Categories
Forex Money Management Forex Risk Management

When Professionals Run Into Problems With Trading, This Is What They Do…

If somebody told you at the beginning of a professional forex career that you will have to bust many accounts and work for a couple of years to get it right, would you still take that road? Probably not, because in the end, you might not even get to the professional level. A lot depends on you, how much do you love trading and how much do you want to have a job most people dream about. People will settle for less, why is that so is not important, it is more about is that enough for you. At some point on this road, in case you lose a few accounts or run into obstacles, you may fall into a bad mood called desperation. So much was sacrificed only to scrap everything, you might think. Nobody will say this, but it will happen to most of the traders if not all. At any moment in a professional forex trading career, it is a possibility your mindset will take a hit, and here is what professionals have to say about this. 

The Old Problem

People that want to become forex traders do it when they want to get out of their present situation. Forex trading is much more attractive than a day job, at least for ordinary people working for XYZ company from 9 to 5. However, with all the warnings forex trading is only for the most persistent, people go in thinking they are just better than everybody else. Well, even genius traders mess it up, and mistakes are good, better make them early on. 

Desperation comes in when you pay for impatience. Rushing to forex trading just because you need alternative income so you can quit your job or drop out of college is a faster path that hits back at you. Feeling that you are missing a lot if you do not start trading now is a warning you need to take seriously. Before allowing forex to hit you financially, demo trade. Then it might hit you psychologically, your real money is safe at least. Professionals take real losses, and you have to get ready for that first. So patience is a must, you are not going to be ready in a few months and more likely not even for a few years. 

Pro Approach 

Professionals know this “trap” so they do not start panicking when they have a bad month. They play the long game and patiently wait out to see if something is really not aligned with their trading. The right mindset about this would be even when you are losing, it is good. Professionals do not get emotional to the point they lose their trading ability, but actually are very intrigued about what could take their multi-year successful strategy down. It is a great discovery because ironing out the problem makes their strategy even closer to perfection. The result of this research is also very beneficial for understanding the market and to other traders as well. What follows is looking for tools or trading measures that could evade the losses from this market situation. 

FOMO and Risk Fear

Fear Of Missing Out is also one of the most common issues beginners develop but later advanced traders may experience the paradox of “knowing too much”. FOMO is handled by having a strict rule set or a trading system. Some traders count candles until it is too late to enter a trade, some have indicators, but they all have something that prevents them from feeling that fear. There is a simple barrier in the form of a rule. 

When traders love trading they are very well informed, they digest a lot of information from various sources. This can at times affect their trading where they become risk-averse. It is hard to have a decision based on every indicator, news, or other data. Traders have to focus on a set of “decision-makers”. 

One of the ways to redirect the risk fear is gradually entering the position. This could be referred to as the Scaling-in method of money management. Older traders and investors are especially fearful of the new wave that is probably taking over currencies as we know them. We are talking about cryptocurrencies of course, and their intangible form is not really understood. The new age of currencies goes along with the new generations but veteran traders are conservative most of the time. Gold and precious metals are their choices over bitcoin and have this fear of risk (unknown). Scaling in method starting with small amounts is a good way to break this fear, gradually increasing the amount as the trade progresses. Professionals with an open mind do not have problems accepting new markets as long the asset is globally present. 

The New Problem

According to the experiences of pro traders, the journey of ironing your emotions does not easily stop. So if you are a beginner reading this article, be ready for a bumpy ride and do not ever get discouraged. Pro traders have devised a way to combat that deep but mellow feeling they have wasted many years and that they might give up trading. This feeling gets stronger when you become a pro. For clarity, a pro trader is not the one who is trading real money, it is the one who does it for a living, with his or with somebody else’s money. The feeling you are not good at what you are doing gets stronger even though you have reached the level most dream about. After every loss, it reminds you. For some, it could be a bad month after you lose sight of the long play you are actually aiming for. Desperation is there, some traders feel it more, some are more rational. According to pro traders, there is no way around it, the longer you are in trying to trade your way the more you get the feeling all was for nothing. 

The best way to get yourself on track nevertheless is by putting the work early on your strategy, plans, the whole system, and of course psychology. When you have a really tested out system with great results, you have confidence in what you are doing. The reason why pros might get desperate is that even though the system is tested out, the market is changing. Results are changing. 

It could be a motivator to find out new, better trading methods, but it is for the wrong reasons. Fear of failure should be overcome at one point, it seems only time (experience) of generally good results can make you glad you chose to be a professional forex trader. According to experts, if they could take away one thing on their road to ascension, it would be that feeling. Otherwise, it is a great profession. Having an eyeopener such as realizing you will be doing 9 to 5 jobs for most of your life will likely put you on a different track than most people. On this track, not necessarily forex trading, the same feeling will come up. Professional traders make sure they know what they are doing, the same translates to everything else.

Categories
Forex Market

Dirty Little Secrets About the Forex Industry

We just adore revealing things that are not talked about in the mainstream media. In our articles series, a trader could notice most of our trading methods are not ordinary. There is a reason for all that. Some could say it is a conspiracy but consider crisp and public proofs on the internet, reporting, news, forums, and other sources, some of which we present here. Dirty little secrets about forex are everywhere, in many forms, from fundamental manipulation to technical trading quirks that turn out to be manipulations too. Here is what we want to tell you.

Forex Gods

We will start from the forex rulers, the world’s largest banks are moving the currencies, not you or me, however big your pocket is. Never try this, and never get vengeful at them, forex has specifics because of the big bank interventions otherwise forex would look like the stock market as some professionals would say. Their dirty little secret is of course manipulating the forex market and the hunt for cluster groups of traders’ positions. It is not just about the Stop Loss positions or any pending orders, but about orders already triggered. Just a hint for those thinking about using a script to hide pending orders away from broker servers. As one familiar pro trader explained, the banks notice where orders are triggered, then they let a small movement that favors the traders, however, what follows is a sharp correction that cuts through most of the traders. Professionals that follow the big banks’ psychology call this accumulation (of traders) and manipulation phase, it looks like this:

Notice the far left side of the picture where the downtrend is reversing. This is the area where traders start open buying positions. The banks like these clusters and leave some movement up to keep them building on. What follows is a sharp move to the downside below the initial reversal level (middle of the picture). This is done to eliminate buyers’ Stop Loss. Only then the real trend starts which is much larger (right side of the picture) than the initial fake one. 

Now, another easier way to see this is by looking at the traders’ sentiment indicator. As mentioned in our previous articles, the IG group has a Client Sentiment Report daily on most forex pairs and other assets. Notice that the most liquid pars, also the most popular ones, are not moving according to the supply and demand logic. It is almost perfectly reversed. When buyers come in, the price falls, and vice versa. 

Hey, this does not happen on crypto! If you wonder why, cryptocurrencies’ core idea is Defi, decentralization, or no bank involvement. Even precious metals are not that manipulated despite the recent fine:

Credit: Reuters

Commodities have real supply and demand, not much room to manipulate there, however, money or currencies can be printed whenever. Printing can be digital with a press of a button too. Here is some more news about this recurring event (CBNC):

Ok, we have some raising eyebrows now, this dirty secret is repeating however there is not much “ordinary” people can do. Interestingly, according to pros, this behavior is what gives forex movements and sets it apart from the stock market, for example. Indexes by the way, also have sentiment anomalies, but be aware there is a very strong link between equities and the forex gods. 

The Brokers

Ok, these guys are not really forex gods but they still play a role to retail traders and they too, of course, have dirty little secrets. They are one part of the forex industry and are playing a similar game, even though forex unethical games come in many flavors, this one is the most popular. It is the Stop Loss hunting

Now, this is done on a smaller scale, it is not in plain sight and justice is rarely served. If you wonder why it is because they are the same team. Transparency is always the issue, you do not know what is done and if there is a conflict of interest caused by the well-known fact some brokers earn money from their clients’ losses. Stop-Loss hunting is hard to prove and the excuse is always the same, brokers are connected to different liquidity pools or banks so not every broker has the same price action. This explanation is overused. If we look up at the clients’ opinions, some brokers are labeled as stop hunters while some are not even though they are companies of the same size. Transparency is not strong with brokers so the only truth meters are the forums that reflect customer satisfaction. 

Review Misleads

Portals that reportedly host broker reviews is another dirty little secret that is present in the forex industry, however not uncommon in many other businesses. Just typing some broker name with the word “review” will overwhelm you with results. There are a few obvious ads first but then what looks like a sound review website. Sometimes the review has a great, 5-star rating, while the same broker is criticized on other portals. This is one easy clue that somebody paid for good reviews. More often than not, the same portals are owned by companies that hold broker brands, making you think they are separate entities. Of course, their brands are top-rated while the competitors are destroyed. There are also affiliate websites that just put a good word for anyone that wants it (pays), provided the affiliate website has a good number of visitors. 

We have put a lot of work writing independent broker reviews, however, if you are looking for client opinions forget about the first search results pages. Real, unbiased opinions come after, where the money noise is dimmed down. Only here there is no special interest by the brokers to mess with the truth. Alternatively to forex-academy.com, the Forex Peace Army portal is a very good source for reviews and client opinion, but there are more out there under the served plate. 

Reading fake reviews does not end with brokers, you will also find reviews for Expert Advisors for MetaTrader platform or automated trading solutions companies. The same marketing scheme is applied, yet the source might be a company that developed the script, not only a broker. It is often mixed since you need a broker and probably a VPN service too. 

Marketing

Similar to other industries, marketing borders with the ethics on one side and the law on the other. Brokerage is a heavily regulated industry yet it still has enough freedom to legally scam beginners. Even though certain regulatory measures are now more restrictive, such as leverage limit, amateurs looking for gamble trade are easy pickings for brokers. If you heard about the high percentage of losing trades in the forex industry then you get the picture of why. Of course, education is also tainted by this scheme so it is not easy to blame the client. Even those who do not want to gamble do not easily have access to good resources and learn to trade. Similar to the review search, good educational websites are rare and show only after all the junk in the first pages. 

Forex is a Scam?

Foul play is present in forex and people do not believe in the trader dream, the dream is vividly presented in marketing to lure uneducated clients. This is easy money for brokers and banks only. As it was not already plagued by the industry, forex is also a good playground for outright scammers. It is especially present today with untraceable cryptocurrencies. Scams are just another reason and alarm for beginners to dig deep when it comes to forex trading that, interestingly, elevates their research skills essential for successful forex trading. Forex has many ways to scam you, however, meticulous, patient, and curious will find their way to the trader’s dream eventually, just keep up the work. 

