There’re more than a few things which come into the picture when it comes to trading in foreign exchange. There’s only one motive though, getting profits. This is just what every single trader like you, beginner and veteran alike, is going after. How do you consistently get profits from foreign exchange? How do you formulate a trading strategy, i.e., a Forex market profile, something that will apply in all cases from a general perspective?
Basic Characteristics of Currency Pair:
You’re not going to trade with one single currency pair, in a specific session resorting to the same trading strategy continuously. Regardless of one’s and all’s, every single time you go forward with a transaction you need proper pre-trading analysis.
Analysis is all about going for a specific market pair after knowing what you’re getting into in the first place. Every currency pair has its individual price action characteristics. This simply means it will have certain price action patterns according to just as specific intra and extra market stimuli.
For example, you won’t see declarations from the Imperial Bank of Japan influencing price action of USD. The thing is, that’s just what will happen if you’re trading with USD JPY. It will have its individual patterns and fluctuations.
If you’ve missed out on a pointer hidden in the example, let’s elaborate on that too. Pair-specific features are directly relative to the individual currencies in that pair. To expound further, you have to consider the co-relative features of the currencies in the pair in mind.
Overall and In-Depth Formulation of a Trading Strategy:
Now, that you have a proper idea, take it to the next step. There’s no point in learning something in Forex if you don’t apply it. Forex market profile trading is naught without a proper strategy.
To continue, strategies are relative to both pair-specific pointers as well market conditions. Your choice of a proper strategy depends on both, but the onus is on the type of pair first.
If you’re going forward with USD JPY, you’re obviously better off carry trading than scalping. On the other hand, if you have USD EUR, scalping or day trading is your bread and butter on a silver platter.
That said, you need to choose both your strategy and pair together sometimes too. If USD JPY is not providing enough interest differentiation in the first place, don’t go for it. Instead, use your USD to get into EUR or even GBP. Trade in the European and North American overlapping sessions.
Red and Green:
What’s the point of a proper market profile in Forex with your currency pair if you’re not getting the right signals? Now, you obviously cannot manipulate these signals. Neither can you keep waiting for them unless your carry trading already! What do you do then?
Nothing. Your hands are tied if the market’s not giving out a proper profit-making opportunity. Take this as a proper suggestion. Do not go into a position unless you’re more confident about the profits than about tentative losses. No matter how much time you’ve spent on your creating your Forex market profile, accounting for pair data with respect to market data for a proper strategy awaiting an application, wait for the signal green.
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.