Archive for the ‘Forex’ Category
Your FOREX Trading Philosophy
Mistakes Of The Beginning Trader
There are 2 common mistakes that many beginner traders make: trading without a strategy and letting emotions rule their decisions. After opening a FOREX account it may be tempting to dive right in and start trading. Watching the movements of EUR/USD for example, you may feel that you are letting an opportunity pass you by if you don’t enter the market immediately. You buy and watch the market move against you. You panic and sell, only to see the market recover.
This kind of undisciplined approach to FOREX is guaranteed to lose money. FOREX traders must have a rational trading strategy and not make trading decisions in the heat of the moment.
Understanding Market Movements
To make rational trading decisions, the FOREX trader must be well educated in market movements. He must be able to apply technical studies to charts and plot out entry and exit points. He must take advantage of the various types of orders to minimize his risk and maximize his profit.
The first step in becoming a successful FOREX trader is to understand the market and the forces behind it. Who trades FOREX and why? This will allow you to identify successful trading strategies and use them.
Accountability
There are 5 major groups of investors who participate in FOREX: governments, banks, corporations, investment funds, and traders. Each group has its own objectives, but 1 thing all groups except traders have in common is external control. Every organization has rules and guidelines for trading currencies and can be held accountable for their trading decisions. Individual traders, on the other hand, are accountable only to themselves.
Large organizations and educated traders approach the FOREX with strategies, and if you hope to succeed as a FOREX trader you must follow suit.
Money Management
Money management is an integral part of any trading strategy. Besides knowing which currencies to trade and how to recognize entry and exit signals, the successful trader has to manage his resources and integrate money management into his trading plan.
There are various strategies for money management. Many rely on the calculation of core equity — your starting balance minus the money used in open positions.
Core Equity And Limited Risk
When entering a position try to limit your risk to 1% to 3% of each trade. This means that if you are trading a standard FOREX lot of $100,000 you should limit your risk to $1,000 to $3,000. You do this with a stop loss order 100 pips (1 pip = $10) above or below your entry position.
As your core equity rises or falls, adjust the dollar amount of your risk. With a starting balance of $10,000 and 1 open position, your core equity is $9000. If you wish to add a second open position, your core equity would fall to $8000 and you should limit your risk to $900. Risk in a third position should be limited to $800.
Greater Profit, Greater Risk
You should also raise your risk level as your core equity rises. After $5,000 profit, your core equity is now $15,000. You could raise your risk to $1,500 per transaction. Alternatively, you could risk more from the profit than from the original starting balance. Some traders may risk up to 5% against their realized profits ($5,000 on a $100,000 lot) for greater profit potential.
These are the kinds of strategic tactics that allow a beginner to get a foothold on profitable trading in FOREX.
TomCherry
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Yes, You Can Start Trading Forex For Free!
And you can also experience the same dynamic market action and go through the same process of making decisions based on breaking news, reacting to charting patterns, and tracking ones performance the same way professional Forex traders do.
And all this can be done even if you don’t put any real money into your account, you won’t see any difference in how the market behaves and how you react to the market. In short, at some point, every new forex trader needs to start Demo-trading.
Once you start placing demo trades, you will learn a lot about how Forex transactions are placed. I can’t emphasize you enough, that this is a very important step for you in order to be able to learn how to become a trader. A demo account allows one to become familiar with trading procedures, such as placing Market, Limit, Stop, OCO Orders without any risk. All dollar losses or gains on a demo account are imaginary but, as mentioned above, the trading experience you acquire is not.
You should notice that making big gains in a demo-account does not guarantee profits in live trading; however, those who are not successful trading on paper rarely are successful when money is on the line. So, yes, just playing around and getting familiar with a demo account can be a great learning experience; however, you will not learn how to become a trader this way. You need to have a trading strategy.
Once you sign up for a mini-demo account, you will need to try one of the trial charting packages from the broker you choose. Any demo software you choose will do because they all have the necessary indicator tools you need. Once you have downloaded the software you can then set up your demo account and start drawing trendlines, marking support & resistance levels, monitoring moving averages, etc. This is also a very good way to get used to how orders are placed. Once you have a real trading system, you will already know how to place orders properly.
