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Assessing the quality of the trade setups

Assessing the quality of the trade setups

The recent advances in technology has opened the door of trading to normal people. Only the large banks and institutions or people with lots of money could trade the Forex market. But due to the introduction of a high leverage trading account, retail traders can place orders and secure a decent profit from this market. Having easy accessibility to the online trading industry has increased the number of active traders but the success rate is still very low. Many people in Australia start to trade the market without knowing how this market works. To make your life better, you must have the ability to find high-quality trades in this market. Let’s learn some useful techniques you can use to assess the quality of trade setups.

Currency pairs

The pair you are trading plays a great role in your profit factors. If you trade a stable pair with no movement, you are not going to make any money. On the other hand, if you trade a highly volatile pair that has no specific trend or movement, you are not going to make any profit. You need to find the perfect balance between market volatility and stable price movement. The pro traders prefer to trade the major pairs because the price movement is reliable and helps traders to make a decent profit. So, think about the currency pairs before you look for potential trade setups.

Risk reward ratio

You may have the ability to find quality trades but do you know the proper way to assess the risk-reward ratio. Good trade setups with a 1:1 risk-reward ratio are not going to help you in the long run. You have to think about the long term consequences to establish your career in the CFD trading industry. If you look for short term gains and trade with a 1:1 or 1:2 risk-reward ratio, recovering the loss will be very hard. On the other hand, if you start to trade the market with a 1:4+ risk-reward ratio you can easily accept the losing trades and make a decent profit even after having few losing trades in a row.

Conditions of the market

Those who are trading the Forex market as a fulltime trader knows the perfect way to assess the condition of the market. Never expect to make a profit when the price is showing wild movement. For instance, finding good trade setups in the GBPUSD pair after the Brexit news is not going to help. In fact trading, the GBPUSD pair at that moment was more like a suicide mission. You have to consider the global economic factors before you place any trade based on quality trade setups. Keep things simple and you will eventually become a profitable trader in the Forex market.

Follow your instinct

At times you will not feel good even after spotting the best signals. Your instinct will suggest not to place any trade. This is where you need to improvise and stay in the sidelines. But the pro traders never improvise and they lose money in Forex. To avoid such problems, you have to learn a lot about this market. Thinks about the elite class businessman in our society. They often stay in the sidelines even though their business strategy suggests strong activity. Listen to your inner voice and you will be able to protect your trading capital.

Time frame

Those who are trading the lower time frame will have a tough time in trading. For this very reason, the pro traders recommend naïve traders become position traders. By trading the market in a longer time frame, you can easily protect your trading capital. Finding high-risk reward trade setups is much easier when you trade the bigger time frame. Stop thinking about a quick way to get rich through trading. Develop your patience and trade the higher time frame.

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