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http://www.forexconspiracyreport.com/range-trading-forex-currencies/Range Trading Forex Currencies
A common way to profit from foreign currency fluctuations is to recognize and trade within established ranges. Range trading in Forex currencies requires attention to the fundamentals that drive each half of a currency pair. This commonly gives the trader a fair idea of the range within which the pair will trade and when than range may change. Then a trader uses technical analysis tools such as Japanese candlesticks to assess market sentiment and help predict just when an up market is about the convert to a down market and vice versa. Trading Forex with candlesticks fits well with the practice of range trading Forex currencies as it gives traders a simple and clear view of evolving market sentiment.
The Mechanics of Range Trading Forex Currencies
An important issue is picking which Forex pair to trade. An excessively stable pair is not prone to delivering profits. An excessively volatile pair may deliver profits or losses. A currency that trades in high volume and liquidity such as a major to major pair is typically more readable with statistical and technical analysis tools. Also, major currencies often provide the trader with more fundamental information on which to determine a likely trading range. Once a trader picks a pair he or she researches the factors that drive currency prices for each currency. This should provide information with which to pick a likely range in which one expects the pair to trade. With this information in hand a trader then uses the simulation trading options on his trade station to test his hypotheses. When he or she can reliably generate profits in simulation trading it is time for range trading Forex currencies in the real world. The time to learn Forex trading is not with live trades on an untested strategy but rather in the “back room” of simulation trading.
Hypothesis and Strategy
When a currency trader assesses the market as a whole, individual currencies, and one currency against another, he or she develops assumptions as to how the market and individual currency pairs will trade in the future. When a review of market history shows that a currency pair repeatedly hits and same highs and lows over time it is time to consider range trading of Forex currencies. When the market is always volatile for a given currency pair, other strategies will likely do better to generate profits.
Entering and Exiting Trades
As we note above range trading Forex currencies is based on assumptions that the market will continue to act as it has and that fundamentals will remain relatively stable. When a trader enters a trade, however, he still sets his trading stops, both high and low. By doing so he assures himself that quick changes in market sentiment or a possible flaw in his strategy will not result in undue losses.