With daily volume sales of around 3 trillion dollars a day, the Commodity Forex Online Trading market is by far the largest financial trading market in the world. Also known as Forex, the Commodity Forex Online is referred to as FX, Spot FX or even Spot.
If you have ever wonder how big the Commodity Forex Online Trading market is, then be prepared to be truly astounded. Indeed the New York Stock Exchange is a midget in comparison as it “only” trades an average of 2 billion dollars a day. In fact combine both the Stock and the Futures market, multiply it by Three and you’ll arrive at a market comparable to that of the Forex Trading market. Did you ever imagine it would have been as big as that?
And just in case you are asking yourself what is that banks trade in Forex Trading, the answer is simple. Money! Loads of it obviously and always in pairs! You see, the simultaneous exchange of one currency against the other is indeed what Forex Trading is and this exchange always takes place in pairs, as in Euro dollar for US dollar (EUR/USD) or the British pound for Japanese Yen (GBP/JPY). And when I mentioned earlier that Commodity Forex Online Trading market was traded by banks, I was partially right as you will discover later on in this article!
Back in earlier times, when money hadn’t been invented and things were seemingly simpler, local economies relied on the principle of bartering when one product was exchanged for another. The value of each product was set by how much the owner of each product thought their product was and this method held for hundreds of years. It is ironic that in this day and age, the Commodity Forex Online Trading Market is still based on a straight bartering exchanging system. Of course, today, the value of each currency is floated and thus independently determined, as opposed to how it was not so long
ago when Forex was introduced.
Unlike traditional purchases, a currency is sought as a sign of investment in it’s country’s economy. The stronger the economy, the safer the trader is that his/her newly acquire currency will not only hold its current value but possibly be even stronger in the future. At times, a trader might forecast that a particular country is due for an upturn in its economy and decide to purchase currency from that very country.
The Commodity Forex Online Market is not only the largest in the world, but it is also unique in that it doesn’t have a physical geographical location, nor does it rely on a central exchange entity. Forex Trading is considered an over the counter market and does not have any restrictions in boundaries. Trading takes place through a network of computers communicating with each other, within a network of banks, 24 hours a day.
In the old days, back in the late 1990’s Commodity Forex Market was reserved for banks and large financial institutions who had the funds to be able to invest the required millions of US Dollars as “working capital”. Today, things have changed drastically since, through the rise of the Internet, smaller retailers and indeed moms and pops operations can trade in the Commodity Forex Online Trading Market.
Not only is the Commodity Forex Online Trading Business now accessible to all, but with the advent of technology, one doesn’t even have to have any prior knowledge of Forex to become an expert and successful trader. Indeed software such as Forex Killer make it now possible to bypass completely the learning curve and enter into this new and exciting market as a true expert.
Thursday, October 30, 2008
Tuesday, October 28, 2008
Easy Forex Trading
When an individual would hear the word 'Forex' it is expected that the initial reaction is that it is a complicated and mind-bugling issue to take. Although this is true at some point, it does not actually work always that way especially if an individual is aware of all the prerequisites of the game. Now, to open each eye about easy Forex trading, this article was created.
• It is easy Forex trading since you need not to overdo things. If you are just new on the Forex trading arena then you can begin with making a profit of only a 20 pips. Do not try to add up more, instead study the tactic that you will have to do the next day.
• You need not to waste all your time; it could be spent on 15 minute chart as well as 1 hour chart only.
• The 5 miniature chart is not there so you could waste yourself into. If you spend too much of your time here then it will only distract you in making a good trading decision.
• Easy Forex trading also means not using the complicated MACD to buy and sell since it only arrive the individual to meaningless trades which anyone would see as a waste of time.
• You can make use of trailing stops during times when you unstoppably keep on moving your Forex proceeds just to cover all your losses. Also keep in mind to practice first with the demo before actually dipping your toe on the real scene.
• You can carry out everything that you can probably do in order to protect your cash through the use of 12-15 pips stop in Forex trading. As expected, you will primarily lose 3 out of 10 trades thus is sensible to hinder your losses to a certain percent and always practice proper money management.
• Some would say that is easy Forex trading given that one can rely only on 'gut feel'. This is not an intuition game; this is a real thing since your money is at risk. Being very much dependent on 'gut feeling' will only lead to financial dilemma thus it is best to control your emotions.
• You need to have a precise and detailed log of every good or bad trade that you had before to serve as your guidelines not to make any erroneous decision later on.
• Every people has their personal indicators thus what work for your friend may not always work for you, be unique.
• Indeed, it is definitely an easy Forex trading but in case you cant compose yourself to be serious on what you are doing then there is no point of even starting.
There are other lists of guideline that would present why it is known as easy Forex trading. For the trader, you have to practice and study every step that you make. Be patient and do not just rely on your inkling if you really want to bag the money all the time.
The Rock Forex Ltd. On-line Forex Investing Platform
If you are looking for an online solution for long-term investing then you might consider Rock Forex Lt. HYIP. This is an international solution to your investing needs and you are sure to see a profit from choosing them. This is a secure place to do online investing and you don’t have to worry about your information being stolen.
The website offered through Rock Forex Ltd. HYIP provides nothing but the highest protection for people who trade. All information transmitted through the site is secure and encrypted. This includes financial information and personal information you might provide to the site. Passwords are forced to be secure and unique.
If you are interested in creating a Rock Forex Ltd. HYIP account then all you have to do is fill out the form. There are no verification procedures you have to be approved by. You must enter information about yourself and who to send payment to based on your revenues. You can send money into your account through e-gold, e-bullion, and liberty reserve. All of these are the safest ways you can send money. You can send money into your account from anywhere in the world with an Internet connection.
There are four different investment products offered through Rock Forex Ltd. HYIP you might be interested in starting your long-term investing with. There is a starter account for people who are interested in investing small amounts of money from $1-$1,000. The investment period for the starter account and all of the accounts is 180 days.
The medium account investment is for those people who are investing between $1,000 and $25,000. The advanced investment account is set up for people who invest between $25,001 and $50,000. The premium investment option through the Rock Forex Ltd. HYIP is for people who want to invest over $50,000.
A nice thing about investing through Rock Forex Ltd. HYIP is that there is no maximum deposit limitation. You can make as many investments as you wish and there is no limit on the amount of investments you make either. You will always receive the principal amount of money you have invested back in 180 days. You will also receive the amount of money your accounts has made in revenues. There is a minimum deposit amount of $10 for people to get started with their first investment account.
When you are paid your money back from Rock Forex Ltd. HYIP and your revenues, you can be paid Mondays through Fridays. There are no payments made to anyone over the weekend. When you are paid interest on your investment accounts, you are paid into your Rock Forex Ltd. private investment account that is setup for you upon creation of your account. You do not pay fees on your withdraws and you can withdraw money from your account any time you wish to. It does take 24 hours to process a withdraw request.
The Rock Forex Ltd. HYIP long-term investment opportunity is an excellent way to make money online. Anyone can take advantage of investing through the company and you can invest as much as you like. It is important to remember that investing through HYIP’s is very risky and you should research as much as possible before you make any decision to do so.
Forex Trading Styles
When you start out in Forex currency trading you will be faced with deciding which of the two main styles to use. Of course, you could combine both styles but there are only so many hours in the day, so it is likely that you will choose one or other of them.
We will explore the main elements of these Forex trading styles below.
Fundamental Forex trading
As a beginner, this is probably the least likely style that you will use. Fundamental trading is based on the examination of economic data. That said, you may indirectly use fundamentals as some of the data used is covered in the day to day news bulletins and in newspapers.
Fundamentalists analyze government reports, current events, news coverage, political events, changes in interest rates, GDP (Gross Domestic Product) changes, inflation predictions, retail price data, unemployment levels and any other factors that they consider important in currency fluctuations. This can extend to political elections, attacks by terrorists, military conflicts, earthquakes, hurricanes, etc.
Technical Forex trading.
This is the most likely tool for the beginner Forex trader. Charts are used to analyze what has happened in the particular currency market you are interested in and then to predict what is likely to happen in the future, based on past events.
At their most basic, charts display the historic relationship between the two currencies you are interested in. This will show the peaks and troughs in the relationship and when you become sufficiently proficient, a chart should be able to help you predict future currency movements.
If you are new to technical Forex trading then the amount of information available to you may appear overwhelming. Take the time to study what you are looking at and make sure that you trade "on paper" before spending your own money.
There are a number of services online who provide chart data in real time. If you decide to trade on the Forex markets as a day trader, such information is essential. A lot can happen during the course of a day and you need to make sure that you stay on top of any fluctuations. This is especially important since the currency market is open 24 hours on weekdays and is a global marketplace.
Thursday, October 23, 2008
Main Strategies are There in Forex Trading
There may be dozens of strategies in Forex trading. Let's just talk about the roots.
Nature Of Market:
Every thing in the universe has its NATURE. So is Forex market. So is every currencies pair in this market. For example, GBP/JPY always moves faster, and its wave range is longer than other pairs, such as a hundred pips during a day or even a hour. EUR/GBP generally waves narrowly several pips only within a day. For American, EUR/USD and GBP/USD like to sleep in day and dance at night. AUD/USD and NZD/USD look like twin, they commonly act in the same style, if one of they goes north, another one does not like to go south. But EUR/USD and USD/CHF are doomed to be enemy, while one of them flies up like a hydrogen balloon, the counterpart mostly will drop like a lead ball. And so on, so on.
Once we find this kind of "Nature of Market", we can develop and figure out some strategies for particular currencies pairs, just follow their nature, predict their moving direction and range. Then we will get our own trading strategy and system.
Fundamental Trading:
In Forex market, many professional analysts like to use a kind of method to predict the future. It is so-called "Fundamental Analysis". Based on this method, they develop many kinds of strategies to trade Forex. These are strategies of forecasting the future price movements of currencies based on economic, political, environmental and other relevant factors and statistics that will affect the basic supply and demand of whatever underlies the foreign currencies.
If you like to try Fundamental Trading, you need learn and understand a lot of finance knowledge. Actually, not only finance knowledge, you need to be interested at many things of this world, including politics, economy, geography, culture, diplomacy, even military affairs. And you need to study the core underlying elements that influence the economy of a particular entity. For example, when the USA's GDP or employment report is strong, you begin to get a fairly clear picture: the general health of America's economy is good. So the US dollar should be stronger than other currencies. But how far can the US dollar go? Fundamental Trading may not answer this question very accurately. You may need to come up with other precise tools as to how best to translate this information into entry and exit points for a particular trading strategy.
Hedge:
In finance, a hedge is an investment that is taken out specifically to reduce the risk in another investment. Hedging is a strategy designed to minimize exposure to an unwanted business risk, while still allowing the business to profit from an investment activity.
