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How Bank Traders make money from the Currency Market - Alldamoney

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How Bank Traders make money from the Currency Market



To make a living trading currency it’s important that you fully understand how the forex markets works before diving into it. First and foremost you need to know and recognize yourself. You must carefully study and analyze your financial goals for coming into forex trading.
This can be done through gaining self-awareness and ensuring that your risk tolerance and capital allocation to forex and trading are not excessive or lacking.
You must systematically define a timeframe and a working plan for your trading career once you know what you want from trading.
Do you aim at financial independence or merely aim to generate extra income? How much time can you devote to trading? These questions should be answered before you gain the vision necessary for a persistent and patient approach to trading.
Whatever your goal or objective is there are method you should follow if u really want to earn from the forex market.this methods include


Step 1:  Be consistent with your chosen methodology and its application
You need to have some idea of how you will make decisions to execute your trades before you enter any market as a trader,. You must know what information you will need in order to make the appropriate decision about whether to enter or exit a trade. Some people choose to look at the underlying fundamentals of the economy, and then use a chart to determine the best time to execute the trade. Others use technical analysis; as a result they will only use charts to time a trade.
For example let’s say u choose trend following as your method you must know which way currency trends are heading.
One of the best ways to determine the overall trend is to drop a 50 period simple moving average on a currency pair’s daily chart. Check out an example of this below
If the trend line is pointing down, you know you have a better shot at selling short this currency. If the trend line is pointing up, you will have better odds if you buy the pair.
always remember to trend in the same direction as the trend line. by doing this, you will make a significant gain than loss if u are consistent.


Step 2:Calculate your expectancy.
To determine how reliable your method is use the Expectancy formula should be used to measure all your trades that were winners versus all your trades that were losers. So that u can determine how profitable your winning trades versus your losing trades .
Take a look at your last 10 trades and see if you have made a profit or a loss. Write these results down. Total all your winning trades and divide the answer by the number of winning trades you made. Here is the formula: If you haven't made any actual trades yet use your chart to see where your system would have indicated that you should enter or exit a trade


E= [1+ (W/L)] x P – 1 (Where: W = Average Winning Trade L = Average Losing Trade and P = Percentage Win Ratio)
Example:
If you made 10 trades and six of them were winning trades and four were losing trades, your percentage win ratio would be 6/10 or 60%. If your six trades made $2,400, then your average win would be $2,400/6 = $400. If your losses were $1,200, then your average loss would be $1,200/4 = $300. Apply these results to the formula and you get; E= [1+ (400/300)] x 0.6 - 1 = 0.40 or 40%. A positive 40% expectancy means that your system will return you 40 cents per dollar over the long term.


Step 3:Do free time analysis.
On weekends when markets are closed, It is always good to prepare in advance by studying weekly charts to look for patterns could affect your trade.
Let’s say a pattern is making a double top and the analysts are suggesting a market reversal. This is a kind of reflexivity where the pattern could be prompting the analysts while the analysts are reinforcing the pattern. Or maybe the analysts may be telling you that the market is about to explode. Perhaps these are analysts hoping to lure you into the market so that they can sell their positions on increased liquidity. These are the kinds of actions to look for to help you formulate your upcoming trading week.
In this case to determine which way currencies are headed. You simply draw support and resistance lines on the chart.
The way to do this is pick a chart that goes back a long ways. The more days of data that you can see, the more likely you are to draw these lines right.
When you connect the major low points on the chart, you’re drawing the support line. When you connect the major highs on the chart, you’re drawing the resistance line.

While the 50 period moving averages and support and resistance lines method might appear simple following it consistently will make u winning trades and huge profits that will put you ahead of the investing crowd.

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