Categories

#### Introduction

In the CADPLN currency pair, CAD is the major currency Canada and PLN is the currency of Poland. In this exotic currency pair, CAD is the base currency, and PLN is the quote currency.

This pair’s price determines the value of PLN, which is equivalent to one CAD. We can quote it as 1 CAD per X numbers of PLN. For example, if the CADPLN pair’s value is at 2.7983; therefore, we need almost 2.7983 PLN to buy one CAD.

Spread is a trading cost, which is simply the difference between the Bid price and the Ask price. The broker controls the value of Spread; therefore, traders don’t have to do anything with this. This value depends on the execution model used for the trade.

###### Fees

The trading fees that forex brokers take are similar to the stock market. It is automatically deducted from traders’ account. Note that, the fees has no impact on STP account.

Slippage

In the case of high volatility, it creates a difference between the execution level and the price open level, which is known as Spread. The main reason to occur slippage is the market volatility and the broker’s execution speed.

The trading range is the representation of the minimum, average, and the maximum volatility of this pair on the 1H, 4H, 1D, 1W, and 1M timeframe. Using these values, we can assess our profit/loss margin of trade. Hence, this proves to be a helpful risk management tool for all types of traders.

###### Procedure to assess Pip Ranges
2. Set the period to 1
3. Add a 200-period SMA to this indicator
4. Shrink the chart so you can assess a large time period
6. Measure the floor level and set this value as the min
7. Measure the level of the 200-period SMA and set this as the average
8. Measure the peak levels and set this as Max.

As per the volatility values of the above mentioned table, we can see that the cost changes with the change in volatility of the market. Later on, we have got the ratio between total cost and the volatility and converted into percentages.

ECN Model Account

Spread = 13 | Slippage = 5 | Trading fee = 8

= 13 + 5 + 8

Total cost = 26

STP Model Account

Spread = 13 | Slippage = 5 | Trading fee = 0

= 13 + 5 + 0

Total cost = 18

The CADPLN is an exotic currency pair that has enough liquidity and volatility in the price. As a result, a trader may find it easier to trade this currency pair.

Wee can see that the percentage values did not move above 288%. It is an indication that the cost of trading in the lower timeframe is higher, and in a higher timeframe, it is lower.

Moreover, with the increase of trading cost, volatility is another risk that a trader may face.

Therefore, the best time to trade in this pair is when the volatility remains at the average value. If the volatility decreases, trading will be ineffective. On the other hand, if the volatility increases, there is a possibility of an unwanted stop loss hit. Therefore, sticking to the average value is suitable for this pair.

Furthermore, another way to reduce the cost is to place a pending order as ‘limit’ and ‘stop’ instead of ‘market.’ In that case, there will be no slippage in the calculation of the total costs. Therefore, the total cost will be reduced by five pips.

Limit Model Account

Spread = 13 | Slippage = 0 | Trading fee = 0

= 13 + 0 + 0

Total cost = 13

Categories

#### Introduction

CAD/JMD is an exotic currency pair. CAD is the Canadian Dollar, and JMD is the Jamaican Dollar. The CAD is the base currency in this pair while the JMD is the quote currency; meaning that the exchange rate of the CAD/JMD pair is the quantity of JMD that can be bought by 1 CAD. If the exchange rate for the pair is 105.68, it means that 1 CAD buys 105.68 JMD.

In forex trading, the spread represents the difference in the value at which you can buy a currency pair and that at which you can sell. The spread varies with different currency pairs.

ECN: 2.4 pips | STP: 7.4 pips

#### Fees

When trading forex with an ECN account, the broker charges a commission for every trade. With STP accounts, no fees are charged on trades.

#### Slippage

In times of market volatility or if the execution of trade is not instant, there will be a discrepancy between the price at which you initiate a trade and the price it executed. This discrepancy is called slippage.

Since the price of a currency pair constantly changes, knowing by how much the price changes across different timeframes can help forex traders better understand volatility. This knowledge is vital, especially when estimating potential loses or gains. If, for example, the CAD/JMD pair has a volatility of 20 pips during the 4-hour timeframe, it means that trading the pair has a potential profit or loss of \$189.2

Below is a table showing the trading range for the CAD/JMD pair.

#### The Procedure to assess Pip Ranges

2. Set the period to 1
3. Add a 200-period SMA to this indicator
4. Shrink the chart so you can determine a larger period
6. Measure the floor level and set this value as the min
7. Measure the level of the 200-period SMA and set this as the average
8. Measure the peak levels and set this as Max.

Trading any currency pair comes at a cost. These costs vary across different timeframes and volatility. Expressing them as a percentage of the trading range will help to inform the trading decision for the pair.

Below are analyses of the trading costs for the CAD/JMD pair across different timeframes.

#### ECN Model Account

Spread = 2.4 | Slippage = 2 | Trading fee = 1

Total cost = 5.4

#### STP Model Account

Spread = 7.4 | Slippage = 2 | Trading fee = 0

Total cost = 9.4

From the above cost analyses, we observe that lower timeframes and low volatility correspond to higher trading costs with the CAD/JMD pair. For both the ECN and the STP accounts, the highest costs are when volatility is the lowest at 3.4 pips. The lowest cost is when volatility is the highest at 899.9 pips.

The long-term trader enjoys lower trading costs that intraday traders. However, across all timeframes, trading when volatility is average lowers the cost and the risks associated with high volatility. Furthermore, traders can lower their costs by employing the use of forex limit orders as opposed to market orders. Limit orders eliminate the cost of slippage. Here are the trading costs when limit orders are used.

#### ECN Account Using Limit Model Account

= 0 + 2.4 + 1 = 3.4

We can notice a significant reduction in the trading costs of the CAD/JMD pair. The highest cost has reduced from 91.53% to 57.63% of the trading range.

Categories

#### Introduction

The CAD/BBD is an exotic currency cross. CAD is the Canadian Dollar, and the BBD is the Barbadian Dollar – the official currency of Barbados. Here, the CAD is the base currency, and the BBD is the quote currency. Thus, the exchange rate of the CAD/BBD pair is the amount of BBD that can be bought using 1 CAD. For example, if the exchange rate for the pair is 1.4961, it means that 1 CAD buys 1.4961 BBD.

One of the costs of trading forex is the spread. It is deducted by the forex broker and is calculated as the difference between the ‘bid’ and ‘ask’ price. The spread varies depending on the type of trade executed. Here are the spread charges for ECN and STP brokers for CAD/BBD pair.

ECN: 12 pips | STP: 17 pips

#### Slippage

In forex, slippage occurs when a trader opens a trade, but that trade is executed at a higher price. The slippage is influenced by market volatility and the speed at which the forex broker executes your trade.

In forex, the trading range shows how a given currency pair fluctuates over time. It shows the minimum, average, and the maximum volatility of pair across different timeframes. The analysis of the trading range can help us the profitability of trade over different timeframes.

#### The Procedure to assess Pip Ranges

2. Set the period to 1
3. Add a 200-period SMA to this indicator
4. Shrink the chart so you can determine a larger period
6. Measure the floor level and set this value as the min
7. Measure the level of the 200-period SMA and set this as the average
8. Measure the peak levels and set this as Max.

Here, we will take the total costs in both the ECN and STP accounts as a ratio of the above volatility and express it as a percentage. This analysis will help us understand the trading costs associated with the CAD/BBD pair across different timeframes; which can be useful to determine which risk management technique is optimal.

#### ECN Model Account

Spread = 12 | Slippage = 2 | Trading fee = 1

Total cost = 15

#### STP Model Account

Spread = 17 | Slippage = 2 | Trading fee = 0

Total cost = 19

From the above analyses, we can see that the trading cost for the CAD/BBD pair is highest at the 1-hour timeframe. The highest trading cost for both the ECN and the STP accounts coincide with a period of lowest volatility of just 0.04 pips. The shorter timeframes have relatively higher trading costs that the longer timeframes. Therefore, longer-term traders tend to enjoy lesser costs.

We can also notice that the overall trading costs reduce as the volatility of the CAD/BBD pair increases from minimum to maximum. Therefore, opening trades when the volatility is above the average can help shorter-term traders reduce their trading costs. More so, intraday traders also significantly lower these costs by adopting the use of forex limit orders over the market orders. The limit order types remove the costs associated with slippage. Below is a demonstration with the ECN account.

#### ECN Account Using Limit Model Account

= 0 + 12 + 1 = 13

Removing the slippage costs reduces the trading costs significantly for the CAD/BBD pair. For example, the highest trading cost has reduced from 322.03% to 220.34% of the trading range.

Categories

## The Dual Candlestick Pattern Strategy

#### Introduction

Previously, we discussed a strategy that was based on a single candlestick pattern that uses the concept of ‘rejection’ in the market. However, the pattern may not provide a great amount of success as does not take into consideration the various factors of the market such as trend, momentum, volume etc. In today’s article, we try to formulate a strategy that addresses some of the issues and increase the probability of success. To increase the probability of successful trades, we combine two candlestick patterns and a technical indicator to find trades.

The first candlestick pattern we will watch for is the ‘Rising Wedge Pattern’ that occurs in an uptrend. The same pattern, when observed in a downtrend, is called a ‘Falling Wedge Pattern.’ The second candlestick pattern that is of importance to us is the ‘Descending Triangle’ pattern which essentially confirms the commencement of a new trend in the market. Let us look into the specifications of the strategy.

#### Time Frame

The strategy is specially designed for trading on very short-term price charts such as the 5 minutes or 1 minute. That means this is a hardcore intraday trading strategy.

#### Indicators

We make use of just one technical indicator in the strategy, and that is the 20-period Exponential Moving Average (EMA).

#### Currency Pairs

As we are trading extremely on small time-frames, the strategy can be traded on major currency pairs only. Few preferred ones are EUR/USD, GBP/USD, USD/CAD, GBP/JPY, EUR/CAD, EUR/JPY, NZD/USD, and EUR/GBP.

#### Strategy Concept

The ‘Dual Candlestick Pattern’ strategy is a simple yet powerful strategy that can be used very often in the market. The strategy revolved around the concept of ‘momentum’, which is extremely crucial in the market. When we gauge the momentum of the market, we get an understanding of the shift in market sentiment. Nothing can be as superior as this when it comes to analysing the market sentiment. The first candlestick pattern gives us an indication that the market is losing the momentum of its current trend and that it could reverse any moment. The price action suggests that the market is unable to move higher, and the price is getting more and more expensive for buyers to take the market higher. Once this becomes evident after a reversal, the second candlestick pattern confirms that the reversal is ‘real’ and there could be further ‘legs’ in the trend.

Since we are waiting for many events to occur in the market, we will end up entering late, i.e. when the majority of the move has happened. Due to this, the risk-to-reward of trades executed using this strategy will not exceed more than 1:1. Even though the probability of occurrences of trades is less, they have a greater degree of accuracy.

In order to execute the strategy, we have considered the 1-minute chart of CAD/JPY where we will be illustrating a ‘short’ trade. Here are the steps to execute the strategy.

Step 1: Firstly, we spot the ‘rising wedge’ pattern in the market where the pattern must be formed above the exponential moving average. What this indicates is that the market has moved into an intermediary uptrend but might be weakening due to the loss in momentum. Our job is to take a trade in the direction of the reversal. Similarly, when a ‘falling wedge’ pattern is formed in the market, it indicates that the sellers are losing momentum and buyers will take over the market. This pattern has to form below the EMA for an upward reversal.

Step 2: Next, we wait for the market to turn on the other side and reverse in direction. After the reversal takes place, the price should form a ‘descending triangle’ pattern below the EMA. The ‘descending triangle’ pattern confirms two things. First, the market has put a ‘lower high’ and ‘lower low’ which are the essentials of a trend and second, the buyers are not strong enough to take the price higher. In a downtrend, the market should form an ‘ascending triangle’ pattern above the EMA that would confirm the reversal. Here the pattern signifies that the market has put a ‘higher high’ and ‘higher low’ along with the inability of the sellers to take the price lower.

Now, let us see the rules for ‘entering’ a trade.

Step 3: In a ‘short’ trade setup, we enter the market when price breaks the ‘support’ line that was created by the ‘descending triangle’ pattern. In simple words, we ‘short’ the currency pair right when the price starts moving below the previous ‘low’ and creates a situation of breakdown. This type of ‘entry’ is shown in below image where we enter right at the break of the ‘support.’ In a ‘long’ trade setup, things are reversed. This means we enter the market when price breaks above the resistance of ‘ascending triangle’ pattern and starts moving higher than the previous ‘high.’

Step 4: Once entered, it is important to determine the stop-loss and take-profit levels for the trade. In a ‘long’ trade, stop-Loss will be set above the first ‘lower high’ that was laid in by the market after reversal. Whereas, in a ‘short’ trade, the stop-loss will be placed below the first ‘higher low’ that was laid in by the market after reversal. Depending on the number of pips of the stop-loss, take-profit will be set by an equal number of pips. This is done to ensure that the risk-to-reward of the trade is at least 1:1. But since we are trading against the trend, we will move our stop-loss to breakeven as soon price moves 80% of the take-profit

#### Strategy Roundup

The two patterns needed for the strategy might appear several times in the market but are observed separately. It is difficult to spot both the patterns together, which reduces the frequency of trades. One way to increase the frequency of trades is by watching for these patterns during the market opening, as volatility is high. But the focus here should be on taking successful and high probability trades.

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## Current Economic Conditions

#### Introduction

One of the primary indicators of a country’s GDP is how the economy is performing presently. The current economic conditions are the best indicators of business and economic cycles in the economy. They can tell us whether the economy is going through expansions or contractions. Thus, the current economic conditions are the best indicators for establishing recessions or recoveries, and can also be used to forewarn about potential overheating of the economy.

#### Understanding Current Economic Conditions

The current state of the economy is a culmination of several macroeconomic and microeconomic factors. Previous economic trends, government and central banks’ policies influence the current economic conditions. Therefore, the current economic conditions can be said to be a gauge of the effectiveness of previous fiscal and monetary policies.

In the US, for example, the Federal Reserve published the current economic conditions in The Beige Book. The Beige Book published the current economic conditions of the 12 Federal Reserve Districts. Below are the components used to determine the current economic conditions.

###### Consumer spending: This shows the changes in the welfare of households. Consumer spending correlates to living conditions and could be used as an indicator of future economic expansion or contraction due to changes in aggregate demand.

Banking and financial services: This section shows the changes in the issuing of new loans and the rate of defaults. The changes in the number of loans issued correspond to the changes in economic activities. The changes in commercial and industrial loans indicate whether businesses are investing and expanding. The repayment schedules indicate the financial health of businesses. Credit standards, delinquency rates and deposits are also included in this category.

Real estate and construction: This category shows the changes in the construction of new residential and commercial buildings. It further shows the sale of new houses. The occupancy levels and the changes in rental rates are also included here.

Services: This section reports the changes in the demand for professional services such as the demand for payroll services, accountancy and deal advisory services. It also shows the changes in the activities in the services sector as a whole.

Agriculture, energy and natural resources: this section reports the changes in the agricultural conditions. It shows the changes in crop production, the market prices for the harvest, cost of farm inputs, storage costs, and any subsidies received in the agricultural sector. This section also shows the changes in the mining sector.

#### How can current economic conditions be used for analysis?

By businesses: The current economic conditions show the trends in demand. Businesses can use the data contained in this report to either scale up their production to match rising demand or lower production in case of shrinking demand. Furthermore, producers get to see the regions where their products are performing well and where the sale is dismal. This data can help them make informed decisions for targeted advertising to improve sales or to exit a particular market segment if the costs outweigh potential profits.

By governments and central banks: The data on the employment situation, consumer spending, inflation and agriculture are useful for the government and central banks to make informed policy decisions. The current economic situation effectively shows if the economy is contracting, stagnating, expanding or overheating. Therefore, this data is crucial in informing the type of policy that will be implemented by the central banks and the government. The policies can be expansionary, contractionary or stay the course, accordingly. Furthermore, the current economic conditions can be used as a scorecard to assess whether previous fiscal and monetary policies brought about the intended changes within the economy. If not, then the government and central banks will know how to tweak the policies to achieve the desired results in the economy.

#### Impact on Currency

When it comes to fundamental economic indicators, forex traders pay the most attention to how the data will affect future monetary policies by central banks.

Source: St. Louis FRED

If the current economic conditions data indicate that the economy is in a recession, forex traders can then anticipate lower GDP levels, and adopt a bearish stance on the currency. Furthermore, they can also anticipate that expansionary monetary policies will be put in place to spur economic growth. Lowering the interest rates as an expansionary policy is negative for a country’s currency. Although the cost of money will be cheaper, investments will also have lower returns relative to other countries. As a result, the currency depreciates.

Conversely, if the current economic data indicates that the economy is expanding, reaching peak levels, forex traders can anticipate higher levels of GDP; thus, adopting a bullish stance on the currency. For the authorities, monitoring the current economic conditions helps determine if the economic expansion is too rapid, resulting in overheating. To prevent the overheating, central banks and governments will implement contractionary monetary and fiscal policies. These policies are meant to ensure sustainable growth in the economy by making the cost of borrowing higher to discourage excessive borrowing. However, the rate of return on investments and government bonds increases. This increase leads to increased demand for investments in the country and consequently, the appreciation of the currency.

#### Sources of data

In the US, The Beige Book is published by the US Federal Reserve Board. This report is released eight times a year, two weeks before each Federal Open Market Committee meeting since it is used to guide their decision of short-term interest rates.

In the Euro Area, the current economic conditions are published by the Economic Research Institute ZEW.

Categories

## Inflation Expectations

#### Introduction

Inflation is one of the most tracked economic indicators by policymakers, economists, consumers, businesses and analysts. The effects of inflation are felt throughout the economy – no exceptions. Inflation expectations can help every player in the economy better to prepare themselves in anticipation of future inflation levels. Therefore, we must understand the how the anticipation of the inflation rate impacts the economy.

#### Understanding Inflation Expectations

Inflation is the increase in the general prices of goods and services that are produced within an economy, over a specific period. This increase in the prices of goods and services tends to erode the purchasing power of a currency. Therefore, assuming there is no increase in wages, consumers can only be able to purchase a lesser quantity of goods and services. There are several causes of inflation, but the primary cause occurs when more money is supplied in the economy relative to the wealth.

Inflation rate: is the percentage increase in the prices for a basket of goods and services over a specific period. It is used to compare inflation over different periods.

Inflation expectation is the opinion about the future rate of inflation. This opinion is derived from different players in different sectors of the economy to guarantee the validity and ensure it the data is comprehensively representative. These players include investors, central bankers, and consumers. Their inflation expectation is based on a variety of economic activities they intend to undertake.

#### How to Calculate Inflation Expectations

These are the two main methods of calculating inflation expectations.

#### Market Survey

The central banks conduct surveys to determine inflation expectations. Households, businesses and economic experts are polled to ascertain if their welfare has improved and what they anticipate. The questioned asked mostly includes household finances, inflation, investment activities, changes in the ease of doing business and inflation. The polled panel is nationally representative

#### Market-based Method

In this method, the expected inflation can be determined by the understanding of the price differential between government bonds and the Treasury Inflated Protected Securities (TIPS). The Treasury Inflated Protected Securities tends to increase the amount of the bonds in tandem with inflation.

In this case, the pricing difference = yield of a government bond – Yield of the TIPS

Let’s look at an example;

Suppose the yield of a 10-year bond is 5%, and the yield of a 10-year TIPS is 3%, the market pricing is 5% – 3% = 2%

The 2% can be said to be average annual expected inflation over the next ten years.

#### How can inflation Expectations be used for analysis?

The data on inflation expectations can be used by a variety of players in the economy. The inflation expectations data is the primary leading indicator of the rate of inflation in an economy.

Source: St. Louis FRED

Here are some of the ways different market participants can use the inflation expectations data.

Investment decision making: Businesses use the expected inflation data to make business decisions about future productions. They can choose to make changes on their product quality or quantity depending on the inflation outlook.

With expected inflations data, businesses can also make adjustments regarding factors of production. If the higher inflation rate is expected, businesses could opt into paying upfront for production inputs of their businesses. This upfront payment enables them to hedge against a future increase in the cost of businesses, thus protecting their bottom line. Furthermore, businesses can use this data during negotiating for employee contracts and wages.

Household decision making: Inflation expectations plays a vital role in households’ budgeting process. The data enables them to make rational decisions regarding expenditure, savings and investments. If they anticipate higher inflation, households can decide to put more funds into the purchase of essential products and cut back on savings and investments, since higher inflation erodes the value of money.

With lower inflation expectations, households might elect to increase their savings and investment activities since the potential increase in purchasing power will leave them with more disposable income.

Central banks and governments: One of the core mandates of the central banks is to ensure that the rate of inflations is kept below the targeted rate. Using the inflation expectations data, the central banks and governments can make informed policy decisions. These decisions are whether to implement expansionary or contractionary policies.

When the rate of inflation is expected to drop and result in deflation, central banks and the government will adopt expansionary monetary and fiscal policies. These policies include lowering interest rates to pump more money into the economy. Dramatically falling in the rates of inflation can be bad for the economy, as the reduced prices encourage complacency in the economy and could result in stagnation.

Conversely, expectations of higher rates of inflation will compel central banks and governments to adopt contractionary monetary and fiscal policies to avoid an overheating economy. Such policies will include increasing interest rates to make the cost of money more expensive and encourage investments and savings.

#### Impact on Currency

Since inflation expectations inform the decision of the central banks, it plays a vital role in the forex market.

When inflation expectations hint to lower rates of inflation, the outlook is negative for a country’s currency. The expansionary policies that ensue results in depreciation of the currency since the rate of return of investments will be less lucrative. The low-interest rates also make foreign bonds and treasury bills more attractive compared to local bonds; which results in a net outflow of investments.

Conversely, expectations of higher rates of inflation are positive for a country’s currency. The central banks will adopt contractionary policies like raising the interest rates, which makes an investment into the country more lucrative; increasing the demand for local currency hence appreciation.

#### Sources of Data

In the US, the inflation expectations data are released monthly on the last Friday of the month. The University of Michigan collates the data.

A comprehensive and historical breakdown of the US inflation expectations data can be accessed at St. Louis FRED here and here.

Statistics on global inflation expectations can be accessed at Trading Economics.

Categories

## JPYINR Asset Analysis

#### Introduction

JPYINR is a currency pair where JPY is the currency of Japan. On the other hand, the Indian Rupee (INR) is the currency of India. It is an exotic currency pair where the JPY is the first currency, and the INR is the second currency

###### Understanding JPYINR

In this currency pair, we can determine the value of INR, which is equivalent to one JPY. It is quoted as 1 JPY per X INR. For example, if the value of JPYINR is at 2.4458, then about 2.4 INR is required to purchase one JPY.

###### JPYINR Specification

The subtraction of Bid price and the Ask price is the spread. It is a charge that the broker takes from a trader when they open a trade. Therefore, the spread is controlled by the broker. This value changes with the execution model used for executing the trades.

Fees

Fees is the charge that broker takes from traders. Fees in the currency market works almost the same of other financial market. Note that, STP accounts does not have any fee, but a few pips is applicable on ECN accounts.

Slippage

Slippage is the difference between the execution price and the entry market price. Slippage occurs due to the market volatility and the broker’s execution.

The trading range is the representation of the minimum, average, and the maximum volatility of this pair on the 1H, 4H, 1D, 1W, and 1M timeframe. Using these values, we can assess our profit/loss margin of trade. Hence, this proves to be a helpful risk management tool for all types of traders.

Procedure to assess Pip Ranges

2. Set the period to 1
3. Add a 200-period SMA to this indicator
4. Shrink the chart so you can assess a large time period
6. Measure the floor level and set this value as the min
7. Measure the level of the 200-period SMA and set this as the average
8. Measure the peak levels and set this as Max.

JPYINR Cost as a Percent of the Trading Range

With the volatility values from the above table, we can determine the chance of cost with the change of volatility. We have got the ratio between the total cost and the volatility values and converted into percentages.

ECN Model Account

Spread = 12 | Slippage = 5 | Trading fee = 8

= 12 + 5 + 8

Total cost = 25

STP Model Account

Spread = 12 | Slippage = 5 | Trading fee = 0

= 12 + 5 + 0

Total cost = 17

The Ideal way to trade the JPYINR

As per the above data, we can say that the JPYINR is very liquid and volatile currency pair. Hence, it is very easy to trade in this exotic-cross currency.

If we look at the timeframe, we can see that the volatility in the lower timeframe is higher compared to the higher timeframe. However, in the higher timeframe it is often hard for traders to trade as it requires a lot of trading equity. Based on the structure, we can say that it is better to follow the average cost of this currency pair

Another way to reduce the cost is to place orders as ‘limit’ and ‘stop’ instead of ‘market.’ In that case, there will be no cost for slippage on the total cost calculation. Therfore, the total cost will reduce by three pips.

Limit Model Account

Spread = 12 | Slippage = 0 | Trading fee = 0

= 12 + 0 + 0

Total cost = 12

Categories

## JPYKES Asset Analysis

#### Introduction

In the JPYKES currency pair, JPY is considered as the currency of Japan. On the other hand, KES is the currency of Kenya. It is an exotic currency pair where the JPY is the first currency, and the KES is the second currency.

Understanding JPYKES

The JPYKES represents how much KES is required to have one JPY. It is quoted as 1 JPY per X KES. For example, if the value of this currency pair is at 1.0286, then about 1.0286 KES is required to purchase one JPY.

JPYKES Specification

Spread comes from the difference between the Ask price and the Bid price that a broker takes as a charge. The brokers control this value; therefore, traders don’t have to do anything with this. This value depends in the execution model used for executing the trades.

Fees

Every broker takes fees from trading in any currency pair, which is similar to the stock market. However, there is no fee on STP accounts, but a few pips on ECN accounts.

Slippage

Slippage is the difference between the open price of the trade and the actual execution level. The main reason for slippage is the market volatility and the broker’s execution speed.

The trading range is the representation of the minimum, average, and the maximum volatility of this pair on the 1H, 4H, 1D, 1W, and 1M timeframe. Using these values, we can assess our profit/loss margin of trade. Hence, this proves to be a helpful risk management tool for all types of traders.

Procedure to assess Pip Ranges

2. Set the period to 1
3. Add a 200-period SMA to this indicator
4. Shrink the chart so you can assess a large time period
6. Measure the floor level and set this value as the min
7. Measure the level of the 200-period SMA and set this as the average
8. Measure the peak levels and set this as Max.

JPYKES Cost as a Percent of the Trading Range

With the volatility values from the above table, we can determine the chance of cost with the change of volatility. All got the ratio between total cost and volatility values and converted into percentages.

ECN Model Account

Spread = 19 | Slippage = 5 | Trading fee = 8

= 19 + 5 + 8

Total cost = 32

STP Model Account

Spread = 19 | Slippage = 5 | Trading fee = 0

= 19 + 5 + 0

Total cost = 24

The Ideal way to trade the JPYKES

The JPYKES is a currency pair that has sufficient volatility and liquidity. Therefore, it is simpler to trade this currency pair.

The percentage values are above 500% in a lower timeframe. This means that the costs are low regardless of the timeframe and volatility you trade.

Digging it a little deeper, the cost increases when the volatility decreases, and the cost decrease when the volatility increases. In a lower timeframe, this pair is very volatile at above 600%; therefore, traders should be cautious to trade it.

However, the best time to trade in this pair is when the volatility remains at the average value. In that case, this pair can provide a decent profit with balanced volatility and cost.

Furthermore, traders can quickly minimize their costs by using orders as ‘limit’ and ‘stop’ instead of ‘market.’ By using these orders, the slippage will not be considered in the calculation of total costs. Therefore, the total cost will reduce by five pips.

Limit Model Account

Spread = 19 | Slippage = 0 | Trading fee = 0

= 19 + 0 + 0

Total cost = 19

Categories

#### Introduction

CAD/BRL is an exotic currency pair. CAD is the Canadian Dollar, and the BRL is Brazilian Real– the official currency of Brazil. For this pair, the CAD is the base currency and BRL the quote currency. Therefore, the exchange rate for the CAD/BRL pair represents the amount of BRL that can be bought by 1 CAD. Let’s say the exchange rate for the pair is 4.1564; this means that 1 CAD buys 4.1564 BRL.

When trading a currency pair, the spread is the difference in the price at which you can buy the pair and that which you can sell. Forex brokers earn their revenues using spread from traders.

ECN: 31 pips | STP: 36 pips

Fees

Another way for forex brokers to earn revenues is by charging a commission for every trade made. The fee charged depends on the broker. STP accounts usually do not have a trading fee charged.

