As a Trader you want to be trading whatever is “HOT” on any given day, week or month.
When I say “HOT” I mean that you are identifying the financial instruments that are showing the biggest moves (either up or down) and you focus on those to find good buying or selling opportunities.
If a specific currency pair, stock or commodity is NOT moving there is no money to be made on those instruments and they are not worth trading or looking at any further, for now.
The instruments that are currently showing the biggest moves right now are the ones that will offer best opportunity to generate a profit.
A useful indicator called the ADR, (Average Daily Range) which is available on the MT4 trading platform will tell you what the average move of an instrument has been over the previous few hours, days or weeks.
For example, the ADR of say the EURUSD might be 100 pips on average over the last 5 days and the ADR of GBPUSD might be on average 30 pips over the last 5 days.
Based on this, you would be more interested in looking for a trade on the EURUSD as there is currently more movement and more opportunity here at this point in time.
The next step is to check if the EURUSD is also moving with momentum. It is the strength of the momentum that make it “HOT” or not.
Momentum means that the price is moving strongly in one direction rather than just moving a lot, but only moving sideways.
We can see on the chart above at the two green arrows that we have both movement and also movement with momentum which made it “HOT” at those points in time. The skill of a trader is to find and exploit these “HOT” moves.
The more instruments you can review the more hot opportunities you will be able identify and trade.
CM trading has recently introduced individual stock trading to its portfolio which will provide you with more opportunities to now identify “hot stocks” in addition to the many other instruments that are currently available.
Join our “ Make me A Trader” 6 Part course and shorten your trading Journey.
Click below to find out more:
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Trading Foreign Exchange (Forex) and Contracts for Differences (CFD’s) is highly speculative, carries a high level of risk and may not be suitable for all investors. You may sustain a loss of some or all of your invested capital, therefore, you should not speculate with capital that you cannot afford to lose. You should be aware of all the risks associated with trading on margin.
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