Saturday, October 24, 2009

How Forex Money Management Protects Currency Traders


If you consider Forex money management a boring distraction from the real fun of Forex trading, you've missed the whole point. Before you can make any real and consistent gains in the Forex, you must come to understand that money management is just as important as the trading part. One of the most essential ingredients of successful Forex trading is the unfailing use of money management techniques to minimize losses and protect your gains.

Before you even begin laying out money and making trades, you'll want to decide on a set of Forex money management guidelines. Placing bets without any kind of safety net is irresponsible toward yourself and your family.

Successful traders recommend that you start small and gain a gut-level grasp of the markets before moving on to bigger bets. Hoping for a big score right at the beginning is the mark of a casino gambler, not an investor.

The best advice:
Keep your risk, right from the beginning, at about one percent or less of your total equity on any one trade. Keeping your risk low, in the one percent range, protects you if disaster strikes and you have a string of losses. You could actually survive 20 consecutive bad trades and still have 80 percent of your equity remaining. Taking tiny little one percent baby steps may seem boring, but it certainly beats being wiped out by a run of adverse trades. It will ensure that you're still around to invest next week, next month and next year. It also helps you safely build confidence, judgment and experience.

Many new Forex traders ask how much they should put into their trading account. The surest and wisest advice is never, ever bet your rent or grocery money. In other words, only use money you can afford to lose. Yes, I know that in your special case there aren't going to be any losses, and you're in a big hurry to make it big. But long experience says it's not going to happen that way for you either. If you were to lose everything you invest, would you and your family still eat okay? Would you still be in your home, or would you have to move into your brother-in-law's basement? Just think about this, okay?

It's important for you to know about the four stops. These are standard (and very wise) ways to prevent losses from ravaging your finances as you begin trading the Forex markets. You or your broker can use one or more of these four stops to protect your money.

1. Equity Stop
This stop lets you decide beforehand how much you're prepared to risk on a single trade, and you won't risk anything beyond that percentage. A beginner may set the equity stop to one or two percent. Once you've gained considerable experience, you might eventually raise this to five percent, but never forget that at the 5% level, ten consecutive bad trades (not impossible) could wipe out half of your account.

Downside: This stop makes no allowance for positive fluctuations. The protection is strong, but if you never vary from it, you may miss out on some of the more profitable trades. When you're a newbie, the safety net it provides while you're learning is more important than any gains you might miss while you'e learning.

2. Chart Stop
The trading charts that technical analysis provides can be accurate indicators of market movements. Technically minded traders who live, eat and breathe mathematics and probabilities often love chart stops. But the smart ones don't get reckless. They also include equity stops in their calculations.

Downside: Generating charts and analyzing them can take significant time for newbies. This is time in which the market has moved on, leaving all that beautifully charted data a little (or a lot) outdated.

3. Volatility Stop
Related to the chart stop but more complex, this one assigns risk values according to volatility rather than price action. Until you're experienced in Forex trading, it's best to leave this difficult technique to your broker. It's based on subtle and sophisticated evaluations of high versus low volatility of currency pairs and assigns greater or lesser risk to each market situation.

Downside: Demands steady, unflinching nerves and a great deal of experience.

4. Margin Stop
With the Margin Stop you're deciding beforehand that you'll get out of any trade before you're out of money. If you have ,000 in your account, setting your margin to 0 means you'll trade with the top textarea,500 but if your losses ever reach that amount, you'll close your position and preserve that last 0.

Downside: It's hard to find a downside to the Margin Stop. You keep control of your account, even when using an account manager.

Forex money management is essential when trading in the currency markets. And these stops are important backup measures to be used in tandem with your own patience, caution and growing judgment to minimize losses while maximizing your gains.

Friday, October 23, 2009

Brief history of Forex trading


Initially, the value of goods was expressed in terms of other goods, i.e. an economy based on barter between individual market participants. The obvious limitations of such a system encouraged establishing more generally accepted means of exchange at a fairly early stage in history, to set a common benchmark of value. In different economies, everything from teeth to feathers to pretty stones has served this purpose, but soon metals, in particular gold and silver, established themselves as an accepted means of payment as well as a reliable storage of value.

Originally, coins were simply minted from the preferred metal, but in stable political regimes the introduction of a paper form of governmental IOUs (I owe you) gained acceptance during the Middle Ages. Such IOUs, often introduced more successfully through force than persuasion were the basis of modern currencies.

Before World War I, most central banks supported their currencies with convertibility to gold. Although paper money could always be exchanged for gold, in reality this did not occur often, fostering the sometimes disastrous notion that there was not necessarily a need for full cover in the central reserves of the government.

At times, the ballooning supply of paper money without gold cover led to devastating inflation and resulting political instability. To protect local national interests, foreign exchange controls were increasingly introduced to prevent market forces from punishing monetary irresponsibility.

In the latter stages of World War II, the Bretton Woods agreement was reached on the initiative of the USA in July 1944. The Bretton Woods Conference rejected John Maynard Keynes suggestion for a new world reserve currency in favour of a system built on the US dollar. Other international institutions such as the IMF, the World Bank and GATT (General Agreement on Tariffs and Trade) were created in the same period as the emerging victors of WW2 searched for a way to avoid the destabilising monetary crises which led to the war. The Bretton Woods agreement resulted in a system of fixed exchange rates that partly reinstated the gold standard, fixing the US dollar at USD35/oz and fixing the other main currencies to the dollar - and was intended to be permanent.

The Bretton Woods system came under increasing pressure as national economies moved in different directions during the sixties. A number of realignments kept the system alive for a long time, but eventually Bretton Woods collapsed in the early seventies following president Nixon's suspension of the gold convertibility in August 1971. The dollar was no longer suitable as the sole international currency at a time when it was under severe pressure from increasing US budget and trade deficits.

The following decades have seen foreign exchange trading develop into the largest global market by far. Restrictions on capital flows have been removed in most countries, leaving the market forces free to adjust foreign exchange rates according to their perceived values.

But the idea of fixed exchange rates has by no means died. The EEC (European Economic Community) introduced a new system of fixed exchange rates in 1979, the European Monetary System. This attempt to fix exchange rates met with near extinction in 1992-93, when pent-up economic pressures forced devaluations of a number of weak European currencies. Nevertheless, the quest for currency stability has continued in Europe with the renewed attempt to not only fix currencies but actually replace many of them with the Euro in 2001.

The lack of sustainability in fixed foreign exchange rates gained new relevance with the events in South East Asia in the latter part of 1997, where currency after currency was devalued against the US dollar, leaving other fixed exchange rates, in particular in South America, looking very vulnerable.

But while commercial companies have had to face a much more volatile currency environment in recent years, investors and financial institutions have found a new playground. The size of foreign exchange markets now dwarfs any other investment market by a large factor. It is estimated that more than USD 3,000 billion is traded every day, far more than the world's stock and bond markets combined.

Thursday, October 22, 2009

e-gold Forex Brokers


A list of Forex brokers which offer e-gold payment system as an option for funds deposit and withdraw. e-gold Forex brokers provide fast, usually commission free way to transfer money to and from Forex trading account, while keeping these transactions anonymous.