Slippage

When initiating a trade, you instruct your broker to execute the trade at a particular price. Slippage in forex is the difference between the price you instruct the broker and the price the broker executes your trade. The primary causes of slippage are prevailing volatility and your broker’s efficiency.

In forex, the price of currency constantly fluctuates across different timeframes. Trading range in forex helps to analyze the market volatility for a currency pair across different timeframes. The volatility for a currency pair can help a trader estimate the amount of profit or loss that is to be expected when trading in different timeframes.

Let’s say, for example, that for the 4-hour timeframe, the volatility of CAD/BRL pair is 10 pips. A trader can expect to either gain or lose \$24 by trading a standard lot of the CAD/BRL pair.

The Procedure to assess Pip Ranges

2. Set the period to 1
3. Add a 200-period SMA to this indicator
4. Shrink the chart so you can determine a larger period
6. Measure the floor level and set this value as the min
7. Measure the level of the 200-period SMA and set this as the average
8. Measure the peak levels and set this as Max.

Expressing trading costs as a percentage of the trading range can help traders determine the difference in the trading costs across various timeframes. It is worth noting that these costs are calculated as Percentage of pips in the different timeframes.

The tables below show the percentage costs to be expected when trading the CAD/BRL pair.

ECN Model Account

Spread = 31 | Slippage = 2 | Trading fee = 1

Total cost = 34

STP Model Account

Spread = 36 | Slippage = 2 | Trading fee = 0

Total cost = 38

From the above cost analysis, we can observe that shorter timeframes when volatility is lower, have higher trading costs. The highest trading costs for both the ECN and the STP accounts are during the 1-hour timeframe, which coincides with the least volatility of 0.4 pips. The least trading costs for either account is at the 1-month timeframe coinciding with the highest volatility of 42.3 pips.

You can also notice that the trading costs reduce as the volatility increases across timeframes. For shorter-term traders, opening CAD/BRL trades when volatility is above average can help reduce trading costs.

Another method which forex traders can implement to reduce trading costs is by using limit orders instead of forex market orders. Forex limit orders eliminate the costs associated with slippage. Here’s how it works.

ECN Account Using Limit Model Account

= 0 + 31 + 1 = 32

You can notice that trading costs have marginally reduced. The highest trading cost has reduced from 576.27% to 542.37%.

Categories

## NZD/AED Asset Analysis

NZD/AED is a currency pair where NZD is the currency of New Zealand. On the other hand, the AED is the currency of the United Arab Emirates (UAE). It is an exotic currency pair where the NZD is the first currency, and the AED is the second currency.

#### Understanding NZD/AED

The price of NZDAED represents the value of AED, which is equivalent to one NZD. It is quoted as 1 NZD per X AED. For example, this pair is at 2.4458, then about 2.4458 AED is required to purchase one NZD.

#### NZD/AED Specification

If we subtract the Bid price and the Ask price, we will find the spread. The spread is usually a charge that the broker takes from a trader when they open a trade. Therefore, the spread is controlled by the broker. This value depends on the execution model used for executing trades.

#### Fees

The fees in the currency pair trading are almost similar to the other financial market. Note that, STP accounts do not take charges, but a few pips are charged on ECN accounts.

#### Slippage

Slippage is the difference between the instant execution price and the open market price. The market volatility and the broker’s execution speed are the reasons for slippage to occur.

The trading range is the representation of the minimum, average, and the maximum volatility of this pair on the 1H, 4H, 1D, 1W, and 1M timeframe. Using these values, we can assess our profit/loss margin of trade. Hence, this proves to be a helpful risk management tool for all types of traders.

#### Procedure to Assess Pip Ranges

2. Set the period to 1
3. Add a 200-period SMA to this indicator
4. Shrink the chart so you can assess a large time period
6. Measure the floor level and set this value as the min
7. Measure the level of the 200-period SMA and set this as the average
8. Measure the peak levels and set this as Max.

#### NZD/AED Cost as a Percent of the Trading Range

With the volatility values from the above table, we can see how the cost changes with the change in volatility of the market. We have got the ratio between the total cost and the volatility values; therefore, converted these into percentages.

#### ECN Model Account

Spread = 9 | Slippage = 5 | Trading fee = 8

= 9 + 5 + 8 = 22

#### STP Model Account

Spread = 14 | Slippage = 5 | Trading fee = 0

= 14 + 5 + 0 = 19

#### The Ideal Way to Trade the NZD/AED

The exotic NZDAED pair is a liquid and volatile currency pair. Therefore, it is very easy to trade this exotic-cross currency pair. From the above table, we can see that the percentage values are 200% in the ECN model and within 128% in the STP model. It means the cost is comparatively low, and if we trade in the STP model, the cost will be further low.

In the lower timeframe, the volatility is comparatively higher, but the Percentage of volatility is not much higher to indicate that it is not tradeable. However, in a higher timeframe, the volatility is lower, but it is often hard for traders to trade in a higher timeframe as it requires a lot of patience and balance.

Furthermore, another way to reduce the cost is to place orders as ‘limit’ and ‘stop’ instead of ‘market.’ In that case, the slippage will not be considered in the calculation of the total costs. So, in our example, the total cost will reduce by three pips.

Limit Model Account

Spread = 14 | Slippage = 0 | Trading fee = 0

= 14 + 0 + 0

Total cost = 14

Categories

## Why Forex Traders Must Value Their Time

All traders at the end of the year always take stock of their own trading activity. There still exists an element that is never taken into account and therefore we tend to forget… How much value do we give to our time? Although it seems obvious, time cannot be “preserved”. It just passes. It is said that when we are born we are full of time, because we have a life ahead of us, but no one can quantify this wealth and no one can know how long a person’s life will last.

Even so, this wealth is a certainty, since time can be devoted to all things that free will allows. Bearing in mind that our choices will show us the way because at each decision we take new paths and leave others. This leads to a consequence: we spend more time on what motivates us the most. This motivation can be effective, economic, labor, sense of duty, etc. It is very interesting to know that on many occasions we use time as a currency of exchange.

This concept applies particularly well to a trader. He exchanges part of his time to have more availability of it, later. What does that mean? Invest money in the financial markets to get more of it and so have more time to live your life according to your desires and goals. Let me explain in detail what this phrase means.

Time and money are surely the two most important resources we have available to invest and make a profit. However, it is money that is really valued as an investment because it allows us, as a system of payment, exchange, and reference, to receive something in return.

Otherwise, when we invest our time, it is not so easy to quantify the return we will get, only in some cases will it give us a profit in the form of money. For example, in the event that we exchange our time with work to be rewarded with a salary. In others, the exchange is not tangible, for example, when we want to increase our knowledge through study.

Paradoxically, these resources have great similarities: both can be managed, lost, wasted, saved, they are not infinite, but the substantial difference is that only money can be earned. If money is lost, it can be recovered over time, but if time is lost, it can never be recovered, even by buying it.

Unconsciously, money is valued more than time, except by increasing age: older people value time more because they realize their lack. Time is available at no cost and is available at will. Moreover, it is the most equitable resource that exists: a priori, we all have it. The problem is your administration.

### Different Uses of Time and Money

The same amount of money and time in the hands of different people will not match their uses, even if the source from which they come is the same. If it is easy to answer that time is the main resource we must fight for, we must be aware that money is decisive for our future. Buying new experiences or particular desires requires a significant monetary expense and an investment of time to enjoy them.

The needs of life and the time in which we live mark the future of events:

well-spent money costs little, while well-spent time is scarce and unwittingly spent

It is a good dilemma.

Time measurement precedes the creation of money and is often related to productivity. Benjamin Franklin said that “time is money” and explained that the time spent working to earn money was time well spent; otherwise, if time has been spent on other matters, the money has been lost. This reflection is correct only in its own context, outside it makes no sense because well-spent time not only generates money but also generates many benefits that go beyond money.

Both time and money are consumed even if nothing is done with them. If time passes, it is spent. If we do nothing with the money, like leaving it in a non-productive place, then inflation, over time, will despise its initial value. And this is one of the main theories of finance: while the price of money remains constant, its value fluctuates over time.

### Time Must Be Devoted to Investment

In the world of investment, the results are obtained after having devoted much of our time to them. The paradox that to make money I have to invest my time and that if I have money I will have more control over my time, does not go beyond the fact that the reward of both is not proportional. Having a lot of money is not synonymous with having a lot of time.

Time is indifferent to the amount of money. Those who have obtained a significant amount of money have invested a lot of time in it and will also need a lot of time to manage it.

It is clear that everyone is happy in their own way, but those who have less money and more time to devote to themselves and their families may be happier. A study by the journal Social Psychological and Personality Science reveals that 64% of respondents prefer to have money for free time, even if the results changed when asked about happiness. In fact, it has been concluded that the amount of money accumulated is not proportional to happiness.

When a certain money limit is reached, by earning more, that additional amount is not proportional to the increase in happiness. In this sense, it is said, and rightly so, that the rich do not enjoy the same happiness as money. According to experts, this limit is at 60,000 euros per year. 60,000 euros a year? Someone will think: and how to reach them? But here an important reflection must enter.

### Investing Time to Buy Time

The trader invests his time because more money improves the ability to use his time. Very true, but how do you use this time invested for this purpose? The trader must be really good at managing the time he dedicates to this profession. If the study of trading requires much of our time and dedication, it is also true that we should not launch it in a 10-hour session that brings nothing good.

Some will say it depends on how much you earn. That’s true, but only in part. If I have to destroy my psycho-physical balance to make money, there’s no point in working like this. Trading is said to be freedom, but this statement is the subtle line between good and evil.

If for the freedom we intend to spend money on totally useless luxury items or sit in front of the computer for many hours to end up repenting and burning our human contact with the outside world, happiness will never be there and this is clear to all. If instead, we refer to the possibility of having quality time, for example, staying with our loved ones or having experiences that enrich us as human beings, then everything changes.

### Trading As a Process of Growth

Trading can be seen as a grand ladder: a path where we grow step by step first as people and then as operators. A continuous exchange of time and money that must have a higher quality of time available, but above all awareness of ourselves and how we want to live our lives.

Life… we know well that it is unique and we will never know the exact moment when we will leave. We must therefore be very responsible to ourselves throughout this journey. Negative emotions, the lack of objectives, and the inability to react in the difficult moments of this work must be prohibited.

Time is the most precious thing we have. Unfortunately, we rarely evaluate it consciously: it continues to diminish, inevitably tending to run towards a zero balance. Only in the future will we lose the past and this can never be recovered. Therefore, it is necessary to manage time: if you want to achieve something, the first thing is to realize it. It would be sad and illogical not to do so, it would be an act of self-denial.

Categories

## Determining the Strength of the Market by Analyzing the VSA

With this publication, we will look at an incredible method of market analysis based on the volume Volume Spread Analysis (VSA), developed by the famous American financial analyst Tom Williams and published in the book «Master the Markets». This is an unusual view that deals with how market makers manipulate crowd behavior.

Not to recount the book, so in this series of articles, we will focus on the practical side of the method with a traditional reference to cryptocurrency trading. You can apply this method to any financial instrument, my examples will be in the BTCUSD pair.

Now, let’s discuss the theoretical principles of price formation in the market and how large capital traders influence the market. I will define the main concepts that I will use throughout the course. Therefore, you should study this article if you are interested in VSA and want to better understand the actions of large traders.

Even if you’re just starting your trading career, you’ve probably found the following phrase: “The market goes up when demand prevails oversupply. And, on the contrary, the market will suffer a decline at the moment when supply is surpassing demand”. We need to study the principles suggested by this phrase in order to better understand what the volume of trade means.

For those who could not find a similar term, I must explain that, in trading, is the number of lots traded on the market within a specific period. Firstly, it should be understood that the volume taken in isolation does not provide much information. But, if what we do is compare the current volume with the previous day’s volume, or a week earlier…, you will see clearly the changes in business activity.

To better understand market processes, let us compare a change in volume with the price differential. This will show the feeling of the great players: bullies or bassists. Remember, the spread is the difference between high and low prices during a particular period.

In practice, price movements do not always correspond to current market activity. There are often cases where, after a small increase in volume, the price increases sharply, confusing many traders. But if you have already studied the concept of inertia, then you will have everything clearer. Then, in this situation, the market can be compared to a car in which driving at high speed will go uphill for a while, even if the driver has taken his foot off the accelerator.

### What is Volume Spread Analysis?

The VSA method provides a complex approach to market analysis, which defines the relationships between asset price, spread, and volume. The last indicator shows the activity in the market. While the spread speaks of the amplitude of the price movement.

In establishing the relationships between these two characteristics, we strive to identify the imbalance between demand and supply. For the most part, it is a consequence of transactions opened by large operators, and in the trading environment, it is considered one of the most significant reasons for the market to move in one direction or another. In turn, knowing the imbalance and the true causes of its occurrence, we can easily predict the direction of future price movement.

### Principles for the Movement of Assets

Volumes, like stock market trends, are also divided into bullish and bearish. The bullish volume increases the volume in the upward movements and decreases the volume in the downward movements. Consequently, the bearish volume increases the volume in downward movements and decreases the volume in upward movements.

Now let us examine the concepts of accumulation and distribution…

Cumulation means buying as many shares as possible, without significantly increasing the price compared to your own purchase, until there are few or no shares available at the price level you have been buying. This purchase usually occurs after a bearish move in the stock market and there are the best prices to buy.

Once most shares have been removed from the hands of other traders (ordinary natural persons), there won’t be much action left to sell at an additional price. In other words, resistance to the bullish movement has been neutralized. Then, in this situation, we can expect a steady increase in prices until syndicated traders perceive prices too high to sell those assets that just bought.

Distribution is the sale of assets, which should ideally be achieved without lowering the price against the sale of the market maker. This operation is done to take advantage of the profits of selling at the conditional peak of a bullish market. At the same time, most of these great players place large orders not even at a fixed cost, but at a range of prices.

If the total volume of transactions is so large that prices are forced to fall, the sale is suspended. Traders have another opportunity to sell securities profitably in the next wave upwards. Once professionals have sold most of their holdings, a bearish market begins because markets tend to fall without professional support.

Now, you understand that big forks see both sides of the market at the same time, which gives them a big advantage over common traders. To better understand the market, study the concepts of strong and weak holders.

Strong forks are professionals who have convenient positions and are able to easily read the market. Despite their ability, they can open more unprofitable operations than profitable ones, but close them quickly, considering losses as inevitable trading costs.

Weak holders are often new market amateurs, tied to their capital and therefore make emotional decisions, which are often at odds with common sense. They are often subjected to market pressure when prices turn against them, which is why they suffer heavy losses.

If we combine these concepts with those described above, we can summarize that: a bullish market is like this when a significant transfer of shares from weak holders to strong holders, usually with a loss for weak holders. A bearish market occurs when there has been a substantial transfer of shares from strong holders to weak holders, usually with a gain for strong holders.

When the market moves from one major trend state to another, an event called a buying or selling climax will occur. As a definition, it is an imbalance of demand and supply that causes a bullish market to become a bearish market or vice versa.

The climax of the purchase arises at a time of high demand for the asset and the active dumping of securities by the big players, which makes continuous growth impossible. In addition, in the bullish bar, the volume looks exceptionally high, accompanied by a new maximum and a widespread. At the end of the purchase climax, the market will close in the middle or high of the candle.

The selling climax, as seen in the name, is the exact opposite of a buying climax and usually occurs at the time of high sales. It presents an extremely high volume in downward movements, accompanied by wide spreads, with the price entering the local minimum. In the last phase of the sale climax, the price will close in the middle or under the candle.

### Causes of Price Reversal

There are only two main reasons why there is a reversal of long-term trends in the market:

1. Most traders panic after observing substantial drops in a market (often from bad news) and usually follow their instinct to sell. Professional traders, in turn, think differently, asking a question: “Are big market players prepared to buy mass stock at these price levels?” If this is fulfilled, this will be a sign that indicates the strength of the market.
2. After substantial increases, usually for good news, most will get angry by missing the upward movement and will rush to buy. At this point, their professional colleagues are only interested in the willingness of big players to sell enough securities at the current price to meet demand. As you’ve already guessed, mass sales are a sign of market weakness.

First, it is necessary to understand that markets move in so-called phases. Looking at the changes in volumes and price spreads, we can see that the market builds a cause for the next phase. The duration of the phases may vary. At the same time, it is normally assumed that short phases lead to small changes, while long ones lead to serious steps. In addition, we will group spreads in width, narrow, or simply average, which will allow us to delve into the current processes.

### Definition of Market Strength

Marketers generally process and match purchase and sale orders from traders around the world. It’s your job to create a market. To perform its functions, the creator must have sufficiently large participation or values. If you do not have enough quantities on your books to trade at the current price level, you can move the price to a more appropriate level.

Often there are situations in which the bullish movement manages to get a better price from the floor of the bag. Why are you getting a good price? Incredible kindness from the creators? The reason is different. In fact, the market value perceived by market makers is much lower than theirs, because they have already received enough sales orders and want to get rid of them quickly, expecting a reversal of the trend or at least the transition from the market to the uncertainty stage.

Such action, repeated many times with any other buyer, will tend to reduce the spread of the day towards contraction. In other words, the upper price limit will be minimal. If, on the other hand, market makers have a bullish view, they will increase the price on their purchase order, giving you what appears to be a low price. This, repeatedly, causes the spread to expand as the price is constantly marked during the day.

Then, by simple observation of the extension of the bar, we can know the references of those who can see both ends of the market.

Another example is when you find market gaps or price gaps. This term in the technical analysis refers to a situation where there is a gap between the closing of the first bar and the opening of the next bar. For example, the market opens when market makers trap as many traders as possible in a potentially weak market and lose trades and create additional stress. As a rule, weak gaps are always in the zones of new highs, when the news is good and the bullish market seems to last forever.

It should be noted that gaps can be seen in strong markets. However, in such cases, a serious difference can be noticed in the form of an extended plane. Traders who have been trapped inside the channel will panic, convulsively trying to exit the trade at a price very similar to what they first entered. Some of them expect a break in price after having bought assets close at the upper limits of the channel. Others bought at the bottom, but do not see any serious upward movement.

In turn, professional traders are aware of the situation and, looking for the time it takes to sell their own assets, to keep the bullish sentiment raise prices, or open a new candle with a gap up. The volume increases, substantially supporting the movement. This leads to the conclusion that the movement of price is not a deceptive maneuver and the big players really see the strength of the market.

Broad spreads in most cases are designed to block most traders out of the market rather than trying to absorb them. This will tend to postpone, as it goes against human nature, buying something today that could have been bought cheaper yesterday. Such manipulations also frighten market participants who opened short positions near the last minimum in the constant bad news that appeared during this period.

So we draw an obvious conclusion. The volume that usually shows a healthy increase is the bullish volume. However, excessive volume is never a good sign, this indicates that supply can saturate demand. The low volume warns you of a clearly misleading upward movement. In this case, professionals perceive the market as weak, refusing to participate in the bullish movement. The amplifier of this signal will be the presence of a flat before the price jumps to low volumes.

We must also pay attention to the low volume rates in the downbars. This is a sign that the strength of the upward trend remains high, and the upward movement will continue in the foreseeable future.

For a bearish movement, the indications are the opposite. A bearish trend is strong when the falling bars have a high volume. However, excessive volume warns that the fall in price may not be natural and that demand may affect supply.

If the volume is decreasing on bearish sails, the sales pressure is also decreasing, which means that professionals are not interested in a further drop in prices. The market may be declining for longer due to inertia, but, soon, the price may increase due to insufficient supply.

Categories

## Overview of “Dark Pools” (AKA Parallel Markets)

In finance, a «dark pool» is a private market used by its participants to trade in different types of securities. They are basically parallel markets operating outside the most well-known regular markets. Liquidity in these markets is called «dark pool liquidity» (sorry I did not find a suitable translation for the term).

The bulk of dark pool transactions represent high-volume transactions conducted by financial institutions, such as those executed outside public markets such as the New York Stock Exchange and NASDAQ, so that they remain confidential and beyond the reach of the general public investor. The fragmentation of financial trading sites and electronic trading has allowed dark pools to be created and they can normally be accessed through cross-network or directly between market participants through private contractual arrangements. Some dark pools can be accessible to the public and can be accessed through retail brokers.

The main advantage for institutional investors in the use of dark pools is that they allow sellers to sell or buy very large volumes of stocks without showing their position to others, which avoids the impact on the market as neither the size of the transaction nor the identity is revealed until the transaction is executed. But, this means that some market participants are at a disadvantage, as they cannot see the transactions before it is executed; prices are agreed by dark pool participants, so the market is no longer transparent.

There are mainly three types of dark pools:

Independent undertakings established to provide a single differentiated basis for trading with different assets.

The dark pools are owned by a broker where the broker’s clients interact, most commonly with other broker clients (and possibly even with operators working for the company itself) under conditions of anonymity.

Some public markets set up their own dark pools to offer their customers the benefits of anonymity and non-deployment of orders in conjunction with a stock market «infrastructure».

Depending on the exact way a dark pool operates and interacts with other places, it can be considered and in fact, referred to as a «gray pool».

Dark pools have become increasingly relevant since 2007, with dozens of different parallel markets representing a substantial portion of US stock trading, a trend we will surely see in other countries as well. There are several types of dark pools and these can be run in multiple ways, including automatically, throughout the day, or at scheduled times.

#### Origin of Dark Pools

With the advent of supercomputers that are able to execute programs created by algorithms in a matter of milliseconds, high-frequency trading (HFT) is already dominating the daily volume of trading in many markets. For example, in the stock market HFT technology allows institutional traders to execute their multi-million dollar stock block orders ahead of other investors, taking advantage of fractional increases or falls in stock prices. When subsequent orders are executed, the benefits will be instantaneously earned by HFT traders who then close their positions. This way of legal piracy can be occurring dozens of times a day, producing huge profits for HFT traders.

Eventually, the HFT became an increasingly widespread practice in the markets, to the point that it became increasingly difficult to execute large operations through a single exchange. Because HFT’s large orders had to be spread across multiple markets, this alerted competitors that they could get in front of the order and snatch the inventory, rising stock prices. All this happened in milliseconds after the initial order was placed.

To avoid transparency of public markets and ensure liquidity for high-volume operations, several investment banks established private markets, which became known as dark pools. For traders with large orders who cannot place on public stock exchanges, or who do not want to make their intentions known, dark pools provide a market of buyers and sellers with sufficient liquidity to execute the transaction. By 2016, there were more than 50 dark pools in operation in the United States alone, mainly run by investment banks.

#### How do Dark Pools Work?

Liquidity can be collected off the market in dark pools using FIX and APIs. Dark groups are actually very similar to standard markets with very similar order types, prioritization rules, and pricing rules. However, liquidity is not deliberately advertised – there is no market depth information. In addition, they prefer not to display and display transactions in any public data feed as standard markets, or if they are legally obliged to do so, they will do so with the greatest possible legal delay, all this to reduce the impact on the market of any transaction. Dark pools are often formed from order books of brokers and other sources of off-market liquidity. When comparing these markets, careful controls should be made as to how liquidity numbers were calculated: some count both sides of the transaction, or even count the liquidity that was placed but not taken.

Dark pools offer institutional investors many of the efficiencies associated with trading in the order books of traditional markets, but without showing their shares to others. These markets avoid this risk because neither the price nor the identity of the company they are trading are shown. Operations in dark pools are recorded as Over-The-Counter transactions. Therefore, detailed information on volumes and types of transactions is left to the network to inform customers if they wish and are contractually bound.

Dark pools allow large amounts of funds to be pooled and large volumes of securities moved without investors having to show what they are doing and what their intentions are. State-of-the-art e-commerce platforms and the total lack of human interaction have reduced the time scale in market movements. This increased responsiveness of an asset’s price to market pressures has made it increasingly difficult to move large volumes of securities without affecting price. Thus, these markets can protect investors from market participants who use HFT (high-frequency trading) in a predatory manner.

#### Dark Pools and Price Discovery

For an asset that can only be publicly traded, it is generally assumed that the standard pricing process ensures that at any time the price is quite “fair” or “right”. But, few assets are available in this category as most can be traded off the market without adding transaction information to a publicly accessible data source. As a proportion of the daily volume generated by the asset traded so secretly increases, the public price could be considered fair as long as certain limits are not exceeded. However, if public trading continues to decline as hidden trading increases, it could reach the point where the public price does not take into account all information about the asset (in particular, it does not take into account what is traded in a hidden manner) and therefore the public price could no longer be considered as «fair».

However, where dark pool transactions are incorporated into a post-transaction transparency regime, investors have access to this information as part of a consolidated list of transactions. This can help the discovery of prices.

#### Regulation of Dark Pools

Although considered legal, dark pools can operate with very little transparency. Those who have been able to denounce the HFT as an unfair advantage to other investors have also condemned zero transparency in dark pools since they can perfectly hide conflicts of interest. The Securities and Exchange Commission (SEC) in the United States has stepped up scrutiny of these markets for complaints related to front-side practices. Illegal running occurs when institutional traders place their order in front of a customer’s order to capitalize on the rise in stock prices. Dark pools advocates insist that they provide essential liquidity, allowing markets to operate more efficiently.

Some traders using a liquidity-based strategy consider that dark pool liquidity should be advertised to allow a more «fair» trading for all parties involved.

Categories

## Gold Market Analysis and Structure

If you are operating in the commodity market, you need to have an idea of the structure and dynamics of the supply and demand of the assets. Oil is a typical example, which is rapidly recovering lost positions, thanks to the growth prospects of global demand and the contraction of the surplus in the midst of the opening of the major world economies. Unlike Brent and WTI, gold is less sensitive to the conjuncture of the physical asset market, but at any time it can punish a trader who ignores the fundamentals.

Global demand for precious metals is dominated by jewelry and investment, which accounted for 48.5% and 29.2% in 2019. The share of gold purchased by central banks was 14.8% and the share of its use in the industry was 7.5%. The last indicator is very important. The fact is that silver is considerably higher, and the closure of industrial plants due to the pandemic caused the faster sinking of XAG/USD compared to XAU/USD. As a result, the ratio of the two metals plummeted to historic highs. It is logical that in conditions of recovery of the world economy it makes sense to expect a reduction of the coefficient, that is, to bet on a faster growth of silver compared to gold.

In the first quarter, the share of investments in the structure of global demand for precious metals increased to 49.8%, while jewelry shops fell to 30.1%. Gold consumption contracted in almost all areas compared to October-December and January-March 2019, with the exception of ETF and coins.

Changing the structure of demand is an important point for pricing. When this happens, we can talk about the stability of the existing trend. The shift from jewelry to investment is a sure sign that bulls dominate the market. Jewelry is too expensive, leading to a reduction in its consumption. On the contrary, the faster the stock of specialized funds traded on the stock exchange grows, the higher the stock price will be and the greater the army of buyers will be. Sometimes, in the context of an upward trend, gold is said to flow from east to west. In fact, the share of China and India in the consumption of precious metals in the jewelry industry in 2019 was 67%, while the main ETFs are located in the United States (including the largest fund SPDR Gold Shares) and in Europe.

The main gold producers are China (404.1 tonnes), Australia (314.9 tonnes), Russia (297.3 tonnes), the United States (221.7 tonnes), and other countries. The impact of supply on price is limited. A typical example is 2013. Then many said that XAU/USD quotes will not fall below \$1300-1350 per ounce, as this is where the equilibrium point of the mining companies lies. They say they will reduce production, leading to shortages and higher prices. In fact, existing hedging technologies allow companies to price and continue production at the same volumes. The gold fell considerably, punishing buyers for themselves.

But, it is necessary to know the offer completely. In 2020, amid the pandemic and company shutdown, investors felt a severe lack of physical assets in the negotiation of forward contracts, leading to increased trading premiums in the United States and Europe, contributing to the increase in XAU/USD contributions.

Therefore, the most important element in the pricing of precious metals is the demand for investment, the value of which, in the first place, is influenced by the monetary policy of central banks. Large-scale monetary expansion contributes to the weakening of the world’s major currencies, falling bond yields, and rising XAU/USD rates.

Categories

## How to Correctly Deal With Forex Losses

For most traders, the toughest aspect of trading in Forex is dealing with financial losses. It’s not just a matter of pain and anguish, but it’s also a latent reality that losses are very often the trigger that drives traders to make their worst mistakes, which can cause even greater losses and start a vicious circle in which the trader’s account is out of control.

It follows that a trader has to have a defined strategy to cope with losses and have the ability to execute that survival strategy. There is no point in “knowing” that your losses are controlled and how to keep them under control if you are not able to apply what you know. Your loss strategy has to be real. You have to know the logic behind your knowledge of losses and believe in your truth with total faith.

