45
Just to add to cowmadagans response about the weak vs strong. As a trader you should be aware on longer term timeframes which currency is doing what, you just need to look at your charts to get an overall picture, a daily or 4hr chart can give you a lot of information. The dollar index chart will also give you an idea if the USD is in a strong or weak phase, knowing interest rates for currencies is also important. Every little retracement is not to be looked at as a major change in the currencys strength.

Currencies tend to stay in the same phase for the duration of a session and then will sometimes reverse going into the next. Nothing is 100%, we are always trying to put the probability of something happening on our side, and going long a strong currency carries a lot more probability of a result than going short. Trading a pair of weak vs strong carries greater probability of a result than trading two strong.

Currency trends rarely just suddenly change direction, it takes time. I think you may be looking to closely at the charts, step back a bit and get a feel for what's happening from larger timeframes. If a currency pair is in a major trend, like for example the AUS/USD pair was last year then yes it can be very easy to make money. As I said before, a retracement of price does not mean that the pair have suddenly changed from bearish to bullish or visa versa.



:) Thanks a lot, that's very helpful and your explanation totally clear the picture.

Now, I would like to ask two more things if you can kindly help me on that, point 13 that says "Be aware of world stock market opening times" and point 15 which says that "always know what the market condition is before trading". So my questions are why should we be aware of the world stock market opening times? And How that impacts on the currency market and Why??

More, what condition you are referring to???
 
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RahmanSL

Major
Messages
2,527
Still a Newbie, I don’t have any meaningful nor wise “Forex Trading Rules” to add, except to say:

“Don’t rely on prayers, witchcraft, medicine man, the occult, soothsayer, bomoh, and all the other mumbo-jumbo to make market to move in your favor, because (trust me) they don’t work!”
 

RahmanSL

Major
Messages
2,527
….and nether does cursing, yelling, stomping around, biting, slapping own face, cutting off fingers (hmmmm, reminded me of something here), etc works either.

But they do help to relieve some of the frustration and anger for entering a bad trade, but absolutely will not help in moving the market in your favor.
 

cowmadagan

Sergeant
Messages
393
To Rasheed (sorry if referring by last name is disrespectful)
In my application of my trading regarding market opening times, it's for a continuation of mentality of the predominating market. As an example I mean that if the Japanese market is dropping due to the Japanese market already having their crack at the US NFP report and taking profits (on Monday) before the London open, it's a good idea to bail on your position for the spike that happens when a massive number of big players enter in with dissimilar interests to those who've been trading the Asian day (again big boys, not retail traders.)
Again, new trading day starts...tight stops are wise.

As for Rahman,
Crying doesn't help either.....sorry...I'm a bit of a fan of comprehensiveness. (in the philosophical sense)
 

West Coast Pips

Sergeant
Messages
132
:) Thanks a lot, that's very helpful and your explanation totally clear the picture.

Now, I would like to ask two more things if you can kindly help me on that, point 13 that says "Be aware of world stock market opening times" and point 15 which says that "always know what the market condition is before trading". So my questions are why should we be aware of the world stock market opening times? And How that impacts on the currency market and Why??

More, what condition you are referring to???
'Risk appetite' is a common term you will come across in relation to the stock market. The yen pairs are governed in many ways by what happens to to the stock market. There is much to say about this but do a Google search on 'risk appetite' and you will see what I mean.
 

Ricex

Sergeant
Messages
359
Awais, there are many things which effect the demand for a certain currency, one of those is the sentiment in the stock market. As WCP says in his comment, big money can be looking to invest in higher risk investments 'risk appetite' or it can be 'risk averse', running scared and looking for a safe haven, this market sentiment directly effects the value of currencies.
The opening times of these markets is frequently a moment where commercial activity is intensified causing movement in the forex market, London and New York especially.

Condition is just another term used to describe the state of the market. Before trading we need to know what the market is doing, is it trending or ranging (consolidating). Different conditions require different trading techniques.

These rules are general rules, every trader needs to make their own personal list that matches their own trading style.
 

Awais Rasheed

Private, 1st Class
Messages
45
To Rasheed (sorry if referring by last name is disrespectful)
In my application of my trading regarding market opening times, it's for a continuation of mentality of the predominating market. As an example I mean that if the Japanese market is dropping due to the Japanese market already having their crack at the US NFP report and taking profits (on Monday) before the London open, it's a good idea to bail on your position for the spike that happens when a massive number of big players enter in with dissimilar interests to those who've been trading the Asian day (again big boys, not retail traders.)
Again, new trading day starts...tight stops are wise.

As for Rahman,
Crying doesn't help either.....sorry...I'm a bit of a fan of comprehensiveness. (in the philosophical sense)

It's alright calling the last name but it's better to call from the first one.
And Thanks for the tip.
 

Awais Rasheed

Private, 1st Class
Messages
45
Awais, there are many things which effect the demand for a certain currency, one of those is the sentiment in the stock market. As WCP says in his comment, big money can be looking to invest in higher risk investments 'risk appetite' or it can be 'risk averse', running scared and looking for a safe haven, this market sentiment directly effects the value of currencies.
The opening times of these markets is frequently a moment where commercial activity is intensified causing movement in the forex market, London and New York especially.

Condition is just another term used to describe the state of the market. Before trading we need to know what the market is doing, is it trending or ranging (consolidating). Different conditions require different trading techniques.

These rules are general rules, every trader needs to make their own personal list that matches their own trading style.
Thanks for the help.
 

Eric Alyea

Master Sergeant
Messages
364
Comparing Rules

Thought I would add this here just for the sake of comparing:
Hi,
I've just added a list of general trading rules to my blog FOREX DAWN and thought I'd start a thread here as well.

This is twenty rules that I've compiled from my own rule book and from around the internet, please add to the list any that you feel I've missed or that you've found important in your trading.

1. Trade a weak currency against a strong currency

2. Accept losses as part of trading

3. Never risk more than x% per trade (x is what you consider acceptable, generally 1-5%)

4. Do not add to losing trades

5. Trade with the flow not against it

6. Keep your trading simple, complication breeds confusion

7. Keep your losses small and your profits large

8. Use technically placed stops, either mental or hard

8.a. If you are using mental stops, place an "emergency" stop loss farther out to prevent a disaster if your internet connection or trading platform goes down.

9. Never believe you know better than the market, the market is always right

10. Be patient and wait for the right trade set-ups

11. Always trade your strategy and avoid temptation by not over trading

12. Be aware of news times if your intraday trading

13. Be aware of world stock market opening times

14. If you hit a losing streak stop trading for the day and try to analyze the problem

15. Always know what the market condition is before trading

16. Trade healthy and don't trade if your ill, stressed out....... or hungover!

17. Be profitable but not greedy

18. Be organized, confident, disciplined and above all consistent in all aspects of your trading

19. Do not become obsessed with trading, keep a healthy mix of interests in your life

20. Do not create rules that you have no intention of keeping.... that's pointless
 
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