And remember, everyone makes mistakes placing orders. So you need to experiment before in a demo account so you can make your mistakes without losing any real money.
TomCherry
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Winning Strategies With Forex Charts
Fundamental analysis doesn’t rely on forex charts. It scrutinizes political and economic indicators to determine trades. Charts here are deployed as used as a secondary reference.
Technical analysis on the other hand, attempts to predict price swings by analysis of historical price activity. Those who use technical analysis study the relationship between price and time.
The most actively traded pair of currencies is the Euro and the US dollar, so we will use them in our example. The dollar is on the right hand side of the chart and the Euro is on the left hand side. The currencies are expressed in relationship to each other in pairing. Forex charges will always display how much of the currency on the right hand side is necessary to buy a unit of the currency on the left side. Looking at the typical EU-USD, chart you will notice the last price displayed per given date. This number is always emphasized. The time is tabbed horizontally across the bottom of a chart and the price scale is displayed vertically along the right hand edge of the chart. The time and the price are set in all caps to help the trader remember that technical analysis rests upon the relationship between time and price.
The trader observes the price and time movement on a chart. These include bars, lines, point and figure, and Japanese candle sticks– the most favored method. With the candlestick method there is a large, red section that is the body of the candlestick. Lines protrude from the top and bottom and they are the upper and lower wicks. When you look at all the candles on a chart it is apparent that bodies come by difference sizes. Sometimes no body exists at all.
The same is true with wicks. Candle wicks come by many difference sizes; there may be no wick at all. The length of the body and the length of the wick are determined by the price range for the candle. Longer candles will have had more price movement during the time that they were open. The top of a candle wick is the highest price for that currency while the wick’s bottom is the lowest price. A currency is bullish when the close of the candle is higher than the open. In simple terms this means that there were more buyers than there were sales during the opening time period. Sometimes the candles will not have wicks. The price opened and it dropped off until it closed.
Forex charts don’t offer bullet proof trading hints, but they can help a trader. Past trends do have their place in forex trading as most traders will admit, and using the charts to track historical trends can assist a trader in making a snap decision.
The online investor typically joins a service that provides realtime charts that updates on currency activity. Charts can be checked on a minute to minute basis. For those who primarily do their trading based on historical accuracy this can ease the burden of prediction.
Most forex traders however use a combination of fundamental and technical analysis. They may chart historical trends, but they will also pay close attention to political, cultural and economic indicators within a region. They might use charts and other techniques to check correlation between political climate and currency fluctuations. But even the most sophisticated technical analysis software or tool has its limitations. A trader must be prepared to take risks… and invest money that is not needed for the immediate future.
TomCherry
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Why You Should Trade FOREX Over Other Investments
More and more astute internet entrepreneurs are shunning the traditional financial markets and turning to FOREX trading. They know that it is possible to earn a full-time income from part-time effort – if you’d like to make $200 to $3,000 for as little as ten minutes’ work, and with minimal risk, then FOREX is for you.
FOREX, the spot (cash) market for buying and selling currency, is the largest financial market in the world. Every day more than $1.5 trillion (yes, trillion) is traded globally and, unlike the stock market, which has fixed hours, it is a market that never sleeps. Somewhere in the world, at any time of day or night, FOREX is open for business, six days a week. The market starts each day in Sydney and moves around the globe as other FOREX financial centers open: first to Tokyo, then London and New York.
In simple terms, currencies are traded in pairs, for example the Euro and the US dollar (EUR/USD). The first currency – in this case the Euro – is known as the base currency; the second currency (here, the US dollar), is the counter-currency. All trades result in the simultaneous buying of one currency and the selling of the other. Thus, in this example, if you place an order to buy the EUR/USD, you are buying the Euro and selling the US dollar. If you were to sell the pair, you would be selling the Euro and buying the US dollar. There are many other currency pairs, such as USD/JPY, GBP/USD, EUR/GBP, USD/CHF and so on.
What makes trading FOREX an incredible way to make money online, is that price movements are highly predictable, creating trends that can be anticipated when it comes to decide when to buy and sell. Contrasting with stocks and shares, FOREX trading through brokers is commission free. It is also possible – and definitely recommended – to open a demo (practice) account with a broker first, where you can learn to trade and gain experience before you part with a cent of your own money.