Sort by: Order | Minimum Account | Traders' Rating | Name

Forex Broker Name Min. Account Size MT4 WebMoney CFD Browser-based
Platform
Registered
with any Regulator
Easy On-line
Account Opening
Rating
FXOpen$1++--++8.8
Ava FX$100-++--+6.9
InstaForex$1+++-++3.3
Forex4you$1+++--+6.8
FXcast$10++---+5.0
MFN$500--+--+3.6
FXM Financial Group$10++--++8.1

Forex Market Offers Opportunity And Information


The forex market is what is called an international exchange currency market, where currencies are exchanged on a daily basis. There are five forex market centers around the world — New York, London, Tokyo, Frankfurt and Zurich. One does not need to be on the trading floor, so to speak to be involved in the forex market. Today, forex trading can be done from home on a computer.

The forex market itself is basically a worldwide connection of traders, who make investment moves based on the price of currencies, or their values relative to other currencies. These traders constantly negotiate prices with other traders resulting in the fluctuation or movement of a currency's value. The value of a currency on the forex market also corresponds with supply. If there is greater demand for the Euro, let's say, then there will be less supply of it on the forex market, which means, in time, it will make a Euro more valuable compared to let's say the dollar. In short, in this forex market situation, one Euro would yield more dollars, subsequently weakening the dollar as well. Analyzing the forex market's fluctuations allows investors to make predictions on how a currency will move in relation to another currency. They then can make predictions and buy and sell currency accordingly.

While some people view the forex market as a place to see what their exchange rate will be when they travel abroad, others view it as an opportunity to make great gains in their financial planning and future.

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Tuesday, October 20, 2009

10 factors to consider when choosing a forex broker


There are a number factors to consider when you choose a Forex broker and to help you do so here is a list of 10 of the key factors you should consider when you select a Forex Broker that will suite you.

1. Reputation This may seem like an obvious place to start but surprisingly this is quite often overlooked in people's quest for profits. A simple place to start is to check out several Forex forums to see what other traders have said about their experiences with brokers and this will help you to get a good idea of the general user experience as well as details about the level of service and support you are likely to get from particular brokers and probably most importantly, payments.

2. Foundation and legitimacy Most Forex brokerages are usually either associated with or are part of a bank or large financial organization but with the rising number of online Forex brokers there are a number of checks concerning their foundation that should be made. Brokerages that are associated with large financial organizations or banks are not only backed up by funds from their Forex trading but also have other income streams and investments which means they don't have all their eggs in one financial basket. Having fund insurance against fraud or bankruptcy is good to have as this means you aren't relying just on being paid from their backup investments which might otherwise mean a longer wait for your money should they be experiencing any financial difficulties. Are they registered with the appropriate regulatory organizations? Legitimate Forex brokers should be registered with the Futures Commission Merchant (FCM) and regulated by the Commodity Futures Trading Commission (CFTC) Note: It is also worthwhile checking out any parent company's website for any financial information that can assure you that your funds are covered and secure.

3. Execution Quite simply this is how they conduct their business. There are two main business models that Forex brokers use, Electronic Communication Network, (ECN), and Market Maker. The ECN model is one where a Forex Broker provides a marketplace for Market Makers, traders and banks to enter their competing bids and offers into this trading platform and have them filled by liquidity providers. All trades made in this environment are made in the name of the ECN broker which means that your trades are all performed completely anonymously. The Market Maker model provides pricing and liquidity for a particular currency pair and then stands ready to buy or sell that currency at the quoted price. A market maker takes the opposite side of whatever your trade is and has the option of either holding that position fully or to partially offset it with other market traders in order to manage their aggregate exposure to their clients. Other aspects of the Forex brokers' execution of their business are: Do they use automatic execution for trades? If they do not have this as part of their model then how fast is their average order execution? How much are you allowed to trade without having to request a quote? Do they offset client trades?

4. Trading Platforms Forex trading is a rapidly moving environment and it pays to have a home computer that can keep up with the processing involved because time lag could mean you are not trading on the latest figures. If your current computer is not as up to date as you would like it to be and you are not in a position to bring it up to a faster processing specification or replace it with a faster workstation, then it is worth considering only using Forex Brokers that operate the ECN platform because this software requires less processing power to run at full speed as it is simpler software Some Forex brokers have restrictions on the number of currency pairs you can trade so check how many of these you are allowed to trade. Get used to the trading platforms and the features they have, such as one click trading, mobile trading, orders types and other features. The best way to do this is to sign up for a Demo account as these use the same software you would use with a live trading account. These accounts are free and if you are considering several Forex brokers then why not try them out with a demo account to see which one you prefer?

5. Account Size If you are starting out you aren't going to go gungo-ho and open large live trading accounts that have high minimum trades, but having said that you might want to increase your amounts later and so need some flexibility. Ascertain what the minimum trade size is as well as whether or not you can adjust the standard lot traded. Unsurprisingly the minimum account opening balance a broker requires is important in deciding which broker to use. It is also very worth checking whether or not unused equity will earn you interest.

6. Spread The spread is the difference between the ask price (the price you buy currency at) and the bid price (the price you sell it at). These are quoted in pips. An example of this is: If you are trading the currency pair US dollars and Euros you might see a spread like this, 1.2700/05, the spread is the difference between 1.2700 and 1.2705, or 5 pips. In order to make the most from your trades you need to know the brokers spread so find out if they use a fixed or variable spread? How tight is the spread? Is the spread larger for small accounts?

Note: Fixed or variable? This choice depends on your trading pattern. If you make trades only or mostly influenced by news announcements--when markets tend to be volatile--you might be better off with fixed spreads. Although this is only if the quality of execution is good. Some brokers have different spreads for different clients. Clients with larger accounts or that make larger trades can receive tighter spreads. Clients that are referred by an introducing broker might receive wider spreads so as to cover the costs of the referral. Other brokers though might offer everyone the same spread regardless of whom they are or the size of their account. It can be difficult to determine a company's spread policy so the best way to find out is to try various brokers, or talk to other traders who have, and of course check out the forums.

7. Slippage Slippage is the time between when your order is placed and the transaction is completed, so find out how much slippage can be expected for fast and normal moving markets.

8. Commissions This is probably the simplest thing to find out. Check your prospective Forex broker's commissions to see if they are built into the spread, as with most Market Makers, or if they charge a separate commission.

9. Margin The margin is the amount of deposit required to either open or maintain a trade position. Margins are either "free" or "used". A used margin is the amount which is being used to maintain a position that is open, and a free margin is the amount that is available to open a new trade position. Check what the broker's margin requirement is. Is this margin the same for both standard and mini accounts? Does the margin change for different currency groups or change for different days of the week?

10. Rollover Policy Rolling over will either accrue you interest or cost you interest depending on whether you bought a currency with a higher interest rate or sold a currency with a higher interest rate. Check the broker's conditions or requirements regarding earning rollover interest. There may be a minimum margin requirement before can earn interest on overnight positions so make sure you know your position.

Sunday, October 18, 2009

Can the Markets Rise, When Economies Dive?

During the course of an economic cycle, interest rate increases are used to restrain rapid inflation or growth during a bullish market, while rate cuts are used during market mayhem (a bearish market), in hope that the declining rates will encourage consumer consumption, returning the economy to a normal and healthy state.

Throughout this cycle 2003-2009, the Fed has used numerous methods apart from its standard rate cuts to propel the economy. The recent one has been quantitative easing, where central banks have participated in the bond market, while injecting money into the financial system.

Over a year and a half ago, analysts thought the claim that a market recession reaching the scales of the 1930’s depression is ‘farfetched’. To date those investor’s thoughts are quite different as exploitation of the housing sector has caused a snow-ball affect throughout the world economy, forcing government officials to make coordinate efforts to redeem the world’s economy.

