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The essential aspect of trading in foreign exchange is your ability to be able to identify a channel through which you will trade. This channel is identifiable through a chart when you open.

You go through it and study the trend of the candles as indicated on the chart table.Once you are able to identify this channel by drawing a line on the chart connecting candle then you are good to go at trading foreign exchange currency transaction.

Now before you go into the foreign exchange currency trading full blast, you need to know some basic rules that you are to stick to. These will guide you on daily basis on your trading moves. These are:-

You need to know that it is only one of the lines in your channel is tradable. The line on the reverse of the bone fide should be reserved for profit target only and not for trading. Avoid trade bounce or breaks of this line because it is not a valid trend line.

A line that is sloping upwards MUST be connected with swing lows, so also a line that is sloping downwards MUST be connected with swing high. In order to ascertain that a line is truly a channel, it must be the same widths at all points entirely through the channel

The above are the three critical golden rules that must be adhered to very strictly for you to make a success of your trading attempt in foreign exchange currency transaction. Having identified your trading channel, the next step for you to take is how to utilize what you already know. The following are few steps to that will take you to the stage of trading;-

1. Watch price movement to prove to you that it is actually your expectation the movement is doing. If you are trading trend line and channels, then placing an entry order just a couple of pips above the candle that touches the trend line may be the appropriate move. Exercise patience, do not jump in with a view of predicting the market, rather, and wait for the market to come to you. Your action of placing the entry point above the candle will create a safe zone for you to trade.

2. Drop your stop loss above the trend line that you are bouncing from. This now depends on your accounts balance, your desire to earn a profit, the time frame upon which you are trading, your propensity to risk factor, and your overall trading strategy. Of the above-enumerated points are not exhaustive, they are just to mention a few.

3. Your profit target must be before the nearest possible swing. Should you want to enter an order from the bounce of the top of a downwards sloping trend line, at this instance your profit target will most likely be just earlier before the nearest swing low. Do you know what is spread in forex? The answer is that your action is predictive of the market that it will continue to swing downwards. In case it does happen just as you predicted, then it has to go past the previous swing.

4. You are advised not to trade a channel bounce where the profit target is not at the minimum the same distance as your stop loss. As you continue to experience trading, you will develop skills sufficient enough for you to make your calls all by yourself. I will, of course, recommend to you that you trade using minimum 1:1 Risk Reward. This is a simple interpretation that you don’t risk more than what you can gain.

5. Ferrari Strategy

In this type of strategy, you will be educated on 2 core strategies. Firstly, is the “Rent Paying Strategy”. It is a foreign exchange currency trading strategy that is designed with a view of paying the rent and bills. It is a strategy that is based on probabilities and statistics and with an expected outcome of the consistent monthly percentage of outcome gain. The type of channel trading which I have been explaining all the while fits into Ferrari Strategy. It is a trade which all of a sudden, prices will shoot up and you may gain many pips in one single trade in just a moment.

6. Ferrari Trading Strategy is controlled by the stop loss and it is based purely on price action. Let us look at this example; you are predicting that price will nosedive, therefore as soon as it begins to go the way you have predicted, do not vacate your position. While doing so as well, you are expected to have an initial profit target to ensure that it is a 1:1 Risk Reward Trade. It is simply an eloquent fact that you are predicting that prices will go down. At this point in time, the human nature in you is that you will want to vacate your position thinking that you have realized your stated goal and objective. The advice is that you should not. Again, with this type of strategy, using the stop loss to lock in profit may allow you to make a generous profit all from simple trades which allows the market to give all that it intends giving you.

Having given you the essentials in foreign exchange currency trading, I hope you will be able to now take the bold step of launching out to making the move and get involved in foreign exchange currency transaction. It is very interesting and financially rewarding if you learn the ropes and apply them as duly important.