Forex Signal Trade
Posted on February 7th, 2009 by Tom Flora under Forex Signal Trade.
How To Find A Useful Forex Signal Trade
There are many ways and many schools of thought to find a proper forex signal trade. For example, one way is to use a simple 14 period exponential moving average - or ema - on a one minute chart. This is a very basic trade. When the candle closes above the ema - buy. When it closes below - sell.
I understand that for most people that is way too simple. So let's add another component to our next trade. We will now add a 5 period ema and move out to a five or even a fifteen minute chart. So the rule for this forex signal trade is: Once the 5 period ema crosses above the 14 period ema, we buy. When it crosses below, we sell.
Now let's add one more component to this trade that will give us a higher probability in our trade direction. We now add a 62 period simple moving average - or sma. When the 62 period sma is going up, then we only take long or buy side trades and pass on the sell trades. When the 62 period sma is pointing down then we only take sell trades. The idea is we want to trade with the trend. Often times this type of trade will net us more pips with less stop outs. As with any forex signal trade, always have a stop in place and don't get out of a positive trade until you see signs of a market reversal. Please be advised that the use of stop loss orders may not limit your losses to a specific level as market conditions may make it impossible for the order to get executed at a specific price. Have a good risk to reward ratio and make sure that your forex signal trade has been tested on a free demo account for a few weeks first.
Risk Warning