I am sorry if my question seems too stupid, but I am a beginner and I want to be sure I perfectly understand every aspect.
I made some successful trades on demo account for EUR/USD pair. I used a USD denominated account. Usually I bought EUR/USD for price x and sold it later for price y > x.
But many times, after I took the profit, i noticed that currency will drop, and I was right. But what was I supposed to do? To sell? What? So the only way to make a profit when market goes down is to wait to buy and then to sell again when the market is rising? What are you usually doing when the market goes down for currency EUR/USD and you have account in USD? I hope I was clear
You can make money either by going long (buy) or going short (selling). It’ll all depends on the time frame and market conditions.
For instance, if you are following a 4 hour chart trend, that is obviously going long but seems to be losing some steam, you can lower your time frame to say 15 min and try to get in smaller trades on the retrace. After that, you can rebuy and continue on with the long trade.
I don’t recommend this as I think it is a formula for getting stopped out, but it is an option.
If you want to stick with the major trends then waiting is part of the game. If the market is ranging then the only choice is to wait until it chooses a direction. This is where Price Action, support and resistance, and MA’s along with other technical indicators will help you out. While waiting, consult your trading plan and forecast where the market will go.
Also, the denomination of your account doesn’t really mean anything when trading. Conversion is instant. So you can buy EUR, sell EUR, buy JPY, sell JPY, and do it all while keeping your profit in USD.
You captured an up-move by buying the currency pair (in this case the EUR/USD), and later selling it for a higher price.
You can capture a down-move just as easily by selling the pair SHORT, and later buying it back at a lower price.
Go back to the School of Pipsology, and study carefully. The concept of selling short is fundamental to the concept of trading. In the forex market, there are no impediments to selling short; and short selling is, in fact, about half of our normal, daily activity.
Here’s one way to look at buying and selling currency pairs: When you buy any pair (say, the EUR/USD), you are buying the base currency (in this case, the EUR) and selling the cross-currency (in this case, the USD). When you sell a currency pair (again, say it’s the EUR/USD), you sell the base currency (EUR), and buy the cross-currency (USD).
Notice that there are two kinds of buying: You can buy to open a LONG position, and you can buy to close a SHORT position. And there are two kinds of selling: You can sell to open a SHORT position, and you can sell to close a LONG position.
Study these concepts, until they become second-nature to you.
I read a lot these days about forex trading and tried 2 demo accounts: one started with $3000 and now its $6000, and the other started with $100, was $200 and now it’s $20
I lost most of my money in the second account because I didn’t use stop loss and I think I learned my lesson.
But there is something I don’t understand. Let’s say I see a very strong candlestick pattern, a bearish reversal one. Ok. I will sell short on this one, but my question is … where do I set correct take profit and stop loss. Stop loss it’s easier to set, but take profit is very hard. if I am too greedy. i might end up not reaching the desired level and start to lose until stop loss level is reached. It happened to me not only once.
So how do you know to set a realistic take profit level upon discovering a strong bearish reversal pattern? Or any other strong pattern in fact.
Some people go for a set pip profit, while others set their “take profit” at a monetary value, it is up to you, and what type of trading style that you want to evolve into…
Funny you ask…I just took my short eur/usd profit…at 60 pips…I decided that target when I made the trade…also…I am done for the night and don;t want to continue monitoring it…
