Throughout the month we’re giving you a few Forex Profit Hacks to help increase your profit potential. There are 5 parts in all, so if this is the first one you’re reading, be sure and catch up!
Tip 1: Save Time and Multiply Your Profits by Trading in Baskets
Have you ever heard the phrase “You can’t have your cake and eat it too?”
This is a fancy way of saying that you can’t have it both ways. While this is true in many aspects of life, it’s not true in the Forex! There is a strategy that allows you to have it both ways
It’s called trading in baskets, and it involves picking a currency and putting it into one of two sections:
- The Control Section
The Pegged Section.
The control section is when the currency (let’s say USD) is on the left side of the slash when it comes to the pairing. USD/CHF, USD/JPY etc.
The pegged section is where your currency pair is on the right side of the slash. EUR/USD, GBP/USD etc.
This process starts by picking one currency to focus on. Once you have your currency chosen you to create your control and pegged baskets.
The next step is to do research on your chosen currency. Then, based on your research, you will know how your currency fares against the currency it is paired with.
By splitting the pairs into baskets you are able to trade both bearish and bullish at the same time.
Here’s an example. Let’s say you want to trade the USD and, based on your research, you know it is strong against the Swiss Franc, but weak against the Japanese Yen.
You would set up a basket trade where you would buy the USD/CHF pair, and sell the USD/JPY pair.
You are able to trade bullish against the Franc, and bearish against the Yen simultaneously.
Here’s what it would look like inside MTI’s Ultimate Charting Software:
By trading in baskets, you have the opportunity to double your profits!
Tip 2: Finding Your Basket Information
The key to successfully trading baskets is the research conducted on your chosen currency.
Research should begin by using your charting software and reading the candlesticks.
If a currency is strengthening, you would look at the charts to verify the bullish uptrend. As the currency’s control of the pair goes higher, it gets more control.
Here’s an example of a strengthening economy using the GBP as an example:
You can see that even though there are bearish candlesticks here and there on the chart, the overall trend is going up.
At the same time, if the GBP is weak against a certain currency, you would then expect the currency pairs to move downward, as with this example:
Therefore, your basket trade would consist of buying the GBP/USD and selling the GBP/JPY.
Tip 3: Use The Grade Your Trade Checklist
Wouldn’t it be great if you had a way of figuring out just how likely your trade was to succeed BEFORE you place your trade?
You can do just that by downloading the Grade Your Trade Checklist.
The first step to using the checklist it to determine which direction the market is trading. A bullish trend will require you to use the left-hand side of the chart, and a bearish trend will use the right-hand side of the chart.
Once you know which direction the market is heading, you can set your ABCDs.Take note of the points of convergence on your ABCDs, this is what you’ll be using to check the boxes off in the Grade your Trade Checklist.
It’s important to note that you need to check the box for each true statement! This is important because the final percentage total is based on the sum of your checkboxes. Just because one box is checked doesn’t mean that the others need to be blank.
Once you have summed up the total percentage of your trade, consult the bottom of the worksheet to see whether your trade is viable enough to happen, A 60-70% range is the most ideal.
This is the third in a series of posts covering Forex trading tips.
In case you missed our first two…
Make sure you’re on the lookout for more Forex Profit Hacking tips every Saturday!