Trading Forex - buying and selling round numbers.

 There is a lot of ways to trade Forex market. Some people are attracted to participate in it because of its long lasting primary trends. Others like large leverage available. Others still might like 24 hour nature of this markets, while yet another another group might appreciate the unprecedented volume. There is little surprise, that for a large segment of traders, active intraday trading is a way to go.

Very short term traders tend to concentrate on price action trading methodologies, rather than indicator and oscillator based systems. An example is trying to exploit previous highs or lows. Congestion zones are other areas of interest. So are simple chart patterns, like triangles, pennants and wedges. Even something a little more complex, head and shoulders with its variations known as "crowns" are price action set ups. They don't require any other input but the price data itself.

Past high and lows are viewed as supports and resistances. When trading intraday, it is impossible to look for bounces off of every one of those levels and expect to be profitable. The key to successful intraday trading requires that we be more selective and enter only at those levels where a reaction is more likely. For example, one could look for areas where there is a confluence of these trading zones. A high, or low, visible on both 15M and 5M charts is certainly more important that one apparent only on 5M graph.

Then there are psychologically important levels. These areas might not have a clear representation as most recent support or resistance zones, but have importance because of other reasons. Probably best known of these are round numbers, also known as "the figures". Example of round number is 1.5600 in EUR-USD, or 107.00 in USD-JPY. Fractional even numbers like 1.5640 or 107.70 are too common and not really of much importance. On the other hand "full" or "triple zeros", like 1.5000 in EUR-USD, are extremely important but don't happen often enough and, for the purpose of this article, are treated as any other round number. Why are those areas psychologically important levels? Market participants as a whole tend to put conditional orders near or around the same levels. While stop-loss orders are usually placed just beyond the round numbers, traders will group their take-profit order at the round number. As a result, take-profit orders have a very high tendency of being placed at full "figure" level. Since the FX market is a nonstop continuous market, speculators also use stop and limit orders much more frequently than in other markets. Unlike other financial markets, an average trader doesn't have access to the order book and can judge for himself the order flow. Round offer a relative predictability of order placement.

It is believed that large banks with access to conditional order flow, like stops and limits, actively seek to exploit these zones. So, strategy of fading round numbers attempts to put traders on the same side as market makers or the "smart money". Here are rules for a simple, contra-trend, trading strategy. (Trading Forex - buying and selling round numbers)

For a buy set up, identify a currency pair that has already moved 30-50 pips and is approaching round number. Once the figure is breached, enter a position a few pips below the level, but no more than 10-12 pips away. Place stop/loss 15-25 pips from your entry. Look to take profit at minimum twice the amount you risked. For a sell trade, revers the rules.

Strategy is very simple, but should be practiced for a while, just like any other one. Also, some currency pairs with large spread, are not necessarily best candidates for using it. GBP-JPY comes to mind. On the other hand, most of the major crosses lend themselves handsomely for this set up. They have small spreads and, collectively, touch round numbers often enough throughout the day, to make it a viable trading method.

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Forex Trading Advantages - the Most Complete List!

FOREX stands for Foreign Exchange market. Often it is also called "Forex", "FX", "Spot FX", and "Spot". Simply put, Forex Trading is the buying of one currency and selling of another simultaneously. The profits and losses in Forex trading are dependent on the fluctuations in the exchange rate between the currency pair.

In general, the exchange rate of a currency versus other currencies is a reflection of the condition of that country's economy, compared to the other countries' economies.

There are many advantages to trading Forex. This is the list of the main Forex advantages:

   1.

      Opportunity to make money irrespective of business cycle. Currency pairs always move upwards and downwards relative to each other. In either case, there is a constant possibility to make money.
   2.

      No commissions (no clearing fees, no exchange fees, no government fees, no brokerage fees because the brokers are compensated for their services through the bid-ask spread)
   3.

      No middlemen. Forex spot market eliminates the middlemen, and allows you to trade directly with the market responsible for the pricing on a given currency pair.
   4.

      Huge trading volume (about $2 trillion a day)
   5.

      Low minimal investments because of the low margin and resulting in a high leverages (this increases both - the potential profits and losses). In Forex trading, a small margin deposit will allow a much greater total value of the contract. This means that you do not have to pay the full value of the currency. For example, some Forex brokers offer 100 to 1 leverage. That way a $100 margin deposit would allow to buy or sell $10,000 worth of currencies and so on. But without appropriate risk management this can lead to large losses as well as profits.

      In case of the margin basis investors are obligated to lodge capital as security (initial margins) and to cover all net debit adverse market movement (variation margins). When clients loss reaches an extent where they no longer meet the margin requirements they are required to "top up" their accounts or to "close out" their position.
   6.

      Very high liquidity (With a typical trading volume of more than $2 trillion per day, Forex is the most liquid market on the planet)
   7.

      Geographically decentralized over-the-counter (OTC) market. The Forex spot market considerably differs from other markets as it has neither a physical location nor a central exchange. It operates electronically through networks of banks, corporations, and people trading currencies.
   8.

      24 hours a day market (Closed on weekends). This is important for those who want to trade on a part-time basis, because you can choose the time when to trade.
   9.

      No Fixed lot size: In the futures markets, lot or contract sizes are determined by the exchanges. In spot markets you determine your lot size. This allows traders to successfully participate with accounts less than $1,000.00.
  10.

      Small transaction cost: The retail transaction fee (the bid/ask spread) is as a rule less than 0.1 percent under regular market situations. At larger dealers, the spread could be as low as 0.07 percent. Certainly this depends on the leverage.
  11.

      Instant transactions due to the high liquidity.
  12.

      Online access (Internet trading platforms).
  13.

      Nobody can corner or "force" the Forex: The Forex trading market is so colossal and has countless participants that no unique participant, not even a powerful central bank, can have power over the market price for an extended period of time.
  14.

      No insider trading: Because of the size of the Forex trading market and non-centralized environment, there is practically no chance for any insider trading.
  15.

      Limited regulation: There is limited governmental regulation in the Forex trading, basically because there is no central location or exchange. However, this may be a two-edged sword.
  16.

      Free "demo" accounts (99% of online Forex brokers offer 'demo' accounts to practice trading), free charts and diagrams, news, and analysis. These are very valuable resources for "poor" and SMART traders who would like to try their trading skills before risking real money.
  17.

      "Mini" and "Micro" Forex Trading: You would think that getting started as a currency trader is very costly. In fact, it isn't. You can find an online Forex broker that offers an account with a minimum deposit of a hundred bucks. It does not mean that you should open an account with the minimum deposit but it does makes Forex much more accessible to the average person.

This is the most complete list of the Forex trading Advantages.

You may also want to learn about the Forex trading Disadvantages

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Forex Trading Advantages - the Most Complete List! by JOHN ROBINSON

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