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.

Forex Scalping

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.

Scalping rules:
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.

Positional Trading

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.

Trading strategy

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

Currency strength

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.

Currency pairs.

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.

Other factors

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.

NFP definition

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.

Employment

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.

How to trade long term forex strategy and How to Plan an Effective Long-Term Forex Trading Strategy in 2020?

In the world of forex, it would be essential to have different types of trading strategies for the short term. Along with it, long term planning is equally essential. With the forex trading strategy for the long run, you aim towards larger prospective profits with even little amount of capital investments. Also, these wouldn’t translate to premature stop losses, unlike trade approaches that are short term.

Making an efficient trading strategy for the long term

Recently we created article Forex Weekly Strategy.Traders need general advice about How to Plan an Effective Long-Term Forex Trading Strategy because trading rules are not only important things. Traders need to see the bigger picture.

It’s better to have a clearer picture of what you would like to have from the forex market. The target has to break down the following.

Fundamental analysis and long term system and COT report

The term would refer to proper tracking of the progress of commanding economy heights while are known as fundamentals that would go along with the aforementioned idea. Fundamentals would be things such as interest rates, employment, CPI along with politics.

While trading in the big picture, you would have to know about fundamentals for the involved currencies. It’s much better not to avoid interest rates when trading a bigger picture. Upon holding currency trade for higher than a day, you’ll also notice a thing which is known as rollover. This depends on the involved currencies with the trade direction, you would also pay little interest or also earn interest as well. For the part, if a country pays the ideal amount of interest, the world traders purchase currency against weak currencies while forming trends.

For me, Interest rate, Industrial production, GDP and current high important news are the most important information that I check before any new long term trade. For example, if I want to trade EURUSD I need to know these important facts about the European Union and US economy. Daily chart and Fundamental analysis need to show the exact same direction of the trade before any trade execution.

I like every Tuesday to check the COT report. How to use the COT report in forex trading? In the COT report is most important to figure out Reversals Type One or Reversal Type Two and using knowledge from that to assume the next long term movement in the forex market.
What we can see in COT report :

Try to see Reversals Type One – When the spread between commercial traders and large investors is big, then we should expect a market reversal.

or

Reversal Type Two – When large traders start to reverse their positions (i.e. the large investor’s line’s trend starts reversing), we can expect a market reversal most of the times.

Weekly charts and price levels

In step 2, traders need to see the big picture using the weekly chart, to get the idea for Long Term Forex Strategy. On the weekly chart, the trader needs to analyze important levels, last month and last year high and low, close prices, important Fib. levels. Important price levels are trader’s edge, an important trigger for any trade.

So, if you’re not grasping on the happening on currency pairs, it is better to view all weekly chart details with a step back. This would stop you from making uneducated guesswork.

Larger weekly based charts make move on your daily chart appear trivial while providing you with a better feeling about the data you’re analyzing. With a step back you can minimize second-guessing.

With such items, you also make strong decisions for trading for supporting positions that you hold. You must never make trades just for making these. Also, you must easily be able to explain all of these to third parties upon having. If you follow the rule, it would help in avoiding boring trade. With real trading, especially larger picture trading, it gets slow and boring. A lot of traders get brought in and trade in a quick and leveraged way, and due to this there are a lot of failing forex traders.

Forex Trading Technical analysis for long term strategy

The technical analysis takes a lot of forms while you’re putting this into practice. If you’re saying technical analysis for a single trader, they would also think about moving averages, while another market operator would think of MACD while mentioning technical trading.

Except for price levels, technical analysis can show divergence, supply and demand areas, Pivot point areas, oscillators levels such as RSI levels, Stochastic levels, MACd, etc.

There are no perfect rules for trading orders which can tell you when to buy or sell the asset with high probability. Trading is like signature unique, and traders need to develop an original methodology for trading and for market understanding.

While forex trading strategy with a bigger picture, you look out for different technical aspects for supporting trade. So, if you’re concerned about purchasing a currency pair, it shouldn’t be technically overbought.

Am I true or wrong?

And true and wrong. Momentum traders can buy overbought assets very easy but the mean reversion trader will sell. Both can be on the right side.

Some technical analyses must be involved in supporting the decision. This helps with timing while helping to avoid getting within a bad time. Overall you would also get the right idea, but with technical analysis, in the future, you’re also able to reduce associated risks.

Trading with long term forex trading strategy is all about taking all essentials into account while coming towards an informed decision. This is one of the best available methods of forex trading that has been utilized by experts.

What is my Best Long Term Forex Strategy? I like when fundamental news and technical chart show the same. For example, the strong engulfing pattern on the daily chart or weekly chart with strong industrial production for rising currency for me is the best trading opportunity.

