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Tag Archives: How to trade forex

300 Pip Rally and a Short?

Posted on 14. Jan, 2011 by .

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Yesterday we had close to a 300 pip rally on EUR/USD which probably came as a surprise for a lot of traders out there. Initially we started the London session with close to a perfect correlation between EUR/USD and USD/CHF which is a fairly rare type of price action. After a short period of time USD/CHF gave us a correction and plummeted, giving us a total daily range of just around 150 pips. I emailed my readers last night after the run-up and London close, to go in on a short trade on EUR/USD @ 1.3360 with a stop loss of 80 pips in total. First of all, we did come fairly close to some potential trend line resistance which was likely to give us a bit of bounce. Then just in general, after a 300 pip move there is always a good chance for some kind of pullback. Additionally you often see that when a pair is gaining or losing a lot of ground throughout the week, it is likely to give a bit back coming closer to the end of the week. Finally if the trade would go in our direction, we would be in for really great risk:reward setup. Now we did enter the trade after the busiest trading hours of the day, where we in general often see pairs fading a bit. We kept the trade open overnight, (read; Asian session) as this is where we were likely to see the pair giving back a bit. Now when I got up this morning we were looking at just around 20 (I think 22 pips at the best level) of profit and hence not really the size of a drop that I had anticipated, or thought likely. So I decided to move stop loss to break even, and told my readers to do the same. About an hour later the pair hit out breakeven level and we got stopped out. Getting out at 0 is always better than taking a loss; better to be safe than sorry. There is always another chance to get in on a new trade, and I might be looking to pull the trigger on this once more later today, but right now I am on the sideline. I will keep you all updated.  Read more... (450 words, estimated 1:48 mins reading time)

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Pips – Dollars – Percentage – ?

Posted on 28. Sep, 2009 by .

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When I started out trading forex, I was often confused about all the different terms which are often used in the forex industry. For some time, I was sure that “making pips” was what I needed to learn. If I could make 100 pips a day I would be profitable, right? But then again, what I really wanted was not pips, but actual money. However, I knew there was a link between the two, so I stayed with the idea about pips. I am certain that I am not the only one who has made this mistake. Furthermore, whenever you see some new EA or forex system, the sales page is always filled with statements about how much money you can make with whatever they are selling. This does not make sense. There is no point in writing that a system will make you thousands of dollars within days, as this all depends on how much you are willing to risk, in addition to your account balance. I promise you that you will not be making $10.000 in a couple of days if your current account balance is say maybe $10. But if you have an account balance of maybe 20 zillion billion dollars, then you could probably make a lot more, than what they state (that is, of course only if they tell the truth, which they most likely don’t). However, it is relative, just as pips. Who cares if you can make 10.000 pips in a week if you need to use a stop loss of 5.000 pips per trade? It all comes down to risk/reward ratio and money management. Even though someone claims to be up 500 pips for the month, it is still possible that the actual percentage of return for the month is negative.  Read more... (405 words, estimated 1:37 mins reading time)

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