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Using a Herd Instinct When Trading Forex Live

This article looks at the different aspects of the forex live herd instinct strategy.

Forex Live Herd Instinct

There are various methods of trading on the forex live market; one of these techniques is through herd instinct.  Trading on herd instinct means you are following a foreign exchange market trend blindly in the belief that it will lead to profits.  Generally, this behaviour is prompted by a friend or mass of traders heading in the same direction.  While this type of trading can incur profits, you must have an idea of what you are doing in order to be truly successful.

The key component of forex live herd instinct trading

Before entering the foreign exchange market with a herd instinct strategy, you must understand what the key component of this strategy is.  Herd trading on the forex live market is a psychological tactic and is based on social cognition; it looks at the belief that following the group will make profits.  Truthfully, this behaviour is generally seen among most new traders irrespective of whether they are following blinding or completing independent analysis.  While counter trading can bring rewards the associated risks are often too great for consideration.

Why herd instinct is a negative tactic

While using the herd instinct is a natural behaviour, it is highly recommended that new traders avoid it.  This is due to beginners often looking for trends to ride and then blindly following them.  This is a dangerous action as you will base your trading on instinct and not on factual analysis.  If one were to conduct analysis, you may note that the trend is not a positive forex live trading opportunity.

Effective trading should be based on facts and not gut feelings.  Before you open a trade you should have conducted some form of analysis to verify the trend you will be following.  It is pointless to enter a trade if the market is about to change directions.  This will only lead to losses and in some cases emotional reactions.

Guidelines to forex live trading

When considering a forex live trading strategy, there are various points to take into account.  By examining different factors of the market and your trading style you can choose the best strategy for you.  Here are some guidelines if you are considering herd instinct as a method of trading.

1. Don’t trade on a declining trend

Do not trade on a trend that is losing moment.  It is important to note a foreign exchange market’s movements to determine when the best entry and exit points are.  If you enter a trade just before the trend is about the turn, the chances of detrimental loss are high.

2. Have an exit strategy on hand

It is vital that you have a pre-planned exit strategy available.  When trading the forex live market on a herd strategy, you must ensure that you do not fall victim to losses when there is a rush to exit the trade.  You should also consider using stop losses as a means of risk management.  This will ensure you protect your capital if losses are experienced.

 

 

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