Forex Risk Management Strategies That You Should Know

What is the risk in forex trading? Risk is the potential for uncontrolled loss of capital in trading. Leverage in trading is a borrowed capital to increase the potential returns and in the forex market, high leverage is up to 1:1000. So traders can trade with more money than they have.

Risk percentage = Risk / Capital

But there is the problem there – high risk in the trading cause that 95% of traders lose money. Traders need to know risk management trading forex rules.

Look at this table again and again:

As we know if trader risk and make drawdown he/she will need more percentage of money to recover. If you lose 50% of your equity you need to earn 100% to recover.

The main reason why many traders don’t make money is not because of inexperience but from the poor risk management trading Forex. Due to the unpredictable nature of the Forex market, it is extremely risky. Hence, Forex risk management is considered to be the success factor irrespective of whether you are a professional or a new trader.

In this article, you will get an insight into the top risk management strategies that will help you to make profits, and avoid loss, so that you can have a good experience while trading Forex.

Risk management strategies in forex trading

In prop companies, traders will get Risk management rules and for example, it looks like this:

1) Do not fall below X% relative drawdown. For example 2% or 4%.
2) Do not fall below X% absolute drawdown. For example, absolute drawdown is the sum difference between the initial capital risked and a minimal point below that level and a lot of companies set to be 5%.
3) Do not risk over X% on each trade. For example 1% per trade or 0.5% per trade etc.
4) Do not have more than a 2% weekly drawdown. In that case, if some trader has above 2% he/she will not trade that week anymore.
5) Position size need to be calculated based on this formula.

Of course, rules can be more detail, this is just an example.

Risk management strategies and related to position size calculation too.

Position size = Winrate – ( 1- Winrate / Risk Reward Ratio) is an example of Kelly criterion (one of the simplest) but in many companies, traders use their own formulas.

If you trade alone, as a retail trader, you need to define your own rules and stick to those rules. If you lose more than wished in this day or week – just stop trade and wait for next week. Do not chase for profit.

Risk management trading Forex tips – risk management for forex trading beginners

Here are some of the risk management trading Forex strategies that would be beneficial for both experienced and beginner traders.

#1: Have a proper understanding of the risks involved in trading Forex

If you are new in the world of trading, the best thing you can do is to educate yourself. Remember that your approach towards Forex trading should be similar to that of any career, in which you need to learn about the subject in detail.

However, there is a diverse range of resources such as Forex videos, webinars, and articles that can provide you with the absolute knowledge you are seeking. After gathering sufficient information on the various aspects of Forex trading, you can test yourself by opening a demo account.

The foreign exchange market and risk management is based on the trader’s plan when and how much lots he/she will trade.

In most articles on the internet for retail traders, the maximum recommended exposure is 2%, where traders risk no more than 2% of their available capital. In my prop company, the maximum risk is 0.5% per position and a maximum weekly drawdown of 2%. This is forex exposure management.

By using virtual funds, you can use the free account to trade Forex. Such type of account will help you to trade in the markets without any risks. As such, you will be able to know the functioning of Forex markets, the different trading platforms, and utilize various trading strategies.

#2: Make use of stop-loss in managing Forex risks

Typically, a stop-loss mechanism is a process of protecting the trades from unforeseen movements in the trading market. Simply put, it is a price that has been set earlier in the system at which the trade will close automatically.

Hence, a stop-loss is very important if you want your trade to end fine. You may consider setting the stop-loss at such a level where you won’t lose above 2% of the trading balance for a given trade. After you have set the loss margin, it is wise not to increase it.

That’s because there is no point in having a safety parameter if you won’t use it properly. Although there are certain types of these in Forex, determining your stop will rely on your experience. Moreover, analyze your stops frequently to find out if they were successful or not.

Of course, there are the traders that do not like stop-loss because they can be “washed up”. It is a situation when the price hits your stop loss and then continues in your wished direction and instead of profit traders deal with a loss.

Because of that a lot of traders use hourly close stop loss or daily close stop loss. For example, the trade will be closed if daily close price is above or below some level.

Traders need to have some kind of stop-loss anyway.

#3: Never risk further if you can’t lose more

This is considered as one of the basic rules in the risk management of Forex trading. It is unfortunate that this particular mistake is very common in Forex traders who have just started out. As the market is very unpredictable, traders who are putting in more money rather than they could afford, are highly exposed to the Forex risks.

Recovering a Forex capital that has been lost is quite difficult because you need to make a greater amount to cover for your loss. It is often seen that after a loss, many traders try to recover in the following trade. This is the worst thing to do, because the account balance is low, and the risk increases. However, a tested rule is not to risk above 2% of the account balance a single trade.

