Forex Trading – Scale Trading
Scale trading is a method of trading that was originally developed for commodity traders. In it’s most basic form, you buy a commodity as the price sinks. You do this because you know the price of corn, oil, wheat, live cattle, etc can’t go to zero. These are real products that the masses need.
Then as the price rebounds, the futures contracts are sold off at prices slightly higher than when they were bought. If the price dips before all contracts can be sold, then more are bought with the profits of the ones that have already been sold.
That in a nutshell is how scale trading is done in futures. One of the most important keys to this method of trading is simply making sure that you don’t run out of capital. You are going to let the price run against you. If you don’t properly prepare ahead of time, you could be out all your trading capital.
Just like commodities, we know that currency prices will not get to zero (unless the currency becomes totally worthless, and believe me, if a currency like the dollar or euro becomes worthless, you will have much bigger problems than the fact that the currency itself is worth nothing!)
To effectively scale trade currencies, you need to find the major resistance points in the market. By major I mean MAJOR. You are going to treat these points as the zero line. Then from where ever the price is now get the difference between the price and your zero line (major resistance).
That is the distance you have to cover with your trading capital. Divide it into equal parts so that you won’t run out of capital even if you have to buy all the way down.
The as the price dips, you buy. As it surges back up, you sell taking your profits.
Thanks To : What is Forex Finance Converting Currency Online.com
