Forex and intra-day trading!

[JTrader]

Forex and intra-day trading - beginner questions!

Hello

I want to learn about trading Forex and have a few questions. The pairs that I am interested in are;

EUR/USD
EUR/GBP
GBP/USD

How many pips stop-loss would you recommend for each of the above pairs?

Besides TA charts and having access to impending economic announcements what other entities are useful or necessary to a good Forex trading strategy?

When buying for example £10,000 worth of USD, a 1 pip movement would equate to a $1 profit or loss, and may typically require 1% margin (£100). I would like to stick to the 1% risk to trading capital per trade rule. Therefore does intraday Forex trading require more capital than other forms of trading in order to account for a decent sized stop loss and the 1% rule?

Will a technical analysis strategy that can work well with stocks (i.e. implementing RSI, SMA), work equally well with Forex, or can there be inherant differences?

What other (if any) inherent differences exist between Forex and stock trading?

I'm sorry if these questions sound all too basic, but I am a Forex beginner!

Any other information welcome

Many thanks

jtrader.

 

[neil]

http://www.trade2win.co.uk/boards/forumdisplay.php?f=54

Use the "Search" facility under the tab "Discussion" at the top of the page.

 

[TheBramble]

JT - I don't think it matters which pair you choose. I think it is important that you only choose one pair to start with.

 

[Buk]

agree totally with Bramble....pick ONE pair & observe it's behaviour/characteristics fully! you'll find that conventional t/a works pretty well on the Forex, and conforms to the typical pattern behaviour of other instruments you may have traded. As the crosses have a tendancy to 'trend' in (occasional) large ranges, entries can be established up & down the ladder, according to normal t/a rules.....I wouldn't say you'd require more capital to trade the crosses, just define your risk/reward & stop management according to your plan & stick to it! They can 'whip' on news quite ferociously, so be aware of impending 'news' releases prior to entering positions.

 

[JonnyT]

You can trade these with a 10 pip stop if you get the strategy right.

JonnyT

 

[Newtron Bomb]

All of the above is good advice

If you scapling then 10 pips or less will be as good a stop as any. Wil this be a mental stop of a physical stop? are you able to pull the trigger if this is a mental stop? If you are using d4f will they allow you to place a 10 pip stop?
How much stop would i recommend for each pair...? what the most you would be prepared to loose on each trade? If you have sufficient funds to manage your account efficiently then one suggestion could be to use a % of capital and let the charts dictate how much your stop loss should be.

There has been a lot of FX discussion on the bb in particular about JonnyT's BO strat which is well worth a read.

Happy trading
NB

 

[TheBramble]

Good points all.

One thing I will add (and I am very much still a newbie myself to FX) is the physical mechanism of setting stops.

I'm using FXCM which I think is pretty good. But setting a system stop on my position rather than a mental one has not really worked out well so far.

I use a 5min chart and spikes last week (only been trading FX a week) knocked me out of 3 trades which would not have occurred on manual stop.

In one instance, I was triggered into the market AND stopped out, all in the same 5 min bar!

I know it's a trade off between controlling risk and being whipsawed out prematurely, but I'm still undecided how I personally want to play it.

My current preference is to come out only if the close of the bar is through my stoploss. I appreciate this may expose me to greater loss than planned stoploss, but as I say, a trade off.

 

[rog1111]

TheBramble

I don't like the sound of these spikes - what size stoploss were you using ? Do you think that the spike was a data error (intentional or not), or real trade prices ?

rog1111

Good points all.

One thing I will add (and I am very much still a newbie myself to FX) is the physical mechanism of setting stops.

I'm using FXCM which I think is pretty good. But setting a system stop on my position rather than a mental one has not really worked out well so far.

I use a 5min chart and spikes last week (only been trading FX a week) knocked me out of 3 trades which would not have occurred on manual stop.

In one instance, I was triggered into the market AND stopped out, all in the same 5 min bar!

I know it's a trade off between controlling risk and being whipsawed out prematurely, but I'm still undecided how I personally want to play it.

My current preference is to come out only if the close of the bar is through my stoploss. I appreciate this may expose me to greater loss than planned stoploss, but as I say, a trade off.

 

[TheBramble]

TheBramble

I don't like the sound of these spikes - what size stoploss were you using ? Do you think that the spike was a data error (intentional or not), or real trade prices ?

rog1111

No, they weren't data errors or anything like that. The news release at 13:30 (BST) on Thursday was a case in point. Obviously in future, a time to be out of the market - however temporarily.

I'm using a very tight Stoploss - not normally more than 35pips, more usually in the 7-10pips range.

All based on pivot level differences. Higher volatility market = larger stoploss.

 

[rog1111]

TheBramble

Personally tight 7-10 pip stops would worry me, even if they were trailing stops. I have found optimum historical results using fixed stops larger than 35 pips for EUR$ and GBP$, but then it depends on your time frame I guess.

rog1111

No, they weren't data errors or anything like that. The news release at 13:30 (BST) on Thursday was a case in point. Obviously in future, a time to be out of the market - however temporarily.

I'm using a very tight Stoploss - not normally more than 35pips, more usually in the 7-10pips range.

All based on pivot level differences. Higher volatility market = larger stoploss.

 

[chaana1]

jtrader,

FX trading for all the major 6 pairs is very similar... some pairs move the same way (up) and others move the opposite(down) Like EUR/USD and GBP/USD move in the same direction. Stick to the major 6 pairs and the spreads you will get from your Bank will be tight... 3-5 pips depending on the bank/broker.

As far as stops are concerned 20-30 pip stops are more than sufficent... imo. But then since FX is not a regulated by exchange it can slip quite a bit... so best to trade with good support/resistance.

Also trailing stops must be used... behind support/ resistance to avoid turning a good trade bad.

All the Best

 

[mikeyuk]

what is a good ,/safer time frame to trade the forex would say ,,, intro day,,, or daily,,,

 

[c6ackp]

mikeyuk

I'm not sure there's a "safer" time frame: it all depends on how much time you have to dedicate to trading, how long (on average) you expect to hold onto your positions, maximum drawdown, etc.

For intraday trading, assuming a 3-5 pip spread, you would need to be very skilled/disciplined to trade profitably off the 1 min chart only.

Trading off the 5 min chart (assuming you have strategies that work) you could get away with stops of 10 pips or less.

Trading EOD prices you would probably need stops of 50-100 pips (depending on the opportunity) to allow for noise (so your possible drawdown may be large).

Whatever you select as your primary timeframe, I would suggest using as many timeframes as possible simultaneously, in order to get the full picture.

HTH
Best of Luck
Steve