#### The Losses Are Inevitable

Loss-making positions are inevitable; in fact, it is usually more difficult to make money with strategies that try to ensure a very high rate of profit. This is simply the natural form of market movements.

There are some traders who follow a methodology that tries to greatly reduce or even completely eliminate losses. There are only two methodologies that can achieve this and it is important to understand them perfectly:

1- Add to a position with losses by believing that he was right when he placed the original position and that he was only wrong when he opened it. You can even add a larger amount in the next position to make recovery easier. The reality is that, while this may work as a method, it is usually not optimal and we will usually have better results simply by accepting the first loss and closing the position instead of trying a “rescue”. After all, if your original stop loss was touched, why is the second operation going to be better than the first.

2- “Change with the wind” and open a position in the opposite direction. This is not really “avoiding” a loss, it is actually crystallizing a loss by changing the net position. If you go long with a 1 lot and then short with 2 lots, you will be going short with a 1 net lot with a crystallized loss in 1 long lot.

There is another thing you can do: do not close the position that is losing and let it run more and more against you. If he does, he’s liable to burn his account. Hopefully, maybe I’ve already convinced him that we should accept some losing operations. If I haven’t, please go back and read that over and over again until I’m convinced. If you are not convinced, you can write to me and explain your reasons: perhaps I could convince you by email!

#### Know What Losses You Can Tolerate

Once you have accepted that you will have operations with losses and go through streaks of losses (known as “drawdowns”), you have to decide how much you can psychologically tolerate losing without losing your nerves as well. For that, you have to have an honest conversation with yourself. You might think you can deal with something like a 50% drawdown on your trading account, but you might actually find yourself unable to cope with even a 25% loss when it takes place in reality. Try to visualize this happening, close your eyes, and get in position.

A second factor that has to be considered is that as you increase any drawdown on your account, it increases the amount you need to win back to reach the amount you started with. For example, if you lose 10%, then you must grow the remaining 90% by 11.11% just to return to the original 100% amount. When we have a very deep drawdown of 50%, you must earn 100% just to return to the original amount of 100%. It is a vital fact that the deepest their losses, the more difficult it will be to get back to square one. Having considered this, on the other hand, it is also true that the less you risk, the less you will win when trading progresses in a favorable way.

#### Maximum Losses

A good goal to consider is never to ever, in any case, lose more than 25% of the value of your trading account, because once you lose 25% you will have to make 33.33% profit just to get back to where you started, and when you lose more than 25% of the amount you would later have to earn to return or even to increase very quickly: once you have dropped 50%, you have to earn 100%, for example. In a crazed market, your stop loss might not work at all and you could be completely eliminated if you use too much leverage.

Once you have established what the maximum loss you can tolerate is, you need to be sure of the method you are going to use to choose when to enter and exit operations and what financial asset you are going to trade, and this method should be a proven method that produces a positive “hope”. That is, by analyzing a lot of positions, he earns more money than he loses. You need to believe that it is a cost-effective method by itself, and also subject it to a review or backtest over several years of historical data.

This is very important because, when you have a streak of unavoidable losses, you have to have the courage to continue trading. If you do not do it and stop operating, or if you lose your nerves and operate in excess, you will miss the winning streak that will come after the losing streak.

Another great advantage of a backtest is that you can use a great one in a long-term review to determine what was the worst performance in terms of drawdown and the number of consecutive losing operations. You can use this to have the assurance that you will be perfectly able to survive the bad streaks. For example, if the worst outcome of your strategy in the last 10 years and thousands of operations is 50 consecutive losing operations, and you believe that the maximum drawdown you’re going to be able to tolerate is 25%, that suggests that, if you risk 0,50% of your trading capital per transaction, you are likely to experience such a drawdown in the next 10 years. If you reduce the risk to, for example, 0.25% per operation, this drawdown depth will be less likely.

You should also use a strategy to manage fractional risk, this gives you peace of mind with the knowledge that there is a cushion to minimize the total loss of evil seasons. You will also be able to decide that, if you ever experience a reduction worse than the worst case in the last 5 years, you will have to stop trading and revisit your strategy.

#### Catastrophic Losses

Sometimes events happen on the market that triggers such large, sharp movements at the price that even if you are working with a stop-loss your agent will not be able to run. This means that when the stop is well activated, you can encounter much greater losses than you had anticipated. When the bond of the Swiss franc was withdrawn in 2015 we had a good example of this. The vote in favor of Brexit was a much softer example.

You can avoid this problem by ceasing to operate any currency whose central banks have a policy of swimming against the tide of the market by tying its value to another currency, and not having open positions right before there’s a huge risk of an event being scheduled, such as a referendum.

Once you have taken the steps outlined above, you may have the confidence to risk money on operations within the parameters you have defined. You will know more or less what percentage of operations tend to lose, the duration of the streaks, and, most importantly, that over time tends to go ahead. At this stage, it must be accepted that loss-making operations are natural, and are the only necessary sacrifices that you must make in the market to earn money. In other words, the cost of doing business.

Categories

## 7 Horrible Mistakes You’re Making With Forex Trading

If we are going to be completely honest, we all make mistakes and when it comes to trading, we have made many, and we are sure that you have too. Some of them are not too bad, some of them though, are pretty horrible and have thrown off our trading quite a bit. If you look back, we are sure that there are some mistakes that you have made in the past, especially when just starting out that you are most likely not too proud of. We are going to be looking at some of the horrible mistakes that we have made and that other trades have made during their forex trading careers.

### Spending Too Much Time Trading

One that you probably would not expect to see, but spending too much time can be just as bad as spending not enough. The majority of traders have other things in their life too, maybe a job, maybe a daily, anything else that gives you some form of responsibility. What you do not want to do is to use every minute that you have spare, or even to take away from the other things in your life. This can lead to a lot of problems, we have known traders to lose their job or to lose their families just from spending too much time on their trading. Do not let this happen to you, make sure that you divide your time up between the things that are important and don’t let trading take over.

### Continuing to Trade a Losing Strategy

A lot of traders have a lot of pride, they like to think that they are correct, while it is good to be proud of what you do, it is not good to let that pride cloud your judgment. If you are trading a strategy that is losing, why would you want to continue doing it? Maybe you believe that it will eventually work, maybe you blame the markets, but one thing is for sure, these traders do not want to admit that maybe their strategy just doesn’t work at the moment. If something is not working, work out why and make changes, do not keep trying to force it to work or trading and waiting, you will only end up losing money, so you need to admit when something isn’t working and then make a change.

### Trading with More Than You Can Afford

One of the things that you will always be told is that you should never trade with more than you can afford to lose, what this means is that if the money that you are using is needed for something else, like bills, rent, or food, then you should not be using it. As soon as you use this money you are basically saying that you may not be able to pay the rent this month, not a situation that you want to be in. Even worse are the people who are borrowing money, getting a loan just for the purpose of trading it. This is not something that you want to do, do not put yourself into debt just to be able to trade. You should only trade what you can afford to lose, money that won’t affect your life if you lose it. Not only does it help protect your finances and life, but it also helps you to reduce the levels of stress that would come with potentially losing money that you need.

Emotions can have a huge effect on our trading, especially when we come across losses. When we experience those losses, we sometimes want to win it back, we do this by placing larger trades, or more trades that are not in line with our strategy for risk management. This is not something that you want to do and it is known as chasing your losses. You place larger trades in order to try and win the money back, but what happens when that trade also loses? You will end up placing an even larger one, then larger until eventually you cannot afford to make any others and you have pretty much blown your account. Avoid doing this, it is not smart and lots of people have actually gone bankrupt trying it.

### Guessing the News

News events can be very lucrative, you can make a lot of money from them if you get things right, especially things like the Non-Farm Payroll announcements. The problem is that if you get it wrong, you can lose a lot of money. What some people try to do is to guess the direction that the news will make the markets move, this is never a good idea. The news can be unpredictable, the markets also do not always move in the direction that the news suggests it should. With news events the markets can jump quite a lot, so even with stop losses in place the markets can actually jump past them and you can end up losing more than you expected. Avoid trading the news unless you really know what it is that you are doing, it is far safer to avoid it than to guess at it.

This one is more relevant to those that are just starting out in their trading careers. Trading without a plan basically means that you are placing trades without any reason, this is the part of trading that could best be compared to simple gambling. You need to use a plan, otherwise, ask yourself why you are placing the trade that you are. If you cannot answer it properly, with analysis and things like that, or you just simply say because you think it will win, then you should not be placing it. Do not place trades without a plan, at any time in your trading career.

Those are some of the horrible mistakes that you and a lot of other people may be making. They can have a real negative effect on your trading or your life as a whole, try and avoid doing them at all costs. If you are currently doing one and can recognize that, then see what you can do to help yourself get out of doing it, you will see some huge improvements to your trading results and even possibly your personal life too.

We are always on the lookout for new ways to improve our trading and the results that we are achieving. We have probably tried a lot of things in the past that have either worked or not worked. Instead of just throwing random ideas out there, we are going to be looking at 10 of the things that have worked and have been successful in improving our overall trading. Some may be big things, others very small, but the important thing is that they have the potential to make us a better trader.

One of the biggest and best things that you can do is to start a trading journal. A trading journal is basically that, a journal where you write down things that you do, your entries, exits, time trades are open, profits, losses, and more, pretty much everything that you do and the reasons for as well as the results of what you did. It sounds like a lot, but once you get used to it you can fill it out pretty quickly, and once you do it is an invaluable tool. You can use it to find out what you are doing well as well as what you are not doing well or where you are deviating from your plan, this then allows you to make adjustments and then ultimately improve on your trading.

Feedback can be a powerful thing, especially when it comes from other traders. Often when we do something we have a sort of tunnel vision, we see what we want to see and the things that we do have a nice rosy tint on them. Getting feedback from someone else, outside of your own views will give you a new perspective and they may be able to see things that you are doing wrong or that could be improved that you could not. Sometimes it can be hard to take criticism on what you are doing, but accept it and work with it, it is a great way to improve your overall trading.

### Practice

A pretty simple one, but practice does make perfect after all. Make sure that you have a demo account available for you to use, this demo account is where you can practice your new strategies or trade ideas, it lets you try things without any real risks to your capital. It is always good to use a demo account, to begin with before you try something for real, so take advantage of one whenever you can.

Now, we need to be clear that we are not meaning that you should simply copy other successful traders, that won’t benefit you at all. Instead, you need to look at what sort of things that they are doing. This can then give you ideas on how you can adapt your trading. The things that they are doing are clearly working, so why not try and implement some of those things into your own trading strategy? It can help give you new ideas to improve but be wary about simply blindly copying, that will only lead to losses due to you not fully understanding what it is that you are doing.

### Watch the News

This does not have to be on TV or in a newspaper, there are plenty of economic calendars out there on the internet that will give you an idea of what economic news events are coming up and the effects that they could potentially have on the markets. Take a look at these each morning and it can give you an idea of what you could trade or what you could avoid. Keep it in mind when you decide which currency pairs to trade, as high volatility news events could increase the risk on certain currencies.

### Try New Strategies

You have your strategy that is working which is great, but there is no harm in trying something new. The strategy that you are using is working for the current conditions, but when they change, it may not be quite as effective. Learn a new one or two, something that you can use when the markets change, not only that, but it will also give you a new view of the markets and even ways to improve your currency strategy. Just try not to go crazy and learn too much at once, this can cause you to get confused and mix them all up.

### Ignore Rumors

Rumors are out there and they turn up a lot when it comes to forex and trading. People shouting about how well a currency is going to do, or that an asset is going to collapse. Yet these things very rarely happen. If you are on social media, then take absolutely everything with a pinch of salt. If you are going to look for news, then look at a reputable site, not random people over the internet or sites that are set up for clickbait. This way you can avoid making trades or not making trades based on false rumors.

### Use Indicators

Indicators can take a lot of the work out of forex trading, by this we simply mean that you no longer need to do some of the analysis that you otherwise would have. They do not take it all away, you still need to read them and then work out what the data shows, but it can certainly speed up the process, it can also help to eliminate some of the human errors that we have when we read and analyze things. The data given will be more accurate and will be presented a lot quicker than if we were to do it ourselves.

### Be Confident

Confidence is a great thing, you need to believe in what you are doing, if you do not believe in yourself then you will end up being reluctant to place trades, not something that will make you much money. Believe in yourself, look back at your history to see how well you have been doing, just try and ensure that you are not getting overconfident this can lead to bad trades, so just believe in yourself but be sure to keep your feet on the ground.

There are ten different ways that you can improve your trading, there will of course be a lot of other things that you can also do, each and every trader will be different with different ideas and different abilities, but there are some things that work for all traders. Try and do as many of them as you can if you aren’t already, and you should hopefully see an improvement in your trading results.

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## Forex Trading: Expectations vs. Reality – Part Two

Let’s be honest, we all came into trading thinking that we were going to be rich, that is simply the expectation that a lot of new traders come into trading thinking, they have seen all the advertising spells with the present but often hidden warnings about the number of people who lost money. Due to these adverts and people on social media, people feel that trading is easy and that they will make a lot of money very easily and very quickly Or there are those that know very little about it that see it as gambling or a risk to do. Both of these expectations come from what they see from the outside, yet when we get into the actual facts, things are very different in reality than they are in their expectations. We are going to be looking at some of the differences between the realities and expectations of trading.

### The Work Involved

If you go onto social media you would get the impression that there isn’t really that much work to put in in order to make a bit of money, if you have watched a trading film, which is the only reference that a lot of people get, you will either think that there is an incredible amount of work or none at all. Either way, whatever your expectation is, it is probably wrong. Those coming into trading thinking that they won’t need to put on a lot of work will be in for a shock. There is in fact a lot of work involved. In fact, it can take a very long time to put on a single trade, if you want to be profitable then this won’t happen overnight. Instead, it will happen over months or even years for a lot of people. If you want to succeed then you need to ignore the idea that it is quick and easy and instead come to realize that you are going to have to put in a lot of time and effort.

### Is It Gambling?

From the outside, forex trading can look like a bit of a gamble, let’s be honest, the markets will either go up or they will go down which makes it a 50/50 chance right? Pretty easy to guess then, well not exactly. The markets are influenced by hundreds of different things, each pulling the market in one direction or another, it is up to you to work out which way it will go. You cannot however simply guess, if you do that, you are pretty much guaranteed to lose overall. Instead, you are going to need to take your time to analyze all the different indications and influences of the markets. This will enable you to see which is the most likely direction that the markets will move in. This can then give you the best chance to trade correctly, so it certainly is not gambling. It is all about weighing up the different probabilities and then trading in the most likely direction.

### Required Funds

Many people seem to be coming into trading thinking that they will be able to make a lot of money off a \$100 account, this is simply not the case though. Much like with anything in life, you need money to make money, the larger your account is the more profits you will be able to make. Those adverts that are promising you that you will make \$100,000 on a \$100 account overnight are simply trying to scam you out of your money. If you want to make a lot then you will need to start with a lot. Otherwise, you will need to slowly build up your account over a longer period of time. If you have a \$100 account then you can expect to make a few quid per week, not double it up every single week.

### Winning Formula

There are hundreds of strategies out there, loads of variations of each one, so why some people come into trading looking for that magic formula that will make them profits all year round is very confusing. If there was one strategy that worked, then we would all be using it and all those other strategies simply would not exist. Not to mention the fact that if there was one strategy, the markets would simply cease to function, as everyone would be using the same strategy and putting on the same trades, meaning that the markets would come to a standstill. For this reason, there cannot be a single strategy that always works, instead, you need to learn a number of different ones in order to remain profitable all year round.

### Is It Random?

The simple answer is no. The markets are far from random but they certainly look like it sometimes. From the outside it looks like they simply do what they want, moving up and down whenever they want for no apparent reason. When in reality there are a lot of different things that can cause them to be and to influence the way that it moves. Trader sentiment, news events, natural disasters, and economic data are just a few of the things that can influence it. When they do take effect, the directions and the effects can be predicted, however even though it can be predicted to a certain extent, it can also move out of sync, moving against what would be expected. This is why trading is not a guaranteed thing, while it can be predicted to an extent, it does have a very small essence of randomness to it, but not as much as it may look like from the outside.

### Is It A Scam?

Another popular opinion amongst those that do not actually trade is that forex is basically a giant scam, it is full of people wanting to take your money and you can’t actually make any profits. The sad truth is that this is partly true, there are a lot of scammers out there, from traders, account managers, signal providers, and even brokers. There are ones that are there to simply take your money, but this is not what all of them are doing. There Are genuine people out there that are actively trying to help you to make money, there are some great brokers that are only there to help, signal providers offering genuine signals, you get the point. So while there are frauds out there there are also some great opportunities too.

Those are just a few of the expectations that we see people have and what is actually going on. There are some similarities in places, what we see is sometimes what we get, however, there are also a  lot of differences, once you actually get into trading you will come to find that there will be a lot of differences in what you experience compared to what you were thinking you were going to get.

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## Forex Trading: Expectations vs. Reality – Part One

When you tell someone about trading and forex, what do you tell people? Most likely you are telling them all the best things about trading, these good reasons are the reason why you trade in the first place after all. These stories that you are telling other people are what is creating an expectation in them of what trading and forex actually are. If you look anywhere on the internet, there will be people talking about forex and how much you can make, how easy it is, and how life-changing it is, very rarely do you hear horror stories or the opposite feelings. This creates a certain expectation from people outside of the trading circle, expectations that do not really match up to the reality of what trading is and what it involves. We are going to be looking at what some of the realities are when compared to the expectations that a lot of people have and seeing whether the general expectation is right, or if reality is completely different.

### It’s Incredibly Easy or Hard

When all you hear about is the fact that people are making a lot of money or that people are making some great returns then it would make it seem like trading is easy, thousands if not millions of people are making money doing it, this is true, but they are putting in a lot of effort in order to get to that level, they did not simply sign up and then place trades in order to be successful, a lot of work needs to be put in. On the other hand, looking from the outside, it can look like it is incredibly complicated, with numbers all over the place, charts, indicators, and more. It can seem very complicated which would make it seem hard to do. When in reality, it is quite straightforward, it does take time and work, but it is nowhere near as complicated, most indicators are self-explanatory and when you actually start using them, they make a lot of sense.

### You Need A Lot of Money

If you have watched any trading films, it would make it seem like you would need a couple hundred thousand to trade properly, and to be honest, this would be true if you went for a 1:1 leverage account. The thing is that a lot of brokers these days are offering far higher leverage. In fact, some go as high as 2000:1 which is a little extreme, but even the popular 500:1 makes it so that trading is far more accessible to the average person. Many brokers allow you to sign up with a minimum deposit of \$10, which will allow you to trade, you would need a couple hundred to trade properly, still a far cry from the hundreds of thousand that you otherwise may have thought you would have needed.

### Forex Is A Scam

When something seems too good to be true, then most people would consider it a scam, and many people see forex as too good to be true, a way of making money by sitting at home in your underwear. It is Perfectly understandable why people think that trading is a scam, but in reality, it is not. Yes, there are people who try to scam newcomers into trading or to take advantage of what they believe, making quick profits, but trading in itself is not a scam. It really is a way to make money at home, even in your underwear, but it takes time and effort, so don’t believe the huge and instant returns that are promised and work on your own trading. Oh, and you should also keep an eye out for those dodgy brokers, but choose a good one and you should be fine.

### It’s All the Same

From the outside, all the different currency pairs look pretty much the same, the charts look pretty similar and they all work the same way. Fortunately, that is not the case, in fact, every single currency pair acts completely differently, they have different levels of liquidity, different levels of volatility and offer a new trading experience when compared to another. For this reason, it is recommended that you learn a single currency at a time, then move on to a new one, if you start with a load you will be confused and make losses. With so many different currency pairs to choose from, it ensures that trading will always be interesting and there will always be new challenges to look for.

### The Gambling Aspect

For some trading and forex simply looks like a gamble, there are only two outcomes, after all, the markets will either move up or they will move down. While technically true, there is a lot more behind it than simply that. There are thousands of different things that can influence the markets. News events, natural disasters, Donald Trump tweeting something, or just other traders thinking the markets will move a certain way. You need to take all of this into consideration, once it has been analyzed you can work out the most likely direction of the markets, it is not simply a 50/50 chance of it moving one way or another. Some people do of course come into it and gamble, but they very quickly learn that you cannot be successful by trading that way.

Managing your expectations is vital when it comes to trading, many people come into it with expectations that are far too high, thinking that they can make a lot of money overnight, this just won’t happen. If you have your expectations in the right place then you will be in a much better place to achieve your overall goals. Managing your expectations is vital for a successful trading career.

Those are some of the differences in the expectations that people have compared to the realities of trading. From the outside forex looks like a very different beast than it is from the inside. You don’t really know what is involved until you are in it and when you are, your expectations will be quickly broken as you realize what it is really about.

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## Investing In Silver (the Forex Way)

Many investors wonder how to invest in silver in the most appropriate way since silver has traditionally held up well to inflation and has contributed to the offsetting of investors’ portfolios. When everything else goes wrong, silver becomes one of the best investment alternatives, just like gold. In today’s article, we will analyze the different options with which we can invest in silver since the possibilities to invest in this unique precious metal are very wide.

#### Silver As A Refuge

It has usually been associated with silver as an active refuge, but it is much more than that, it is a natural element that has a multitude of uses in different fields, ranging from industry to luxury. Historically, gold has played a role closely linked to the monetary field. This historical fact is due to its properties, of which the five most important are the following: its scarcity, its durability or resistance, its divisibility, its homogeneity, and its difficult falsification.

#### Differences Between Gold and Silver

The main difference between gold and silver for investors is that silver has a much more industrial use than gold, therefore silver in relation to gold has to be more valued as a raw material. We do not want to claim that silver is a commodity per se, but in relation to gold, it is, on the other hand, if we compare it with steel, this valuation would change.

Because of this industrial attribute, there have been large discrepancies between the value of silver and gold. Gold has covered inflation, is an international currency, is relatively not very volatile, and is the stock of value par excellence. Silver however has great industrial use, has not covered inflation, and is quite more volatile than gold. For these qualities, it seems that having gold in the portfolio is more interesting than silver, but this also has good qualities, and depending on the period, silver has been a better investment than gold, as has happened recently. From the minimums of the pandemic to the maximums of the post-quarantine rally, silver was revalorized by more than 100%, while gold did so by around 30%.

The risks of investing in silver are not as limited as those of gold, but arguably, the main risk of investing in silver is mainly opportunity cost, because, if we invest in it is waiting for a recession and finally comes an expansive cycle, while the entire stock market goes up your silver investment will fall or fall flat. Another risk is deflationary pressure, since if a crisis comes, where silver is supposed to act better but is linked to a very strong deflationary trend, silver might not behave at all well, because this makes it better with inflationary tensions. Finally, there is a certain cyclical risk, since silver, when used industrially, can have a cyclical component depending on the economic cycle or industry in particular where silver is needed.

#### How To Invest

Undoubtedly, investment in physical gold is traditionally the most common form of investment and widespread option. It consists of the physical acquisition of a silver ingot, silver jewelry, silver coins, or any element that contains silver mostly in its composition. This option has the advantage that you possess silver physically. On the other hand, it has the disadvantage that you have to bear some storage costs because, being such a valuable product, most investors do not keep it at home.

In this sense, there are different companies that are dedicated to the storage of any gold product, and that offers you the possibility of buying gold physically but not having to store it, I mean, you own the amount of silver you buy and it will be 100% insured. To emphasize that the acquisition of physical silver is more related to the idea of acquiring the good more like a luxury good than as an investment asset.

Investing in silver through the stock exchange is a way of owning silver by means of a title that accredits a right over the silver and not by means of its physical possession. This way of acquiring, which as we will see below has many variants, has a more investment approach. As in most situations, it has pros and cons in each of its different branches.

#### Silver ETFs

Silver ETFs are traded funds that try to replicate the behavior of silver. Although the fund must maintain a legal obligation to have all derivative contracts issued backed by silver, the ETF holder owns that derivative contract (ETF) which replicates the silver price, and not a proportion of the silver reserve. In this way, the investor, who owns the derivative, is exposed to the yields of the precious metal.

The advantages and disadvantages of silver ETFs are a projection of the advantages and disadvantages of the overall investment in ETFs. Investing in a silver ETF and not in physics has the advantage that it requires a lower cost, both for the execution of the investment and storage. In addition, as they are listed in the market as any stock they have the advantage of having greater liquidity compared to investment funds, giving the possibility to liquidate the position at any time in the market.

On the other hand, it has the disadvantages that the investor did not pose the silver physically, but a title (right) on some silver reserves. There is the possibility that the ETF does not faithfully replicate the price of silver, depending in part on how the ETF is composed. The ETFs are subject to commissions in their purchase, it will be necessary to take into account what are the commissions that can charge us for the operation and what impact it will have on the replication of the silver price.

#### Investment Funds

These are funds that develop their entire investment strategy around silver, gold, or other precious metals, either by acquiring companies that develop activity within the silver sector, either by own acquisition of silver in any of its tradable forms or by acquisition of ETFs silver. In addition, they are also often exposed to other precious metals, which increases the diversification of the fund. In addition, as you comment later on it is very complicated to find companies that have only exposure to silver and not to more precious metals.

The advantages of investing in silver through this form are the professionalized management of the fund, focusing on generating value for the shareholder. At the same time, it gives the possibility to invest in shares or other funds where it is not possible individually.

The disadvantages are the costs associated with the management of the fund, greater than in the ETFs, which can weigh the profitability.

#### Listed Silver Companies

Investing in shares of listed silver companies is the most direct way to invest in silver. We will differentiate two main types of businesses that operate in the sector with different business models: pure mining and royalty companies. In either option, we are exposed to greater risk than in the rest of the alternatives, which implies that we can enjoy both higher profits and higher losses. Within these two, the business model of royalties can be more interesting and less risky.

Seeing all the conflicts that are currently developing, the lower interest rates, the US elections, and the real risk of a slowdown, or even a recession triggered by the coronavirus, It seems not unreasonable to think that people will continue to support their investment strategy in buying gold with the aim of reducing risk and further diversifying their portfolio. Therefore, we could be looking at a good time in the cycle to buy silver.

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## Forex Vs. Stock Trading: Which Carries More Risk and Why?

Is forex trading riskier than stock trading? And Why? To answer this question we must analyze what is the best market to trade, whether Forex or stocks, and that is what we will try to reveal in this article because a person who is just beginning in order to know the different markets you have to decide in which of them you will make your investment and two of the best options are precisely Forex or stocks.

Over time, money is losing value as a result of inflation and a large part of your capital may disappear if you don’t work. So what you should do is have your resources constantly work for you. In order to achieve this goal, one of the ways to achieve this is to become a trader, a race full of emotions that begins when you choose a market to start trading. In the following paragraphs, we will make a comparison between two giants of the modern economy: stocks vs Forex.

#### The Stock Market

Stocks are financial instruments that provide the ownership of a company. Depending on the number of stocks held, a person can become the owner of a business together with the other shareholders and is entitled to the profits (or losses) that are given. It should be mentioned that the percentage of the company controlled by the investor is equal to the number of its stocks. The higher the number of shares you have, the greater your participation will be and you will enjoy better profits.

Thousands of people and institutions gather in the stock market to negotiate securities that represent ownership of several companies listed on the market. The stock market has been the main asset exchange market since the time of the industrial revolution. But thanks to the arrival of new technologies and the expansion of the Internet, other markets have emerged that counterbalance traditional actions.

#### The Forex Market

Forex, also known as the currency market, refers to the market where participants trade and exchange coins from any country. Currency is how money is officially issued by a nation’s central bank and serves as a means of exchange outside and within a given economy. There are people and companies that carry out transactions from different nations, therefore it is necessary a scenario in which it is possible to exchange these different currencies.

“We will analyze the most relevant aspects of Forex vs Stocks to determine which may be the best investment.”

#### Ease of Access

Forex trading, in contrast to the stock market, is not based on physical stock exchanges but is OTC (over the counter). This means that negotiations are conducted via the Internet and people can access them anytime and anywhere, which translates into superb accessibility.

We must know that today, the negotiations with stocks (and in general with any financial instrument) are conducted via the Internet. Anyone who wants to trade, whether with currencies or stocks, just select a broker, open an account and download the trading platform. In this respect, both the Forex and stock markets are easily accessible.

#### Leverage

First of all, it should be borne in mind that, both in stocks and in the foreign exchange market, entry requirements are minimal and in some cases, it is possible to open accounts without making any deposits. An important element to consider is leverage, which can be accessed when negotiating. This leverage is like a loan that the broker makes to its clients to make a trade with more money than we have.