Categories
Forex Market

What’s Holding Back the Forex Industry?

The short answer is well known but the rabbit hole goes deep. It is the same reason we have global economic downturns, each special in its way but with a common enemy. The behavior of all actors linked to the forex industry is guided by many interests. Interests that do not align with individual forex trading. Let’s try to understand the gist since the short answer just turns people away from trading even though forex trading is one of the best ways to attain financial freedom, despite its quirks. 

Forex Views

We could bring the scam debate that plagues individual trading almost since it became available to regular folk. But we could not just stop there and tell it is the only thing on the way of what is really great about forex trading. Interestingly, the first thing that comes to mind to people about forex (also binary options) is betting, scammers in suits, and very unethical ties in the backstage of brokers. 

Some parts of the globe are educated and know a thing or two about the markets, be it equities, crypto, forex, or something else. Others do not, and unfortunately, these people are good targets for scammers. It is enough to be a victim and then the word of mouth forms groupthink. It is really hard to get out of the common conception that not all forex brokers are bad and not all traders are losers. Simply, once you get burned it is likely you will get burned again, which makes it even sadder knowing in most cases it is because these people are truthful or in desperate need of income. 

Forex Broker Agents

In so many cases broker agents are just employees with good on-phone selling skills. Sometimes not even that. Outsourcing the workforce benefits the broker industry but not the actual client. People with just a bit of common sense know if somebody is looking to save by putting a non-native speaker to speak about sensitive, demanding topics of forex trading does not care about the client or their money. Then the client or the forex trader, beginner or not, is perceived as part of the money harvest. 

We can go even deeper to understand the whole picture. These employees are also just a part of the broker scheme to make a high turnover of small deposits from small investors who are oblivious about what is about to happen, let alone about forex trading. The pressure is on sales, so much it borders with manipulation using half-truths, sometimes complete lies. If the sales team does not deliver the “investing now” hype to the client, they will get replaced eventually. All this creates a profoundly exploding “Wall Street” atmosphere seen in the movies. The reality, of course, is not easily discovered. Can you blame the business model? Some would say it is just how business is done, which gets us to the next point.

Broker Business Model

Spend some time reading about the broker model and you will notice a lot of discussions. Interestingly, some topics are not discussed much within the industry. How come there are brokers who can act as market makers with their pool of positioning against a trader that is not in conflict of interest? This conflict of interest is now covered with different technology, connectivity, liquidity providers, all of which actually belong to a bigger motion of deals between banks and brokers. Even the biggest brokers in the forex industry, like the IC Markets, openly state brokers are not following the interest of traders. Apart from a few exceptions, most make money when their clients lose. Do not get lost reading about the ECN, STP, B-book, A-book brokers, it doesn’t matter really. 

At the end of the day, it falls to the traders’ community. In these places, they can share their experience based on which a new trader can decide if some broker is good or not. But what about all the people who do not always find these sources? These portals are not what first comes out of the search or the broker’s websites. Whatsmore, the marketing is carefully designed to bring out all of the good feelings about trading even though it is superficial. Their targets are not the people who dig deep to find the right portals and information, but those that are impulsive and unaware. Since the majority of traders lose in the industry, a lucrative business will continue. 

The Big Banks Game

Forex has never been designed to bring fortunes to traders, on the contrary. A direct proof of that is the sentiment index available at one of the biggest forex houses, IG group. But this forex game has been present from the beginning, it is not the reason that is arguably holding back the industry. It is the fact major players have the final saying, even if it is against the law. Experienced traders have witnessed so many fines paid by funds and banks measured in billions yet no one questions if the same game will continue. It will, it seems, be how forex works and how it is connected with other industries. Major players turn so much volume fines are just one drop in the bucket. Like the concept of fines are made just to appease the law is present and functioning. Now, the big banks control the forex, governments can also generate money out of thin air, and the world elite has their wealth secured and multiplying, but this does not stop forex still being one of the best tools of your personal finance management.

Regulators

Everyone remembers how most governments of the world were somewhat clumsy reacting to the COVID-19. Similar is with regulating the brokerage. As some broker CEOs agree, not much has been done to cope with problems related to the inappropriate approach to forex trading, more specifically risk management. Reducing leverage has not solved the problem, the leverage is still optional to a significant degree and it will still eat up reckless trading. It is not even a compromise solution between clients on the one side and brokers and regulators on the other. Clients still lose despite the reduced leverage for regulated brokers. To make you think, observe how much is invested in marketing and how much into education and responsible trading. Just to make things clear, forex is primarily a money network for the big players, regulators are under pressure but not by the traders. Invent something like bitcoin where the focus is on the network user alone and you have governments, companies, and the big banks looking to seize the control.

Media and Marketing

The media has its own place in the industry, as with many other “markets” not clearly defined on the economy table. What is presented to you on TV, in newspapers, and most of the other popular information sources are sometimes even made up reasons for crashes that unexpectedly happened. Smart presenters tell you a correlated chain of events that lead to a flash crash, for example, but they always seem to be late tellers. This does not help anyone except to keep you calm and quiet. Eat up your loss because it was an “accident” no one is responsible for. Experienced traders know what happened, and most of these events are driven by the major forex players on purpose. Pegged Swissy is a perfect example. 

Another interesting phenomenon is market presenters always sound very smart, but they are not good traders. If it is cool and easy to understand, that is what the masses want, not what traders can benefit from. 

Real Forex Trading Benefit

The real trading education starts far away from the marketing and the media for the masses. It is not always what you want to hear, but forex trading actually can be one of the best “jobs” you can get. However, to get to the top and be in the minority of winners is hard work, at least in the beginning and it is for the persistent researchers. All the unforeseen barriers to entry deny many who try. Those that remain enjoy forex knowledge which translates to many other investing areas and real life.

Categories
Beginners Forex Education Forex Basics

Fundamentals of Forex Trading You Didn’t Learn in School

This is what trading should be about. It should give you the freedom to not depend on the money you are getting but to be in control of it. Sometimes, this is easier said than done. That is why we have selected a few critical points that need to be reiterated for every beginner trader to read. With the present-day market expansion and ease of internet access, novice traders can read about lots of things that really aren’t that relevant. We have a different agenda. Today, you will read the things they don’t teach you. We will show you the bigger picture.

“If you work for money, you give the power to your employer. If money works for you, you keep the power and control it.” (Rich Dad, Poor Dad, Robert Kiyosaki)

Who runs the world?

Traders often miss this one key fact about trading – not all markets are governed in the same way. With stocks, things are quite clear. The money flow will dictate how the prices are going to be determined. But that flow can be out of the context of the free market sometimes (printing). In spot forex, however, when the money flows into the market, everything works mostly how the banks set. The prices will always go the opposite way traders go because this is how the big banks (i.e. Citibank, Deutsche Bank, Chase Bank, and HSBC, among others) manipulate the market. 

Get educated and don’t let the prevailing thought affect your critical thinking.

“One of the reasons the rich get richer, the poor get poorer, and the middle class struggles in debt is because the subject of money is taught at home, not in school.”  (Robert Kiyosaki)

What’s money worth?

When we think of stocks or commodities, we think of balance sheets, assets, and products that help us assign a price to any equity. What traders often fail to understand is that currencies act differently. So, when experienced stock traders wish to expand their portfolio and start trading forex, they overlook the nature of today’s currencies. The currencies we know now are fiat, which means they don’t have the value of their own like they did during the gold standard. The currencies’ value is nowadays solely determined by big banks. 

Understand what you are willing to trade as well as the essential differences between various instruments, tools, and markets.

“A person can be highly educated, professionally successful, and financially illiterate.” (Robert Kiyosaki)

Where did everybody go?

When beginners first start trading, they look for valuable content and support for development. Still, many make the mistake of following groupthink that immediately puts them in the losing group. Why does this happen? Traders who develop herd mentality don’t rely on their own analytical skills, knowledge, and experience, which is one of the main reasons why they can’t remain traders long term. Secondly, if you are a forex trader and you just look for the areas in the chart where everyone else is, you will soon be disappointed because the big banks will soon step in and change the price direction. 

Look up IG client sentiment and avoid outdated tools that are likely to give you this type of information. Your system should tell you how to avoid big banks, not how to be under their radar.

“Most people go along with the crowd. They do things because everybody else does it.” (Robert Kiyosaki)

Become rich in 30 days

Your favorite YouTuber or your trading mentor won’t be there to hold your hand forever. You must get in the game on your own. Yes, wealthy people do have advisors to keep getting the lofty return year after year, but to get there you first need to learn how to trade on your own. Even trading robots (expert advisors/EAs) can’t help you much if you don’t know which strategy or style of trading you want to use. 

Know what you care about. Explore your options and don’t believe the promises of getting unprecedented returns. You owe yourself that.

“There are no bad business and investment opportunities, but there are bad entrepreneurs and investors.” (Robert Kiyosaki)

Who are you? 

This is a deal-breaker if you want to be good at trading in any market. As a human being, regardless of your gender, you are prone to feeling different emotions that will either make you go forward or tell you that something isn’t the best choice for you. Sometimes, however, these emotions push us to do things we shouldn’t. We overleverage or under leverage; we enter too many trades; we don’t sleep and so on. This is not sustainable and you, like anyone else, will break at some point.

↳ Get to know yourself and understand your triggers so you can have control over your actions. Do the trading psychology test to get more insight.

“Emotions are what make us human. Make us real. The word ‘emotion’ stands for energy in motion. Be truthful about your emotions, and use your mind and emotions in your favor, not against yourself.” (Robert Kiyosaki)

Do you put all of your eggs into one basket? 

What do the experts do? Besides relying on experience, successful traders always diversify. They never depend only on the profit they can get from one market, and so should you. If you are a crypto trader, you will firstly diversify your coins. If you are a forex trader, you will think of different currency pairs to trade. Still, to be free of having to depend on one source of income (as one market is one source), you will look for other markets to trade. 

Make sure that you understand the similarities and differences between the markets and always have money management in place.

“When it comes to money, the only skill most people know is to work hard.” (Robert Kiyosaki)

How can traders lose the right way?

