Page 152 - Ultimate Guide to Currency Trading

world's stock markets) because of an upcoming economic report that is due to be released out of the
United States next week. It could be that there has been a run-up or losing streak in the stock markets
and traders are taking a breather going into a long weekend. Whatever the reason, you will have to
decide if you should close out or keep your long positions.

If you run into this scenario, then the best thing to do is to look over your original trading plan.
If the idea of getting into the long GBP/USD pair was a good one from the beginning, then there is a
very good chance that the original trading plan still is good. Just because nothing has happened in the
currency markets yet doesn't mean that the trade will not work out in the end. In this case you know
that the GBP/USD pair frequently makes it up to 1.63, so you know that your take-profit point is within
reach of the normal price range.

Reviewing the quality of your trades as a method of deciding if you should let the positions
ride or if you should close them out can make for good business. Reminding yourself of the reasoning
behind a trade is also a form of quality control that will ensure the keeping of good trades when you
are thinking of doing the opposite.

In this case it would be best to wait for the long GBP/USD trade to come around and make a
profit. While it might be tempting to close out a trade that seems to be flat, the reviewing of your
notes can lead you to stay in the trade and wait for the 1.63 price level to come your way. If you have
the patience to wait for a well-placed and well-thought out trade to work out, you can be rewarded,
sometimes with very substantial gains. Gains from well-thought out trades will go a long way in
keeping your currency account profitable, and keep you in the currency trading game!

Buying into Long Term Trends

If you are trading your currency account for low risk/low return results, then you should be looking for
longer-term trends for your trading ideas. Long-term trends can mean slower currency-price
movements, which can equate to a chance to build up your positions over a length of time. In addition
to building up your position over several weeks, you can use much smaller bites at the currency pair.

A good example of this would be if your broker recommended that you build up long positions
in GBP/USD at any price below 1.60 as was presented earlier. The situation might be that the
GBP/USD might not move in any direction for a several weeks or even a few months. In this example,
you could go about an accumulation of the pair by a two-pronged method.

The first way would be to begin with your current margin balance and divide by thirds. The
idea is that you will limit the total exposure of your long GBP/USD account to no more than one-third
of your total margin. While it is usually recommended that you divide this third into three equal entry
points of the FX pair, you should now divide this one-third into six equal parts. These six parts are
intended for you to enter into the trade over the coming weeks.