Hey traders, Imre Gams here.
As many readers know, I recently launched my new forex service Currency Trader. Many people wrote in with good questions and that sparked an idea.
My goal with Currency Trader is not only to provide great trade recommendations… but to also provide a reliable source of education.
And this prompted me to start a weekly series of Q&A issues where I answer my readers’ most pressing forex questions.
Full Q&A issues are only available to Currency Trader subscribers. But today, I wanted to do something different and share a sneak-peek for my readers at Market Minute.
Let’s dive right in to the first question…
I’m just curious if you have any pivotal or favorite books on forex that you would recommend to help us all hone our skills and learn the ropes? Thanks so much.
– Donald B.
Hi Donald,
Great question! Specifically, as it relates to forex, I would recommend the very simple “Currency Trading for Dummies” by Brian Dolan and Kathleen Brooks.
In terms of trading overall, I highly recommend “Trading in the Zone” by Mark Douglas.
When it comes to overall finance, the best book I know of is “The Socionomic Theory of Finance” by Robert Prechter.
Hello Imre,
Thanks so much for the new Currency Trader service. I took the first trade and followed your recommendations and I’m now out of it having closed my position this morning.
I have Jeff’s other services and we usually use limit orders to enter positions. For the trade we just closed, I was a bit confused on the entry. Did you mean for it to be a market or limit order at the price you targeted in the alert?
I initially placed it like a limit and waited a bit for it to come back. After that didn’t happen, I canceled that order and went in at the market price which was above the entry price in the alert.
When the alert came through, I was still setting up and funding my account, so I was a bit late to the party. I still made some money, but just a little. Can you please clarify what you mean when you say, “Buy the pair if it crosses X”?
Probably a basic question but I’m a total beginner with forex. Thanks again for the service and the great advice. It’s great having your knowledge and experience working for us.
– Jeff M.
Hi Jeff,
Thank you for joining us at Currency Trader! We appreciate the trust you place on us.
My trading style for forex is a bit different from how my colleague Jeff Clark approaches trading options and equity markets.
I don’t foresee ever suggesting a limit-entry order type for any of our trades.
The reason for this is that when it comes to forex, I’m primarily a breakout trader and limit orders won’t really work for breakouts.
Therefore, I’ll either recommend using a stop-entry order or a market-entry order.
The “buy if prices cross X” statement refers to the breakout condition I’m looking for – which is the green light to take the trade.
On my charting platform, I’ll set an alert at a specific price level. If prices cross this level, I receive the alert from the charting platform and I whip up the trade recommendation as soon as I can.
I hope this answers your question. If you still have some follow-up questions, please let me know and I’ll see if I can record a video to better illustrate the concepts.
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Imre,
It seems to me that by keeping the spread smaller, and reducing risk, you also increase the likelihood that a small move in the wrong direction will trigger the stop loss and take you out of the trade.
Conversely, increasing the spread, and increasing the risk, also reduces the likelihood that a small change in direction won’t take you out of the trade – so that if you plan the direction right – you’ll remain in it until it turns your way. Am I thinking correctly?
– Laurence S.
Hi Lawrence,
Thanks for sending in this question.
You’re on the right track here. When you use the word “spread” I’m assuming that you are actually referring to the “stop loss” we use on every trade.
The stop loss is a protective order we use that gets us out of a trade automatically if the trade turns sour and goes against us.
Unfortunately, this is bound to happen from time to time.
Currency Trader doesn’t trade options, so our bets on the market are purely directional. In simple terms, we’re looking to buy low and sell high or sell high and buy back low.
A wider stop loss does increase the odds that we’re going to be able to stay in a trade longer – and a tighter stop-loss reduces the margin for error.
Where I recommend the stop loss will be a function of two things: market volatility and my technical analysis of the market.
Sometimes, we’ll be able to “get away” with a tighter stop loss, which increases the potential profit factor of the trade.
Other times, it’ll be wiser to stick a wider stop loss to give the market “room to breathe.”
In situations where the stop loss is wider, I’ll look for opportunities to tighten the stop loss as soon as possible to reduce or even eliminate our open risk.
And that’s all for today. Thank you everyone for your thoughtful questions. Continue sending them to [email protected].
Happy trading,
Imre Gams
Analyst, Market Minute
P.S. If you’re curious about forex and would like to learn more, just click right here to get started.
Reader Mailbag
In today’s mailbag, Currency Trader member Darynne thanks Imre…
Hey Imre! I’m making money with you so thanks for that! I actually made a few hundred bucks on this recent trade. I was very picky about my entry, then used a tight stop. Anyway, yes let’s trade BTC.
I’ve been into crypto for a few years. But I lost a lot of money though. I love the updates you provide while we are in a trade!
– Darynne J.
Let us know your thoughts – and any questions you have – at [email protected].