Forex Trading Fallacies: What you should know

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.

Can Gold Prices Rally Further?

Can Gold Prices Rally Further?
Can Gold Prices Rally Further?

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.

Also Read: Can The US Dollar Witness Renewed Strength?

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.

GOLDDaily 16102014

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.

Follow me on twitter to discuss latest markets events @Fx_Anil

 

Anil Panchal
Market Analyst
Admiral Markets

At any use of the analytical material taken from the site of company Admiral Markets, and the secondary publication on any other resources, the rights to intellectual property for a dealing center «Admiral Markets», the reference to the company site is obligatory.

Forex: Determining How Much Money You Should Risk At The Beginning

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:

  • Mini Lot
  • Standard Lot
  • Micro Lot

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. 

Five of the Most Traded Currencies and the Reasons for their Popularity

Five of the Most Traded Currencies and the Reasons for their Popularity
Five of the Most Traded Currencies and the Reasons for their Popularity
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.

Source: www.mtrading.ng , A Nigerian Forex broker.

Important Points To Facilitate The Choice Of A Good And Reliable Broker

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.

Why Traders Fail

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.

Unrealistic goals

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.

 A Guest Post by FXTM

Shortcut keys for MetaTrader 4

Shortcut keys for MetaTrader 4
Shortcut keys for MetaTrader 4
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 

Enter – open/close fast navigation window 

Esc – close the dialog window

What Are the Different Types of Forex Brokers and their Individual Functions?

 

What Are the Different Types of Forex Brokers and their Individual Functions?
What Are the Different Types of Forex Brokers and their Individual Functions?

 

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. 


Source: http://www.mtrading.ng

 

Effective Tips in Managing / Controlling Risks in Forex Trading


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.

Copy Credit http://forextradinginphilippines.blogspot.com/

Forex Tutorials: Trading Forex Not Like Cheating on a Test

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.  

 

Choosing a Forex Broker

Choosing a Forex Broker

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.  

Spreads

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 as a Payment Method

300x250_enjan14NETELLER 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!

 

Managing Emotions in Day Trading

Managing Emotions in Day Trading

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 long as 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. 

 

How to use the RSI indicator

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.

Divergence

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.

 

Selecting the Best Trading Tools

In order to achieve successful and sustainable gains over the long term, you will need to consciously select the trading tools that will become the basis for your trading strategy.  You can do this by talking to other traders, reading internet sites devoted to the subject, or by looking at the various technical analysis books that have been published in recent years.  To get a sense of some of the options, trading tools include indicators like SMAs or EMA (simple moving averages and exponential moving averages), the MACD indicator, the Relative Strength Index, Stochastics, or Parabolic SAR (among others).  All of these trading tools are discussed in greater depth in some of my other articles, so we will not get into the specifics of these trading tools here.   

Deciding on Your Preferred Forex Currency Pairs and Technical Indicators

Essentially, what you are looking for is for these tools to give you clear trading signals that are easy to identify.  All of the major forex brokers offer trading software that will give you free access to each of these tools (and many others), so it is very easy to test a wide variety of these trading tools before settling on your favorite choices.  One example of a trading scenario (using moving averages) can be seen if, hypothetically, a 10-day moving average crosses above a 20-day moving average, as this would signal positive momentum going forward.  Many traders look for situations like this in order to initiate buy positions, and tactics like can be defined for any technical chart indicator you choose..

Once you have tested some of the available charting tools, you will want to use the results to begin selecting the currency pairs that you would like to focus on in your investment practices.  This is another vital aspect in defining your strategy because not all currency pairs trade in the same fashion.  Since some currency pairs are much more common (and commonly traded) than others, price movements in one currency pair will likely see many differences in relation to other currency pairs.  For example, the most common forex pairs like the GBP/USD and the USD/CHF tend to be much less volatile than currency pairs that are less commonly traded, such as the EUR/JPY or the AUD/NZD.

So, ultimately, the currency pair that you choose will depend heavily on the degree to which you are interested in dealing with market volatility.  Of course, market volatility is needed in order to make large gains — volatility simply refers to large price moves.  But it should be understood that some strategies are better tailored for this than others, and this is one of the first factors that should be considered once you begin trading. 

 

Forex Markets: Introduction to Fundamental Analysis

Forex Markets:  Introduction to Fundamental Analysis

If you have had any exposure to the forex markets, it is highly likely that you have heard the term “fundamental analysis.”  This term is often included as part of the debate that exists between “price-based” and “economically-based” traders.  But what does the term refer to, exactly?  How can traders use “fundamental” knowledge and logic to place actual trades in the forex markets?

