Forex position trading strategy is a simple technique to increase your position size without increasing your risk. This trading strategy is particularly effective with mini lots and with averaging into a position also it works equally efficiently for standard lots.
For example you may buy one mini-lot of EUR/USD at 1.3100 and set the stop loss at 1.2980. It pose a risk of $20. When the price rises, you may buy a second mini-lot at say, 1.3120 and set the stop at 1.3100 with raising the stop of the first lot to 1.3100. Now you have two lots with overall risk still at $20.
If you find the price to be still rising, you buy a third lot at 1.3140 and set the stop at 1.3120 along with rising the stop of the first two lots also to 1.3120. This would ensure that even in the worst case the whole trade is at break even. Now, with further price rise, you buy a fourth lot at say 1.3160 setting the stop at 1.3140.
Accordingly, you raise the stop on the first three lots at 1.3140, which will protect your profit. Finally, you buy the fifth lot, set the stops as before and ensure a profit of $100. Throughout the process your risks remain at a constant of $20. So in this forex position trading strategy, you limit your risk exposure and at the same time gain handsome profits.
You can use a similar forex position trading method to average your trades. Weekly 3-bar pattern is a strategy which is ideal for forex position trading and which is very effective on longer time frames like the daily or the weekly chart. This forex position trading strategy lets you stay with the trend for a longer period of time.
Ideally, any day trading should be done with minimum lot size position. With forex position trading strategy, the initial profit is less but with trailing stop it can maximize the profit. A good position of day trading can be changed with forex position trading into a long-term profit option.
With forex position trading your exposure to the market is less and therefore no need to monitor the market continuously. The hedging order protects the position and limits your risk in the trading. With forex position trading, you can earn profit with minimal loss that boosts your trading confidence.
You can find many trusted money management software to calculate tradable profit/loss patterns along with optimizing trade sizes for supporting your forex position trading strategy. These software are designed to calculate trade position sizes according to various money management models with several successful positions sizing formula.
The forex position trading strategy may use formulas based on fixed percent risk, float percent units, fixed units, etc. The software are easy to use and help in calculating the most optimal position size for forex position trading strategy. You may also have many online position sizing techniques and position size calculators, which can supplement your forex trading strategy.
By: Paul Bryan
Posts Tagged ‘Trading Forex’
Using Technical Analysis in Forex Trading
March 16th, 2010
Forex trading is the trading of foreign exchange on the global markets. The technical aspects of forex are mainly concerned with the happenings of the forex market rather than what can actually happen. A technical analysts studies the price and the volume movements of the market and with the help of such data that are derived from the various actions of the market players, creates charts and graphs. These are later used as the primary tool of Forex trading analysts. The technical analysts are not much concerned about larger aspect of the market but rather concentrate on the different activities of the concerned instrument’s market.
The main principles on which the technical analysis is based upon are as follows:
- Market action discounts everything: the phrase means that the exchange price of the currency is actually the reflection of all the things that are known to the market and also all the factors that can affect the market as a whole. There are various factors that affect the market as a whole – the factor of supply and demand, market sentiments and other political factors. Technical analysts are mainly concerned with the price movements and do not deal with the reasons behind the changes.
- Prices move in trends: in the case of forex trading, the technical analysis is used for the identification of the patterns of the market behavior. This is a significant method of knowing the behavior of the market. For most of the given patterns, there is a high probability that the method will yield the expected results. However, there are also some recognized patterns that repeat themselves on a fixed basis.
- History repeat itself: the chart patterns are categorized and recognized for years and the patterns repeat themselves after a fixed interval of time.
According to the experts, the list of categories of technical analysis theory consists of the following examples; Indicators (oscillators), Number theory (Fibonacci numbers, Gann numbers), Waves, Gaps (high-low), trends (following the moving average), chart formations (channels, head and shoulders and triangles).
There are also various indicators that are used for the forex trading. Some of the important indicators are as follows:
a) Technical indicators; there are a number of ways for the execution of the technical trading systems. The technical indicators that exist in the forex market either are used in isolation or are used in combination with the others.
b) Trend indicators; it is used for the information about the persistence of price movements in a single direction. The common method to spot the trend indicators are via “trend lines”, “drawn below price lows” and “above price highs”.
Other forms of indicators are – support or resistance indicators, volatility indicators, sentiment indicators, momentum indicators and the cycle indicators.
By: Jonathan Gibson