In FOREX, there are two kinds of similar "hedging" strategies:
1, Buy and Sell the same currencies pair, same lots, same timing. Then let it go. While one of those orders goes north, the counterpart will go south. After the winner takes profit, we can wait for the loser turning around. In a yo-yo market, this method works well.
For example, buy 2 lots GBP/USD at 2.0003, at the same time sell 2 lots GBP/USD at 1.9997. While the rate rises up to 2.0053, we close the buy order and take profit 50 pips. Now, the sell order will draw down around 50 pips. Let's wait for the rate falling down, it will fall down usually, especially in yo-yo market environment. If the rate drops down to 2.0037, close the sell order, the sell order will lose 40 pips. Does it hurt? No. Don't forget the 50 pips we have taken at the buy order. Totally, we can get 50-40=10 pips. Furthermore, if the rate keeps falling, let's say down to 2.0027, we can take 50-30=20 pips, etc.
Some people would doubt it... doesn't this "strategy" sound like hedging flat for nothing, just paying double spread? Why bother? Well, they are right, because we forgot mentioning the key point: timing of closing orders. When to close the winning order to set a foundation and when to close the losing order to lock the profit, there are some tricks inside. Experienced traders use technical analysis skills to decide this vital timing. Believe it or not, those experienced traders say that this method helps them screening false signals out.
This kind of "Yo-Yo Hedge" can work at any currencies pair.
2, Buy (or sell) unequal lots of special currencies pairs and buy unequal quantities of another kinds of currencies pairs which usually move in the opposite direction. This seems a "Semi-Hedge" trading strategy. It is created based on "Correlation" between some particular currencies pairs. So it is not suitable for every currencies pair.
Actually, this kind of hedge has another feature: earning SWAP! You earn interest daily on the held position which can yield up to 50% per year of your full account balance.
There are several pairs can do it. Such as EUR/USD Vs. USD /CHF, GBP/USD Vs. USD/CHF, AUD/USD Vs. NZD/USD, EUR/JPY Vs. CHF/JPY, GBP/JPY Vs. CHF/JPY.
Let's take the EUR/USD and the CHF/USD pairs.
These pairs are historically negatively correlative 93-98% of the time. That is when one pair goes up the other goes down, and vice versa, up to 98% of the time. In a high leverage account (as high as 400:1 or 500:1), you could earn 50% SWAP interest in a year. How? Let's say you have $5,000 in your account and a 10% risk margin set. If the net interest we receive is 1.25% annually, this 1.25% interest will be enlarged to 50% per annum, by the 400:1 leverage.
And, this return does not include the buy low/sell high profits.
But, if the base of this kind of hedge collapses, it means the "Correlation" does not exist any more, for example the "Correlation" drops under 50% or lower, there will be a disaster.
Arbitrage:
Some people call "Arbitrage" as a risk free strategy. But other people call it as a trick which looks like the cat pawing chestnuts from a fire. But in theory, its risk is minimum in deed. We introduce three types of arbitrage strategies here:
1, Triangle Arbitrage: Searching for two highly fast-moving pairs (like EUR/USD and USD/JPY), the price of a not-so-fast moving pair like EURJPY should always be derived by multiplying (or dividing, etc) the fast-moving pairs. So for example, if EUR/USD is 1.4871 and USD/JPY is 108.24, the logical price of EUR/JPY should be 1.2 x 120 = 160.96. But at the same time, the real EUR/JPY rate is 160.90. The slower moving pair lags behind the logical price, then profit opportunity comes.
In practice currencies are quoted with a bid ask spread, so a trader should be careful that he is actually buying at the quoted ask price, and selling at the quoted bid price. Other transaction costs, such as commissions, might also invalidate the apparent free lunch.
More pairs:
AUD/CAD CAD/JPY AUD/JPY
AUD/CAD GBP/CAD GBP/AUD
AUD/CAD USD/CAD AUD/USD
AUD/CHF CHF/JPY AUD/JPY
AUD/CHF GBP/CHF GBP/AUD
AUD/CHF USD/CHF AUD/USD
AUD/JPY EUR/JPY EUR/AUD
AUD/JPY GBP/JPY GBP/AUD
AUD/JPY USD/JPY AUD/USD
AUD/USD GBP/USD GBP/AUD
AUD/USD USD/CAD AUD/CAD
AUD/USD USD/CHF AUD/CHF
AUD/USD USD/JPY AUD/JPY
CAD/JPY EUR/JPY EUR/CAD
CAD/JPY GBP/JPY GBP/CAD
CAD/JPY USD/JPY USD/CAD
CHF/JPY EUR/JPY EUR/CHF
CHF/JPY GBP/JPY GBP/CHF
EUR/AUD AUD/CHF EUR/CHF
EUR/AUD AUD/JPY EUR/JPY
EUR/AUD AUD/USD EUR/USD
EUR/AUD GBP/AUD EUR/GBP
EUR/CAD AUD/CAD EUR/AUD
EUR/CAD GBP/CAD EUR/CAD
EUR/CAD USD/CAD EUR/USD
EUR/CHF AUD/CHF EUR/AUD
EUR/CHF GBP/CHF EUR/GBP
EUR/CHF USD/CHF EUR/USD
EUR/GBP GBP/AUD EUR/AUD
EUR/GBP GBP/CAD EUR/CAD
EUR/GBP GBP/CHF EUR/CHF
EUR/GBP GBP/JPY EUR/JPY
EUR/GBP GBP/USD EUR/USD
EUR/JPY GBP/JPY EUR/GBP
EUR/JPY USD/JPY EUR/USD
EUR/USD GBP/USD EUR/GBP
EUR/USD USD/JPY EUR/JPY
GBP/JPY USD/JPY GBP/USD
2, Hedging Arbitrage:
This technique is the safest ever, and the most profitable of all hedging techniques while keeping minimal risks. This technique uses the arbitrage of roll over interest rates (SWAP) between two brokers.
One broker which pays or charges roll over interest at end of day, and the other should not charge or pay this kind of roll over SWAP interest. The main idea about this type of Hedge Arbitrage is to open a position of currency (Fore example, the highest SWAP GBP/JPY) at a broker which will pay you a high interest for every night the position is carried, and to open a reverse of that position for the same currency with the broker that does not charge interest for carrying the trade. This way you will gain the interest or SWAP that is credited to your account, risk-free.
3, Netting Arbitrage:
The main idea behind the strategy is, using differences between cross rates (such as EUR/USD, GBP/USD, and EUR/GBP) at different markets.
For example, suppose you had opened the following positions:
buy 1 lot EUR/USD at 1.4867;
sell 1 lot EUR/GBP at 0.7600;
and sell 0.76 lot GBP/USD at 1.9586.
The netting/clearing gives the following results:
Long EUR from the first pair and short EUR from the second pair gives zero exposure in EUR.
Long position in GBP from the second pair and short position from the third pair gives zero exposure in GBP.
Short position from the first pair ($148,670.00) in USD and long position from the third pair ($195,860.00*0.76) in USD gives you $183.60 profit without open positions and exposures.
Simple? Not really for small traders, may be for those "big brothers" only. Because it is really hard to play spread, slippage, stop loss hunting or so on games against brokers.
Carry Trading:
Carry trading is a well known trading strategy which an investor sells a certain currency with a relatively low interest rate and uses the funds to purchase a different currency yielding a higher interest rate. Then this investor can make profit from the difference of these two interest rates.
JPY is currently considered to be the most popular currency to use as the low interest yielding currency in the carry trade, because its interest rate is the lowest of the world almost at 0. And GBP is currently considered to be the high yielding currency. So are NZD and AUD.
When we buy these currencies pairs: GBP/JPY, AUD/JPY, GBP/CHF, USD/JPY, or EUR/CHF;
Or sell: EUR/AUD, EUR/GBP, AUD/NZD;
Both actions can yield positive SWAP roll over interest. If combining with some kinds of hedge trading, we can make as high as 100% profit annually and keep the risk low.
The big risk in a carry trading is the uncertainty of exchange rates. Also, these transactions are generally done with a high leverage, so a small movement in exchange rates can result in huge losses unless hedged appropriately.
Martingale:
Originally, martingale referred to a class of betting strategies popular in 18th century France. In Forex trading, the strategy let the trader double his/her order lots after every loss, so that the first win would recover all previous losses plus win a profit equal to the original investment. In the example below, you bought 1 lot EUR/USD at 1.4650. Unfortunately, the rate drops. You play it in martingale way, "double down", buy two lots, you need the EUR/USD to rally from 1.4630 to 1.4640 to break even. As the price moves lower and you add four lots, you only need it to rally to 1.4625 instead of 1.4640 to break even. The more lots you add, the lower your average entry price. Even though you may lose 100 pips on the first lot of the EUR/USD if the price hits 1.4550, you only need the currencies pair to rally to 1.4569 to break even on your entire holdings. Once the rate goes up one more pip, you will win a lot.
EUR/USD Lots Average or Breakeven Price
1.4650 1 1.4650
1.4630 2 1.4640
1.4610 4 1.4625
1.4590 8 1.4605
1.4570 16 1.4588
1.4550 32 1.4569
The Martingale strategy needs a very strict money management and you must understand that in the beginning money will be coming slowly, but if you lose the patience and raise risk level up to much, you may not hang on to the end to see the turn-around.
Anti-Martingale:
The anti-martingale strategy is the opposite of the better known martingale approach. This approach instead increases order lots after wins, while reducing them after a loss. Using an anti-martingale risk management scheme will increase profits during time periods when a trading approach is working well, while automatically decreasing exposure during portions of the cycle where trading is unprofitable. This is believed to decrease the risk of ruin for trading.
Grid:
Basically the trader sets a series of entry limit orders X pips from the current price, for example 15 pips. Some experienced traders like to use the Fibonacci Series Numbers (0, 1, 1, 2, 3, 5, 8, 13, ...) or Golden Section Numbers to make this grid. Once price hits the level the limit order is executed. Then every 15 pips there is another order at limit price executed. And so on. In a yo-yo market, while the price moves up or down, there always be some limit orders executed. Once the order is taken profit, and the price moves to its original level again, a new limit order shall be executed again, then repeat the same process. Just open orders and take profits in a set of "grid". It is simple and easy, but hard to deal with when and how to close all orders, especially the Stop Loss. Some experts say we do not need stop loss, but will you take the chance to hold your all positions till "Margin Call?"
Day trading:
This refers to the practice of buying and selling currencies pairs such that all positions will usually be closed within the same Forex the trading day. The day trading idea comes from stock market. Day traders rapidly buy and sell stocks throughout the day in the hope that their stocks will continue climbing or falling in value for the seconds to minutes they own the stock, allowing them to lock in quick profits. Day trading is extremely risky and can result in substantial financial losses in a very short period of time. Under the rules of NYSE and NASD, customers who are deemed "pattern day traders" must have at least $25,000 in their accounts and can only trade in margin accounts.