Focusing on Economic Statistics

Specifically, when traders mention “fundamentals” what they are actually talking about is the economic statistics of the country in question.   “This information is helpful for traders who are looking to assess the financial strength or weakness of a given country,” said Rick Bartlett, currency analyst at CornerTrader.  “These pieces of information tend to have a very clear impact on the long term prospects for the value of the currency in that region.”  Economic fundamentals focus on a large and varied collection data reports.  This information is usually released on a pre-determined schedule that is established in advance by the government of each country.

In addition to this, analyst reports can also have a major impact on market expectations.  This, of course, is not something that is released by a government but by groups of people working in private companies.  In the most extreme cases, you might see things like credit downgrades (or upgrades) from ratings agencies, and these releases tend to generate volatile reactions in the forex markets for investors viewing prices on both short and long term time horizons.

Fundamental Data Comes in Many Different Forms

At its core, fundamental analysis is the application and study assessment of economic data releases and geopolitical news events.  These assessments are viewed in terms of the ways that they are able to affect currency values, as real world events that are occurring around us will inevitably impact market forces and have a large impact on the ways that people make purchases on a daily basis.  Macroeconomic factors, such as national growth rates, employment rates and inflation rates are key in understanding the ways investors will make trading decisions, so it is highly important to monitor these economic releases before committing to new forex positions.

But not all of these releases are the same.  And, in fact, some of these reports will be interpreted very differently when viewed as a relative comparison.  Strength or weakness in a report from the Federal Reserve that describes New Home Sales will not give investors the same results as an Interest Rate decision or a change in monetary policy.  An increasing unemployment rate is generally negative for a currency, whereas rising GDP is going to be viewed as a positive.    In any case, you can be sure that all of these releases will have some impact on the viewpoint of the market, and that some reaction will take place once the data is made available for public consumption. 

 

Forex Indicator Tools

Forex Indicator Tools

The increasing prevalence of computers in regular trading activity has led investors to look for new ways to make price forecasts in the markets.  Because of this, a critical component of any sufficient forex education will need to see the implementation of some non-traditional strategies.  One of the best examples of this can be seen in technical chart analysis, which seeks to assess historical price activity as a means for forecasting where valuations will head next.  When these price forecasts are accurate, some significant gains can be made — even on the shortest time durations. 

“Technical analysts tend to argue that economic data, of even the identity of the asset itself, are largely irrelevant and not necessary for making successful trades,” said Haris Constantinou, currency analyst at TeleTrade.  Of course, there are many market traditionalists that would disagree with these assertions and instead suggest that economic fundamentals are the only things that should be used when making market forecasts.  But even if you disagree with technical chart analysis, its growing presence in forex markets is undeniable.  Here are some of the key tools needed when implementing these “technical” strategies in forex trades. 

Indicators and Oscillators

Some of the most basic technical tools fall into the category of indicators and oscillators, which help traders identify regions where prices are either oversold (have been sold-off too excessively) or are overbought (which suggests prices have risen too high, too quickly).  Some of the most popular tools in this category include the Moving Average Convergence Divergence (MACD), and the Relative Strength Index (RSI). 

The RSI, for example uses a 0 to 100 scale, where anything below 30 is considered to be “oversold”.  This essentially implies that the asset price has become too cheap and will likely reverse higher. This information can be used to establish “buy” positions. In contrast, numbers above 70 suggest that prices are “overbought”.  This essentially implies that the asset price is now too expensive and likely to start falling lower.  This information can be used to establish “sell” positions.

Fibonacci Retracements

Another common tool is the Fibonacci retracement.  With this tool, traders will look for a significant price move in either direction (either bullish or bearish).  Since prices tend to move back toward “the mean,” traders can play against the initial price move.  For example, if a currency pair moves from 100 to 200, and prices fall back to 150, we would say that prices have retraced 50% of the initial move.  These significant percentage areas can then be used to establish new trading positions. 

Moving Averages

Since prices tend to gravitate toward their averages, Moving Average indicators can also be used.  These averages tend to fall into two categories: Simple and Exponential.  Simple moving averages simply show the average price over a given time period, while Exponential moving averages place greater weight at more recent intervals.  Buy positions are taken when prices move above their moving averages, while sell positions are taken when prices move below their moving averages. 

