Swing trading strategies: A Beginners Guide Which Explains Step by Step Proven Strategies on Stocks, Forex, Options, Commodities and Money Management for Financial Freedom by Make Mark

Author:Make, Mark [Make, Mark]
Language: eng
Format: epub
Published: 2019-10-23T16:00:00+00:00

Your broker may do this for a number of reasons. For instance, your broker may raise the spread during times when liquidity is low. When there are few buyers and sellers in a market (which translates to low liquidity), your broker is obligated by law to step in and provide a market. This presents a huge risk for him and so, he may raise the spread to offset that risk.

Another reason he may do this is due to high volatility in the market. This is especially the case when it comes to periods of fundamental news releases. Due to the impact that news releases have on the markets and the fact news today is readily available, more and more people are becoming interested in trading news or fundamentals.

During periods of fundamental announcements, your broker may raise the spread, to account for the huge risk, which results from the huge volume of trading that occurs during such times.

What this means is that the risk is transferred to you as the trader or investor who decides to do business during such times.

Up to this point, what I’ve taught you is to carry out technical analysis as the way to inform your trading decisions. In my experience, I find no reason at all to increase your risk by trading during periods of high volatility such as when fundamental news is being released.

It is very vital that you keep the spreads as low as possible if you want an edge in this business. Huge spreads could end up eating into your profits thus crippling you in the long run.

4. Always maintain an acceptable risk-reward ratio

The risk-reward ratio is another part of every trade that should always be under your radar.

Risk reward-ratio can be defined as the measurement of the downside risk to the upside profit potential that a trade holds.

This is one of the key areas where many novice traders who fail to make money in the markets mainly go wrong. A study done by Daily fx researchers on traits of successful traders, highlighted wrong risk-reward ratios as the number one mistake made by most traders.

The study pointed out that on average; top traders were right 50 to 60 percent of the time. The study also showed that most traders were able to meet this number.

In short, most traders were just about as right as the top traders. So what made most of these traders lose? This was when an amazing discovery was made.

The top traders were able to make money because they kept a high risk reward ratio in all their trades. The losing traders allowed for exceptions and therefore most of their winning trades were outdone by the huge losses on their losing trades.

In short, a good risk reward ratio can mean the difference between losing and making money.

Take a look at the math of it. Let’s assume that you maintained a risk reward ratio of 1:2 in all your trades. That means that for each risk you took, you were looking to make at least twice that amount in profit.

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