But in Forex market, every one can be a day trader to do day trading. Actually, more than day trading, they can do "scalping".
Scalping:
Scalping is a trading style where small price gaps created by the bid-ask spreads are exploited. It normally involves establishing and liquidating a position quickly, usually within minutes or even seconds. It means trying to get a few points (1~3 pips only, no greed, no long term) off the market every time. This strategy is based on a fact: approximately 70 to 80% of the time, the market is in a consolidation pattern. What this means is that for the majority of time the market is not making significant moves. For example, after the USA market is closed and before the Europe market is open, the Forex market tends to range in a consolidation channel for hours at a time before making another significant move in one direction. This kind of market behavior pattern is ideal for Forex scalping. Every time you enter the market, wait 10 or 20 minutes, once you have several pips gain then cash it and go.
Scalping has some features:
1, Lower exposure, lower risks. Scalpers are only exposed in a relatively short period.
2, Smaller moves, easier to obtain. The normal wave of the market will give you several pips easily.
3, Large volume, adding profits up. Since the profit obtained per share or contract is very small due to its target of spread, they need to trade large in order to add up the profits. Scalping is not suitable for small-capital traders.
But be careful, not every broker welcomes this kind of scalping strategy. If you scalp it too quick and thin, let's say you just hit 1 pip every 2 or 3 minutes then run, and repeat it again and again within a day, every day, you must feel high, eh? But the broker may be not happy and bans you. You will be kicked out because of your successful scalping!
Break-Out:
Using the Bollinger Bands indicator on a chart, we will find every Forex currencies pair is waving in a "band", or a channel. By finding major support and resistance levels with technical analysis, a Break-Out strategy trader will buy this pair at the lower level of support (bottom of the band/channel) and sell them near resistance (top of the band/channel). Till now there is not a Break-Out yet.
Once the price breaks the upper range line with larger-than-average volume, or the opposite: the price breaks the lower range line with larger-than-average volume, the chance is coming. The idea of this strategy is that when a currencies pair breaks out of the channel, it usually experiences a large price movement in the direction of the breakout. So buy it at the price breaks the upper range line and continue to hold it until the rate has risen a distance comparable to the height of the range. If it goes down instead, stop losses as it penetrates the upper range line. Or, sell it at the price breaks the lower range line, and continue to hold it until the rate has fallen a distance comparable to the height of the range. If it goes up instead, stop losses as it penetrates the lower range line.
Pivot:
Besides Support and Resistance levels, many foreign exchange traders like to use another indicator to analyze and predict currency pairs' price changes, it is so-called: the Pivot Point. To calculate and analyze pivot is a subset of technical analysis, with this bench mark, traders can locate the rotation point of the trend, and this is very helpful for deciding when and where to buy or sell.
Classical Pivot Point, Support and Resistance Formulas are as follows:
Look at any one chart, the pivot is an average of the previous bar's high, low, and closing prices. In the following formula, "H" represents the previous bar's high, "L" represents the previous bar's low, and "C" represents the previous bar's closing price.
Current Bar's Pivot Point (P)=Previous Bar's (H+L+C)/3
First level of support and resistance can be calculated as follows:
First Resistance Level (R1)=(2*P)-L
First Support Level (S1)=(2*P)-H
Likewise, the second level of support and resistance:
Second Resistance Level (R2)=P+(R1-S1)
Second Support Level (S2)=P-(R1-S1)
Since many currency pairs tend to fluctuate between Support and Resistance levels, and these levels are calculated based on Pivot points, so when a trend or breakout trader knows where the pivot point is, it will enable him/her to find out key levels that need to be broken for a move to qualify as a breakout.
News Trading:
The system is developed based on economic news events from around the world. Nearly half of those announcements have moved the market significantly. Before a big news is coming, we can buy and sell some currencies pairs at the same time, same lots, set stop loss prices for them. After the news is released, especially for the big one, both sides of buy order and sell order will jump significantly. No matter which order is a winner, just let it go. And the loser will hit the Stop Loss, just let it be. The winner's gain minus the loser's loss, it is your news trading profit. For example, Non-Farm Payrolls/Employment Report - The NFP is the most influential news release of every month. It's announced on the first Friday of the month at 8:30am EST for the prior month. We can put a buy order and a sell order at market prices for GBP/USD, at 8:29 am EST. Don't forget, set 30 pips Stop Loss level for them. Wait 2 minutes only, the news is announced, it is a big one! Then the sell order jumps over 100 pips, and the buy order drops like a brick. The brick hits the Stop Loss and the pain is over. Totally, your gain could be 100-30=70 pips. Quick and easy, cool enough?
Trend Following:
It is so simple, just follow the trend. Buy it is the most difficult strategy because no one can tell you 100% for sure what is the right TREND. Go to look at a weekly chat of USD/CAD, if you had shorted this pair in September 2001 and held it till September 2007, you know what the trend means.
The most famous trend analysis tool seems the Wave Principle. In the 1930s, Ralph Nelson Elliott discovered that stock market prices trend and reverse in recognizable patterns. Elliott isolated five such patterns, or "waves," that recur in market price data.
Another trend analysis guru should be W. D. Gann. In 1908, Gann discovered what he called the "market time factor", which made him one of the pioneers of technical analysis. To test his new strategy, he opened one account with $300 and one with $150. It turned out to be wildly successful: Gann was able to make $25,000 profit with his $300 account in only three months; meanwhile, he made $12,000 profit with his $150 account in only 30 days! After his results were verified, he became famous on Wall Street as one of the best forecasters of all time.
Back to the chat of USD/CAD, now, please tell me, how to follow the trend? Will USD/CAD continue the trend which is going south further to 0.6000, or, another trend going north reversely back to 1.6000?
Nature Of Market:
Every thing in the universe has its NATURE. So is Forex market. So is every currencies pair in this market. For example, GBP/JPY always moves faster, and its wave range is longer than other pairs, such as a hundred pips during a day or even a hour. EUR/GBP generally waves narrowly several pips only within a day. For American, EUR/USD and GBP/USD like to sleep in day and dance at night. AUD/USD and NZD/USD look like twin, they commonly act in the same style, if one of they goes north, another one does not like to go south. But EUR/USD and USD/CHF are doomed to be enemy, while one of them flies up like a hydrogen balloon, the counterpart mostly will drop like a lead ball. And so on, so on.
Once we find this kind of "Nature of Market", we can develop and figure out some strategies for particular currencies pairs, just follow their nature, predict their moving direction and range. Then we will get our own trading strategy and system.
Fundamental Trading:
In Forex market, many professional analysts like to use a kind of method to predict the future. It is so-called "Fundamental Analysis". Based on this method, they develop many kinds of strategies to trade Forex. These are strategies of forecasting the future price movements of currencies based on economic, political, environmental and other relevant factors and statistics that will affect the basic supply and demand of whatever underlies the foreign currencies.
If you like to try Fundamental Trading, you need learn and understand a lot of finance knowledge. Actually, not only finance knowledge, you need to be interested at many things of this world, including politics, economy, geography, culture, diplomacy, even military affairs. And you need to study the core underlying elements that influence the economy of a particular entity. For example, when the USA's GDP or employment report is strong, you begin to get a fairly clear picture: the general health of America's economy is good. So the US dollar should be stronger than other currencies. But how far can the US dollar go? Fundamental Trading may not answer this question very accurately. You may need to come up with other precise tools as to how best to translate this information into entry and exit points for a particular trading strategy.
Hedge:
In finance, a hedge is an investment that is taken out specifically to reduce the risk in another investment. Hedging is a strategy designed to minimize exposure to an unwanted business risk, while still allowing the business to profit from an investment activity.
In FOREX, there are two kinds of similar "hedging" strategies:
1, Buy and Sell the same currencies pair, same lots, same timing. Then let it go. While one of those orders goes north, the counterpart will go south. After the winner takes profit, we can wait for the loser turning around. In a yo-yo market, this method works well.
For example, buy 2 lots GBP/USD at 2.0003, at the same time sell 2 lots GBP/USD at 1.9997. While the rate rises up to 2.0053, we close the buy order and take profit 50 pips. Now, the sell order will draw down around 50 pips. Let's wait for the rate falling down, it will fall down usually, especially in yo-yo market environment. If the rate drops down to 2.0037, close the sell order, the sell order will lose 40 pips. Does it hurt? No. Don't forget the 50 pips we have taken at the buy order. Totally, we can get 50-40=10 pips. Furthermore, if the rate keeps falling, let's say down to 2.0027, we can take 50-30=20 pips, etc.
Some people would doubt it... doesn't this "strategy" sound like hedging flat for nothing, just paying double spread? Why bother? Well, they are right, because we forgot mentioning the key point: timing of closing orders. When to close the winning order to set a foundation and when to close the losing order to lock the profit, there are some tricks inside. Experienced traders use technical analysis skills to decide this vital timing. Believe it or not, those experienced traders say that this method helps them screening false signals out.
This kind of "Yo-Yo Hedge" can work at any currencies pair.
2, Buy (or sell) unequal lots of special currencies pairs and buy unequal quantities of another kinds of currencies pairs which usually move in the opposite direction. This seems a "Semi-Hedge" trading strategy. It is created based on "Correlation" between some particular currencies pairs. So it is not suitable for every currencies pair.
Actually, this kind of hedge has another feature: earning SWAP! You earn interest daily on the held position which can yield up to 50% per year of your full account balance.
There are several pairs can do it. Such as EUR/USD Vs. USD /CHF, GBP/USD Vs. USD/CHF, AUD/USD Vs. NZD/USD, EUR/JPY Vs. CHF/JPY, GBP/JPY Vs. CHF/JPY.
Let's take the EUR/USD and the CHF/USD pairs.
These pairs are historically negatively correlative 93-98% of the time. That is when one pair goes up the other goes down, and vice versa, up to 98% of the time. In a high leverage account (as high as 400:1 or 500:1), you could earn 50% SWAP interest in a year. How? Let's say you have $5,000 in your account and a 10% risk margin set. If the net interest we receive is 1.25% annually, this 1.25% interest will be enlarged to 50% per annum, by the 400:1 leverage.
And, this return does not include the buy low/sell high profits.
But, if the base of this kind of hedge collapses, it means the "Correlation" does not exist any more, for example the "Correlation" drops under 50% or lower, there will be a disaster.
Arbitrage:
Some people call "Arbitrage" as a risk free strategy. But other people call it as a trick which looks like the cat pawing chestnuts from a fire. But in theory, its risk is minimum in deed. We introduce three types of arbitrage strategies here:
1, Triangle Arbitrage: Searching for two highly fast-moving pairs (like EUR/USD and USD/JPY), the price of a not-so-fast moving pair like EURJPY should always be derived by multiplying (or dividing, etc) the fast-moving pairs. So for example, if EUR/USD is 1.4871 and USD/JPY is 108.24, the logical price of EUR/JPY should be 1.2 x 120 = 160.96. But at the same time, the real EUR/JPY rate is 160.90. The slower moving pair lags behind the logical price, then profit opportunity comes.