Do you want financial freedom? With huge advantages over other more conventional money markets, why not experience the excitement of pips, rollovers, leverage, lots, long and short positions, limit orders etc. and start to trade FOREX. Good luck!
Penelope Housden.
TomCherry
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Why Forex Trading Is So Popular
For those of you who don’t know, the Forex stands for, Foreign Exchange Market. The Forex deals in all different types of currencies and pits them all against each other. For example: the English pound might be worth more than the American dollar but if there is a natural disaster or a nasty political event, then the pound could drop below the value of the American dollar and thus would make money for the individual who had bought the English pound, when they sell.
The people who trade on the Forex market are known as day traders. The reason for this is that the day trader buys at the beginning of the market for that day and then sells off all that he or she had bought by the end of the day. This type of trading is not for the inexperienced. There is potential to make a lot of money on the Forex market, but it takes a person knowledgeable in all the different facets of this slippery exchange to make money. A neophyte to this market can easily be wiped out in a matter of minutes!
The Forex market is also a liquid market with currencies exchanging hands moment to moment. Since transactions are handled electronically around the world, it only takes moments for funds to transfer to different accounts. It is easy to make some trades, watching news events in the country of the currency bought, and then sell it all, in order have money in your bank account by dinner time.
The Forex market is also open twenty-four hours a day since it encompasses the larger markets all over the world. Theoretically, a trader can work all day and all night. This makes the foreign exchange market very popular since people can trade any time they wish. A person can be trading on the Paris exchange until they close at which time the New York exchange is just opening up for the day. There are five major foreign exchange market around the world. They are New York, London, Frankfurt, Paris, Tokyo, and Zurich.
Many people like to invest in the Forex market since there is a lot of leverage available to the day trader. For instance, five thousand dollars can be leveraged to purchase five hundred thousand dollars through margins. What this means is that individual investors can trade with much more money than they actually have. However, one must be careful; it is quite easy to lose the money and thus has to pay much more than is actually in the bank account.
The Forex market is a challenging market to understand and can be hazardous to those not experienced in day trading. Nevertheless, for those who are experienced and can see the patterns of the market, it can be thrilling and extremely lucrative.
TomCherry
JVZoo Product Feed
Why Get Into Forex Trading?
There is the stock market and there is the foreign exchange market. The latter is considered the bigger opportunity-if you know how it works and if you have the money to invest. There are a lot of reasons nowadays why people are flocking to learn the in and outs of forex trading.
But why get into forex trading anyway? Are there any truths behind the big profit boon we all keep hearing about? These points are the prime reasons why the forex market is so huge right now:
Boundless Activity The foreign exchange market is open 24 hours on weekdays. Compared to other markets that operate at specific hours and days, the forex market is a buzz of activity and opportunities in the week. Investors can react to specific changes and trends that happen within the week, anytime.
Freedom This also means freedom from normal office hours; traders can operate whatever time they wish. Naturally, this attracts people from different lifestyles, locales and classes. If you have a laptop, then you can trade no matter where you are.
Less Cost Add the purely liquid nature of the market and the electronic way of transacting in it then you would have a feature that will definitely attract people: the lesser trading costs. We can do away with the traditional costs that add up to your bill and concentrate on only the spreads. The spreads here are usually smaller than the spreads in other markets, and that would mean better profits.
Leverage Unlike other markets where leverages are small, forex trading allows for bigger leverages, giving you the chances to trade up to a hundred times your investment. Brokers have features where they can give you a lot of leverage depending on the account. Of course, this also means a bigger risk of losing money. Risk management protects you from this.
Stable Price Since your trade is done immediately, chances are the prices you saw are what you are going to get. Compared this to other markets, where your transaction often ends in a span of a day or two thus giving a chance for the price to slip and change. The stability and speed attracts a lot of traders in this market. Your assets are not tied up for long periods, giving you more control.
Transparency Being electronic in transactions and having liquid, movable assets is easier to analyze and manage. Everything can be accessed by your platform and laptop. Your deals can be executed as per your viewpoint and strategy. This gives you a better feel of the market cycle, making your predictions more accurate each time you trade.
