Category: finance

Forex: What Desire For Risk

The single most significant issue for us to understand once first starting to trade is risk management. Of course we all need to trade to aquire money. So the main thing we need to understand is not to lose it. Of course you will experience losing trades, we all do, it is part of trading, it is inevitable. But learn to survive those losses and subsequently endeavour to minimise and keep on minimising them.

With this in mind I confess to being intrigued by the wildly distinctive approaches proposed by various people. Some will tell you to swing trade so that you can capture whichever significant swings that occur throughout the day. Their argument is that by doing this they will not lose out on any major movements that take place. They benefit from sizeable stop losses to allow the trade a chance to breathe, as they say. This way they can permit the trade run and run for a decent long while and gather in a nice high profit. They do not need to stay chained to a laptop all day long and are comfortable in the knowledge that a large stop loss allows them to trade in this way. And various traders do precisely this.

Let us consider the amount they are risking. Suppose for example the pound is falling against the euro and the chart shows the price bouncing down and up against say the 40 daily moving average. Let us imagine that our stop loss is trailing slightly above the 40dma.There might well be a difference between the price and the stop loss of say 2-400 pips. That is one heck of a lot of risk! You need very deep pockets for this method.

Another method that the risk adverse beginner might want to consider is somewhat different. Imagine the chart described above instead of being a daily chart is a 10-minute chart although we will presume its outline is much the same. Because the price variations are smaller the risk is much smaller. Being a smaller time frame it will need closer monitoring than a swing trade but this is a balance that needs to be struck.

It often amazes me that certain traders will let a trade rise to its summit and subsequently let it retrace in the hope that it will take off again to a higher peak. This it might or might not achieve. When a price reaches its high point it is surely wise to exit the trade at the earliest obvious sign of a reversal and to re-enter later on. By following such an approach the stop loss, instead of being placed on a moving average can be placed at say the low of the preceding bar. As a consequence the risk is reduced to a very low level and fulfils one of the criteria outlined at the start of this article. In order to continue to reduce the risk element you might find you can reduce the stop loss to a portion of the proceeding bar so instead of having a 200 pip stop loss you can perhaps get away with say 20. Now that is low risk.

Four Tips to Successful Day Trading

Day trading is also known as spread trading. Day trading consists of opening and closing trades in a single day. It is called day trading but it’s traded all around the clock because when people go to sleep others are waking up in another part of the world. The internet has enhanced day trading since you can conduct your trades at the comfort of your home or in any location around the world as long as you have internet connection. The basics of day trading is to monitor the market and track every change in order to trade every opportunity the market offers. You will find, here, a day trading guide that will help you become a successful trader.

Cut your losses quickly

The key to any trading strategy is to defend your capital from a margin call before thinking of making any profit. There are rules that, if followed can assure you success. The most important rule you need to have is to reduce your losses as soon as possible. Many experts would recommend that you wait until your stop is hit, but that is not totally true as the only time you are allowed to wait is before opening a position.

Use tight stop losses

A tight stop is your best friend in this market. Never wait for a trade hoping that the market will reverse. Hope is a good quality in human nature but hope can be your enemy in the markets. Never hope that your trade will turn positive. Most of the time, a loser won’t become a winner. To become successful, you have to trade against human instincts. This is one of the main reasons; successful traders are so rare. Human nature is the reason why 90% of day traders fail in the first place.

Make sure every trade goes into profit immediately

As a day trader, you need to break every complex process into small parts and deal with each of those separately. That is why you should be constantly checking your day trading guide to make sure you don’t forget your own rules. This will help you in the better understanding of the trade. It is very easy to fail and very easy to succeed. Wait for the perfect moment to enter your trade. This will help you make your trade go into profitable territory immediately, if it doesn’t then your best strategy is to close it. This might be radical to some people, but it does work.

Don’t wait for the market to prove you are wrong

The best day trading tip is that it is not logic to wait for any market to prove you wrong. If the market does not prove you right as soon as you enter into a trade, it shows that you should leave immediately. Some of the most successful traders have been using these rules for decades and they sure do enjoy the benefits.

You also have to know the best currency pairs to trade and at what time. Four currency pairs are traded most in the forex market. It is important to stick to these currencies that have high liquidity.

In conclusion

Be on the lookout and exit a trade when you think it is about to go sour. Eliminate hope in your trading, it can be the cause of your margin call. Constantly keep revising your day trading guide to stay relevant in the market.

Day trading requires your attention in every moment of a trade. This is why you should have a look at the following guidelines to be on the safe side when starting out.

Why More Than 90% Of Forex Traders Lose Money

There are lots of Forex traders out there. However, over 90% of them never become profitable with foreign exchange. In reality, making money with Forex is not as difficult as many investors make it. Here are 3 ways to make it happen.

