The forex market has a reputation for being exceptionally volatile. This unpredictable nature might be precarious if the price moves against your position. It is therefore prudent to use Key Performance Indicators (KPI’s) that will help you get the most out of your forex trading endeavors.
One of the most overlooked and yet important KPI is the time of day. Many people end up not being successful in this business because they trade at the wrong time of the day. Traders who are successful are reported to be trading during the late US and Asian or early European trading sessions.
Another KPI is range trading. To make profit in forex trading you are required to buy low and sell high. In the event that a currency falls and is trading at significant support levels, it will best to buy it. In the event that the same currency trades higher, you can sell it. You however need to watch out for the worst market conditions whereby the currency continues to trade within ranges that are relatively low.
The currency pair is another important KPI to keep in mind. Not all currencies act the same in this market, so you will need to know which pairs are going to be more profitable to you. You will also need to know which time of day a certain currency pair tends to perform well, for instance, the Japanese Yen is usually more volatile during Asian hours compared to the British Pound or Euro since these are business hours in in Japan.
Another KPI that most forex traders use is called the Stochastic. This is a forex market timing tool that helps you analyze the performance of the market, specifically the highs and lows. When the signal is more powerful, you can go ahead and make the trades but when it is not, you will need to wait.
Another popular KPI is the relative strength currency trading indicator index. It helps you to know the strength of the trend so that you can have advance warning of any contrary move. You will be able to know when the trend is still up or when it down so as to know whether to place the trade or not.
The Bollinger brand is another KPI to keep in mind. It allows you to know the volatility of the price as well as the best time to place a trade. It also helps you to know the areas that are in line with support and resistance to trade in to.
Moving averages are also very important when it comes to knowing the performance of the forex market. They help you know the best time to sell back into the existing trends or load in new trades. During strong trending moves in the forex market, it is important to trail your stops behind the support or resistance levels if you want to stay long in the long term trend.