One of the more popular analytical methods that is used with MT4 that is used to coordinate share trades is based on the Fibonnaci series (each number in this series except one is the product of the preceding two numbers; i.e., 1, 2, 3, 5, 8, 13 & #8230;). This Fibonacci series is used in quantitative trading systems such as MT4 to help traders modify their investments in real-time as the market changes as described further below.
2- Fibonacci
The Fibonacci series can be found throughout nature in the way a pinecone grows when viewed from above or the patterns in a seashell such as the nautilus. Humans have a natural affinity for the Fibonacci series which is also known as the "Golden Ratio" because it provides an aesthetic that is pleasing to humans (Gelet, 2009). Also pleasing to humans is the power of the Fibonacci series to help manage Forex trades. The Fibonacci series is used by Forex traders to develop retracement levels on charts, the specific timing of their entries and exits in the market, an approach that is used with the eFibo trading strategy that buys and sells various sizes of lots depending on the behavior of the market. To accomplish this, the eFibo strategy uses a basic indicator that identifies trends and/or countertrends; eFibo's trending function will add additional lot sizes when profit levels increases; conversely, the application's countertrend mode performs the reverse by selling into strength and buying into weakness (Gelet, 2009). The strategy can also be applied as an order entry technique for either a trending or counter trending strategy (Gelet, 2009).
In order to use this function properly, Forex traders have to determine appropriate levels for each new order following the entry of its initial position using a simple trend or countertrend trading strategy. Performed manually, these levels can be determined by analyzing the highest high-low range for the preceding three trading sessions and then adding 20% (Gelet, 2009). Because the Forex market is highly dynamic, trading strategies can take advantage of automated trading systems such as MT4 by setting ranges that will differentiate important movements in the market from transient spikes. Identifying trends or countertrends in the Forex market can be accomplished by using the indicators described in the "Forex Indicators" section below, or Forex traders can formulate the decision to buy or sell based on their experience and their intuitive view of the market's historic performance. Exit strategies using these approaches are also straightforward:
1. A stop loss can be placed on each trade that is one half of the pip level;
2. A total trade take profit can be established that will close the entire trade when a certain profit levels has been achieved or the trader has been stopped out. Many Forex traders take advantage of their practice account feature to experiment with these settings to identify the best way to achieve their investment goals while simultaneously minimizing their risk.
Because traders can be stopped out and their entire trade ended before their profit goal has been reached by automated settings, it is important to manage stops to ensure that the trends identified by the Forex indicators being used do not prevent the full profit goals from being achieved. In many instances, a trade may be stopped out but the price will then continue in the direction that was initially projected, causing the trader to lose out on the additional profits that could be generated. Indeed, managing stop losses effectively represents one of the most salient challenges in Forex trading today (Cofnas, 2003). It is possible, though, to identify a solid balance in stop losses by taking advantage of the guidance available from the experts at PIPPOINT and their powerful MT4 trading system which is discussed further below.
3- Expert Advisor
While Forex traders do not absolutely require an automated trading system,...
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