In the stock market, the usual leverage is 1:2 (you can borrow 2 dollars for every dollar you have of capital), while in Forex it can reach 500:1. There is no need to be too smart to choose the best option. The high margins offered by brokers give this point to the currency market. But…leverage can become a problem for some traders, especially for those starting out in this market. This tool allows you to multiply profits, but the same will happen with losses. So you need to use leverage with responsibility and knowledge.

Another aspect to compare between Forex and the stock market is the different trading costs. In Forex, commissions are usually lower due to the large number of brokers that exist. On the other hand, stock exchange brokers charge commissions, spreads, and other fees that can significantly increase commercial costs.

It may seem that these small costs do not have much incidence because they will mean a few cents, but as time goes by you will see how they add up and become a major expense. These small expenses can deplete a portion of your earnings. At this second point, the Forex market takes the lead with its higher leverage ratios and lower transaction costs.

#### Operating Hours

Probably the most obvious difference, when comparing Forex to stock trading, is trading schedules. The stock market is limited by timetables of exchanges worldwide. Forex is open 5 days a week and 24 hours a day. This Forex feature allows people to trade at any time, providing for investors who have traditional jobs. But, although the Forex market is widely accessible, there are hours with higher volumes and therefore better opportunities.

One of the features of Forex is that volatility and liquidity levels remain relatively constant over time, allowing traders to generate profits in the short term. However, that doesn’t mean that you should envy yourself to the market and spend all your time viewing the graphics. The market won’t go anywhere.

Another positive aspect of foreign exchange trading is that if you open a position and get important information that forces you to close the position, you can do it immediately without waiting for the opening of the stock exchange. When deciding between trading stocks or currencies, the advantage of Forex is obvious. Its great accessibility is a plus.

#### Diversity of Offers

One of the most diverse markets is the stock market. There you will find the stocks of hundreds of open capital companies belonging to a wide variety of sectors and industries. This may seem positive, but such diversity can become confusing and prevent a quick analysis of available options. Can you imagine having to analyze hundreds of stocks and then buy just one of them?

Looking at the Forex market versus the stock market, it is possible to show that with currencies the scenario is significantly different. In Forex, the most quoted instruments are the so-called major pairs (groups of currencies composed of the most important currencies) and the US dollar is part of the vast majority of transactions. A trader who is aware of the key factors affecting the dollar will have a good overview of the other currencies.

Similarly, most Forex brokers offer one more possibility: CFDs (difference contracts). These instruments allow transactions with different assets without actually having them. ¡ That means even on Forex you can trade stocks! And so, when comparing Forex vs stocks, it is the currency market that takes the lead once again thanks to CFDs.

In conclusion, thanks to its greater accessibility, vast amount of possibilities, and superior freedom, Forex manages to position itself as a better investment option than stocks. While it is true that Forex risk may be higher because of increased leverage, we have options to have good risk management and minimize them.

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### Leverage

The first advantage that we are going to be looking at is leverage, but before we work out why it is good, let’s get a little understanding of what it actually is. Leverage basically allows you to borrow the money that is needed to make a trade from your brokers. It allows you to place trades that are far larger than your balance would otherwise allow you to make, this is one of the reasons why it is so sought after. So if we take a simple example, let’s imagine that you have a balance of just \$100, you would not be able to place much with a 1:1 leverage on the account, so we go for a 100:1 account. This means that for every \$1 that we have in our account, the broker will top it up to \$100, so will add \$99 themselves. So that \$100 account is now acting like a \$10,000 account, allowing you to make far more trades. Of course, some brokers go higher, at 500:1, 1000:1, or even 2000:1, the latter two are a little too high and the 500:1 seems to be the sweet spot.

### Liquidity

The forex markets are one of the most liquid markets in the world, this simply means that there is a lot of money available to be traded at any one time. Liquidity is basically defined as the ability for a currency or asset to be traded on demand. As the forex markets are so liquid, this basically means that you are able to trade at any given time whenever you want, and the more liquid that a currency pair is, the lower the spread cost that comes with it. With high levels of liquidity also comes a certain level of calm, the markets will not jump up and down as violently when there is a lot of liquidity in the markets, making it a slightly safer investment opportunity. While the forex markets as a whole are incredibly liquid, there are some pairs that are a little less liquid and so the spreads may be higher and there may be larger jumps in those currency pairs.

Some of the higher liquidity pairs include EURUSD, GBPUSD, USDJPY, EURGBP, AUDUSD, USDCAD, USDCHF, and NZDUSD. Some of the lower liquidity pairs include the exotic pairs such as PLNJPPY, these sorts of currency pairs cannot be purchased in huge lot sizes due to the lack of liquidity, however, with smaller trade sizes they can offer large jumps and large potential profits and losses.

### Volatility

Volatility within the forex markets is basically a measure of the frequency and the size of changes to a currency’s value. If something is described as having high volatility, this simply means that that currency or currency pair has frequent movements within its market price and those movements can be sharp and large, whereas a currency that is considered to have lower volatility will simply move up and down at a more controlled pace and those movements will not be as sudden and the price is far less likely to simply jump up and down.

Both high and low volatility pairs can offer us some advantages as a trader, if we take high volatility, the profit potential of these pairs is far higher than low volatility pairs. Imply due to the fact that the markets will be moving a lot more and when they do move, they move a much larger distance. So a single trade on a highly volatile pair has a lot higher profit potential in a shorter period of time than one on a low volatile pair. Having said that, there are advantages to a low volatility pair too, they are much safer to trade, you do not need to worry about any sudden jumps in the wrong direction and they are often considered as being a lot easier to predict. The slow movements allow you to constantly analyze the markets and changing conditions, allowing you to get in and out at a much more comfortable level. Which one works for you the best will simply come down to your own preferences and your own trading style.

So that is Leverage, Liquidity, and Volatility, all three offer you very different advantages to trading forex, and combined they are the reason why forex trading is becoming so popular for both professionals and retail traders. Ensure that you get an understanding of how each one works, this will enable you to much better maintain your account and to understand the risks and advantages that you are getting from your account and the markets that you are trading. Do not be afraid to experiment with different pairs that offer different volatility and liquidity, part of being a good trader is trying out new ways to make a profit.

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## How to Correctly Use an Economic Calendar

The Economic News Calendar, also known as the calendar of economic events, plays an important role in the life of every trader and investor in the world, whether this is a minor trader who speculates with a personal account or an operator trading as part of an institutional trading network (institutional operators). An economic calendar is a tool that shows the fundamental events that affect the trading environment of financial markets.

In financial markets like Forex, there are certain announcements that are made with some frequency that highlight very important events in the socio-political and economic world. These announcements come from government agencies, central banks, private organisations, lobbyists and others, and can sometimes serve as reference points on which economic policies are based and strategic movements are made in the business and political landscape.

For example, the onset of the global financial crisis led Governments around the world to respond in a political manner in accordance with how their countries and Governments were affected by the events from 2008 to 2010. In the eurozone, the sovereign debt crisis has boosted the change of governments, the implementation of economic policies and decisions. In the United States, we saw the birth of the Asset Rescue Program in Trouble (TARP), several major bailouts, and the easing policies of the Federal Reserve Bank. Several of these decisions were made around the world, changing the aspect of the calendar of economic news as we know it, forever.

The globalized nature of the world today means that these announcements directly affect the global economy, with far-reaching effects on how we live our lives and how future events will shape our future. Financial market operators have had to come to understand how these announcements affect the investment climate in a country, region, or global markets, and depending on the content and tone of these economic announcements, positive or negative sentiment in a currency, market or economy can develop. This in turn leads investors to operate in different markets in a certain way, as a result of the volatility that occurs. These ads are known as market news.

Market news is not published randomly but is published according to a well-planned month-to-month calendar, in a full-year cycle. This economic news publishing program is what is known as the economic calendar. For Forex traders, it is also known as the Forex calendar or Forex news calendar, because most of the news it shows has an immediate and direct (and sometimes lasting) impact on the currency market. Indeed, the economic calendar affects all markets, although the degree of affectation varies.

### Components of the Economic Calendar

What is the Economic News Calendar made of? What is in this tool that traders need to consider? Here is a detailed description of the specific components of the Economic Calendar:

The date and time of publication of each economic news item included in the calendar. In this case, the operator can clearly see the exact time when the news will be released, which usually appears in Eastern United States time by default. Some economic calendars have tools that allow the operator to change time settings to match their local time. However, the global standard of reference is eastern time in the United States. Therefore, the operator needs to know how far from the Eastern Time Zone of the United States its own time zone is, in order to know the moments of the day when it must be attentive to the markets.

The economic news itself. Logically the trader should know what is economic news to be published and with which he is trying to act accordingly.

Below is a nice video created by Trading 212 regarding Economic Calendars…

In the case of Forex, the currency of the country of origin of each news item. This is the currency that is usually affected by the news, and therefore traders will be on the lookout for the currency pairs in question to see which pairs present the greatest trading opportunities. Usually, the ISO abbreviation of the currency will be displayed, or the flag of the country with the affected currency will be displayed.

The degree of impact on the market of the publication of the news. This is an indication of how strong the impact of the news can be on markets, measured by the degree of market volatility and the range of price movements. News on an economic calendar is classified into low-impact (green), medium-impact (amber), and high-impact (red) economic news. Some calendars will use the colour codes next to the news, while others may use stars (*) to indicate the degree of impact on the market so that the highest-impact news has a 5-star rating (*****) and low-impact news has two stars or even a single star.

Some economic calendar providers will display a «Detail» box. Operators can click here for more information on a particular news item, as well as the impact on the market in case there are higher than expected or lower than expected numbers.

Economic calendars usually show the previous value, expected value, present value, and revised value of each economic news item. This is where traders can get information about the benchmarks for each data and the actual numbers of the news as it arrives. Some providers provide a historical chart or template that shows the performance of a particular story in recent months or years for comparative analysis.

### Sources of Economic News Calendars

The economic calendar can be obtained for free on the websites of almost every major Forex broker. There are also other external providers that can be useful. It is up to each trader to search the websites of Forex brokers, online market analysis sites, online forums related to markets, and analysis service providers to find a good economic calendar that offers complete and up-to-date information. Different economic calendar providers can add certain features that will make their calendar versions more attractive. This does not affect the dates and times of publication of each news item.

### How to use the Economic Calendar?

Now that we know what the content of the economic calendar is, it is essential to understand how to use it correctly. While there are no strict rules on the use of economic calendars, here’s a guide on how this tool can be used to trade in markets like Forex.

Rule 1: Always study the news program on the economic calendar in a block of time of an allowance, and do this for the following month in advance. This is so that the trader can take note of the high-impact news and the dates and times on which this news is scheduled for publication. This allows you to plan your operations accordingly, so that you do not have open positions that may be negatively affected by the publication of the news, eliminating its gains or significantly increasing the unrealised losses of losing trades. It is impressive how many traders simply ignore this simple fact, at their own risk.

Rule 2: Use world time tools (showing the current time in any time zone) available in the search engines to know the time difference between the local time and the time shown in the economic calendar. This will allow you to adjust your time settings accordingly. This will help you not to miss the negotiation opportunities that will bring particular economic news.

Rule 3: Use historical data to study how a particular story affects markets. If you want to know what is the way in which a currency pair or index will react to the publication of a certain economic news item (as an important economic indicator), then the most appropriate response might be to study your past behavior using historical data and graphs. This will prevent a trader from setting a profit goal of say 100 pips, for a story that will only move the market around 50 pips, for example. It will also help to know whether an individual economic news item is unstable.

Rule 4: Trading only with high-impact news is recommended, as these are the events that move markets and create the volatility needed to produce good trading opportunities. Low-impact economic news does not create enough volatility, and therefore is not suitable for high-profit markets because it generates small-scale movements.

Rule 5: Use calendars that have automatic update tools that add the current numbers to the calendar at the time the news is published. This will help you closely monitor your operations.

### Conclusion

In summary, we can conclude that an economic calendar is an important tool for traders in all financial markets. It must be used in a complete and correct manner so that operators can derive the maximum benefits from the information it provides. Sometimes an operator may have to combine two or three calendars in order to get everything they want from an economic calendar, as some may have additional features and have shortcomings in other respects.

Trading is mainly based on planning. Knowing the economic calendar well in advance can help the trader to plan his operations in such a way that he does not end up trapped in some of the surprises that may occur during economic news publications.

Also, note that the market is constantly evolving. Some economic news that was low-impact a few years ago has become more important to markets and has a high impact due to the emergence of new sectors that are now engines of the global economy. An example of this is housing data in the United States. Before 2006, some of the housing sector indicators were not very important, but as the subprime mortgage crisis was identified as the main cause behind the global financial crisis, US housing data has become a highly monitored economic news item.

Finally, the trader should be aware of adding new economic news and removing some that are irrelevant and even archaic. Some of this news can be highly impacted, such as the JOLTS employment report from the United States, which was born out of the labor sector crisis in that nation.

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## Forex Isn’t As Difficult As You Think: Here’s Why…

With all the warning signs that you got all over the place about trading, the little notices that say things like “Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 77% of retail investor accounts lose money when trading CFDs with IC Markets (EU) Ltd. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.” You would think that trading would be pretty hard wouldn’t you? Well, the truth of the matter is that trading forex is simply not that difficult, at least not as difficult as you may think it is.

That is quite a bold thing to say, considering so many people have lost money. In fact, a lot of people have lost everything that they own due to trading, but is that because it is hard? Or is it due to the fact that there may have been some flaws in their plans, or even in their own personality which has caused them to lose, or maybe it was simply the unfortunate event where they signed up with a scammy broker or apparent account manager. Whatever the reason was, there are things that you can do to prevent these losses and ultimately make forex trading a lot simpler and dare we say it, easier.

The concept behind trading is simple, we are taking one currency, converting it to another, and then converting it back once the price of the currencies has changed. If they change in the right direction then we profit, if they change in the wrong direction then we lose. That is the very basic concept of trading and why it is fundamentally very easy to do. All you need to get started is a broker, of which there are thousands, a little money, some brokers allow you to trade from as little as \$10, and an internet connection. You can then use your phone or computer to load up an application and start trading, that is as easy as it is to start trading.

So if it is so easy, why do so many people fail and lose money? The simple fact is that they did something wrong, it was not the markets that did anything wrong, they work how they work. It is up to use to analyse and work out what it is that they will be doing, something that a lot of these losing traders did not do due to either a lack of knowledge or simply not being bothered and wanting some quick profits. Trading and forex are not rich quick schemes, even though it is described like this in various places. It is a methodical, long-term endeavor that takes patience and understanding.

Forex is all about creating a plan and then sticking to it, if you are able to do this then there is a good chance that you could end up being a successful and profitable trader. When we start trading we always need to create a trading plan, this plan then includes a number of different things like our strategy and our risk management plans. These things combined make it so that trading can become a lot simpler, it can be a lot more straightforward and more importantly, it can become a lot easier.

Your trading plan should involve creating your strategy. It is important to understand that you need to develop a good understanding of your strategy. Simply having one is not good enough, you need to understand how it works and also why it works. Doing this will enable you to adapt things should the market conditions change, and they will change, regularly. Being able to adapt will mean that you are able to maintain your profitability and also keep risks low in multiple different trading conditions, something that a lot of new traders fail and so end up losing out.

The other and arguably the most important thing that you need to have in place in order to make trading more successful and easier is our risk management plan. This will set out the different aspects of you trading that is to do with risk Your risk to reward ratio will detail how much you will risk on each trade and how much you are aiming to profit. With this being a positive ratio, 3:1 as an example, you only need to be right 33% of the time in order to be profitable, something that is much more achievable than some people who try and be right 80% of the time. This risk management plan will also detail things such as where you will be putting your stop losses. Trading without a stop-loss, putting extra risk on your account, is not something you want to be doing at all.

The final tip to give you is simply the fact that you need to ensure that you are not taking on any scams. There are a lot of them out there, do not take people’s word for granted and if something looks like it is going to be too good to be true, it most certainly is, so beware. Trade yourself, learn yourself and you will thank yourself for it, as you will be able to trade for years to come and will be able to adapt should you need to, not something you would be able to do if you were relying on someone else.

Trading seems very difficult from the outside, especially with all the warnings about it, but when you dig a little deeper there are things and rules set in place that are there to protect you. These are there to make things easier for you and they are there to help you to be profitable. Do not rush in, plan your trades, plan your education and things will end up being a lot easier than you may think they are.

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## How Much Money Should I Risk On Forex Trading?

Novice traders are often surprised to learn that when it comes to being profitable in the long run, controlling risk is as fundamental as making good trades.  Position size, Risk, and money management are no less fundamental than entry strategies and trade exit strategies and must be considered scientifically and completely. If you succeed, then as long as you can maintain a trading margin (which is not so complicated, there are several well-documented trading margins), you will have a solid model to make a lot of money. You don’t need to choose spectacular trading operations to make large amounts of money, you just have to keep doing the right thing constantly, and let the magic of managing money be composed of snowballs growing from your bottom line. To get it right, start by asking the right questions.

##### How much money should I put into my trading account?

You have hired an account with a broker, and are ready to start trading. Just deposit some cash. How much should you put? You should be honest with yourself, and consider how much money you have that is available for wealth creation. It should not include assets such as a house or car in that calculation, or pensions: the correct question would be, how much free cash can you get in your hands, without debt, and use it to try to increase your profits? When you have this figure, you should be thinking of placing between 10% –  15% of it in something risky, like Forex Trading. You may think this is a small amount, but it really isn’t – please read on and I’ll explain why.

##### The risk or “Barbell”

Imagine that there are two traders, trader A, and trader B. Both have USD 10,000 in liquidity, which is all the cash that each of them can get to invest in creating wealth. After opening brokerage accounts, Trader A invests its \$10,000, while Trader B invests 10% of the same amount, \$1,000, while the remaining \$9,000 is invested in United States-guaranteed Treasury bonds that pay a low interest rate.

Consider your respective positions. Trader A will be at a psychological disadvantage, as the account represents all the money he has, so the losses will probably be painful for him. You also need to worry about the broker, lest he files for bankruptcy and be unable to repay any of his funds back unless the broker is backed by a government deposit insurance program and obviously as we always recommend, will have to be a regulated broker.

Even then, its capital could be held back for over a year before he could get any insurance. Because of his fears, even though he knows that the best risk per trade for his trading strategy is 2% of his share account per trade (explain the issue of how to calculate later), he decides to risk less than this. He decides to risk only one-tenth of the total amount, so he will risk 0.2% of his capital on each operation.

Both Trader A and Trader B will start by risking the same amount per cash transaction, \$20.

Trader B, with the account under \$1,000 and the \$9,000 in US Treasury bonds, ends up with a total profit of \$811, of which \$117 is interest received at the end of the year on US Treasury bonds. Trader A, with the largest account of \$10,000, ends up with a total profit of \$627. Although they initially start with the same risk, if they diversify risk capital between a very conservative fixed income and a more risky investment, it pays Trader B a significant profit and gives her the peace of mind to aggressively play the risk as it should be.

##### How much money should I risk?

This is not a difficult question to answer if you know the average or average benefit you can objectively expect to make in each transaction and are only interested in maximizing your total long-term benefit: use a fixed fractional money management system based on the Kelly Criteria (a formula to will be explained in more detail in the next paragraph). A fixed fractional system has the risk that the same percentage amount of the value of your account in each trade, as shown in the above example of Traders A and B using 0.2% and 2%.

Fixed fractional money management has two major advantages over other strategies. First, you risk less during losing streaks, and more during winning streaks, when the effect of composition really helps to build the account. Second, it is virtually impossible to lose your entire account, as you are always risking X% of the remaining, and never everything.

The last question is, how is the size of the risk fraction calculated? The Kelly Criterion is a formula that was developed to show the maximum amount that could be risked in a trade and would maximize the long-term benefit. If you know your approximate odds for each operation, you can easily calculate the optimal amount using a Kelly Cries calculator. In the best Forex strategies, the amount advised by Kelly’s formula is typically between 2% and 4% of the capital account.

A warning: the use of the total amount suggested by Kelly is bound to result in large reductions after losing the veins. Some veteran traders, such as the prominent Ed Thorp, have suggested using half the amount suggested by a Kelly Criteria calculator. This generates 75% of the long-term benefit, but only 50% of the reduction, produced by the full Kelly criteria.

##### Monetary management: Part of “Holy Grail”

It’s no exaggeration to say that the main reason why traders still fail, even when they’re following the trend and getting their inputs and exits mostly right, is because they are not following the money and risk management techniques set out here in this article, as part of a global trading plan. Forget the trade result you take today and worry about the overall results of the next 200, 500, or 1000 trades you will take in your place. If you are able to make a profit of only 20% of your average risk by trade, which is feasible using a trend-tracking volatility-breaking strategy, it is totally possible to turn a few hundred into a million within a few years.

In this article what I want to tell you is one of my strategies that is working well in real life using the CAD/JPY pair. Why this pair? I have chosen this pair as an example but will show you different trading systems using different currency pairs.

#### What is the Strategy Based On?

In a very simple system, you will know that my systems are characterized by that. The reason is that they tend to be the ones that last the longest and the most robust. You’d be amazed to see the simple systems that exist that have been producing good results for years and years.

First of all, what I’m going to show you next is a profitable, not perfect Forex trading system. The curves without falls or volatility are left to the martingales and gurus.

1.1 Criteria for entry

We will enter the market by purchasing in the CAD/JPY pair when there is an upward turn in the Accumulation Distribution indicator and the price opens below the simple moving average of 19 periods. We will do the opposite (we will enter shorts in CAD/JPY) when the AD spin is down and the price opens above the average. As I write this article we are short on this pair indeed.

1.2 Exit criteria

We will close the position we have taken provided one of these conditions is met:

1.2.1 Output per indicator

We leave the buying position when the Williams Percent Range indicator falls below the marked level (59, you can see in the chart above). We will also close our short position when it passes this level.

1.2.2 Exit by stop or profit

If the indicator has not already given us a sign of closure, we will do so when our operation reaches the loss limit of 60 pips (stop loss) or we have reached our profit target (take profit) of 220 pips. The interesting thing here is that a winning operation compensates us for more than three losing trades since when we achieve 220 pips we can lose three out of 60 and still not have lost money.

#### Statistics of the System

With the well-defined rules of our trading system, let’s see how it has behaved in recent years and what the main features are. Note that this system has not been optimized.

The stability in the balance line, as its name indicates, measures how the return curve behaves. Our goal is that it is as stable as possible and that there are no abrupt drops. The closer to 100 the better, so an 81.73 is good data. In addition, it is important to note that we have a sample of 300 trades so it is a significant sample. If I show you this strategy with 40 trades and it is winning, it can be a chance. Logic tells us that the larger the sample, the more reliable will be. Remember that we seek to minimize chance and bring statistics to our advantage.

It’s very important to know that you have up to 11 consecutive losing trades, but considering that the risk-to-profit ratio is 1:3, it is acceptable. One of my favorite parameters when choosing a trading strategy is the profit factor or profit factor. A PF above 1.5 is good. This ratio tells us how much our system earns when it pays compared to how much it loses when it loses. Simply put, our system on average earns more when it wins than it loses when it loses. And we’re very interested in this.

Another star point for me within a trading system is return/drawdown. Why? Because it is a yardstick to measure what has fallen the profit curve and that profit obtained. When you do real trading you don’t only care about the return, but you care about how to get that return and try to minimize these drops. A ratio of 7.48 is more than okay.

#### What Can We Expect from this Strategy?

Let’s see how this strategy behaves by comparing buying and short transactions. Not bad. Both when the CAD/JPY pair has maintained a trend and when the pair has steered without a clear direction the lengths and the shorts have remained stable. Now we see those falls as they are. There are no peaks too strong and they are also kept under control.

#### Is It a Forever Strategy?

This strategy is not the only strategy I apply and it will not last forever. It is a strategy of a portfolio of systems that I apply in an automated way in Forex. It is a portfolio that rotates with rules of connection and disconnection of systems depending on their behavior.

You must understand that there are trading systems whose statistical advantage disappears and that you must therefore stop trading. This is nothing else that stops being profitable because a certain pattern is no longer profitable. This happens on a day-to-day basis with some businesses, with trading also happening, for example, when a large number of traders exploit a method. The advantage disappears, therefore.

Instead of applying or learning the foolproof method of trading on Forex or any other asset, learn to measure what you are going to apply before, during, and after. If you can measure, you can improve, but above all, you can make informed decisions.

#### Is This the Best Strategy Ever?

The goal of this article is not to remove the arsenal. But it is a system that I have been applying in real life with good results. The important thing is that you understand that a simple strategy can work very well over time, that you need data to evaluate it and criteria to manage it. And that this is all just a work plan.

Categories

## How to Start Investing in Forex

Forex or Forex Trading is a market, also known as OTC (Over-the-counter) and is the largest market in which billions of dollars are executed daily. It’s even bigger than America’s stock markets. But given its OTC nature, no trader can really calculate the correct numbers regarding currency rotation. However, foreign exchange is in fact a large market and is therefore integrated by many participants. From your bank or from large specialized investment firms, foreign exchange markets always offer a piece of the action to whoever you are and wherever you are (even from home).

The basic concept of currency trading is very simple. You trade or speculate against other traders in the direction that you take a currency. Therefore, if you believe the euro will rise, you WOULD COMPARE the euro, or SELL the euro if you are convinced that the euro would fall. It is as easy as that.

### Learn the Fundamentals of Currency

Before you prepare to deposit your funds and start trading there are some important points you must understand, each of which are described below.

Brokers of the Forex: To start trading with Forex, you will need to operate with the help of a foreign exchange broker. There are many currency brokers that allow you to open a forex account with just \$5 dollars. The forex broker is the one who allows your purchase and sales orders and also allows you to investigate the markets (also known as technical analysis or fundamental analysis) to help you make the best decisions…and obviously allows you to deposit more funds or withdraw your benefits whenever you want.

Trading Venue: You need to have a trading platform from which you can conduct your transactions, which are then sent to the settlement broker. In addition, a trading platform is essential to enable it to carry out its technical analysis and also to view current market prices. Most retail brokers offer the MT4 trading platform (Metatrader 4), which is free. You can also open a Forex Trading demo account and practice trading with virtual money forex to gain the necessary experience before trading with real money.

Timetables of Forex Trading: While you may have heard that currency markets never sleep, you really do. Firstly, you will not be able to trade on weekends (Sundays and Saturdays). But for the other days of the week, the currency market works 24 hours a day. This is due to the fact that currency trading is global. At any time, you will always find an overlap of a new market session while closing the previous market. What time of day or what trading market session plays an important role if you are an intra-day trader or a scalper? Now that you already have an overview of Forex trading, here are some final tips to remember before you start trading for yourself.

Pips: Pip is a measure of the change in the value of a currency pair and is the fifth decimal place. For example, if EUR/USD changes from 1.31428 to 1.31429, the change is called 1Pip (1.31426 – 1.31427 = 0.00001). When you negotiate, the more pips you make, the more benefit you have. Example: Buying EUR/USD at 1.31428 and selling (or closing your trade) at 1.31528 would give you 100 Pips in earnings.

Quotations for the Reading: Forex quotes are presented at a Bid and Ask price (which vary in pips and from one broker to another). The price of the Offer is the price at which it can be bought and the Selling Price is the price that can be sold. Therefore, a EUR/USD quote would look like this 1.31428 (Bid) /1.31420 (Ask).

What is the Spread? Spread is no more than the difference between the price Bid and Ask. Therefore, in the above example, for 1.31428 / 1.31420, the spread would be 8 Pips.

What is an Asset Leverage? Leverage is the amount of capital by which you can ask your broker to expand (or increase) its trading value. Leverage is often quoted in relationships like 1:50, which means that when you trade with a leverage of 1:50, your \$100 is magnified to \$50,000. Leverage is very important both in terms of making more profits and risk management and therefore its operations.

What is a Batch? Much is a unit by which you conduct your trade. In financial terms, much is also known as a contract. There are pre-established lots (or contract sizes) that you can negotiate. For example, a standard batch is no more than 100,000 units (known as 1 batch).

Tables of the Reading: The ability to understand and read graphics is very essential for trading. Depending on your approach, you have the ability to choose between a line, bars, or candles and trading accordingly (for example, trading based on candle patterns).

Placing orders (How to buy and sell): In Forex trading, it is possible to buy or sell any currency pair. Most trading platforms give you this option. You buy when you think the price will rise and you sell when you think the price will fall. There is common terminology used in foreign exchange trading, which is Buy Low, Sell High; that is an important point to remember.

