Wednesday, January 5, 2011

Forex Trading - How To Make Money In 2011

I've been lucky enough to make some very nice profits from forex trading in 2010, but you can never be completely confident in your own abilities because market conditions can quickly change. So how can you make some consistent profits in 2011?

Well first of all if you're a day trader or an early morning trader, for instance, you should be aware of the average daily trading range for each of the major currency pairs. In the last few months many of the leading pairs have seen their averages fall quite considerably, as indicated by the Average True Range indicator.

So therefore if this trend continues into 2011 and we see a relatively small trading range each day, you have to take this into consideration. There is no point targeting big points gains that are well in excess of the latest ATR figure.

To give you an example, the average true range of the GBP/USD pair is currently 135 points at the time of writing (December 29th 2010). So if you are like me and enjoy trading early morning breakouts, you would have to be cautious about trading any breakouts early in the day if the overnight trading range is already in excess of 100 points, for instance.

However if the range so far is just 30 or 40 points and a breakout occurs when the London market opens, then there is much more room for the price to move strongly in the same direction for the rest of the day. This is in stark contrast to earlier in the year when the trading range was in excess of 200 points and you could be a lot more confident about the price continuing to move in the desired direction.

Another way to make money in 2011 is by concentrating on longer term trades. A lot of people focus on trying to make quick profits, but as I've already pointed out, the trading ranges are quite small at the moment for the major pairs and this could continue into next year.

You are much better off trading the 4 hour and daily charts. My main forex trading system uses the daily chart for highlighting the overall trend, and the 4 hour chart for pinpointing entry and exit points. This has worked very well for several years now, and there is no reason why this shouldn't continue to be profitable in 2011.

The major pairs will always conform very well to technical analysis on these longer time frames, and overall it is a lot easier to make money. You simply need to come up with a straight-forward trading system that is able to detect one or two high probability trading opportunities every week.

The point is that if previous years are anything to go by, there should be plenty of opportunities to make money from forex trading in 2011. This is particularly true if you lengthen your time frames and trade the longer term charts. However it is still possible to make money from short-term trading as well despite the narrow trading ranges. You just need to find the right trading method.

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