Friday, April 04, 2008

online forex Information

Day Trading Forex Market Behaviour


Technology advances like the internet have spawned a new craze, where anyone with a secure internet connection prepared to undertake a small amount of training can engage in trading foreign exchange on the forex market.



Just as a day trader will closely track stock price movements on the Dow Jones Industrial Average, all over the world forex traders monitor currency fluctuations in a similar fashion.



Forex traders have the aim of using the smallest amount of one currency, say the US dollar, to purchase another currency like the British Pound. If supply of the pound lessens in a busy market, it will cost more dollars to buy pounds, and the forex trader hopes to sell their pounds at a higher than their purchase price. In many respects, this type of trading behaviour is very similar to trading in stocks, where the aim of nearly all traders is to buy low and sell high.



The trading process works under a bid/ask system. In the above example, a forex trader might bid 10 dollars in return for 5.7 British pounds, and the seller of the pounds could be asking 11 dollars for the same amount of pounds. If the seller accepts the bid, the trader then hopes the pound continues to increase in price, so that when time comes to sell, they can get in excess of the 10 dollars initially paid.



As only registered traders have access to this auction process, most online speculators will trade through a bank or broking house. Such brokerages charge a commission for facilitating the trades, and forex traders should consider these transaction costs when calculating their selling offer when time comes to exit their position, as this will influence their profit margin.



The global foreign exchange market can trade in excess of a trillion dollars a day. Sheer market size means there is considerable money to be made, and lost, through miscalculation. It is neither a guaranteed, nor easy path to riches, so traders should be educated in how to play the market. Instructional packages are available, and should be carefully reviewed as they can easily range in quality and price.


About the Author: Jay Moncliff is the founder of http://www.forexadvise.info a website specialized on Forex, resources and articles. This site provides updated information on Forex. For more info on Forex visit: http://www.forexadvise.info



Pivot Points in Forex: Mapping your Time Frame



It is useful to have a map and be able to see where the price is relative to previous market action. This way we can see how is the sentiment of traders and investors at any given moment, it also gives us a general idea of where the market is heading during the day. This information can help us decide which way to trade.


Pivot points, a technique developed by floor traders, help us see where the price is relative to previous market action.


As a definition, a pivot point is a turning point or condition. The same applies to the Forex market, the pivot point is a level in which the sentiment of the market changes from "bull" to "bear" or vice versa. If the market breaks this level up, then the sentiment is said to be a bull market and it is likely to continue its way up, on the other hand, if the market breaks this level down, then the sentiment is bear, and it is expected to continue its way down. Also at this level, the market is expected to have some kind of support/resistance, and if price can't break the pivot point, a possible bounce from it is plausible.


Pivot points work best on highly liquid markets, like the spot currency market, but they can also be used in other markets as well.


Pivot Points


In a few words, pivot point is a level in which the sentiment of traders and investors changes from bull to bear or vice versa.

Why PP work?
They work simply because many individual traders and investors use and trust them, as well as bank and institutional traders. It is known to every trader that the pivot point is an important measure of strength and weakness of any market.


Calculating pivot points
There are several ways to arrive to the Pivot point. The method we found to have the most accurate results is calculated by taking the average of the high, low and close of a previous period (or session).


Pivot point (PP) = (High + Low + Close) / 3


Take for instance the following EUR/USD information from the previous session:


Open: 1.2386
High: 1.2474
Low: 1.2376
Close: 1.2458


The PP would be,
PP = (1.2474 + 1.2376 + 1.2458) / 3 = 1.2439


What does this number tell us?
It simply tells us that if the market is trading above 1.2439, Bulls are winning the battle pushing the prices higher. And if the market is trading below this 1.2439 the bears are winning the battle pulling prices lower. On both cases this condition is likely to sustain until the next session.


Since the Forex market is a 24hr market (no close or open from day to day) there is a eternal battle on deciding at white time we should take the open, close, high and low from each session. From our point of view, the times that produce more accurate predictions is taking the open at 00:00 GMT and the close at 23:59 GMT.