Types of Orders: In addition to buying and selling, another point to remember is the types of orders. There are two types of basic orders: market orders and pending orders. At the time of clicking on “Sell” or “Buy”, you are basically buying (or selling) at the current market price. On the other hand, a limited order tells the broker that he wants to buy or sell only at a certain price.

### Find a Forex Broker

As mentioned, there are many Forex brokers in the market today and therefore you may feel extremely confused about how to choose the currency broker that is right for you. To summarize briefly, remember the following points when choosing a forex broker. Look for a regulated Forex broker, this is extremely important to stay away from scam situations.

• See if the broker sets a minimum deposit
• What is the advantage you have with a broker?
• What is the minimum size of the contract you can negotiate?
• Types of deposit and withdrawal, as well as terms and conditions
• Trading methods allowed by the broker

### Start Operating

Finally, now you have chosen a Forex broker to trade with him, it is recommended to first open a demo account or a practice account. Most Forex brokers offer unlimited demo trading accounts (but will be disabled if not used for 30 days). This is an excellent way to be familiar with foreign exchange markets and also help you understand your style of trading (scalper or intraday trading, swing trading, etc.) and approach (fundamental or technical analysis). You can look for various commercial methods and systems or you can develop yourself when you have an excellent knowledge of the technique or fundamental indicators.

### Conclusion

Forex trading is one of the most dynamic and active forms of trading in financial markets. The heart of everything is the basic fluctuations in currency values that drive everything else. Learning to trade Forex and understanding foreign exchange markets can provide a good basis for trading other markets such as derivatives or equities.

Categories

## How Is COVID-19 Impacting the Forex Market?

I’m not here today to talk about algorithmic trading or systems or tools. I’d like to tell you something that is in the focus of traders in recent days and especially because it is an important issue because it affects the lives of many people. As you know, if it affects people’s lives it affects the economy and, of course, the currency market. But how does the forex market react in this environment? We’ll tell you…

I’m sure you’ve heard of Covid, but just in case, let’s discuss. It is a virus that we can catch through the mouth, ears, nose, and even the eyes and affects the respiratory system. Symptoms are dry throat, cough, sneezing, muscle cramps, breathing problems, high fever and can be as fatal as kidney failure leading to death.

It seems that there is a consensus and that the virus started in Wuhan (China) in about December 2019 last month and has traveled through Japan, Thailand, and now America. There are several hundred people infected and he has several deaths on his back.

#### How Coronavirus Impacts Markets

Understanding history will help us understand the reaction of markets in a similar case, bearing in mind that each circumstance is different from the previous one. The outbreak of the virus is reminiscent of the SARS pandemic in 2002 and 2003 that killed some 800 people, most of them from China and Hong Kong, according to World Health Organization data.

SARS had a significant impact on Asian currencies, in its rates and actions from the point where infections were officially identified by the World Health Organization in February 2003 to the peak of new daily infections.

How many times have we already warned that the markets least like fear and uncertainty? With this background, the investor keeps his portfolio and prefers to be out of the market before possible strong movements that affect him in a bad way. This leads to falls in global indices and greater volatility in the foreign exchange market.

#### Coronavirus and the Currency Market

To the point, Ruben. It is clear that because of the nature of the coronavirus the currencies that are most affected are the Asian ones. The Japanese yen (JPY) is acting as a refuge, as it usually does in times of economic uncertainty. That is why we can see in most crossings how it is being strengthened with respect to other currencies. The Chinese yuan (CNH) is looking very weak and in most pairs, we can see strong movements down the currency.

Also important is the Australian Dollar (AUD) which, due to its direct relationship with China, is being negatively affected. This is because of Australia’s trade relationship with China. Any signs of slowdown or risk directly affect AUD.

#### What to Do As a Trader

It is impossible to predict what happens with active x and establish clear rules for buying or selling in these situations. The ideal is as we always say to rely on cost-effective systems that have an advantage and management with connection and disconnection rules. Systems should be created by already contemplating data or market scenarios with high and low volatility. That being so, you should have no problem when events happen. Manage your systems as if you were a watch and adjust your risk so when the volatility is triggered it affects you as little as possible.

There are traders who prefer to stay out until everything happens, fully understandable as well. But remember that most of the time there’s going to be some event that’s going to create uncertainty for you.

Categories

## Deliberate Practice Trading: What It Is and Why You Should Be Doing It

You would have most likely have been told plenty of times that if you want to be good at something, you will need to practice, practice and practice. The same goes for trading, you will only become truly good at it, or more efficient at it if you put in the work and practice. The practice needs to be focused though, you need to concentrate on a specific aspect of your trading, if you are struggling with your analysis speed, then there is no point in practicing other aspects of trading. Doing these things over and over is known as deliberate practice, the idea of doing the same thing over and over so that you improve on it.

Practicing is not all about the simple thing of doing something over and over though, in order for it to be effective you also need to have some additional aspects thrown in, if you are practicing something, how are you going to work out whether or not you are doing better now than you were before? You would of course have some form of measurement, a way of seeing your progress, and a way of ensuring that you are in fact getting better at what you are doing.

If you are going for your analysis time, simply start a stopwatch before you start and then end it when you finish, this was you can see the progress, of course, this is tricky in this regard as different analysis takes different time, especially if there is more happening in the markets, so ensure that whatever way you measure it, it is recordable and has as much information that is needed to make it relevant. So when we look at the art of deliberate practice, we can break it down into three different stages:

### The Act

The act is simply doing what it is that you need to do, the result of what you do doesn’t matter, it can be either successful or not successful, this does not matter. The important thing is that you tried to do it and that you tried your best. When we think about this in a trading scenario, it is simply the act of putting on trades, either in demo or in live (although if you are just starting out then we would recommend demo trades).

### Feedback

One of the things that many people find hard is to give themselves some honest feedback, people often either go too nicely or too harshly on themselves. So instead you need to be able to give yourself some third-party feedback. You can still do this by yourself, but it will require you to record everything that you have done and everything that there is to know about each action that you have taken. This will then allow you to look back at it from a new point of view to see what has gone wrong and what has gone well. Keeping a trading journal is perfect for this.

### Incorporation

The third stage of trading is the incorporation of the information you have received. This is where you need to look at the feedback that you received and then put it into action. If there is something that is constantly going wrong, then stop doing it, look at what it is and adjust it to hopefully be more successful. If you do this with a new aspect every single day then you will be slowly changing your routines and your trading habits to be better suited and more successful. Constantly going through the three cycles will keep the improvements coming through this form of practice.

Those are the three stages of deliberate practice, but we need to remember that it doesn’t always start out easy, trading and this form of practice get easier and quicker the more you do it. When you first start out you will be pretty slow, working out what to write down and then working out what it actually means. The more that you do it though, the better you will be at it and the quicker the entire process becomes.

There are however things that people do, and do quite a lot which can hamper the progress of this form of deliberate trading, so let’s take a little look at what they are, remember, these are things that you need to try and avoid as much as you can, as they will only end up setting you back.

### Mindlessness

The act of deliberate trading as we discussed above is all about repeating a certain action with the mind that you will be improving it. The problem comes from that old saying of doing something for 10,000 hours and you will be an expert. Unfortunately, this is not the case. If you are simply doing something over and over without understanding why you are doing it, or mindfully recording what you’re doing, then the work that you are putting in is pretty much useless. Simply repeating something does not mean progress, you need to have a focus on the errors and then rectify them, not simply doing it over and over again.

### Inconsistency

Being consistent is important, at the start of the process you need to be consistent in order to properly work out where the weak spots are and what it is that you need to improve. Once you are past that initial stage then consistency is important in order to ensure that you are constantly doing the right thing and that you will not end up falling back into the bad habits which were causing the issues in the first place. Track errors, change them, and then keep them changed.

### Not Tracking Progress

You need to be tracking your progress and what it is that you are doing. This cannot be said enough as even when not doing this form of practicing, you should be tracking what it is that you are doing. If you aren’t doing this, how are you going to know whether or not you have made any progress? The simple answer is that you won’t. We understand that it takes up time and that it can be boring, but it is so vital that you do it that if you manage to forget, it makes the entire process completely pointless and a waste of time. So set up a trading journal, you will thank yourself in the long run, as there are very very few successful traders without one.

### Pride

Pride can be a good thing, being proud of the work that you do is always good, but you don’t want to let it take over. If you do, then it can cause you to simply stop improving If you are too proud of your work, why would you need to improve it? It’s already perfect. If you have this mentality then your progress will simply stop and you will just keep on doing exactly what it is that you are doing. So don’t hold onto things too much and remember that anything may need changing at some point, just be open and ready when it needs to be changed.

Have you been practicing or do you plan on doing it? Just remember to always be open to changes, record what it is that you are doing and you will be able to improve on your overall trading. Practice can be fantastic too, so as long as you understand why you are doing it and not simply aimlessly doing something over and over again.

## How to Achieve Financial Freedom Through Forex

In this article, I will present a practical guide with the 3 key points to achieve financial freedom. This means that someone who does not follow these premises will not be able to reach it, but the odds of becoming financially independent are much higher considering everything I am going to tell you next.

What is Financial Freedom?

Financial freedom is to be able to spend your time in the way you prefer, whenever he receives a regular income that allows you to live well by bearing all your expenses without having to work to get a salary. That is, to invest money in certain assets until they generate a higher income than our expenses. That’s what we call financial freedom. This sounds very nice, and it’s also very easy to say, but we know it’s hard to get. Although not impossible…

Normally, people have a job, to which we dedicate about 40 hours a week or so, and for which we receive a salary that allows us to live. In this situation, it seems a utopia to be able to generate revenue on a regular basis without the need to exchange our time for money, but believe me, it is possible.

Why Should Financial Freedom Be Achieved?

It’s not an obligation. If you are completely happy working 8 hours a day and you would not like to do anything else during those 8 hours more than your tasks at work, and you think you will be able to continue working in the same until 65 years (minimum), you’re probably not interested in financial freedom.

Now, imagine that every month you were given an amount of money that allowed you to live well without the need to go to work. In that case, we can say that we are free financially, so if really what we want at that time is to work… Great!

The Fundamental Requirement for Financial Freedom

Most importantly, bearing in mind that if we do not meet this requirement we will not be able to achieve financial independence:

Have a powerful reason.

That is, to have a motivation that allows us to be constant until achieving our goal. It is very difficult to make a habit of any new behavior that we want to implement. On many occasions, if you have not yet reached financial freedom with your current habits, it will be necessary to develop new habits that allow you to reach them.

And if it is sometimes difficult to establish simple habits such as going to the gym one day a week to leave a good tipín for the summer, achieving financial independence is not something that is usually achieved within a few months of establishing some habits. This process takes years, but in my opinion, the reward gained and the duration of the subsequent gratification far outweigh the effort.

The question is…

And you, what are you willing to do to achieve financial freedom? In the end, the goal is not to achieve financial independence, the goal is to be very clear why we want to have free time to decide what to do with it. Spend more time with family? Children? Travel the world? There are thousands of reasons, but you must have a very powerful one that allows you not to give up on the road until you get it. Therefore, the first essential step if we want to achieve financial freedom is to find the main motivation that makes us wake up every morning convinced that we will work to achieve our goal.

Step 1: Calculate how much money you need.

It is very important to keep track of our income and expenses. In this way, we can know if we need 600€, 1500€ or 4000€ monthly to live well with all our needs met (not only the basic ones, we also have to go out with friends, go to dinner, travel, etc.). And not only that but surely a person with 25 years can live and save money with 1000€ per month but someone with 40 years, a mortgage and 3 children will obviously need more income to live well. That is why we need to consider not only how much money we need to live well today, but also in the future, and to do so we need to see what our expenditure might be in the future.

Step 2: Start generating profitability for your money

IMPORTANT: It is impossible to achieve financial freedom without investing our money. This needs to be clear. If we don’t want to invest our capital in any assets, we will never achieve financial freedom. The alternative to exchanging our time for money is to exchange our money for more money, if we are not condemned to work 40 hours a week until we retire.

It is true that sometimes this investment can start out small, and that there are thousands of assets in which to invest (open a business, invest in real estate, invest in vending machines, invest in the stock exchange, do trading…). I will assume that throughout my career as an investor I get an average of 12% annual return. This means that if I invest 1,000,000€ I would get an annual income of 120,000€. Or if I invest 400,000€ I would get an income of 48,000€ per year (on average), or what is the same, 4,000€ per month.

And how can I get that kind of money?

Imagine that my goal is to achieve financial freedom 20 years from now. If I start with an initial capital of €20,000, and I am able to save and invest €500 per month at 12%, within 20 years I will have achieved €496,543 (with inflation of 2.5% per year).

Step 3: Don’t start It’s already costing you too much

In the example we saw above, we can see that after investing 20,000€ + 500€ monthly would be able to reach almost 500,000€ in 20 years. Do you know what would happen if I waited a year to start? If instead of starting to invest today I waited 365 days more, in 20 years would no longer have 496.543€, but 445.657€. I mean, I lost 50,000€ just to start a year later. Doing exactly the same thing, let’s be clear. And what if with my current saving capacity I am unable to achieve Financial Freedom? In that case, a number of things need to be considered.

The first, although it may sound redundant, is that we need to be able to maximize our savings capacity, and for that, there are two options: either we reduce spending, or we increase revenue (or both).

Before you tell me that it is not possible to further reduce expenses, if you really have a strong motivation to achieve financial freedom, you must be in control of what you spend your money on. Only then will you be able to rethink and see clearly whether all your expenses are justified or there is some way you think you can save more at some point. Know what you spend on clothing, food, gasoline, vehicle maintenance, insurance, loans, leisure…

And on the other hand… how do you increase income?

In the first case, if our main source of income is work, we have to think if we can materialize some task on our part that we can take to benefit the company in which we work so that a salary increase can be justified. Are you certainly being as productive as you can? Could you increase your productivity by making some changes to your work routine? Do you lose something by proposing a raise to your boss?

## What Lot Sizes Should I Be Trading?

If you are a novice in the Forex market and you don’t know exactly what a lot on Forex is and what this is all about, in this article I will show you what it is and how to know what amount you should use or what amount in lots you should use in your case to trade on Forex.

### What are Pips and Lots?

The first thing to understand is that pips and lots are two concepts in the currency market that are related when calculating gains or losses in a move that can make a quote for a currency pair.

The pips measure how much the currency varies and the lots measure how much you buy or sell from that currency crossing. That’s why the more you flow in pips and the greater what you’ve bought or sold the more it will affect your account.

How many units make up a Forex lot

When you trade in the currency market you do it as if it were in a pack. What does this really mean? A lot is 100,000 units, so if for example, you make a purchase in the pair EUR/USD of a lot, you are performing an operation worth 100,000 dollars. This type of trading can be done even with much less money in your account, as brokers offer leverage for it.

### What is a Micro Lot and a Mini Lot?

You must be thinking that leverage and \$100,000 doesn’t sound very good to start with. Definitely not. Therefore, it is possible to do it for the minimum possible and that is where the mini lots and micro-lots come in.

Mini lots are one-tenth of a lot, so if a lot is equal to 100,000 units, when you operate a mini lot in EUR/USD you do it for \$10,000. Okay, this is something else, but what if I want to do it for less? Is it possible? Indeed, there is also the possibility of a micro lot, that is 1,000 units. Following the example above, 1,000 dollars.

### How to Calculate the Value of a Forex Lot

Understood all these now I will explain how you can know the value of a lot in a currency and how it will affect your account every change that occurs in the price.

Step 1: Choose the currency pair. GBP/JPY.

Step 2: Calculate how much a pip is worth. In most cases, the pip at a crossover is the fourth decimal. In the crossings with JPY is the second (yes, I have put it on purpose for you to learn it well).

GBP/JPY is currently listed at 175,150

If GBP/JPY moves and its price goes to 175.170 there will be two pips varied (175.170 – 175.150).

How much is this variation in my account with a micro-lot?

1000 units * 0.02 = 20 yen.

Step 3: Calculation in your currency. How much does this mean if your account materialized in dollars? We just need to do a conversion by looking at the USD/JPY rate, which currently stands at 107,750. Thus, if one dollar is equivalent to 107,750 yen, 20 yen is equivalent to 0.18 euro.

That is, the change of two pips in our account implies a variation of 18 cents.

Can we give another example for the classic EUR/USD?

Step 1: we have it, EUR/USD.

Step 2: Suppose EUR/USD varies from 1.12500 to 1.2490.

We have mentioned above that in most pairs a pip supposes the minimum variation in the fourth decimal place. This is the case, a drop in the price of the pair of 10 pips or 1 pip.

If in this case, you have bought a mini lot (10,000 units):

0.0001* 10,000 =1 dollar per pip.

You’d be missing a dollar more commissions in this scenario.

Step 3: What if your account is in euros?

1/1.12500 = 0.88 euros. It would vary instead of one euro, 88 cents.

Just as we have calculated the value of one pip in this last case or two in the previous one, we can do it for 100 or 200 and so depending on the entry price and stop calculate what is the maximum you can lose or win in each operation. Easy, isn’t it?

### Online Calculator

All right, Ruben. I have understood everything, but I find it a drag to have to be doing these calculations to be able to calculate the potential gains and losses in each operation. Relax, I have a solution for you, here you have a calculator where to do all this in a simple way.

Just choose the currency of account, the balance (use equity), the percentage that you are willing to risk, and stop-loss in the currency crossing you have chosen. From here the rest calculates as you will see automatically.

### Commission Per Lot on Forex

You know how lots and pips work in the currency market. I have previously told you that brokers allow leverage so in Forex you will be able to move more amounts than you have in your account.

First, you should be very careful with all this talk. Leverage generates greater potential gains, but also potential losses that can end your account. Now, leveraging here in a controlled manner is another matter. Why does the broker allow you to beat yourself up and move more money than you actually have? Because he’s interested, that means more commissions for him. At times when there is more volume on the market, the more money you will receive for it. Even with all this, I have to tell you that competitive brokers allow you to move up to \$100,000 by paying only \$7 in commissions. The cost is relatively low for financing the operation.

I recommend that you practice all this in a demo account so that you do not have any doubts. The above calculation can help you do your calculations, but it’s OK to start doing it yourself manually and then check if it’s OK. Also, as you learn and progress my advice is that you can automate all this so there is no miscalculation. Remember that every failure here costs money.

In the end, you have already seen that this pips and lots is not at all complex, everything is in standing with attention to understanding how it works and making a couple of practical examples like these.

Categories

## How to Balance Your Forex Investment Portfolio

From whom to copy more efficient transactions? From a trader with a high performance 2 months a year, but has a positive balance at the end of the year, or from a trader with a small but stable income throughout the year? Balancing an investment portfolio under the investor’s objectives allows the investor to reduce potential risks and increase potential earnings. Read on and you will know what balancing methods exist and what you should take into account when choosing a trader to copy Forex transactions.

Many times we have talked in previous articles about what is copying of transactions in the currency market. Today I’m going to try to talk to you about how and under what criteria choose traders to make their investment portfolio as balanced and optimized as possible in terms of risk and profitability.

### Optimising Risk and Profitability

The greater the potential benefit, the greater the risk of loss. A strategy, involving the opening of 2 operations per week (conventionally) is riskier than the strategy with 10 operations per week with the same weekly profit. The first one saves time, though.

Before you start building your balanced investment portfolio, answer the following questions:

What’s more important to you, low risk or maximum benefit?

Do you prefer a strategy with a quick one-off profit, but with high risk or a stable income with low risk, but slower? What is more important to you, save time but risk or spend more time but with less risk of loss?

There are two approaches to optimising the investment portfolio:

“Don’t put all the eggs in a basket”. Create a balanced investment portfolio. Most of the assets here are financial assets with an average yield level and moderate volatility, their portfolio share can reach 60%-80%. Assets whose price is less dependent on Forex market fluctuations and key factors prevail. The rest comes from conservative and high-risk/high-yield instruments. For example, cryptocurrencies and refuge assets (gold/US treasury bonds).

“Put all the eggs in a basket, but take care of the basket itself”. Creating multiple portfolios: venture capital, with a high level of risk, for those who are willing to risk money painlessly, but dream of big quick wins. Or several conservative portfolios, for investors interested in lower risk and a stable long-term income. Similar approaches can be applied when creating an investment portfolio when copying transactions.

### Criteria for Balancing

The basic criteria for balancing and optimizing the portfolio of traders are:

Level of profitability of the trader. Traders who show very high profitability in financial markets tend to use Martingale and other high-risk trading strategies. The following screen shows the radical difference in profitability levels in the last 4 months.

Type of strategy used. Traders are unwilling to disclose the strategy they applied, but it could be partially deciphered by the nature of equity. Learn more about it and evaluate the effectiveness of the strategy here.

The volume of the trader’s own assets. The higher the amount of the trader deposit, the more likely you will be to trade cautiously.

### Frequency of Transactions

How to optimise the risks of an investment portfolio:

1. Compare the requirements of the trading strategy of the trader with its capabilities.

This is the deposit amount used for leverage/volume of position, etc. If your deposit is USD 100, the trader deposit you copy is USD 1000. Thus, the trader can withstand a big downsizing, while their trades will close under stop out. The same applies to the volume of the position. If you use leverage, place a large volume of trades, your positions could close earlier under a stop out.

Council. If your deposit differs greatly from the deposit of your trader manager, change the type of copy trading, set the parameter “Proportionally to my funds” or “% of the volume of each transaction”. The second option is much more convenient if you are copying the transactions of multiple traders simultaneously. Consider the minimum amount of investment specified by the trader.

1. Diversify traders’ strategies according to the following criteria:

Profitability and risk. These parameters are commonly inversely correlated, but not always. If you look at a return of 100%-200%-500% per month, keep in mind that it can only be once. (“Good luck”, otherwise, everyone would already be millionaires). But if the trader can get such a return again, you are lucky to find such a trader!

Stable earnings are important. The low performance of a trader does not mean low risks, it may indicate a lack of professionalism. And vice versa, a stable high income does not always mean high risk but speaks of a professional trader.

Amount and time of open transactions. Select traders and strategies so that you do not create a simultaneous deposit charge. In other words, operations according to different strategies must be opened at different times (for example, in different negotiation sessions) and not simultaneously.

Type of strategy. Add long-term and short-term strategies to your portfolio simultaneously.

Instruments. Add to your investment portfolio traders trading not only currency pairs but also other types of assets, such as stocks or commodities.

1. Pay attention to the following parameters:

Trader Commission. The first trader with an average return of 100% per month charges a 50% commission. The second trader has a return of 70%, but a commission of 20%. What would be the risk? Undoubtedly, the second option is rather more profitable.

Account Life. In a perfect situation, the account of the trader you want to copy should have existed for at least one year. There must be no interruptions in trading on this account.

Maximum reduction over the lifetime of the account and reductions over individual periods. A prolonged reduction means that it does not work in a stable way.

Performance stability every month. The greater the difference between monthly performance, the less stable the strategy and the greater the risk.

The number of people who copy the signals from the trader. The more investors, the better. The total amount of money in the accounts of copying investors is also important. But we must always bear in mind that all investors do not have a sensible approach to selecting a trader. There can be a lot of copying investors because the trader’s commission is low and profitability is high (i.e., high risks).

Frequency of deposits that a trader makes. If the trader gradually increases trading volumes, it means that he has confidence and a serious spirit of success.

And finally, one more tip. No strategy can be profitable forever. If a trader changes strategy, approaches trading or even takes a break, it will have a direct impact on the structure of the investment portfolio. If you notice a further reduction in deposits, a sharp drop in profitability, or another sign of stability, rebalance your portfolio.

### Conclusion

There is no perfect investment strategy on how to create an optimally balanced investment portfolio, but there are ways to optimize your portfolio according to your personality, objectives, and risk. It’s up to you!

Categories

## The Big Mac Index: How Much Does the USD Really Cost?

The real dollar rate can be defined using the cost of the Big Mac in a particular country. “Burgeconomics” is not an absolutely accurate indicator of monetary incoherence. But this index has been set as a global standard, is included in some economics manuals, and is the subject of academic research.

This Big Mac index was first considered by The Economist in 1967. So this burger cost 47 cents. After 20 years \$1.60. Now a Big Mac costs \$4.30. From here it follows that the dollar over 50 years has depreciated tenfold. Of course, this does not mean that in 50 years the dollar will depreciate another 10 times. Although, a certain trend is clearly visible.

How to know the real cost of the dollar using the Big Mac index?

The Big Mac index is normally used as means to informally determine purchasing power parity. With your help, I can calculate the real value of the dollar against the ruble. Why? McDonald’s uses a franchise with strict quality regulation of the production of the components of each of its dishes, for example, all the bread around the world are baked by the same company with the same ingredients and the same machinery, In addition, all the restaurants in the chain follow the same manufacturing process. In short, this means that the production of the Big Mac in each country uses a completely identical technology, respectively, the production/sales costs will be the same.

A Big Mac also contains enough food components (bread, cheese, meat, and vegetables) to be considered a universal prototype of the national economy. Well, Big Mac is the burger that’s on the menu at “McDonald’s” in every country. Well, don’t waste time looking for the prices of this burger on the official website, as the resources created and specialized will sweep away prices from around the world and be meticulously added to a table.

In 2018 in the US a Big Mac cost 5.51 dollars, and in Germany, it cost 3.99 euros. We divide 3.99 by 5.51, we get 0.72 euros, that is, how much a US dollar actually costs. Consequently, the real price in US dollars to euros is 0.72, based on the Big Mac index.

What does the dollar rate depend on?

Let’s analyze in this chapter whether macroeconomic indicators, Fed outlook, international risks affect the US currency rate. What influences the cost of this currency? Not long ago, witty people joked that the price of oil may fluctuate depending on whether the prince of Saudi Arabia coughs or not, but few will argue that the figure of the US president is now much more important than Riyadh’s blue blood.

The US president is the most authoritative person on Forex, however, the sensitivity of the market to his words in the first years of the presidency was associated with the element of surprise. Before Trump, rarely did any head of state intervene in the life of Forex, influencing the monetary policy regulated by central banks. Little by little, the market got used to it and began to turn a blind eye to Trump’s words about the dangers of a strong dollar. In fact, there’s a significant difference between what you say and what you do. Trump’s policy is to strengthen the green note as if he does not want to weaken it with words. In this sense, the growing popularity of the US president leads to a revaluation of the dollar.

From a theoretical point of view, the rate of the currency is influenced by the financial flows of trade and investment. The demand for foreign currency has been determined by the interest in products manufactured in this country. However, as the economy and public debt grew, stock and bond markets also increased. New issuers of securities appeared, whose demand led to a change in the exchange rate. Including the USD. Normally, at present, investment flows are more mobile or larger, but foreign trade should not be discounted when studying exchange rates.

When an investor makes the decision where to invest, in US shares or other shares, he judges based on the state of the economy. Overall, world GDP is believed to be growing faster than US GDP, as the former includes developing countries and China. For China, a growth of 6% is normal, for the US growth of 3% is something incredible. As the world economy expands faster than the US economy, money flows to emerging international markets. On the contrary, the acceleration of US GDP under the influence of fiscal reform or the Fed’s monetary expansion is a great opportunity to buy US shares and the dollar.

In this sense, such external stimuli as trade wars or coronavirus should be considered in on the direction the world economy will take and that of the US. The latter remains stable, the former, under the influence of a slowdown in China’s GDP that is beginning to decelerate. As a result, the dollar is strengthened even in the context of a drop in the rate of federal funds.

So, no matter how much Trump would like to weaken the dollar if his goal is to accelerate GDP to 3% and reach new historical highs of the S&P 500 or forget about devaluation. The excessive protectionism of the US president and his slogan “America first!” means achieving the goal at the expense of others. Trump is not satisfied with the US foreign trade deficit and is doing everything possible to reduce it. However, let us remember, improving trade flows is a direct path to the growth of the national currency rate!

Along with the stock market situation and the trade balance, Treasury bonds also influence the value of the dollar. Demand for them is driven by an interest in safe-haven assets, which increases in periods of confusion and uncertainty, and by the Fed’s monetary policy. It is no secret that the federal funding rate is now higher than its counterparts in other developed countries. Consequently, the return on US treasury bills is higher. They seem more preferable than European and Japanese values, and that helps transfer capital to the New World and strengthen the dollar.

Devaluation and Overvaluation at an Exchange Value

Currency volatility has a big influence on the economy, but most people don’t pay attention to it, as most transactions are done in the national currency. An ordinary person is interested in the exchange value during the trip, paying for goods, any purchased or financial transfers.

