In the following sections we will look at a new type of forex trading system called offset trading and try to understand how it works. Offset trading is a system which attempts to capture large amount of forex pips by utilizing any type of expected economic declaration.
In this system purchase orders & sale orders are placed above & below present forex trading price of any given currency pair just before some economic announcement is made. This is like a gamble where forex trader assumes that forex market will move significantly in any one direction right after the economic announcement. Theoretically it may look like a very simple technique but to develop a winning strategy using this method really takes a long time so that all unforeseen variables can be handled properly and success can be achieved.
This type of forex trading involves a strategy where trading is done at a time when highest movement of currency pairs can be achieved. For offset trading most suitable currency pair is EUR/USD and time period between 8 AM & 11 AM is considered to be ideal time to trade as in this time period both London as well as New York markets are active.
Selecting a Broker
At the time of selecting a broker it is important to know the difference that exists between forex brokers who have dealing desk & other brokers operating with a dealing desk. Many times use of dealing desk is not beneficial for you as broker using them may do trading against the orders you place and therefore the results might not be as desired. On the other hand brokers not using dealing desk use STP or straight through processing to send orders to different banks thereby improving chances of price fluctuation gains. In addition to it a trading station should be selected which lets forex trader prefix profit limit and also stop losses before trading starts would make trading much easier for the trader.
Deciding Time to Trade
By performing close analysis you will know that in morning hours there is significant movement of forex pips in a EUR/USD chart of ten minutes. You will also find that in case any major economic announcement occurs, the movement in the market is biggest during morning hours. Your main responsibility here will be to understand whether trend is moving down or up but it is difficult to understand such movement as you can not predict when any trend will reverse.
In such situation starting a trade after any economic announcement has already resulted in market movement of about twenty to thirty pips will be very late and chances of losing the trade are much higher in such situation. The offset trading method can assist a forex broker capture first 20 to 30 forex pips as soon as any economic announcement takes place.
Thus we can conclude that offset trading is a unique method used in forex market and by properly learning this method forex traders can take maximum benefit from opportunities that arise.