Besides the calculation of the PP, there are other support and resistance levels that are calculated taking the PP as a reference.


Support 1 (S1) = (PP * 2) - H
Resistance 1 (R1) = (PP * 2) - L
Support 2 (S2) = PP - (R1 - S1)
Resistance 2 (R2) = PP + (R1 - S1)


Where , H is the High of the previous period and L is the low of the previous period


Continuing with the example above, PP = 1.2439


S1 = (1.2439 * 2) - 1.2474 = 1.2404
R1 = (1.2439 * 2) - 1.2376 = 1.2502
R2 = 1.2439 + (1.2636 - 1.2537) = 1.2537
S2 = 1.2439 - (1.2636 - 1.2537) = 1.2537


These levels are supposed to mark support and resistance levels for the current session.


On the example above, the PP was calculated using information of the previous session (previous day.) This way we could see possible intraday resistance and support levels. But it can also be calculated using the previous weekly or monthly data to determine such levels. By doing so we are able to see the sentiment over longer periods of time. Also we can see possible levels that might offer support and resistance throughout the week or month. Calculating the Pivot point in a weekly or monthly basis is mostly used by long term traders, but it can also be used by short time traders, it gives us a good idea about the longer term trend.


S1, S2, R1 AND R2...? An Objective Alternative


As already stated, the pivot point zone is a well-known technique and it works simply because many traders and investors use and trust it. But what about the other support and resistance zones (S1, S2, R1 and R2,) to forecast a support or resistance level with some mathematical formula is somehow subjective. It is hard to rely on them blindly just because the formula popped out that level. For this reason, we have created an alternative way to map our time frame, simpler but more objective and effective.


We calculate the pivot point as showed before. But our support and resistance levels are drawn in a different way. We take the previous session high and low, and draw those levels on today's chart. The same is done with the session before the previous session. So, we will have our PP and four more important levels drawn in our chart.


LOPS1, low of the previous session.
HOPS1, high of the previous session.
LOPS2, low of the session before the previous session.
HOPS2, high of the session before the previous session.
PP, pivot point.


These levels will tell us the strength of the market at any given moment. If the market is trading above the PP, then the market is considered in a possible uptrend. If the market is trading above HOPS1 or HOPS2, then the market is in an uptrend, and we only take long positions. If the market is trading below the PP then the market is considered in a possible downtrend. If the market is trading below LOPS1 or LOPS2, then the market is in a downtrend, and we should only consider short trades.


The psychology behind this approach is simple. We know that for some reason the market stopped there from going higher/lower the previous session, or the session before that. We don't know the reason, and we don't need to know it. We only know the fact: the market reversed at that level. We also know that traders and investors have memories, they do remember that the price stopped there before, and the odds are that the market reverses from there again (maybe because the same reason, and maybe not) or at least find some support or resistance at these levels.


What is important about his approach is that support and resistance levels are measured objectively; they aren't just a level derived from a mathematical formula, the price reversed there before so these levels have a higher probability of being effective.


Our mapping method works on both market conditions, when trending and on sideways conditions. In a trending market, it helps us determine the strength of the trend and trade off important levels. On sideways markets it shows us possible reversal levels.


How we use our mapping method?
We at StraightForex (www.straightforex.com) use the mapping method in three different ways: as a trend identification (measure of the strength of the trend), a trading system using important levels with price behavior as a trading signal and to set the risk reward ratio (RR) of any given trade based on where the is the market relative to the previous session.

About the Author


Raul Lopez is the founder of www.straightforex.com A site dedicated to provide high quality training for Forex traders.

Three Reasons Why Forex Trading Is Great.



As a Forex trader you will always be attempting to make more profits than losses from the fluctuations of exchange rates between currencies in the forex market; in short, this is what is called forex trading. The good news is that nobody is going to ask you for a diploma, or somehow verify the amount of hours you've spent studying the foreign exchange market (FOREX). All you need is the proper training and the tools that will help you become a profitable trader. But this is not the only advantage you get when trading forex, compared to other ways of investment and speculation as stocks. You have a other great advantages that will make you decide for forex and forget about stocks and commodities.