In practice currencies are quoted with a bid ask spread, so a trader should be careful that he is actually buying at the quoted ask price, and selling at the quoted bid price. Other transaction costs, such as commissions, might also invalidate the apparent free lunch.
More pairs:
AUD/CAD CAD/JPY AUD/JPY
AUD/CAD GBP/CAD GBP/AUD
AUD/CAD USD/CAD AUD/USD
AUD/CHF CHF/JPY AUD/JPY
AUD/CHF GBP/CHF GBP/AUD
AUD/CHF USD/CHF AUD/USD
AUD/JPY EUR/JPY EUR/AUD
AUD/JPY GBP/JPY GBP/AUD
AUD/JPY USD/JPY AUD/USD
AUD/USD GBP/USD GBP/AUD
AUD/USD USD/CAD AUD/CAD
AUD/USD USD/CHF AUD/CHF
AUD/USD USD/JPY AUD/JPY
CAD/JPY EUR/JPY EUR/CAD
CAD/JPY GBP/JPY GBP/CAD
CAD/JPY USD/JPY USD/CAD
CHF/JPY EUR/JPY EUR/CHF
CHF/JPY GBP/JPY GBP/CHF
EUR/AUD AUD/CHF EUR/CHF
EUR/AUD AUD/JPY EUR/JPY
EUR/AUD AUD/USD EUR/USD
EUR/AUD GBP/AUD EUR/GBP
EUR/CAD AUD/CAD EUR/AUD
EUR/CAD GBP/CAD EUR/CAD
EUR/CAD USD/CAD EUR/USD
EUR/CHF AUD/CHF EUR/AUD
EUR/CHF GBP/CHF EUR/GBP
EUR/CHF USD/CHF EUR/USD
EUR/GBP GBP/AUD EUR/AUD
EUR/GBP GBP/CAD EUR/CAD
EUR/GBP GBP/CHF EUR/CHF
EUR/GBP GBP/JPY EUR/JPY
EUR/GBP GBP/USD EUR/USD
EUR/JPY GBP/JPY EUR/GBP
EUR/JPY USD/JPY EUR/USD
EUR/USD GBP/USD EUR/GBP
EUR/USD USD/JPY EUR/JPY
GBP/JPY USD/JPY GBP/USD
2, Hedging Arbitrage:
This technique is the safest ever, and the most profitable of all hedging techniques while keeping minimal risks. This technique uses the arbitrage of roll over interest rates (SWAP) between two brokers.
One broker which pays or charges roll over interest at end of day, and the other should not charge or pay this kind of roll over SWAP interest. The main idea about this type of Hedge Arbitrage is to open a position of currency (Fore example, the highest SWAP GBP/JPY) at a broker which will pay you a high interest for every night the position is carried, and to open a reverse of that position for the same currency with the broker that does not charge interest for carrying the trade. This way you will gain the interest or SWAP that is credited to your account, risk-free.
3, Netting Arbitrage:
The main idea behind the strategy is, using differences between cross rates (such as EUR/USD, GBP/USD, and EUR/GBP) at different markets.
For example, suppose you had opened the following positions:
buy 1 lot EUR/USD at 1.4867;
sell 1 lot EUR/GBP at 0.7600;
and sell 0.76 lot GBP/USD at 1.9586.
The netting/clearing gives the following results:
Long EUR from the first pair and short EUR from the second pair gives zero exposure in EUR.
Long position in GBP from the second pair and short position from the third pair gives zero exposure in GBP.
Short position from the first pair ($148,670.00) in USD and long position from the third pair ($195,860.00*0.76) in USD gives you $183.60 profit without open positions and exposures.
Simple? Not really for small traders, may be for those "big brothers" only. Because it is really hard to play spread, slippage, stop loss hunting or so on games against brokers.
Carry Trading:
Carry trading is a well known trading strategy which an investor sells a certain currency with a relatively low interest rate and uses the funds to purchase a different currency yielding a higher interest rate. Then this investor can make profit from the difference of these two interest rates.
JPY is currently considered to be the most popular currency to use as the low interest yielding currency in the carry trade, because its interest rate is the lowest of the world almost at 0. And GBP is currently considered to be the high yielding currency. So are NZD and AUD.
When we buy these currencies pairs: GBP/JPY, AUD/JPY, GBP/CHF, USD/JPY, or EUR/CHF;
Or sell: EUR/AUD, EUR/GBP, AUD/NZD;
Both actions can yield positive SWAP roll over interest. If combining with some kinds of hedge trading, we can make as high as 100% profit annually and keep the risk low.
The big risk in a carry trading is the uncertainty of exchange rates. Also, these transactions are generally done with a high leverage, so a small movement in exchange rates can result in huge losses unless hedged appropriately.
Martingale:
Originally, martingale referred to a class of betting strategies popular in 18th century France. In Forex trading, the strategy let the trader double his/her order lots after every loss, so that the first win would recover all previous losses plus win a profit equal to the original investment. In the example below, you bought 1 lot EUR/USD at 1.4650. Unfortunately, the rate drops. You play it in martingale way, "double down", buy two lots, you need the EUR/USD to rally from 1.4630 to 1.4640 to break even. As the price moves lower and you add four lots, you only need it to rally to 1.4625 instead of 1.4640 to break even. The more lots you add, the lower your average entry price. Even though you may lose 100 pips on the first lot of the EUR/USD if the price hits 1.4550, you only need the currencies pair to rally to 1.4569 to break even on your entire holdings. Once the rate goes up one more pip, you will win a lot.
EUR/USD Lots Average or Breakeven Price
1.4650 1 1.4650
1.4630 2 1.4640
1.4610 4 1.4625
1.4590 8 1.4605
1.4570 16 1.4588
1.4550 32 1.4569
The Martingale strategy needs a very strict money management and you must understand that in the beginning money will be coming slowly, but if you lose the patience and raise risk level up to much, you may not hang on to the end to see the turn-around.
Anti-Martingale:
The anti-martingale strategy is the opposite of the better known martingale approach. This approach instead increases order lots after wins, while reducing them after a loss. Using an anti-martingale risk management scheme will increase profits during time periods when a trading approach is working well, while automatically decreasing exposure during portions of the cycle where trading is unprofitable. This is believed to decrease the risk of ruin for trading.
Grid:
Basically the trader sets a series of entry limit orders X pips from the current price, for example 15 pips. Some experienced traders like to use the Fibonacci Series Numbers (0, 1, 1, 2, 3, 5, 8, 13, ...) or Golden Section Numbers to make this grid. Once price hits the level the limit order is executed. Then every 15 pips there is another order at limit price executed. And so on. In a yo-yo market, while the price moves up or down, there always be some limit orders executed. Once the order is taken profit, and the price moves to its original level again, a new limit order shall be executed again, then repeat the same process. Just open orders and take profits in a set of "grid". It is simple and easy, but hard to deal with when and how to close all orders, especially the Stop Loss. Some experts say we do not need stop loss, but will you take the chance to hold your all positions till "Margin Call?"
Day trading:
This refers to the practice of buying and selling currencies pairs such that all positions will usually be closed within the same Forex the trading day. The day trading idea comes from stock market. Day traders rapidly buy and sell stocks throughout the day in the hope that their stocks will continue climbing or falling in value for the seconds to minutes they own the stock, allowing them to lock in quick profits. Day trading is extremely risky and can result in substantial financial losses in a very short period of time. Under the rules of NYSE and NASD, customers who are deemed "pattern day traders" must have at least $25,000 in their accounts and can only trade in margin accounts.
But in Forex market, every one can be a day trader to do day trading. Actually, more than day trading, they can do "scalping".
Scalping:
Scalping is a trading style where small price gaps created by the bid-ask spreads are exploited. It normally involves establishing and liquidating a position quickly, usually within minutes or even seconds. It means trying to get a few points (1~3 pips only, no greed, no long term) off the market every time. This strategy is based on a fact: approximately 70 to 80% of the time, the market is in a consolidation pattern. What this means is that for the majority of time the market is not making significant moves. For example, after the USA market is closed and before the Europe market is open, the Forex market tends to range in a consolidation channel for hours at a time before making another significant move in one direction. This kind of market behavior pattern is ideal for Forex scalping. Every time you enter the market, wait 10 or 20 minutes, once you have several pips gain then cash it and go.
Scalping has some features:
1, Lower exposure, lower risks. Scalpers are only exposed in a relatively short period.
2, Smaller moves, easier to obtain. The normal wave of the market will give you several pips easily.
3, Large volume, adding profits up. Since the profit obtained per share or contract is very small due to its target of spread, they need to trade large in order to add up the profits. Scalping is not suitable for small-capital traders.
But be careful, not every broker welcomes this kind of scalping strategy. If you scalp it too quick and thin, let's say you just hit 1 pip every 2 or 3 minutes then run, and repeat it again and again within a day, every day, you must feel high, eh? But the broker may be not happy and bans you. You will be kicked out because of your successful scalping!
Break-Out:
Using the Bollinger Bands indicator on a chart, we will find every Forex currencies pair is waving in a "band", or a channel. By finding major support and resistance levels with technical analysis, a Break-Out strategy trader will buy this pair at the lower level of support (bottom of the band/channel) and sell them near resistance (top of the band/channel). Till now there is not a Break-Out yet.
Once the price breaks the upper range line with larger-than-average volume, or the opposite: the price breaks the lower range line with larger-than-average volume, the chance is coming. The idea of this strategy is that when a currencies pair breaks out of the channel, it usually experiences a large price movement in the direction of the breakout. So buy it at the price breaks the upper range line and continue to hold it until the rate has risen a distance comparable to the height of the range. If it goes down instead, stop losses as it penetrates the upper range line. Or, sell it at the price breaks the lower range line, and continue to hold it until the rate has fallen a distance comparable to the height of the range. If it goes up instead, stop losses as it penetrates the lower range line.
Pivot:
Besides Support and Resistance levels, many foreign exchange traders like to use another indicator to analyze and predict currency pairs' price changes, it is so-called: the Pivot Point. To calculate and analyze pivot is a subset of technical analysis, with this bench mark, traders can locate the rotation point of the trend, and this is very helpful for deciding when and where to buy or sell.
Classical Pivot Point, Support and Resistance Formulas are as follows:
Look at any one chart, the pivot is an average of the previous bar's high, low, and closing prices. In the following formula, "H" represents the previous bar's high, "L" represents the previous bar's low, and "C" represents the previous bar's closing price.
