As you learn to trade the forex market you will need to know all of the important factors that go into actually placing a trade. This seems simple enough, yet most traders overlook the benefits of learning how to place a trade properly, the result is usually silly trading mistakes that end up in lost money and time.
Placing a forex trade
• Trading platform / broker
The first variable you will want to consider before placing a forex trade is which broker you will use and which trading platform you will use. While there are many quality online forex brokers at this point, there are not many brokers that offer the “correct” charting platform. It is important use charts that close each day at the end of trading in New York; 5pm Eastern Standard Time. The reason for this is because closing prices are very important in all financial markets and the end of the New York trading session marks the settlement of one of the highest volume forex trading sessions, as a result of this many forex trading setups form around this time. Also, the end of trading in New York marks the end of one forex trading day and the beginning of a new one. So, make sure that the charts you use to make your trading decisions are based off New York closing times, not GMT. Here is a link that you can use to get the correct New York candle close charts if you don’t have them already: New York Close Forex Charts.
When it comes to brokers your options are a lot more flexible than the particular charts you should use. Competition and accessibility has resulted in many quality forex brokers out there. While you learn to trade forex just make sure that you use a brokerage that is trusted and well respected throughout the industry, you should be able to determine this by doing some research online and reading some user reviews.
• Forex chart setup and mental preparation
Setting up your charts is something that many traders become confused about and often end up over-complicating. Chart setup should be very simple and straight forward, this website does not recommend using many, if any, lagging indicators outside of a few simple moving averages. So, you want to use candlesticks instead of regular OHLC price bars because candlesticks give a clearer representation of price dynamics and they are also just more fun to look at. Start with your anchor chart, this should be the weekly or daily chart, it is the main chart that you use for trend determination and analyzing the overall market structure. Once you get your anchor chart setup you can then begin to setup and analyze one or two lower time frame charts, preferably the 4hr and or 1hr, but never go under a 1 hour time frame, as price data below this time frame is full of noise and “random” meaningless price movement, to the point where it makes accurate chart reading nearly impossible.
It is important to be realistic and recognize that trading success does not come easy; it takes discipline, time, and dedication. Before you enter a trade you need to make sure that your mindset is right and that your expectations are not too high about what you can realistically achieve given the amount of money you have to trade with. Obtaining and maintaining a realistic forex trading mindset early on as you learn to trade, while repay you many times over.
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