Page 27 - Ultimate Guide to Currency Trading

can work against you or for you. To make it work for you, go against wisdom: Place your
predetermined profit-taking point at one-third the value of your loss point.

In other words, you can set the software in your trading platform to close the trade
automatically at a profit three times as often as the trading plat-form will close the trade at a loss.

Use Caution to Trade Successfully

Remember, you are trading expectancies: the market expects something to happen, it just doesn't
know what. Neither do you. All you know is that the world's FX traders who are following the EUR/CHF
developments will be entering into that trade, both long and short, in a tug of war that will have the
effect of pushing the Swiss franc up and down, right up until the Swiss National Bank makes a formal
announcement. There is money to be made with this type of trade, in this type of market, and when a
currency pair is in the news and in play.

Using your trading software correctly, you could set up automatic selling points at a ratio of
win to loss of 3:1. After each winning trade and after the trading software automatically closes out
your position, you would then re-enter the trade, at the same ratio, repeating the process over and
over, until you made your paycheck for the week.

What math skills are required to trade currencies?
To trade currencies effectively it would be good to know how to do the basics: add,
subtract, multiply, and divide. Knowing a bit about ratios would also serve you well,
as positions are best made using a system of predetermined ratios to your total
QUESTION
account value.

As you can see, trading expectancies are a process of reading brokers' reports, digesting the
news, and looking at the technical indicators. Taking it to the next step would include spotting
situations in which the world's currency traders will be wondering what direction to go in for that FX
pair: long or short. Lastly, you would then place trades with automated profit and loss points that
would allow you to capture profits at a ratio suited for the volatility of that particular currency pair.

Trading Gold Like a Currency Pair

Although FX trading by definition involves the paper currencies of the world's economies, the trading
of spot gold can also be considered to be a form of currency trading. This is because gold itself if a
form of money that is traded the world over. Prices of gold are set in euros, Great Britain pounds, and
U.S. dollars. Additionally, like currencies, gold is traded from Sunday afternoon New York time until
Friday afternoon New York time. These hours and crosses are equivalent to Gold/EUR, Gold/GBP, and
Gold/USD. With this in mind, gold is and can be traded like a currency.