Current Bar's Pivot Point (P)=Previous Bar's (H+L+C)/3
First level of support and resistance can be calculated as follows:
First Resistance Level (R1)=(2*P)-L
First Support Level (S1)=(2*P)-H
Likewise, the second level of support and resistance:
Second Resistance Level (R2)=P+(R1-S1)
Second Support Level (S2)=P-(R1-S1)
Since many currency pairs tend to fluctuate between Support and Resistance levels, and these levels are calculated based on Pivot points, so when a trend or breakout trader knows where the pivot point is, it will enable him/her to find out key levels that need to be broken for a move to qualify as a breakout.
News Trading:
The system is developed based on economic news events from around the world. Nearly half of those announcements have moved the market significantly. Before a big news is coming, we can buy and sell some currencies pairs at the same time, same lots, set stop loss prices for them. After the news is released, especially for the big one, both sides of buy order and sell order will jump significantly. No matter which order is a winner, just let it go. And the loser will hit the Stop Loss, just let it be. The winner's gain minus the loser's loss, it is your news trading profit. For example, Non-Farm Payrolls/Employment Report - The NFP is the most influential news release of every month. It's announced on the first Friday of the month at 8:30am EST for the prior month. We can put a buy order and a sell order at market prices for GBP/USD, at 8:29 am EST. Don't forget, set 30 pips Stop Loss level for them. Wait 2 minutes only, the news is announced, it is a big one! Then the sell order jumps over 100 pips, and the buy order drops like a brick. The brick hits the Stop Loss and the pain is over. Totally, your gain could be 100-30=70 pips. Quick and easy, cool enough?
Trend Following:
It is so simple, just follow the trend. Buy it is the most difficult strategy because no one can tell you 100% for sure what is the right TREND. Go to look at a weekly chat of USD/CAD, if you had shorted this pair in September 2001 and held it till September 2007, you know what the trend means.
The most famous trend analysis tool seems the Wave Principle. In the 1930s, Ralph Nelson Elliott discovered that stock market prices trend and reverse in recognizable patterns. Elliott isolated five such patterns, or "waves," that recur in market price data.
Another trend analysis guru should be W. D. Gann. In 1908, Gann discovered what he called the "market time factor", which made him one of the pioneers of technical analysis. To test his new strategy, he opened one account with $300 and one with $150. It turned out to be wildly successful: Gann was able to make $25,000 profit with his $300 account in only three months; meanwhile, he made $12,000 profit with his $150 account in only 30 days! After his results were verified, he became famous on Wall Street as one of the best forecasters of all time.
Back to the chat of USD/CAD, now, please tell me, how to follow the trend? Will USD/CAD continue the trend which is going south further to 0.6000, or, another trend going north reversely back to 1.6000?
Monday, October 20, 2008
Revealing Forex Deals
Did you know that more than 95% of all forex trading today is for speculative reasons only (that is to make a profit from the currency movements). The remainder is for heding and other activity.
Forex trades (trading onboard internet platforms) are non-delivery trades: currencies are not physically traded, but rather there are currency contracts which are agreed upon and performed. Investors to such deals or contract undertake to fulfill their obligations agreed upon: one side undertakes to sell the amount specified, and the other undertakes to buy it. As mentioned, over 95% of the market activity is for speculative purposes, so there is no intention on either side to actually perform the contract (the physical delivery of the currencies). Therefore, the contract or Forex Deal ends by the offsetting it against an opposite position, ending in the profiting and or loss involved in the deal.
Components of a Forex deal
A Forex deal is a contract agreed upon between the trader and the market- maker (i.e. the Trading Platform). The contract is comprised of the following components:
The currency pairs (which currency to buy; which currency to sell)
The principal amount (or "face", or "nominal": the amount of currency involved in the deal)
The Rate (agreed rate of the actual exchange)
The frame is also a factor in some deals, but this article focuses on Day-Trading (similar to "Spot" or "Current Time" trading) in which deals have a lifespan of no more than a full day. Therefore the time does not matter in this situation. Note however, that deals can be renewed or (rolled-over) to the next day
The Forex deal, in this context, is therefore an obligation to buy and sell a specific amount of a particular pair of currencies at a pre-determined rate.
Forex trading is always done in pairs of currency. For example, imagine that the exchange rate of EUR/USD (euros to US dollars) on a certain day is 1.5000 (this number is also referred to as a "spot rate", or just a "rate". If an investor had brought 1,000 euros on that date, he would have paid 1,500.00 US dollars. If one year later, the Forex rate was 1.5100, the value of the eruo has increased in relation to the US dollar. The investor would then have USD 10.00 more than when they started a year earlier.
The important thing is to know when one has made a good investment or now. You need to compare your investments to be sure. You must find that the (RIO) should be compares to the return on a risk. US governement bonds are considered the most risk free i.e. the US government is not likely to go bankrupt, or be unable or unwilling to pay its debts.
Do not trade unless you expect the currency you are buying yo increase in value over the currency you are selling. If the currency you are buying does profit. An open trade (also called an "open position") is one in which a trader has bought or sold a particular currency pair, and has not yet sold or bought back the equivalent amount to complete the deal.
It is estimated that around 95% of the FX market is speculative. The movment of that particular currency pair.
Forex trades (trading onboard internet platforms) are non-delivery trades: currencies are not physically traded, but rather there are currency contracts which are agreed upon and performed. Investors to such deals or contract undertake to fulfill their obligations agreed upon: one side undertakes to sell the amount specified, and the other undertakes to buy it. As mentioned, over 95% of the market activity is for speculative purposes, so there is no intention on either side to actually perform the contract (the physical delivery of the currencies). Therefore, the contract or Forex Deal ends by the offsetting it against an opposite position, ending in the profiting and or loss involved in the deal.
Components of a Forex deal
A Forex deal is a contract agreed upon between the trader and the market- maker (i.e. the Trading Platform). The contract is comprised of the following components:
The currency pairs (which currency to buy; which currency to sell)
The principal amount (or "face", or "nominal": the amount of currency involved in the deal)
The Rate (agreed rate of the actual exchange)
The frame is also a factor in some deals, but this article focuses on Day-Trading (similar to "Spot" or "Current Time" trading) in which deals have a lifespan of no more than a full day. Therefore the time does not matter in this situation. Note however, that deals can be renewed or (rolled-over) to the next day
The Forex deal, in this context, is therefore an obligation to buy and sell a specific amount of a particular pair of currencies at a pre-determined rate.
Forex trading is always done in pairs of currency. For example, imagine that the exchange rate of EUR/USD (euros to US dollars) on a certain day is 1.5000 (this number is also referred to as a "spot rate", or just a "rate". If an investor had brought 1,000 euros on that date, he would have paid 1,500.00 US dollars. If one year later, the Forex rate was 1.5100, the value of the eruo has increased in relation to the US dollar. The investor would then have USD 10.00 more than when they started a year earlier.
The important thing is to know when one has made a good investment or now. You need to compare your investments to be sure. You must find that the (RIO) should be compares to the return on a risk. US governement bonds are considered the most risk free i.e. the US government is not likely to go bankrupt, or be unable or unwilling to pay its debts.
Do not trade unless you expect the currency you are buying yo increase in value over the currency you are selling. If the currency you are buying does profit. An open trade (also called an "open position") is one in which a trader has bought or sold a particular currency pair, and has not yet sold or bought back the equivalent amount to complete the deal.
It is estimated that around 95% of the FX market is speculative. The movment of that particular currency pair.
Real Time Forex
In the crazy Forex market having real time Forex and its rates is a huge benefit. Real time foreign exchange allows for the trader to have absolute confidence in the trade and the rate they are getting. This is because actual time Forex informs the trader in actual time the current rates for trading and exchange between foreign currencies. This assures the trader that they are getting the best deal they can at that time and place. Real time Forex can help with uniformity and equality.
A Forex trader depends on the rates to make all their trading decisions, and with actual time foreign exchange it makes that job easier. In order to fully benefit from real time Forex one needs to have Forex software, which will assist in displaying any of the latest rates. Everything, including buying and selling, affects Forex rates and that is why having a server that constantly and accurately updates as well as Forex software is very important to actual time Forex.
Another important aspect to actual time Forex is that these rates must constantly and instantly made known worldwide to Forex traders. This insures no discrepancies. Highly sophisticated trading applications that are written by skilled programmers help make this real time possibility work smoothly and accurately all around the world.
Independence is indeed a great advantage of having actual time rates displayed. This makes them less dependent on brokerages or foreign exchange bureaus for their needs. Real time FX has made it possible for the trader to monitor everything whenever they want from wherever they want.
Usually all that is needed for actual time Forex is a computer; high speed Internet, a Forex trading account and knowledge on how the Forex market work and they are ready to go. The twenty four hours a day availability can allow an individual trader able to log on any time they wish and conduct transactions or just take and look and monitor what is going on anywhere in the world.
These advantages are hugely beneficial to the trader who wishes to be independent or work from home or anywhere they wish to. Real time Forex is an excellent way to benefit from the Forex market and earn profits and can be used anywhere day or night in any part of the world where the Internet is available. This makes using actual time FX and an excellent way to go, with a little money and very little effort.
Thursday, October 16, 2008
Currency Trading Rates
Foreign Exchange (or Forex) trading has grown in popularity in the last ten years. There are new traders entering the market every day, and the daily trading volume in this financial market is ever-increasing.
Unlike most other financial trading markets, currencies are not traded on their own, but rather in pairs. The trading of currency pairs have unfortunately confused many would-be traders and have discouraged them from learning more about currency trading.
What Is A Currency Pair?
Whenever we purchase a product, we pay money for it. This is also what happens in the stock and futures trading markets: we trade our money in exchange for a stock or for a futures contract. It’s not a difficult concept to grasp, right?
Now, in the currency market, things will get a little more complicated. You see this time, instead of trading money for goods you are trading money for money. So for example, if I wish to purchase 1 Euro, I would have to pay a certain amount of U.S. Dollars for it. If I wish to purchase 1 Pound, I also would have to pay a certain amount of U.S. Dollars for it.
For example, one stock of company A may cost US$20, so we have:
1 stock of ABC company = $20
In the same manner, one Euro may cost US$1.50:
1 Euro = 1.50 USD
This is known as a currency trading rate. For purposes of simplicity, this rate is often quoted as:
EUR/USD = 1.5000
This is essentially how most currency trading rates are expressed. The Euro is the Base Currency, as it is the currency that the U.S. Dollar is quoted against.
For the USD/JPY currency pair, the U.S. Dollar is the Base Currency. For the GBP/USD pair, the Base Currency is the Pound.
And that’s all there is to it. It’s easy to understand Currency trading rates when you know how, isn’t it?
