Summary of some foreign exchange trading skills
2023-06-20
Forex Trading Tips
1. General trading discipline
Trading discipline is a macro regulation for risk control. It is a rule to avoid people's psychological weaknesses and mentality changes, and to help control the trading frequency after mentality changes. It is the first component of the trading system.
1. Macro discipline
(1) If there are 3 consecutive losses, you should force yourself to take a break, not blindly trade, analyze the reasons for your losses, adjust your mentality, and then look for opportunities to enter the market.
(2) If the continuous trading profit exceeds 50%, it will be forced to take a break.
(3) Daily transactions should not be too frequent.
(4) After the transaction stop loss, do not conduct reverse transactions within 3 hours.
2. Discipline before admission
(1) Do not enter the arena when it is silent.
(2) Try to be a currency with a clear trend, and not a currency with an uncertain trend.
(3) When going long, only do strong currencies and not weak ones; when shorting, only do weak ones and not strong ones.
(4) Transactions include at least four basic elements: entry price, stop loss price, target price, and position control.
(5) Shock market, when the shock range is small, do not trade within the shock range.
3. Discipline after admission
(1) If the profit of the short-term position exceeds 30 points, the stop loss will be brought to the vicinity of the cost price as soon as possible.
(2) Execute the trading plan at the same time level. For example, according to the operation done on the hourly chart, do not rashly change the plan just because of the short-term bad signs appearing on the 30-minute chart. Those who take the initiative to leave the market must have clear rules, that is, clear rules for closing positions.
(3) After the contrarian order enters the market, if there is a loss, it will not be changed to a midline position due to any signal. Short-term contrarian trading positions, try not to hold positions overnight.
2. Principles of opening positions
1. The principle of taking advantage of the trend to build a position The rising trend will never continue to rise because the increase is too large, and the falling trend will never refuse to continue to fall because the decline is too large. The biggest feature of the trend is continuity, and opening a position along the trend is the relatively least risky way to open a position. in principle:
(1) Entry: Enter the market cautiously at any time, even if you operate with the trend, you must trade based on the basis, and you must strictly control risks.
(2) Holding positions: The trend has not changed the signal, so hold firm confidence.
(3) Profit: follow the trend, continuously increase the stop loss, and do not predict the high point, so as to grasp the continuity of the trend.
2. The principle of building a position against the trend When building a position against the trend, it is especially taboo to be greedy for cheap, and under no circumstances should it be used as a reason for opening a position because the drop has been particularly large. And pay attention: do not do small-level contrarian transactions. in principle:
(1) Control is the top priority in contrarian trading to prevent irreparable losses.
(2) give up. There will always be rebound opportunities, but many rebounds are not suitable for trading: small-level rebounds, weak rebounds, and the first wave of rebounds. These opportunities are significantly large risk opportunities.
(3) Before the trend is confirmed to reverse, one must fast in and fast out when trading against the trend, and must not be willing to fight.
(4) Trading against the trend without basis. Sometimes trading with the trend can even be unfounded, as long as the risks can be controlled well, and in trading against the market, even if the risks can be well controlled, don't trade without basis.
3. Principle of liquidation
As a closing signal for homeopathic trading, it mainly uses Dow theory, channel, wave analysis, k-line, k-line combination, moving average, macd and other indicator signals. Note: The exit signal for homeopathic trading also requires multiple signal verifications before it can be used as an exit signal; in contrarian trading, a reliable signal can be used as an exit signal. For example: the use of channel closing signals: the resistance generated by the channel is often regarded as an exit signal, but the concepts of mid-line and short-term must also be distinguished, not necessarily all closing signals. For example: in an upward trend, the upper edge of the upward channel may not be used as a signal to close positions in a trend-following transaction, but only as a warning not to continue to establish long orders. Finally, when there is a reverse breakthrough in the channel, it is regarded as an accurate exit signal for trading with the trend.
Note: The exit signal generated by the analysis method should preferably be the same level signal. For example, if the signal on the hourly chart goes long with the trend, the exit signal should also come from the hourly chart or a higher time-level graph, instead of the exit signal below the 30-minute chart. In the process of holding positions against the trend, if there is a regular signal of opening a position against the market at the same level, it is necessary to leave or reduce the position following the trend, or follow up the stop loss to a very close support position. In mid-line trading, the stop loss can also be set according to the short-term, so as to protect the position as much as possible. When trading against the trend, if a trend-following trading signal has been issued, the counter-trend order must leave the market, and the exit signal at this time is equivalent to the entry rule for trend-following trading.
4. How to set stop loss
1. The necessity of stop loss: The greatest trader in the world has a useful and simple trading rule - "Alligator Principle". The law stems from the way crocodiles eat: the more the prey struggles, the more the crocodile gets. Suppose a crocodile bites your foot. If you try to break free with your arm, its mouth will bite your foot and arm at the same time. The more you struggle, the deeper you sink. So, in case the crocodile bites your foot, remember: your only chance of survival is to sacrifice one foot. If expressed in the language of the foreign exchange market, this principle is: when you know that you have made a mistake, you should immediately end your appearance! No more excuses, reasons, or expectations, and get out of here.
