Page 82 - Ultimate Guide to Currency Trading

Different News, Different FX Pairs

It is important to trade the FX pair that is in the news during that time. Movement in the market is
what allows you to make money. A nonmoving or stagnant currency pair will only tie up cash with no
gains, all while still having that amount of cash at risk. You will do well to trade with a long and a short
time horizon, but above all, trade the news. Trading the news is the process of scouting for setups, or
opportunities to make money in the market. Looking for setups is your currency trading job while you
are not actually in a trade.

It is possible to look for an appropriate and profitable setup for days before one develops that
has your risk tolerance and an appropriate return potential. In fact, the scouting for setups is the
process of keeping your money safe and not in a trade, and allowing yourself to trade only when you
have a very certain chance of getting your money back intact, along with a profit for your risk taking
You should get to the point where you actually prefer to be in cash, and not in a trade. Only
begrudgingly should you enter into a trade, and only if the setup offers a reasonable chance of profit.

It is possible to build a short-term trading system for maximum safety by being in cash
over 90 percent of the trading week and be in a trade less than 10 percent of the time.
This equates to about twenty-four ultrashort-term trades a week. Limiting your cash
exposure to the market can keep your account safe and secure!

If you are going into a trading week, look for points that might develop into trading
opportunities. If you find them before the week starts, (if you spend an early Saturday morning
reviewing charts and fundamentals), that is good. Sometimes, however, things can change (for the
better!) and a clearer directional trade will present itself. You would then switch gears and change
your focus and money to the new FX pair that is in the news.

At any time during the trading week, information regarding economies and the currencies
those economies affect will be in the news. Not only that, but the news story that you have been
following over the weekend and into the beginning of Monday and Tuesday might fall out of
importance as a bigger story in a different country or part of the world develops. You might have been
following the first story in your broker's reports and on the news wire, and may have been getting
ready for a chance to enter the market on the winning side of that trade.

It might be that the Hungarian forint is gaining too much value against the Swiss franc. A story
might be developing that the HUF is just about to change direction against the CHF. Upon further
examination, you determine that the CHF/HUF is at the top of its 200-day moving average. Not only
that, you determine that there is a resistance point at the current trading level, and that volume has
been building. Under these circumstances, a small, highly leveraged, long-term trade would be your
preference, and you begin to look to entering the trade later on in the week.