Unlike most other financial trading markets, currencies are not traded on their own, but rather in pairs. The trading of currency pairs have unfortunately confused many would-be traders and have discouraged them from learning more about currency trading.
What Is A Currency Pair?
Whenever we purchase a product, we pay money for it. This is also what happens in the stock and futures trading markets: we trade our money in exchange for a stock or for a futures contract. It’s not a difficult concept to grasp, right?
Now, in the currency market, things will get a little more complicated. You see this time, instead of trading money for goods you are trading money for money. So for example, if I wish to purchase 1 Euro, I would have to pay a certain amount of U.S. Dollars for it. If I wish to purchase 1 Pound, I also would have to pay a certain amount of U.S. Dollars for it.
For example, one stock of company A may cost US$20, so we have:
1 stock of ABC company = $20
In the same manner, one Euro may cost US$1.50:
1 Euro = 1.50 USD
This is known as a currency trading rate. For purposes of simplicity, this rate is often quoted as:
EUR/USD = 1.5000
This is essentially how most currency trading rates are expressed. The Euro is the Base Currency, as it is the currency that the U.S. Dollar is quoted against.
For the USD/JPY currency pair, the U.S. Dollar is the Base Currency. For the GBP/USD pair, the Base Currency is the Pound.
And that’s all there is to it. It’s easy to understand Currency trading rates when you know how, isn’t it?
Online Currency Trading and the FOREX Market
Online currency trading takes on more than just a speculators or investors role in today's complex markets. If you are running a multi-company trading business, or even if you are 'just' a property investor, moving currencies around different exchanges at the right time can add quite a considerable amount to your bottom line.
As most property transactions are in many hundreds of thousands of dollars, a few points alteration on the exchange rate of the day could actually make or break the profitably of a deal.
However, many people regularly invest on the Foreign Exchange markets as a pure investment. Well, I say many, but actually FOREX is the largest market in the World, but it doesn't have an actual home.
There are a number of workshops available that are ideal if you're new to the Forex market and have some experience trading stocks or other products. Whether you're looking to diversify your portfolio, learn a new skill, or supplement your income, you'll find out if the Forex market is right for you. Have a look at forex.com for more information.
Online currency trading is all done through the Foreign Exchange or FOREX. It is the largest market in the world with about $1.9 trillion going into different hands everyday. Unlike all other financial markets on the planet, FOREX doesn't actually have an actual physical location.
That is because it is all done on the Internet and through banks with individuals trading their local currency for another. Or, if they have come back from a different country, then they might be changing from that currency into their home currency. Because FOREX is all based on the Internet, you can use online currency trading services to work within the market 24 hours a day.
But to be able to use the FOREX service, you have to sign yourself up to one of the many companies that offer these trading accounts to customers. You can open an account with any one of the hundreds of companies available; and then immediately begin trading currencies.
You will not want to use this service if you only exchange currency once a year, as you can do that at your local bank. Although this choice of account is available, large corporations mostly use online currency trading and they are the ones that will use this service the most.
However, in many cases, there are agencies available that you can sign up with ,that for a low percentage return will actually take care of all this for you.
For the really serious investor, there is a lot of money to be made, and often a lot of money held on risk. There is so much information that is now readily available, that with laptops and a wireless connection, anybody can trade basically anywhere in the world.
Also, on these online currency trading websites, you will get up to minute exchange rates from all over the world, so you will know the exact amount that you will get from your money. This also enables you to know the best time to use the online currency trading services. When the rates are just right for you, then that is when you can exchange your money.
However, it is important to note that some currency trading companies will need two days advance notice before you withdraw your money, so it is always wise to plan ahead if your goal is to make money with FOREX trading then use that money to pay bills or to pay for living expenses.
Have a look, you may well find that this is an interesting, and potentially, a very profitable new area of investing for you to look at.
Currency Trading Systems
If you want to trade currencies then you need a currency trading system that will get the odds in your favour and here we will show the basics that make a successful one. Anyone can build one and incorporate it in their Forex trading strategy and it's easy to do - Let's look at the basics.
1. Identifying the Opportunity
The best way to identify an opportunity is to use support and resistance and good old trend lines. We won't explain support and resistance here - but if you are not familiar with it look it up on the net - Here we want you to keep in mind one key point:
When you trade be selective and only trade valid support and resistance.
What do we mean by valid?
- The more tests the better
- The more time frames involved the better
- The longer the duration between the time frame the better
The above are just general guidelines - you can use 2 tests but 3 tests or more, are better and look for resistance or support that is considered important by the market.
You then need to decide after spotting the opportunity on your forex charts when to trade.
2. Executing the Trading Signal
Never simply buy into support or sell into resistance with your currency trading system.
This wont work, as your predicting what may happen and as you can't predict the future ( despite what many guru's will tell you), you are simply hoping or guessing and the market will kill you.
You need confirmation.
If you don't know what momentum indicators are look them up - you need them and there an essential part of your forex education.
You only need a couple to confirm the move - more is not better as you need a simple system - more complicated ones have more elements to break.
The way to use them is to watch for a level to hold and when momentum shifts away from the level then you trade.
Don't just look for support or resistance to hold though - incorporate breakout methodology. It's a fact that most trends start form new market highs NOT Market lows. So, if prices breakout supported by momentum buy them!
Most traders can't do this they want to get back in on a pullback that never comes - don't make this mistake trade the breakouts like the pros do.
Finally be very selective and only trade the best set ups - in forex trading you don't get paid for how often you trade you get paid for being RIGHT.
Trade sparingly and only trade the big high odds trades.
3. Stops and Profits
Stops are easy and behind support and resistance. Place them as soon as your currency trading system gives a signal.
If you are long term trend following, keep your stop well back and give the market room to breathe, so you don't get stopped out by random volatility.
You are going to miss the turn but as you can't predict that anyway, that's fine.
Catch 50 - 60% of the big trends and you will become very rich.
Swing trading is another matter.
You're looking for smaller moves and they can disappear quickly, so use a profit target and take your profit early!
Don't worry about perfection of what you might have made - concentrate on making money - no one is perfect but that won't stop you enjoying currency trading success.
4. Managing Your Money
Forex trading is risky, that's why the rewards are so high. Many traders however try and restrict risk so much they create it.
They trade to often have stops to close and move them too quickly and end up losing.
Confront risk cheerfully!
Forget all the common wisdom about risking 2% per trade- if you're trading a $10,000 account that's 200! If you don't risk much you wont win.
If you have a high odds trade risk 20% and have the courage of your conviction.
If you take calculated risks at the right time you can enjoy currency trading success.
FINALLY REMEMBER THIS!
So there you have it the above is a simple system - support resistance and a few confirming indicators and the best systems are.
Keep in mind that forex trading is as much to do with mindset as method and you need to maintain discipline.
Simple currency trading systems are easier to understand, apply and have confidence in which leads to the discipline to follow your currency trading system to long term currency trading success.
1. Identifying the Opportunity
The best way to identify an opportunity is to use support and resistance and good old trend lines. We won't explain support and resistance here - but if you are not familiar with it look it up on the net - Here we want you to keep in mind one key point:
When you trade be selective and only trade valid support and resistance.
What do we mean by valid?
- The more tests the better
- The more time frames involved the better
- The longer the duration between the time frame the better
The above are just general guidelines - you can use 2 tests but 3 tests or more, are better and look for resistance or support that is considered important by the market.
You then need to decide after spotting the opportunity on your forex charts when to trade.
2. Executing the Trading Signal
Never simply buy into support or sell into resistance with your currency trading system.
This wont work, as your predicting what may happen and as you can't predict the future ( despite what many guru's will tell you), you are simply hoping or guessing and the market will kill you.
You need confirmation.
If you don't know what momentum indicators are look them up - you need them and there an essential part of your forex education.
You only need a couple to confirm the move - more is not better as you need a simple system - more complicated ones have more elements to break.
The way to use them is to watch for a level to hold and when momentum shifts away from the level then you trade.
Don't just look for support or resistance to hold though - incorporate breakout methodology. It's a fact that most trends start form new market highs NOT Market lows. So, if prices breakout supported by momentum buy them!
Most traders can't do this they want to get back in on a pullback that never comes - don't make this mistake trade the breakouts like the pros do.
Finally be very selective and only trade the best set ups - in forex trading you don't get paid for how often you trade you get paid for being RIGHT.
Trade sparingly and only trade the big high odds trades.
3. Stops and Profits
Stops are easy and behind support and resistance. Place them as soon as your currency trading system gives a signal.
If you are long term trend following, keep your stop well back and give the market room to breathe, so you don't get stopped out by random volatility.
You are going to miss the turn but as you can't predict that anyway, that's fine.
Catch 50 - 60% of the big trends and you will become very rich.
Swing trading is another matter.
You're looking for smaller moves and they can disappear quickly, so use a profit target and take your profit early!
Don't worry about perfection of what you might have made - concentrate on making money - no one is perfect but that won't stop you enjoying currency trading success.
4. Managing Your Money
Forex trading is risky, that's why the rewards are so high. Many traders however try and restrict risk so much they create it.
They trade to often have stops to close and move them too quickly and end up losing.
Confront risk cheerfully!
Forget all the common wisdom about risking 2% per trade- if you're trading a $10,000 account that's 200! If you don't risk much you wont win.
If you have a high odds trade risk 20% and have the courage of your conviction.
If you take calculated risks at the right time you can enjoy currency trading success.
FINALLY REMEMBER THIS!
So there you have it the above is a simple system - support resistance and a few confirming indicators and the best systems are.
Keep in mind that forex trading is as much to do with mindset as method and you need to maintain discipline.
Simple currency trading systems are easier to understand, apply and have confidence in which leads to the discipline to follow your currency trading system to long term currency trading success.
Monday, October 13, 2008
7 Reasons to Trade Forex
There are many money-making opportunities out there and we’ve been involved with quite a few, namely property marketing, web development, residential construction security, multi-level marketing businesses etc.
We’ve come to a few conclusions with the help of some well-known properity coaches.
Often people with the income they desire don’t have the time to enjoy it. Those that have time don’t often have money. You don’t have to sacrifice your life-style to earn an above-average income. If you focus on the Forex for a few months you can make that dream a reality and create time and money to do what you REALLY want.
To earn a living money is given in exchange for a product or service rendered. It needs to be sold continuously otherwise your income stops abruptly unless it’s a repeat type of product or service.
Money is a medium of exchange. There’s no magical formula to possess it, you need to exchange something of value for it.
What if, you could have access to thousands of customers who are ready, willing and able to buy from you whenever you wanted? Wouldn’t it be great to avoid any hassles like money collection problems (just had a delayed payment from my web business), keeping difficult customers happy (we all know what that’s like), competition stealing your business without providing the same value etc.
All that is possible with Forex. You can also trade from anywhere. Take your laptop with you, find an internet connection and away you go.
