There are different varieties of trading that are based on the trading behavior, length of the trade and the type of the analysis one goes with, etc. but there are three most important types of trading – scalping, day trading and swing trading. Not that the other types are irrelevant, but these three specific types of trading are important because of how they fit well with different types of human personalities.
Scalping is the type of trading where the trades are open for less than a minute. It is an intense form of trading which requires a huge amount of concentration for short bursts. The scalpers generally follow tick charts or 1 minute charts, study the price movement and make decisions on whether to go long or short and whether to continue with the trade or close it. Depending on the time spent for trading, the scalpers could do anywhere between 50 and 500 trades a day, much more if they use a software program to trade.
Day traders are those who are happy with profits at the end of the day. They generally put in money at the start of the day and would like to withdraw their profits at the end of the day. They usually follow the 5 minute and 15 minute charts and make less than 50 trades a day. It isn’t as intense as scalping but it could be as risky or rewarding as scalping.
The final type is swing trading. Swing trades are those that last several days. Some trades remain open for several weeks and sometimes months as well. As you can see, it’s a pretty relaxed form of trading where the trader uses the daily or weekly charts to analyze a trade and probably spends much less time trading than the day traders or scalpers. But again, the risks and the rewards are no less.
So, which type of trading suits you?
Unlike what most traders think, the type of trading that suits you isn’t the one that matches your office clock or your need for success/money. The trading style that suits you depends more on your character than on any other factor. If you are aggressive and are a go-getter by nature, scalping and day trading would be more suitable for you. If you are laid back and calculative in nature with lots of patience, then swing trading is more suitable for you.
One of the major mistakes that traders make is that they try to bend their character to suit the trading style that they have chosen. This is like putting the chariot in front of the horse. The trader should choose a style that blends and complements his character. There are a lot of traders who are aggressive by nature but they choose to do swing trading either due to the fact that they are busy or they have their office work to take care of. But they fail in the long run. They just cant change their mindset to just sit around and twiddle their thumbs while the swing trade does its job of running into profits. They need action. So, they cut off the swing trades early leading to huge losses.
Likewise, patient traders find the intense job of day trading and scalping too much for their emotions and ultimately fail.
Rather than fighting your instincts, try to embrace what you have and what suits you. Trading style is like your career and life partner which comes along with you all your life. Unless you are in sync with it and get along smoothly with it, it will only end in failure. Determine what kind of a person you are and choose the appropriate trading style to match that. Success will follow.
“Forex” or foreign exchange is by definition a currency trading market. It is regarded as the world’s largest market with a daily turnover of roughly 3 trillion U.S dollars. Instead of goods being traded in the forex market, currencies of the world are being traded instead. Another difference between the forex market and traditional markets of physical goods is the simultaneous nature of dual transactions. This means when you are buying a currency, you are effectively selling another currency at the same time. For example, when you are buying Euros, you might be exchanging U.S dollars for Euros.
The players in the forex market include Central Banks, commercial banks, corporations, hedge funds and retail traders. Over the last decade facilitated by the development of fast and efficient online trading platforms, forex trading has gained a huge following among the small time retail traders. Apart from the advancement in internet technology facilitating the growth of the online forex trading industry, another key factor is the ability to “leverage” one’s investment capital.
Operating on the same principle as “margin trading” in the equity markets, leveraging in forex lets a forex trader increase his investments many fold with just a limited amount of capital. For example, with a leverage ratio of 1:100, each dollar invested can be used to purchase 100 dollars worth of forex contracts. So if a trader decides to invest $1000, his invested contract value can be equivalent to $100,000.
Profiting From Forex Trading
To profit from forex trading, one obviously needs to buy a currency at a low rate and sell the currency back to the market at a higher rate. This means a trader has to be quick to spot the price differentials in the exchange rate from the fluctuations happening in the forex market. To help the trader in spotting the profitable opportunities arising from the price fluctuations in the market, he can rely on the art and science of fundamental analysis and technical analysis.
Chapter 2: Fundamental Analysis
As we have said earlier, for a trader to profit from the price fluctuations in the forex market, he needs to be able to predict the movements in the market. One of the ways that he can analyze the market to help him make his prediction is through the art and science of “fundamental analysis”.
Fundamental analysis is known as a science because it is based on the social science of economics. It is also known as an art among the practitioners of fundamental analysis because of the skill required to apply the theories of economic to real world scenarios effectively.
A cornerstone of investing in forex, fundamental analysis involves studying the economic health of different countries and analyzes how that can affect the exchange rates of different currencies. It is primarily concerned with information such as figures and statements made in speeches by politicians and economists which can impact currency movements.
Some of these important figures include:
Higher interest rate – this will attract more investments into country and as such means more demand for the country’s currency. This in turn will push the exchange rate upwards.
Higher unemployment means a weaker economy. To help stimulate economic growth, central banks normally will lower the interest rate to attract investments.
Likewise, a lower GDP growth rate will indicate a weaker economy and hence the expectation of lower interest rates.
Trade Balances Figures
A high trade deficit is normally indicative of a weaker currency as a country needs to sell off its currency to pay for its imports.
Public Expenditure Budget
Depending on the context, a higher public expenditure could mean a lower currency due to the need for the government to raise funds to finance the increased expenditure.
Other important information that a fundamentalist practitioner needs to take account into include statements made by key leading figures in the political and economic establishments such as the treasury, central bank and the head of state like the president or prime minister.
To help analysts and traders get a head start in their market analysis, they usually resort to the use of an economic calendar. The economic calendar is created by economists and major financial institutions to help those who use the calendar to track upcoming economic events. They contain information such as past figures, analysts’ forecasts, the time and date of when new figures will be announced the relevant agencies tasked with collecting the market data.
Trading the Forex Market with Fundamental Analysis
In order for a trader to use fundamental analysis effectively in his analysis of the forex market, he must base his analysis on the medium or long-term time frames. This is because fundamental factors in the economy and market require a certain period of time for the factors to play out.
Hence by focusing on the fundamental macroeconomic factors such as those mentioned above, he can predict with a degree of certainty how a currency pair will react in the medium and long term.
For example, if the U.S economy has been facing an increase in its unemployment rate, this means on the whole that the economy is weak and ultimately a weak dollar. To profit from such a scenario, a trader will purchase Euros in the hope that the euro will increase in value relative to the U.S dollar.
On the other hand, if the signs are indicating that the U.S economy is experiencing growth, this will prompt investors to invest more in U.S financial instruments such as equities and treasury bonds. Consequently, this will result in a stronger dollar. To profit from this kind of scenario, a trader will need to sell the euro against the dollar in the expectation that the U.S dollar will rise relative to the euro.
While fundamental analysis is useful in helping traders predict the movement of currency for the medium and long-term, it is insufficient on its own, as it does not provide specific entry and exit points for a trader to act upon. Because of this, it is difficult for a trader to manage his trading risk especially when he is relying heavily on leverage. In order to help him determine the best entry and exit point for his trade he need to rely on something more technical such as technical analysis.
