Everyone knows about the Forex market. When you discuss the Forex trading business, we generally think about the currency pairs. But the currency pair not going to be our main concern in this concept. We will discuss the indices. For new traders, you might not know what the indices are. These are the average price movement of some major companies that are traded in the global market. For instance, if you talk about US30 or Dow Jones, we are referring to the average price of the top 30 companies in the United States of America. Similarly, if you discuss the UK 100 we are referring to the average share price of the top 100 companies in the United Kingdom.
Since indices have some big players, we have to be cautious. The volatility is so high it becomes really hard for the naïve traders to make a profit at indices trading. But by following four simple rules, you might be able to trade indices like an expert.
Ride the trend
This is a very common known topic for retail traders. Everyone knows trading with the trend has a great advantage. But how many traders trade with the major trend? The majority of the retail traders are betting against the trend as they want to get the best price in each asset. At indices, you don’t have any best price. You should be looking for the optimum position to take trades. So, find a way to draw the critical trend line in a very effective manner. Forget about the steps mentioned in the unknown sites. Visit Saxo and get the basics so that you don’t make any mistake while riding the trend. Click here to contact the professionals at Saxo and set up a demo account. Use that platform to learn the trend trading method.
Reduce the leverage
Indices are very volatile. The average hourly pip movement can be more than 200 pips. You can experience 100+ pips movement per minute without any major economic announcement. So, expecting to take advantage of leverage and trying to secure big gains is more like trusting your luck. Believe us, nothing called luck exists in the trading business. You have to reduce the leverage and take trades in such a way so that you feel comfortable with the potential amount of loss. Putting yourself in an unwanted situation by increasing the risk forces you to break the rules. Once you start breaking the rules, you can consider yourself as a loser in the trading industry.
Analyze the major and minor news
The Forex traders are always told to analyze the major news. But to trade the indices, you should trade the minor news also. Major and minor news events have a big impact on the indices market. Compared to the pips movement, you can expect 100+ pips movement in the minor news and 500+ movement pips in the major news. So, it’s obvious you don’t have the luxury to avoid the news while taking trades in the indices. Develop the habit of analyzing the news regularly. Without staying tuned with the latest market news, it will be tough to make significant profit from this market.
Curate a well-balanced trading method
The last thing to think about is the development of your trading strategy. You can’t trade the indices with your currency trading system. You have to create a unique trading method considering the volatility of the market. If you can devise the trading strategy properly, the chances of making a profit from indices are very high. But it requires special skill and vigorous back-testing to create a perfect trading method. Try spending more time in the development of your trading method as it determines your profit potential. Stop chasing the complicated market and focus on the core factors of the market.