Three advanced forex signal system for beginners
Are you new to forex trading? If yes, then here’s the first tip is for you – you should learn to implement a trading setup that includes entry and exit signals. Well, this setup is actually known as the forex trading strategy. Of course, there are various trading strategies that you can try.
Typically, the beginners try to implement a few trading strategies and analyze which one will suit their skills and help them to earn maximum profits. Are you now looking for some of the trading strategies that can create profit-making opportunities for you? If yes, then please keep checking the following sections where you will reveal three advanced forex signal systems that are suitable for beginners.
As you already know the forex trading market is extremely dynamic and complex. In addition to it, you must also note that there isn’t any foolproof forex trading technique and no strategy can offer you 100% success.
Every trading strategy carries its own risks. So, if you can intelligently mitigate the risks, then there will be chances of making profits. However, do not be worried as there are a bunch of advanced forex trading strategies that are aimed to help you make a satisfactory amount of profits. One such strategy is forex scalping which is aimed to help you make quick profit potential. The idea of this trading technique is quite simple and straight-forward.
It recommends you to trade in brief time frames when there are slight moves observed in the forex market. In this way, it opens up the possibility of making frequent profits. This forex strategy is undoubtedly impressive and innovative.
But, if you opt for forex scalping, you must possess a thorough knowledge of the market. It’s further recommended to make a detailed analysis of the market before you use forex scalping. This strategy is typically thought to be suitable for day traders.
Summarizing the key facts about forex scalping, it generally happens when traders get rid of a position for a brief period. Here, the primary factor lies in identifying a brief period but nobody is sure how long this period can last. The time between the opening position and closing position of trades is pretty short and this period may last only for a few minutes. Well, if you can successfully predict this brief period, you can make significant profits very quickly and efficiently.
Speaking of the drawback of this forex trading strategy, since your trading period is brief, you can’t make a decent return and the profit potential can be lower. But, the cumulative gains from all scaling positions will be good enough. Plus, as you grow and cultivate your trading skills, you will place larger capital and volumes and this will increase your profit potential.
Here’re the four key points to note about forex scalping
* The maximum holding time should be up to five minutes max 1 hour. Do not exceed this time.
* Your trade size is recommended to be large.
* It’s mostly suitable for day traders.
* Your profit-making chances are increased with the number of daily trades.
Buy asset if
the price is above EMA200 on the daily chart
EMA200 is flat (not strong bullish or strong bearish)
price is near MA20 on the 1-minute chart
MA20 is rising on the 1-minute chart.
Sell asset if
the price is below EMA200 on the daily chart
EMA200 is flat (not strong bullish or strong bearish)
price is near MA20 on the 1-minute chart
MA20 is bearish on the 1-minute chart.
This advanced forex strategy is often used by top-earning traders. This trading technique is quite different from day trading and forex scalping.
As you have learned in the above sections, the forex scalping traders are expected to hold a position for a few minutes. This minimum recommended holding time is decided based on a trader’s overview and insight about the market.
However, the strategy of positional trading is absolutely different. Here, the trade size is recommended to be small as compared to forex scalping. Plus, the holding period for positional trading is large enough so that you can aim to make more than 100 pips. Rest assured that your position will be safer even if the market fluctuates.
Positional trading has its own risks as well. However, you can avoid extensive risk as your trade size is small. Typically, a trader should put less than 2% of their total capital in this technique.
Here, your trade will be kept for a few weeks to a few months. Hence, your trading positions are subjected to swaps. To give a brief overview of swaps, it’s the fee of transferring your position overnight. Swaps are also termed as rollover fees or rollovers.
Sometimes, the rollover fees become more than the pips you have earned. That’s why you must be cautious and you must have an excellent overview of the current economic situation and market situation. Plus, you should also be aware of the current geopolitical issues.
You should do the above analysis before you consider opening a position and you will again do another round of analysis to find the right exit point.
Position trading strong-weak currency strategy
Advanced foreign strategy using weak and strong currencies
Trading in foreign exchange is very risky, with a large number of traders making losses. Hence forex traders are always interested in finding out the right strategy for trading so that they can make a profit in most of their trades. One of the most successful advanced forex strategies involves identifying currencies that are stronger or weaker than their typical values. Then the trader will make trades by going long on the currency which he has identified as being strong. In exactly a similar manner, he will go short on the currencies which he has identified as being weak while opening forex trades.
The first step in this trading strategy is identifying the currencies which are weak or strong. In some cases, the trader will have to wait for some time, since the currencies are not reaching their high or low price. One of the most important aspects of this strategy is that the trader should be willing not to open any trade if he is not able to find currencies that fit his criteria for being strong or weak. If the trader is opening trades daily even if he cannot find very strong or very weak currencies, he is likely to lose money
Traders have different identification criteria to determine if a currency is strong or weak. Some traders are looking at the prices of the most widely traded currency pairs for a particular currency over a period of 50 days. If the currency pairs are at a 50 day high, it indicates that the currency is strong. In exactly the same manner, if the related currency pair prices are at their lowest over a period of 50 days, it is an indication of the weakness of the currency. The trader should also consider other factors, like whether the central bank for the currency is modifying the monetary policy which could result in the increase or decrease in the value of the currency.
