5 Factors which may Contribute to a Successful Forex Trade

5 Factors which may Contribute to a Successful Forex Trade

1. Setting a stop-loss

While a stop-loss is there to protect from sudden moves in the market, it can also clarify in what conditions a trade will no longer be successful. A trade which moves against the chosen direction is not necessarily unsuccessful. The Forex market typically gets to higher or lower values relative to where it is at the start of the trade, in retracements. However at a certain point a retracement may become a counter move with reduced expectation of turning in the desired direction.

2. Paying attention to the 1 minute chart

It is possible for even the 5 minute candlestick chart to show an apparent continued direction, but for the 1 minute to show a retracement happening. While this can be simply a fluctuation, the Forex market tends to move up and down, depending on the time frame but also irrespective of the time frame. Thus signs of a change in direction may appear with greater or lesser clarity on 1 minute first, as a kind of heads up.

To give a salient example, a strong move down on a news surprise may continue down but at some stage it may reverse or at least level out. A spike may appear on 1 minute which can set a marker for a change. It can be helpful to look at volatility on a higher time frame in more detail as it can turn out to be a pattern at the beginning of a trend.

3. Working out support and resistance

This should be done before the trade ideally, as this can also help set a market sensitive stop-loss. It can more effectively be done across multiple time frames, from 1 minute to 1 month. With practice this can be performed quickly. The aim is not to analyze every major time frame but to get a sense of where the pair has turned in the past.

Because support and resistance may well not be respected in Forex, it can be helpful to supplement this analysis with big figure analysis. It can help provide rhyme and reason to moves which look like breakouts but instead result in reverse moves and patterns where the pair sharply retraces before moving up.

4. Looking for patterns

While Forex does exhibit technical patterns in abundance, the capacity of the market to move up or down results in sets of patterns which taken together result in a complex series of moves. Thus it can be helpful to see patterns as stepping stones in a greater whole rather than indicating a directional outcome.

5. Knowing when to exit

Knowing when to exit is situational but it can be helpful to apply exit patterns. For example, in news trading a sharp move may typically stall at support or resistance. This may look like a move to stay in, and it might be, but this stalling can also be followed by a rapid reverse.

To give another example, in Forex moves do appear which have certain repeated patterns, such as trends. These tend to end, and indeed following the logic of the market may be expected to. Like the news trade example, the point at which they end can have the appearance of moves to greater things.

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