Chapter 3: Technical Analysis
While technical analysis can initially be mentally challenging for the uninitiated, it is actually the most frequently used method by forex traders to help them identify suitable entry and exit points for their trades. Essentially, it is a methodology which comprises of an array of technical observations that can be utilized for predicting price movements as well as generating buy and sell signals.
One confusing aspect of technical analysis is the fact that the technical analyst is faced with so many ways of analyzing the market. This leads to the danger of misinterpreting the information on hand and thus resulting in the wrong conclusion.
On the other hand, since almost everyone is relying on technical analysis to identify their buy and sell signals, it results in a self-fulfilling prophecy. Since everyone is observing the same technical indicator, this will invariably result in the market moving in the direction as predicted by the indicator.
Trading the Forex Market with Technical Analysis
A key tool used by traders in technical analysis is price charts especially candlesticks charts. Candlesticks charts are used for the identification of price trends once they developed in the market. For forex traders, this is crucial since movements in the forex market comprises mainly of trends. Once the trader is able to identify the trend, this will allow him to capitalize on its movement until the trend changes direction.
Resistance & Support
To help traders indentify changes in the trend, one of the key concepts used by technical analysts is the concept of resistance and support. The resistance level is the level where prices have peaked and are having difficulties rising further.
On the opposite end is the support level. The support level is the level prices are at their lowest and is unlikely to fall any further. While the determination of these levels is subjective, they do help traders in determining the ideal entry and exit point as the areas around these levels are normally where price reversals will occur.
Exponential Moving Averages (EMAs)
Another frequently relied upon tool by technical analysts is Exponential Moving Averages or EMAs. EMAs are a trend-following or lagging indicator which filters out market noises resulting from random price fluctuations as well as to smoothing out the price actions so the trends are more discernible. The difference between a simple moving average and EMAs is the fact that the latter gives more weight to the more recent prices.
To help traders spot changes in the trend with EMAs, they look for crossover between the short period EMA and the longer period EMA. Once the crossover has occurred, this is indicative of a change in the trend.
Apart from the tools mentioned above, technical analysts also use a variety of oscillators to determine the conditions in the market. One of these frequently used oscillators is the Relative Strength Index (RSI).
An innovation of J. Welles Wilder, the RSI is defined as a momentum indicator that contrast the quantum of recent losses to recent gains over a period of time to determine if the market is overbought (overvalued) or oversold (undervalued). It provide traders with a better perspective since it gives more weight to the more recent data and is less sensitive to sharp fluctuations. Traders determine the conditions of the market by looking at the reading of the RSI which is on a scale of 0 to 100. If RSI reading is below 30, this meant that the market is oversold. On the other hand if the RSI reading is above 70, this meant that the market is overbought.
Another Way of Using the RSI
In addition to determining if the market is overbought or oversold, the RSI can also be used to indicate divergence in the market. This is a situation where prices are reaching new highs but is not indicated as such by the RSI readings. In such a scenario, this means a price reversal is likely to occur very soon.
Fibonacci Retracements Ratios
More of a series of ratios rather than a technical indicator, the fibonacci ratios are a series of numbers that describe a state of natural progression in terms of proportions. They are used by traders as an indication of possible levels of resistance and support. These levels are normally plotted on a chart with the following ratios:
The idea of Fibonacci retracements is to predict to which level the prices will retrace to. This information will in turn help the trader decide if he should go long or short.
Chapter 4: Fundamental Analysis vs. Technical Analysis
As we have learnt, fundamental analysis is more suited for the analysis of the market in the medium and long term. Technical analysis, on the other hand, is more suited to situations where traders want to trade on the short term price movements. It ignores the fundamental factors and concentrates solely on the price data on hand. Hence, to say outright that fundamental analysis or technical analysis is better than the other is like saying an orange taste better than an apple. This is because traders normally use fundamental analysis when it comes to investing in the market.
When it comes to speculating in the market, they tend to rely more on technical analysis. In short, the importance of each type of analysis weighs heavily on the trader’s motive for trading whether it is for investments or reaping a quick profit through speculations.
For Investments Purposes
When it comes to investments, a trader will normally look to the qualitative and quantitative factors surrounding the investment. This is why the analysis is geared toward the fundamentals of the market sector and the interrelated sectors. It is always about looking at the bigger picture such as whether the economy is in a recession, a boom or in transition.
For Speculation Purposes
The short-term trader is normally more concerned about the profits that can be earned from the short-term price movements in the market. Hence, his focus is normally on the price trends in the market and the volume traded.
So Which Is Better?
Traditionally, fundamental analysis has been the only accepted method of analyzing the markets. However, with the advancement of computer technologies and online trading platforms, analysis of the markets has become more technical and uses software algorithms to help traders make their trading decisions. In fact, computerized trading forms the bulk of the transactions that are occurring in the forex market. In short, the market has changed and to be able to stay in the game one must be able to adapt to the changing circumstances. In other words, the best way to beat the market is to use a combination of both fundamental analysis and technical analysis. Use fundamental analysis to choose the currency pair to trade in and use technical analysis to determine the best time to buy or sell.
Chapter 5: Summary
The chapters that we have covered above only represent a brief overview of the analysis methodologies used by forex traders. It is recommended that before you start to trade in the forex market, you should seek more in depth knowledge about the skills that are needed for a good assessment of the market that you are going to trade in. Once you have a good understanding of the market, you need to develop a trading strategy based on what you know and stick to it regardless. A trader is only as good as his attitude.
While a person might be able to come up with the best possible trading strategy, the strategy is only as good as the mental state of the person acting on it. If the person is too fearful, greedy or inflexible, there is very little hope that the trading strategy will get to be implemented as the way it was designed for. One must always remember that the market is always fluid and circumstances changes every minute of the trading day. While some circumstances can be predicted, there are some which cannot be foreseen. How a trader will react under those circumstances will ultimately determine if he will be a successful trader or not.
Suggested Trading Tips
The focus of fundamental analysis is on the macro economic factors that can the exchange rate of a currency and technical analysis uses historical price data to help traders predict future possible price movements. With a combination of both approaches, you should be able to arrive at a single conclusion regarding the price movements in the market.
We mentioned earlier that technical analysis is flexible enough for a trader to use to find out different trading conditions in the market. To avoid any misinterpretation, understand the different uses of each tool and always use an alternative method of confirming your analysis before you make your trading decision. This way you can avoid acting on false signals generated by the ‘noise’ in the market. Finally, remember trading forex is a high-risk endeavour. As such, always trade with money that you can afford to lose to avoid being pressured mentally by extraneous factors.
Face it, who can deny that unmistakable feeling of euphoria when they make a killing from the market? Compare that to the stomach-churning pain of when you get it wrong then lose money, and you have a wide range of emotions. The gulf between pleasure and pain can often feel enormous. But having the ability to keep your emotions in check when you are trading is a game-changer.
Taking the emotion out of trading is easier said than done. However, when mastered, it will dramatically help to transform your trading into a peaceful and relaxing hobby, as opposed to a highly stressful emotional rollercoaster!
Tip 1: Don’t have set short-term expectations
It’s crucial to maintain an open mind. Accept that trades can win or lose. Sure, you may feel like you are entitled to a winning trade. Yes, you may have read books, attended the seminars, and spent thousands on your education… but does the market cares about rewarding you for your efforts when you do come to place that trade? Heck, no! The market will simply do “its thing” regardless…even though you feel you may deserve a win!
