Nowadays Islamic forex trading is increasing day by day since most of the leading brokers are offering Islamic account for the retail traders. Trading the financial instrument in the Islamic trading account is perfectly halal for the Muslim community since the broker has compensated all the swap and interest factors from that account. To be precise they are simply charging a small fee for their provided service. Most of the brokers even don’t charge any commission to the traders and the service charge is taken from the spread of different currency pair. According to the theory of Islamic finance, traders are obliged to risk a certain portion of their account equity in order to declare the earning as halal. As a forex trader, you are always risking certain portion of your account equity and trying to make a decent profit by taking the best possible trade in the market. In this article, we will tell all the necessary steps to become a professional trader in the finance industry. Most of the novice traders fail to make a decent amount of profit by trading the financial instrument due to their lack of knowledge and trading discipline. On the contrary, the profession traders are making a consistent profit due to their strong determination, dedication, and strict trading discipline.
Consider forex as business
In Islam, any sort of gambling is completely haram. As a Muslim trader, you have the unique benefit in forex trading since you will not behave like other novice trader and try to make money through wild guess. In order to get a clear overview of the market next move, you must analysis all the technical and fundamental parameters. Most of the professional traders develop their trading strategy based on the fundamental and technical analysis. There are many different ways doing the technical analysis but you should stick to the basic principles of technical analysis. Most of the great trades are taken by using the key support and resistance level in the market. In Islam, there is no quick way of achieving success. You must have sincerity and strong passion before you can achieve something good in your life. Similarly, you can expect to make a huge amount of money from the very first day of your trading career. You should consider forex as business and continuously work hard to improve your trading skills. There is no another alternative other than gathering knowledge. Make sure you develop a strong reading habit and always try to remain up to date with the recent financial events of the world economy.
There are many traders in the financial industry who takes dozens of trades in a single day. They think that the more they will trade the more money they will make. But in reality, the finance world doesn’t work like this. In the eyes of trained professional trading, the forex market is pretty much similar to the life of a sniper. You can’t afford to take unnecessary risk in the market. Make sure that you have your patience and execute a quality trade in the market only. If you truly want to become a successful trader then you must rely on quality trade execution rather than quantity. The expert forex traders hardly take two to three trades in the market. Before you take any trade in the market make sure that you have logical reasons behind the execution of your trade.
Proper risk management factors
Trading the forex market requires an extreme level of trading discipline. Even in the Islam, it is clearly written to follow specific rules in every single business. When you trade the forex market make sure that you follow strict money management rules. As a forex trader, you should not invest your whole savings in the forex industry. Use proper risk reward ratio in every single trade so that your winners are always bigger than your losers. Most of the novice traders cut their profitable trades early in the market whereas the wait for their losers to grow big. In order to remain profitable in the forex market, you must follow proper risk management factors. In the eyes of trained professional money management is the only Holy Grail that a trader can have in his trading career.
Peaceful trading environment
If you observe the life of a successful forex trader then you will easily notice that they all have a very peaceful trading environment. They always stay calm in danger because they know very precisely that quick decision is not going to solve their problem. As a professional forex trader, you must have a calm trading environment where you can do your technical and fundamental analysis very precisely without the influence of external factors.SO make sure that you have a separate trading room where you can access all of your trading material very easily. And if you incur few losses in the market leave your trading station and socialize with other people since this will greatly recover your emotional stress with a positive attitude.
Summary: Forex trading is a lucrative business which can offer you financial freedom if mastered properly. As a professional forex trader, you must have a strong trading foundation and consider trading as a business. Like any other business, you need to grow slow in the market and learn all the details of the financial market with the great level of accuracy. Always remember that there is no alternative other than strict trading discipline and proper foundation of the financial market to make profit consistently. And make sure that you not trading with the money that you can’t afford to lose.
Trading the forex market can extremely difficult if you are relatively new in this industry. Most of the professional forex trader who is making consistent profit in the forex market have undergone many obstacles in their trading career. It’s true that almost 95 percent of the forex traders in the financial world fails to make a consistent profit yet the number of new traders is increasing in every single day. In Dubai Islamic, commodity trading platform has been launched so that the Muslim community can also participate in the trillion dollar market. All the Islamic rules are strictly followed and trading the financial instrument using the Islamic commodity trading platform is 100 percent halal for the Muslim Ummah. Since taking interest is prohibited in Islam the Dubai government has made such a unique system which actually confirms the existence of physical assets in trading. Previously many talented Muslim traders didn’t participate in the online forex trading world due to the norms of Islam. But in today’s world many brokers are offering swap free Islamic account in which all the trades are executed by maintaining the Islamic rules and regulations. In this article, we briefly describe how to trade the financial instrument profitably by using the Islamic account provided by reputed brokers.