Over the last couple of months government interference in the markets has intensified as numerous banks and large caps have been nationalized, to help prevent further loses across the globe. In addition, economic data continues to pour out showing a deteriorating economy, forcing officials to come out with new creative methods.

Despite the negative data and gloomy outlook the markets have recently increased, making investors question as to whether the recent rally is a change in trend or just a simply a bullish rally in a bearish market.
While it is too early to determine any change of trend, one must take into consideration the following:

1) Interest rates reductions or increases can take up to 9 months to leak through the system, affecting the economy.
2) The markets work on expectations; therefore if government officials are aiming for a market turnaround towards the end of this year, the indices will price it in beforehand.
3) Once the indices retrace a fair part of their losses, demand will increase on positive sentiment, driving the markets even higher.
4) Low interest rates will eventually spark demand across the board as consumers will take advantage of the low rates, especially as rates like these might not last.

Last week’s trading session presented mixed signals as the U.S housing sector suddenly showed signs of slight improvement. According to the National Association of Homebuilders, single family homes increased for the first time in seven months, adding an increase of 4.7% to new-home sales. In addition, over the last two weeks of trading the U.S government has addressed the market, stating that it intends to buy back government bonds and the far end of the curve, in an effort to reduce the costs of home purchasing. By taking a look at the homebuilder’s index one can see the recent increase, caused by the improving data and overall market momentum.



Will the Market Rally Continue?

While there is quite a lot of market moving data coming out this week, including the G20 meeting and unemployment results from the U.S on Friday, one must not steer away from the housing sector (the cause of the current economic situation).

Following this week’s U.S manufacturing data, housing figures are expected to be released and could show a further improvement in the sector. In addition unemployment data is expected to show another 656,000 job losses in the month of March. While one might think that the figures are devastating, the markets could react in a completely different way.

During the U.S ‘s last recession (2003-2003) the U.S unemployment rate continued to rise and Non-farm Payrolls decreased, while the markets were forming a bottom. The unemployment rate peaked during the middle of 2003, when the U.S indices were far off their lows.

With the G20 meeting coming up, an interest rate decision from Europe and employment data coming out, the markets could see some profit taking around current levels, accompanied by an increase in market volatility. Just keep in mind that the markets could surprise, especially when investors are already expecting further bad news. A ‘higher-low’ will give confirmation like in 2003.

Thursday, October 15, 2009

Car Finance Basics


There happens to be a lot of different things that people do no understand when it comes to getting yourself a new vehicle whether it is through leasing it or buying it, it still requires some information to know how it really does work. The thing that you should keep in mind the most is that a car dealership does not typically finance a car lease or a loan but in turn they will most definitely have some sort of impact on how much you will end up paying on your car financing.

One good thing to keep in mind is that a car dealership will always sell you a vehicle for cash in hand. These people are third party businesses that have purchased a franchise from one or multiple different car makers in order to sell the vehicles. They do not work for these car makers and always work for themselves. It is important to realize that the dealers buy these cars themselves usually through the use of a very large loan through a bank or another type of financial institution and as a result they are also charged rates of interest on these car loans. They then need to sell the cars off in order to pay off their initial loans as well as all of the other associated costs that come with running a car dealership.

Dealers will always get cash for a vehicle that they sell to someone, it could either come from the consumer himself, or some other financial institution that has loaned out the finances to a consumer in order to purchase the vehicle of their choice through an auto loan. People are usually under the misconception that they will be able to get a discount or a better deal if they pay for a vehicle in cash but this is not the case because they in fact will make more from raised interest rates and commissions if you go about financing the vehicle itself.

When a car dealership sells a vehicle to a consumer he will usually push onto them the typical bank or financial institution that they have working with them in order to get their financing settled. A lot of these dealerships will use some of the more well known and major financial institutions that have special deals with the car makers if you do not already have one and you would be paying an additional premium for that luxury. As a consumer however, you have the ability to bring on your own auto financing company if you would like to. The point of stating this is to make it perfectly clear to you that a car dealership does not finance a loan to a consumer at all. They will not process the loans or even take payments on the loans themselves, all they will do is take the application papers that you fill out and will try to arrange some sort of financing with companies that they usually work with for a small fee.

Now a dealer could go about checking your credit history, but this is not for the purposes of getting you the consumer a car or vehicle loan, but is done in order to figure out quickly whether or not the consumer would even be capable of getting a vehicle or if they have any serious credit issues that are currently outstanding. The dealer is not the financial institution and is unable to approve you the consumer for a loan. The financial institution that the dealership forwards your filled out application to will do their own set of credit history checks as well as check out your past payment history and your overall debt to income ratio. This check is a lot better done then what a dealer could possibly do so if you happen to have a dealer check out your credit and tell you that you are alright, they really may not have any idea at all so keep this in mind as well.

When the financial institution is done checking out your credit worthiness you will be classified in one of three types which are prime, near prime, and sub prime. Prime means that you have a great credit profile and have a higher score usually above six hundred and eighty, as a result of this you will be offered the best possible interest rates on your loan. Near prime usually will fall around the six hundred and twenty to the six hundred eighty mark and will usually mean that you could pay as much as four or so percent more then someone that has a prime score. If you happen to be below that and are considered to be sub prime then you are going to have some issues with finding a lending institution that will be willing to give you a auto loan and when you do end up finding a good one the rate of interest you will be paying is going to be very high.

You should also be aware that a car dealership has the ability to change the rate of interest that you would be paying on your car loan. One of the types of hidden fees that some shady car dealerships will try to include to consumers when they purchase or lease a vehicle is to mark it up so that your interest rate is increased regardless of your good credit score. This sort of markup can go up as much as two percent on your overall rate of interest and this particular markup of your interest rate will never be mentioned on any document that you would ever be signing. The car dealership will say that this increase can be considered justifiable because it helps them cover the cost of getting the consumer the financing they need but it is just additional profit or is used to make up for something they may have given to you somewhere else in the car deal. The most a car dealership is legally allowed to mark up your interest rate is by two and a half percent.

Something that a lot of people will ask when they go about getting a new car or vehicle is whether or not they are able to negotiate for their own rate of interest. In a lot of these situations you will not be able to negotiate the base rate of interest that a lending institution gives to you but you will be able to try and haggle down the markup that a car dealership tries to give to you. You should know that though some car dealerships practice this shady act not all of them take part in it. You should also realize that the better credit profile that you have the better rate of interest you will receive over all from the financial institution. So knowing what your credit profile looks like and shopping around on the internet is of the best things you can do for yourself before even ever walking into a car dealership.

Even if a car dealership does check your credit it really does not matter and this is a mistake that most people think occurs. Just because they said it looks good on their end it does not mean it is a done deal for you. When a consumer buys or leases a new vehicle with a car finance they will usually sign papers that state that they agree to purchase the vehicle using funds that are provided to them through a financing company and if they are not approved by the company the deal itself is considered nulled and voided unless they are able to secure another way of financing. Once this is done the car dealership is in no way again involved in the monthly repayment of the loan itself and is no longer responsible for it.

If you happen to have poor credit and come across problems trying to get approved for a vehicle because of your past payment history or debt to income ratio there are still a couple of things that you can do in order to get yourself that car of your dreams. Often times a co signer will allow you to get a vehicle without much of a problem. Other times a financial institution will ask for a large down payment to off set the high amount of risk that you have shown to them through your credit history. This will usually allow you to keep the same monthly payments while having the overall cost of the vehicle to go up. Even if a dealer lets you drive away with the car if the bank or financial company comes back to them denying the loan application the vehicle still will legally belong to them and they will require you to return it regardless of anything that you could have signed originally.