Stable Profit Chances Since your trading involves two currencies and not other markets and trends, one always has the opportunity for profit. There is no bulldog watching of rising or falling of markets, goods and industries. Whether the market is bullish or bearish does not really need to worry you. What really matters is that you pick the right currency to trade.
Forex trading is considered the perfect competition for logical reasons. Everybody is presented with an equal playing field. Even if the currency is falling, it just means that there is currency rising somewhere and the opportunity of profit exists. An unlimited earning potential, the freedom, and the even opportunity makes the foreign exchange market an exciting opportunity for anyone.
TomCherry
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Who Are The Top Forex Chart Providers?
Fundamental investors rely upon news releases and their overall impression of the economic outlook of nations in a currency pair. Technical traders, however, use charts and the application of analysis to help guide their investment decisions. Fundamental investors tend to be short-term investors while technical traders try to look at the bigger picture and be more focused upon the long-term pricing outlook.
In truth, most technical retail traders on the Forex market do not have the time to compile charts from scratch. While many retail investors do import information into programs like Excel in order to interpret the information, they still tend to rely on an outside source for the raw data. To do this, the technical retail trader relies upon Forex chart providers like the following:
* FxTrek * ESignal * FX-Charts
So who is the top Forex chart provider? The answer to this question depends upon the individual investor but you do want to look for a provider that produces charts that are easy-to-read and relevant to the particular strategy you employ. Now there are chart providers that are going to insist upon offering up a ton of “insider secrets” to the market in addition to their charts. In fact, all providers will provide some degree of insight but this is no criteria to choose a chart by–this information will only confuse you and cause you to doubt your investment strategy.
If there is one common problem to most investors new to the Forex it is a tendency to over trade and ignore the stops they put into place when acquiring a position. Fear is a common human emotion and it guides more investments than people think but it also causes people to exit positions prematurely and over trade. While the opinions of investment experts may sound perfectly logical and a lot more involved than your own strategy–they are just opinions. The market is always right–no investing expert can claim likewise.
Once you acquire a position, place your stops and keep them in place. Losses will happen but you need to perfect your own investing strategy using continual back testing and chart analysis–not listening to the opinion of others once you are already in the game. What you need most of all from an FX chart provider is accurate and easy-to-read charts. While the advice may be helpful when learning the market and prior to acquiring a position, it tends to breed fear and cause doubt once you already are in the game. Thus, choose your chart provider based upon their charts–not the advice they produce each and every month!
TomCherry
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Which Would You Rather Do: Forex Or Daytrading?
Day Trading
Day Trading had its heyday during the bull market of the 1990′s. All the amateurs have since dropped out, but day trading is still being practiced by professionals. There are fewer opportunities in the current market, but skilled investors can still find them if they know what to look for.
FOREX Trading
The Foreign Exchange Market (FOREX), the world’s largest financial exchange market, originated in 1973. It has a daily turnover of currency worth more than $1.2 trillion dollars.
Unlike many other securities, FOREX does not trade on a fixed exchange rate; instead, currencies are traded primarily between central banks, commercial banks, various non-banking international corporations, hedge funds, personal investors and not to forget, speculators. Previously, smaller investors were excluded from FOREX due to the huge amount of deposit involved. This was changed in 1995, and now smaller investors can trade alongside the multi-nationals. As a result, the number of traders within the FOREX market has grown rapidly, and many FOREX courses are appearing to help individual traders increase their skills.
As a matter of fact, it’s advisable to take FOREX training even before opening a trading account. It is vital to know the market mechanics of FOREX, leveraging in FOREX, rollovers and the analysis of the FOREX market. Due to this fact, potential FOREX traders would do well to either enroll in a FOREX training courses or even purchase some books regarding FOREX trading.
There are pros and cons to enrolling into a FOREX course. For beginners a FOREX course is a rapid method of learning the basics of FOREX trading. Not much time is spent on history of the market or arcane economic theories. Often, on-line or phone support from a skilled FOREX trader is available to answer any questions. Also, the information is condensed and practical, often with graphs and charts.
The disadvantage is the price, as courses are more expensive than a paperback from the bookstore. Also, the course may just teach the approach of the trader who wrote it, and individuals have different trading strategies. The student may grow accustomed to the logic and focus of the teacher without coming to realise that nothing is predictable in the FOREX market, and many different strategies will bring profits in varying market circumstances. Also, knowledge of practical applications may not be enough, as the FOREX is highly unpredictable and there are many external factors, such as political issues, affecting the flow of finances in the market.
