Before learning about the “stop hunting” trading strategy here is a brief explanation about FOREX and the basic terms you should be familiar with before reading this article.
The FOREX is the largest and still growing financial market in the world. With endless liquidity, more than $1.5 trillion changing hand every day. Anyone can use the FOREX market, now days you can download trading software from a handful of broker firms offering their services. The Foreign Exchange market has no physical place where it is exchanged and it never closes. Remember, it is all about money. Buying, selling and trading money from all over the world, creating for you opportunities to make a profit. But the FOREX market is also a very risky market and for being a successful trader you need to do your homework, learn the market and all the aspects around it.
* Leverage - the ratio between the money you deposit in your account (MARGIN) to the actual value, i.e. using a $1,000 to buy a FOREX lot (contract) with a $100,000 value
** Marginal trading - trading with a borrowed capital
*** Stop loss- An order placed with a broker to sell a security when it reaches a certain price. Limiting the investor's loss or locking in his or her profit.
Today FOREX traders and investors have acquired the habit of trading with a large leverage and constant use of margin. This comes in contradiction to the way of experienced traders who know how to limit their leverage up to a regular 10:1 leverage ratio. In the FOREX market the leverage ratios set new heights within any comparing financial market by offering a vast 100:1 ratio. Some firms even raised the ratio up to 200:1 meaning that you can put in $1000 for a $200,000 value control. To appreciate the big dissimilarity from other markets here some leverage examples from outside the FOREX world: In equities, a standard margin is set at 2:1. On options, the leverage can rise up to 10:1, and in the futures markets the leverage factor is amplified to 20:1.
Almost without doubt a good number of you have by now read about leverage and margin or are already using it in every-day trading, so why did I stress this subject? What if I can tell you that there is a chance to profit off of the prediction of short-term movements on the account of those high leverage traders? This is the heart and soul of the “stop hunting” approach.
Andrew Keynes is a long time FOREX trader. A husband and father of two, Keynes has proven himself and built his reputation as an expert to the Foreign Exchange market over many years.He has successfully served as financial advisor to several large hedge funds and groups and is nowadays busy pushing his latest effort,
www.forexblogs.net,a place on the web where economists from all over the globe congregate and share their trading and investing experiences with each other.
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