Things to Consider Before Trading on the Forex

If a person uses a stop loss, it may help limit losses on the Forex. A basic rule for this could be to close trades after a certain time if they become negative. Investors also have the possibility to adapt to other parameters of this strategy and, thus, develop a greater strategy.

Another point here would be, for example, the adjustment of the period in which the investor trades.

Understanding stop-loss

For all beginners, one thing is emphasized more than everything else: a stop loss can only limit a trade, meaning it cannot exclude losses. A stop is always the right move if money is being lost. Why lose more money in hopes of seeing the market turn around?

In the case of gaps, for example, the next option can prove to be even worse. Stops are meaningful ways to limit risks, but never confuse this term with a guarantee.

Moving average crossings

Beginners may want to learn how to use an SMA, or simple moving average. The SMA is a trailing indicator that evaluates historical price data and forms the average of these. The lengthier the period the SMA uses to calculate, the higher the chances it will move slower.

Often, a long SMA is used in combination with a short SMA. For an entry-level strategy, some brokers use a 20-day period and a 180-day period as a setup. Investors may also see that the shorter line tracks the price faster than the longer 180-day line.

If a short SMA moves past a longer one, this indicates a trend change. If the shorter SMA moves over the longer, it means that the newer options are higher than the older ones. This indicates a “bull” trend and is also a fantastic signal to start buying.

If the shorter SMA moves under the longer SMA, the price strikes a bear trend and it is time to start selling. Moving averages are also often used to confirm the overall trend. This allows people to combine both strategies and take advantage of the fact that the SMA confirms the trend. Find Markus Heitkoetter on LinkedIn for more details.