Sell Eur/Jpy

Sell Eur/Jpy @110.45
T.p 70 pips
S.l 70 Pips

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Why It's Important to Accurately Time Your Trade

Timing is everything in forex. Time it right, you win. Get your timing wrong, your money goes up in smoke.

In a fast paced market with periods of intense volatility like the forex market, timing is essential. There is a saying that “the trend is your friend till it ends”. I will say that the “trend is your enemy if you get in too late”.

Traders are advised to “trade fundamentally, enter technically.” This implies that traders are expected to follow the direction of a high impact news item. But in doing so, traders must use their technical analysis to enter at the right time.

What happens if entries are not timed properly? These are the scenarios that could occur.

1)      Some high impact news hits the news wires and it favors a long trade. You go long, but you discover that the market has spiked by almost 80 pips about a second after news release. Your entry is still pending, waiting for the broker to fulfill it. Too late. Prices are too far gone and you are asked to “REQUOTE”. Not wanting to miss out, you re-enter the market not minding the prices, and your order is instantly fulfilled. Suddenly, the price starts to retrace wildly, and you are stopped out, just in time for the price to resume its move northwards. It’s almost like the market maker was watching you to do you in.



2)      The second scenario is a bit like the first, but instead of a requote, your order is filled at a price so far away from market price, it will take a miracle move in the trade direction to break even, let alone make a profit. Slippage sucks.

Let’s explain the two scenarios. In a high impact news trade, the news feeds are received by the institutional investors before anyone else via premium news services like Bloomberg and Reuters, who charge thousands of dollars a month for this. A team of veteran traders will be waiting to analyze the news and hit the trade buttons fast. The sheer volume of such trades sends the currency price candlesticks spiking. Sometimes the spikes happen even before the retail traders get the same news. As such, any trade entered by a retail trader at this point will most likely not be fulfilled; requotes follow. If a trader enters the trade at this time, he will meet the institutional guys offloading their positions to take profits, and he will get hit by the unavoidable retracement that follows.

The two scenarios are a case of wrong timing at work.

How Can You Accurately Time Your Trades to Avoid Losses?

For news trades, it is pretty obvious here that you should not try mixing it with the big dogs. You will get blown out by the two scenarios I painted again and again. Only enter news trades when the initial madness has died down. Soon, the market will respond in a slower and more purposeful direction to the news trade, as we see here from the Non-Farm Payroll report of June 3, 2011.

Secondly, use pivot points in addition to your other technical indicators to determine if you are still within touching distance of a profit. If a long trade is closer to a resistance than a support level, the chances of that trading making a profit is lower than if the entry was closer to the support level.

There are many tips, but hang on to these two for now.

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What Is Hedging

Hedging denotes safety and security. Hedging is protection of client's funds from unfavorable currency rate fluctuations. Account funds are fixed at their current price through conducting trades on Forex. Thus, hedging helps to ease exposure to currency rate change risks, which helps to achieve result not influenced by fluctuations.

In fact, hedging presupposes using one instrument in order to lower the risk related to unfavorable market factors impact on the price of another one directly associated with it. More often, the notion ‘hedging’ means insurance from the currency price fluctuations, assets etc. Hedging can also be considered as a type of investment allowing to minimize the price movements risk in the market. The hedging cost should be valued with regard to possible losses in the event of refusal from it.

Hedging types on Forex

The first type is hedging the buyer’s money to lower the risk of possible increase of an instrument price. Another type is hedging the seller’s money in order to lower a price drop risk.

Hedging example

A trader, who imports foreign currency, opens buy trade with a currency on his trading account in advance, and when the real time of currency purchase comes in his bank, he closes the position. And a trader, who exports foreign currency, opens a sell trade with a currency on his trading account beforehand, and at a real moment of this currency purchase in his bank, he closes it.

There is a so-called hedging mechanism, which implies obligations balancing in the currency market (or securities market etc.) and the opposite futures market. To hedge capital losses from a particular instrument, the position is opened with another instrument, which can compensate financial losses.

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Forex Trading Signals

Forex Trading Signals are signals to buy or sell trading instruments (currency, shares, CFD, precious metals, etc.), these are the signals for timely opening and closing positions. Trading Signals are very popular service on Forex market at the moment.

These signals suggest to a trader useful information - what currency and price is worth to make operation at, the moment for closing a position, better level to set stop loss, to avoid great losses in case you incorrectly predict the trend movements, or take profit for getting the maximal result etc.

Undoubtedly, signals play an important role for traders on Forex market, but the trader should not follow them fully and unconditionally. They are only assistants during the daily trading, once again, only assistants. Trader must make decisions according to the totality of factors, particularly, external environment (micro- and macroeconomic factors, i.e. fundamental analysis which is an analysis of economic indicators, social factors and government policy of a business cycle, can forecast price movement and trends of the market) and technical analysis and take into account non-market factors (political situation, different force-majour circumstances and etc.)

There are a lot of websites in the Internet, offering Forex signals, which guarantee a huge profit. (For example: If you use our Forex signals you will be able to get profit about 1000 - 1500 pips per month by 10 currencies, we also suggest fully automatic trading process.....) Don't believe it! Be attentive and extremely suspicious to such offers and trust reliable sources only, which have authority and reputation in the trading world.

You can check the quality of Forex signals by the following way: the comments of people you know (friends, colleagues, relatives who use the services of Forex signals provider) are the best indicator. Another way is to test the dynamics of executed transactions in a foreign exchange market. Such statistics is available for the clients, if it is not, you have to look for another Internet broker providing such information.

Forex Trading Signals may be considered as an alternative to trust management. In any case, carrying out transactions you rely on experience of other people or on the program algorithm, then analyze the market independently. In the first case, you pay a fixed sum for trading signal and independently execute transactions on a trading platform. In the second case, broker executes transactions on your behalf, but you share a part of your profit with it. In any case, if the situation in the currency market goes against you, only you take the loss risk.

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