2. How to set a stop loss
(1) Points stop loss setting method, such as 30 points, 40 points, 50 points, etc., choose the appropriate points according to different trading cycles. For short-term trading, it is best to choose a stop loss of about 30 points, and for medium and long-term trading, the stop loss should also be kept within 100 points.
(2) Set the stop loss position at the nearest high and low point, generally choose 10-20 points above the high point or 10-20 points below the low point.
(3) The resistance and support level settings of technical indicators mainly include: moving average, trend line, and golden section.
(4) Reference objects for K-line shape setting mainly include: the tangent line of the trend line; the neckline position of the head shape such as head shoulder top or arc top; the upper and lower rails of the channel; the edge of the gap.
(5) The integer price of the exchange rate is mainly because the integer price has a certain support and resistance effect on the psychology of the investing public.
5. How to control the position
1. Total position control rules (in the total position control, positions that have already made profits and locked in zero risk positions are not counted.)
(1) Trading with the trend We divide the positions into light positions, medium positions, and heavy positions. Then in the trend-oriented trading, the medium position can be reserved as a position following the market trend, and the other positions can be used as liquidity positions. The specific division can be adjusted according to the individual preferences of investors. Those who emphasize short-term operations can increase their liquidity positions, and those who emphasize mid-line operations can reduce their liquidity positions.
(2) Counter-trend trading Position control in counter-trend trading is more important. In most cases, you can only take light positions. For very mature trading rules with a high success rate, you can appropriately expand your position to a medium position ; In contrarian trading, unless the direction is clearly reversed, there is no opportunity to operate a heavy position.
(3) Trading in a sideways market The position control in the consolidation market is relatively strict. Before the consolidation area is broken through, heavy positions cannot be operated. After the breakthrough, the position can be gradually increased.
2. Rules for adding positions
(1) The method of increasing positions Equal allocation and increasing positions: that is, each time a position is established, the position allocation is consistent, and there is no increase or decrease. Pyramid increase: that is, each time a position is established, it is smaller than the position of the last established position (when the position is not closed). This situation is often used to take advantage of the trend to increase positions. Inverted pyramid increase: that is, each time a position is established, it is greater than the position of the position that was established last time (when the position is not closed). After several years of communication with tens of thousands of Huimin, I know that this third method of increasing positions is commonly used by many investors. Here I would like to remind everyone that investors must use this method with caution.
(2) The use of homeopathic trading under different trends: the method of increasing positions by equal distribution and pyramid is mainly used; for multiple positions within the plan, the inverted pyramid can be used to increase positions with a basis. Adverse market trading: short-term trading, do not use any method of increasing positions, only one-time position building; medium-term trading, you can appropriately increase positions according to short-term homeopathic trading, but the method of increasing positions can only be increased by pyramid. Sideways trading: Before the breakthrough of the sideways range, no method of increasing positions is used, only one-time position building; after the breakthrough of the sideways range, positions can be increased by equal distribution or inverted pyramid.
6. Trading time selection
1. Trading time when it is easy to lose money
(1) Friday: The market on Friday is the worst to predict.
(2) Holidays: The trading volume at this time is very small, especially the holidays in the United States and the United Kingdom have a great impact on the market, and many banks and institutional investors do not participate in the transaction. The market may fluctuate very little, or the market may be magnified due to the small trading volume, and the exchange rate may rise or fall sharply in the short term. So leaves are hard to grasp.
(3) News and data: Before the release of data or news time, it is difficult for us to predict the direction of price movement. If you trade rashly before you are sure of the corresponding method, the result may make you miserable. If you must trade, I suggest You use the data trading strategy that I will describe to you below.
2. Trading time selection
To engage in foreign exchange trading, it is best to choose the trading hours when the market is relatively active. The foreign exchange market is relatively active from 16:00 Beijing time (15:00 in summer time) to 1:00 in Europe (0:00 in summer time). During this period, there are many important data releases and news events in Europe and the United States Occurrence is the most volatile market and the trading session with the most participants, and it is also the best trading session. For the Chinese, even if they can't catch the afternoon trading due to work, they can also trade during the overlapping hours of Europe and the United States. Of course, if you have a special job and can only trade during inactive trading hours, you must also adhere to discipline and concentrate on studying the laws of the market during these special hours.
Seven, data news market trading
We know that there will be some very important data releases or news events in the world every week. For the violent market fluctuations caused by these data and news events, we cannot predict the direction beforehand. At this time, we must not hold the mentality of gambling Easy entry. In addition, after general data and news events are announced, the market fluctuates violently, and it is difficult to place orders manually. Here I will introduce to you a simple and effective trading strategy: pending order trading. There are four types of pending orders: buy limit, buy stop, sell limit, and sell stop.
Eight, deviate from the transaction
1. Deviation transaction
There are two common divergences in foreign exchange: the first is the divergence between price and indicators (oscillating indicators, trend indicators, etc.); the second is the divergence between technical and fundamentals, such as the divergence between price trends and fundamentals. The main thing here is the divergence between the exchange rate and the indicator.
