Selasa, 20 November 2007

What Forex Pair that I Should Trade?

Most trader doesn’t realize that not the pair has to be suit for him/her but the trader it self that have to make adjustment with the pair he/she choose. Currency market changing everyday and you can’t predict where it goes or how it will change. We as human that have ability to change and make adjustment to the market changing.

A trader can choose major pair like EUR/USD or GBP/USD as his/her trading currency because it suit with his/her equity, it’s volatily, and trading time. But no one can guarantee it will last forever. So the trader has to be flexible that he/she could change his/her trading currency whenever the recent currency market changing. There’s a proverb about it, ”Don’t Fall in Love With Your Trading”. When it change you have to change too because if you don’t you only get crushed. That’s why until this day I’m not using automatic trading software.

Ok, now you know that you are the one who need to adjust with the forex pair, but still you need to choose the best pair that suit for your trading style. First, you must know how much time you have every day? If you only have one full day on the weekend, I guess you not suit for trading, because many broker not allowed to trade on weekend and you can’t make transaction in or out. The only thing that you can do in weekend is making a backtest and analyze about your trading on that week. You should have at least 2-3 hours in five trading day from Monday to Friday at active market time based on that currency. If you live in Asia like me, you will have time at evening. This could be good because not disturbing your working time in morning and afternoon.

Then you have to know the margin, spread, minimum equity needed, and minimum quantity of your broker on their term of services. You must know that if you follow this minimum requirement, you not in a bad situation that could make you panic and make a bad decision. I know a lot of people who make a bad decision because their quantity of transaction is very big which is the minimum quantity of his broker. A good trader usually only risking 1-10% of equity on each trading, never more. So if you loss, you will loss money about 1-10%, not make you in very bad position I guess, and won’t make you panic if you are lossing. This is a situation that you should consider if you are trading the currency pair that need a lot of margin, and have high volatily,ie: GBP/JPY. That currency pair is very volatile during the news announcement, and need a big stop loss. If you can’t handle the volatily, don’t trade in currency pair like that.

Your trading system could make you get money or lose money. Make sure that your trading system have a good signal that offer you to get the money than losing it even when volatily. During flat market and volatily times, market often make a false signal for many traders. Make sure that your trading system and you know when to stay out from the market.

Then last is try a backtest and forward test with a demo trading with virtual money. You will know at last the best trading pair that suit for you. Only by doing it, you will know the truth. Good Luck!