1): There will Never be a Bear Market in FOREX.


You can have access to a mutually-inclusive (two-way) exchange of world currencies. In other words; currencies trade in "pairs"(for example, US dollar vs. yen or US dollar vs. Euro), one side of every currency pair is constantly moving (up or down) in relation to the other one. Thus, when you buy a particular currency, you are actually simultaneously selling the other currency in that particular pair. As the market moves, one of the currencies will increase in value while the other will decrease proportionally. It is up to you to choose the correct currency to be long or short. Since currency trading always involves buying one currency and selling another, it all means that you have equal potential for profits in both a rising or falling market.



2): Trade with High Leverage - up to 200:1 Leverage.


Every trader participating in the forex market is allowed to trade foreign currencies on a high leverage basis - up to 200 times your investment with some brokers. This is primarily attributed to the higher levels of liquidity within the currency markets. Standard 100,000-unit currency lots can be traded with as little as 1% margin, or $1,000, which is a pretty nice feature of forex. Mini Forex accounts are permitted to trade with just 0.5% margin -- in other words, just $50 allows you to control a 10,000-unit currency position. Futures traders, who are asked for margin requirements generally equal to 5%-8% of the total contract value, will immediately appreciate that the FOREX market provides much greater leverage; and stock traders, who must post at least 50% margin, may think they are dreaming.


3): Most Price Movements Are Highly Predictable.


Many times currency prices in the forex market may be volatile, but they have the great advantage that generally repeat themselves in relatively predictable cycles, creating trends. The strong trends that foreign currencies develop are a significant advantage for traders who use the "technical" methods and strategies.


Unlike stocks that sometimes seem to simple lay down in narrow price alleys, currencies rarely spend much time in tight trading ranges and have the tendency to develop strong trends. It is known that over 80% of the trading volume in forex is speculative in nature and, as a result, the market frequently overshoots and then corrects itself. As a technically-trained trader, you can easily identify new trends and breakouts, which provide for multiple opportunities to enter and exit trading positions.

About the Author


Adrian Pablo is a freelance writer with articles published in a number of places. Get a free report onFibonacci Tradingand learn more about the world of trading , visit the website:
http://www.1-forex.com

Forex Trading: Margin Usage and Introduction to Hedging



A good rule of thumb for either a mini-account or standard forex account, is to limit your margin usage for each trade to 5% - 10% of your usable margin.


As an example, if your usable margin is $5000, to trade safely, limit your margin usage for each trade to a maximum of $250. This means trading only 1 full lot for each trade. This is assuming that you are trading in a CMS Universal account with 400:1 margin. Your use of margin is increased with a smaller ratio, as most other brokerages only offer a smaller ratio, normally 200:1 or even 100:1.


As your account grows and your usable margin grows, you can increase your margin usage and trade bigger mini or full lot sizes. If you lose money and your account shrinks, drop your margin usage back down to smaller sizes. You need to learn to keep your eye on your usable margin, especially if you've suffered some losses.


Protect your usable Margin by not having more than 2 open hedged or unhedged position at any one time. Your usable margin & equity will get eaten up by un-hedged open positions that go bad in the wrong direction...this is a really good reason why you want to use stops, and if
you hedge, hedge tightly.


IMPORTANT: Don't just keep putting on positions because you think it's a good opportunity. First sell a position and book some usable margin before you put on another position.


NOTE: Hedging does not use up more margin! Use it to protect your equity & usable margin, esp. in an emergency situation!


If you break the hedging rules, and your positions go against you and you aren't properly hedged with stop losses, you'll quickly see your usable margin degrade.
If it degrades enough so that your usable margin goes into the negative, you'll get a margin call. This means that the operators will automatically start selling some of your lots in your oldest losing positions in order to beef up your usable margin. This makes your unrealized loss become a realized loss...and the money is gone from your account.


If you lose too much useable margin, they won't even let you trade in your account, the message they'll give you when you try to put on a new trade is, 'Account in Untradeable Condition'.