So when it comes down to it you should always know what your personal credit profile and score is before even walking into a car dealership just to make sure that you will not be startled when something goes down later on. The next thing you should do is to shop around for a good car finance that is flexible for all situations online before going into a car dealership so that you are prepared with money in hand in order to make sure that the car you are buying is yours and not the dealers. There are many different places to do this online and getting multiple quotes from different companies will allow you to find the best possible deal regardless of your credit history and situation.

If you have credit problems, repossession, bankruptcy, slow pays or are a first time buyer and in need of Car Lenders in USA. The car finance company offers the opportunity to buy a car on credit when you have been refused credit in the past. So, whatever the reasons - bad credit or no credit or bankruptcy, there is a good chance we can help you!

Wednesday, October 14, 2009

Foreign Margin Markets

Comparing to other investment, the Foreign Exchange margin trading is one of the fairest and the most attractive investment method.

The Foreign Exchange margin trading meaning the traders borrow loan from bank, finance organization or broker house to carry on the foreign currency trading. Generally, the financing proportion is above 20 times, which means the Forex traders’ fund may enlarge to 20 times to carry on the trading. The bigger the financing proportion, means the Forex traders just need to pay very less fund, for example, the financing proportion provided by the financial organization is 400 times, namely the lowest margin request is 0.25%, the traders just need to pay 25 US dollars, then he or she could trade as high as 10,000 US dollars, fully using the contra method to make big profit by only paying a very less price.

Besides the fund enlargement, another attraction of the Forex margin trading method is that it can be traded in both ways, you can make profit by buying the currency when the currency rise (makes many), or to sell a currency when the currency is dropping to make profit (short-selling), thus does not need to be restricted by the restriction so-called bear market is unable to make money.

Making Profit in the Foreign Exchange Market
The currency fluctuate continuously due to reasons such as political, economical reasons, sometimes the changes could be extremely great, therefore, the Forex traders also can have the opportunity in among which makes a profit. For example, the Japanese Yen daily fluctuation is probably between 0.7% to 1.5%, Forex traders may make profit through buying and selling. All trading could be completed in a short time, the trading strategy could be carry up according to the market conditions, it is extremely flexible, even if the direction looks wrong, the lost could be stop immediately, the lost could reduce but profit potential is still great. Therefore, the Foreign Exchange margin trading is the most flexible and the most reliable investment method.
Foreign Exchange Margin Trading elementary knowledge
Currency name Commonly used currency code
Singapore dollar
Thai Bath
Swedish krona
Danish Krone
Norwegian krone
Spanish peseta
German Mark
US dollar
Euro
Japanese Yen
Pound
Swiss franc
Australian dollar
New Zealand Yuan
Canadian dollar
Hong Kong dollar
French franc
Italian lira
Belgian franc
SGD
THB
SEK
DKK
NOK
ESP
DEM
USD
EUR
JPY
GBP
CHF
AUD
NZD
CAD
HKD
FRF
ITL
BEF

The Perfect Forex Trading System


Most Forex trading systems forget about the most important component in a trading system, price action. Incorporating it in our trading system will generate more consistent results.

Trading the Forex market has became very popular in the last few years. But how difficult is it to achieve success in the Forex trading arena? One of the main reasons of this is because Forex traders focus on technical indicators to make their trading decisions and totally forget about the most important factor: Price behavior.

Most Forex trading systems are made off technical indicators (a moving average (MA) crossover, overbought/oversold conditions in an oscillator, etc.) But what are technical indicators? They are just a series of data points plotted in a chart; these points are derived from a mathematical formula applied to the price of any given currency pair. In other words, it is a chart of price plotted in a different way that helps us see other aspects of price.

There is an important implication on this definition of technical indicators. The fact that the readings obtained from them are based on price action. Take for instance a long MA crossover signal, the price has gone up enough to make the short period MA crossover the long period MA generating a long signal. Most traders see it as “the MA crossover made the price go up,” but it happened the other way around, the MA crossover signal occurred because the price went up. Where I’m trying to get here is that at the end, price behavior dictates how an indicator will act, and this should be taken into consideration on any trading decision made.

Trading decisions based on technical indicators without taking price action into consideration will give us less accurate results. For example, again a long signal generated by a MA crossover as the market approaches an important resistance level. If the price suddenly starts to bounce back off that important level there is no point on taking this signal, price action is telling us the market doesn’t want to go up. Most of the time, under this circumstances, the market will continue to fall down, disregarding the MA crossover.

Don’t get me wrong here, technical indicators are a very important aspect of trading. They help us see certain conditions that are otherwise difficult to see by watching pure price action. But when it comes to pull the trigger, price action incorporation into our Forex trading system will definitely put the odds in our favor, it will generate higher probability trades.

So, how to create a perfect Forex trading system?
First of all, you need to make sure your trading system fits your trading personality; otherwise you will find it hard to follow it. Every trader has different needs and goals, thus there is no system that perfectly fits all traders. You need to make your own research on various trading styles and technical indicators until you find a concept that perfectly works for you. Make sure you know the nature of whatever technical indicator used.

Secondly, incorporate price action into your system. So you only take long signals if the price behavior tells you the market wants to go up, and short signals if the market gives you indication that it will go down.

Third, and most importantly, you need to have the discipline to follow your Forex trading system rigorously. Try it first on a demo account, then move on to a small account and finally when feeling comfortably and being consistent profitable apply your system in a regular account.

Tuesday, October 13, 2009

What is Forex???


Most aspiring traders may have heard about forex trading. For those that are unfamiliar with this market, here is a simple definition of what Forex is. Forex basically refers to the Foreign Exchange market. Veterans in this market have givin’ the market several names over time, some include “FX”, “Spot FX” or “Retail Forex”. Whatever you want to call it, you should know that it is the biggest financial market in the entire world. With volume trades nearing $5 trillion dollars a day. Compared to other popular American markets such as the NYSE (New York Stock Exchange) this equates to nearly 40x larger. Its no surprise that Forex trading has huge a following of aspiring traders!

Friday, October 9, 2009

Benefits of Forex Markets

FX market trading requires the trade of money or worldwide currencies There are not many nations in the world that aren’t engaged in the fx market where they buy and sell money based on the value of that particular currency at the moment. because of the fact that some currencies aren’t worth much that money will not be bought and sold hard when the currency improves in value, additional brokers and bankers start to commit in the market at that moment.


The trading on the Forex market happens daily and it involves moving over two trillion dollars each day which is a lot of money. Think about how many millions it takes to bring about a total of a trillion and now think about how this is done each day. So, if you want to get involved in where the money is, the foreign exchanage market is the setting where money is exchanging hands each day.

The currencies that are traded on the forex markets are going to be those from countries all over the world. Each currency has it’s own three-letter symbol this symbol represents that country and the monies that are being traded. For example the British pound is GBP and the United Stated dollar is USD, and the Japense yen is JPY and the Euro is EUR. Many currencies can be traded in one day, or you can trade to a different currency every day. Most trades through a broker, or those of a company are going to require some type of fee, before making too many trades you want to be sure of the trades you are making so you know which involve additional fees.

