Forex Focus
The Intraday Trade
Here’s a low-risk/high-profit trend-following method that you can apply to the forex markets.
The idea of a short-term trade itself is very attractive, just like a romantic cruise. It’s alluring to sit by the computer for an hour or two when no one distracts you, and earn money getting pleasure from your work.
But there are pitfalls on the way to success. One of the major ones is not having a system-defined trade that results in a lack of consistency in your trades. You must understand that any trade must have a plan of action, and your task is to follow that plan without inventing new rules impulsively. Keep on that plan and you’ll be more likely to achieve success and join the elite group of professionals that really make money.
So how do you get into that elite group? Here is a system you can try, by applying to intraday trading.
FIGURE 1: a buy signal. After getting a buy signal, the trader must wait for the candlestick to close above the moving averages for this technique..
Intraday Trading
When I refer to “intraday trade,” I mean opening and closing a trade within a 24-hour period. If you are going to do this, you should take these rules into consideration:
- Time is money. When trading intraday, you need to act immediately when you get a signal. All the rules you checked and tested based on historical performance and the demo account you paper-traded in the comfort of your office should be applied to the real account automatically. If you hesitate, you will miss out.
- Your spirit. Making short-term trades takes plenty of energy, but at the same time, you should be diligent. You must wait for the right moment and then make quick decisions. If you’re not on your toes, you’ll regret it.
- Tough discipline. You have to have a precise set of rules for opening and closing your positions. Intraday trading often attracts those who are excited about the possibility of making lots of money, but without a system in place, failure is inevitable. Inventing new rules on the fly will not work.
- News. You must keep track of when the news that cause market movements is released. You may want to print out an economic calendar and always have it on hand. Before any significant news is released, you should close all open trades or at least protect them with a stop at the breakeven area. Open new positions only after the news is released.
- Spread (commission). Spread is relevant when trading currencies intraday. It’s more convenient to work with a currency pair that is active enough and has a small spread. This is because in an intraday time scale, spreads could eat up a considerable part of your profit.
- Length of time in the market. Besides price, you should also take into consideration the time you stay in the market. “Short-term trade” means that you stay in the market for a short period of time. If after a while your trade doesn’t achieve its objective, at the very least, protect it with a stop where you break even.