Remember that your strategy is your “edge” in the market and that if it’s a proven, profitably strategy that you should judge its performance based on the net sum of all trades, and have expectations that span to the “bigger picture” rather than simply being in the moment. Don’t focus in “the moment”. Instead, picture a longer-term view.
Tip 2: Remember investments go up and down
The money spent on learning to trade is an investment in you – the “best kind of investment”, according to Benjamin Franklin. But be realistic in your expectations regarding what can be achieved over the medium and long-term horizon rather than the here and now.
By having realistic expectations rather than entertaining dreams of grandeur, your goals will be far easier to achieve. Remember that 90% of people who have a go at trading simply fail. If you haven’t become a part of this statistic within your first year of trading then this is fantastic on its own!
Furthermore, if you are making an average of 2% per month then you will have trounced the annual rate of interest your bank is offering you per annum – in 30 days! It may not seem like much when in the present, but long term – this is an impressive track-record to have.
Tip 3: Accept winning some battles are necessary to win the war
Remember that markets are random – they can do absolutely anything at anytime! Bearing this in mind, the distribution of legitimate trade set-ups which conform to your rules to entry are random in their frequency…not to mention the frequency of winning outcomes compared to losses.
But you have to be in it to win it! With no way of telling in advance what the outcome of any trade set-up will be, you will need to trade each setup in pursuit of a profitable long-term outcome, as a result of your strategy’s edge.
No outcome to a trade set-up is guaranteed. Even some of the best looking trades out there with the highest profit potential could turn out to be duds. But through being true to your “big picture” vision of becoming consistently profitable long-term by trading a bigger sample of trades, then you will need to simply view losing trades as part and parcel of trading; that losing a trade or a short-term strategic battle but one necessary in pursuit of winning the overall war.
Tip 4: Find a hobby
Whatever you do, do not watch your trades. Not only does this cause your trading experience to feel like an emotional rollercoaster and mentally exhausting – it’s suicidal to your long-term prospects in the market. Furthermore, it will cause you to second guess what should have been a perfectly decent trade set-up.
Set the trade up, put the mouse down and walk away from that computer. Providing you have positive reward to risk and have trade sized (essential), you can walk away safe in the knowledge that if the market proves you right that you stand to make far more than you lose if you are proved wrong.
The emotions of fear and greed have driven the markets since the very concept of a marketplace was conceived. But these emotions do not have to have an adverse effect on our trading performance, if we know how to deal with them.
In this article I shall discuss ways to help you will overcome fear in trading so that you can let go and transform your trading into a peaceful activity- once and for all.
Remove your emotional attachment to money and the result of your trade
Rationalise. Some strategies win some of the time, others most of the time…but no single strategy can win the whole time. Accept this. But if you are trading with positive reward to risk (3:1) then there’s every reason you should be at peace with the world. After all, what is the worst possible thing that can happen if you lose? You forfeit 1% of your account’s value. But if, on the flip side, your trade hits target then you stand to gain a lot more than is at stake.
Celebrate staying out as an opportunity to preserve your capital
Many traders – particularly market newcomers – fret and get anxious if they are not in the market and “in on the action” and therefore not making money. Typically they will therefore place a trade out of boredom, frustration or even anger in the hope of making some money – anything to be “in the game”. Except, instead they lose money because they have unwittingly taken a sub-standard setup or, indeed, a setup that doesn’t even exist!
A simple solution to this paradigm is to reframe staying out of the market as a great opportunity to preserve capital. If you have not seen a set-up that looks obvious, then it probably does not exist!
Crippled by the fear of failure
Face it, nobody likes losing. Not only is losing to the markets representative of a financial hit but also an emotional one too. Sound familiar? Have you ever found yourself staying out of the market even though you know, deep down, that the trade set-up actually meets your strategy’s rules for entry?
It may be that you’ve endured a few losses and you just can’t handle the pain of taking one more. It may even by that, on the flipside, you’ve had a great flurry of winning trades and you just do not want this party to end! So you avoid trading a picture perfect set-up in case it is a loss…even though you know that it does, in fact, meet the rules.
Remember that ignoring trade set-ups which tick all the boxes is self-sabotage. You will have taken yourself out of your strategy’s flow of opportunity. After all, any strategy’s overall success is determined from the net sum of all trades you place. But you do have to be in it to win it!
If you trade a profitable rule-based strategy with a positive reward/risk profile and keep the risk small for every trade you place, there really isn’t much that much can go wrong. You keep trading peaceful and remain at ease, safe in the knowledge that you have an edge which is well and truly steeped in your favour. Having an awareness of how to deal with psychological pitfalls along the way will stand you head-and-shoulders above most.
Pursuit of Happiness is one story almost all of us are familiar with, a man’s story of rags to riches in the Wall Street. Sheer luck was not what made him successful. Determination to thrive and keep trying was what had him reach the benchmark. The biggest problem with us is we are not clear about Forex trading as of yet to actually go forward and show interest in it.
What actually is Forex Trading?
One of the largest investment markets in the world, Forex is the termed used to describe foreign currency trade in short form. The difference between the stock trading and Forex trading is that stock trading deals with various big and small companies and their ventures while Forex Trading deals with the 8 major currencies dominating the world economy. As per the current status it was quoted saying that each day 2000 billion US dollars are traded thus making Forex trading the biggest capital venture currently.
Principals of Forex trading
One distinctive feature of Forex trading is absence of central marketing system. Unlike Stock market where all the trading occurs through the Stock Exchange, Forex Trading can only be done through electronic media. So if one is interested in getting involved in Forex trading then basic computer skill is a must. The trading continues for 24 hours on all 5 weekdays and half day on Saturday.
Forex trading is done under three specific patterns. They are Spot market, forward market and future market of which the Spot market is the most preferred section for Forex Trading as this pattern save a lot of money needed in investment. The loss and profit made in Forex trading is based on the simple principle of Rise and fall of currency value depending on the Geographic distribution of Political situation and economic movements globally.
Things to remember in the trading market
Being entirely and Electronic platform based market, Forex traders are prone to numerous high risk situations like scams and fraudulence as all the mandatory transactions are done through online Forex traders.. With over 750 million dollar worth of fraudulence reported as of 2013, it is important to research well before choosing the right Forex trader. Though Background Affiliation Status Information center have been able to do a bit of control on the situation and save a lot of money, however new scamming techniques keeps being introduced into the market.
Numerous software and automated robotic system has been introduced in the market to help in safe Forex trading but instead of making you save a lot of money, many of these helped investors spending twice the money earned. Online buying and selling is not always a secured procurement procedure and there is no guarantee about the sideline products helping in the trading. In such situation it is always best to opt for cheaper and easier options like discount coupons for these purchases. For e.g. Everyday promo code from www.everydaypromocode.com can help you save a lot of money and also keep worries about brokerage expenses at bay.
So now you can stop thinking and start investing because it is definitive that in no time you will be rolling cash even if in small amount at the beginning.