At the moment of experiencing a loss, traders are often unable to stop overreacting. They chase losses and enter new trades, which only takes their accounts further into the abyss. If you’ve been there, you know that this isn’t the right way. Therefore, the first step is to accept the loss and step away from your computer. Then, you will be smart about this experience and learn as much as you can. 

Use testing and journaling to understand how a particular trade loss can be mitigated. Then, improve your system, strategy, and money management to change your future trading.

“Wealth is a person’s ability to survive so many days forward— or, if I stopped working today, how long could I survive?” (Robert Kiyosaki)

How can you become a pro?

Leave no stone unturned. Learn about yourself, your weak points, your algorithm, and your skills, and make room for development. Don’t cry over spilled milk but shift from thinker to doer. Also, if you really want to stay in the game, get rid of the casino mentality and learn to wait patiently while working diligently. There is no instant gratification in the long game, only demo trading, journaling, testing, and revising before you invest your real money. 

Professional trading is trading real money for a living. Still, everyone can try that. Be a trader who persists in the struggles. Be the one who sees the bigger picture.

 “There is a difference between being poor and being broke. Broke is temporary. Poor is eternal.” (Robert Kiyosaki)

And, finally…

If you always see yourself as lacking, you can see neither the market potential nor the potential that comes from losing. Sometimes we fear loss; other times, we fear success. The question is what you will do about it.

Categories
Beginners Forex Education Forex Basic Strategies

How to Get Better Results Out of Your Forex Strategies

Some many strategies are developed but all traders have one in common, the element that separates them from the pack (most starters lose). These traders have tested their strategies to the bone which gives them a really good chance to have profits at the end of the year. So, yes, they are slow turtles, actually, they are not racing at all. That element is called persistence, it is present in so many ways and many aspects of trading. Each of the trader’s eras requires persistence which ultimately improves your overall trading skills. Now, here is how to improve results with just this one element, even though we could argue there are many, we believe this one is the one that cannot go away if you want to see the results every year. 

Strategies that Work

It would take many pages to describe how you can improve a strategy classified as a reversal, swing trading, scalping, channel breakouts, deviation probability, and so on. You can even mix strategies based on the market conditions or mix the theories to create a “diversified” decision. At the end of the day, backtesting results will judge if that strategy combo is working or not. Strategies that work are the ones that are tested out and give good results over and over in the long term. It is great we have demo accounts so we can test as much as we like, yet we need to be persistent in this endeavor to find the right combo. And this is how most traders start, testing their first strategies. The first and the best way to improve your strategy is by analyzing the test results from the excel table, myfxbook, or any other journaling tool.

The stats are a good giveaway of what is good and bad with your strategy. The P/L line is not always the most important, pay attention to other markers such as the drawdown, profit factor, Sharpe Ratio, and other, trade-specific stats, such as Risk to Reward ratio, how much money you risk per trade, and so on. The amount of attention and work you invest in this stage will equal how much your strategy is improved. However, do not spend a year on one project just to conclude it does not work, take a hit and abandon ship. Persist. There is so much to explore out there. 

The Iron Mind Strategy

All that work you have done is paying off, your strategy works consistently in your backtests. Forward tests confirm you can make good money, all you have to do is go live. And disaster strikes. Feeling broken or mad? Does not matter, to make it in this game you need to persist. At this point, if your strategy works mathematically, there is one factor that could ruin your nicely developed system. Your psychology probably failed. The system never had a chance to do its thing because you kept interfering. 

We would advise you to start with indicators since they are strict, unlike our minds. Especially on very important trading parts such as risk management. We can get emotional, we might be tired, drunk, or something else, If we let our physical and psychological state interfere with our trading we cannot get persistent results. And there is that word again. 

Indicators are an easy solution for this, but it might not be enough, we have to accept the strategy could be better if we interfere less and let the tools work. The extent of how many indicators and tools you have in your strategy depends on you. It still might not matter because beginner traders think they can do better. Some traders drop the indicators once they become experienced reading the charts, some keep them forever and look out for better ones. 

Keeping the Mind Open

Traders can put the badges on once they overcome psychological issues. The strategies they have are finally doing what they do in the backtests year after year. With these, they can become pros, using their own money or having investors. However, traders will need to improve on what they already have. They need to be persistent still because at some point the market will change, the same way forex is different today than 10 years ago. Of course, your strategy could work great, even though it was based on the old market conditions, but this is not always the case. Very successful traders could “lose their mojo”, and this happens even to veterans in the industry.

If your strategy is indicator-based, lookout for new versions or adaptation of the same. If you use some moving average, try out a step version of the same. Did you know inverse Bollinger bands indicator can also be a great type of moving average? Improving the strategy requires keeping an open mind about ideas, similar or completely different. Each strategy has something unique, when browsing strategies pay attention to the trading plan, there might be a rule that could benefit your strategy if applied.

Find Good Resources

Exploring the world of forex is very interesting, you never know if some forum from the depth of the search list might be what you are looking for. Interestingly it is mostly the community portals where people share their ideas and creations that are the best sources. If you thought a good source is some popular tv station, you are wrong. Even the websites on the first search result page are more of the same. It is like they are cloned. Know you need to dig deeper unless you like conventional ideas that do not get you anywhere. Presenters on tv are bad traders, they just sound smart with the lines and tools understandable to the masses. We all know better, even beginners who went through babypips’ school know the analysis is much deeper, from a technical standpoint. 

Their fundamental analysis also is not what you need. Rarely ever some information from the TV is useful for trading. If you want to really have insights into what is going on with the markets, pay attention to dedicated research channels. They are present on social media like YouTube and Twitter. For example, The Rich Dad Channel is hosted by well-known investor and bestseller author Robert Kiyosaki. The channel is full of fundamental insights about the markets and politics inevitably connected to the USD, EUR, and other currencies. What is great about the channel is that Robert hosts pros who are specialized in certain markets, who in turn have their own channels. You get the idea this is great for exploring other channels of your interest knowing you won’t stumble on shallow analysis TV stations. 

Connect with Other Traders

Introverts rarely do this however, when you are really stuck and do not get the results you want, consult with other traders. Forums are a good way to go with this but do not expect someone to hold your hand. More often than not someone has already asked the same question. Still, if you have some new problem worth sharing, you will be amazed at how many smart trades are there who could help. Sometimes it is just words that you might need, not pointers or indicators. If you ever become interested to become a pro trader, try to apply with a prop firm that organizes trader community events. This is a rare value that is very helpful for your strategies and your mindset. 

Categories
Forex Market

Forex Trading By the Numbers (This Information May Shock You)

For most current traders Forex markets are the privilege they were born into. As the majority of them are below forty–five years of age, they are too young to remember the Bretton Woods Agreement that was set to rebuild the post-World War II economy. This agreement established a system that ensured that each country adopted a monetary policy pegging their currency to the US dollar which was in turn tied to the price of gold. That became known as the Gold Standard.

Due to insufficient gold supply to cover for dollars in circulation during Nixon’s administration, the dollar has depreciated. The two currencies parted ways leading to the collapse of the said system in 1971. Finding a new model took a while and in 1973. countries were permitted to adopt any suitable exchange arrangement for their currency or let it float freely. Market forces began determining the value of one currency relative to other country’s currencies, thus giving birth to modern forex trading.

Initially, it was exclusively a playground for major players. The only ones who had access to forex trading were leading banks, financial institutions, and governments. The required minimum sum at the time was 40-60 million dollars. It was not until the nineties that a single person such as yourself could cross the threshold of trading with the first deposit not larger than $1,000.  Admittedly, even in 2020 market share of retail forex trading is only 5.5% while multinational corporations and hedge funds have the rest. Still, there seems to be enough for everyone. 

Technological progress played an important role in letting individual traders get into the game. The emergence of the Internet and the spurt of communication accelerated the information exchange. The appearance of forex trading platforms in 1996. facilitated trading currencies in real-time through the Internet and forex brokers. Software development gave us Meta Trader 4 (or MT4) in 2005 and MT5 in 2010 which are still used by 54% of the retail brokers a decade later in spite of numerous other software with user-friendly interfaces. Mobile phones play a big part in today’s trading. 35% of traders search for brokers via smartphones.

A Word or Two about the Market

The Forex market is the only financial market that works round the clock. Major world markets either overlap or as one closes in one part of the world the other one opens across the globe which makes it available 24 hours a day. 

There are four accepted time zones or sessions named after the cities where most forex trading takes place. Those are London, New York, Sydney, and Tokyo. The overlap of London and New York sessions marks the busiest part of the day. During those four hours, the bulk of the average daily $6.6 trillion of trade transpires. In comparison to the New York Stock Exchange, the daily trade volume is 53 times greater. This number is significantly higher than in 2016 when the previous market analysis was carried out by The Bank for International Settlements (BIS). 

The triennial period marks yet another growth of nearly 25%. The entire global forex market was valued at $1.934 quadrillion dollars in 2016. In case you were wondering, the figure is now $2.409 quadrillion. It is twelvefold the futures market and 27 times greater than the equities market.

Currencies and Currency Pairs

There are 170 currencies traded on the global forex market. In terms of how frequently they are exchanged, they could be either exotic or major.  The former is not in the top seven, but may still be noteworthy. Exotic currencies of emerging market economies (India, Mexico, Russia, Pakistan, Saudi Arabia, China, and Brazil) contribute to 24.5% of all market transactions.  

The latter ones are exchanged most frequently. They include the US dollar, the Euro, the Japanese Yen, the British Pound, Australian Dollar, the Canadian Dollar, and the Swiss Franc. In ascending order the last two account for the 5% of forex trading each, AUD for 6.8%, GBP for 12.8%, and JPY holds third place with 16.8%. The Euro is our silver medalist with 32.3% of all daily trades. Finally, lonely at the top is the USD. It is the only currency on either the base side of the quote side of major currency pairs involved in as much as 88.3% of forex deals as stated in the BIS survey of 2019.

According to the currencies involved in trading, there are three types of currency pairs. Majors are dollar-based transactions of major currencies and they make up 67.4% of the Forex market’s daily trade. Minors consist of two of the major currencies, the USD excluded (for instance GBP/EUR and AUD/JPY). Exotic pairs consist of one major currency and one exotic currency (e.g. a currency of a developing economy such as China or Brazil).

The Magnificent Seven

Major currency pairs are the 7 most prominent: EUR/USD, USD/JPY,  GBP/USD, AUD/USD, USD/CAD, USD/CNY, and USD/CHF. In everyday speech, they are often referred to by their nicknames.

