Forex Pips Trading

By: Charley Warady 

There is a simple way of making steady money by Forex pips trading. After the Forex trader has sifted through the vast amounts of Forex technical charts, and trading theories, and online courses, he might want to just get back to basics. The question always remains: How much are you willing to make? And how much are you willing to lose?

Obviously, the answers with all Forex traders will be that they're willing make fortunes, and not willing to lose anything. But once he lands back in reality he realizes these are legitimate questions to consider.

Check the charts

 A good technical analysis using charts will always help in choosing entry and exit points and is the key to successful Forex pips trading. The support and resistance levels can show the trend and be the basis of not just one Forex trade, but a series of trades. After all, a lot of smaller profits will still equal one big profit, and yet diminish the odds of turning a profit into a loss or leaving money on the table.

With Forex pips trading, it all boils down to the discipline involved to follow your system and not get sidetracked by emotion. Remember that your charts are the guides, but it's the Forex trader that has to initiate the trade. The number of opportunities for the entry and exit points will always be there.

It is also with the use of these Forex charts that can limit your loss when dealing with Forex pips trading. Losses are part of the game. Limiting losses is part of the skill of playing the game.

Ratios

 The key to Forex pips trading is establishing a profit loss ratio that you, the Forex trader, are comfortable with. The most common ratio is 2:1 as far as profit to loss. It's always a good place to start. That tell you where place your entry order; where to place your exit order; and most importantly, where to place your stop loss order. When you're dealing with this kind of system you have to realize that “riding the trend” can represent a series of trades as opposed to just one trade.

Don't ever try to chase the market. It is easy to get undisciplined and raise (or lower) a stop loss order because you don't want to get hit right before you're sure the market is going to turn your way. Will it happen? Absolutely. But it's no reason to become undisciplined. The amount of times you'll be wrong in this case far outweighs the amount of times you'll be right.

When you begin to get more comfortable with the Forex technical aspect of trading, you might want to increase the ratio to 3:1 or even 4:1. It all falls in with successful Forex pips trading, keeping in mind that increasing the ratio actually calls for more, not less, self control. Stick to the plan and you'll be able to continue to trade Forex successfully.

Chasing markets

When a Forex trader tries to maximize a profit by trying to pick a high or a low, not wanting to leave anything on the table, what often happens is that while trying to chase the market he'll turn a profit into a loss. That's the most frustrating thing in the world. Once you formulate a Forex pips trading system, you'll become a well oiled machine and realize that highs and lows don't matter. Profits and losses do.


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1 User comments
Rowen
2010-11-07 06:43:08Z

Good article. The whole concept of discipline though, is easier said than done. But it's a good reminder. Thanks.


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Please make sure your comments are appropriate and that they do not promote services or products, political parties, campaign material or ballot propositions. Comments that contain abusive, vulgar, offensive, threatening or harassing language, or personal attacks of any kind will be deleted. Comments including inappropriate will also be removed.

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