So you think you’re a successful and profitable trader, huh? What do your results say? They will reveal that hard and empirical truth for you, no matter how much you think you know about financial markets today.
If you are not yet making the untold riches you may have once dreamed of – or at the very least – are not yet consistently profitably then read on. In this article, you will discover the key differences in mindset which separate the loss-making rookies and the seasoned professional. But perhaps most importantly, you will learn how you could reverse your fortunes by simply mimicking the pros.
Rookie Forex Trader Misconception #1: “Trading = easy and fast cash”
The rookie will often find themselves on a white-knuckle journey as they attempt to trade the markets, often in a desperate plea to make as much money in the shortest amount of time possible…but this will often come with dire consequences. Not only will their expectations of what they can quickly make from the market differ enormously from the realms of what can realistically be achieved, they will often have an insatiable appetite for obtaining that quick buck.
In comparison, the experienced trader will hold a longer-term horizon and will happily play “the long game”. They will accept that it is far more desirable to make small yet consistent gains over a longer period of time rather than to have wild fluctuations in their equity curve. They will measure their success in percentage gain or loss, rather than in monetary terms or by simply counting how many pips they made.
Reassuringly though, many of the battle-scarred seasoned market professionals have made many rookie errors in their time yet simply attribute them down to the school of hard knocks. What separates them from many vast majority who simply give up and walk away is an unwavering determination and ambition to succeed.
Rookie Forex Trader Misconception #2: “I’m missing out if I’m not in the market”
The rookie will typically entertain the idea that more equals more when it comes to financial markets trading; that the more trades placed and the longer they are in the markets for will simply lead to greater profits. You could say they are fearful of missing out. However, this will typically serve as a false economy. Not only will this mentality cause the rookie trader to deviate away from their strategy (supposing they even have one!), it will expose them to unnecessary intra-day noise which will be detrimental to their trading account.
To the professional trader, less will mean more…and more will mean less! The will welcome the opportunity to relax and stay out of the market as an opportunity to simply preserve their capital. If the rules of their strategy are not met – they will simply stay out, rather than fret over what they could be missing out on.
Rookie Forex Trader Misconception #3: “I have a feeling…”
The rookie will typically blindly jump into the market without a plan. By doing this, they would have unwittingly have planned to fail! But in a market where anything can happen at any time, the rookie and their slapdash approach will serve as no than fresh meat for the market to devour before spitting out. Without a plan, strategy or even a willingness to learn, the odds will be well and truly stacked against the rookie.
The experienced professionals will have a very set idea of what to trade and when to trade it. They will have a very specific set of rules and every possible outcome will be assessed before taking a trade set-up. They will typically have rules for entry, rules for exiting the trade as well as strict risk parameters. Mention this to many-a-rookie and they will consider such essential requirements as a mere inconvenience.
Rookie Forex Trader Misconception #4: “More market knowledge = more success as a trader”
The amateur forex trader will kid themselves into thinking that the more books they read and the more strategies they learn, the more prosperous their trading career will be. This is a fool’s paradise as the sheer volume of information will almost certainly cloud judgement with conflicting information which will cause the rookie to digress into crippling state of “analysis paralysis”.
The more seasoned trader will have had the benefit of experience and will have a very fixed view of the market and how their strategy fits both for them and within the market. Sure, it’s likely they will have tried many strategies and systems throughout their trading career but this will have propelled their current choice. They will typically like to keep things as simple as possible, embracing the “less is more” philosophy.
Ever heard the cliché: “To create is effort, to copy is genius?” It’s one that makes sense in many facets of life – not least financial markets trading. Simply model the attributes of those who are doing it and doing it well, and you will save yourself those episodes you would rather forget – or even avoid.
Whether you are a seasoned trader or a newbie, you cannot really be absolutely convinced of the fact that you are totally free of the innumerable myths or fallacies which the world of forex is brimming with. A Trader’s Fallacy is in fact, one of the potent ways in which a trader can go wrong. So what exactly are the misconceptions that you should be aware of, as a trader? Read on to find out.
What are the myths surrounding Forex?
Forex is designed for short-term trading
One of the major fallacies that has riddled the largest financial market (in terms of volumes of trade) is that it is actually meant for short term traders. Now, the presence of high leverage DOES NOT necessarily mean that forex can be indiscriminately branded as a short term trading proposition. Forex is very much about long term tradable trends as well. The traders looking for long term benefits are more concerned with the larger trends and not really bothered about everyday swivels in the market.
Forex is the simplest and quickest way to riches
Budding traders, making a foray in to the forex market, considering this to be their passport to quick riches— might as well think again. This prevalent belief, ruling the market space has hastened the entry of many a traders willing to make a quick fortune. However, it should be remembered that forex is much about patience as it is about making huge (not quick) wealth. All of it starts with the choice of right trading software (some of the leading trading software applications include http://www.quantshare.com, http://www.esignal.com and http://www.metatrader4.com). Do you really think you would be able to generate huge profits without investing time in monitoring the market in a bid to analyze it and then build on your strategies in accordance? You need to demonstrate due consistency if you are willing to make it big here. The more you learn about the complicated charts and other analytic tools the more you are likely to psyche out. However, contrary to popular belief, success in forex is not about simplicity. The belief that simpletactics will yield better results than the complex ones is generally perpetrated by traders who are afraid of comprehending the complex layers of each of the trading strategies.
Identified Profit Targets are Infallible
You might come across trading systems which help you to benefit from an identified profit target. Scalpers usually set large targets just because they have spent considerable time on the trading charts than the long term traders have done. The problem is—just because the scalpers are doing it— does not necessarily mean that it’s a good practice. The market is hardly bothered as to what your targets are. For instance, if the market wants an offer only up to 10%, it won’t really bother if you are setting the target at 20%.
There is a “perfect” strategy for success
The belief that you can chalk out an infallible strategy has its own dangers. It will either leave you cornered for ever or else leave you languishing with an over optimized and inflexible game plan.
With the IMF’s downward revision of global growth forecast and the intimation by the FOMC minutes to still consume considerable time before thinking of an interest rate hike caused the rebound in gold prices from the year’s low during last week. The yellow metal secured nearly 2.5% so far during the current month and is heading for the first back-to-back weekly rise since July. The September month which is historically considered to be a buying month due to the festival season at the world’s second largest bullion consumer, India, is likely to witness increased volatility into the gold prices due to the below mentioned reasons.
The rout of safe haven buying emanated ever since the IMF downgraded its global growth forecast for the next year and signaled that the European economy can trigger another rescission should the concerned leaders don’t take necessary steps. The IMF also upgraded the US growth forecast considering the recent improvements in their economic numbers; however, the US Dollar couldn’t witness a gain as FOMC members continued spreading the word that the world’s largest economy can face weaker days due to global pessimism. The Japanese Yen also witnessed considerable strength due to the safe haven buying after the IMF release.
In addition to the FOMC members’ comments during last week, pessimistic economic signals from the world’s largest economy continue forcing market players to weaken US Dollar by expecting a slow tapering of monetary asset purchase and a delayed rate hike by Federal Reserve.