Every day there are trades between countries and markets most of the heavy trading takes place between the Euro and the US dollar, then the US dollar and the Japanese yen, and finally between the British pound and the US dollar. The trading takes place all night, and all day and in various markets. As one country opens trading for the day other countries are closing trading for the day which means worldwide time zones impact how the trading will take place and at what time the markets open.

Moving from one market to another moving from one currency to another your transactions will be explained by symbols. Each transaction will look something like this JPYzzz/USDzzz the zzz is to represent the percentages of trading for the percentage of the transaction. You could also see could look like this AUSzzz/USD and so on. When you review and read your fx statement as well as your online information the symbols will make more sense just learn the symbols that represent the currency that you are trading.

Thursday, October 8, 2009

Forex Trading Basics


The global foreign exchange market is the biggest market in the world. The 3.2 trillion USD daily turnover dwarfs the combined turnover of all the world's stock and bond markets.

There are many reasons for the popularity of foreign exchange trading, but among the most important are the leverage available, the high liquidity 24 hours a day and the very low dealing costs associated with trading.

Of course many commercial organisations participate purely due to the currency exposures created by their import and export activities, but the main part of the turnover is accounted for by financial institutions. Investing in foreign exchange remains predominantly the domain of the big professional players in the market - funds, banks and brokers. Nevertheless, any investor with the necessary knowledge of the market's functions can benefit from the advantages stated above.

In the following article, we would like to introduce you to some of the basic concepts of foreign exchange trading. If you would like any further information, we suggest that you sign up for a FREE Membership on this website, where you will be able to exchange views with other Forex traders and get answers to any questions you might have.

Margin Trading

Foreign exchange is normally traded on margin. A relatively small deposit can control much larger positions in the market. For trading the main currencies, Saxo Bank requires a 1% margin deposit. This means that in order to trade one million dollars, you need to place just USD 10,000 by way of security.

In other words, you will have obtained a gearing of up to 100 times. This means that a change of, say 2%, in the underlying value of your trade will result in a 200% profit or loss on your deposit. See below for specific examples. As you can see, this calls for a very disciplined approach to trading as both profit opportunities and potential risks are very large indeed.

Base Currency and Variable Currency

When you trade, you will always trade a combination of two currencies. For example, you will buy US dollars and sell euro. Or buy euro and sell Japanese yen, or any other combination of dozens of widely traded currencies. But there is always a long (bought) and a short (sold) side to a trade, which means that you are speculating on the prospect of one of the currencies strengthening in relation to the other.

The trade currency is normally, but not always, the currency with the highest value. When trading US dollars against Singapore dollars, the normal way to trade is buying or selling a fixed amount of US dollars, i.e. USD 1,000,000. When closing the position, the opposite trade is done, again USD 1,000,000. The profit or loss will be apparent in the change of the amount of SGD credited and debited for the two transactions. In other words, your profit or loss will be denominated in SGD, which is known as the price currency. As part of our service, Saxo Bank will automatically exchange your profits and losses into your base currency if you require this.

Dealing Spread, but No Commissions

When trading foreign exchange, you are quoted a dealing spread offering you a buying and a selling level for your trade. Once you accept the offered price and receive confirmation from our dealers, the trade is done. There is no need to call an exchange floor. There are no other time-consuming delays. This is possible due to live streaming prices, which are also a great advantage in times of fast-moving markets: You can see where the market is trading and you know whether your orders are filled or not.

The dealing spread is typically 3-5 points in normal market conditions. This means that you can sell US dollars against the euro at 1.7780 and buy at 1.7785. There are no further costs, commissions or exchange fees.

This ensures that you can get in and out of your trades at very low slippage and many traders are therefore active intra-day traders, given that a typical day in USDEUR presents price swings of 150-200 points.

Spot and forward trading

When you trade foreign exchange you are normally quoted a spot price. This means that if you take no further steps, your trade will be settled after two business days. This ensures that your trades are undertaken subject to supervision by regulatory authorities for your own protection and security. If you are a commercial customer, you may need to convert the currencies for international payments. If you are an investor, you will normally want to swap your trade forward to a later date. This can be undertaken on a daily basis or for a longer period at a time. Often investors will swap their trades forward anywhere from a week or two up to several months depending on the time frame of the investment.

Although a forward trade is for a future date, the position can be closed out at any time - the closing part of the position is then swapped forward to the same future value date.

Interest Rate Differentials

Different currencies pay different interest rates. This is one of the main driving forces behind foreign exchange trends. It is inherently attractive to be a buyer of a currency that pays a high interest rate while being short a currency that has a low interest rate.

Although such interest rate differentials may not appear very large, they are of great significance in a highly leveraged position. For example, the interest rate differential between the US dollar and the Japanese yen has been approximately 5% for several years. In a position that can be supported by a 5% margin deposit, this results in a 100% profit on capital per annum when you buy the US dollar. Of course, an even more important factor normally is the relative value of the currencies, which changed 15% from low to high during 2005 – disregarding the interest rate differential. From a pure interest rate differential viewpoint, you have an advantage of 100% per annum in your favour by being long US dollar and an initial disadvantage of the same size by being short.
Please refer to our page Forex Rates & Conditions for current Spreads, Margins and Conditions!

Such a situation clearly benefits the high interest rate currency and as result, the US dollar was in a strong bull market all through 2005. But it is by no means a certainty that the currency with the higher interest rate will be strongest. If the reason for the high interest rate is runaway inflation, this may undermine confidence in the currency even more than the benefits perceived from the high interest rate.

Stop-loss discipline

As you can see from the description above, there are significant opportunities and risks in foreign exchange markets. Aggressive traders might experience profit/loss swings of 20-30% daily. This calls for strict stop-loss policies in positions that are moving against you.

Fortunately, there are no daily limits on foreign exchange trading and no restrictions on trading hours other than the weekend. This means that there will nearly always be an opportunity to react to moves in the main currency markets and a low risk of getting caught without the opportunity of getting out. Of course, the market can move very fast and a stop-loss order is by no means a guarantee of getting out at the desired level.

But the main risk is really an event over the weekend, where all markets are closed. This happens from time to time as many important political events, such as G7 meetings, are normally scheduled for weekends.

For speculative trading, we always recommend the placement of protective stop-lossorders. With Saxo Bank Internet Trading you can easily place and change such orders while watching market development graphically on your computer screen.