Example:
We have for example trader who had $100 000 and he traded 1 lot per time. After 500 trades he has $50 000 and he still trades using 1 lot. This is a mistake. Less money less position size. He should trade with 0.5 lots.

#4: Limit the use of leverage in managing Forex risk

In layman’s terms, leverage provides you with the chance of magnifying the profits that were made out of your trading account. However, there is a possibility of a risk, and it increases. For instance, leverage on an account of $400 of 1:200 generally means that a trade can be placed for about $80,000 (200 x $400). Similarly, when you apply a 1:500 leverage, you can trade for $200,000 (500 x $400).

Hence, by investing $400 you can experience a complete impact of $200,000 or $80,000. But the risks are quite high as you can have more profits if the market stands with you. Higher leverage can attract higher levels of risk. For beginners, it is suggested to avoid high leverage.

I like high leverage but I do not want to risk more than I planned.

#5: Never have unrealistic profit expectations while managing risks

The main reason why new traders are more aggressive lies in the fact that they are having unrealistic expectations about earning profits. They harbor a false belief that only by aggressively trading they are going to earn more returns in a short time. Maintaining a conventional approach and realistic goals are the only way to get started in Forex trading.

When you are realistic, you can find out where you went wrong. It is very crucial to make an exit when you realize that you haven’t made a good trade. Although it is natural to try in such a way so as to turn the worst situation to a good one, it is not the same with Forex trading and might end in disaster. Poor decisions in trading are often fueled by greed.

#6: Manage Forex trading with take-profit

When you are clear about your expectations, a simple way of securing the profits is to use a take-profit. Just like the stop-loss, this works in the opposite way. A stop-loss automatically closes a trade for preventing further loss, whereas a take-profit automatically closes a trade as soon as it hits a specific profit level.

Based on the expectations of each trade, you will be able to set a specific profit margin and decide what should be the exact risk level for a particular trade. It is better to aim for a 2:1 ratio where the anticipated profit will be twice the risk associated with the trade.

#7: Have a proper plan in Forex trading

It is pretty common with new traders where they make an entry to the platform and make trades relying on their instinct, or following a piece of recent news. While some of them might lead to great trades, but in fact, they are the outcomes of sheer luck. For managing the risks involved in Forex trading, you will need to follow a plan that will outline a few important things.

Those include opening a trade, closing it, fixing a stop-loss to take-profit ratio, percentage of balance you can afford to risk, and so on. Generate a plan and strictly adhere to it. A good plan will keep personal emotions at bay so that you can’t over-trade.

The plan will bring discipline in your trading, and help you in managing risks. Never ignore the rules or tend to bend them, because the failure or success of every trade will depend upon it. A proven way of creating a great trading strategy is to follow and learn from people who are experts in this area.

#8: Always prepare for the worst

As aforementioned, the Forex market is very unpredictable. Despite this, there are lots of evidence in the form of past events that show how a market reacts in a certain situation. Previous happenings or events might not get repeated, but it shows a trend.

Hence, it is crucial to consider the history of a particular currency pair that you are trading. Develop an action plan that will save you from a bad situation if that happens. It is unwise to underestimate the possibilities of sudden price movements. As such, you need a plan that will sail you through it.

#9: Expand your Forex portfolio

You may have heard about a popular risk management rule, which suggests never to put all the eggs in a single basket. Well, the same is true for Forex trading as well. When you have a wide range of investment, it will protect you in situations where the other market will compensate for the particular one that has been dropped.

With this frame of mind, you will be able to manage the risk by making sure that it’s a part of the portfolio and not everything. Another way of expanding your portfolio is to exchange a few currency pairs.

#10: Try to control your emotions

When you are trading in Forex, you should know how to control your emotions. Failing to keep a tab on the emotions won’t allow you to reach a suitable position from where you can earn the profits from trading. That’s because emotional traders find it hard to adhere to the trading strategies and rules.

Stubborn traders will not exit despite losing streaks and expect that they would come out with shining colors after a few trades. But such a thing might never happen. A wise trader will withdraw after realizing the mistake with the smallest loss.

Once out, they will be patient and enter the market whenever an opportunity appears. A trader on winning streak might become greedy and stop following the proper risk management strategies.

Conclusion:

The best way in which the aspects of Forex trading works will vary from one trader to another and depend on their perspectives. Some traders will take calculated risks than the others. It is recommended to start practicing in a conventional way of reducing the amount of risk. Do not chase for profit wait for opportunity and think about risk every day.