2. The type of divergence between the exchange rate and the indicator
(1) A normal divergence is seen as a possible signal of a trend reversal. If the exchange rate makes lower lows, but the indicators gradually increase, then it is usually a bullish divergence, that is, a bullish bottom divergence. Conversely, if the price is making higher highs and the indicator is making new lows, then it is usually a bearish divergence, also known as a bearish top divergence.
(2) Implied divergence An implied divergence is usually seen as a signal that the trend may be more sustainable. If the exchange rate makes a higher low and the indicator makes a new low, then it is usually a bullish implied divergence, which is an implied bullish bottom divergence. Conversely, if the exchange rate makes lower highs and the indicator makes new highs, then it is usually a bearish implied divergence, which is an implied bearish top divergence. It is also the same picture just now, we can see from the picture that the exchange rate hits a higher low point, while KDJ hits a lower low point, and there is an implied bullish bottom divergence
3. The method of trading deviation
Divergence is like an early warning signal, telling you when the market is turning. What you should pay attention to here is that divergence is only a signal, not a sufficient condition for opening a position. i also need to combine other different types of indicators and patterns for cross-validation and signal filtering.
9. How to deal with emergencies
In foreign exchange operations, unexpected events are a factor that cannot be ignored. Emergencies include a lot of content, from political, military to economic aspects, all-encompassing. When encountering emergencies, the most important thing is to stay calm in the face of danger. Don't affect the operating mentality because of the violent fluctuations in the disk . If it is a short position at this time, avoid chasing the ups and downs. If you have a position and fail to close the position in the first time, you must keep calm and don't close the position in a panic, because the positions closed by panic are all panic Panic trading often only triggers short-term market trends, and has little significance for mid-line trends. To judge the market after an emergency, we should trace back to the source, understand what emergency happened and what is the significance of this event, so as to judge the future trend. Emergencies can be divided into two categories, one is emergencies that have only short-term impact and does not hinder the medium and long-term trend; the other is emergencies that can change the mid-line trend and have inflection point significance, and most emergencies belong to the former.
Make a subsection here:
emergencies are unpredictable;
Unexpected events will cause large short-term fluctuations in the market;
When encountering emergencies, keep calm and do not enter or leave the market blindly;
It is wiser to wait and see than to chase up and down;
Observing discipline (such as strict stop loss) can minimize unexpected losses;
Most emergencies will not change the midline trend of the market.
10. Carry trade
1. What is carry trade
The base interest rates of different currencies are different, which leads to the interest rate difference between the currencies, and the arbitrage is to take the interest rate difference between the two currencies. Note: The spread is a risk-free benefit. Due to the relatively high leverage used in foreign exchange margin trading, this allows small funds to carry out carry trades. For example, we use 100:1 leverage to carry out AUD/JPY carry trade:
2. Principles of carry trade
First: Choose a currency pair with a large interest difference. Second: Under the first condition, choose a currency pair that is in an obvious trend, so that you can not only get the interest rate difference from it, but also earn the difference from the exchange rate change.
11. Short-term trading
The foreign exchange market can be both long and short, can enter and exit dozens of times a day, and is difficult to be manipulated by dealers, especially suitable for short-term traders.
1. Matters needing attention in short-term trading
First, keep a clear head and don't choose to do it when you are in a bad mood. Second, a little understanding of technical analysis, three points depend on ability, and seven points depend on feeling. So what to learn? Line charts with different periods can draw trend lines and use short-term average lines, that's all. The other is to look at the market index, listen to the fundamental news, and do it according to the feeling.
Third, the market is relatively chaotic, no matter the length of time, never trade.
Fourth, short-term trading is not every day trading.
Fifth, short-term trading does not mean that you are going to hit the bottom and hit the top. You should do it in conjunction with the trend, and try to restrain yourself from making contrarian orders. This is the most important one!
2. How to do short-term trading
There are many trading strategies for short-term trading. Almost every foreign exchange trader has his own set of short-term trading methods. Here we only introduce the following methods. You can refer to them and create your own short-term trading methods based on your own preferences. system.
12. Range trading
The assumption of range trading is that no matter which direction the exchange rate goes, there is a high probability that it will return to the origin. In fact, range traders are betting that the exchange rate may trade at the same level multiple times, so it is especially important to collect as many swing points as possible. Range trading is the simple concept of profiting by buying at support levels and selling at resistance levels. When major support and resistance levels are found, range traders buy currency pairs at the lows of the support levels and then sell as the price approaches the resistance levels. Investors may repeat this procedure several times until the exchange rate breaks out of the range. Range traders follow the principle of buying on dips and selling on rallies. When the exchange rate continues to trade within the channel for several weeks, or even several months, this trading strategy is an effective and profitable strategy. A horizontal range with a sufficiently large price span, buying near the bottom of the range, selling near the top of the range, and repeated operations can be called the ideal state of range trading.
Matters needing attention in range trading: First, there needs to be a certain profit margin. The profit margin is too small, so do not do it; second, the range needs to be confirmed multiple times at high and low points, and the high point and location must be tested at least twice; again, the exchange rate effectively breaks through the range When resolutely leave.