Timing Your Forex Trading Online

Timing Your Forex Trading Online

The forex market is fast paced with times of increased volatility which makes the timing of your trade important.  If you do not time your trades correctly you can miss out on profitable opportunities.  Trading at the correct time is what separates a successful trader from an unsuccessful one.

Advice for Timing Your Forex Trading Online

When new traders enter the market they are often told to trade fundamentally but enter technically.  This statement implies that you should follow the swing of major news articles while using technical analysis to find the best entry points.  This is the best way to correctly time a trade as the news gives you a time range for trading while the analysis gives you a more exact point to trade.

What Happens When Trades are not Timed Properly?

Of course, there are times when even the most experienced traders do not time their trades correctly.  In these instances there are two scenarios that can occur:

  • The first scenario is that a big new event has happened and the reaction favours long trades.  However, in the seconds after the news hits the market has swung up but your trade is still pending.  When asked to ‘requote’ you agree but the market takes a sudden downturn.  This down swing hits your stop loss before the market turns up again.
  • The second scenario is that your trade does go through correctly, but the prices are too far away from market price that you would never be able to make a profit.

In both of these scenarios the problem is that after news items the retail traders are facing the institutional traders.  The institutional traders will unload their trade seconds after news items come out which often leads to retail trades not being fulfilled immediately.  The large institutional trades cause the first spike in the market but this is often followed by a retracement that could lead to losses.

In the second scenario the profit you make is affected by the spreads offered after a news event.  Brokers are aware that this is when traders unload their positions and they widen the spread to make more profit.  This leads to you paying more than the market price and making less profit.  Unfortunately, there is very little to be done as you cannot change the spreads.

How to Avoid Losses

The best way to avoid the losses in regards to timing is to not try and compete with the institutional traders.  If you do the two mentioned scenarios are what you will be facing and retail traders cannot compete with institutional traders.  It is recommended that you only enter news trades after the initial spike because you are less likely to suffer from a retracement.  After the initial spike the market steadies and forms a better trend which you can trade on.

You should also use pivot points to ensure you will make a profit from your trade.  If your trade is closer to the resistance level than the support level the profit you make is lower.

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