Trade what you not what you believe
Most of the rookie traders in the financial world have a tendency to sell the rally and buy at the dip. They think that the price of a certain commodity has reached its peak and it’s the right time to execute sell order in the market. Similarly, when the price goes too low on the market they think that it’s nearly impossible for the certain assets to remain at such a low price. For this reason, they execute their buy order in the market. But in reality, most of the financial instrument always have a tendency to breaks its previous high so that it can make a new high in the market. Similarly, the market always tries to break the most recent low to make significant low in the market. Professional traders use their Islamic commodity trading platform to assess the technical parameter of a certain commodity. They simply ignore their emotions and execute their trade order in the market based on their technical analysis. If you truly want to become a professional trader then you can rely on emotions rather you should concentrate on the market momentum and take your trading decision based on the fundamental and technical analysis.
Trading in favor of the long-term prevailing trend
There is a well-known proverb in the forex industry that trend is your friend. The expert in this industry follows this proverb blindly since they know that trading along with the long term prevailing trend always reduces their exposed risk in the market. As a professional trader, you must have the capacity to identify the prevailing trend in the market. Always make sure that you use higher time frame in your Islamic commodity trading platform to identify the long-term prevailing trend in the market. Once you identify the prevailing trend in the market try to spot a trading opportunity in favor of the current trend of the market. Since you will be a trend trader, most of the time you have to hold your position for more than one day. Being an Islamic trading account holder you will also have some added benefits which the other traders in the financial world will not get. As Muslim trader, you won’t be paying any swap for overnight carrying position in the financial market.to be precise you will be trading according to the Islamic sharia and the broker will take care your extra charge as their complementary service.
Combination of technical, fundamental and sentimental analysis
Trading the financial instrument successfully requires an extreme level of skills. Most of the novice traders in the forex industry try to make a profit based on their technical analysis. But the execution of perfect entry in the market requires combinational analysis of the three major factors. As a professional forex trader, you can easily do your technical analysis by using the Islamic commodity trading platform. For the fundamental analysis, there are many online forex news websites from which you can get a clear overview of the economic performance of your desired country. Once you complete your technical and fundamental analysis the remaining part is your sentiment analysis. This is one of the toughest things in the forex market. You cannot learn the market sentiment unless you spend a considerable amount of time in the forex industry. This something that you develop inside you over the period of time.
Summary: Forex trading is now not only limited to certain individuals .Due to the smart approach of different brokers and leading financial leaders online trading is now halal for the Muslim community. The number of Muslim traders is increasing every single day. As a professional forex trader, you can easily secure your financial freedom and enjoy the other benefits of this world in your spare time. If you truly want to become a professional forex trader then you must have a clear understanding of the financial market. Don’t skip any single topics that you don’t understand. Go through them again and again and eventually the complex thing will be extremely easy to you. Even you can learn the forex trading without spending any dime since all the professional educational materials are available for free on the internet. Sincerity, devotion, and dedication are enough to turn you into a professional forex trader.
Forex is such a lucrative market where every single individual trade to earn money. Those who are still struggling with forex market might be wondering that money is the ultimate reward that every successful trader gets by trading the “financial instrument”. In real life scenario, most of the successful traders come to one conclusion that they enjoy the others benefit more, like “self-development, discipline, stable personality” etc. These are the things that they achieved during their journey to becoming a successful trader. To them, money is the least efficient outcome of the forex trading compared to the other key self-development parameters that successful traders have. A true successful forex trader will have “determination, devotion, and dedication” commonly known as 3D, embedded in their heart which will make them unique from the ordinary gentleman in the society.
The famous Elliot wave theory was developed by R.N. Elliott. This theory has changed the whole world of trading. Trend trading and identifying the reversal is very easy using the Elliot wave theory. The Elliot wave generally consists of 5 waves in the forex trending market. Out of the five waves there are three impulsive waves or motive wave and two corrective wave.
Let’s see an example of Elliot wave sequence
Figure: Elliot Wave sequence
1, 3, 5 are the impulsive wave or the motive waves formed in an uptrend. The correctives wave is 2 and 4.This simple wave theory helps the trader a lot while trading the trending
The first wave is the initial starting wave of any trending currency pair. The second wave is known as the corrective wave. The market retraces downward in second wave creating a higher low. In an uptrend formation higher low is very important since it tells us about the momentum of the trend. The third wave is the most extended wave in Elliot wave. This the trending wave of Elliot wave which creates the major move of the trend. After the major upward move the market tends to retrace a bit. Thefourth wave is the last corrective wave in an uptrend. The fifth wave is the last and final wave of an existing trend according to Elliot wave theory.