After the Geo-Political tensions in Israel taking a stop, the crisis between Ukraine and Russia are still not calmed down and there are new protests in Hong Kong which continued providing buying support to the gold prices. Recently, the protests in Hong Kong taking wild turns after the police used forces to remove student protestors. Market players are speculating that the protests in important Chinese part can also cause the world’s largest industrial player to witness weaker days. Moreover, the situation between Russia and Ukraine can also trigger another series of geo-political crisis which in-turn can support the safe haven demand of the yellow metal.
On the physical side, the ETFs and ETPs registered first increase in their gold holdings in two weeks on Monday after the pessimism fueled risk-aversion demand during the previous week. Gold holdings in SPDR, world’s largest gold backed ETF, liquidated nearly 2 tons yesterday totaling 10.72 tons of liquidation during the month of October while the holdings in global ETPs rose by 3.7 tons on Monday which was the first increase in holdings during two weeks. Gold import from the world’s biggest two consumers, China and India respectively, signaled complex scenarios as Indian gold imports during September 2014 increased by over 450% to $3.75 billion while the China’s net gold imports from Hong Kong declined in August to the lowest since May 2011. Hence, the overall physical demand counter is weak; however with the upcoming buying season in India, the Indian market players expecting higher buying due to the upcoming festival and marriage season together with the lower prices’ support.
From the technical perspective, the breakout from the descending trend channel on the Daily Chart and a reversal from important support level signals additional hike of the gold prices towards the $1265 region where 100-day EMA and 61.8% Fibonacci Retracement level of its January-March up-move resides. Moreover, a close above $1265 can cause the yellow metal to rally till $1295 – $1300, which has been a crucial medium-term zone. Alternatively, a plunge below $1230 can cause it to test $1200 and $1182 levels, breaking which chances of near-term up-move can be negates with the metal prices expected to test sub – $1150 levels.
To sum up, uncertainty surrounding the global growth and deflationary pressure at some of the developed world can continue supporting the safe haven demand of the gold. Further, the speculation concerning interest rate hike by Federal Reserve, which have been fueling US Dollar and weakening Gold prices, is also fading after the recent FOMC release, which in-turn can support the gold prices which generally trades in reverse direction to US Dollar strength.
Moreover, the festival season at the world’s second largest consumer, India, and the on-going geo-political crisis at Ukraine and Hong-Kong, can also provide considerable support to the gold prices.
However, should the Federal Reserve, in its meeting on 28 – 29 October, completes its asset purchase after a final tapering of $15 billion and conveys a message to alter interest rates, the US Dollar can regain its strength and provide considerable weakness to the Gold prices.
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Anil Panchal Market Analyst Admiral Markets
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One of the crucial decisions that a potential trader has to make ,before he starts investing in forex- is the total amount of capital that he requires to invest here. The total amount of money that the trader has in his disposal goes on to determine his chances at the trade in a major way. In fact, even a slight edge in the capital can result in to great returns for him.
Traders are often guided by the belief that small investments can guarantee them big very big returns- which rarely happens. Traders with small investments are often tempted to explore a large amount of leverage or take huge risks to build on their account very quickly. Hardly do they realize that the fund managers themselves end up making less than 10 to 15% a year and as such traders with small amounts cannot practically expect to secure double or triple of their investments. The exposure to the higher effective leverage is practically a result of sheer inexperience of traders. The leverage increase can actually magnify losses in the account. As a result, disappointed traders either give up trading totally or choose to compound the results of trading with high leverage. In order to avoid these mistakes, its only prudent for you to learn about the factors that determine the amount of money you should start trading with. Go further through the post before you open forex account.
How much money should you start with?
One of the first lessons in forex trading is that you should not risk more than 1-2% of your trading account on a particular trade. The trading capital and the size of the stop loss on the trade determine how much money you can trade with. Irrespective of what the trader’s trading capital is, the size of his position will be governed by the size of his stop loss. The larger is your stop loss, the greater will you have to reduce your position size in order to ensure that you stay within acceptable limits of money management.
The 3 types of position sizes available for you are:
Each one of these aforementioned position sizes requires different trading amounts, based on the size of stop loss.
The mini lot is offered to traders who do not have as high a trading account as would be required to open a standard lot. This lot is equal to 10,000 units of base currency with each trade having a value of $1 per pip. Standard lot, on the other hand, is 100,000 units of base currency. A micro lot equates a thousand units of base currency with a value of $0.10 per pip.
The Total Cost
Please do not forget that the overall cost of trading includes various other fees and commissions besides the money you are risking. Other costs include:
1) Optional costs which you have to pay for the services you might want to avail like- custom technical analysis services, daily forex news etc
2) Commissions for brokers on each of the trade placed: It varies from broker to broker but is a tiny amount.
3) Spread: It is the difference between the buy and the sell price of the currency pair and it depends primarily on market volatility.
It is important to take note that while smaller accounts are largely impacted by the commissions and other fees, mentioned above, unlike a larger account.
There are 180 currencies that are currently in active circulation around the globe. Majority of the transactions done in the foreign exchange market are only done with the use of around half a dozen of these currencies. If you are familiar with the Pareto principle, this would make a very good real-world application. In this article, you will be given an overview of the currencies that currently dominate the foreign exchange market.
There following are the five most traded currencies in forex backed up with the reasons for their popularity:
The United States Dollar: There is no doubt about US dollar’s dominance as a currency. Truth be told, this currency does not have any serious kind of competition. This popularity can be attributed to the long term government stability and the economic dynamism of the United States. It has a very consistent value due to the fact that it is not very much affected by inflation over a long period of time. Many foreign governments are literally holding on to their dollars as their reserve currency mainly because this is the currency used for international transactions. The US dollar, needless to say, is on the pedestal and its status as a currency cannot be paralleled – well, to be precise, not yet.
The Euro: The US dollar as a primary currency definitely needs a second currency. Surprisingly, this currency is one of the youngest and it is considered as the official currency from Finland to Portugal and from Slovakia to Slovenia. The euro is the next most traded of all the currencies of the world. Currently, there are about 500 million people residing across Africa and Europe who use the currency for trading. The importance of euro, with time, is likely to increase.
The Japanese Yen: Currently, the Japanese yen has gained so much ground because its value has tripled. With that, Japanese firms took the advantage to purchase several positions related to purchasing in many institutions in the United States. With these current developments, the yen gradually became one of the most important currencies used in the foreign exchange market.
The British Pound: The pound has somewhat lost its glory. A few decades back, it is the second most widely used currency, but with the decline of the British Empire and the rise of the Euro, the pound took the backseat. Today, only six percent of all the foreign exchange transactions use the pound for trading. If you are wondering why pound suddenly fell to fourth place, the best answer will be due to the fact that it is in a relative vacuum. The government of the United Kingdom fixed its price relative to the dollar and this is not good because it no longer reflects the currency’s actual importance.
The Australian dollar: This currency is created in 1966 as a replacement to the Australian pound which is now obsolete. Ever since then, it became one of the most popular reserve currency that is traded throughout Oceania and the Asia-Pacific region. It slowly became one of the most favored currencies for trading.