If this happens, you might have an open position that needs to be hedged immediately or you might need to sell an old position. Or you might need to deposit more money into your account. Then you can start trading smaller lots to win back some usable margin.


You can lose your entire account balance if you're not careful. One other good thing about forex trading is that you will never lose more money than is in your account, you won't have to sell your house if you get a margin call! Stick to the rules above and this won't happen to you. You'll make more money than you thought possible and without the stress of loss.

About the Author


Cynthia Macy is co-author of 'The Day Trade Forex System: The Ultimate Step-By-Step Guide To Online Currency Trading'.
http://www.daytrade-forex.com
http://www.successtrading2000.com http://www.professionalforextradingonline.info
http://www.shorterminvestingsite.com

More information on currency forex online trading currency exchange iraq

The Definition Of Forex Is Not "Easy Money"


The definition of Forex is: whenever one form of currency is traded in exchange of another. As with most things online the Forex market has become an opportunistic battlefield for small time people to make big bucks in selling hype. If you do a search for Forex online, you will likely find thousands if not millions of sites dedicated to showing you how to make money in the Forex Market. Most of them always claim the same thing, ?I?ll show you how to make 7 figures a year!?

If you?re like me, you?ve grown so tired of seeing that headline, that you immediately hit the ?X? button when you see that title on a site. Personally I thank them for believing people are so gullible because it?s the only reason I have the job that I have. All day long I receive request for reviews of e-books, memberships, online opportunities and too many other things to name. Most of the time I?m bored out of my mind but the sheer repetition of the same re-canned junk.

So you can imagine my delight when something that I?m reviewing is able to hold my childishly short attention span. By no means is trading on the Forex market an easy venture to understand, nor garner a seven figure income with ease (if it were that easy do you think they?d give it away for a few bucks?). But there are a handful of programs that truly teach you exactly how to go from newbie to earner in fairly short order.

The latest program that came across my desk is called Forex Trading Machine and was developed by a guy named Avi Frister. He?s been a successful Forex trader for over 11 years and his system backs his expertise up. Most of the programs that are successful have found ways to maximize earnings while minimizing risk, and as far as I?ve seen, this is probably one of the most unique and profitable Forex systems available online.

Jordan Drew is and expert reviewer on all things things in the Clickbank network, as well as hundreds of other products opportunities offered online. Know before you buy!

http://www.beforeyoubuyonline.com

http://www.beforeyoubuyonline.blogspot.com



Forex Trading Systems - Picking The RIGHT One To Make Big Profits


Forex trading systems are big business get the right one and you can make big currency profits and get the cost you paid back many times over.

However, most forex systems don?t make money so you need to choose the right forex trading system and this is what this article is all about.

1. Track record

You will see lots of claims made by vendors selling systems and it?s tempting to believe them.

?90% success rate?

?6 figure income guaranteed?

And many more ? The first thing to do is ask for their track record. What have they made with the system?

While this does not guarantee profits in the future it will show the logic of the system is soundly based and the vendor has confidence in it. If they don?t trade it why should you?

Treat hypothetical track records with caution we can all make a profit if we know what the closing price was!

2. Pick a trend following system

That?s longer term by nature ? day trading systems NEVER make money we have written frequently on this if you don?t know why read them.

3. Pick a simple system where the logic is revealed

Why?

Quite simply, if you don?t know how a system makes trades you will not have the confidence to follow it through inevitable losing periods.

Confidence leads to discipline, which is an essential part of trading a forex trading system for profits.

If you don?t have the discipline to follow a system you don?t have one at all!

4. Pick a simple system with a few parameters

It?s a well known fact that simple systems with a few indicators work far better than more complicated systems.

Why?

Because, they are more robust in the face of brutal market conditions.

5. Beware of optimized systems

There are systems that use different rules to trade different markets or currencies.

These are frequent in hypothetical track records.

The vendor can?t make the rules work on all currencies, so they optimize them and this leads to losses in the market

6. Check out the vendor

It?s a fact that most forex trading systems are sold by people who have never traded and leads on from our point about looking for a real time track record.