 

Why You Should Trade the Forex Market

Why You Should Trade the Forex Market
Why You Should Trade the Forex Market

Forex trading, also known as the foreign exchange market is a globally decentralized market where investors trade on currencies. There are multiple financial centers globally, which lay the trading foundation for different types of traders in the market. The Forex market is charged with the responsibility of determining the relative value of various currencies. A number of merits make it one of the best markets to trade in the world.

For instance, it is the biggest financial market globally, transacting over $4 trillion each day. It is thrice as big as the global stock market, besides being rated as the only market nearest to perfect competition.  There were strict financial requirements which locked out individual investors some time back, but at the moment even small retail investors can take part.

Market transparency is one of the virtues which should draw investors to explore this field of trading. Forex quotes are driven by economic news and report announcements, which are aired publicly for everyone to access, unlike in stock or commodity marketing.

High levels of liquidity characterize this market, owing to the currency exchange services which are offered by large banks to individual investors and multinational companies so that even the biggest transactions are complete within seconds.

In this field, investors are able to trade within any time of the day all through the five days of the week because the Forex market runs continuously for a period of 24 hours, which means at any time, somewhere in the world, the marketing is open. This flexibility allows you to trade any time from any location in the world.

Both in rising and falling markets, you have the opportunity of gaining. Essentially, if you have a feeling that the market is bound to rise, you buy the currencies. And when you feel the market will go down, you sell the currencies and in both ways you stand to gain and avoid most of the uncertainties that there are in other markets.

The Forex market is easily accessible, especially through the internet. Most retail traders carry out the business either from their homes or at work where they enjoy the flexibility of doing other jobs. There are different forex brokers over the internet, offering advanced tools to aid you in Forex trading if you want to do it over the internet.

The price movements in Forex trading are highly predictable, because there are multiple patterns which repeat themselves over a period of time. This is one of the greatest benefits that a Forex trader reaps because it is relatively easier to trade in a trending market than in a chaotic one.

You will also enjoy high leverage in this market, which is one of the most essential tools in this trading. If you want to make a deal worth $10,000 for instance, on a leverage of 1:500, it means you will only need a deposit of $200. This high leverage makes the Forex market very profitable, although it has its risks involved.

Forex trading is commission free, and the overall costs of transaction are low. Most brokers lower or abolish the commission fee completely because they are compensated by the bid or spread from each currency pair.

In this market, there are no constraints in the type and number of transactions that you make. There comes a time of ‘limit -up and limit -down’ when the price fluctuates beyond the daily levels that had been predetermined. This limits traders from attaining new positions, but they can quit the present ones at their own discretion. This is only meant to control volatility but essentially there is no limitation regarding the number of transactions.

There are a variety of opportunities in this market, provided by several currency pairs from which to select. Every trader has the opportunity of researching on the currency pair that sells the most, so that he or she will invest in it.

Forex trading is relatively easy to execute because you need not analyze price movements in most of the companies but rather monitor a handful of currencies and besides there is no going short or selling on uptick, as is the case with stocks because selling is as cheap as buying in the Forex trading market.

There is an unlimited earning potential in this market, owing to the large amounts that are transacted in this market. No matter how little the profit per currency pair is, the number of transactions that can be done each day is huge, considering the fact that it is a 24-hour trading period, no doubt large profit margins are expected.

Similarly, the market cannot be cornered because it is too huge for any corporation or even government to exert control over. It is entirely driven by supply and demand and hence cannot be skewed by an individual or group of individuals.

There is also the advantage of easy entry because individuals are not regulated as long as a person has the passion for trading in the Forex market and the knowledge needed to start and sustain transactions in this area that experiences a lot of competition.

This market is a two-way profit journey, which enables traders to earn profits both when they purchase currencies and when they will choose to sell them, a virtue that cannot be compared to any other market. Coupled with free trading software, this is the right and near perfect trading opportunity.

Though it has a side of its pitfalls too, the Forex market has merits that far outweigh the demerits. Though there are several people who have incurred losses in this trade, it is also clear that they fail to follow the guidelines and study the market well before trading.

There are multiple indicators which show whether you are bound to lose or gain and once you follow them closely, it becomes the most competitive yet friendly trading ground. In a nutshell, if you need an investment opportunity free of the many hustles that characterize most business opportunities, this is the right business area to explore.

This post is provided by Topbrokerforex.com, a review site of forex broker Indonesia.

Understanding Long and Short Time Period Charts

While there may be a few traders who prefer to “look at the fundamentals instead of the patterns”, most experienced dealers would still advise you to study charts for you to know the current trends. For this reason, Forex charts with different time periods were designed to allow dealers to buy according to the trend for lower risks of losing income.

