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Position Trading: How Forex Traders Use Positions

Within the forex market, there are traders known as position traders (sometimes listed as “buy and hold” traders), who take positions for the long term. They base this on long-term charts and macroeconomics, and they operate in pretty much every market there is—including the hyperactive forex market. 

Considering how the popularity of position trading is growing, it’s worth putting this market approach under the microscope. Here’s a look at the details behind position trading, along with how common traders use positions.

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Forex Trading Basics: How to Spot and Trade Harmonic Patterns

If you’re serious about forex trading, you need to understand how charts and chart analysis tools can help you identify trades that maximize your potential earnings while minimizing risk. 

Standard chart patterns are easy to identify just by glancing at a chart and spotting certain movements, but advanced patterns, also known as harmonic patterns, require additional tools and information to identify trade opportunities and monitor price movements.

These harmonic patterns offer incredible value to traders who use them to inform their trading plan, and all of the tools you need to spot and track these patterns are available in online platforms such as MetaTrader 5. In general, the key characteristic of any harmonic pattern is the way the chart movement corresponds to the famous Fibonacci levels.

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4 Steps to Using the Inside Bar for Trading

When analyzing chart patterns to identify potential volatility with an asset’s price, an inside bar indicator is one of the stronger signals traders can spot. Inside bars on a candlestick chart represent consolidation of price action where the bulls and bears are both struggling to move the price higher or lower from its current position.

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Forex Hedging: What is It and How Do You Use It?

Investors of all stripes use hedging as a strategy to protect one position from adverse price movements. Typically, hedging involves the opening of a second position that is likely to have a negative correlation with the primary asset being held, meaning that if the primary asset’s price makes an adverse movement, the second position will experience a complementary and opposite movement that offsets those losses.

In forex trading, investors can use a second pair as a hedge for an existing position they’re reluctant to close out. Although hedging reduces risk at the expense of profits, it can be a valuable tool to protect profits and stave off losses in forex trading.

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Currency Pair Trading: 3 Ways to Trade GBP/USD

As the third-most popular currency trading pair in the world, GBP/USD offers one of the most liquid forex tradings you can expect to find. That comes with many of the expected characteristics of a pairing traded at a high volume, including narrow spreads, high volatility, and opportunity to carve out strong profits with well-timed positions.

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Your #1 Trading Goal

The bottom line is that money management will make or break you as a trader. This is a widely accepted fact.  Proper money management rules have been proven over long periods of time and are not secrets to anyone. The rules of ‘keeping your trades small’ and ‘cutting losses’ for example, have worked for hundreds of years, yet many people ignore them. 

No matter what aims you may identify when first determining what you are setting out to achieve with your trading, all aims are secondary to your primary goal — preserving your trading capital. This is by far the most important aspect of successful trading. Simply stated, you need capital to trade.

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Chart Patterns vs Indicators: What's Best for Technical Analysis?

For any trader, a critical step in developing effective trading strategies is choosing an analysis method that evaluates charts and potential trade opportunities.

Chart patterns and indicators offer different approaches to evaluating markets, with each presenting its own relative strengths and weaknesses. Although some trading experts are staunch advocates of one over the other, many traders do use a combination of these methods to create their own customized trading strategy.

Here’s a look at the benefits and drawbacks of each school of thought.

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EUR/USD Day Trading Strategies

As the two largest currency markets in the world, the EUR/USD pairing offers excellent liquidity for forex traders of all types. While the pairing has seen periods of high volatility—most notably in 2010 and 2011, due in part to Greece’s economic crisis—the recent trading history for this pair has seen lower volatility and tight spreads.

This lack of volatility can be a challenge for day traders, since stable prices for the pair can limit a trader’s potential profit margin. The risk is lower, but so is the potential reward. Despite this overall stability, there are still opportunities to capitalize on EUR/USD volatility by paying attention to price movements and tracking potential market triggers.

Here’s a look at some possible day trading strategies to deploy with the EUR/USD currency pair.

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Currency Pair Trading: How and When to Trade USD/JPY

With high liquidity and low bid-ask spreads, USD/JPY is a popular currency pair for experienced traders as well as beginners. Since the financial crisis in 2008, Japan’s yen has demonstrated itself as a reliable reserve currency, becoming the world’s third-largest safe-haven currency in recent years. The USD/JPY pairing also plays an important role in trading activity throughout Asian markets, since JPY is often bought or sold as a substitute for more unpredictable currencies in the region.

Because JPY is the leading reserve currency in the Asian market, its high liquidity is a benefit to traders looking to capitalize on market movement in countries whose currencies would otherwise be tougher to trade—especially at a large volume. Even though the USD/JPY pairing offers greater stability and liquidity than other pairings, traders should still study the market factors that can affect price movements.

Here’s some insight into the timing considerations and other market influences to watch when trading USD/JPY.

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Timing is Everything

I believe one of the most often overlooked yet simple decision to make when developing your trading plan is the timing.  What will your trading style be like and what type of trends will you look to trade?

I also believe this is critical as trying to trade a wide range of trading styles and time frames at the same time, becomes counter-productive.  It makes it difficult for the trader to focus on one approach and master that approach. 

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