The currency market is a 24 hrs market – it is different from other markets like for example – commodity, stock or debt. Here traders participate from different countries during different timings. Besides, the market volumes also show big variations, which leads to bigger moves which may be in tandem with the expectations of the traders or against. This market follows data release time, news and rumors like other markets but the moves are basically USD weakening or gaining moves. Also,other stretched moves will also be seen when volatility occurs in currency crosses.There are 3 sessions in which the market shows active moves –  the Japanese (00:3007:30 GMT) session, the European (08:00-14:00 GMT) session and the US session (14:30-21:30 GMT). In between these sessions, there are gap times when false moves (moves that are contrary to what will occur during the sessions) will be seen prior to the sessions. There is shift in sessions during day light saving time.

Sample Euro/USD chart

The USD is considered as the main major and EURO, GBP, CHF and YEN are considered as other majors. These are traded against USD and are called major pairs – EURO/USD, GBP/USD, USD/CHF and USD/YEN. CAD and AUD are called commodity pairs as their moves are supposed to be dependent on demand and supply of commodity market. Other majors that are traded against each other are called crosses – EURO/GBP, EURO/CHF, GBP/CHF (European crosses) and EURO/YEN, GBP/YEN and CHF/YEN (Yen crosses).

The rates are derived ratios of the pairs and are given up to the 4th decimals. E.g. EURO/USD when shown as 1.3020 – means for 1 EURO 1.3020 USD will be equivalent. This ratio keeps changing in the 4th decimal level and is called pip. When a position is taken in the market – say 1 lot in standard forex account means $100,000 position and the used margin to be provided is $500 – is called 1:200 leverage.

Planning forex day trading

The currency pairs normally make volatiles moves. To decide on the entry and exit we need to watch the market for 30 min from the start of any session and if it is near low and has not cut the low for more than 30 min we can take a buy position and if seen near high we can take sell position with 30 pips hedging order or stop. Hedging refers to taking the opposite position in the same pair without off setting the original position. Once the position makes a profit of 30 pips then remove the hedging order and keep stop at entry to eliminate the risk of loss. Then change the stop status to trailing stop maintaining 30 pips from market or manually trail the stop. Keep 75 pips limit for the market to close the position either with a limit or the trailing stop in order to protect profit. In case the hedge order is filled, watch the market for 30 min and if the hedging makes loss, then understand it was filled during a stop hunt move of the market and cut the hedging position with a small loss and keep another hedging order 30 pips away from the market and trail to the original hedged level when the market moves in your favor – this is a trading strategy to limit the risk in any market condition.

Basic trading rules

  1. Take positions only for less than 10% of the equity to avoid over trading and margin calls.

  2. Keep greed and fear in check and trade at ease with the view that market means swings and that it keeps giving good trading opportunities

  3. Never chase and take positions – buying during a quick rise or selling during a quick fall is a mistake. They are moves designed to trap the traders before market reversals.

  4. Limit the trades to the time available for trading – never market it stressful. We come to the market with the objective to earn and improve our lifestyle.

  5. Equity management in the earning process is very important rather than the imaginations of whether the market will rise or drop.

  6. Use other analysts’ calls as tools for your market study- don’t depend on them as they can misguide you during trend reversal times.

  7. Do not over trade. Take few positions at a time to minimize the risk and maximize the profit. Act like a professional – accept the loss when it is minimal and maximize when the profit is good using trading strategies.

  8. Visualize and plan well before hand how you handle the positions when the market moves in your favor or against. Don’t be stunned when the market moves against you.

  9. Try to read the market moves, its limitations and advantages to decide upon your trading.

  10. Don’t become addict to trading, trade only when a good opportunity is seen in the market.