If they don?t have confidence to trade for real why on earth would you want to take their advice?

These are just a few tips to follow when choosing a forex trading currency system, they don?t guarantee success, but they will certainly put the odds in your favor for finding a good one.

Forex systems can and do make money, but it is all about getting the right one so spend some time doing some shopping around.

A FOREX TRADING SYSTEM WITH REAL TIME SUCCESSFUL TRACK RECORD

On all aspects of becoming a profitable trader including info about legendary trader W D Gann who made a $50 million fortune trading go to our website for an exclusive real time profitable Trading system visit our website at http://www.net-planet.org/index.html



Learn Forex Currency Trading Online-Start To Profit Today


FOREX ? The Foreign Currency Market - is the hottest trading market in the world today. When you learn FOREX currency trading online, you open the door to incredible investment results as well as diversification for your portfolio.

You can easily see when you learn FOREX currency trading online that the FOREX has benefits that the stock market does not have. You can trade 24 hours a day, since the world currency market is always open somewhere. You can profit in up or down markets, since you do not have to wait for a downtick to trade short (or ?sell?). There are FOREX futures and options available as well, similar to options and future in the stock market.

One of the biggest advantages of FOREX is that you have leverage not available to you in the stock markets. Your trades take place at leverage of 1:100 to as high as 1:200. This means that with $100 you control 10,000 worth of currency ? with the resulting profits and losses. By taking steps to learn forex currency trading online, will see that you can make significant returns eve using day trading, since the leverage available lets you get in and out of the market on even small moves. Of course, this level of leverage also opens you up to losses equally fast, but if you learn forex currency trading online from a reputable course, such as Trading Universe, you will have all of the tools to trade this market with confidence.

FOREX being a worldwide market, the trading takes place online and your brokerage account, charting packages, tools and resources are all available at your fingertips. There are also FOREX trading courses online as well. By taking an online course that you can follow at your own pace, you will be able to go through the course at the same time you trade your free practice account to see the results as you learn. A course should offer a free practice account, along with complete lessons on how the market operates, trading signals you need to know, technical and fundamental analysis of the currency market, entry and pivot points, and money management techniques. You also want a course that has brokers available to answer questions and demonstrate the lessons. Not all courses are the same ? be sure to choose one to learn FOREX currency trading online that is complete, thorough, and gives you all the tools you need to make a profit in this exciting new market.

MF Calhoun trades FOREX and writes on FOREX market topics. Learn FOREX trading online with one of the most detailed courses available, at http://forextradingprograms.com/forex-trading-online-course.html



Currency Forex Trading Systems-How Long Does It Takes For You To Become A Successful Forex Trader?


Most people approach the need to learn forex trading with a measure of trepidation or fear of the unknown. For those who are undergoing a period of self education and instruction by gathering relevant training materials and tools, and practising new skills in the comfort of home, one common question of the unknown would usually linger in their minds : "Would my self learning be sufficient to make me a successful forex trader?". For those who have chosen to learn under a mentor, a common question is this: "Will the mentor reveal all his secrets to me so that I, as the understudy, can trade successfully on my own?"

Indeed, when will a novice trader be able to know exactly the timing of his metamorphosis from a learner to a skilled trader, and so that he can proceed to trade on his own?

There are some who believe learning to forex trade is an effort that spans an entire life. This group of people believes that learning and education never stops. A forex trader reacts to the news, and to his setups, and trading is always different every day. To this group, learning is a lifelong process. They would look at their trades daily, analyse them to see what made certain trades work, and why certain trades were failures. In this manner, they are able to extract good lessons out of bad trades, and would become wiser, never to repeat these mistakes again.

The main difficulty for this group of new traders is finding the most appropiate time for them to say, " I have learnt enough, and it is time for me to go into the battle field and to fight the good fight of the faith. I will start to trade!"

Speaking from the viewpoint of a trading coach and a professional trader, here are two suggestions.