The EUR/USD pair or popularly – Fiber, accounted for 24% of trades in 2019. which makes it the No. 1 traded pair on the foreign exchange.

The USD/JPY currency pair or Ninja holds second place despite the decrease from 17.8% of forex trades in 2016 to 13.2% in 2019. 

The firm third place is reserved for the GBP/USD pair nicknamed Cable, which has been stable for three years accounting for 9.6% of 2019 transactions. 

The fourth is the Aussie or the AUD/USD pair, which has been almost fixed since 2016 represented 5.4% of all transactions.

The USD/CAD, also known as the Loonie, is the fifth pair and it made up 4.4% of trades in 2019. 

The relation between the American Dollar and the Chinese Renminbi is the penultimate of the seven majors. This USD/CNY pair rose by 0.3% in three years’ time and it represented 4.1% of 2019 forex transactions

The USD/CHF pair nicknamed Swissy comes in last with its 3.6% of forex transactions of 2019 daily trades. 

Demographics

Most forex traders are men in their thirties and forties. Although the numbers fluctuate, divided into age groups – 43.5% of traders are aged 25-34, 41.5% stretches over another decade (35-44 years of age) and 15% are older than 45. Such a large percentage of young people involved in trading forex can be explained by being born as digital natives. They were surrounded by computers, the Internet, tablets, and smartphones from childhood and they are up-close and personal with innovative technology. 

Genderwise, women make a tenth of all traders (or 10.9 % to be exact). Still, they outperform men by 1.8% as they are not prone to risky behaviour, but rather long-term strategies. Speaking of performance, only 15% of all traders make a profit, so 80% quit in just a year or two. Only 1% of traders are able to generate income for more than four consecutive quarters.

A mere 7% have been trading for over a decade and 23% for 4-9 years. That makes new traders a sizable group. 31% are in their first year of trading and another 39% have traded for 1-3 years.  On a day-to-day basis 45% of traders spend up to 2 hours a day dealing with forex, 41% invest 2-6 hours of their time, and 14% devote more than 6 hours to trading. Monthly, 35% of traders make 4-8 trades. 41% of traders make 9-20 trades, an average of 16 trades per month for a profitable trader. Finally, 14% make over 30 trades each month.

As they are driven by their will to succeed over 50% have acquired books, purchased courses, and strategy testers. Their online time is also focused on education and self-betterment and it is split between reading materials and watching trading-related content on one hand and finding advice on social media and forums on the other.

Categories
Beginners Forex Education Forex Basic Strategies

Apply These 5 Secret Techniques To Improve Your Forex Trading

There are so many ways to fail with forex trading but so many ways to improve on. Each trader is unique in how he is playing the long forex game, however, common techniques are applied in various forms that make a huge difference to the trader’s psychology and other trading aspects. Such techniques are not always on the scene, frankly, we think most of the good stuff is not in plain sight. This article will try to provide techniques everybody can apply but a few know about. 

#1 Use Personality Tests

You will certainly find trading techniques not applicable to you or your lifestyle. Every trader has inherited advantages and disadvantages related to forex trading. Now, it is very rare to connect your results from popular personality tests with forex trading. Did you know you can use these tests to see where you will be great and where you will fail in trading, regardless of the strategy you choose? This is a secret only experts talk about or prop firms when registering new members. It may be a good idea for you to research this topic, however, we will give you some examples. Personality tests are there to help you, so you should answer them honestly, they are just describing your personality after all. We will use 16 personality types created by Isabel Myers and Katharine Briggs. 

  • If you are an extrovert, you are likely happy to start trading right away, opportunities are never missed, you like to take action. All this eagerness, on the other side, is dangerous. Overtrading is a common mistake with these traders, they also get emotional quickly. They should work on rules that will prevent them from overtrading, such as going to the gym, reading sessions, or similar, just away from their trading platform.
  • Introverts are great strategists, planners, strategy engineers. On the downside, they miss opportunities because of too much information. Another drawback of such traders is their hesitation to talk about their trading that could produce a great idea. 
  • Your lifestyle is how you look at the world and this also defines how you look at fore trading. If you are perceptive, for example, you do not like plans, rigid constructs that tell you what to do exactly. Even though such traders are curious and open-minded, they may lack conviction or confidence. Accepting a decision system solves this, provided a trader follows it to the letter even though he dislikes it in the beginning. More on the personality test is found in our dedicated article.

#2 Achieve Consistency With Indicators

Indicators are a way to go for beginners especially. If your trading is already advanced and consistent you do not have to mess with indicators. Beginner traders need guidance, and indicators are tools just made for that. However, consistency could not be achieved just by plugging random indicators, you will need a system. Indicators are great decision-makers, but you need specialized ones. To be precise, each indicator has its role, what they measure, how they serve best. You will rarely find a good indicator that is universal if that is even possible. Use specialized ones and arrange them to have a system you can follow, do not rely on your instincts, at least not until you build experience. 

Your instincts and your psychology do not do well when you start losing. Each time you experience a loss from a gut feel trade, there will be self-doubt. Continue to do so and you might quit trading altogether. By using an indicator system, and following it, you create a foundation where you can relax. On a proven system you know you have a winning formula, drawdown will not shake you as much. Many adverse factors on your consistency will be eliminated this way, forget all the videos about trading that do not implement indicators. Find special Moving Averages for trends, volume indicators for gauging market conditions, and even use indicators for money management. To some, this might not be any secret technique, yet you will be amazed how many beginners do not know the true value of trading systems. 

#3 Custom Formulas

Did you know you can use a formula to make your index or a currency basket? Tradingview is a popular platform that allows you to do this. Indicators for MT4 that represent a currency basket, for example, are very rare, but in TradingView, you can make your own by typing one in the symbol box. Currency strength meters are not quite good replicas because you cannot see price action and you cannot factor in or out assets you want. This is still possible for free on the mentioned platform. You can use this formula for the Euro against the other 6 majors: 

(EURUSD+EURJPY/100+EURAUD+EURCAD+EURNZD+EURCHF+EURGBP)/7

You can also use inversion (1/X) which is needed for correct chart presentation, such as for the USD basket:

(USDJPY/100+USDCAD+1/EURUSD+1/GBPUSD+1/AUDUSD+1/NZDUSD+USDCHF)/7

On a basket chart, you can analyze, draw lines, put indicators like on any other. This is a secret technique currency basket traders adore, however even if you do not follow that strategy you can use it for a scoring system. If a single currency is trending up then you know to avoid selling it and mark it +1 point if you are looking to buy. This is just one secret from using custom formulas, we leave the rest for you to find out or create one of your own.

#4 Have a Schedule

Did you know trading is not only reading about strategies and ways to win trades? Professional traders have their routines and do not deviate from them. The reason for this trading technique is that it fosters their pros and encloses their drawbacks. It is what makes them have their trading “mojo”. We have mentioned indicators but professionals retain the edge with a routine, especially if they do not have a strict technical trading system. 

Take any trading book and you will see a lot of charts and setups, however, rarely about what really makes a professional trader. If you want to use a daily, weekly, or even monthly time frame, your trading schedule is much easier. Lower time frames require your presence but without a schedule, you can mess up your trading big time. If you find yourself looking at the charts for fun, to see what is going on in the middle of the night or similar, this is a sign you need to work on your schedule. FOMO is an unreasonable fear, there is always another opportunity with trading, chasing them is actually bad. 

Daily timeframe trading requires very little screen time. Basically, just 30 minutes to check if you want to trade and the news. Each period is one day so you only need to take a look once the candle closes. Set and forget for the next 24 hrs, easy. Lower time frames, on the other hand, require a plan in line with the sessions and the strategy. Execute this plan to the letter and then close the charts, do something else. You will be glad you did.

#5 Using Volume and Volatility

Did you know the trend following strategies are the most successful compared to everything else? Try to develop one with this special ingredient. So, if you are not totally new to trading then you have heard about volatility and volume. But have you noticed very few traders use these measurements? Too bad for them but now you know the secret of trend riding. To connect the two, trends rely on energy that pushes them further, and that energy is measured with volume/volatility indicators. This is a secret once again because rising volume or volatility alignment with the trend start makes such a big impact on trading. Whatsmore, such indicators are not common, which makes them even more special. Incorporate one as a rule for your trading, there are some to be found on the MetaQuotes portal for MT4 or ForexFactory

Categories
Beginners Forex Education Forex Assets

Gold As Part of a Diversified Investment Portfolio

Today we’re gonna talk about what diversification means and gold as part of a diversified portfolio. Finally, we will analyze the gold, what has happened in recent months, and what we expect from it in the coming months.

If we want to define diversification we could do it as a way to invest in different assets with the aim of reducing portfolio risk. There are different theories and formulas, but the important thing is to understand that the assets in which you invest have to be totally or partially uncorrelated. Investing in BBVA and Telefónica at the level of decoupling is of little use. It obviously implies a small diversification (although only sectoral), but they are quite correlated assets. If the bag goes down or up, as the beta of the two is very similar, the two will go up and down. As we can assume, this is not the best way to reduce risk or volatility. The same would be extendable, for example, to the case of buying the American stock exchange: within being diversifying (geographically), we would be doing it with a highly correlated product.

If we want to define diversification we could do it as a way to invest in different assets with the aim of reducing portfolio risk. To make effective and real diversification we have to do it by investing in assets that have a correlation close to 0, both positive and negative. To diversify you can combine many assets, but there is a limit after which, even by increasing the number of assets in a portfolio, you do not reduce risk (It is called systemic risk).

Some theories say that this number varies between 8 and 12 assets, but depends a lot on whether they are separate assets, funds, or sectoral indices. To make effective and real diversification we have to do it by investing in assets that have a correlation close to 0. To build an efficient portfolio, we need to know the volatility (variance of the assets that make it up), and its correlations. Thus we can estimate the optimal diversification of a portfolio (also called an efficient border).

It is important to note that the correlations of these assets, which make up a portfolio, vary over time. For this reason, the composition of the portfolio has to be adjusted if we want to have optimal and efficient diversification.

One of the great virtues of the Seasonal Quant Multistrategy Sphere, FI is precisely that it is not correlated with any other asset as it develops a unique strategy based on the seasonalities of raw materials. For this reason, it can perfectly be part of the diversification of an efficient portfolio, more when it has really low volatility and therefore is suitable for the vast majority of investors.