Saturday, August 29, 2009

International organizations of Finance and Trading


International organizations European Common Market GATT = General Agreement on Tariffs and Trade G8 IMF = International Monetary Fund OPEC = Organization of the Petroleum Exporting Countries Basically trade means exchange of goods, services, or both. Trade is also called commerce. The actual face of trade was barter, which was the direct exchange of goods and services. Today traders generally negotiate through a medium of exchange, like money, which then makes buying separate from selling, or earning. The invention of money has made trade simpler. Trade between two traders is called bilateral trade, while trade between more than two traders is called multilateral trade. Trade exists for many reasons. It can be due to specialization and division of labor. Trade exists between regions because different regions have a comparative advantage in the production of some tradable commodity, or because different regions' size helps getting benefits of mass production. History of Trade: Trade originated in prehistoric times. It was the main facility of prehistoric people, who bartered goods and services from each other when modern money was never even thought of. Peter Watson dates the history of long-distance commerce from circa 150,000 years ago. Trade is believed to have taken place throughout much of recorded human history. Materials used for the creation of jewelry were traded with Egypt since 3000 BC. Long-distance trade routes first appeared in the 3rd millennium BC, by the Sumerians in Mesopotamia when they traded with the Harappan civilization of the Indus Valley. Trading is greatly important to the global economy. From the very beginning of Greek civilization to the fall of the Roman Empire in the 5th century, a financially worthwhile trade brought valuable spice to Europe from the Far East, including China. The fall of the Roman Empire, and the succeeding Dark Ages brought insecurity to Western Europe and a near end of the trade network. However some trade did occur, the Radhanites were a medieval group of Jewish merchants who traded between the Christians in Europe and the Muslims of the Near East. The Sogdians ruled the East-West trade route known as the Silk Road from the end 4th century AD to the 8th century AD. The Vikings and Varangians also traded from the 8th to the 11th century as they sailed from and to Scandinavia. Vikings sailed to Western Europe, while Varangians to Russia. Vasco da Gama restarted the European Spice trade in 1498. Earlier to his sailing around Africa, the flow of spice into Europe was controlled by Islamic powers, especially Egypt. The spice trade was of major economic importance and helped encourage the Age of Exploration. Spices brought to Europe from distant lands were some of the most valuable commodities for their weight, sometimes rivaling gold. In the 16th century, Holland was the centre of free trade, imposing no exchange controls, and advocating the free movement of goods. In 1776, Adam Smith published the paper “An Inquiry into the Nature and Causes of the Wealth of Nations”. This paper criticized Mercantilism, and argued that economic specialization could benefit nations just as much as firms. Since that time the division of labor was restricted by the size of the market, he said that countries having access to larger markets would be able to divide labor more efficiently and thereby become more productive. The Great Depression was a major economic collapse that ran from 1929 to the late 1930s. There was a great setback in trade and other economic indicators during this period. The lack of free trade was considered by many as a root cause of the depression. Only during the World War II the recession ended in United States. History of Money: The first instances of money were objects with fundamental value are called commodity money and includes any commonly-available commodity that has intrinsic value; historical examples include rare seashells, whale's teeth, and cattle. In medieval Iraq, bread was used as an early form of money. Roman denarius Currency was introduced as a standardized money to facilitate a wider exchange of goods and services. This first stage of currency metals were used to represent stored value. As the system of commodity money evolved in many instances it then became representative money. Current Trends: Doha round The Doha round of World Trade Organization negotiations aims to lower barriers to trade around the world, focusing on making trade fairer for developing countries. Talks have been hung over a divide between the rich, developed countries, and the major developing countries. Agricultural subsidies are the most significant issue upon which agreement has been hardest to negotiate. By contrast, there was much agreement on trade facilitation and capacity building. The Doha round began in Doha, Qatar, and negotiations has subsequently continued in: Cancun, Mexico; Geneva, Switzerland; and Paris, France and Hong Kong.

10 Forex Trading Essentials


These 10 Forex trading essentials are a high-level peek at the pitfalls that catch many traders. Compare your trading style with these simple fixes and if you are not employing some or all of them, you are placing yourself at a higher risk level. 1) Increase your time perspective - If you are not a well seasoned Forex trader, you shouldn't even look at a price chart of less than 60 minutes. The randomness of the normal transactions which occur in Forex will distort your judgment of the true picture. Use longer time frames, such as 60 minute, 4 hour and daily charts when planning your trades. 2) Reduce your position size to 5% Maximum - Having more than 3 to 5 percent of your trading capital on the table is a major no no. High leverage makes it very easy to get in away over your head. This combination snares many traders and can rapidly destroy your account. You need to have the ability to ride the volatility waves common in Forex. 3) Give your trade time to work - You can only use this option effectively if your position is sized safely... as per 2) above. Prices will fluctuate dramatically in Forex, and you need to be sure that a loss really is a loss before you close a trade that is moving against your plan. A 30 pip stop loss will often kick you out of a trade, just as it's about to turn in your direction. You need to allow for larger price swings... if you have determined the major price trend, be patient and let the odds work in your favor. 4) Reduce your dependence on technical indicators - Due to the fact that technical indicators get their data from past events, the reality is they have no ability to predict the future. Pro's that enjoy success using these indicators, often profit from the knowledge of how the masses are likely to react to this data, rather than the information itself. You need to determine the major trend (a simple moving average will show you this) and hop aboard. Use a longer time frame, as in 1). The largest players in Forex rely about 25% on technical indicators when making their trading decisions. 5) Trade only one or two currency pairs - And stick to the majors... not the crosses. Currency prices are driven primarily by fundamental data. In order to anticipate what is likely coming down the road, you need to follow some basic data for each of the countries involved. Trading too many currencies will make it difficult to keep up to date. There is equal opportunity to profit from each of the pairs, so wait until your experience level has matured and the information tends to sink in without as much effort on your part before you start to trade more currencies. 6) Average in and out of your trades - If your trading account is less than $50,000 have your broker enable mini-lots for your account. This will allow you to average in and out of your trades... a great way to add more flexibility to your account. If this applies to you and your broker doesn't offer mini lots, find a new broker... this is an important need to do. 7) Follow the data for your currency pair(s) - Know what data is pending for release. Volatility often increases dramatically when these releases occur. The safe strategy is to exit your positions prior to major releases... this is the way many of the larger accounts handle these situations. Data releases can often cause a change to the trend. Take them seriously. 8) Determine the trend and get aboard - As with any type of trading, the safest bet is to determine which way prices are trending, and then trade in that direction. You don't need anything fancy... a simple moving average on your candlestick chart is sufficient. Zoom your chart out to be sure you have the big picture. Compare where the price is now, relative to where is has been for a significant amount of time (at least a month). Use caution if the current price is near upper or lower extremes, as there may be a trend change once that extreme is reached. 9) Know when to take a profit - A winning position can quickly turn into a loser if you set your sights too high. Don't be afraid to take your profit - or a part of your profit at 20 or 30 pips. The price waves in Forex make it ideally suited to averaging into and out of positions by using multiple entry and exit points for each position. This is exactly where your mini lots can help! The benefit of spreading out your position is that your overall risk is reduced. 10) Stop listening to "Gurus" - Don't fall into the trap of believing everything, or even most things, you hear. The trading world is overflowing with gurus only too willing to offer their opinion on the future. It will only be an opinion, nothing more. They may seem to have convincing data, but trust your own brain. You need to weigh the economic data from your countries... that is what drives currency prices. The enormous size and nature of Forex ensure there is no insider information. You have access to the same data as everyone else in the game. In time, your own instinct will guide you to your goals, and that is what you need to trust.

Forex Trading, What Hours Should I Be Ready For Trading?


Once you have decided to enter the Forex trading world you will find that FX trading has many advantages over other capital markets. Including among others; very low margins, free trading platforms, high leverage and around-the-clock trading. It is my main concern in this article to let you know what hours you should be ready and focus for start trading, so you can expect the highest profits in your trades, and not just consider that around-the-clock trading means you should randomly trade through out the day. In short, it is important to know what the best hours to trade are because if you want to find an appreciable number of profitable trades you need to enter the forex market at the best period of time, i.e., when the activity, the volume of transactions, is the highest. At any given time; somebody, somewhere in the world is buying and selling currencies. As one market closes, another market opens. Business hours overlap, and the exchange continues as day becomes night and night becomes day. Giving you 5.5 entire potential trading days. Forex Trading begins in New Zealand at Sunday 5pm EST, and then is followed by Australia, Asia, the Middle East, Europe, and America in this order and through out the day and through out the week until Friday 4pm EST when the American market closes. Other important facts every Forex trader should know are: the US & UK markets account for more than 50% of the forex market transactions; Forex major markets are: London, New York and Tokyo. Nearly two-thirds of NY activity occurs in the morning hours while European markets are open. And maybe one of the most important characteristics; Forex Trading activity is heaviest when major markets overlap. So, the answer to the question; “What hours should I be trading?” is dictated by this last characteristic, you should trade when the major markets overlap. Now, when do they overlap?. Considering the different time zones of the world and open and close times for Australian, New Zealand, Japan, America and Europe markets. We can arrive to the conclusion that there are two major time gaps when two of the major markets overlap during trading hours. These hours are between 2 am and 4 am EST (Asian/European) and between 8 am to 12 pm EST(European/N. American). So if you want to catch the best trading opportunities of the day and you are in the American continent you must be ready to wake up early or go to sleep late some times. Of course things change around the world. What's the best region where to trade from if you can't wake up early?… Maybe the Ukraine.