Foreign exchange in the 21st century moves towards diversity. Investors are looking into the currency’s stability and volatility. Also, the economy’s reputation and security as a nation also matters in the process of choosing. Finally, another factor that is considered is the extent by which the currency is used.
In Forex trading, brokers have a great role to play. Choosing a good broker can turn out to be a daunting task. With few simple tips, you can make this process a smooth one. Over the net, you will come across advertisements of various brokers and you need to choose the one that is registered. As with any other facility, the best place to avail any service is the internet. If you are a beginner, then you can contact the authorized body to have an insight of the various brokers in terms of their regulations and other features. You can also gather the information regarding the recent complaints and other disciplinary actions.
Know the deposit limit
The first step that you need to take while choosing a brokerage is to note the deposit for each of these brokerages. Look for the ones, who have low brokerages in the initial level. Regardless, of the fact the amount that you want to trade with, if any brokerage asks for high deposits then refrain from availing their services. Next is the regulation of these brokers. As per the Federal rules, the brokers are members of the National Futures Association and are registered to the U. S. Commodity Futures Trading Commission.
Regulation and reputation
The NFA is a self-regulated organization that develops rules and designed programs to uphold the integrity of Forex market and its participants. On the other hand, CFTC is a government agency that aims at protecting the participants from fraud and other abusive practices. So you need to verify the status of the brokerage through the website of the NFA. Once you are sure that the broker has a clean record, you can easily opt for their services. The reputation of the broker also needs to be considered. You need to research thoroughly regarding the same. You can go through the message board of the broker in this regard.
Leverages and commissions
Also consider the account offerings of the brokers. This includes the leverage amount offered by the broker. Leverage works in the favor of the trader as it boosts the chances of winning and it also magnifies the loss, so you need to handle the same with utmost caution. The commission and spreads are other factors that you need to consider. These are the avenues through which the brokers earn profits. Often the brokers advertise that they do not charge any commission money, rather they opt for wider spreads.
Mode of payment
The withdrawal and the funding policy of each of the brokers are different, and you need to know them prior to availing their services. Payments through credit cards, PayPal, bank check or wire transfers are mostly common and the brokers charge a fee for the same. Currency pair that is available for the trading is also important. Often that broker offers a wide range of currency pairs, but you need note, whether they provide that pairs that you are in interested in. A Fuchsberg personal injury lawyer has stated that the points that traders need to keep in mind also the loopholes that they need to avoid while choosing a broker. They have the experience of aiding the litigants who have suffered from fraud in this regard.
Round the clock customer assistance
Another important feature that you need to consider is the customer service. It is essential for the brokers to provide round the clock customer assistance, to ever come any technical hassle or any such issue. A call to the agency can give of a glimpse of their services. It is equally essential for the representatives to know about the details of trades and provide accurate answers to various queries.
Author Bio: Michael Warner is a Forex trader and he has mentioned the important points that you need to consider while opting for brokers. One of his fellow traders appointed a Fuchsberg personal injury lawyer to fight for his cause to against a broker on ground of fraud.
While there are many investors in the forex market, the unfortunate truth is that relatively few are consistently successful – and many fail catastrophically. Although investing in forex has many of the same pitfalls as other types of asset trading, the high levels of leverage and unique dynamics of the forex market make it far less forgiving. For instance, a 1% decline in a stock price may result in a relatively modest loss for a stock trader, but a 1% drop in a currency price can wipe out a forex trader’s entire investment if they are too highly leveraged.
Given this, what common mistakes should you try to avoid when you invest in the forex market?
Trial and error strategy
First of all, if you are a novice investor, don’t just try things to see if they work. A trial and error approach is likely to lead to large losses very quickly, bringing an abrupt end to your forex trading career. Also, don’t just assume that strategies that worked for you in equity markets will transfer to the forex market. Instead, invest in formal education before you start out, or find a mentor who has a proven track record in the currency markets. Complement this with extensive practice – many forex brokers offer free demo accounts where you can hone your skills without risk.
Second, don’t fall victim to unwarranted expectations. While it is certainly possible to earn a good living and even become rich in the currency markets, forex trading is not a ticket to instant wealth. Good forex traders have a clear strategy and are happy to build up their profits slowly over time. Going for that single big win is more likely to result in major financial losses than significant gains. Investors who abandon prudent money and risk management practices to do this are almost certainly destined to fail.
In fact, well-defined money and risk management plans should be at the heart of any trader’s strategy. Make sure that all of your positions have appropriate stop losses in place, and that you are comfortable with how much of your capital is at risk given the returns that you are projecting in your plan. Diversify your portfolio across multiple currency pairs, and diversify your trading strategies as well. As your account balance grows, separate your capital into multiple pools, allocating a small proportion for high-risk/high-return investments while adopting more conservative strategies with the rest. This will increase the likelihood that even if a trade goes badly wrong, your losses will be sustainable.
Too much leverage
Finally, don’t be enticed by the high leverage levels that are available. While you may be offered leverage as high as 400:1, this level of risk may be unacceptable. Instead, consider keeping a leverage of around 2:1 for your trading. In other words, make sure that the value of your account is at least 50% of the total value of your positions. This is the ratio that most successful professional traders use – and for good reason.
The trading platform MetaTrader 4 is fast becoming the essential tool needed to profit from the forex markets. It is an immensely powerful application that allows automated trading, back-testing and charting. But to get the most of it, you need to know how to use it efficiently. Here are a full list of MetaTrader shortcut keys to speed up your trading processes:
Function (F) Keys
F1 – open “Help”
F2 – open the “History Center” window
F3 – open the “Global Variables” window
F4 – open MetaEditor
F6 – call the “Tester” window for testing the expert attached to the chart window
F7 – call the “Properties” window of the expert attached to their chart window in order to change settings
F8 – call the “Chart Setup” window
F9 – call the “New Order” window
F10 – open the “Popup prices” window
F11 – enable/disable the full screen mode
F12 – move the chart by one bar to the left
Shift Key Combinations
Shift+F12 – move the chart by one bar to the right
Shift+F5 – switch to the previous profile
Alt Key Combinations
Alt+1 – display the chart as a sequence of bars (transform into bar chart)
Alt+2 – display the chart as a sequence of candlesticks (transform into candlesticks)
Alt+3 – display the chart as a broken line (transform into line chart)
Alt+A – copy all test/optimization results into the clipboard
Alt+W – call the chart managing window
Alt+F4 – close the client terminal
Alt+Backspace or Ctrl+Z – undo object deletion
Ctrl Key Combinations
Ctrl+A – arrange all indicator windows heights by default
Ctrl+B – call the “Objects List” window
Ctrl+C or Ctrl+Insert – copy to the clipboard
Ctrl+E – enable/disable expert advisor
Ctrl+F – enable “Crosshair”
Ctrl+G – show/hide grid
Ctrl+H – show/hide OHLC line
Ctrl+I – call the “Indicators List” window
Ctrl+L – show/hide volumes
Ctrl+P – print the chart
Ctrl+S – save the chart in a file having extensions: “CSV”, “PRN”, “HTM”
Ctrl+W or Ctrl+F4 – close the chart window
Ctrl+Y– show/hide period separators
Ctrl+Z or Alt+Backspace – undo the object deletion
Ctrl+D – open/close the “Data Window”
Ctrl+M – open/close the “Market Watch” window
Ctrl+N – open/close the “Navigator” window
Ctrl+O – open the “Options” window
Ctrl+R – open/close the “Tester” window
Ctrl+T – open/close the “Terminal” window
Ctrl+F5 – switch to the next profile
Ctrl+F6 – activate the next chart window
Ctrl+F9 – open the “Terminal – Trade” window and switch the focus into it. After this, the trading activities can be managed with keyboard
Keypad and Combinations
“left arrow” – chart scrolling to the left
“right arrow” – chart scrolling to the right
“up arrow” – fast chart scrolling to the left or, if the scale is defined, chart scrolling up
“down arrow” – fast chart scrolling to the right or, if the scale is defined, chart scrolling down
Numpad 5 – restoring of automatic chart vertical scale after its being changed. If the scale was defined, this hot key will return the chart into the visible range
Page Up – fast chart scrolling to the left
Page Down – fast chart scrolling to the right
Home – move the chart to the start point
End – move the chart to the end point
“-” – chart zoom out
“+” – chart zoom in
Delete – delete all selected graphical objects
Backspace – delete the latest objects imposed into the chart window
Forex brokerscome in several types, ranging from the most legitimate brokerage firms to betting houses that work illegally. Forex traders, whether beginners and experts, should carefully choose their brokers to ensure that they will be working with a reliable one. Note that while most of these brokers usually have the same access and qualities in the foreign exchange market, the procedures and policies that they use still differ dramatically.