Small investors can be satisfied with the strength of the local currency as it reduces the costs of imported products and travel. But a substantially strong currency can sometimes hurt the financial sector in the long run. Industry becomes profitable, in the market, millions of people are left without work. Ordinary people may be dissatisfied with the local currency weakening, as tourism and imports become more expensive, but the devalued currency can give many benefits to the national economy.

The exchange value of a currency is the tool of a central bank, an important sign of monetary policy. So, directly or indirectly, a currency devaluation or overvaluation affects many variables. It will affect interest changes, returns on an investment portfolio, prices for goods and services, employee value. We will study the devaluation and overvaluation of some currencies in real examples.

In the monthly USD/JPY chart, it is clear that the yen is growing stronger against the US dollar. This trend may continue because the Big Mac index indicates the devaluation of the yen against the dollar. Values continue to fall in the coming months. The yen devalues to the US dollar by 36.58%, which is significant. It can only affect the economy of the Japanese country. But the reality is that Japan may be interested in this imbalance. The Japanese obviously want to sell their products, and artificially devalue the national currency.

You must remember that the national currency is strictly in Japan. We have been alert about how the Japanese yen grows or falls in price for no reason. The value of the yen remains difficult to predict. Also for the New Zealand/US dollar pair, the kiwi devalues and can grow strong against the US dollar. According to the Big Mac Index, it was devalued by 16.37%.

The value of the kiwi depends heavily on the crop cut in New Zealand, in prices for certain products and food. So the price could go up. Also, the pair could operate in the same direction for a long time, up and down. Visually, you see that price moves in the middle of your trading range.

The Euro also devalues against the dollar by 16.37%, so it can continue to raise the price. However, EUR/USD could rise to 1.23 and fall to 1.035. A price of \$1.23 may also suggest that the euro is suffering a devaluation. And as we always say, the Forex market is always unpredictable and surprising.

If we listen to the Big Mac Index, the Australian dollar is devalued by 14.57%. AUD is relatively cheap but can change soon. It is clear from the AUD/USD chart is close to your local minimum. The price chart used to raise to 1.10 USD for an “Aussie”. Indeed, you must not wait for the same thing soon; it looks like the hike will follow.

The Australian economy and economic sector depend on the price of gold. For example, If the price of precious metals falls, Australia’s financial sector suffers. But the graphics of gold and AUD/USD is not completely the same. Australia exports gold, but this country also exports a lot of iron, food… High prices for these products can withstand the “Aussie”. Australia can make the Australian dollar low in value. The Canadian dollar is also devalued. If you study the Big Mac cost table, you will see that the “loonie” is 12.16% devalued. USD/CAD was operated at 1.60 and 1:1.

Will the Canadian dollar continue to rise? In reality, no person can safely claim, but the Big Mac index may be correct, indicating it. USD may fall against CAD. It is, of course, over the long term. The Swiss franc pair – the Japanese yen is the most demonstrative of the popular currency pair, characterized by its strength in one currency and the weakness of the other. The yen is falling (-36.58%), and the Swiss franc is the strongest (+27.2%) of all. Most likely, the yen will get stronger and the franc will go down. The value of the pair can go down. But at the very least, the Big Mac index suggests this.

The US dollar pair – the South African rand is illustrative. The Rand is clearly devalued (57.34%). However, it is actively on the rise in recent times. Rand could be even stronger, as this currency is difficult to predict. According to the monthly chart, it can be assumed that the current trend will continue. Necessarily, you require a lot of attention not only to the Big Mac index but to “how far” the price can go.

When the price goes too low, it grows more sharply. And the opposite way, when the price is too high, it could fall. Rand, like the “Aussie”, depends heavily on the price of gold. South Africa currently produces a lot of gold. The country’s financial sector and economy are heavily dependent on the price of gold. In addition to gold, South Africa produces a lot of platinum (the world’s largest producer), iron, cobalt… Certainly, we should take all this into account if trade this currency pair.

If you operate USD/ZAR you should also know that there can often be social unrest, attacks on the offices of gold-producing companies, and other setbacks. If there were any problems in South Africa, then the Big Mac Index will not be based on trading decisions. If investors withdraw their capital from the country, factories close, gold mines are blocked, then the national currency falls in value very quickly. The dollar can also devalue fast. It is not the gold standard. However, the price of gold also changes all the time.

If the United States Federal Reserve changes the interest rate, this will be the most important. And then, it won’t be important how a Big Mac is. The price for the burger will not be significant. For example, in 2008, the dollar dropped sharply when the interest rate dropped to 0-0.25%. In addition to the Swiss franc, there is an overvalued Norwegian krone by 11% and Swedish krona by 9.79%. These currencies have traditionally been overvalued. But, this fact must also be taken into account in trading. Over-valued currencies can fall in price, especially against devalued ones.

Big Mac: Both cheap and expensive

Why is Big Mac so expensive in Switzerland? First, because it’s an expensive job. A Swiss worker earns tens of times more than a worker in Egypt. The Big Mac index is also affected by other factors such as time. In Switzerland, it’s very cold for six months of the year, you have to heat buildings…

Costs are also expensive in Sweden and Finland. The cold climate is considered a difficult factor in these countries. It’s no surprise that a hamburger there is much more expensive than in other countries. It depends a lot on changes in inflation. For example, in Argentina in 2001, where there was a very violent crisis, a Big Mac was cheap because labor was very cheap, and prices for many products fell drastically if they were converted into foreign free currency.

You cannot estimate the total economic performance of a certain country, based on the Big Mac index alone, which should be taken into account as well. For example, Japan and Thailand are very close to each other, and according to the Big Mac index. However, the income of Thais and Japanese cannot even be compared. Thailand has cheap labour in its favour, and Japan benefits from the automation of many processes and the efficient use of labour. For example, to do some tasks, there are few people needed in Thailand. But the same task can be completed by a simple operator in Japan.

Why is hamburger so expensive in Canada? In Canada, in fact, many legumes are produced, oil… But certainly, the weather conditions in the country are extreme. If, for example, in Russia, there are some regions where tropical plants can grow, it is completely impossible in Canada. Heating is expensive, especially during the extreme cold of winter. The Labrador Current cools the country, being expensive for payers and employees tax.

However, the Big Mac index is of interest to traders from Western countries with strong currencies, rather than those from underdeveloped countries.

Conclusion

What conclusion should you draw regarding the Big Mac index when trading currency pairs? This index cannot be entirely accurate or a reference for action. But, the Big Mac index very often suggests an appropriate judgment in a certain currency if it is devalued or overvalued.

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## The Legality of Online Forex Trading in South Africa

If you were to go through any of the major social media platforms and look for things related to Forex, you will most likely find quite a large community of people that are from South Africa. Forex and trading have started to become quite a popular pastime and business opportunity for those living in South Africa, and this is on the rise due to the increase in the accessibility of trading with the entry requirements being as low as having an internet connection, phone and just \$1 to trade with.

One thing that has been made clear from both Tito Mboweni and the regulatory body FSCA is that it is illegal for people in South Africa to purchase forex or to use forex based services from firms or people that do not have the proper authorisation to sell and offer those services, it has also been made clear that it is actually illegal to speculate against the rand. The problem is that there is a lot of confusion being created from the fact that not everyone actually understands what forex actually is.

Forex trading is a form of contract for difference (CFD) trading, these are financial instruments that get their value from the underlying assets, this includes things like the exchange rate of a currency pair or the price of a metal or equity. Due to the CFDs getting their price from an asset, they are classed as a derivative, when you make a trade in forex, neither the trader nor the provider of the trade is taking ownership of that asset.

Due to forex trading being classed as derivative trading, this word means that trading would be legal in South Africa as both the minister and the FSCA have confirmed that it is ok for South Africans to trade these derivatives. The FSCA still states that any South Africa based firms must be authorised and regulated to offer these services, but there is no law in South Africa that prevents its people from trading with a broker that is based outside of South Africa, or even with brokers that are not regulated by the FSCA, they are strictly there to monitor the providers rather than the trader.

The rise of online brokers who are offering CFDs to trade has made it far easier for South Africans to trade, in fact, it would be quite difficult to find a broker that would be classified as illegal in South Africa. This is simply due to the fact that for it to be classed as illegal, you would need to be making a purchase directly with real currency, which would cost a fortune, millions of dollars in order to make any trades of value. All online trading in South Africa Derivative trading does not however mean that it is without its issues or grey area. Brokers such as JP MArkets which was one of the biggest South African brokers have just gone into liquidation and showed us that there were a lot of issues within the South African trading scene, but it would appear that illegal trading would not be one of those issues.

The regulation within South Africa is regularly changing, the recent collapse of JP Markets was based around a change in the regulation from the FSCA, where they introduced a new licence for brokers within South Africa which was called the ODP licence. When the FSCA investigated JP Markets, they did not hold this new license and so they were then able to quickly shut the operation down

The thing to take away from this is the fact that as a trader in South Africa, there are no legal issues or reasons as to why you should not be trading with an online broker. As long as it is CFD trading to which 99.9% of online brokers are, then you are fully within your rights and the law to trade, even from brokers that are not stationed within South Africa. If you are going for a South African broker, then ensure that they are regulated by the FCA and that they have all the required licenses, this way you will be sure that you are trading with a legal firm and that you are at least partly protected from any wrongdoing.

So to answer the question as to whether or not reading and forex is legal in South Africa, it is a yes, as long as it is CFD/derivative trading.

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## Top 10 Things I Wish I’d Known Earlier About Forex

Hindsight is a fantastic thing for those of us that have been trading for a long time. We made a lot of mistakes or didn’t do things quite the right way when we started out, things that we wish we had known or done differently. For those just starting now, you can take advantage of the fact that we have learned a lot of new things about our trading and the things that we can do, meaning that you can start off where we are now, rather than at the very start of a trading journey. So here are ten things that we wish we had known earlier in our trading career.

1. No single best time to trade: When I started out trading, I was told that there are certain times during the day that you need to trade at, and should pretty much avoid the rest, this is simply not the case Yes there are times where there is a lot more liquidity and movements in the markets, such as during the changeover of the different markets (London and New York for example). This does not, however, mean that this is the only time that you are able to trade, but this is what we thought, of course, we don’t mean that we weren’t able to, just that it would not be as beneficial for our strategy, now, however, we know that we can trade at pretty much anytime and it can be effective, bar some special circumstances or random news events.

2. The majority of traders lose money: If you are just coming into trading now then you probably already knew this, but a number of years ago, forex brokers did not have to have the disclaimer about the majority of traders losing money as they do now. In fact, they purposely hid it, which is why the requirement came into lace. Due to this, we believe that everyone could make a lot of money, but we now have the understanding that it is a hard thing to do, and this makes us more cautious and careful with the trades that we make.

3. Some currencies are linked: A number of the currency pairs and different assets are linked together, think about oil and CAD for instance, when the oil prices change, so does the CAD currency. Knowing which assets work with each other can give you a real advantage when it comes to knowing how the markets will move and how certain things like news events will affect other currencies, ones that say not necessarily be involved in the news.

4. You can profit with more losses than wins: Losses are a part of trading, in fact, it is something that all of us will experience and experience a lot of them. What we did not understand before is that you are actually able to be profitable by winning only a fraction of your overall trades. Our current strategy means that we only need to win 25% of our trades, something that is certainly achievable. Get your risk management and risk to reward ratio right and you can profit with just a small number of wins overall.

5. You can lose with more winners than losers: The other side to the coin mentioned above is the fact that you can actually lose money, even if you win 80% of your trades, if you do not use proper risk management techniques, then even if you have a number of winning trades, when you have a losing one, without the proper things in place, that one losing one could take away all of your profits and leave you out of pocket. This shows us how you need to get your risk management right, no matter the strategy that you are using.

6. Big news can be bad news: News events can be a little scary, yet we were not told this when we first started. Instead, we just traded whenever, with little regard to what news events were going on around us. This is where we went wrong, we wish we knew about the effects that news events can have on the markets, we have been trading through them and seeing ht markets jump massively up or down which has caused us both large wins, but also large losses, far more losses. So now we know not to trade during the news events, which has saved us a lot of money.

7. Don’t quit your job: Not something we actually did, at least not to begin with, but quitting your job was the goal of a lot of people, and we were told that it is certainly possible due to this, a large number of people took the leap a little too early. Unless you are really ready for it, with a lot of time and work behind you, then you will not be ready, no matter how well you are doing, you are not ready to quit your job unless you have been successful for at least a year in a row and are making more than you do with your job, only then should you do it. We weren’t told this before, and many learned it the hard way.

8. It can be good not to trade: A quick one at this, but you don’t actually need to trade. If the conditions aren’t right, then there is no need to actually put on any trades. It can be best to sit back and be patient. Better opportunities will come up and if the markets are not in line with your entry requirements, then putting on a trade would be considered a bad trade, something that we want to avoid doing as much as we possibly can.

9. You don’t need loads of indicators: Indicators can be fantastic, they can show you a whole host of information, but do you really need all of it? If you have too many indicators it can actually slow down your trading, each one that you add is another bit of information that you need to check before putting on a trade, the more you have, the more time that will take. Not to mention the fact that it could simply confuse you seeing so much information on the screen. Instead, choose just a few, this will enable you to get the info you need while still streamlining your trading and making it much quicker. Oh, and make sure they are at least relevant to your strategy and not just simply random indicators because they look cool.

10. Forex is long term: We came into trading like many others did, with the idea that we can make a lot of money and make it very quickly, we now know that this is north e case and instead Forex and trading are long term things where we can build for our future. Trying to make a lot quickly will only cause you to lose your deposited capital, so take your time and slowly build your balance rather than going for the big bucks.

Those are 10 of the things that we wish we had known when starting out our trading carers. You probably know most of them already as the information is much more accessible and people have been through the same experiences as us and shared them online. There will of course be learning opportunities and things that you will develop that you wished you knew before, but ultimately that is life and will happen with everything that we do.

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## Addicted to Forex? Us Too. Here’s 5 Reasons Why We Just Can’t Get Enough!

Forex can be exciting, it can be exhilarating, it can be amazing but it can also be devastating, no matter what it is doing, there is one thing that will remain true, we are absolutely addicted to it. For whatever reason, once we started trading we just could not stop, and there are a lot of other people out there too that have the exact same feelings. We are going to be looking at some of the reasons why we are completely addicted to trading, as well as some of the reasons that have been given by those of you on various websites around the internet.

### The Profits

Let’s be honest, a lot of you probably started trading because of the potential profits that you could make, and then as soon as you started making them you simply did not want to stop. This is a perfectly natural reaction and thankfully, it has a positive outcome to it. When those profits start rolling in you will do what you can to make more, to keep it consistent, and to ensure that you continuously earn those big bucks. When you achieve what it is that you set out to do it can give you a great feeling and so we will want to continue to feel that, hence why these profits keep us coming back for more.

### The Highs…And Lows

Forex is full of highs and lows, and it is mainly those highs that give us the adrenaline, it gives us the feeling that we can do anything, that we are invincible, and that we can make a lot of money. However, with forex, there are also those lows, when things aren’t quite going right for us, when we have made mistakes and even losses. However, the next trade, we could be on a high again, this is a rollercoaster, trading and forex is a rollercoaster, and it is a rollercoaster that we do not want to get off. When your feelings and emotions are up and down rapidly, it gives you a real yearning, it makes you want more. Those highs that we experience can be similar to those that you experience when traveling 100 mph on a rollercoaster, those coasters are popular, and so is trading.

### It Gives Us a Feeling of Belonging

Forex traders often act as a community due to this it can actually give you a sense of belonging, to be a part of a group. Many traders sit at home by themselves, it can be lonely, loved ones may not understand things and neither do your friends or maybe you don’t have friends, either way, it is a pretty lonely thing to do. However, there are a lot of trading communities out there, communities where traders come together to help each other, to share ideas, and to simply meet one another. These sorts of communities can give us a new home, somewhere where we can talk to like-minded people about things that we enjoy, we can get ideas from them, new trades, test our analysis on people and more, these communities are fantastic and the sense of belonging can be addicting all by itself.

### Hitting Milestones

Milestones are little goals that we set ourselves, if you are setting them properly then they will be set up in a way that will make them easy to achieve and also in set increments, increments that work with one another to lead us to the next one. When set up in this way we feel that we are always achieving something, this helps us to motivate ourselves and to push us to continue. Each time we achieve one we feel great, we feel that we want to continue, to push to the next one, and with each milestone being hit we get a little more addicted to trying to hit the next one, not to mention that fact that with each milestone we are being a little more successful and we are making a little bit more money, the main reason why so many of us started trading in the first place.

### It Gives Us A Better Life

This kind of takes in a lot of the other things that we mentioned above, when we trade, we make a bit of money, that money can then be used on the sweeter things in life, to allow us to treat ourselves and to give us a little more financial freedom than we otherwise would have had, heck, it even lets us treat our significant other. Of course, it can have the opposite, cause us to lose things, but when it comes to our love of trading, we of course think about the good things it brings us and the improvements that it allows us to make to our everyday life.

Those are some of the things that make us addicted to trading, we love it, it gives us highs, it gives us profits and it gives us a community to be a part of, things that make it worthwhile for us, even though those losses and lows that come with it.

While trading is great, and we speak about how we love doing it, we do have to mention one thing though, those with an actual addiction, not just a real fondness of trading should try and seek help. Being addicted to something can actually ruin lives and when it comes to anything that involves finances, from gambling to forex trading, it can devastate lives. If you think that you or someone that you know is actually addicted to trading, then you should do what you can to try and seek help for them, try to do this as soon as you can, the earlier to catch it, the earlier that you can help that person get out of it.

Trading addiction can cause you to spend all your money, to use the money you cannot afford to use, so do what you can to get out of it, and most importantly, do not be afraid to ask for help, help is out there, and waiting for you.

Categories

## Top 15 Undeniable Reasons to Love Forex Trading

When it comes to trading, there are a lot of things that we love about it, we would not be trading if we didn’t love it after all. We are going to be looking at 15 of the reasons why we really love to trade and how those different loves affect our outlook at our trading.

#### 1- You can make money.

Who doesn’t love this aspect of trading? The fact that you can make a little extra money, or even a lot of money is a real draw-in for a lot of people and it is for us too. For a lot of people, the fact that you can make money is the initial draw in and the reason why a  lot of people trade, if there was not an opportunity to make money then there would be far fewer people actually trading.

#### 2- Anyone can do it.

The great thing about trading is that pretty much anyone can do it, of course, there are a few limitations like needing to be over the age of 18 and to have access to a computer or phone, but otherwise, there is pretty much nothing stopping you from taking part, brokers are accessible, the markets are too. If you want to trade, there is always a way of managing to do it.

#### 3- It’s very accessible.

As with the above, trading is getting more and more accessible and it has never been easier to get involved. You only need as little as \$10 or even \$1 for some brokers to get started. You can also access it from anywhere that has an internet connection using a desktop computer, a laptop, or even a smartphone, heck even some fridges have the capability of doing it now too. If you want to trade, there are more than enough ways to get involved and it is very easy to get started.

#### 4- You can do it on your phone.

As we mentioned above, your smartphone is not a full-fledged trading terminal, years ago people would never have thought that they would be able to trade on their phone, now you can. On the train, on the couch, on the toilet, no matter where you are, as long as you have your phone with you and an internet connection, then you can very easily start trading.

#### 5- It doesn’t take long.

You don’t need to be sat in front of the computer to make trades, it can be done in a few minutes, of course when you are first starting out it will take quite a bit longer, and you need to do the initial learning, but once you know what you are doing, you can get through your trading pretty quickly. That is something that we love as we do not want to spend 5 hours a day putting on trades.

#### 6- It provides good reading material.

There is a lot of information when it comes to trading which is great for those that have the time to read. You can read up on things pretty much anywhere you are and there will always be something new for you to read and learn about. No matter the sort of writings you like from fact to fiction, there will be some related to trading that will suit your tastes.

#### 7- There is a great community.

The trading community is one of the best, once you get past the plastic traders or those trying to get other people’s money, the community is fantastic. They are always there ready to help, to share ideas, and to discuss different things related to trading and the markets. There are a number of different communities out there so it shouldn’t be too hard to find one that suits you. They are also a great place to let off steam and the frustrations from trading.

#### 8- You can work from home.

One of the main draws for a lot of people is that you can work from home, you can choose your own times to trade, you can trade as much or as little as you want and you can have a nice lie each day. It is fantastic being able to trade from home and to avoid the long daily commute that you used to do when you worked your previous 9 to 5 job.

#### 9- You don’t have a boss.

Most of us hate having a boss, it is something that pretty much any job comes with and it is something that we strive to get away from. Trading is the perfect place to get rid of your boss and to basically be your own boss. Lots of freedom to do what you need without someone peering over your shoulder is a fantastic feeling and one that trading can very much provide you.

#### 10- There are a lot of assets to trade.

There are a lot of options and assets to choose from, you will always be able to find one to trade and one that suits your style of trading. If one is going slow, fund another, there will always be options. That is the fantastic thing about trading, there are currency pairs, oils, metals, stocks, and more to choose from, so you will always have things to do and it will always be exciting.

#### 11- It’s never boring.

Trading is never boring, things are always happening and this makes it so good to trade. Just when you think you will have a quiet period, something will happen, a news event, a disaster somewhere, whatever it is it can really shake up the markets and move things about. Even when you have trades open, you will need to keep an eye on them simply because anything could cause the markets to move. Some currencies can be slow, but there are others that will certainly be doing something.

#### 12- Helps you control risks in life.

A part of trading is risk management, if you’re able to do it during your time trading then you can certainly take that into other aspects of your life too. Take what you learn and start reducing the risks that you are taking in other aspects of your life too.

#### 13- It’s a profitable hobby.

Hobbies often cost you a lot of money, trading is a little different, it can actually help you to make money, not many people can say that their hobby brings them additional income rather than costing it. It takes time and work, but it can certainly help you to make a little extra on the side.

#### 14- You can trade at any time.

There are no limits as to when you can trade. You can trade first thing in the morning, late in the afternoon, or in the middle of the night, the markets are always open. They close over the weekends but otherwise, they are a 24/7 opportunity to make money that you certainly should be taking advantage of.

#### 15- It provides a shot of adrenaline.

Trading can be exciting, it can really boost your adrenaline levels, especially when the trade is doing the right or wrong way, it can really pump us up and that is a great feeling, for many, it is what they trade for. If you find trading boring then you won’t get this, but for the rest of us, the excitement is enough, the money is a bonus.

Those are some of the reasons why we love trading forex and why you should too. There are of course more reasons out there, but these are the main ones that come to mind. Think about why you love trading, and keep that in mind next time you get frustrated or bored. We will always love trading, and so should you.

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## How Much Can You Really Earn from Trading Forex?

How much can I make trading forex? This is a question that you hear quite a lot being thrown around or asked in various trading communities. The problem is that there isn’t a set answer for it. Forex is one of the most popular forms of trading and also one of the most profitable, most likely the reason why it became the most popular method in the first place. Forex trading takes place during the week, 24 hours a day which gives you a lot of opportunities to make some money. If you are here then you most likely know a little about the forex markets and how it works, but many simply just want to know how much they could potentially make, and so we are going to be looking into this, to try and work out what sorts of profits you will be able to bring in.

The problem is that there isn’t a simple answer. In fact, there are countless factors that will affect the amount of potential profits that you can make. Things like your account size, the risk management that you have in place, your trading strategy, and how much time that you have available to trade, these variables are different for each and every trader, so one answer won’t be the same for them all. There are no guarantees when it comes to profits, there are possibilities and probabilities, things that you need to take into consideration that will help to dictate how much you can make or more importantly, how much you can safely make. You also need to understand that you won’t make the same profits each month, it is variable, so you may be a profitable one, in a loss the next, or make \$1000 one month and \$3000 the next, there is no set income, all we can do is try to maximise the opportunities for profits.

### Education

Have you ever tried to do something that people consider to be quite complicated and then get it perfect the first time? Probably not if you have, then there was most likely an element of luck involved in it. It is incredibly hard or in some cases completely impossible to make a successful career out of something that you understand very little of. You wouldn’t start installing a new boiler into your house if you had no idea about gas or water plumbing, it would most likely end in disaster if you did. The exact same thing can be said for forex trading, if you jump in with very little to no knowledge, then it will only end up as a disaster with you losing whatever money you had put in. It has happened to many people before and will continue to any other person that tries.

The forex markets are one of the most complex things to look at, with many different factors taking effect and influencing h movements, some within your control, but many more out of it. There are also a large number of ways that you are able to educate yourself about the markets and how they work. One of the most popular methods is by trial and error, it is, however, also one of the most costly, as each mistake has the potential to cost you money (unless you are sensible and using a demo account of course). This method involves you doing things, making trades, and then looking at the results, working out what worked and what did not, altering something, and trying again. It is easy to do but can take a booking time to master any form of trading this way, simply because you will be constantly making mistakes and adapting over a very long period of time.

There are also a number of different online learning platforms, websites that offer insights, information, and learning materials that you can use. Some of these sites are free and are a fantastic resource, giving you the basics of trading plus some ideas on different trading styles and strategies, well worth taking a look at, especially if you are not yet ready to jump in and make some actual trades. There are also paid websites, these often offer greater depth as well as some personal training, you must be wary of these sites though, they are often hidden behind a paywall with all sorts of marketing on top to make you want to jump in. Get some genuine reviews before you do, but if you find a good one, the amount of knowledge and information that you can get from them can really help to boost your initial trading knowledge.

There are also a number of different trading communities out there, these are places where different kinds of traders come to discuss their trades, their ideas, and what is going on within the forex markets. These are often fantastic places to receive feedback on your ideas, as well as to understand others’ viewpoints, which can give you a better insight into the markets and a viewpoint that you may not have otherwise considered. You need to remember though, that often the members of these sites are not experts and the majority are most likely in the same position as you, so use if your information and ideas, but do not consider what people say to be gospel.

Regardless of how you get your information, if you want to be a successful forex trader and to actually make a profit, you need to indulge yourself in information, you will never stop learning throughout your career, but the most vital point of education is the start, get a basic understanding before you trade, then build on that foundation as you go.

### Discipline and Patience

Discipline and patience are probably two of the most vital traits that you can have as a trader and without them, you will be led down a road of bad trades and ultimately losses. Once you have gained some education and worked out a trading strategy, you would think that it would be a good idea to stick to what you have. Yet so many traders seem to forget this, an idea comes up in their head or they see someone is doing something and so they do that instead, going against what it is that they have been working towards, this ends up with a loss and another ross, not sticking to your plan is vital to your success.

Being patient and being disciplined allows you to wait for the correct moments to trade, sometimes there just aren’t opportunities, and if you want to make as much money as possible then you need to only take the opportunities that match what you have learned and what you strategy details, not doing this will lead to losses and ultimately will cause you to make less money or even a loss.

### Starting Balance

Much like anything in the world, you need to have money in order to make money, the more you have the more you can make, it really is that simple, of course, you need to continue to use what we have mentioned above too. The higher your starting balance, the larger trade sixes you can make which will then lead to higher profits with each trade. If you start with an account balance of \$100 then you won’t be able to make \$1,000 a month, however, if your balance is \$10,000 then it will be far easier and far more likely that you will be able to make \$1,000 a month. Once your balance begins to grow, compounding will take effect and your profits will increase. However, it is important to remember that even with a large balance, you can still make very little or even a loss each month, so there is no guarantee that a large balance means large profits.

So the bottom line is that we are not able to accurately predict or guess how much you can make each month, it all comes down to the work that you put in, what you learn, your discipline, and how much you start your account with. If you are prepared to put in the work, to learn all that you can, to stay disciplined then you can certainly make a profit and become a profitable trader, however, we still can’t comment on exactly how much, that will be down to the work and the time that you put in.

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At the onset of the digital awakening, Steve Jobs emerged as a symbol of innovativeness. His legacy precedes him but is no less of a wonder than his own set of traits. He was a true creative, a visionary, and a master salesman who set the grounds for how business was going to be done in years to come. He bestowed the world with not just amazing products but also with lasting lessons that we can and should apply to Forex trading as well.

• Clear Vision & Focus

“Focusing is about saying no.” When Steve Jobs returned to the company in 1997, he immediately stopped all experiments on products he considered futile. He diverted the company’s attention to the things that really mattered. “Focus on a few products because others would drag down the company.” As traders, we can sometimes get torn between our everyday life, developing our trading systems, and our hopes for the future. Steve Jobs made Apple take fewer projects to direct energy to what deserves improvement. More trades won’t make you a good trader but the right focus and prioritization will give you the impetus to become one.

• Results & Reinvention

Steve Jobs didn’t believe that people had to follow a system just because things had always been done that way. He often explained how we have “an opportunity to always question what we do.” This is a necessary approach in trading because we tend to read so much material on how to become successful traders but we may not be as devoted to testing and journaling to make this dream a reality. Each product Apple launched was a more supreme combination of features the market needed, which is a reflection of the effort put into their development.