Some of the most popular currencies for forex trading are the USD, EUR, JPY, and GBP. So the GBP/USD and GBP/JPY currency pairs are reaching their highest price in the last 50 days, while the EUR/GBP pair is at its lowest value in the same period, it means that the GBP is a strong currency. Its value is likely to increase in the future, so the trader can open trades accordingly, taking this into consideration. In some cases, the currency pair highs and lows may be considered for a shorter period of time like 30 days instead of 50 days.
Though there are a large number of foreign currencies, usually the strength and weakness of the currency of a particular country are compared with its major trading partners by the traders. A large number of forex transactions take place when items and services are imported and exported between the major trading partners of a particular country. Hence the strength of the currency pairs of the trading partners’ currency and the country’s currency is considered since most of the forex transactions will take place to make payments for the items or services purchased.
NFP trading strategy
Foreign exchange(forex) trading is risky since a large number of factors affect forex rates. Hence forex traders are always interested in getting more information on the factors affecting forex rates. One of the main factors affecting the volatility of the forex rates is non-farm payrolls (NFP). The NFP indicates the changes in the number of jobs in the country. The economic calendar for the country specifies the days when NFP data will be released, and the forex traders using this information to plan their NFP trading strategy.
This is the third advanced forex signal system in this list. Nonfarm Payrolls or NFP is one of the major economic news that is released in the US every month. Please note, this economic news can create severe impacts on the day traders.
Typically, it has been found that whenever this economic news is released in the market, it fluctuates the USD pair price for fifty and even more pips.
So, the key aspect of NFP trading is that you will have to position the price of your currency pair in the right direction and it will generate a high number of pips for you within a few hours. On the contrary, the changes occur in the reverse direction, then it will trigger stop-loss.
Here’s the summarized idea about the NFP trading, it allows you to make pips if there is a winning trade. Also, it restricts your loss in case if your prediction fails or it doesn’t work as expected.
NFP is also known as an advanced level of scalping. It kicks off when the NFP results are released every month and the market starts to fluctuate. Since NFP results are released just once per month, you can utilize this trading strategy on a monthly basis which is a drawback.
With this, you have learned three advanced forex signal systems. So, what are you waiting for? Please feel free to learn and apply them today and make profits.
The non-farm payroll(NFP) is the number of jobs that are added in the United States excluding the employees in farms, government, private households, and nonprofit organizations. It is an important indicator for the economy of the country. Historically, after NFP data is released, the forex market is very versatile. Typically the NFP data is released at 8.30 am ET on the month’s first Friday. The monthly NFP data is important because it is a very accurate indicator of the economic conditions in the country. The Bureau of Labor Statistics releases NFP data and the government economic calendar specifies the next release date.
The central bank, Federal reserve, considers employment to be one of the most accurate indicators of the state of the economy. If unemployment rates are high, the policymakers will implement monetary policy to stimulate the economy, reducing interest rates. This monetary policy is expansionary and aims to increase the employment and output of the economy. When unemployment rates are higher, the economy is functioning below its potential, so policymakers will try to reduce rates to increase investment in businesses. Since the interest rates reduce, the dollar yield will reduce, and the demand for the dollar will also reduce.
Volatility during NFP
If the number of job additions in the economy, is far lower than expected resulting in increased unemployment, the dollar index (DXY) reduced its value, and the forex market became more volatile. Forex traders should plan their strategy considering NFP and other similar data releases. Some traders may get stopped after the market suddenly increases volatility. Additionally spreads will also increase at the same time, leading to some margin calls.
Currency pairs affected
NFP information indicates US employment, so US dollar-linked currency pairs are most affected by the information released. Some of the currency pairs are EUR/USD, GBP/USD, USD/JPY, USD/CHF, and AUD/USD. Other currency pairs that do not include the US dollar may also become volatile when NFP is released. Traders should be aware of this, because they may be stopped out. Statistical data shows that traders are often stopped from a position though do not trade a US dollar-linked currency pair.
Experts recommend that traders use a pullback strategy after NFP data release, waiting for currency pair to regain its original value before trading. This is preferred to a breakout strategy.
NFP trading strategy:
Buy 5 minutes after NFP release if the 5. minute candle is bullish and NFP news is good for trade. Stop-loss daily low, target open. (for an example BUY EURUSD if NFP results are bad for a dollar).
Sell 5 minutes after NFP release if the 5-minute candle is bearish and NFP news is good for trade. Stop-loss daily high, target open. (for an example SELL EURUSD if NFP results are good for a dollar).
Trading using NFP data
After NFP data release there is usually an increase in volatility and spreads for forex pairs will also widen. It can cause losses to the trader who has not anticipated the fluctuations in the forex rates. One of the ways to avoid losses and being stopped out, the trader should use the right leverage, or in some cases, no leverage should be used. In addition to the NFP data, the forex market rates and volatility will also fluctuate when other important economic parameters like GDP growth rate, Fed fund rates, and CPI, (consumer price inflation) are released by the government. These parameters will affect the demand for the US dollar and the currency of its trading partners, making currency pair prices volatile.
Like other financial parameters, Forex rates will fluctuate depending on the financial, political news affecting the economy and data releases linked to the economy. It is also advisable to review the traits of successful forex traders to avoid the main mistakes which the forex traders are usually making. Traders should also be aware of the importance of the central banks in forex trading, how the intervention of the central bank can affect the forex rates. It is advisable to use an economic calendar so all-important financial news and data can be easily monitored to finalize trading. This includes interest rate data, speeches of the central bank, and releases providing the latest data related to the economy.