Lately, there have been many comments from permanent portfolios, which are always on the market, but we think that in the case of gold this is not entirely true. You have to know how to choose the moment, as in many other investments, since gold can bring negative returns to the portfolio at certain times and even increase volatility. Let’s see it.

For starters, let’s compare the long-term behavior of gold with the SP500 index and 10-year American bonds (treasuries). We take the VOO (ETF of the SP500), the GLD (ETF of gold), and the TLT (ETF of long-term bonds). The comparison began in 1974 after the gold standard with Nixon ended in 1971. It coincides that it is the first year that has long-term bond data. “Heavy spending for the Vietnam War”

Gold has its moments, in 1974 it goes up 72%, while the SP500 goes down 26%. During the dot.com bubble gold rose by 21% (2000-2002) while the SP500 fell by 38% and in the last crisis 2008, the SP500 fell by 38% while gold only rose by 8%. In 1980 gold was quoted at 590/oz and in 2005 it was worth the same.

Combining an asset always with another asset with which it has a near zero or negative correlation does not help much if the asset in question is not of absolute return. And it has its times as bad as gold. I mean, you have to know the time to have it in your wallet.

Gold may be a safe haven currency, it even seems to beat inflation during the comparison period, but not having much more utility should not be added to a permanent portfolio as a long-term investment, because in many cases it has very negative returns and adds volatility to the portfolio. In addition, it often does not serve as coverage in bad times, as has been shown.

“If you look at the March data, we see that they have all dropped, gold, equity, and bonds. Something incredible. We call this total correlation.”

Let’s give an example, if we stop to observe in the March data, you see that they’ve all gone down, gold, equity, and bonds. That’s amazing. We call this total correlation. Assets that a priori should not move in tandem, do so and this destroys any portfolio. This is the reason why the management team of the Seasonal Sphere Quant Multistrategy, FI thinks that you have to have gold in your portfolio, but selectively and punctually. We have already taken a position and will continue to ponder it as long as external factors indicate that it is reasonable to have it because it can provide profitability and control of volatility.

What happened in the past months and what we expect from GOLD in the coming months? What happened in March to make everything correlate? To find out the best time to have gold in the portfolio we believe it is important to know what happened in March and the previous months with gold.

There are two main reasons for this March downturn. The first is in the futures market. The fact that speculators are strongly positioned long hands does not like it. The good thing about being all leveraged is that with a small move you clean up the market and this is precisely what happened. Strong hands shake the tree a little so that those who can’t keep warranties close (they’ll buy back in highs and help raise the price further when strong hands come off.).

And the cleaning of the market came:

We have seen the fastest decline in the equity market in years, even I think we can say the fastest in history (in days). Liquidity has been reduced even in the high-quality bond market and all accompanied by a rise in bestial volatility.

A rise in volatility leads to higher collateral margins for participants, that is, the money they need to take into account every day in order to keep their leveraged positions open. And as many operators lost in equities and fixed income the shortage of volume made them sell at worse prices, because many chose to sell what was still in profits and had liquidity. This dragged to the market at the time when everything went wrong. It rarely happens, but it does happen, so it’s important to diversify a portfolio with the right assets.

In addition, the market needed to be cleaned up so that something out of the ordinary could happen and the market could return to highs. We can observe that during the mass liquidations of March, more or less 100,000 contracts (100000x100x1720= about 17.2MM (nominal billion) have left the market, giving the green light to see new highs. In addition, there have been two more events, the Coronavirus (Covid-19) which is an event not expected by anyone (we have also seen how it has put the world economies against the wall) and of course, as expected, central banks all agree to mass-print money (more than ever) as a theoretically infallible remedy to exit the crisis. We will see in the future how the experiment ends.

With the current price of the future of gold over $1,720, a significant volume of open positions on call 2,500 this December, but also on call 3,000, and even on call 4,000. In addition, there is still a very strong interest for the call 3.500 and call 4.000 of June 2021. Therefore, and although we know that options positions are often part of a more complete portfolio, combined with futures or with options spreads, we conclude that there is a very strong bullish bet on gold by the market.

Categories
Forex Trade Types

Binary Options Warning! Five Risks to Avoid

There are many ways to lose your money in this world but here’s one you haven’t met before: Binary options websites (digital options or fixed-profit options). An innovation that has shown great growth in recent years, but as social trading and managed accounts, is something so new that there is very little information about it.

The sites attract the same kind of people who play online poker and other types of casino games. But somehow they have an aura of being more respectable because they present themselves as a form of investment. Don’t get your hopes up. These are simple, pure gambling sites. It is naturally a matter of time before local authorities sanction them, as well as with the European authorities. Did they promise you that you can live on binary options? then everything you need to know about them.

What are binary options?

Earn 70% in one hour! Limited risk! you simply have to predict the trend and bingo! No experience is needed! Try to google binary options, and that’s what they typically use to sell to you. The material is more focused on attracting speculators who are not careful, than on attracting and teaching prudent and serious traders and investors how and when to use binary options. Like most rational adults, you should stop believing in promises to get rich fast just like you did when you stopped believing in Santa Claus.

The rise of binary options for forex and other instruments has literally been exploited since 2010-12 by the combination of simplicity and its high-profit potential. Then, you can enter a bet (which is really so) on anything that is publicly traded, depending on the website you use. Some sites offer free guides on how to get started with binary options.

Here is a brief summary of the key points you should know to get an idea of binary options as another alternative to lifelong trading in forex, stock exchange, commodities, cryptocurrency, and ETFs. Read on for more information or start trading and see for yourself as the classic CFD trading, not the bets, can make you win a lot of money.

Here are the 5 points you should know about binary options – the most important lessons you will learn.

A Risk-Negative Benefit Ratio

Something common for the trader is to make 75% of what he bets correctly. For example, if a trader places $100 betting on the value of the Eurusd going up, and he hits, he will receive $75 plus his initial investment. If the value of this pair goes down, the trader loses 100% of what he bet.

That means you have to hit 55% of the time not to waste your money and most of the time to try to make money with binary options. The house naturally has an advantage. Binary options work much like a roulette wheel: if your prediction is incorrect, you will lose the entire capital that was risked, but if your bet is correct you get your money plus a profit.

Those who are better able to manage capital and risk will generally be more able to get better risk/benefit ratios with forex and difference contracts, where the risk management rules tell them to bet only when there is at least one risk/benefit ratio of 1:3.

Forex traders and difference contracts can be winners with a small percentage of successful transactions. Negotiating difference contracts is more about how much you can do when you’re right and how little you can lose when you’re wrong using tools like Stop Loss and Take Profit.

It Is Impossible to Know Price Movement In Advance

No one, no matter how much knowledge they have, can consistently predict where a currency pair, stock, or commodity is going to move in a short period of time. Will the gold price go up or down in the next 10 minutes? Unless a major event has just occurred, there is no way to predict that. In order to make money by trading gold, for example, one must understand these 3 things about it:

Do Not Place Orders in Advance

This means you must be ready and waiting if you want to enter a specific point. That is really an inconvenience, and for those who are not always seeing the markets (and who does), that can mean lost opportunities and absolutely no flexibility.

In traditional forex trading and difference contracts, traders are free to decide where and when they can enter the market, how long will they remain in their positions? , and under what conditions they will leave. As a result, the markets have no power over the traders and do not generate any expectations from them.

Most of the merchants (and we speak especially of those who are more novices in the markets) are very unaware of different types of orders such as Market, Stop, Limit, or combo. And commands are like tools: you want the right one to do the job.

The way to do this in a simple way is to use the “limit” type orders that dictate how much you want to pay… always in advance. You get that price or the order doesn’t go through.

A Limited Selection of Instruments

Most binary options brokers do not offer a wide variety of trading instruments like most of the best forex brokers, however, they offer the most popular instruments, which is a problem for some traders.

Binary options brokers offer fewer services. For example, graphics packages, as well as training and mentoring in trading tend to be minimal or non-existent. Binary options traders will need to find their own software for graphics as well as for data analysis in order to make a true technical analysis.

They Are Not Regulated

Finally, these websites are unregulated. No authority is protecting people’s interests. This is a financial Old West. The Financial Conduct Authority (FCA UK) has obliged a permanent veto on the sale of binary options to retail customers to reduce the risk of fraud and prevents the amount of £17 million a year in consumer losses!

Frauds through binary options are under the spotlight of the police. Even the FBI has commented that binary options trading is very dangerous and has classified it as a new form of fraud, here is the FBI’s message and link:

Stock options. It is a fairly common investment term, in general, that one party sells or offers another the opportunity to invest by buying a particular share at a previously agreed price over a period of time. Everything perfectly legal and highly regulated- and if the investor takes advantage of the opportunity and action has a good performance, there is a benefit to be obtained. And if the stock doesn’t perform well, well, the investor knows the risk.

But here is another similar financial term from which the public must take care-binary options.

Binary options fraud is a growing problem, which the FBI is targeting. In 2011, our Cyber Crime Complaints Center (IC3) received 4 complaints-with reported losses of just over $20,000-from victims of binary options fraud. Five years have passed and the IC3 has received hundreds of complaints with millions of dollars in losses reported during 2016. And those numbers only reflect the victims who have reported to IC3-The true extent of fraud, which has victims around the world, is really unknown. Some European countries have reported that complaints about binary options fraud account for 25 percent of all complaints they receive.

So, where does fraud come in? The perpetrators behind many binary options websites, mainly criminals who are in other countries, are only interested in one thing-taking your money. Complaints about your activities usually fall into one of these categories:

They refuse to pay withdrawals to customers or reimburse them. This is usually done by canceling customer withdrawal orders, ignoring customer calls and emails as well as sometimes freezing their accounts and accusing the customer himself of being a fraud.

Identity theft. Representatives of binary options websites may falsely say that the government requires photocopies of your credit cards, passport, license, electricity, water, phone, or other personal data. This information can potentially be used to steal your identity.

Manipulation of trading software. Some of these online platforms may have reconfigured the algorithms they use to make the customer lose, usually distorting prices and payments. For example, if a customer has a successful transaction, the expiration is extended to become a loss.

Fraudulent websites have no scruples about recruiting investors. They post their platforms-usually on social media, trading websites, chat platforms, and spam spam-with the great promise of easy money, low risk, and great customer care. Potential investors also receive cold calls from the trading room, where sellers put a lot of pressure using bank phone numbers to make as many calls as possible to offer a once-in-a-lifetime opportunity.

