All,
Could anyone give me some advice on my current approach to Forex trading.
Over the last two weeks or so I have amended the way I place my trades. Below is what I have been doing and wanted some input/thoughts.
Strategy/Process I use
Pairs I place trades on: eur/usd, gbp/usd & usd/chf. Why do I use these pairs? Well, the first two of these (when in strong trends) are good trends to trade from what I have seen so far. Plus as I am in the UK and I am better placed I think to get a steer of what is happening in the UK than say in Australia. Usd/chf will typically move in the opposite direction to eur/usd so generally can sense what will happen to this pair if there is a strong direction on eur/usd.
Previously I have been trading on 30 pip take profits but then was introduced to the concept of risk:reward ratios. I am a newbie to Forex. So I have introduced this to my strategy but on a 30 pip reward trading strategy, on 1:3 or even 1:2 this will not work very well (because the stop loss was being hit far too often). Instead over the last week or so I have started to trade 1:1 risk:reward ratios on 100 pip trades.
As I have limited time to assess/place my trades (I have about 30minutes or so) before going to work each morning I look for trends on 1hr/4hr/daily charts. In terms of what I have found generally these pairs tend to trade between a range before continuing on longer trends on these charts. Typically when I see this early morning I place pending trades (i.e. if eur/usd is at 1.32500 and has been range trading between say 1.32300 and 1.32600 overnight for instance) then the trade would be triggered at 1.32800 with a take profit of 1.32900 (stop loss of 1.32700). I only get to check this the following morning when I can log back into my account.
I also look at the following weeks fundamental releases over a weekend and try and assess what major releases would impact these pairs (more eur/usd & gbp/usd). Also based on this and a fairly basic technical assessment (RSI indicator, Bollinger bands and support/resistance on 4hr/daily charts) if I am unsure as to which way a pair will go (but I feel it will move during the day based on data releases and past performance and I don’t want to miss out!) then I would place trades either way (one sell stop and other buy stop again just outside of the current range using a 1:1 ratio). But I do not tend to do this very often.
I have used this approach on a live account for last week but with quite small trades (i.e.30p/50p trade) on £70 account. So would only ever have a loss or gain of £3 or so. When I am sure the trend is going to go one way it on occasions takes a few days to trigger a trade but I don’t mind this as I can be patient if it will happen.
The following is a summary of my pip return based on this approach over last couple of weeks.
200 pip take profit & 300 pip loss – total of 5 trades placed using this method
Questions I have are:
What are your thoughts on this type of approach? Does anyone with experience on these pairs feel it could work (i.e. have a higher pip take profit than stop loss)?
Can I improve this method in the time I have as currently I have lost more than gained? Is there anything that will help in assessing markets better (i.e. technically in charts)
Does anyone have more experience on these pairs that can help?
Is placing a trade both ways a good idea?
What should I change if I only had 30 minutes each day in the morning? Is there anything I can do to better judge when to place my pending trades as I have a feeling these are not quite right?
Any input on this would be very helpful and appreciated.
On my last couple of trades the stop loss has been hit very quickly (early this week) so have been a little unsure as to whether 100 pip ratio is sensible.
Many thanks for any input