Forex Trading : What Do I Get Out of This?

You should trade the Forex to make money. If you want to have fun, go to Facebook and play Farmtown. I do both.

Concepts in Common

In virtual farming you buy seeds to plant. You are told the harvest price and how long to harvest time. Because I value my time I will only plant crops that yield the best reward of harvest versus the cost of the seed, and the time till harvest.

This is wonderful. My farm account is constantly growing with virtual money given the time I can spend farming. I can have the best things that virtual money can buy (To the envy of my farming friends.)

I farm smart. I only wish Forex trading was this easy. The following concepts will help you without a guarantee, but are time proven tools of success in Forex trading.

In Forex Systems you employ concepts of:

- Risk Reward Ratio: which is a ratio between your stop loss risk and your desired take profit reward

- Time Stops: your expected time to profit or end the trade

- Time Frame of your Trading Style: Scalping in minutes, Day Trading in Hours, Swing Trading in Days

All of these concepts can work together within a Forex trading plan to help you determine if the trade you are about to enter is worth your effort and money risk.

I will focus on Risk versus Reward Ratio for the rest of this article. Time stops and Trading Style I will leave for you to explore on your own.

I trade smart. I never take a trade unless my expected take profit is greater than my stop loss risk.

Because prices often reverse by definition at Support and Resistance areas, your Take Profit should be between your entry price and S/R.

Example: For every 1 pip I risk I expect to make 2 pips profit – Risk Reward Ratio is 1:2

Pre Trade Questions: What is my:
Risk Reward Ratio
Risk/Stop Loss in pips
Reward/Target Price in pips
Direction of Trade:
Long -- look to Resistance area
Short -- look to Support area

Forex Market Conditions:
Where is Support and Resistance in relation to my Entry price?
Does this fit with my Risk Reward Ratio?
If yes – Take the Trade
If no – No Trade

Forex Trading Example:
Risk Reward = 1 risk versus 2 reward
Risk/Stop Loss = 15 pips
Reward/Target Price = Must be 30 pips or better

Forex Market Conditions
Trade Direction is Long
Next Resistance is 50 pips away @ 1.1285

Current price / entry is 1.1235
Stop Loss below entry @ 1.1220
Target Price above entry @ 1.1265

Evaluation

There is room to trade. Target price is under the resistance area by 20 pips, within my R/R ratio. All other entry criteria are met. I enter the trade managing it according to my trade management plan.

Conclusion: I hope this will improve your trading.