• Passion

Steve Jobs believed that we should all do what we feel passionate about so that we can make changes around us. As an exceptionally passionate individual, he was able to motivate his company and employees to make history. This special love for his job was transmitted to the products and, hence, to the customers as well. As a trader, you are too making history and changing your (and/or your family’s) everyday life. We cannot become great with a half-hearted attitude. Go all the way now to build confidence and render results gradually.

• Personal & Career Development

The man we know recognize as the face of digital expansion was once a college dropout. He also managed to get fired from his own company. Life wasn’t always easy and Steve Jobs certainly wasn’t an easy person to handle. Besides his genius and the success his attention to detail generated, he was also a human who made mistakes. His products and his mindset revealed how he always believed in innovation and improvement. Still, he didn’t rest his business’s growth solely on intuition; he made changes in the company, in the people he hired, and most importantly in himself.

• Perseverance

Steve Jobs himself said that passion fuels a person’s journey and any ordinary person would certainly quit unless there was any passion. If you see trading as a means to run away from your current boss or a way to finally prove to your ex-wife that you are the man, you won’t last the hurdles that come your way. Persistence needs vision; sustainability requires internal motivation. Don’t rely on the rose-colored glasses to cross the bridge for you. Also, accept your failures as lessons. As Steve Jobs said, “I didn’t see it then, but being fired from Apple was the best thing that could have ever happened to me.” Sometimes, the best lessons are the most painful. Just power through.

Steve Jobs was known for not wanting to delegate. He strived to be interwoven in every business facet. He knew about technology and sales which helped him translate his vision into products that are still sold around the globe. As traders, we need to understand different aspects of trading; while beginners will focus more on the vocabulary and understanding new terms, as they grow they will start to realize that other topics (e.g. news and elections) are of significant importance for trading accomplishments. Traders cannot say that they are only interested in one side of trading because they are owners, the CEO, and the employees all in one. As Steve Jobs put it, “The greatest people are self-managing.”

• Confidence

“You have to trust that the dots will somehow connect in your future. You have to trust something – your gut, destiny, life,  karma, whatever – because believing that the dots will connect down the road will give you the confidence to follow your heart even when it leads you off the well-worn path, and that will make all the difference.” If you doubt your every step as a trader, you won’t get far. You need to believe in what you are doing. Learning and improving will additionally help build your stamina because positive self-talk is not what Steve Jobs relied on (at least not solely) to build an empire.

• Facing Challenges

Steve Jobs was always able to pinpoint a problem and present it to others in looking for a way to resolve it. He never wavered thinking that it would go away. Traders too need to address any issues and not procrastinate because of their severity. Great minds charge forwards solving problems on the way. Steve Jobs took the responsibility for growth and so should you.

• Tech-savvy

Mangers may not be that good at understanding the technical side of the business, but Steve Jobs was different. In the years that he wasn’t part of Apple, the company is said to have struggled immensely. Steve Jobs certainly wasn’t the best engineer but he was a man who knew how to get to what he wants. He always found ways to translate his ideas into reality. Traders may not know all instruments there are, but they do need to know how to use what they have properly or where more learning and training is required to reach perfection.

• Talent

As we said above, Steve Jobs wasn’t a top engineer but he knew how to recognize talent. He explained how “it doesn’t make sense to hire smart people and tell them what to do; we hire smart people so they can tell us what to do.” Likewise, traders need to find tools that can assist them in trading as well as tell them what to do at key points in a trade. You don’t want to have to tweak your settings constantly or micromanage your trades all the time because this means your toolbox is flawed.

Steve Jobs never feared failure. When he was fired from Apple, he went on and created NeXT, a computer platform development company. What turned out to be one of his monumental contributions was that he helped drive the development of Pixar, thus boosting the troubled animation industry. Steve Jobs understood his talents and passions and didn’t stop after his failure. Traders often get discouraged because they take losses.

The key ingredient is learning through one’s mistakes and taking the knowledge from one busies to another. We can derive so many lessons from him and his experience. Traders can learn about extremely important topics such as diversification and investment that we often believe is only possible for the wealthy. Steve Jobs never believed in money alone but experience and the message. What is your storyline? What is that great motivating factor that makes you go back to trading? And, finally, how is your routine able to support your vision?

“The doers are the major thinkers. The people that really create the things that change this industry are both the thinker and doer in one person.”

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## Check Out These Go-To Forex Resources

Knowledge is power alright, but where do you build that knowledge matters more. There is nothing worse than learning the wrong. Many successful investors are not really different from average people, they are just well informed and act. They are willing to put their capital to risk based on the information they have. Having valid and relevant information also requires the right timing, and this is the secret sauce.

We are about to share with you one of the best sources of forex trading information sources you can find online, it is up to you to decide if you want to act upon them. These will be diversified on different aspects of trading, some are fundamental, others deal with technical analysis while some are specialized. Note that we will also try to provide less known resources since the majors are easier to find, and some other resources not mentioned before in our articles.

## BabyPips.com

We must start with the beginners’ resource for learning all about forex and trading, even though it is popular. Of course, there is nothing for the seasoned investors here however, beginners would need an easy to consume resource to get literate about something serious as forex. It all starts here and it is important to deliver indulging content, forex and trading are not as complex as many people think. BabyPips portal does the job with good lined-up lesson follow-ups that just urge you to keep learning.

## Statista.com

Now let’s go into the world of statistics. If you want to get the picture, look at the picture. Charts about every market segment are on this website, pick any economic area and there it is under the magnifying glass. Many of Statista.com charts are used in other publications and the sources are credible. There is so much variety and so much information here it is easy to get lost, so it is advised to have a plan for what you want to research. Also, if you just want general articles they are also available, for example, a report on 2020 by the numbers covers the COVID-19 stats, economy, politics, and society. Investors take special attention to trends in certain markets and based on these one could understand the long-term implications on state currencies.

## finviz.com

A great resource if you want customized currency heatmaps, performance charts, and other stats scaled to different timeframes. Additionally, this portal provides more information on other related markets, not just forex. A free subscription covers most of the needs but if you want specials like backtesting, advanced charting, alerts, and more, you will have to subscribe. If your forex trading is based on basket correlations and price action, this portal is a must resource.

## dailyfx.com

A well-known company with great content not found on other portals, mostly because of its sentiment index indicator on many markets, but focused on forex. The sentiment index is not an easily found indicator as precise calculation requires a good sampling of traders’ positions only larger brokerage can have. Dailyfx sentiment report is just one of many other tools forex traders find useful. It is a great resource for strategies, currency data, education, market news, and more.

## fxcodebase.com

A fantastic resource for indicators and technical analysis if you do not mind the lack of website makeup. Custom-made indicators are the main takeaway however the forum gold nuggets could be found in other sections. Most traders have MetaTrader clients but Station II/Marketscope 2.0 is not far behind by use. Custom indicators for this platform are made daily so be sure to check it out. Of course, it does not end with custom indicators, find automated trading solutions, strategies, and coder help if you want to learn to code and make your own indicators. MetaTrader freebies have a separate section, with equally deep and fresh content.

## barchart.com

Barchart does not focus only on the currency majors but on exotics too. The forex market coverage is very wide and deep where you can find a good overlook of all things forex. One of the more interesting analyses is The Commitment of Traders Report and The Commitments of Traders Financial Traders (TFF) Report. They are both structured overviews that answer who are the major movers of the specific currency or market – large speculators, commercial or other small actors. If you want to look where the “smart money” is going, this is a good window.

Barchart has many other interesting tools that are worth checking out, such as the Forex News section for fundamental analysis and Long term Trends charts within the Market Pulse section.

## desynced.net

A rare find with thousands of indicators and the code behind them. This means that if you happen to be a coder you can also create and mix your own creations using the published coding lines. The only problem is the somewhat poor structure of the website, it is almost a list of indicators without really explaining their trading purpose. So some coding and trading knowledge is required to get some value out of the text but still a great resource, for Expert Advisor creators especially.

## The Secret Mindset YouTube Channel

If you are into indicators, this channel is one of the best when it comes to presenting them what they can do, their purpose, and what could be composed with them. The website, thesecretmindset.com has great articles too, but their videos are very well made (if you do not mind the accent) and will present trading ideas better. The videos are not biased, are not marketing anything, and very deep if you want to nerd out on strategies and indicators. Maybe the best value of this channel is that each video inspires listeners to try something of their own. Beginners will like how everything technical is explained easily but scientifically while experienced traders will enjoy new approaches that could be utilized for their strategies.

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Well, understandably, there are quite a few practical benefits you get from polishing your skills in trading:

While these are just a few perquisites you get from improving your trading skills, you should ask yourself what it is that you feel comfortable with or that you really need in your life.

Some people are fine with doing things halfway. They are at peace with what they have and they are not looking for more.

If you are not one of them, then great – we are going to go deep today.

Ok, so the first step is always to see what type of trading you are interested in.

This is a crucial point because depending on your trading style, there are many additional questions we can ask. For example, if you are a naked chart reader, we would not be focusing on your ability to test different indicators but on your ability to understand what the chart is suggesting.

Most of the time people don’t make any changes because everything is going well on the surface. As Idowu Koyenikan said, you must have a level of discontent to feel the urge to want to grow. Still, do we need to get there? Do we need to take a major loss just to see that something in our system is not working? It’s like with beginner traders who manage to get some unbelievable returns month after month only because of reckless money management. This, of course, is never sustainable and, just because they lack experience and don’t listen to experts, they face the consequences of their actions and choices real soon.

You don’t want to get more than you bargained for and you don’t have to suffer. You need to be attentive to what your style of trading requires.

Therefore, the next step would be to see how you understand risk and how you manage it. This is vital for trading because, as a trader, you will soon learn that it’s not about winning but protecting your account from losses. The better you are at keeping your leverage balanced, the more in control you are of your emotions, but we will discuss this aspect of trading soon enough.

An excellent way to mitigate risk is to diversify your wealth structure (portfolio). As a trader, you have many different options – you can trade forex, stocks, bonds, ETFs, and so on. We cannot predict market behavior, but we can all agree on one thing – change is the only thing we can be sure of. The more you expand your portfolio, the further you are from putting all of your eggs into one basket.

Now, to get to this point and level of expertise, you do need to invest in your analytical skills. And, even if you say that you are more of a learner from my mistakes type of person, you truly need to acknowledge your ownership in your growth. It simply isn’t enough to say that you made a mistake. The trading world is not that forgiving and your account will prove it sooner or later.

So, how can we work on our analytical thinking? We journal our trades and we commit to backtesting and forward testing with diligence and a sense of purpose. You don’t have to like it but you do have to recognize its potential for it to work on a regular basis. Your notes are your strongest weapon because they help you track your progress, make conclusions, and think of additional tools, indicators, and strategies you can include in trading to improve your system and render better results.

Also, make sure not to be too quick to make changes. Developing one’s skills is a process, not a pill you can take for everything to turn to gold. If you see that your trading plan is making you feel concerned, you should give yourself some space and base your judgment on a bigger sample size. You need more trades and much more notetaking to make such vital changes in your trading.

This, of course, will teach you how to do research. In the same way you had to discover different resources on how to trade, now you need to be a detective and investigate how your actions and decisions generated specific results. This process does not have to be dull if you don’t build up unnecessary tension inside and attach negative meanings to it. This approach will help you tackle one of the key trading challenges – ensuring that you have fewer, not more, losses. What you come up with after such research may differ from other traders, but it is nonetheless relevant for you as we are all essentially different people.

Additionally, as traders, we really need to develop an insight into what the market needs. We may think something is relevant but if our everyday trading experience points at some other areas or skills, we cannot turn a blind eye and expect the problem to resolve itself. Similarly, we should strive to learn the conditions under which the market is the most permeable and agreeable with what we aim to achieve. For example, you should learn that unfavorable periods, such as elections, are there to be avoided because we do not need any excess volatility; we need flowing waters and a supportive breeze, not full-blown hurricanes, tsunamis, and volcano eruptions. Unless you adore these risky opportunities.

And, last but not least, you should really devote energy and attention to understanding yourself. Traders are often their own greatest sabotage. If you don’t know what you react to compulsively and why you are like a baby on its own – innocent and dangerous to yourself. Luckily, we are very predictable beings, so if you just take a little time and focus a little more on your emotional reactions, you can learn a great deal about what you do to hinder your personal development and financial growth. Psychology is a fundamental step in becoming a professional trader and ensuring a consistent money flow.

Still, remember that even if you can tick all of the points we listed at the beginning of this article and throughout the previous paragraphs, there is always room for improvement. Often we procrastinate to a large extent because we feel that what we need to do is big – sometimes in terms of the time and effort, we need to invest and, other times, in terms of the importance of what needs to be done.

In case you didn’t know…

We want things to be so perfect, but what we don’t understand is that this lack of confidence won’t go away unless we do something about it. And, the more we push things aside, trying to ignore whatever seems to be bugging us, the more they resurface. It’s like with the Hydra, the monster from Greek mythology – if you cut one head off, two more would grow back immediately. This is how you alone let yourself play out a part in this vicious circle.

Now, we have two major contemplative questions for you:

Who benefits from you staying in this loop of never progressing?

What is bigger – the fear of success or fear of failure?

The psychological benefits are no less impressive or significant than the increase in money in your account. Always keep in mind that what is essential is invisible to the eye (Little Prince).

Trust the process and trust yourself

Still, if you ever feel overwhelmed with the improvements you need to make, just take one thing at a time. Take that notebook and write down one—three things that you can do each day to improve your trading skills.

Good luck!

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## You’ll Kick Yourself for Not Knowing This About Forex…

While many stock enthusiasts who turned forex traders assume that currencies behave in the same fashion, this is far from true. First of all, currencies, unlike stocks, run from any money influx. If you take a look at any currency pair in the chart, you will see that the price eventually always goes in the opposite direction from where most traders are found. This happens because the forex market does depend on money flow as the stock one does.

The currency market is only governed by big baking institutions that make a profit when traders lose. They always step in when they find that most traders are going to give up so they can earn more. This often happens with reversal traders because they are so bent on trying to call a reversal that they chase the price going in one direction. However, the price won’t move until most traders give up. This is the essential mechanism of how prices change in this market – through big banks’ manipulation. That is why it is absolutely necessary that you build your system and do not do what the majority does. Of course, this article is just an observation.

Can we beat the big banks?

Our short answer is no. You cannot and you should not even attempt this because it is pointless. Many traders already tried to achieve this by acquiring volume information. They thought that the DOM indicator, for example, could tell them how to play the big banks’ game. Unfortunately, they failed to understand the numbers concerning volume. The DOM will never tell you anything about the type of orders that comprise the volume, whether they are limit or stop orders, or if the majority is entering long or short trades at the time. Not only is the missing information a crucial component but this approach will inevitably put you in the losing group.

The majority of traders attempted to do exactly what the big banks were doing, which is the reason why so many traders lost most trades and accounts. The role of the big banks has always been clear and attempting to outsmart the one entity with more information than anyone else in the forex market possesses at any given time is a sure way to experience great losses. Hence, to beat the game, you should learn how to use and interpret the information you come by so that you can rise above their radar and focus your attention elsewhere.

Are there any indicators forex traders shouldn’t use?

Spot forex as we know it was created in 1996. Today, just over a decade later, we have about 10 thousand indicators at our disposal. Interestingly enough, we still use tools that were either designed specifically for stock trading or so old and outdated that using them makes no sense. Let’s see which ones made it to our top worst list (most will be surprised).

ADX (average directional index) is still pretty popular. It is also worth mentioning that it was created in 1978 (!) and that it lags so badly that it can barely do what it’s supposed to – measure volume.

Trend Lines are also one of the more favored tools traders use to this day. Still, as different traders can draw different trend lines, the variations can be so drastic that no consensus can be made. This approach leaves too much room for mistakes in particular because most trends are over by the time we discover them.

Stochastics dates back to the 1950s. It’s interesting to note how even stock traders, for whom this indicator was firstly designed, avoid using it. Most signals are false and traders can hardly follow trends because of inaccurate information.

Price Levels may not be an indicator per se but they still attract a lot of attention. Traders seem to believe that there is something more to round numbers in trading, but they fail to see how many options this thinking leaves. Price levels won’t be able to tell you where the price will go, but they will probably pique the big banks’ interest.

CCI (Commodity Channel Index) developed in 1980 is not your best choice because it will probably force you to make a move too early.

Support/Resistance Lines are quite easy to draw, which only makes you a part of a much bigger crowd if you use them. The moment any group activity is noticeable in the chart, you will see the price go the other way, so this approach definitely isn’t worth the effort.

Japanese Candlesticks are the oldest indicator of them all (XVIII century) and also one that will directly get you under the big banks’ radar. Mind you, even if you got an occasional win here and there using this tool, it happened because these banks want you in the game for as long as it’s possible.

Bollinger Bands, another stock-trading tool from the 80s, will most probably make you exit trades too early, so you definitely won’t be able to enjoy long trades.

Fibonacci is similar to support and resistance lines in that you can draw different lines and you can hardly know which line the price is going to balance off of.

RSI (Relative Strength Index), created in 1978 for trading stocks, is still widely used. Let’s just say that even stock traders refrain from using it nowadays.

MAs (Moving Average Crossovers) won’t give you an exclusive insight into market activity. What is more, it won’t get you in the game on time and you will often be too late.

Chart Patterns focus on sentiment, which is absolutely the least favored option for any forex trader. They are exceptionally easy to spot so after big banks take traders’ orders, they will trigger them and whipsaw the price.

Can we fix any old indicators?

Some indicators have different varieties, like Stochastics that has a slower and a faster version. Still, what you will often see is that some basic problems do not change. While one problem is tackled (e.g. lagging), another one remains (e.g. inaccurate information).

Some traders like to combine different indicators from this list to yield better results; for example, ADX and MAs are often combined for improving the volume indicator. Nevertheless, this is still pointless when you can in fact find one indicator that can give you what you are looking for without having to go to great lengths.

Is the USD the best currency to trade?

The USD is one of the most traded currencies as well as a global reserve currency. Besides the forex market, all commodities are generally traded in this currency. All this points to is the currency’s liquidity. Did you know that the EUR/USD pair accounts for 37% of all trading volume in the world? However, there is one thing they rarely tell you – the USD is the absolute first when it comes to the big banks’ radar. Big banking institutions love this currency and they will track traders twice as much as in any other currency. Does this mean that we should avoid USD pairs? No, but we should pay extra attention to money management and risk management. Novice traders, however, may consider delaying any trades involving this currency to a later date when they gather more experience because of the expected volatility that the USD entails.

This article is a small contribution to the forex community in an attempt to make things more clear. Just don’t believe everything you read and demo test every tool and currency pair before risking your own money. Just because one thing works for someone else does not mean that you have to use it.

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## ICO´s Are Indeed Risky, But Here’s Why You Shouldn’t Ignore Them…

What will the future of ICOs look like internationally? Without a doubt, ICOs are generating great expectations and I think there is probably an excess of them. Often these are planned too quickly or with a very unclear after business idea. But it is also true that very powerful and interesting projects are coming to light and that they are also generating a lot of benefit to many investors and also in the short term.

The regulations established and the time will make the situation normal, but we must also bear in mind which is very laborious to analyse the real potential that some blockchain companies can have in the long term. Probably, some of the ICOs that have already come out is laying the groundwork for how technology works in the near future.

##### What is the operation, essentially, of an ICO, why is this system born and what differentiates it from the rest?

An ICO is a new financing (and therefore investment) model for technology companies in the Blockchain sector, although they are also starting to be used in other sectors. ICO stands for Initial Coin Offering and there are certain similarities between an ICO and an OPV. In early 2012, J. R. Willett published a draft of the project he wanted to create: Mastercoin. The summer of 2013 opened a time period where users could buy Mastercoins, the future tokens that the protocol would use to perform transactions.

The idea was that with all the money raised the Mastercoin protocol could be developed, so the appraisal of the tokens would be increased and the initial investors could sell their Mastercoins more expensive than when they bought them. This way both sides would win.

Funding a project through an ICO allows you to get financing through a path that did not exist until recently and with several advantages. Many could be listed, but I will only highlight a few. For example, you can present your idea to thousands of people and not just a dozen investors, so you increase the chances of finding more people willing to invest in your proposal.

Another positive point is not having to negotiate different agreements or contracts for months with different investors. In addition, at no time do you relinquish control over decisions that are made in exchange for investment.

Also, if you look from the investor’s point of view, the ICOs are very interesting because you have a chance to get very good returns in a relatively short time and also has a great range to choose from, although we do not fool ourselves, choosing a very profitable project is not so easy. And finally, note that VCs are increasingly interested in this new figure for the liquidity that allows them and that they in their model can not have.

##### How to differentiate a cryptocurrency from a “Token”? On many occasions, we confuse them…

We call a cryptocurrency a currency (virtual and digital), which is encrypted using cryptography. By the latter, I mean that encryption techniques are used to secure and verify the performance of transactions.

We could then categorize cryptocurrencies in two ways: altcoins (“alternative cryptocurrency coins”) and tokens.

Altcoins could be said to be alternative currencies to Bitcoin. Some altcoins are a variant of Bitcoin, that is, they have been created using the protocol itself but changing parts of the code leading to a new currency with different features. Some examples of this type of altcoins could be Litecoin. But in addition, there are other altcoins that have not been created from the Bitcoin protocol. This means that they have been created with their own Blockchain and protocol that supports their currency. A very clear example is Ethereum. In short, it could be said that altcoins have their own independent Blockchain, where transactions relating to their native currency occur.

Tokens are the representation of a certain value or functionality and are normally located above another blockchain. For the latter reason, creating tokens is a much more “easy” process as you don’t have to modify the code of a particular protocol or create a blockchain from scratch. All you have to do is follow the requirements of a certain blockchain such as Ethereum or Waves, which allows you to create your own tokens.

In short, one of the main differences between altcoins and tokens lies in their structure. altcoins use their own blockchain, while tokens operate on a blockchain It could also be explained or differentiated in another way. Altcoins can be used as money, and tokens “only” can be used on the platform that created them. Although this does not mean that a token can also be sold or purchased at a certain price.

##### What is the procedure to launch an ICO? And to go to an ICO?

There are really different ways to launch an ICO but I could summarize some common points that you have to have the knowledge very clear when launching. The first, and one of the most important, is to know if the token of the ICO has a sense, a real utility, in the future project. Otherwise, it doesn’t make much sense to throw an Initial Coin Offering. Linked to the token, it is also highly recommended to correctly set the type of token sales model (reverse Dutch auctions, hybrid capped, etc.) because it is another of the many elements that can influence whether or not to collect the required amount.

Another point to bear in mind is to have the right legal and tax advice. First, because being such a recent sector it is difficult to find real professionals. And second, because if you don’t have the legal and fiscal conditions well defined, the ICO could be blocked at some point.

With regard to security, it could be said that a smart contract should be developed to raise funds and issue tokens that have passed different security audits. You have to be prepared to receive “attacks” to the web and be very attentive to the different forms of phishing that are given, either from your own web as in social networks and forums.

To achieve the highest visibility of the project, and therefore, a large number of investors is vital to proper marketing planning where I can tell you that the costs of campaigns are very high given that there are more and more ICOs that need to stand out from the rest. And more briefly, it is necessary to write a detailed Whitepaper, get agreements with the most important exchanges, have an investment committee, and that the customer service before, during, and after the ICO is excellent.

Regarding the steps to go to an ICO. To tell you that it is complex because you must have a wallet compatible with ERC-20 tokens, find a solid ICO, and with revaluation possibilities. Once you get to that point you should wait for the day of the launch of the ICO, be quick not to stay out, and also buy your tokens correctly. Well, it is usually difficult not to arrive on time because it usually takes several weeks before all the tokens have been purchased, unless it is a very important ICO since there have been cases that in a matter of hours all the tokens have been sold.

##### Are ICOs safe? Of course, there have been cases of failure and success.

Let’s not kid ourselves, investing in an ICO is a high-risk operation but it is proportional to the great returns you can get. However, if you take different measures you can partially minimize that risk. For example, you must read the Whitepaper several times to be well informed about the project and from there you can look for additional information: know the state of the sector where it will operate, know in more detail the equipment behind, request information in case of doubt, analyse whether the distribution and destination of the money to be collected are correct, etc.

A story, in this case, of success, because it has achieved high profitability, which I always like to name is that of the Stratis project. The price of the token during the ICO cost \$0.007 and a few weeks ago I got to see it at \$4.9 which is an x700. But I have also seen for example the token of Virtual Accelerator that was worth \$0.04 in its beginnings and that its price has been at some point at \$0.002.

And we ask ourselves the next question, what is the most important thing we need to know before we enter the world of cryptocurrencies? The most important issue we need to take into account with respect to the two big cryptocurrencies of the moment, Bitcoin and Ethereum, is that if you plan to invest in them you must do it with long-term thought and not sell even when there are moments of heavy falls. However, it is only a point of view and in the end, everyone decides their strategy and what to do with their money.

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## Let’s Get Real: Is Day Trading Really Profitable?

Day Trading or also known as Intraday Trading can be very profitable. But, many ask: Is Day Trading really profitable? But, it is not such an easy method to perform. And that is, the frustration of losing money can discourage more than one. Although with enthusiasm, a positive mind, a lot of discipline, and a good methodology, everything is possible and you can get good results at the end of the day.

Day Trading is one of the most complicated and complex strategies that exist, so the vast majority of investors or users lose their money trying. But, for those who are more wrestling, skillful, and consistent, your luck will come and you will have very good wins.

Intraday trading is known as a strategy that is applied in a financial negotiation, especially of purchase and sale, which is carried out on the same day of the business. Day traders or intraday traders use this quick trading strategy to try to make daily profits and not have to wait for long-term investments. These traders must close all their positions before the end of the day in the market.

Financial instruments that are included in the day trading include currencies, stocks, options, and futures contracts. If you would like to be a Day Trader, in the beginning, the fundamental thing is to have a good formation.

#### What is the Profitability of Day Trading?

On the same day of trading, it makes it possible for high profits to occur or, conversely, large losses. Therefore, the profitability of Day Trading is very variable. It can be around an annual average of between 10% and up to 50%.

Although the most pessimistic say, that every day you lose money and at the end of the year, you get less return than making a long-term investment. But, if we get carried away by the statistics of some big investors in history, such as Peter Lynch (in 13 years) and Warren Buffett (in 32 years or so), the average annual return was 29 and 24% respectively.

If you are a person who only trades and does not invest in stocks in the long run or survive the day-to-day, it is said that you do not possess financial freedom. This means that financial freedom is obtained when the income that is received for the assets, manages to properly maintain the lifestyle and you can live from it every month without problems. Therefore, a well-known phrase for determining financial health is how much passive money is received from assets.

Something very beneficial for day traders is that brokers allow a higher margin for daily trade (about 25% for intraday shopping). In that case, a daily trader who has a minimum set in his account (of about \$25,000), will be able to buy shares of up to \$100,000 during the same day. But, in that case, half of those shares, must come out before the market closes.

#### Day Trading Benefits and Risks

The results of all trading operations that are carried out daily, can be very profitable or on the contrary, a total failure. In that case, day traders can get large percentage returns from their investment or huge losses, not pleasant at all.

Daily trading can be risky, especially in the following cases:

• Poor execution of operations.
• Not appropriate risk capital.
• Exchange of game or operations.

A very common strategy in Day Trading is to buy instruments using funds that are not their own. This can increase gains or losses, as the case may be, and in a very short time. If we consider the high risk of daily trading, a day trader will be forced to abandon a losing position almost immediately. In this way, a fatal loss, much higher than the original investment or the total assets, will be avoided.

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## What Should I Expect With Regard to Forex Commissions?

A commission is a cost for the trader. Brokers usually charge commissions for their work and this has an impact on our final result. These costs directly or indirectly undermine the profitability of trading. However, they are necessary operating costs, so it is important to know them in order to reduce them.

A commission is an economic consideration for a service performed. To do trading we must have the services of an intermediary (broker) that is responsible for executing the purchase-sale operations we request as well as other aspects such as money lent by leverage and, in some cases, currency changes, the cash movements we make on our account,…

Commissions and Their Importance in Our Outcomes

All financial services companies have the obligation to show their commissions before contracting the services; so that the customer is in a position to value and compare them. Almost all brokers apply the same commission rates and due to the increasing competition in recent years, these commissions are increasingly adjusted for the benefit of traders.

How Do Commissions Impact Our Trading?