There has always been a fight between the traders to find which analysis is the best. “Should I emphasize on technical analysis or should stick to my fundamental analysis report?” It seems to be million dollar question. Don’t worry we will clarify which analysis is the best .Both “technical and fundamental analysis” is required to trade the forex market successfully. Technical analysis is the complement of fundamental analysis and vice versa.
Technical analysis: The study of price raw price data along with support and resistance level, use of different kind of indicators to find the next possible move of the pair is known as technical analysis. Traders use technical approach to spotting the potential “entry and exit point” of a trade. Different chart patterns like head and shoulder, triple top, double bottom are some of the highly reliable chart patterns used by a technical analyst for taking the trade. Potential stop loss and take profit area can also be identified by support and resistance level of the market through proper technical analysis. Some trader also uses indicators and oscillators to filter the false signal and spike.
Fundamental analysis: Fundamental analysis is based on the economic news release. Traders analyze different major economic news of a currency pair and gauge the strength and weakness of the pair. Trend change occurs in the forex market when major any major economic news is released. “The interest rate, minimum bid rate” etc. are one the major economic data release strong enough to wash away support and resistance level in a second. “Professional short time traders trades on news and make quick cash from the volatility created in a news event.”
The best trading result can be achieved by combining the technical analysis and fundamental analysis. The confluence of both types of analysis leads to the generation stable and high-quality signals. However, some technical traders totally ignore the fundamental analysis of the forex market. They solely depend on of price action and chart data. But in forex, there is a term “History repeat itself”. Professional technical traders make the profit from the reoccurring chart pattern and price movements. On the contrary, the trader who uses the news to trade the pair is often known as scalpers. They enter into a trade right after the major news event. They use tight stop loss while trading the news. “News trading can be extremely profitable if executed successfully.”
Now in today’s modern world traders are way smarter than before. They know how to filter out the best trade from the market. All the traders are now trading the forex market with technical and fundamental analysis report. If both of them generate the same signal than they take the trade. Or else nothing is executed in the market. Technical traders now know the timing of the major economic news release to save their trade from false spike and make maximum profit. On the contrary fundament traders also knows something big is going to happen in the market since the economic data is either over valued or undervalued. Regardless of technical analysis and fundamental analysis, it’s almost certain that every single person who wants to be a professional trader must have proper money management skill. This skill is even more important than the technical and fundamental analysis.
Forex Trading is considered to be one of the most profitable business in the whole world. Surprised with the word “business”? Well, the most successful trader who enjoys a high standard life by Forex trading treats this as a business. But there is hard truth behind Forex trading. Very few traders can actually become a professional trader in real life.
GBPUSD is one of the most widely traded currency pair in the world. The trending popularity of the GBPUSD pair is due to the fact of low spread compared to its movement and less noise in the course of price action.
GBP USD daily chart
Figure: Trading GBPUSD with ADX and trend line
In the above figure a trend line is drawn with the higher low of the current prevailing uptrend ascending towards the resistance. Trader make sure that the trend line is drawn with minimum three point connected to each other. Once the market reject the key resistance for the final time it breaks the short term up trend line and forms the new bearish trend. ADX helps to identify the establishment of a new bearish trend.
Trading condition and entry signal
- The pair should be trending and price must be near to the key support or resistance level. This is very the first condition of trading the GBPUSD daily chart with this strategy.
- Traders must draw the key support or resistance area in the daily chart .The support or the resistance zone should be tested twice at least.
- ADX indicator should be used with its default value. When the green line cross above the red line it means uptrend is in action and when the red line cross below the green line it means the bearish trend is in action.
- The black line in the ADX indicates the strength of the trend. Before considering the black line the traders must confirm that a prevailing long-term trend is present in the market which going to bottom or tops the price.
- As soon as the redline goes above the green line along with strong trend momentum trader can expect that the breach of current line support will be broken.
- Traders take their short entry with a valid break out of the trend line with a stop loss above the last high made by this pair. This trading strategy is extremely profitable when there is chance of imminent trend reversal.
- While taking any trade using this trading strategy proper money management system should be followed. No system is 100% perfect. Hats why professional trader use money management technique to save their hard earned money in the forex market. Never risk more that 2-3 % of your account equity and trade within in your risk tolerance level.
- Before taking this system live in to market its advices that trader use this technique for at least two month with virtual dollar provided in the demo account. Even all the professional traders also switch to demo trading before making any change into his trading strategy.