Each broker also represents a different level in the industry. There are those that represent a high level of expertise in the field and can directly access the market. There are also brokers who are very distant and have little connection to the market. Researching about the different types of brokers is the key towards maximizing your chances of choosing one who can help in transforming you into a successful forex trader. Here are just few of the brokers working in the forex market and the unique functions and roles that they play:
1. Dealing Desk (DD)
This broker refers to a market maker. Dealing desk brokers or market makers usually provide fixed spreads. Most of them also work by electing to quote below or above the real-time market prices at a given time. Working with a dealing desk is a wise move for beginning and expert traders who do not wish to trade directly with liquidity providers. Dealing desk brokers normally receive payment through spreads.
2. No Dealing Desk (NDD)
No Dealing Desk forex brokersallow forex traders to have direct access into the interbank market. A genuine NDD broker does not require the re-quoting of prices. In other words, traders get the chance to trade following any economic announcements without facing restrictions. Working with NDD brokers allows the use of low and unfixed spreads. Since the spreads are not fixed, there is a great tendency for their value to increase significantly when an increase in volatility takes place due to a significant economic announcement. To get paid, NDD brokers might increase the spread or charge a commission on every forex trade.
3. Electric Communication Network (ECN)
These brokers offer and display actual order book details that usually feature processed orders as well as the offered prices by different banks in the interbank market. Most ECN brokers work by offering information to all the participants in the forex market as a means of improving market transparency. They charge a commission on each traded volume to earn income from working with traders. ECN brokers also allow traders to process all their transactions in the interbank market.
4. Straight Through Processing (STP)
STP brokers can directly pass trading orders into their liquidity providers. They do not also interfere in order execution transactions. Most STP forex brokers work with several liquidity providers. STP brokers that work with many liquidity providers can also provide their traders with better chances to succeed in the forex market.
When planning to succeed in foreign exchange, forex traders should make sure that they choose a broker which can offer their required services without engaging in fraudulent activities.
Using the most efficient risk management tips and techniques can make a huge difference between your sudden death or continuous survival in the field of forex trading. No matter how efficient your trading system is, it is still possible to fail if you do not implement the best risk management strategies. Risk management involves combining different ideas in controlling trading risk. This may involve restricting your trade lot size, determining the perfect time to take losses, hedging and trading only at certain days or hours.
Here are few of the most valuable risk management strategies that will surely minimize or eliminate risks when trading in the forex market.
1. Control Losses
This forex risk management strategy involves cutting or limiting your losses in all your trading transactions. It is possible to use the mental stop or hard stop strategy when managing risks by controlling your losses. A mental stop refers to the process of setting limits on the level of draw-down or pressure that a trader should take in a single trade. Hard stop, on the other hand, involves setting up a stop loss at certain levels during the initiation of your trade. While identifying the perfect timing to establishing your stop loss is a bit difficult, note that the key is to make sure that the setting of stop loss should be capable of reasonably limiting your risks in a trade.
2. Calculate the Odds
Calculating the odds in forex trading is the first rule in managing risks. It is vital to be aware of both technical and fundamental analysis when trying to measure odds accurately. It is also essential to gain a full understanding about the trading market’s dynamics as well as the psychological price trigger points. Measuring the risk of your desired trade is the key towards managing or controlling it.
3. Understand Portfolio Diversification
Diversification is an effective risk management technique which involves finding a reliable means of protecting traders from losing their money. However, it is crucial for forex traders to moderate their portfolio diversification. It is essential to strike the most reasonable balance between concentration and diversification in order to manage risks. In order to make your diversification activities reliable, it is also advisable to open a position on four to six various groups of financial instruments. It is also significant to note that diversification tends to differ inversely with correlations used between different trading tool groups. A negative correlation represents a solid and less risky investment diversification.
4. Use a Neutral Trading Style
Risk management in forex trading involves finding the most suitable trading style for your transactions and sticking with it. Make sure that this is also neutral. Maintaining objectivity while also controlling your emotions is also the key towards obtaining a clear thinking necessary in formulating sound trading decisions. When trading, consider maintaining a neutral outlook since this ensures fulfilling your planned trading style objectively.
Forex Tutorials: Trading Forex Not Like Cheating on a Test
We have all been there: You have a big school test and you have not had the time, interest, or motivation to study. Maybe you start to get nervous and look for shortcuts. Maybe you write yourself a “cheat sheet” and glue it to your school desk. Maybe you even take it a step further and cheat off of the person sitting next to you. But while this might have worked in school it is much less likely to work in the financial markets. This is because a high test score might help to give you a good grade for the semester. But the balance in your trading account works very differently. One positive trade can be completely wiped out by a negative trade, so the two scenarios are completely different.
So what does this mean for impatient traders? Is there a way to quickly rise to the top and to start getting rich and making money with minimal effort? There are many — maybe even most — advertisers of trading programs available on the internet that will tell you this is possible. Unfortunately, this is not even close to being the case and if you have this type of approach, you are going to be looking at failure straight in the face. You are also likely to lose your trading account in short order. If you want to stay active in the forex game, you will need to exercise patience, do your research and develop a real strategy before you should be placing any real trades.
Use Your Available Resources
So while getting a real forex education might seem daunting, the reality is that market trading is not that difficult. If you are willing to pay your dues and learn about how these markets actually operate, there should be the potential for successful long-term gains in your future. For many strategies (ie technical analysis) it is usually better to use educational materials that utilize visual aids. Most of the newest materials are in video form, so there will be plenty of options for traders that are looking for forex tutorials that are visual in nature as well as those that use text-based materials.