What is being done to combat binary options fraud? The FBI currently has a number of cases of fraud with binary options, working with sister institutions such as the CFTC and the Securities and Exchange Commission (SEC). And this past January, the bureau organized the 2017 Europol Binary Options Fraud Summit in the Hague, bringing together regulators from North America and Europe to discuss the growing problem of fraud with binary options.

Special Agent Milan Kosanovich, who works for the criminal division of complex financial crimes, was one of the FBI representatives at this meeting.” The summit, he said, “gave us all the opportunity to sit down and talk about what we discovered with regard to our investigations of binary options fraud, where are the challenges? And how can we all work together?”

One of the biggest obstacles facing the authorities, according to Kosanovich, is the fact that fraudsters are sophisticated and have operations in several countries. “So the key to dealing with this type of fraud,” he continues, “is national and international coordination between regulatory agencies, authorities, and the financial industry.”

Another important factor, Kosanovich said, is that the investor is educated and informed. “Investors need to be informed of the great potential for fraud on a binary options website and need to make sure they do a good investigation before they even place the first transaction or bet.” Source: https://www.fbi.gov/news/stories/binary-options-fraud

Did trading become easier or just riskier? First, this kind of thing can easily become an addiction, especially for market addicts. However, although the amounts you bet may be small, the total can quickly be added up if several bets are placed in one day. It won’t take long to get out of control.

Second, no one, no matter how much knowledge they have, can consistently predict what action or raw material will do in a short period of time. Will EUR/USD or GOLD go up or down in the next 10 minutes? No chance of even guessing that. Binary Options traders simply bet on whether the price of an instrument will be up or down a certain point in a specific period of time.

Third, the house definitely has an advantage. Binary options trading works in a similar way to roulette: if your prediction is incorrect, you lose all the capital you put at risk, but if the prediction is correct, you get your money back plus a profit.

If people want to bet, that’s their choice. But we shouldn’t confuse that with investing. In my personal opinion, binary options are most often a fraud, pure and simple.

Categories
Beginners Forex Education Forex Basics

Gann’s 20 Rules of Trading

William D. Gann was a financier who developed a technical tool known as Gann’s angles. The trading rules with which it operated are as impressive as this tool. These rules range from basic principles of money management to the important mental game. Anyway, the impressive thing about these rules is that although they were written 100 years ago, they are as true today as they were at the time.

In this article, we will set out some of Gann’s most ambitious rules along with a brief commentary on each. Our purpose is that when you finish this article, you will have an idea that, although the market may change over time, there are many trading rules that remain unchanged.

1 – Always use stop-loss commands.

This rule goes without much explanation. The use of stop-loss is always mandatory if you want to become a profitable forex trader. By not using it, you open yourself to the potential to operate under emotions, which is never good. Operating without a stop loss is like trying to drive a car without brakes. So, make sure you put it on every time you enter the market.

2 – Never over opers.

We have already talked about not trading. The profit potential increases exponentially as soon as you reduce your trading frequency. What exactly does this mean? This means that when we talk about trade, less is more. The more patience we have becomes, the less operate, and the less you operate, the more you concentrate only on the confluent trading setups.

3 – Do not enter an operation if you are unsure of the trend. Never resist the trend.

This rule is important in 2 respects:

Only active markets operate. If a market is not trending, or you are not sure about the direction of it, stay away.

Don’t run moves against tendencies. It might be tempting to try to trap a roof or floor in some market, but swimming against the current is much more difficult than doing it in favor. Make sure you always operate with the market momentum, never against it.

4 – When in doubt, come out, stay out of it.

If you ever find yourself unsure about an open position, the best thing to do is to get out, especially if the position is at a loss. As a trader, there is no worse option than not having a plan available for the current situation.

Over the years, we’ve discovered that the number one reason why a trader stays in a losing position is because of the fear of taking the loss and then the market moves in the desired direction once it’s out.

The problem is that when you’re in uncharted territory, there’s a 50% chance of earning or losing money. In short, you no longer have a commercial advantage, and therefore you should leave the market.

5 – Only active markets operate.

This rule is extremely important but is often overlooked by many traders. You cannot make money in a market that is not moving. Still, we have seen many traders try to operate side markets. There is nothing wrong with operating price action breakouts inside markets, but trying to operate a side market is one of the fastest ways to lose money in the forex market.

Your most profitable operations will always come from biased markets. This is because it is not only possible to capitalize on the initial position, as a strong trend gives you the good opportunity to multiply your winnings using the technique of pyramiding.

6 – Do not close operations without a reason.

Have you ever gotten out of an operation because of the fear of losing unrealized profits, only to be able to observe the market as continues in the desired direction? We’re sure you do. This is something that every trader must master, the ability to control emotions in a way that allows you to operate based purely on technical analysis.

One way to keep your emotions under control, in case you feel the urge to close a position too soon is to simply ask yourself “why am I closing this position?” If your answer is anything without technical grounds, then you’re probably making a decision based on emotions.

7 – Never promise a loss.

This rule is as old as trading. You should never add to a position that may be a loser. There are many reasons why what we talk about is true, but perhaps the most important thing is that a losing position is a warning that your analysis may have been wrong. By adding this situation, you are making your risk without having first a confirmation from the market that it is not in an unfavourable position.

8 – Never leave the market because you have lost patience and never enter because you are anxious for the wait.

We often speak of patience, which is important for your success. But patience isn’t just waiting for the perfect setup, it also plays a critical role in managing your open operations.

The market has no calendar. It flows according to the news and the feeling that impacts it. This is one of the reasons why as traders we set profitability targets but do not set time limits. A market needs time for the open operation in it to reach its goal, just as it takes time to form the perfect setup. In both cases, patience is required.

9 – Avoid taking small gains and large losses.

We saw an article a while ago that said that making money in forex is hard work. While we agree with this, what we do not agree with is what he said afterward. Whoever wrote the article claimed that it’s all about quick wins, in other words, making small profits every day.

This is totally against our opinion. Becoming consistently profitable is more about letting your winning operations run wild. In essence, you must make enough money on your winners to be able to pay your losers. W.D. Gann had the right approach. He knew that being a trader consistently and profitably means taking big profits and small losses.

10 – Never cancel a stop loss after you have placed the operation.

Why? Because, once you enter the market, your judgments are skewed. Now you have something to lose, which triggers the emotional side of your brain when you make decisions. On the other hand, when you determine a stop loss before entering the market, you have the ability to make an impartial decision about your placement location. This allows you to keep disciplined by operating what the market is doing vs. what you want the market to do.

11 – Avoid entering and leaving the market too often.

Do you find yourself entering a position just to close it within the first 30 minutes in order to pursue a “better” setup? This is very common among Forex traders, the idea that there is always another setup going around that will make them earn more profitability in less time.

The most common reason for this behavior is to risk too much capital in a single operation. In order to let your winning operations run, you must give the market “breathing room”. If you’re risking too much capital on an operation, you’ll be tempted to close the position too soon, losing potential profits.

12 – Be willing to make money from both sides of the market.

For us forex traders, this rule is easy. That said, we still see some traders who prefer only to take long positions or just short positions. While this might seem harmless in principle, it is actually a problem.

If we are price action traders, our main job is to stay patient and wait for the market to show its cards before pulling the trigger. But if we’re only interested in operating long or short but not both, we could miss opportunities. Even you could try to convince yourself that the market is producing a valid signal to go on sale (because you only operate sales) when in fact a setup is being produced to buy, which would leave you on the losing side of the market.

You must there is always a need to be flexible in its approach to financial markets. We must try not to favour one side over the other, as the two are capable of producing profitable trading opportunities.

13 – Never sell or buy for the reason that the price is high or low.

The words “high” and “low” are relative when it comes to markets. What is low for one person could be high for another, and vice versa. For this reason, we are not in favour of using the terms “over-bought” and “over-sold”. Instead of looking to buy a market at a low price or sell a market at a high price, it is much more efficient to be able to use the technical levels, combining them with price action signals. This combination will give you an optimal opportunity to catch a favorable entrance.

14 – Should be pyramided only once the support/resistance levels have been crossed.

The key to a proper pyramid strategy is only to add to a trade when the market has passed a key level of strength or support. This will give you the option to have a degree of confidence in that market will probably continue in the direction intended by adding to your position.

15 – Never change your position without a good reason.

What is a “good” motive? I mean, a good motive is a reasonably valid reason. And therefore a valid reason must be based on technical facts. Entering or leaving a market because you’ve heard someone mention it as a buyer or seller is not a good reason. Similarly, entering or exiting a financial market because it has moved “too low” or “too high” is not a determining reason.

However, if you are in a selling position and the market has reached a support level and forms a bullish bar pin against your position, that is a good reason to at least consider closing the position.

16 – Avoid operating after long periods of success or failure.

One of the reasons why becoming a consistently profitable trader is considered the biggest challenge you will ever face in your life is the word consistently. Placing a winning operation, or even a series of winning operations, is not so difficult after all; we even dare to say that it is easy if market conditions are given. But growing a trading account consistently over the course of several months and years requires much more than a few good trades. A strong mentality is needed, among other things.

Part of that mental strength must include the ability to withdraw from the market after a series of winning operations, or after a series of losing operations. All scenarios can easily lead to emotional decision-making, which can be very negative for your trading account. By stepping away from the market for a while after a streak of winners or losers, you can “reset” your mind.

17 – Don’t try to guess where the roofs or floors are.

Trying to guess where the roofs or floors of a market will be found is purely a form of gambling. If we are traders, our own ability to make money consistently depends largely on our advantage, which is a conjunction of events that help us put the odds in our favor. By trying to guess where the roofs or floors are, you nullify any advantage you might have, and leave your potential winnings to chance.

Many will say that a roof or floor in the market is not clear until the opposite movement has already begun. We do not entirely agree. What is true is that we cannot know for sure whether the market has found a roof or a floor until the opposite movement has begun, what we can do is determine the probability of such movement by using technical patterns and signals. For this reason, learning price action is essential to your success as a trader, regardless of the trading strategy with which you end up trading.

18 – Do not follow the advice of a blind man.

Have you visited a forex blog somewhere? If you have, we are sure that you can relate it to the following rule. The advent of the internet has been a great invention. It not only gives us our ability to trade in forex from the comfort of our homes, but it also provides us with a lot of information about the subject of trading.