The best advice would be to do some background research on the FOREX market first, and then enroll in a course.
TomCherry
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Which Forex Trading System To Choose?
A Forex trading system is a set of rules which are aimed to ensure that you are trading in a way that is free of bias and the influence of emotion. Most beginner traders will look to learn a forex trading system whereas more experienced traders will eventually move to build a trading system of their own.
A good Forex trading system should look to encompass and cover for all possible eventualities which the markets may through up. In that respect, they should comprise of rules which govern, amongst other things the following:
1. Which currency pairs to trade.
2. When exactly to enter and exit a trade.
3. Where to place Stop Losses and Take Profit rates.
Forex trading systems must always be tested against historical data (known as back-testing). Beginner traders, when looking to purchase a forex trading system, should always ensure that the system was properly backtested and that the results are genuine. There are certain software packages available now which back-test trading systems automatically.
Which Forex Trading System To Choose?
This will depend upon your trading style. Some traders are swing traders and will look to keep positions for days, weeks or even months. Others prefer a day trading style and will be in and out of a trade within the same day. A typical swing trading system will look to take larger moves ranging from 100-300 pips over a period of a few days or weeks. On the other hand, an intraday forex system looks for smaller opportunities ranging from 25-50 pips.
Forex scalping systems have become popular of late as well. Scalping is a trading style which looks to take profits on very small price changes, usually soon after a trade has been entered into and becomes profitable. It is a strategy that does not look to capture 50+ pip moves; rather it is more about watching the price and getting in and out of trades for quick 5 pip moves which little by little add up.
While this might sound risky, it can be quite a low risk strategy if performed correctly. As with all trading systems, the most important parameter which has to be addressed here is money management. Having a strict exit strategy and rules on how much of your equity to risk per trade must be clearly outlined.
TomCherry
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What To Consider When Comparing Forex Brokerages
Leverage
One of the major benefits of trading currencies is the tremendous amount of leverage even small-time traders are allowed. Typical leverage is 100:1, meaning for every $1 in your brokerage account, you can control up to $100 in currencies. A thousand dollars would thus allow you to control $100,000 worth of currency, so if the currency went up by 1% — $1,000 — you would actually double your money! But if the currency went down by just 1%, you would lose all $1,000 of your investment. What would happen if the currency went down by 2%? Well, theoretically, you would lose $1,000 above and beyond your initial investment, but in reality, a brokerage firm will usually step in and prevent this kind of loss.
Your main decision is what level of leverage to apply for. Leverage is given based on credit-worthiness, so if your credit report is pretty poor, you might want to pursue just 50:1 leverage — which still gives you a lot of room to profit but limits your risk. Alternatively, if you have true nerves of steel and a real knack for forex trading, you may be able to apply for as great as 250:1 leverage!
Spreads
The good news is that there are no commissions charged on forex trades. The bad news is that, like stocks, forex currency pairs do have a bid/ask spread — meaning a market maker will pay less for a currency than he is willing to sell it for. These spreads are extremely small, usually less than 0.05 cents, but the wider the spread, the more costly trading will be over the long run.
Not every brokerage has the same spreads, so it is important to review the typical distance between the bid and ask prices before selecting a broker.
Other Considerations
First and foremost among all other considerations are the currency pairs that a given brokerage deals in. For example, if you want to perform a Japanese yen for Swiss franc trade, you will need to find a brokerage that offers that currency pair. Virtually every forex brokerage deals in the main currency pairs — the U.S. dollar vs. each of the following currencies: The Euro, the British pound, the Australian dollar, the New Zealand dollar, the Canadian dollar, the Swiss franc, and the Japanese yen — but not all brokers deal in every possible “cross currency” pair (i.e. currency pairs that do not involve the U.S. dollar).
Finally, it’s important to deal with a reputable broker. Currency trading is far less regulated than most other financial markets, and there are a lot of fly-by-night companies in the business. Be sure to investigate the company before sending them a check for a few thousand dollars — it will be time well spent.
TomCherry
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