Fundamental analysis requires an understanding of the underlying economics related to your chosen assets, so this is usually much more difficult to express through visual materials. So when you are looking for useful forex tutorials it will be important to understand how your own mind works and which strengths you will be able to use when formulating your own forex strategy. In any case, it must be understood that you will need to have patience when you are looking to enter into trading in the forex markets. This is especially true when you are seeking to use leverage in your individual trades.
It might seem like it goes without saying that it is important to do your due diligence before committing to a market broker in any asset class — be it forex, commodities, options or stocks. But what is most surprising is the fact that most traders choose their brokers without giving it much thought because they feel the need to jump right into the markets and start making amazing gains. Those of us with experience in these markets know that there are some important reasons to have patience in these areas because not all forex brokers are created equal. Additionally, the potential for destructive losses in many cases is even greater in forex markets because most traders (especially new traders) will utilize large levels of leverage in order to maximize gains. Unfortunately these practices have the potential to maximize losses as well — so it is highly important to understand the inner workings of your broker before taking on real market risk.
Stops and Execution
When you want to choose a forex broker, the first area to monitor is the broker’s ability to execute trade and honor specific order levels. For example, if you have a stop loss in a EUR/USD trade that is placed at 1.35, it will be critical to have that stop loss filled correctly if prices trade at the 1.35 level. If this does not happen, you can undergo unnecessary losses or even encounter a margin call that you were not prepared to experience. Some brokers offer guaranteed stop losses, while others offer variable stop losses that may or may not be filled (depending on overall market liquidity). This is an important difference that must be understood before any real trades are placed.
If you are not prepared for the arrangement that is offered by your broker, you could begin to experience losses at a rate that is much faster than you were initially expecting. Looking at stop loss arrangements and trading execution is one of the quickest and easiest ways you can determine whether or not a specific broker is right for you. But you will also need to spend some time using that broker’s demo account in order to determine whether or not you are seeing slippage between the order level you were expecting and the one that was actually filled in your trading account.
The second important factor to watch is the spread that is offered on your most commonly traded currency pairs. In pairs like the EUR/USD these will usually be somewhere between 1 and 3 pips, but there are brokers that offer even lower rates and this can only help your trading account. One sacrifice that is often made when getting lower spreads is weaker trading execution, so you will need to determine which aspect of the broker arrangement is most important to you before you open a live trading account and begin establishing positions. Spreads, Stop Losses, and Trading execution are a few of the most important factors to consider when choosing your main forex broker.
NETELLER is an online payment service, providing specifically an e-wallet facility. NETELLER online payments can be made in many ways. You can pay with your NETELLER account at over 1,000 merchants including mot online FX brokers. You can usually tell if a merchant accepts NETELLER payments by visiting the FAQ sections. Once NETELLER has been confirmed as an acceptable payment method you would transfer funds from your NETELLER account to the merchant site quickly and easily but most importantly the process is a safe and secure one.
For merchants that offer NETELLER not directly as a numerical method, you can use the free Net+ Prepaid MasterCard. With this you can pay wherever MasterCard is accepted as payment. You can also withdraw your NETELLER balance from nearly all ATMs worldwide. If you use NETELLER for payments or withdrawing from your broker, the amounts paid are usually within a few hours on your NETELLER account available.
Deposits on your NETELLER account, you can make by bank transfer, Credit Card, Maestro Card, Ukash, and Neosurf. Payments by Credit or Maestro card and Ukash are immediately available in the account. The member to member money transfer service will allow you to send funds from your NETELLER account to a fellow NETELLER member for free – members find this an incredibly useful and popular function on their accounts
Check out NETELLER to store and withdraw your winnings!
Great difficulties can be seen once traders start to change their original trading plan once losses start to accumulate. The main point here is that your trading plan was established for a reason, and it is usually a mistake to deviate from these plans. These changes usually come at a time when trades are losing money, and these are the cases where it is much more difficult to make logical and rational decisions. This is one of the most common errors displayed by experienced and inexperienced traders alike. There tends to be some small differences between the mistakes that traders make at various points in their careers. But there are also some common themes that are key for understanding the flaws that are involved in the trader’s mindset.
It is true that trading in the forex markets can at times be a difficult task and losing trades can lead to emotional decisions rather than logical decisions. This is generally the biggest source of error that both new and experienced traders will face. At the same time, is should be remembered that you are a trader should not be striving for perfection, as this would simply not be possible in any other intellectual discipline. Most people taking an SAT test will not score a perfect 1600 every time the test is taken. But this does not mean that those same people cannot be successful traders.
Using a Conservative Approach
As long as you approach the forex market with a conservative method that bases all trades on logical market calculations, it will be possible (and, in fact, not very difficult) for you to achieve consistent gains that are repeatable over the longer term time horizon. “It would be unreasonable to expect that any trader would be able to eliminate any and all mistakes from a daily trading plan but as longas we understand some of the common pitfalls,” said Haris Constantinou, currency analyst at TeleTrade, “it will be easier to see these mistakes in our own trades as they occur.”
In any case, new traders should be looking to start trading with a demo account so that it is easier to see and understand how live forex market conditions progress. This will enable you to construct your own trading plan without taking on excessive (and potentially expensive risks) and this added knowledge will ultimately enhance your ability to react to changing environments — and place your trades accordingly. Many new traders avoid this step in the process because they feel they are wasting time. It is true that you cannot make money using a forex demo account, but this can also help you to avoid losses, which can have an equally positive impact on your trading account balance.
The RSI, or relative strength indicator, is a versatile momentum indicator and is one of the most popular technical analysis indicators used by forex traders.
The indicator uses a formula to calculate the magnitude of recent losses to recent gains in an effort to tell when the market is likely to be at an overbought or oversold level.
The formula itself is simple and calculated as below, then presented as an oscillator:
RSI = 100 – 100(1 + RS)
In this instance RS refers to the average of the assets day up closes divided by the average of the assets day down closes.
RS = Average of days’ up closes / Average of days’ down closes.
Using this formula it is possible to garner values stretching from 0 – 100. These values are then used to represent momentum within the market which can be plotted directly below the price chart in the form of an oscillator.
In theory, the higher or lower the value of the oscillator, the stronger the momentum within the market. However, in practice, due to the way the formula is calculated, the RSI will rarely go higher than 80, or lower than 20. It is therefore much more common to use the levels 70 and 30 for trading decisions.
Thus, when the RSI is above 70, the market is deemed to be in an overbought condition and when it is below 30, the market is oversold. The best strategy is therefore to initiate a buy when RSI crosses under 30 and to go short when RSI crosses over 70.
This is the typical way to use the RSI, however the indicator can also be used in the reverse way – in order to follow trends. Using this method, a trader buys the market when the RSI crosses over 70 and does not sell until it crosses back under 30. Conversely, you can short the market when the RSI crosses under 30 and buy back when it crosses over 70.
As well as measuring momentum, the RSI can indicate divergence. For example, let’s say a currency has made a new high but the RSI has just turned down (it has not made a new high). In this case, the market is showing signs of decreasing momentum – even though the price has gone up, it has not been accompanied with an increasing RSI.
This is a clear signal of divergence and signals a reversal in the market is likely.