Be Skeptical Of Forex Robots

Robot Forex trading programs get a lot of hype. While they can make you money, none of them will make you rich-even the best ones. Many investors think they will see returns of 20-30% a year with these robot programs, but these claims are greatly exaggerated. Most likely, you will see returns in the 5-10% range, assuming you pick a quality robot. If you do not, you could lose money.

A good robot will never make as much as a human investor. While many of them will make you money, they will not make you the huge ROI many investors claim. Instead, you want to focus on learning investing yourself if you really want to become profitable.

Consider Fundamental Analysis.

This is a form of investing where you focus on buying currency pairs for the long term. Most Forex traders use technical analysis, simply because fundamental analysis is rather difficult when dealing with foreign exchange. However, technical analysis can be very time consuming. While it can make you money, it requires a lot more time and effort.

On the other hand, fundamental analysis is designed to help you make money long term from an investment pair. The factors you look at to determine a currencies’ long term potential include the countries’ interest rates, unemployment statistics, and inflation rates. These are the best indicators of how a currency will do for the long term.

As mentioned, fundamental analysis will help you make money long term. This is because you are buying with the intention of holding for the long haul, and you do not have to keep making trades to be profitable. The whole strategy is designed around fewer, low quantity trades.

Cut Your Losses

Having stop losses is very important with Forex trading. If you do not, you can easily hold an investment for too long, and you can end up losing a lot of money from it. Instead, you want to have a set point you will sell at no matter what.

Conclusion

If you are looking to join the many Forex traders investing in foreign currency, you have to take a different approach than most of them. The important things to do are to invest yourself, cut your losses and invest for the long haul. Use these 3 tips and you will become a profitable trader shortly.

How Automated Systems Have Evolved Forex Trading.

Have automated Forex system become important in the trading markets?

In order to answer that question we must glimpse at how big the Forex market has become. From that perspective we will understand the importance of automated systems.

It is general knowledge that The Forex market in terms of daily turnover and revenue per trader is the largest in the world. It is also comprised with greatest number of players.

The following are some of those that regularly trade inf the Forex markets for one purpose or another.

BANKS- are more than deposits and loans, in fact they are a major participant in the currency markets.. Banks service both speculative traders and commercial transactions for business purposes.. Large banks can trade billions of dollars in the Forex markets daily.. Some of the trades are undertaken on behalf of their clients, but most are through proprietary desks.

COMMERCIAL COMPANIES- these commercial companies trade minor quantities of foreign currencies compared to larger banks and their trades produce small and short-term impact on the market rates. Nonetheless, the long term trends of exchange rates are influenced by the transactions of the commercial companies.

CENTRAL BANKS- central banks play an important role in the Forex market. This results from the fact that they control the supply of money, interest rates and inflation.. more importantly they set ranges that they would like their currencies to trade in.. One of their functions of central banks is to stabilize their currency through the purchase and sale, or intervention, in the foreign currency markets. Their intervention in the market is enough to stabilize a certain currency.

INVESTMENT MANAGEMENT FIRMS-these firms commonly manage huge accounts on behalf of their clients such as endowments and pension funds. They are using the Forex market to facilitate transactions, specifically in foreign securities. Normally investment managers who hold international equities need to hedge their exposure by buiyng and selling currency pairs.

RETAIL FX BROKERS- are responsible for fraction of the Volume of the Forex Market.. Forex estimates retail volume of between 25 to 50 billion dollars each day, which is estimated to be at 2% of the total market volume.

SPECULATORS- These are the participants who speculate and profit on price fluctuations during a given period of time. They play an important role shifting the risk to individuals who do not want it..

In Forex market alone, these are the six major players participating in the $1.8 trillion worth of daily volume. With such large volume and player and the fast and furious action be these participants it becomes obvious why a automated Forex system is a need.

The major players mentioned above used automated systems for their transactions.. Since they focus on the price fluctuations of various foreign currencies in order to profit, the real time data analysis will help them determine trades that will give advantage to them.

Several automated or robot system exist currently. Some of these systems are free as part of a traders account and provided by the brokerage firms.. These systems are plain trading systems that do not approach the sophistication of the trading robots. Additional features are not typically free and get more expensive as more are added.

There are two types of automated Forex trading system:.

Desktop-based system- all Forex-related data are stored on your desktops hard drive. This system is unpopular to Forex traders because all data are vulnerable to computer virus contamination and other security problems. Worse case scenario is if your system crashes and you did not make a backup you have lost all your data. However, it is little expensive compared to the other types of automated trading system.

Web-base systems were the security and data protection are supplied by the service provider.These are secured servers.. It is also convenient in the sense that there will be no software required and it is universally compatible with your Internet browser.

Forex robots represent the most intriguing way to trade and have become almost necessary. Among the advantages is the speed in which it can react to market movements and be aware of many more variable a trader could possibly be. Today’s markets are characterized by millisecond movements and not using one of these robots will always leave you one step behind.. These robots are program for profitability and have the advantage of removing human emotion from trading which is the demise of most traders.