Another advantage is that you don’t need experience to get started. Get a traditionally job involves accumulating specialized experience, having a well-polished resume and having the right contacts. With the right training course, you can get started straight away.
Here’s 7 more reasons to trade Forex:
1. It never closes. It’s open around the clock, worldwide. Trading positions open at Monday 7am, New Zealand time and close 5pm New York time on Friday. During this time, you can enter or exit the market whenever you like. It’s a continuous electronic currency exchange. This is great because you can trade whenever you have spare time.
2. Leverage. Standard $100 000 currency lots can be traded with as little as $1000. This is mainly because of the ease with which you can buy and sell, some brokers will leverage up to 200 times, so with $100 you can control a 200 000 unit currency position. It’s the best use of trading capital around, even banks lending on property investments don’t come close.
3. Accurately predict the outcomes. Currency prices generally repeat themselves in predictable cycles so you can see what the trends are. ‘Technical Analysis’ helps to see these trends and profit from them.
4. Low Transaction Cost. In other words, you mistakes won’t cost you a fortune. Good brokers won’ charge commissions to trade or maintain an account even if you have a mini account and trade small volumes.
5. Unlimited Earning Potential. Forex has a daily trading volume of over 1.5 trillion, the largest financial market in the world. It dwarfs the equities market (50 billion daily) and the futures market (30 billion).
6. You can make money in any market conditions. Each market is one currency against another, so when you buy in one, you’re selling in another so there’s no biase towards either currency moving up or down. This means it’s up to you to choose which currency to buy or sell with. Yu can make money going up or down.
7. Market transparency. This is an advantage in any business or trading environment. It means you can manage risk and execute orders within seconds. It’s highly efficient and allows you to avoid unexpected ‘surprises’.
I hope you’re now convinced that Forex is the best investment and income opportunity around.
FOREX Tradeology
The foreign currency exchange market is available for people from all over the world. More and more people take their first steps in FOREX trading, contributing to its volume and making it viable and easy to use for the ordinary individual, in contrast to only a few years back when only pros, hedge funds, major banks and institutional traders used the FOREX market. The key explanation for this turn of events is the Internet which dramatically increased accessibility. Almost all firms are now offering, free or in return for signing-up, easy to operate software for online FOREX trading.
Traders’ essential goal in FOREX is to estimate which currency will increase in worth against a different currency, and so getting a hold of a method which helps you to foresee future movements can help you in gaining a nice fortune. Realizing the fact that you are always trading by a ratio between two currencies should clarify the cause for seeing these letters arrangements: EUR/USD, USD/JPY, and GBP/USD etc. The five most important and highly popular currencies are the US Dollar, Japanese Yen, British Pound, Euro and Swiss Franc.
The FOREX market is open 24 hours a day; major firms keep brokers working shifts uninterruptedly so people from all over the world can trade always. This is attributable to the fact that nowadays most trades are carried out through company brokers.
Fear not, you can rest well at nights and even enjoy a day off every once and a while without being logged-on the FOREX market 24/7. All you have to do is give your broker your “stop-loss” / “stop-orders” to buy or sell currency once they have reached a certain price, thus preventing major losses.
The FOREX is considered to be a solid market. Nothing like the stock market which is highly unstable, this market is friendly and easy to comprehend. Another plus is that it has high liquidity which grants you the prospects of getting your money in or out at any given time. Be careful though, even when the FOREX seems like a playground to you, please seek your broker or another pro-trader’s counsel before getting involved in this market unless you have a lot of money to spend that you don’t really need. The big boys of FOREX would not care too much about seeing you lose all your life savings.
Traders’ essential goal in FOREX is to estimate which currency will increase in worth against a different currency, and so getting a hold of a method which helps you to foresee future movements can help you in gaining a nice fortune. Realizing the fact that you are always trading by a ratio between two currencies should clarify the cause for seeing these letters arrangements: EUR/USD, USD/JPY, and GBP/USD etc. The five most important and highly popular currencies are the US Dollar, Japanese Yen, British Pound, Euro and Swiss Franc.
The FOREX market is open 24 hours a day; major firms keep brokers working shifts uninterruptedly so people from all over the world can trade always. This is attributable to the fact that nowadays most trades are carried out through company brokers.
Fear not, you can rest well at nights and even enjoy a day off every once and a while without being logged-on the FOREX market 24/7. All you have to do is give your broker your “stop-loss” / “stop-orders” to buy or sell currency once they have reached a certain price, thus preventing major losses.
The FOREX is considered to be a solid market. Nothing like the stock market which is highly unstable, this market is friendly and easy to comprehend. Another plus is that it has high liquidity which grants you the prospects of getting your money in or out at any given time. Be careful though, even when the FOREX seems like a playground to you, please seek your broker or another pro-trader’s counsel before getting involved in this market unless you have a lot of money to spend that you don’t really need. The big boys of FOREX would not care too much about seeing you lose all your life savings.
Thursday, October 9, 2008
Trade The Forex Market With Success!
Lets start from the basics.The first thing someone needs is very good education.And this requires a lot of thorough research as there are many sources but not all are worth the money for their services.So in this sense an online forex course could be a good idea along with some books.But here comes the first major problem.Which course and which books,which aspects to cover?The technical analysis issue?The maxim go with the trend?The candlesticks analysis?And which system to use and follow?There are thousands of them!So before we even begin a trader is confused.And confusion is a very bad enemy but it can be arranged.How it can be arranged?With some simple steps.Such as simplicity.The more you know the better chances you have to succeed trading forex and it all comes down to probabilities.
Education is a must to all trading aspects from stocks to futures to forex.But forex has two unique features.High liquidity and extremely high leverage.And although the liquidity is a very good feature high leverage is not.At least not until you know what you are doing.Here we focus again on education.Besides a participation in a forex course either online or not,an amount that will be put away as an investment for education is the first thing a trader must do.Some ideas are to focus on analyzing the current conditions of the market and to have a bias for a specific currency pair.A system such as following the trend could be the core of a trading strategy.And a demo account with many virtual trades as many as possible for a long period of time is the next step.
Now the most important part of the trading action is to make a plan,stick to it and apply very strict money management rules because if the capital is finished and it very easy this to happen then our trading career will finish within a few days,months or even hours.
Lets face the truth that trading is not easy.It is unfortunately far more easy for someone to lose all his account rather than make wild profits beyond each expectation.That is because emotions and psychology are very crucial for success.Some of the most important emotions are fear,uncertainty,euphoria and revenge.Revenge comes into play very very often as when someone loses an amount wants desperately to get it back and often the outcome is that more loses come simply because the trader is on the wrong side of the trend!
Discipline and patience are virtues that distinguish a good trader from a mediocre trader.Without specific goals and a written procedure a trader is like a cargo ship that has sailed without any destination.Someday the fuel will be exhausted and many dangers from the weather to the potential physical damages may happen.Risks exist all the time.The point is how to deal with them.
One of the most useful phrases is taken from the movie Forrest Gump.Life is like a box of chocolates,you never know what you gonna get!
It is true.Be as prepared as possible.Do not let the brokers excite you promising very high returns and extremely high leverage.Do some very thorough research before opening an account funded with real money.Compare the bid-ask spreads and technical support to name only a few aspects.
Be very skeptical to previous results as offered from many signal services.The major aim should be to learn to trade and make your own decisions and not blindly follow some others decisions and opinions. Confidense and experience come with the passage of time.
So we mentioned simplicity before.Being realistic and having a controlled life balance is very important.One major goal should be consistency so as to have the ability to make profits each month and keep them.
Fundamental news are another important issue and in essence the technical analysis is the mirror of fundamentals.Expectations change rapidly and emotions also.And if you think about it emotions and expectations mainly move the forex market.Most times like the recent Fed rate hike decision a move is under way but the danger is when it will be finished and certainly not getting in at the wrong time after all the move is completed.
The best approach for a trader would be to set specific goals and if achieved then stop trading.The worst idea is to trade in a choppy market where random noise will make it difficult to get specific profits.
So a tested system with very precise rules such as entering exiting and having stop-loss orders may not be a holly grail but is surely one very good approach to start with and focus on it.Pivot points are such a system.At least it is a good start.They encompass education,discipline,strict criteria,targets and are a proven system that major players use.They are not foolproof always as nothing is certain but they deal with high probabilities and this is very important.
Also a very practical way is to act as organizes as possible.Meaning that :
1.Develop your own trading journal where you will be writing down your trades and a brief explanation of what made you place a particular trade so as to evaluate performance.Note each day the major economic releases if any because it is often wise to be out of the market before the release of the news and trade only after having a much clearer opinion of what price action may be.Remember it is all about high probabilities.
2.A risk/reward ratio of 1:2 meaning that you risk an amount to get at least the twice if all go well is suggested but sometimes it is best to be conservative and even apply an 1:1 ratio by applying very strict risk management risking no more than 2-3% of total capital per trade.Survival is everything.
3.It would be a good idea from time to time to have breaks from trading.Opportunities exist always so stopping trading when losses of 10-20% maximum of trading capital have accumulated is a good way to revaluate what is going on before a large amount of capital is lost.Trading is not gambling it is a way of investment.The philosophy should be to define realistic goals such as a number of pips per day and if achieved then stop trading.Greed is another bad enemy of traders.On the contrary the notion of compounding profits and retiring a portion of them each month is a good way to build a solid account and keep monitoring its growth.
So in this first article we touched briefly many ideas from education to psychology to a proven trading system etc.Each idea will have more in depth analysis in the very near future.Your comments and suggestions will help us a lot to focus on what you need or want to analyze.Above all interactive communication brings the best results.
Education is a must to all trading aspects from stocks to futures to forex.But forex has two unique features.High liquidity and extremely high leverage.And although the liquidity is a very good feature high leverage is not.At least not until you know what you are doing.Here we focus again on education.Besides a participation in a forex course either online or not,an amount that will be put away as an investment for education is the first thing a trader must do.Some ideas are to focus on analyzing the current conditions of the market and to have a bias for a specific currency pair.A system such as following the trend could be the core of a trading strategy.And a demo account with many virtual trades as many as possible for a long period of time is the next step.
Now the most important part of the trading action is to make a plan,stick to it and apply very strict money management rules because if the capital is finished and it very easy this to happen then our trading career will finish within a few days,months or even hours.
Lets face the truth that trading is not easy.It is unfortunately far more easy for someone to lose all his account rather than make wild profits beyond each expectation.That is because emotions and psychology are very crucial for success.Some of the most important emotions are fear,uncertainty,euphoria and revenge.Revenge comes into play very very often as when someone loses an amount wants desperately to get it back and often the outcome is that more loses come simply because the trader is on the wrong side of the trend!
