Photo credit: Liberal Dictionary
What is Forex Trading?
First things first, what is Forex Trading?
Forex is a way of trying to earn a profit by investing in currency exchanges on the money market. This means taking one currency and trading it against another and making a profit on the small changes between the different prices measured in pips.
What currencies are traded?
Using the no nonsense Forex method, there are a few guidelines to the chosen traded currencies. This method only uses the major currency pairs plus the Singapore dollar, so this allows for a total of 36 different pairing combinations to trade. A few of these include:
By trading just the major currencies, there is a greater chance at more steady gains as the market is not as volatile as with some of the less established countries that have their currencies fall under the minor currency pair list or the exotic currency pair list.
What are some of the best trading pairs?
With the no nonsense Forex approach, there are five main trading pairs that begin with. These pairs are as follows:
These combinations serve as an initial test to your no nonsense forex trading with your particular software or algorithm. If your account performs well with these five pairs, then in many cases your algorithm will perform well in the larger spread of major currency pairs long term.
This is not determined immediately though. Like all good things, it does take time. To get a good test or scope of your overall performance, it is good to allow for about six months of data to be collected. After this period, review your trendlines and see if it fares well enough to add in additional trades and currency pairs.
If you are a bit unsure during or before this time. Create a demo account, to begin with. This will allow an algorithm to run its course without all the risk associated with running it on a live account. If it works on a demo then it should work well on a live account.
Be sure you know how to read the information and the statistics associated with your account. Spend time on your forex education to be fully prepared for the world of trading. Between knowing how to read the information and having a good spread of information available to read, you will be better set at launching yourself into the world of Forex.
The algorithm for no nonsense Forex
Taking a no nonsense approach to Forex also includes running trades by a certain algorithmic approach. This approach is summed up by looking at certain key indicators.
The following indicators are looked at in the listed order to determine profitability and risk associated with a trade:
- Average True Range (ATR) Indicator- this is the indicator looked at to determine the profitability of an execution.
- Primary and secondary confirmation indicators- these are then looked at after ATR and are the indicators that send a signal at the best time to enter a trade and when to exit a trade.
- Baseline and exit indicators- these are signalled and marked by the data shown from the primary and secondary confirmation indicators. The baseline is also the overall trendline for that particular currency pair over a spread.
- Volume indicator- this indicator shows how many money movements or shifts occur in that particular currency pair within a set amount of time. This time set can be determined manually or automatically depending on the platform, software, and overall algorithm being used.
What about the news?
One specific point to be made about the no nonsense Forex approach is that a great deal of news in regards to the economy is avoided. In many cases, if the news announces certain currency or economic shifts, the market will make large shifts in certain directions depending on what information is given.
This trading approach avoids actively trading during possible turbulent times or times of great shifts, and if you trade right before a large shift, it can be a signal to exit a trade or reassess the overall trading plan in place.