A Good Forex Trading System And Its Main Characteristics.


Forex trading is one of the great money making opportunities available these days. People from many walks of life, men and women, decide to join the forex trading world everyday looking for the great style of life a profitable forex trader can achieve. But once you enter the world of Forex trading the first thing you will realize is that it's not easy to become a profitable trader. The more you learn about the currency markets the more you realize the urgent need of a good forex trading system in order to make money and not just spend your time entering trades as a hobby taking you nowhere. There are many companies and individuals out there offering you forex trading systems that promise to be the real thing and that will teach you how to earn tons of money easily. But you must be aware that not all of them are always sincere and you should be ready to look for some specific characteristics good forex trading systems must have. For example; they must be willing to let you know part or the basics of their trading system for free, so you can evaluate their claims and be sure of what you will be buying from them. Also, they should offer you a money back guarantee in case the complete system doesn't stand to their initial claims. A very good sign of the “goodness” and utility of the system would be if the company offering you their services offers to follow up with you about any doubts and questions arising from the use of their trading system. This follow up can include a users forum, contact phone number, email direct contact, etc. Also the forex trading system you are acquiring should be recession-proof and go beyond the traditional linear models that are based mostly on past results, it is difficult to make decisions about the future moves of the currency markets based just on past performance. Ideally, the currency trading system you get should allow you to go with the market direction, either up or down, instead of hoping and believing it will go one way or another, and then find out it was all wrong. And, of course. The system should be given to you with software that performs the complex math behind it, making it simple for you to use at any time and without strange formulas. Look for these main characteristics in the forex trading system you are planning to buy, and if it full fills them; then you are quite certainly making a good decision by planning about using it in your trading career.

Are You Trading to Your Strengths?

In your trading, are you playing to your strengths, or are you simply being an "opportunity seeker"? There is a huge difference between the two and if you're just an opportunity seeker, then you are leaving yourself open to frustration and losses. There are many parallels between trading, business and gambling, and your ultimate success long-term will be determined by how you approach any of the three. Playing to your strengths is critical in all three. In any of the pursuits, there is competition and you always want to make sure that you're playing to your strengths and not your weaknesses. The objective is winning, that is profiting, and you want every advantage that you can get. Too often, the opportunity seeker will go after an opportunity just because they see that there's money to be made, and they figure that they can shore up their weaknesses (learn more) enough to go get that money. Let's take a brief look at how this applies in each area, keeping in mind the parallels between them. In business, the long term successes are built by those with an end goal in mind, a vision of what the business will look like when it's mature. This is critical because the company must stay on a course that is consistent with its vision while it is growing. Distractions and deviations from the path only serve to slow it down or even take it backwards. Successful business leaders know when to pursue an opportunity and when to say "no". Saying "no" is essential to keeping the company's activities (investments of time) focused where competitive advantages exist and avoiding those where the company is at a disadvantage. In gambling, the poker player will stay at the BlackJack table and make his money there. He won't jump up and run to the Roulette table just because he heard somebody just won $50,000 over there. He knows what he's good at and will only venture over to other tables for entertainment, not to make money. In Trading, let's say investing for the sake of argument, a good real estate investor that knows how to make $1 million a year isn't necessarily going to do well in trading. They are completely different games. Just because a person knows how to buy properties right, increase their value through rehab or raising rents, does not mean that they will have the talents or skills to make money in the Futures or Forex markets. Even an experienced trader should be hesitant to jump from one game to the next. A buy-and-hold position trader should exercise great caution before jumping into day-trading, and a spread better should hone his skills before thinking about buying (or selling) outright futures contracts. Each strategy (or game let's say) has different skills associated with it, and different emotional requirements. The other serious consideration is your proficiency level - period. This combined with your ability to devote time to trading. If you are completely new to trading or you haven't yet become proficient at the necessary skills to trade, then you definitely should seek out help. The learning curve can be very costly in trading, and if you don't have the time or a plan to become proficient, how do you ever expect to make regular profits from it? If you don't have the proficiency, the strengths, needed to be a good trader, nor do you have the time and resources to become one, you may want to consider other choices available to you. If you have neither the skills nor the time to develop them, but want to take advantage of the nice money to be made in trading, you may want to consider a managed account. Why settle for an amateur trading with your money (YOU), when you can have a pro do it for you? Do your Due Diligence first though!!! Ask for the track record and the plan going forward. Your next option if you're "starting from scratch" is to trade with the assistance of a seasoned broker. That's what they are there for. Of course you can find very low commission brokers to deal with, but you may get just what you pay for. A good broker can be found for $50-$100 round turn commission, and they'll give you the best advice they can. In the long run, you're likely to be way better off - if you'll follow their advice! Again, ask for their track record, and check with the NFA to see if they have any complaints. It wouldn't hurt to see if the broker you're considering is recognized within the trading community as being good. Many very good brokers publish regular articles or advisory columns on respected websites and in established periodicals. Generally, if you see that the person has been published for a period of years, then that is a good sign. The wackos and charlatans bounce around too much and aren't allowed to stay in one place for long before their reputation catches up with them. Until you have the strengths yourself, borrow them from someone who has them while you're developing. When you have the proficiency, the skills, and the resources, only then should you venture out on your own. And that is only if you are so inclined to actually becoming a trader and doing it all yourself. If your true objective is to make money, then play it smart. Make use of other people's knowledge and skills until you have developed your own. Of course, if you really don't want to devote the time to being a full-time or highly active trader, but still want trading to be part of your income portfolio, consider your other choices. Whatever you do, don't simply chase another "opportunity" to make money if it doesn't play to your strengths. For Trading, those strengths need to be discipline, emotional control, coach-ability, ability to focus, follow-through, decisiveness, understanding of probabilities, dealing with uncertainty, and a slew of others. There are activities for entertainment and others for making money. Trading can be both, but if it is not taken seriously, with a sincere review of your own characteristics and desires, then it can wind up being neither. In any endeavor where money is the end result, get help from a trusted friend. Rememer, a good mentor is there to show you the right steps to take and those to avoid.