We’ll start by recognizing what kind of trading we’re going to do. The most important commissions, to have a greater impact, are those that come from the sale of assets. The size of the trade (amount of money to invest) and the number of trades we make (the more trades the more fees applied) have a direct impact on this type of commission.

Therefore, the trader must determine what type of trading you do. With what investment style do you feel most comfortable? (Scalping, Swing trading,…). After thinking about our trading style we will be in a better disposition to determine if we are interested in working with a broker that offers better conditions in one type of commission or in another.

Another important aspect is the level of average capital in the account. This determines the size of our operations and therefore we may be interested in working with one or other brokers based on their commissions.

“A study of how we operate in the financial markets can be very useful to save us commissions.”

Spread: It is the difference between the purchase price and the selling price of a financial asset. The market price is only one. However, the broker offers the trader two prices: one to buy and one to sell. Most Forex and CFDs brokers get their fees this way. This differential is applied to us when opening a trade. That is, we must recover the spread first to enter into profits if the operation advances in our favor.

• Bid is the price offered to sell the currency pair or instrument it was.
• Ask is the price offered to buy the currency pair or instrument it was.

Ask will always be a few pips more expensive than the Bid. The difference between the two is the Spread.

Position Size: Applying commissions per operation in the form of Spread assumes that this cost has a direct impact depending on the size of the position (the amount of money to invest). Therefore, the first thing we must do is to calculate the value of the pip; both to keep in mind the amount of the spread in monetary terms and to know how much our potential profit or our maximum loss can amount to.

Fixed spreads and variable spreads: When we talk about fixed spreads we are referring to the fact that, although the price fluctuates in the market, the Spread remains constant. The spread will be different depending on the currency pair. However, when a fixed spread is charged, it remains unchanged for that same financial asset.

On the other hand, there are brokers that offer variable or floating spreads. The spread between the “bid” and the “ask” varies depending on the market conditions. Depending on the liquidity that exists in the market at a specific time, a more or less low Spread will be applied. When the brokers offer us this condition of variable spread, in the rates we will put the minimum that they charge, and in moments of less liquidity the Spread will increase.

Fixed commission per trade: Outside of Spread, the broker may charge a fixed amount for opening and closing the position. Sometimes they can even apply the two commission rates at the same time (Spread plus fixed commission).

Most online brokers usually apply only the spread but there are others, especially ECN brokers, targeting traders with higher volumes, that choose to offer smaller spreads but compensate with a fixed commission each time a trade is made. Depending on the average size of our trades, we will assess whether it is convenient to use it or it is more profitable for us to trade only with Spreads.

“A very short-term trading style (scalping type) is more sensitive to this type of commissions. But if your trading style is to trade more in the medium term, these commissions are not so decisive for the final result.”

Leverage and Swap: When opening a Forex trading position it is not necessary to contribute all the money required by the transaction. The money is actually borrowed by the broker and what we leave is a guarantee to be able to open the transaction.

The margin guarantee is a percentage of the size of the trade. Depending on the asset we decide to trade, and the conditions of the online broker, this percentage will be higher or lower. It’s what’s known as leverage. This money is put on the market by the broker himself and must be liquidated before the end of the market day.

If this money is not settled before the end of the day, we will be granted an automatic extension, a refinancing (rollover) that earns interest. The Swap commission is based on these interests.

Therefore, the Swap fee is nothing more than the overnight interbank market interest rate for keeping the position open (with money borrowed from leverage). This fee varies according to central banks’ interest rate policy and interbank market conditions.

Swap: a percentage that is applied to the size of the transaction. It can also be expressed in pips, for each contract or lot traded in the operation (so it will be necessary to know the value of each pip). However, this fee can even be credited to our account instead of a fee. How is this possible? The explanation is given when trading on the Forex market, where each trade is composed of the purchase of one currency and simultaneously the sale of another.

When you sell a currency, you charge the interest rate. When you buy it, you pay us. Better explained: We will pay the Swap of the currency sold and we will pay the Swap of the currency purchased. In these situations, it may be positive to plan multi-day Forex operations if it is consistent with our trading strategy.

Commission on cash withdrawal: We are not referring to the one that charges the chosen means of payment. There will be means of payment that will not charge you anything and others that can apply some commission to send or receive money. We focus on the commissions your broker can charge you for withdrawing funds. Usually, when depositing there is no commission but when withdrawing the broker can apply a commission of its own.

Commission for foreign Exchange: This type of fee can have a greater impact if it is added with the withdrawal of funds from the account. Both can be added. A trading account is denominated in a particular currency. In most cases brokers allow us to deposit funds in the most common currencies. So, the funds in the account may or may not be in our local currency. Ideally, the trading account should be in the local currency, as not being so implies a currency conversion each time funds are deposited or withdrawn.

Commission for inactivity: There are brokers who can apply a commission of this type and others who do not. This commission is determined by the non-use of our trading account in a given period of time established by the broker. Inactivity means not trading or not logging into the trading platform.

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Diversify. This is the advice that is repeated time and again in the world of investment. Now, what does true diversification involve? Could we talk about diversification by trading a single asset with a single trading system? In this article, we’ll show you how to do it. Specification Risk: One more reason to diversify your systems.

For a while now, I have made a fierce defense of the benefits of diversification, beyond asset diversification. But it is just now, after the big fall and the subsequent recovery (I am writing this with the SP500 trading above 2900 points) when people review their systems, contradict themselves, and regret not having diversified further. It is the great movements of the market that shake our beliefs and cause us to thoroughly review our mistakes and successes. And not having diversified well, may have been one of the great mistakes of the vast majority of investors.

Two different entry points for the same system could lead to very different results over time. We must therefore also diversify the entry points in order to get as close as possible to the expected outcome of the investment system.

This point of diversification is particularly important in systems where binary decisions are made. That is, in those models in which you are invested, or not, is a type of asset depending on a signal. Many Asset Allocation and trend systems follow this philosophy.

In order to illustrate the great dispersions that we can see, in relation to the chosen points of entry, we will analyze the behaviors during this year of a very simple trend system with 2 ETFs. If for a given period the SPY has positive momentum, it will invest in the SPY, if not, in TLT. Every four weeks, we re-measure the signal and make a decision. This system represents in a simplified way the investment in equities or fixed income depending on the momentum of the equities measured each month. We will start by using 252 days (1 year) as a period to measure momentum.

Operating a single entry point generates scattered results. We could say that the problem is that the system is not robust. It would have to work the same or a more similar way even if we varied the points of entry. Many of these systems are designed, and tested, with end-of-month data. However, diversification does not end there.

When we start designing an investment model, we look for and analyze many combinations of parameters in order to exploit an advantage. These combinations are filtered until you find the winners. And finally, the robust zone, which is the one that contains a series of stable combinations over time. It is usual to take the best combination of the robust area and operate it.

However, these parameters are sensitive to variations. What has historically been the best combination may not be so in the future. That the advantage exists and that it is robust, within a zone of parameters, is necessary to operate the model. But the best combination within the robust zone may not always be.

Two combinations of parameters can lead to small differences in the operation (an operation that you don’t take, an output that you do afterward, etc.) but that in the long term materializes in large differences in the results. This sensitivity grows as the uncorrelated parameters of a system increase. It is what is known as “specification risk”.

This sensitivity is closely linked to the types of systems. A permanent portfolio has very little sensitivity, while trend systems, where binary decisions are made (e.g. you are either 100% in equities, or you are 100% in fixed income), the sensitivity is very high. This also applies to intraday trading systems, factor-based investment systems, and all those using parameters. The difference between them shall be the sensitivity of the results to slight variations between the parameters.

This sensitivity may pose a risk of obtaining fewer results than expected by the model. When we started designing our system, we decided to use 1 year as a period to measure momentum and rebalance every 4 weeks. These two parameters appear to be very “current”, but simply that simple decision can lead to very disparate results than would have been obtained with other parameters close to each other.

In the following example we can see how using the variations for the same system, but using 3-4 weeks of rebalancing or 10-11-12 months of rebalancement, the signals begin to decouple gradually. This does not seem to matter, but in the long run, it can lead to large differences. And the more complex the system and the more variations the parameters allow the more they can be enlarged. If instead of an average, it were taking 2 or varied between simple or exponential, the differences in the signals would become more and more frequent.

### Specification Risk In the Long Term?

Let’s look at this from a longer-term perspective. As the objective of the article is to raise awareness of the sensitivity to the parameters of some systems, we will continue working with a very simple model. The model will evaluate the momentum at 10-11-12 months of SPY, ignoring the last or 2 months. If positive, purchase SPY; if negative, TLT. Every 3-4 weeks it evaluates the signal and takes positions.

Therefore we have 3 parameters that vary very slightly. The period in which we measure momentum (3 options), the number of recent months we ignore (2 options), and each time we rebalance (2 options). 12 combinations in total. The reason we ignore months when measuring momentum is that assets have different long-term and short-term behaviors. Short-term equity can have an average reversal effect that can affect the long-term trend. Between two systems that differ in that one rebalances every 3 weeks, and another every 4, we find an impressive difference.

We have to know that none has been especially better throughout history. This means that making a decision today about which system is going to work in the future is taking the risk of choosing the worst of the 12. If we do, we will clearly decrease the overall profitability.

There are no longer only differences in profitability, but also in maximum losses. That small difference in signals, at certain times in the market, produces devastating effects. It can leave a system permanently behind. And the truth is, this choice has a big component of chance. It could not have been known in advance what combination, of parameters, would have been appropriate.

This system is designed primarily for educational principles. But it has the basic features of trend systems used by industry and many private investors. If we had decided to apply only the winning combination of parameters, between 1999 and 2009, under the pretext that it was clearly the best combination, we would have found the losing combination between 2009 and 2019. What would have been our mistake? Was the system not robust? The advantage of trend systems is there, but sensitivity to parameters is usually overlooked. The error is not the choice of that particular set of parameters, the error is to choose only a set and not to diversify.

When designing these systems and realizing that the sensitivity of the parameters is high, the first measure is usually to increase the rebalance frequency. It is a natural instinct, but not only is it not beneficial but it is highly harmful. You will find models with many more operations (currently these models rebalance between 20 and 25 times in 20 years) have the same sensitivity to the other parameters. They would still not be diversified. Like the proposed solution to avoid “Timing Luck”, the solution would be to operate all systems, creating an assembled joint system.

Operating the whole of the systems guarantees us to obtain the really expected returns of the trend system, eliminating the risk of choosing the worst of all. In addition, the low rate of rebalancing, of this type of system, plus the fact that much of it is rebalanced on the same days, does not make the costs much higher. For other types of systems, a balance would have to be found between the costs of increased operations and the benefits of risk diversification. This also has an extra benefit: by assembling uncorrelated systems at certain times (when some are long from SPY and others from TLT), while profitability will be the average. In addition, volatility will be lower, producing a better return-volatility ratio.

### Specification Risk: Conclusions

This study will demonstrate that operating a single combination of parameters, of a model, is risky even though it has been the best combination in the past. Just as diversification between assets is important and, as we saw in previous articles, the entry points also affect the results of the operation, the diversification between sets of parameters, of a model, is also necessary to reduce risks.

“The purpose of this study is to show that operating a single combination of parameters, of a model, is risky even though it has been the best combination in the past.”

In the trend system used this sensitivity, between values, is very high since the decay, which can occur from one week between systems, causes that in the long term the results differ markedly. However, this point is applicable to the vast majority of investment models. Even two identical systems that in the past have not had any difference in the signal, having different parameters, can produce different results in the future without knowing a priori which would have been the best combination.

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## A Comprehensive Guide to All Forms of Gold Trading

Investors will always try to diversify their investments in order to reduce their risk. Specifically seek the investments of safe haven that have a better when the rest of the market drops. Of these safe investments – treasury bills, Swiss francs, and others, investors think gold is the best. For this reason, you will see that investors often include gold in their portfolios. Now with COVID19, gold is the order of the day and has a lot of attention from investors

### Gold as Merchandise

Like any other asset, the price of gold is determined by demand and supply. Most of the world’s gold comes from hard rock mining, but it can also be produced by alluvial mining methods or as a by-product of copper mining. China, Australia, and Russia are the largest gold producers in the world. Regarding demand, the main use of gold is jewelry production. It is also used in aerospace, medicine, dentistry, and electronics. Governments and central banks are gold buyers.

At present, the United States is the largest holder of gold, while Germany is second and the International Monetary Fund ( IMF) third. Private investors like you are also interested in buying gold and treat the purchase of gold as an investment. For this reason we have thought to make this guide.

Why are private investors investing in gold? Instead of keeping money in cash, investors can buy gold when they expect a recession, geopolitical uncertainty, inflation, or currency depreciation. Sometimes they keep it as insurance against the market crash. You can’t always predict unwanted events, so it makes sense to keep assets that do well as protection against a market crash.

Over the past 40 years, gold has recorded significant gains from 1979 to 1980 and from 2000 to 2011. It fought during the 1990s and after 2011. Fears of inflation and recession led to gold peaking in 1980, while several events caused gold to be traded higher after 1999. The 9/11 attacks and the war in Iraq kept the price high until 2003. The insurance purchase was behind the gold surge in the 2007 recession. It continued its upward trend as the market traded downwards, with economic uncertainty as to the main issue.

Problems in Europe, the weakening of the US dollar, and concerns about economic recovery kept the price of gold high until 2011. Do not think that gold behaves itself or always well. It has had difficulties during the 1990s due to GDP growth in the US, interest rate increases in 1995, and a strict fiscal policy. After 2011, the strength of the U.S. dollar and the U.S. economy damaged gold. The stock market broke a downward trend and became an upward trend and investors were not as interested in owning gold as insurance. So, now you know a little more about gold and why people can invest in it, let’s see how you can invest in gold

### Investing in Physical Gold

If you want to expose yourself to gold, one way is to buy gold jewelry, gold coins, or gold bullion. Gold bullion is traded very close to the price of gold and may refer to gold bars or gold bullion coins.

Gold bars have no artistic value, which differentiates them from jewellery or coin. To buy gold bullion you must pay a premium on the price of gold that can be in a range of 3 to 10 percent. You will also need to use a vault or bank deposit box to store it. You can buy physical gold online, at a jewelry store, or at another gold store.

Before buying, make sure that the price is right, the gold is real and proven, and that you’re not paying a higher premium for collector coins if you’re just looking for pure gold. Be willing to move away if these rules are not possible to comply with, in particular, if it is an online store or a shop window of dubious repute.

A trusted online store with a 4.9 rating in the google store is Silver Gold Bull, which not only allows you to buy gold, but will also store it, and buy it back if you decide to sell it for a profit. When you buy gold, you need to store it properly. It is possible to store it at home, but security problems could arise in this case. If you prefer to do so buy and keep it at home, make sure you have a proper safe, and take steps to protect your property.

Futures contracts are standard contracts traded on organised exchanges. Allow an investor to sell or buy an underlying in a given time in the future and at the price of the futures contract. First, you need to open an account with a broker. My recommendation is to use Interactive brokers as it is the broker I use 20 years ago and has never been a problem.

The gold futures contract at the Chicago Mercantile Exchange covers 100 troy ounces (ZG), although there is also a future smaller Mini that has no physical delivery (QG). To operate it, it is necessary to deposit an initial margin, which is a minimum amount necessary to open a position. Every day your position will be marked to the market. This means that if the value goes in your direction, you will get a profit, but if it goes against you, you will lose money.

If your account falls below the maintenance margin, you will need to transfer money to your account to meet the securities required by the broker. Futures contracts are leveraged instruments. You only need the balance of your account to be equal to the initial margin, which is less than the value of the entire contract. A 100-ounce contract is currently worth about \$170,000, and you only need an amount less than \$10,000 to open a position.

Some brokers do not have the delivery option, so the contract is settled in cash when it expires. Maturity is also a standardized feature of the gold futures contract and investors can choose their time horizon based on standard maturity. The prices of subsequent maturity contracts may be higher than the spot price and early maturity futures. When this is the situation, we usually say that the financial market is in a quagmire.

In another situation, when the spot price or the price of early-maturity contracts is higher than the price of late-maturity futures contracts, we are behind schedule. If you find yourself buying gold at the time the market is in contango, you additionally will have to pay a premium for contracts later due.

### Invest in Gold ETFs

If you’re not a fan of investing in gold futures, you can try gold ETFs. Instead of having a futures contract and paying attention to the maintenance margin, you can buy shares in ETFs and get gold exposure.

If this is the first time you’ve been able to invest in ETF before and want to start, you must understand its operation well. Once you choose a broker, just open an account and choose your preferred gold ETF. The most popular gold ETF is SPDR Gold Shares (NYSE: GLD) and costs 0.40 percent per year to own it. ETF follows the price of gold bullion.

### Investing in Gold Mining Companies

An investment in gold mining companies offers gold exposure, but exposure is sometimes limited. These companies carry operational risks, which can break the correlation with the price of gold. Gold miners are at risk of default and their shares may be quoted lower in case of an operational problem with the company, regardless of the price of gold.

ETFs seem to be the best way to invest in gold. If you don’t like to own futures and control initial and maintenance margins, you can buy shares in an ETF and follow the price of gold bullion. GLD is a liquid instrument and does not have high transaction costs. Futures are sometimes difficult to handle, so ETFs can be the right move.

### Invest in Gold CFDs

If you don’t want to open a futures account or don’t have that much capital, you can buy gold CFDs at a regulated broker. In these cases, the investment can be from about 1000 euros in a regulated broker. The fundamental aspect that you have to pay attention to is in the Swap, which is the daily cost that the broker will charge you for keeping a CFD from one day to the next.

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Traders and investors often think about how important it is to read and read books, websites, and all kinds of material in order to improve trading. We spend a lot of time reading, but how much time do we spend on real learning?

I’ve already talked about How to win the market and the trap of the best and it is very important to practice and learn from the market. In trading the phrase “An expert is the one who has made all the possible mistakes in his field” is fulfilled and therefore we must devote ourselves to learning from them.

The problem of the human being is that he tends to minimize the bad things of the past and then we forget that we have done well and that we have not. To solve this problem Thomas N. Bulkowski decided to make himself a kind of complete statistic of each and every one of the formations from the chartist analysis you found. His conclusions and statistics are found in a book of more than 1000 pages called Encyclopedia of chart patterns.

Bulkowski was investing in the stock market while working as an engineer until at the age of 36 he had earned enough to retire. I think teaching a little of your book will be a good way to understand how statistics are made to achieve a trading system with positive mathematical hope.

Always study the bullish and bass breaking patterns separately. In this case, study the pennants that have a bullish breaking. Translating a little we have:

• Break-even failure: Percentage of false breakages of chartist figures.
• Average Rise: Average growth after the figure is completed.
• Volume trend: Volume trend (either increasing, decreasing, or constant).
• Percentage meeting price target: Percentage by which the target price of the figure is reached.

Surprising findings: Surprising discoveries. I must admit that this part is my favorite, the detail of counting down to the smallest appreciation says a lot about their way of operating and understanding the market. In this case, he tells us that the pennants that look big and tall are better than the small and short ones. He also comments that pennants with decreasing volume have a better performance. Bulkowski devotes a section to determine that it is considered a pennant and not before giving numerous examples.

For a trend to have the strength the volume must be growing with it, if there is a movement against the trend and the volume does not follow it, then it is a movement that is not supported by professional money and therefore is a FALSE trend. Now it turns out that the chartist analysis tells us that the pennants are pauses in a trend and one feature of it is that the volume is decreasing. If you look at both branches have seen this peculiarity of the market and therefore it is foolish to study each of them thoroughly, the information is duplicated with other words.

Dedicate yourselves to doing things like Bulkowski, studying patterns, studying indicators, studying yourself in front of the market, but stop reading gurus books, blogs with magic indicators and work!

Don’t be afraid to be wrong!

If you ever decide to go the traders’ way, know the only boss you will have to listen to is you. Also know listening to yourself is the harder part of trading. Sounds funny but true. When an established trader thinks about foolish beginnings he can only smile and realize how much he has changed since. Becoming a trader is a lot of work, but it is one that gives many life lessons with a tremendously good outlook for young people. There is one trait that each successful trader has – they are wise. Wisdom requires experience and work, just no way around that. The sooner you start working the better the odds you could retire early. What a trader learns on this path is all about actually becoming a better person and how he sees life around him. Here are the biggest lessons that await you if you decide to become a professional trader.

## “Do, or do it not. There is no try”

This line is definitely familiar to the movie series fans but it holds true to trading especially. Hopefully, it also motivates you. The initiative has to be strong, simply because forex loves to cut quitters. This market will test your mettle psychologically above all else. All those who seek to get in for the easy money will be disappointed. Making forex a sort of casino is possible, most people take it like that. Gamblers are hard to stop, only a zero on their account can until they put some more money if they have it. it does not matter how high they went, unfortunately. Those that keep researching ways to beat the casino might be the ones that find their holy grail. There is a crucial turning point here, do you want to be a gambler or a trader. Is this you in the next few years?

## “Discipline equals freedom”

This is the title of a book by Jocko Willicks. The book is not about forex trading yet it is an essential life lesson that applies to forex too. There is no trader with results without discipline. By giving an example of a book that actually addresses general life problems with practical guidelines, we want to point out that forex punishes those that lack discipline as life itself. Now forex is not dangerous per se, but it can be to your financial status if you do not have rules that stand in the way to complete disaster. What you want to become is one thing, but the way to that goal is what will define you. Forex does not have feelings, do not expect mercy, mistakes will be made. But that is a good thing, you discover your psychological weak points that would need discipline to patch.

## Understanding the Concept of Risk

You have done so many foolish things when you were young, so many songs have been written about that period of human life. Simply, people take irrational risks when young. Why is this so is explained by science but that is not important since you cannot avoid it. Forex is all about how you manage risks and if you stick to the rules you set. If you are on the way to become a forex trader, it is time to make stupid mistakes. Make the hell out of them, however, we strongly advise you to do them on a demo account. Just pretend that demo is the real one. Interestingly, some young traders lack the patience or mentality to accept what they are doing on a demo does not work and go to live trading anyway. This leads us to another lesson.

## Patience

Again, one more interesting result of a science experiment, more precisely the Stanford marshmallow experiment showed that willpower has a dramatic effect on the quality of life. Now, patience does not mean you have to wait for something but to keep searching for ways to improve your trading, be it through researching other traders, strategies, indicators, or reading books. Have the willpower to persist despite the failures that could set you back emotionally, feel like it is a “waste of time”. But it is not, it is just another lesson. The results do not happen overnight. According to some experts, the results may come even after two years of everyday work. Patience is also needed in practical trading, however, this is just a smaller scale of this lesson. Now when you know it takes time to get to that holy grail the question is are you willing to do the right trading approach.

## Decision Making

This skill is so in demand because it carries responsibility not everybody can take. When the time comes to decide and accept the consequences then it takes a special skill. Sometimes this skill is attributed to leaders. In sports, this is especially evident in the last lap, the last-second shot, the final point in a match that decides the winner. Are you the one who makes it despite the failure consequences? Actually, decision-making is a stealthy skill that just makes noise when it is apparent. Elite professionals are deciding all the time by scaling the upsides and downsides of the decision. In forex, these decisions define trading, but traders eliminate the stress by knowing their strategy or a system work in the long run. They are very cool when it is decision time because they know it is just a matter of probability. In the long run, they win.

## Staying Cool

Controlling emotions is a skill and closely tied with good decision-making. You may have the methods and tools that can tell you the odds or what is a good decision. But if emotions mess that up, what good it is? Handling emotions can be done in various ways, it does not mean you need to be emotionless to make the right decision. Many will tell emotional decisions are bad ones. However, it does not mean you need to take a “pill” to stay cool. How about just staying true to your rules? If you have a plan that works in the long run, let it choose for you, there is no reason to change your mind just because you feel like it. In time, you become cool in even the most stressful moments because you strongly believe in something that just works. Now, in life, it is not recommended to be emotionless of course, but every time you need to decide about something important, you will have that attuned, cool, analytical mindset that helps.

## Wisdom

The magnificent harmony of what you have learned by forex trading is the most precious part. At this point the results are inevitable. This is the point where you accomplish and turn to higher goals by reaching out to others and sharing what you know. Now you have the responsibility to make a better future for others. Forex trading made you a better person on many levels, not just financially free. The lessons and values learned is just another lesson your personal accomplishments do not mean much if it is not reflected in the life of others.

## Forex Strategy: A Simple Definition

We can debate how to define a forex trading strategy but in the end, is it really important? We believe it is more important what elements are crucial and how to use them so you know you have a strategy. It is needless to say that without one you are blind and not make very far in forex trading.

## The Definition

We can find many definitions online but here is one that is simple but covers what is important: A strategy is a set of skills, tools, and information that consistently generate profitable trading decisions. We emphasize the word – consistently, so only when you have something that works over a long time you know that strategy has a meaning. It does not mean every trade or month has to be a winner, professionals usually take several positive months to conclude their trading strategy is consistent. The goal is to have profited from trading, however, we would not plan to gain percentages as goals right away simply because pursuing them might set beginner traders to think about winning only, whereas the true effect on the bottom line is about eliminating losers. Here is how to know you are on the right track to having a good strategy.

## The Skill Element

Before all else, you need to be true about it. Follow your plans or everything you designed goes to waste. Your mindset has to be right to pursue any strategy or you are just playing games with yourself. Now, some traders do not rely on tools such as indicators, but they look at the charts at different timeframes and look at how the price is moving. Patterns, volume, and other aspects of the market are considered but they also consider what is going on with other markets, currencies, and any information that moves the upside/downside scale in their heads. This is the skill element of the strategy, and it takes a while to learn fundamental analysis and chart reading. Of course, there are other ways to trade where other skills are developed and could be used in a strategy.

## The Tools Element

One example is the use of indicators and rules for them. Technical traders do not want to rely much on their subjective analysis of the charts or events that drive the markets. They may have an opinion or predictions but they do not trade until their indicators confirm it. Even if they think otherwise, they listen to their tools. Their skill is to be able to create a setup of different indicators that jointly create consistently good decisions. This skill to combine the right tools also requires a lot of work.

Technical traders are focused on indicators research and how they can make for a better overall performance with the others. They understand probabilities, statistics, and gauge what tools could mitigate losses. Also, when it is better to create a rule, like closing all trades on Fridays, they implement them into the strategy mix. Technical traders even use indicators for their money management if needed. It could be said that Price Action traders rely on fuzzy values while technical traders prefer precise points where they put Take Profit and Stop Loss orders, for example.

## The Consistency Element

Consistency is probably the hardest strategy element to achieve. You can have a strategy with inconsistent results but we regard that as an inconclusive trading solution. It is not a strategy that works in the long term. A car that does not move is not really a car, just a pile of materials.

No strategy works every time on every market. And that is why traders spot the best market behavior for their strategies or develop different strategies for different market conditions. They look for ways to attain consistency with their strategies since they make losses in certain situations. That can only be avoided if they wait for a new period of right market conditions. Traders then implement rules to their strategies. The right market conditions have to be spotted. Technical traders have tools or indicators for that while plain chart readers just observe the candles. Forex trading is directional trading so traders of both kinds often look at the volatility and volume. They make rules based on these measurements and pick only volume/volatility levels where their strategies work best. That is why forex, precious metals, stocks, commodity traders have different strategies.

It is not rare to see mixed strategies, technical indicators with fundamental analysis. These traders take into account more data but often they come up with conflicting signals and therefore need more time for a good setup. Does it mean it is better to mix different analyses to attain consistency? Not really, you can see pure PA or indicator traders that perform exceptionally well.

Consistency can be achieved with a certain strategy, but as said in the beginning, a trader has to be consistent first. This side of trading is not in focus by beginners because working on the psychological part is not fun and you will not see it by reading strategy definitions. Therefore, we would also widen the consistency strategy element to the trader psychology too. This is also a skill, a rule, a tool, name it how you wish, but it is a requirement for any strategy to work. Traders that attain consistency with themselves and with the strategy are the elite in forex trading. They have one of the best “jobs” when we speak financially but also about their free time, stress, and resistance to side effects like different crises.

Building a strategy does not stop when it becomes consistent. A trader explores any ways that the strategy becomes either more consistent or more profitable. It does not mean a trader has to change what is already working well, but exploring other markets where such a strategy with small changes could work. More opportunities open where more profits could be made. A strategy like this is evergreen and could be regarded as a holy grail in trading.

To conclude, you have defined a strategy when you have educated yourself about how different strategies work and then design your own with specific rules, tools, or PA patterns. Have a plan for each trade this way and consider consistency building with loss elimination, money management, and having the right mindset. Only then you know you have a strategy that could be built upon as you advance.