Firstly, maintain a trading log even when you are learning to trade. This trading log will serves as your trading diary in which you record all your trades, even during the times of learning which may involve your paper trading or your testing of certain forex trading strategies. Record your personal experiences - why a simulated trade was taken, what was the prescribed action you should take based on the trade setup, and what was the outcome. In this way, you will be able to document and record your experiences, and be able to gain a high degree of confidence from seeing repeated results from taking certain stipulated action arising from similar trade setups.

Secondly, you can adopt a cut-off point where you can start to trade on your own when after a period of paper trading, you find you are consistently having a higher win-loss ratio. In other words, when you find there are more winners than losers in your simulated trades and this is repeated consistently as recorded in your trading log or diary, you can consider moving out to trade on your own.

Needless to say, in whatever self study, it is of the greatest importance that you find the most effective trading strategies and systems, and master not only the trade setups, but also your trading psychology, and be able to pull the trigger to trade. Learn from real traders, who are able to pass on their skills to you. You are there to trade, and convert the head knowledge into real trading skills.

Peter Lim is a Certified Financial Planner. Learning to trade forex by following a course of self study based on the powerful secrets of price action strategies is never easier than NOW! Discover how to earn a 5 figure income by trading forex using 100% mechanical systems by visiting the author's blog at http://1forex-trading.blogspot.com



Another article on learn forex

Forex Trading - No-Touch Options


There is a saying that the person who makes the rules wins the game. Usually that's true. It's also true when it comes to exotic options in forex.

You have to remember that the forex brokers aren't stupid. The way they price the options and all that. They are setting you up to fail if you trade them. There are very complicated algorithms that compute how likely the price is to get to (or not to get to a certain level) by a certain time.

You are playing their game when trading options like that.

For example, if you're sure the price wouldn't touch 1.3212 and you get pricing on that option, you'll notices that if the broker agrees with you, your risk-to-reward ratio is terrible. If the risk-to-reward ratio is good, then definitely don't trade it. The broker thinks you're going to get slaughtered and is trying to bait you into trading it.

The people who make the rules win the game. Remember that.

It's much better to just take an outright position if you really have that strong of an opinion. Remember that no broker can manipulate the price of the currencies (at least not for very long).

Options are a trap. The broker thinks of you as a mouse. The option is really tasty cheese. It promises low cost, and a big pay-out. But it won't deliver. It's very similar to playing the lottery, but you're a trader, not a gambler.

Only take a trade if you have a edge.

Do you want to learn more about how I trade? I have just completed my brand new guide, "Forex Trading - What Finally Worked For Me".

Download it free here: Forex Trading

Nathan Pennington is a forex trader and the author of Winning Forex Trading -THE Definitive Guide



Forex Trading - The Day Trading Myth(s)


There is a whole mythology surrounding day trading. Numerous myths have sprung up around it. Some myth busting needs to be done. :-)

1) There is a trade (or more than one) every day. No. There isn't. If you try to trade like that, you are going to have problems. It's called over-trading. The spread will eat you alive. You're trying to trade like a broker without the advantage of being spread positive.

2) You're always flat at the end of the day. Not true. This relates to the first point. If you try to get in and out quickly, you won't let the market give you anything. But it doesn't matter if the market gives you anything or not, the broker is going to take his share one way or another. You will (in terms of your account balance) bleed to death.

3) It's easier than other kinds of trading. Really? I think the real meaning of this is it's easier to sell day trading courses than other kinds of courses. Remember the old line about a sucker being born every minute (they're actually being born faster now). It's still true.

4) The market is the same on all time frames. They would have you believe that things happen on the five-minute chart just like they do on the daily chart, just the daily chart is slower. Not so. The market is much more random on the faster time frames. More randomness, means it's harder to discern what is really going on. And that means it's a recipe for being separated from your money.

Do you want to learn more about how I trade? I have just completed my brand new guide, "Forex Trading - What Finally Worked For Me".

Download it free here: Forex Trading

Nathan Pennington is a forex trader and the author of Winning Forex Trading -THE Definitive Guide



Forex Currency Trading For Profit - Exit Strategies


So! You've plunged into trading currencies in the Forex market. You've bought USD/JPY, and prices are skyrocketing. You're elated because the trade so far is going in your favor-- and you're wondering when to get out of the trade. When do you take your profits and run?

