How To Create Wealth From Short Term Forex Trading
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.
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