Friday, April 13, 2012

How To Create Wealth From Short Term Forex Trading

July 9, 2010 by  
Filed under Forex Tips


Do not be mistaken that you can only create wealth from short term forex trading and not long term trading. In fact, you can make money from both type of trading style but what I am going to show you are how you can create wealth from short term forex trading strategies like scalping and day trading.

The benefits of short term forex trading strategy are the ability to win you money within a shorter time frame. In addition, you will be spared from the sudden price movement that occurs during news release which is what the long term trades have to withstand.

Because of the short term nature of each trade, the entry and exit position must be well timed and properly executed and this is where most traders lost their money in short term trades.

If you enter a trade too early, there is a high chance that you will be stopped out due to false signal. If you enter a trade too late, the market has moved quite a lot and there is a high chance that it may reverse. Therefore having a good entry is very important for your success in short term trading.

Here is how you can plan your entry:

1) Drawing Trend Line: The trend line is one of the commonly used entry technique. A lot of people like to rush into a trade and tend to enter their position before a trend line break occurs. In the end, they find the market being repelled by the trend line and did not break through it. Therefore waiting for a valid trend line break is a must before you enter your position.

In the case where you have missed the golden opportunity to enter your trade at the breach of the trend line, you should always wait for the market to retrace back to retest the trend line to enter your position.

2) Using MACD Technical Indicator: This is an indicator that I like to use for my entry. I usually use the crossover of this indicator to place my entry. Whenever I have the setup that is according to my trading plan, I will wait for the MACD histogram to flip to the other side before I enter a position.

Having a good entry is only half the game; you need to have a good exit to complete the strategy. There is no point in having a good entry but your exit is too far away which is unrealistic. In the end, the price reverses and takes back all the profit and eventually stops you out.

Here is how you can plan your exit:

1) Using Support and Resistance: The support and resistance are great places to exit a position as these are usually where the market will meet with some sort of repulsive force. Usually I will exit my position at the nearest major support or resistance. In fact you can also make use of Fibonacci levels as well as pivot points for your exit.

2) Using MACD Technical Indicator: Similar to how you use this indicator for entry, you can use the flip over of the histogram to exit your position.

With a well defined entry and exit strategy, you will be able to create wealth from short term forex trading. To find out more about the various strategies you can use for short term trading, you can refer to my blog post on forex scalping system and forex breakout strategy.

If you have anything to share about this post, do feel free to give your comment below. Every comment is valuable to all the readers of this blog as we will be able to learn and grow together.

Other Related Posts:

  1. Forex Information: New NFA Rule 2-43(b)
  2. Forex Strategies – When Is The Best Time To Enter A Trade
  3. Is Forex Trading Journal a Must Have?
  4. How To Trade Market That Is Moving Sideway

Comments

7 Responses to “How To Create Wealth From Short Term Forex Trading”
  1. Marco says:

    Hello!

    I like the way you talk about entry if you want to trade on a short time schedule. You truly shouldn’t rush into a trade as this is one of the reason you’ll get losses.

    I have to agree on the MACD being one of the best tool for scalping or day trading. I personnally use the 15 mins chart as well, although I like to check the 1 min chart to see if I can get a very good entry.

    I read some of your articles and I think you’re very skilled at explaining indicators and technical analysis. Keep it up!

    Sincerely,

    Marco

  2. mohammed haseeb says:

    hai guys……..actully iam a student and do not have much idea about trading ..i want to start trding in currency may be in saudi riyals so any one hae an idea how to trade in currenccy plz help me out……waitng for the help……thank u

  3. Edgar says:

    What time period do you use? 5 Minute?

  4. Lawton says:

    Thank Kelvin
    For your time and effort and sharing your knowledge. I find your website easy to read and understand.

    Kind Regards
    Lawton

  5. tiger2010 says:

    kelvin,
    well, you tell a lot of truth on some important rules in short term trade. from my experience, the short term trade is the best solution for small trader to win in the game. however, the problem is that it maybe too difficult to be learned.

    i love all articles you wrote in the blog. you are so great!
    thank you very much!

    tiger

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