If you are in the situation that I just described, you've made one mistake that sooner or later is going to cost you a lot of money-- probably sooner. It is a common mistake made by newbies who are excited about getting into the Forex market and testing their skills. Think of it as by far the best way to wipe out your traing account in record time. Because the bottom line is: professional traders never begin a trade without an exit strategy firmly in place!

There is no such thing as a trading opportunity that is so exciting that you have to get in the trade right then and there or you will hate yourself forever. Remember that currency trading in the Forex markets is practically non-stop, 24/5.5 (not 24/7). Every day is filled with trading opportunities, plenty of them. If you only see the one oh-so-urgent opportunity before you, could it be that you are not quite ready to trade currencies?

Plan your exit strategy at the same time you plan your entry. Wiser words have seldom been spoken. Do no less.

For entry's sake, what kind of profits are you looking for: how many pips? 5 pips? 10 pips? 20 pips? More? You don't have to be dead-set on a specific number of pips. You can just watch and see if the pips grow in your favor. But if you know ahead of time how many pips will fill your appetite, getting out of a trade is a snap: exit when you've gotten your pips. Don't get greedy! There will be more pips on the table tomorrow.

How strong are your entry signals? Hopefully, you are not considering a trade based on just one financial indicator, as that, too, leads to financial ruin. Given then that you are using a combination of established financial indicators (MACD, RSI, Stochastics, Pivot Points, trandlines, Bollinger Bands), how often have you seen the combination that you are using succeed? How often have you seen it fail? Have you found any early-warning signs of impending failure in previous similar setups?

How many pips are you willing to risk? No, wait. That's only half the question. How many pips are you willing to risk in order to make how many pips? Will you risk 10 pips to make 10? 10 to make 20? Some say that risking 10 pips is not enough-- that if you're not willing to risk 20 pips, you should not be in a trade. Do you agree or disagree? What does that do to your goal of expecting to profit by x amount of pips in the trade?

The amount of pips that you are willing to risk in order to make x amount of pips is really just a gentle way of asking: where are you going to place your stop loss order? Trading without a stop loss order is kind of like bungee jumping without the cord. Trading currencies in the Forex is often extremely fast-paced. Without an automatic stop-loss order to protect you, you may not be able to get out of a trade in time to prevent losses from reaching disastrous levels.

Finally, here's what I have found to be the best question to ask: how much does the currency pair that you are trading spike? Some currencies (the Yen pairs come to mind) spike quite a lot. What's a spike? A spike is a short candle body with one long wick or with long wicks both top or bottom of the body.

Say price for the USD/JPY is at 120.05 when you buy-- and you're looking at the five minute chart. Price starts rising rapidly, very rapidly, and goes all the way up to 120.17. Then, alas, price starts retracing, all the way back back down to the 120.05 at which you bought. Instead of going back up, price keeps falling all the way down to 119.90. And, still within the same five minute candle, price resumes its upward trend and closes at 120.09. On the chart, the body, the solid part of the candle, is short-- from 120.05 to 120.09. The top wick rises from 120.09 to 120.17, the bottom wick falls from 120.05 to 119.90. That's spiking in both directions!

You bought at 120.05, predicting that price would go up-- and it did, five minutes later, closing 4 pips higher than the open. If your stop-loss order was 20 pips below your entry point, no problem-- you're still in the trade. If instead you placed your stop-loss order 10 pips below your entry point, here comes pain: you got stopped at 119.95, only to have price ending higher, proving your buy decision to be right.

When trading currencies in the Forex market, the bottom line on exit strategies is short and sweet. Have one or don't trade. Know how many pips you want to risk when placing your stop-loss orders. And, if you want to do yourself a favor, know if, how, when, and how often your trade's currency pair spikes.

P.K. Wells is an active trader, webmaster and a software developer. For free software that will assist you when trading the Forex currency markets, visit Forex Paper Trader, MarketOpen, Forex News Reader, Free Forex Charts Launcher - 100% Free Forex Software