Making a choice between the two really depends on the dealer’s needs, skills and their trading or investing styles. There are around 20 trading days a month, making that approximately 252 trading days a year. Forex charts may be intraday, daily, weekly, monthly, quarterly or annually. The different time frames that are used in Forex charts mainly depend on data density. The lesser the density, the more data are displayed. Some people would find this amount of data too overwhelming, so they opt for long-term charts. However, denser and more compressed charts offer less data, and some dealers might find that this wouldn’t satisfy their need for details.

Most traders and investors look at long-term charts because they are generally easier to interpret and would allow them to see patterns in the movement of the foreign exchange market over one to four years. It also allows them to make forecasts on possible changes that may occur in a few years’ time. There is often less noise in long-term charts because of the wider range of time frame used, and as such, the compressed data shown in these charts won’t reflect price movements as extreme.

On the other hand, short-term charts are used by dealers who wish to look more into detail. They focus on daily and intraday data for traders who are interested in less dense data. They are usually volatile and would have a lot of noise because of the sudden price movements that would be projected in the short time Forex charts. It takes some time to better understand and get used to short time period charts because of their wide price gaps and high-low ranges. Traders who focus on short-term charts are usually interested in small details that can actually affect the overall picture.

There are also some investors who make use of a combination of both long and short term Forex charts. With the long-term charts, they are able to get a broad perspective of the price trends. They then couple this data with the short time frames to see which factors might have affected these trends so that they may use them in making analyses and forecasts in the Forex trading market.

 

Understanding Long and Short Time Period Charts
Understanding Long and Short Time Period Charts

Source of Content: www.admiralmarkets.ae, An Arabic Forex broker.

An Overview of Successful Day Trading

Day Trading is an active, short-term trading strategy to make money in the Forex market. Essentially, Day Trading means buying and selling currencies within the same day so that no positions are held overnight. Day Traders capitalize on intraday price movements: They analyze the market beforehand, decide on a side, and hold their position only for a few minutes or hours to make a profit from short-term changes in prices. This trading style requires good knowledge of technical indicators, excellent risk management skills and therefore a certain amount of training and experience in the Forex market. When practiced correctly, it promises immediate returns with manageable risks.

 Day Trading has numerous advantages, some of which are rather obvious: There is no overnight risk associated with this trading system at all. Thus it also entails a great deal of flexibility; a Day Trader can take a day off trading with no risks pending. Less obvious, but very important is the chance to benefit both from rising and falling markets with a Day Trading strategy.

 The two most dangerous risks associated with Day Trading are poor loss management and overtrading, that is trading too risky or with too large quantities. Both can result from being overwhelmed by the fast pace of daily Forex market movements. To counter those risks, it is very important for every Day Trader to have a strategy in place and follow it with firm discipline.

 A valid trading strategy is based on technical indicators and tested against historical data; it determines entry and exit points for any trades as well as controls risks. Technical indicators should be the basis of every valid trading strategy. They have three functions, as they alert, confirm and predict. To determine entry and exit points, technical indicators are irreplaceable. There is a huge variety of different indicators, but Day Traders should rather focus on two or three significant ones that complement each other (instead of those that move synchronously and generate the same signal). Successful traders never blindly rely on signals created by indicators alone but keep in mind that those signals have to be read in context, considering other valuable technical analysis tools like candlesticks, trends, or patterns.

 Before actually implementing any Day Trading strategies, investors should test them on a demo account that simulates real trading conditions but uses virtual money; it helps to fine tune strategies and eliminate possible bugs. Once the strategy is tested and in place, review is important: Keeping track of an implemented strategy, that is analyzing both good and bad trades, improves it over time – making it more profitable and decreasing the risk.

 Discipline is necessary to keep emotions in check when trading in a fast moving market – Day Traders should stick to their strategy under all circumstances and not abandon it in the heat of the moment, risking great losses.

 When first starting Day Trading, it is wise to place smaller trades and to monitor them closely. As a rule of thumb, investors should never risk a loss of more than one to two percent on a single trade.

 Being a Day Trader requires a considerable amount of time to analyze and monitor the market, as well as a sound knowledge of price movements and indicators. The right education and training are indispensable on the way to becoming a Day Trader. Webinars and Articles like these by Admiral Markets give an introduction to the topics and lay a solid foundation.

 

This post is provided by Forex Ball, an international Forex Contest Championship