Discipline and patience are virtues that distinguish a good trader from a mediocre trader.Without specific goals and a written procedure a trader is like a cargo ship that has sailed without any destination.Someday the fuel will be exhausted and many dangers from the weather to the potential physical damages may happen.Risks exist all the time.The point is how to deal with them.
One of the most useful phrases is taken from the movie Forrest Gump.Life is like a box of chocolates,you never know what you gonna get!
It is true.Be as prepared as possible.Do not let the brokers excite you promising very high returns and extremely high leverage.Do some very thorough research before opening an account funded with real money.Compare the bid-ask spreads and technical support to name only a few aspects.
Be very skeptical to previous results as offered from many signal services.The major aim should be to learn to trade and make your own decisions and not blindly follow some others decisions and opinions. Confidense and experience come with the passage of time.
So we mentioned simplicity before.Being realistic and having a controlled life balance is very important.One major goal should be consistency so as to have the ability to make profits each month and keep them.
Fundamental news are another important issue and in essence the technical analysis is the mirror of fundamentals.Expectations change rapidly and emotions also.And if you think about it emotions and expectations mainly move the forex market.Most times like the recent Fed rate hike decision a move is under way but the danger is when it will be finished and certainly not getting in at the wrong time after all the move is completed.
The best approach for a trader would be to set specific goals and if achieved then stop trading.The worst idea is to trade in a choppy market where random noise will make it difficult to get specific profits.
So a tested system with very precise rules such as entering exiting and having stop-loss orders may not be a holly grail but is surely one very good approach to start with and focus on it.Pivot points are such a system.At least it is a good start.They encompass education,discipline,strict criteria,targets and are a proven system that major players use.They are not foolproof always as nothing is certain but they deal with high probabilities and this is very important.
Also a very practical way is to act as organizes as possible.Meaning that :
1.Develop your own trading journal where you will be writing down your trades and a brief explanation of what made you place a particular trade so as to evaluate performance.Note each day the major economic releases if any because it is often wise to be out of the market before the release of the news and trade only after having a much clearer opinion of what price action may be.Remember it is all about high probabilities.
2.A risk/reward ratio of 1:2 meaning that you risk an amount to get at least the twice if all go well is suggested but sometimes it is best to be conservative and even apply an 1:1 ratio by applying very strict risk management risking no more than 2-3% of total capital per trade.Survival is everything.
3.It would be a good idea from time to time to have breaks from trading.Opportunities exist always so stopping trading when losses of 10-20% maximum of trading capital have accumulated is a good way to revaluate what is going on before a large amount of capital is lost.Trading is not gambling it is a way of investment.The philosophy should be to define realistic goals such as a number of pips per day and if achieved then stop trading.Greed is another bad enemy of traders.On the contrary the notion of compounding profits and retiring a portion of them each month is a good way to build a solid account and keep monitoring its growth.
So in this first article we touched briefly many ideas from education to psychology to a proven trading system etc.Each idea will have more in depth analysis in the very near future.Your comments and suggestions will help us a lot to focus on what you need or want to analyze.Above all interactive communication brings the best results.
First Successful Forex Trade
If you get of to a good start with Forex it will give you confidence and will encourage you to trade regularly.
Follow these tips to get of to the best start possible:
Making your first Forex trade can be quite an exciting event.
It also is an event that requires some planning in advance, as well as doing some checking and double-checking before you ever make that first trade.
Here are some suggestions for preparation that will help you to really get the most out of that first trading event.
Trading currency comes with a certain amount of risk.
The prudent trader will always make sure, that he or she has enough resources to be able to withstand a period where there are more losses than there are gains. From that perspective, it is important to never risk more funds than you can reasonably do without.
Examine the condition of your finances carefully, and determine the amount of your resources that can be comfortably involved in the process of currency trading without creating any financial burdens.
Keep in mind that the volume of your transactions will often come into play when it comes to purchasing currency.
Simply put, the more you can afford to buy, the better rate you are likely to command. Your circumstances will of course dictate how much you can afford to invest in a single transaction.
Individuals who are involved in currency trading will also have to keep in mind that there is the matter of that minimum margin deposit that you must be able to maintain.
You may have to begin with smaller transactions that yield less return. But keep in mind that as you grow your revenue from your currency trading efforts, you will be in a position to go for the more lucrative deals.
It is a very good idea to begin developing your strategy well before you make that first trade.
You can get a great deal of help developing that strategy by utilizing the various reports and other sources at your disposal to try some projections of your own.
Set up some test runs by structuring a currency trade on paper and watch how things would have gone had you actually made the transaction. Learn from the outcome, whether it was a win or a loss.
Either outcome can help you identify some valuable tools that will help you refine your basic strategy.
You may find that you need to include more sources of information in your decision making process.
Perhaps your simulated trades will teach you that there is a source or two that needs to be disregarded or replaced in your roster of informative sources.
The point is to refine your strategy as much as possible before you go "live" with your currency trading.
Making money and having some fun in the process are what the trading is all about.
When you perform due diligence before you ever begin you can ensure that your first Forex trade, will be a true example of what you are capable of accomplishing.
It should be noted Forex trading involves substantial risk of loss and is not suitable for all investors.
Follow these tips to get of to the best start possible:
Making your first Forex trade can be quite an exciting event.
It also is an event that requires some planning in advance, as well as doing some checking and double-checking before you ever make that first trade.
Here are some suggestions for preparation that will help you to really get the most out of that first trading event.
Trading currency comes with a certain amount of risk.
The prudent trader will always make sure, that he or she has enough resources to be able to withstand a period where there are more losses than there are gains. From that perspective, it is important to never risk more funds than you can reasonably do without.
Examine the condition of your finances carefully, and determine the amount of your resources that can be comfortably involved in the process of currency trading without creating any financial burdens.
Keep in mind that the volume of your transactions will often come into play when it comes to purchasing currency.
Simply put, the more you can afford to buy, the better rate you are likely to command. Your circumstances will of course dictate how much you can afford to invest in a single transaction.
Individuals who are involved in currency trading will also have to keep in mind that there is the matter of that minimum margin deposit that you must be able to maintain.
You may have to begin with smaller transactions that yield less return. But keep in mind that as you grow your revenue from your currency trading efforts, you will be in a position to go for the more lucrative deals.
It is a very good idea to begin developing your strategy well before you make that first trade.
You can get a great deal of help developing that strategy by utilizing the various reports and other sources at your disposal to try some projections of your own.
Set up some test runs by structuring a currency trade on paper and watch how things would have gone had you actually made the transaction. Learn from the outcome, whether it was a win or a loss.
Either outcome can help you identify some valuable tools that will help you refine your basic strategy.
You may find that you need to include more sources of information in your decision making process.
Perhaps your simulated trades will teach you that there is a source or two that needs to be disregarded or replaced in your roster of informative sources.
The point is to refine your strategy as much as possible before you go "live" with your currency trading.
Making money and having some fun in the process are what the trading is all about.
When you perform due diligence before you ever begin you can ensure that your first Forex trade, will be a true example of what you are capable of accomplishing.
It should be noted Forex trading involves substantial risk of loss and is not suitable for all investors.
Sunday, October 5, 2008
Forex Trading - Instinct Or Algorithm?
What is the most important thing in trading - instinct of a trader or algorithm of a trading system? The financial profitability is the criterion that measures the success of a trader and algorithm of trading robot.
Hunting in the market.
There is an opinion saying there is no correlation between trader's knowledge and his results of trading. They think that absence of knowledge in math, technical analysis and market does not prevent him from succeeding in trading. Trader is considered to be as a hunter in market. He uses only one tool available in hunting his instinct. They think that only the instinct can help in predicting the market movements.
The only thing we need is to find out how efficient is this instinct of a hunter is in market. We need some kind of coefficient of efficiency to do that. It is hard to do it with high precision but we can find approximate answers. Based on data form IG Index, plc we can confidently say that 95% of "hunters" fail in Forex market and only 5% of them succeed. Therefore this coefficient of efficiency of the instinct is only 5%. Even a century old steam machine could do better.
What are the obstacles for successful trading?
There are two things that prevent a trader to trade efficiently. The first one is a continuous desire to use his "hunter's instinct". The second one is trying to predict the future of the market.
Inexperienced traders always try to substitute the experience with instinct. The root cause for it is greed that makes them feel unsatisfied with the profit they have. Instead of systematic market study trader relies on his individual feeling about the market. Imagining himself as an invincible hunter a trader gets his adrenaline dose and becomes overconfident about market behavior. The final result is that market will teach him a lesson by taking away his money.
It is impossible to predict price movement in market. This statement is the source of many arguments. Many people argue that they can predict the probabilities of price reaching a certain level. But it is impossible to predict the price accurately. From probability theory that means that probability of price reaching a certain level is 100%. But usually no one can predict with accuracy of 100%
The only alternative to hunter's instinct and predicting the price is carefully developed trading system. A trading system can eliminate second-guessing, predicting and relaying on instinct from the trading. A trading system gives you exact points of entry and exits. It works very efficiently from financial standpoint.
Forex Trading - 20 Rules For Success
So many people fail in trading Forex. But you don't have to. Some people ask me if there any rules to become a successful trader. When I think about my trading I clearly see 20 rules that if followed can make you consistently profitable trader. Some of them you probably know. The only thing is left is to implement them in your trading.
1. Plan your trades and trade your plan.
2. Fear and hope are the two worst enemies for trader. Learn to control them
3. Always keep the records of the results for your trading.
4. Keep the positive attitude regardless of the results of your trading.
5. Don't think about Forex market when you are not trading.
6. Stop-loss is the key to your success in trading. Always cut your losses.
7. Successful traders always devote their time to study the market.
8. Successful trader always sets his profit limit in each trade.
9. Do not collect opinions from people before entering the market. Facts are priceless. Opinions are worthless.
10. Never exit your position because of impatience. Never enter the market because you tired of waiting for the right signal.
11. Do not move your stop losses during the trade.
12. The most powerful tool in your trading is a simple trend following.
13. The hardest part in trading is not predicting the market movement but control of your emotions and discipline. Successful trading is a hard work and can be disappointing. You are the most important element in your success.
14. Develop discipline by following your plan of trading.
15. Expect and appreciative your losses. One who focuses on losses too much usually misses the next profitable opportunity.
16. Applying constant effort is the only necessary component of succeeding in Forex trading.
17. If you don't progress in Forex you will slip back. As soon as you reached your goal set another a higher one.
18. The power of concentration will make you a great trader. In other words split your time between studying the market, developing your trading plan, analyzing your past trades and actually executing the trades.
19. Divide your profit in two parts and never risk more that 50% of your profit in the next trade. That will help you to grow your account.
20. The most successful traders do not do what they wish to do in trading. They have trained themselves to choose between two kinds of freedom: freedom of doing whatever they wish to do and freedom of doing what they must do in order to be profitable.
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