But there is the problem… With more information comes confusion, especially when most of this information comes from trading blogs in which everyone is a so-called expert. These traders like to share their convictions, which in principle is harmless, but when other traders operate based on those convictions it can be disastrous.

Information from all forex-related sites, including this one, should be used to generate trading ideas. Nothing more or less. There must be no place to be used to enter blindly operations. In order to be successful as a forex trader, you must learn to run your own technical analysis. Getting ideas from forex websites is fine, but make sure you always follow your own analysis before placing your capital at risk.

19 – Reduce your trading after the first loss, never increase it.

Revenge trading is one of the deadliest sins a trader can commit. It starts with a loser trade and ends with many more losses. One way to avoid revenge trading is either to reduce your trading immediately after a loss or to completely deviate from the market for a while.

20 – Avoid entering incorrectly and exit correctly. Or enter correctly and exit incorrectly.

Becoming a successful trader is about timing. It’s not enough to just get a good entry or a good exit from the market. You must be sure to be right on both fronts to be cost-effective in a consistent manner. Using a combination of entry strategies, correct stop-loss strategy, and key levels to determine profit-making goals, you can learn to enter correctly and exit correctly.

In Summary

What’s amazing is that after 100 years, these rules W.D. Gann has devised are as valid today as yesterday. This shows that some of the simplest forms of technical analysis, such as price evolution, are here to be taken into account always, as happens with the most elementary rules of trading psychology.

We trust that this humble article has helped you to put a little more clarity on how W.D. Gann operates and how these 20 rules can be applied to your own trading to make you a better trader.

Categories
Beginners Forex Education Forex Assets

NASDAQ: What Forex Traders Need to Know

It is possible to invest in Nasdaq in a simple way, both in the general market (through an index) and in individual stocks. Just choose the financial instrument that best suits your needs and open an account with a broker. Nasdaq is the name of a financial market, usually associated with technology, but why? What advantages does this have? One of the most important questions is, how is it possible to invest in this market?

What is Nasdaq?

The term Nasdaq is an acronym. It corresponds to the National Association of Securities Dealers Automated Quotation (National Association of Securities Dealers Automated Quotation). It is a market; a stock exchange. The largest in the United States behind the NYSE (New York Stock Exchange). This market also has its own representative indices, and they also adopt the name Nasdaq (which we will see shortly). It is worth noting that the Nasdaq Stock Market does not have a physical location (such as the New York Stock Exchange parquet), but is based on a telecommunications network.

The birth of the Nasdaq, as a stock market, takes place when the Securities Exchange Commission (SEC), the US stock market regulator, asked the National Association of Securities Dealers (NASD) to regulate the OTC (Over The Counter) market in the ’60s.

To give us an idea, before the Nasdaq saw the light of day, in the United States, the stocks of companies could be bought and sold in three ways:

  • At the New York Stock Exchange (NYSE)
  • In the American Stock Exchange (AMEX)
  • Outside a stock exchange (OTC market; “over the counter”: agreements between two parties, outside an official market)

Buying and selling OTC stocks is not illegal, however, neither are all the guarantees of security, transparency, liquidity, etc. Therefore, the SEC called for a better organization. This led to the automation of the market (by the NASD), which has already been discussed and, thus, the NASDAQ was created in 1971. But there was a question that did not end up pleasing: it was still an OTC market and therefore a second category market. The companies listed in the same began in this way because they could not access the “real parquet”. In other words, his ambition was to go on the AMEX market and, as a climax, enter the NYSE (the largest stock exchange).

In order to have the opportunity to be listed on the stock exchange, different companies must meet a number of requirements. However, the conditions imposed by the NYSE are very strict and make it difficult for young companies to access. In this way, many companies started trading in this new market. These were mainly technology firms and, for this reason, the Nasdaq has always identified with technology. Its fully electronic operation also influenced the attractiveness of companies belonging to this sector.

But the National Association of Securities Dealers Automated Quotation (NASDAQ) was not willing to be a “second-class” market. Thus, in 1975, it developed its own listing rules and separated the stocks of stronger companies from the OTC. In 1982 the most powerful companies of the Nasdaq split up and created the Nasdaq National Market. Finally, in 1991 stock market regulators recognised the stocks of Nasdaq companies as equal to those listed in AMEX or NYSE.

Currently, this market is operated by the company Nasdaq Stock Market (later privatized). In addition, it is par excellence, the market where technology companies (electronics, biotechnology, telecommunications, computing) are listed. Companies such as Microsoft or Intel are listed on this Stock Exchange. On the other hand, its popularity came from the hand of the great Internet bubble, in the 90s.

We should look at all the listed companies, analyse them one by one and make an average of the movements they have experienced individually. In this way, we will have an idea of whether the market, in general terms, has behaved bullish or bearish. But there is a simpler way: take a set of the most representative stocks and, through an average (weighted, in most cases) of the share price, check their evolution. This is precisely a stock market index.

As we discussed earlier, investing in an index is like investing in the market as a whole. In this case, investing in a Nasdaq index is investing in a basket of securities composed of a number of more representative Nasdaq companies: Follow the evolution of an entire market.

Nasdaq 100: The Nasdaq 100 index was created on 31 January 1985 and is made up of the 100 largest technology companies listed in the Nasdaq Stock Market (actually there are 103, since 3 of the companies that make up the index issue two classes of stocks). It does not include stocks of financial companies (nor those dedicated to investment); for this reason, the Nasdaq 100 represents the technology sector well. The Nasdaq Stock Market is open to both US and foreign firms (since 1998). In this way, this index reflects the performance of the 100 largest companies in the technology industry in the world.

Nasdaq Composite: This index is composed of all companies listed in the Nasdaq market. In this “Electronic Stock Exchange” are traded securities of more than 3 thousand companies. It may include stocks of financial, investment and technology companies in general.

Nasdaq Biotechnology: Nasdaq Biotechnology is part of the pharmaceutical and biotechnology companies listed on the Nasdaq Stock Market (and only listed on this market), as well as other requirements).

Nasdaq Financial: includes all financial companies that have been excluded from the Nasdaq 100.

Why Invest In Nasdaq?

Not all stocks listed on the Nasdaq are purely technological. But this market has a strong orientation to that sector. In the Nasdaq 100 index, technology has a weight of 54%. In it, we can find the leading companies in this industry worldwide. The good evolution of technology firms has traditionally been associated with an expansive phase of the business cycle. However, because of the great social changes we are experiencing, technology is increasingly present in our lives.

Technology has a real application in any aspect of our day today. Just to mention a few examples:

  • Transportation (vehicles increasingly equipped in comfort and safety).
  • Telecommunications (social networks, new forms of leisure and information, B2C, B2B, 5G, etc.).
  • Health care (robotics, biotechnology, etc.).
  • Financial services (electronic banking, Fintech, Robo advisors, Blockchain and cryptocurrencies, etc.).
  • Computer science (home automation, cloud computing, artificial intelligence, big data, etc.).

Although some analysts and investors talk about the possibility that a bubble could be created by the growth experienced by this sector in recent years, The fact is that the profits registered by technology companies and the progress they can experience cause the value of this type of company to also be increased.

Many companies in this sector are in the top 10 of the largest companies in the world:

  • Apple
  • Microsoft
  • Amazon
  • Alphabet (Google)
  • Alibaba
  • Facebook

So, it’s very possible that we find solid values, rich in liquidity, and with a good balance sheet position in the technology sector.

Technology companies have also always been associated with volatile securities. This is partly true: the volatility of this sector, little by little, is being equated with that of more mature ones; they no longer have the risk potential of the 1990s and during the year 2000 (when the “dot com” bubble burst).

To sum up: this is an industry with growth potential. The disruption caused by technology is causing a change in this type of company. We can no longer talk about a high-risk sector as a whole; it has stable companies.

In any case, technological companies are characterized by the need for constant innovation, the quality of management is a factor that should be studied. These are high-growth values. Good management can make a difference (and turn a company into the new Facebook or Netflix). Just remember that “Resources must always be allocated in the most efficient manner!”

Categories
Forex Basics

Information You’ll Wish You Had BEFORE You Started Trading Forex

When you start anything new, you are going into it pretty blind, picking things up as you go and of course making mistakes, probably a lot of them. When we have been doing something for a long time, we often look back and think about when we first started out and trading is no different. If you think back to your first days, weeks, month, or even year, you can probably think of some things that you probably wished that you had done differently, or things that you wish you had known, they probably would have saved you a lot of grief, but hindsight is like that, we all know better once something has already been done. We are going to be looking at some of the things that we wish we knew before we started trading all those years ago.

When many people first get into trading they go the easy route, they go after the advertisements about things like automated trading, hands-off trading, or signal copying. They seem like the perfect thing, simply deposit someone, sit back and let them trade for you, the problem with this is that it is the equivalent of simply giving someone your money and letting them do what they want with it. Not the smartest thing to do and also not something that you would do in any other situation. So why we thought it was a good idea back then we have no idea. One thing that we wish we had done differently would to simply not have used these services, it would have saved us thousands of dollars from the losses that were lost by trusting these traders with our money.

It would have been good back then if we understood that there wasn’t a perfect strategy out here, there isn’t a strategy that will allow you to win 100% of the time and so we should not be looking for it. Countless hours spent looking for it, countless hours and hundreds of dollars wasted trying out the so-called perfect strategies. If we knew back then that they wanted one, it would have saved us a lot of time and money. Instead, we should have been learning and developing our own strategies and also multiple different ones to allow us to trade in different trading environments and conditions.

It would have also been a good idea for us to learn a little before jumping into a live account, or at least using a demo account. Pretty much every broker now offers demo accounts, where you can trade on almost the same trading conditions without any risk to your own capital. Back in the day, they were not as regular and people didn’t seem to use them as much. Instead, we just jumped straight into a live trading account with our own money. All tests were done live, all changes were done live and the mistakes made cost us real money. If we were to start over, we would certainly be using a demo account for all of our practice, it can potentially save you a lot of money and also a lot of stress.

Avoid the news, something that is said a lot now. In fact, some brokers no longer let you put on trades during major news events and this is something that we wish we thought about back when we started. Trading the news can be incredibly profitable, the problem is that it can be incredibly risky too, in fact probably more risk than it is worth. The news can cause big movements in the markets, and the markets can even move in ways that are completely non-correlated to the news that was given, making it even riskier. We wish that we had known this before and decided to avoid trading during news events, it would have saved us a lot of money in the long run.