Investing - How To Profit Using Formulas


A classic Wall Street yarn, concerning a young man who was in the early stages of learning to be a professional speculator goes something like this. The young man had a problem, so he went to an elderly gentleman noted for his shrewd investment judgment, for advice. The young man had taken on quite an extensive line of stocks, but the market looked a bit over-valued and so he was thinking that his positions carried too many risks. He wondered if he shouldn't perhaps sell. He was so worried about it that he was having trouble sleeping. The old man's advice was simple and direct: "Sell" he said. "Sell back to the sleeping point." Although there is no doubt that this advice smacks of ambiguity, there is a simple wisdom in it. We may safely assume that neither the young man nor his elder adviser knew which way the market was going, but both were aware that the market was sufficiently shaky to cause legitimate worry. Translated into somewhat more orthodox investment terms, the advice meant - Sell enough of your stocks so that a market collapse won't destroy you, but keep enough so that if your fears turn out to be groundless, and the market rises, you'll still profit to some extent - in the meantime, get some sleep. At first glance, it may seem a bit cynical on the old man's part not to outline for his young disciple an exact and detailed course of action. But he couldn't be honest and at the same time guarantee that he knew exactly what action might turn out to be best. Furthermore, the young man didn't want someone to tell him precisely what to do. All he wanted was some help in easing the pressure and the help he received was clearly sensible. How to Find the Sleeping Point In a real sense, investment formulas are designed to help you in the same way that the old man's advice helped his young friend - they inject an element of caution in your investing when caution seems advisable, they reduce the provision for caution when risks seem relatively low and permit you to benefit when prices rise. In addition, once you incorporate a formula into your investment program, it works more or less automatically, allowing you to sleep nights in the full knowledge that you are continuously hedged against various unforeseen possibilities. But just as the investment sage left it up to the young man to decide exactly what his "sleeping point" might be, you can select a formula appropriate to your own temperament, financial circumstances and proclivity to insomnia. Any formula can be adjusted to suit the needs and preferences of any investor. Although formulas are designed to give un-hedged, unambiguous and unbiased indications for action, the investor should not feel that he is surrendering all personal control over his investments when he adopts a formula. The reason behind this logic is clear. It's because each investor selects the formula that will fit his own individual comfort level. A formula doesn't try to tell you what to do - it merely helps you do what you are already doing more profitably. For example, formulas cannot tell you which stocks to buy or currency to trade. The whole premise of using formulas is based on the fact that those using them are normally quite sophisticated and that they know what kind of investment vehicle they are interested in, how to select them and where to go for advice in their particular area(s) of interest. However, by supplementing their knowledge with considerations of the equally important questions of when to own and in what quantity - formulas can supply a valuable added dimension to their investment results and assist in the management of their portfolio on a more professional level. Along this same line, it is worth mentioning that although the true purpose of a formula is to supply the investor with an investment policy which is definite in its instructions at all times, you need not feel that you must follow the formula precisely in order to profit from it. You cannot, of course, ignore it altogether if you expect to benefit from it, but you can profitably use it as a touchstone or a general guide without swearing eternal allegiance to its dictates. You might, for example, want to use a formula, but also desire to increase or decrease your risks at various times for a variety of reasons. Your use of the formula will show you how far you are departing from your original plan and will give you a well-ordered program to come back to when you are ready.

Forex Trading - A Simple, Easy Tip to Increase Your Profits

Forex trading is all about getting the odds in your favor to reduce rsik and increase reward. The simple tip below is ignored by most traders - yet if you include it in your trading plan, will see your risk decrease and profits increase and that’s what all traders want! Most novice traders don’t use this tip and lose. Learn the significance of this tip and use it and it is simply: Trade with Price Momentum Many traders like to predict where prices are going to go – but they should really be trading on the facts and that’s exactly what looking at shifts in price momentum does. It gives you clues to where prices may go next. Lets Loom at a common error that novice traders make to illustrate the point. Many traders love to buy dips to support and many will use trend lines or moving averages. As prices approach the support level, they buy into the support and hope that it holds. This is a huge mistake! If you rely on “hope” you are going to lose. This is why looking at price momentum is so important. If the momentum of price starts to weaken into support and turns the odds of support holding have increased. Acting on the Facts To watch prices come into support and rather than diving in and taking a position - WAIT for price momentum to weaken into support and turn back up away from support. This is the cue to take a position, as price momentum is now moving away from support and odds favour the bulls. Why dont traders fo this more often? Traders find this hard to do, as they don’t like the fact they missed a bit of the move by waiting, but this is the only way to get the odds on your side. Consider this: Support obviously can either hold or break and you don’t know which will occur in advance it’s impossible to predict – you are simply guessing and that’s a good way to lose. If you look at price momentum you will be acting on confirmation that the odds are in your favour. A trader who is patent and disciplined and acts on confirmation has a far better chance of success than one who guesses or predicts where prices may go. So what are good indicators to look at? The best indicator by far in our opinion is the stochastic indicator – we don’t have enough room to cover it in detail here but it’s a great indicator for graphically showing shifts in price momentum. We like to combine the above indicator with the Relative Strength Index(RSI), another great momentum indicator. We never take a trade unless price momentum points the same way as our trade. Forex trading is an odds game and by using momentum indicators you will increase your chances of success and of course your profit potential.

Why Forex Trading Is So Popular

The Forex market is often more appealing to people that like to live on the edge. The Forex market is often more appealing to people that like to live on the edge. There is more uncertainty by far and the rewards of knowing when to buy and sell can be immense. For those of you who do not 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.ere is more uncertainty by far and the rewards of knowing when to buy and sell can be immense. For those of you who don not 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

Incorporating Price Action Into a Forex Trading System

For the past couple of years Forex market has become very famous. It is a common question that how many dealers make it in the Forex trading. Sadly only fiver percent are able to make it. One point can be that Forex dealers are not aware of the right area to concentrate their focus, in which direction and what decisions have to be taken. Price factor plays an important factor which is not given much importance by the Forex dealers. Technical indicators comprises of the majority of the Forex trading methods such as moving average, overbought/oversold state in an oscillator, crossover etc. The question arises that what are indicators? They are just a sequence of data points that are planned in a chart and these points are obtained from mathematical methods which are used for the price for any currency. In simple terms it is a chart of price planned in a such a way that we are also introduced to other price also. As a matter of fact that the majority of the readings acquired are totally derived from the price action. For example a long MA crossover signal the price has increased considerably to make the shorter period MA cross the long period MA producing a major signal. It is generally believed that MA crossover is the reason behind the increased price which is not a genuine reason as MA crossover signal appeared as the price rise. What I am trying to say is that eventually it is the price factor that will decide the functioning of the indicator and the outcome can be decided on any decision trading. If we try to figure out the trading outcome derived from technical indicators without including the price factor then you cannot get positive effects. For instance, a long signal produced by the MA crosses with the advancement of the market reaches to its resistance stage. There is no point of making use of the signal where the price all of a sudden makes a comeback from that important stage. The price factor justifies that the market is not yet ready to experience an increase. In this situation the market will definitely crash down ignoring MA crossover. Technical indicators are very essential feature of the trading. These assist us to see all those state those are sometimes difficult by only watching price factor. The involvement of the price factor in the Forex trading methods certainly will turn the difficulties in our support and will assist in increasing the trade. The question is how to prepare an accurate Forex trading method? First and foremost, it is very important to choose a trading system that matches your individuality so that you can easily follow it. The requirements and objectives are different for every trader and no system is complete in itself. It is you who have to take the decision of which style and technical indicators to adopt till the time you find the appropriate one. It is very important to know about what technical indicator you are using. The second step is to add in the price factor to the system that you have adopted. It is beneficial for you as it will guide you to take the long signals if the price factor informs that if the market it going to rise or not and taking short signals just in case the market is decreasing. Thirdly it is very essential to follow the method religiously you have selected for your Forex trading. It is recommended to try out first on a demo account then moving to the small accounts and in the end when you are comfortable in using and operating then shift it to the real account.