It would have been good to have had a better understanding of what different currency pairs are as well as the differences between them, we are talking about the difference in volatility, the difference in liquidity, and other aspects like that. Each pair reacts differently and moves differently, and this is something that we would have liked to have known a little earlier. We traded USDMXN the same as we did EURUSD, if any of you have traded both, you will know that they work very differently, but we used the same strategy on both which as you can imagine did not have the best effects and this caused us some pretty hefty losses before we worked out what was going wrong.

Learn the different order types, that is a big one, many traders simply use market execution orders by simply placing trades. Yet there are a lot of other styles of orders too, limit orders, stop orders and more, these different order types allow you to enter the markets in different conditions and at a price that it is not currently at the moment. This adds a whole new level to our trading allowing us to predict movements and to take trades on the support and resistance levels. We just wish we knew about them, or at least how to use them properly back when we started trading.

Forex and trading are not guaranteed, something that should be quite obvious, but back when we started you did not have all the warning signs on every site, that was not a requirement, all that we ask was the opportunity and the other traders stating how much they had made. Of course, now we know that those saying all the positives were simply trying to get some affiliates signed up after them, but back then, the dream was real and it seemed more realistic than it is now (of course it is still possible now too). It would have been nice for there to be more waning like there are now, and we would of course start again knowing that nothing is guaranteed and that we need to put in a lot of work to make it profitable.

Those are just some of the things that we wish we knew before we started trading all those years ago, there are of course some other things that we would have done differently, we could probably write for hours about it. Hindsight is an amazing thing, we need to live with our mistakes but also learn from them, we do not make the same mistakes that we made back then, it is all about learning from what we have done to make us a better trader in the future.

Categories
Forex Basics Forex Psychology

Weird Hobbies That’ll Make You Better at Forex

There are things that we do in our everyday lives that can actually make us better at trading. Some of them may be related, while others will have absolutely nothing to do with trading at all. Our hobbies can have the same effects, there are hobbies out there that people do that will give you the skills that you need to be a fantastic trader, in fact, they will improve aspects of your trading. We are going to be looking at some of the hobbies that people do that help to build our trading skills or develop certain aspects of us that would be beneficial to our forex trading.

Reading

This one may seem quite obvious and to be fair, it is. If you like reading then you will love Forex and trading, as there is a lot of reading to be done. Any people get bored when reading and learning, this is why there are so many video tutorials out there now, but if you actually enjoy it then you will be in a good position as there is so much information available for you to take in. There are also trading-related books out there that can be filled with relevant information and so reading those in your spare time can give you some fantastic insight into different techniques or give you ideas that you can implement into your trading. If you are not a fan of reading, there are alternatives out there, but you will find far more information in the written format than any other format when it comes to trading.

Jigsaw Puzzles

Trading can be compared to puzzles in a number of ways, the most obvious reason is the fact that when you are putting a puzzle together, you are taking lots of small things in order to make a larger overall picture. We do the exact same thing when we are trading, we are taking small bits of information from various analyses or indicators and putting it all together to give us an overall picture of what the markets may do and what we should trade. Doing puzzles helps you to take your time, to analyze each piece of information, and to have patience, afterall, some puzzles can take a long time to complete.

Playing Sports

Sport doesn’t seem like it would give you skills needed for trading, but it does. Well not exactly with your trading, but it is a fantastic way to get rid of some of the stress that can build up when trading. In fact, it gives you the perfect outlet to let off some of that steam. For anyone that sits in front of the computer for the majority of their day, it can damage your posture, can stress you out, and can ultimately make you a little bit fatter. Playing sports is a way of rectifying all three of those things. It helps you keep a good posture, it helps you to relieve stress and it can make you that little bit fitter. So even if this is not one of your current hobbies, try making it one once you start trading, especially if you are doing it full time.

Playing An Instrument

If You have learned to play an instrument in the past then you probably have a number of skills that are very desirable for a forex trader, these include things like consistent learning, patience, and being precise in your learning and implementation. It takes a lot of time and a lot of patience to learn an instrument, much in the same way that it takes time and patience to learn to trade properly. Music can also help to influence your mood or to calm you, something that is vital when it comes to trading. There are no shortcuts when it comes to trading, so being able to bring in the characteristics that were required to learn to play that instrument can be extremely beneficial to you as a forex trader.

Writing

While we don’t do much writing when it comes to trading forex apart from the little notes that we jot down in our trading journal, writing does give us a few skills that we can bring across. Firstly it teaches us to be a little more analytical, looking at what we have written in order to find and rectify any mistakes in the spelling or grammar. It also helps us to research, research is an important part of both writing and trading, so being able to do it when you are writing something means that it will be slightly easier for you to analyze different information sources when it comes to your trading.

Collecting

There are a lot of things out there that you can collect, stamps, pokemon cards, marvel figurines, whatever it is, it will teach you one main skill. That skill is patience, you need to be patient when collecting, finding the right item for the right place, and not jumping in too quickly and ending up out of pocket. This same skill needs to be used when trading, you don’t want to jump into a trade too early and at the wrong place, if you do that too much then you will be making losses, so patience is vital if you are looking to become a successful trader.

Buying and Selling

Some people just love to sell things, and this helps you to understand the value of exchanging one item for money or money for items. This is exactly how trading forex works. We are exchanging one asset for another. Getting an understanding of how this works beforehand and what to look for when it comes to price fluctuations can help you out as a trader. If you do this, you are basically trading already, just in a more physical form rather than online as a retail trader.

The thing with hobbies is that it really doesn’t matter what it is, a hobby is something that you enjoy, this is a great way of destressing yourself. If you have a hobby, do not give it up just because trading is taking up a lot of your time, make time for it, not only will it help your mental health, but it will also help you to develop certain skills that can come in handy when trading, no matter the hobby that you are doing, it will have some form of benefit to your overall trading ability.

Categories
Forex Trade Types

Let’s Talk About Scalping In Forex

What is scalping in Forex trading? The perception is that this is a type of trading where a trader enters several trades in a small period of time and closes them in just a few minutes. But this is not the most correct definition. Scalping suggests placing orders a short distance from the opening point. The trader leaves the trade in a short time, as soon as the price changes at least a few points, including the spread. Even an open transaction based on this principle already refers to scalping. Logically, to make a profit, a trader must make dozens of such transactions in one day, but their number is not that important.

Types of scalping and general examples of strategies:

Scalping in the news. At the time of departure of important news or the publication of economic data, there is a sharp increase in volume and volatility that can last from a few minutes to a few hours. This is the best time for scalpers. There are two ways to operate.

Placing opposite pending orders a few minutes before publishing statistics and removing the order that does not work after publishing. The opening of several short-term trades for directly correlated pairs in the first few minutes after the publication of news in the main trend direction. Making money using such a strategy is quite difficult. The two methods have their advantages and disadvantages, read more about them in this summary.

Types of scalping depending on the time frame chosen:

Pipsing. It is called the most profitable and risky strategy (in terms of profit, the issue is very controversial). Trading takes place in the M1 interval, transactions are carried out in the market for a few minutes. It happens that 1-2 points are enough for the scalper since maximum leverage is used (sometimes up to 1:1000).

Medium-term scalping Suggests a relatively fewer number of open trades, the duration of which is 5-15 minutes. The range is M5. The size of the leverage is determined by the trader.

Conservative scalping. Transactions can last up to 30 minutes, the time frame is M15.

Types of scalping according to technical strategies:

Scalping with analysis of various time frames. Such a strategy is applied when negotiating with the short-term trend. It is possible to invest at almost any time, so classic trend negotiation strategies for time frames per hour will not work there. Such a trend may arise, for example, during a brief pause before the news release, which is quite controversial, judging by the forecasts. Or you can start during a temporary balance of bulls and bears. The essence of the strategy: this type suggests that you identify the beginning of a trend in the H1-H4 range by means of a trend indicator or a confirmation oscillator. Then, analyze the market and look for signals in the M5 timeframe. It will be explained with an example of this strategy later.

Trading based on major currency pairs. The main pair is the pair, through which the scalper makes trading decisions, but carries trading on a correlated pair that is a bit behind. For example, the EUR/USD pair reacts immediately to the publication of US statistics. If EUR/USD and USD/JPY are increasing, then EUR/JPY will also increase.

Intuitive scalping. Considering that a scalper has little time to make decisions, there is a category of traders that use their intuition. They understand the market in such a precise way that they do not need to use any technical indicator.

I will not describe the subdivision by the type of indicator (graph, level analysis, etc.) as it is logical. The rating can be expanded, and I would appreciate it if you, my dear readers, would help me by offering your scalping strategies variants in the comments located at the end of the article.

Rules for successful scalping trading:

There should be no restrictions by the broker to employ such strategies. There should be no restrictions on the offer with respect to the number of open trades and the minimum waiting time.

Instantaneous execution of orders: It depends largely on the broker, liquidity providers, the Internet connection, and the trading platform itself.

Great financial leverage: Professional scalpers work with leverage of 1:500-1:1000, but according to European regulators’ standards, maximum leverage is reduced to 1:50.

The instrument should have the best liquidity.

So what is scalping in trading? I think the answer is clear. Let’s move on to the advantages and disadvantages of strategy.

Advantages of Forex scalping strategies:

Trading should be based on fundamental analysis. Technical indicators are rather used as complementary tools due to price noise in shorter time frames. Although it is not recommended to beginners to negotiate with news, in terms of training and use of simulators, this can be easier and more interesting than technical analysis. It’s all subjective, but I’d say this is a benefit of scalping.

It gives you a chance to do something important for profits. Everything is very relative, but if you consider yourself a professional, scalping trade can generate higher returns compared to daily trading strategies. In scalping, a trader manages to win on almost all price changes in both directions, while in intraday trade, a good part of the profit is “lost” by the existence of setbacks and corrections. Besides, it doesn’t depend on the trend.

Scalping allows for profit when the market is traded unchanged. There are no swap costs (to keep the position open until the next day). I’d say the biggest advantage is training to negotiate scalping. Thanks to high-frequency trading, the trader better understands the moments of entering and leaving the trades, learns to develop intuition, and knows the nature of the market. After mastering scalping which is much more complex, intraday and long-term strategies will seem easier.

Disadvantages of Forex scalping strategies:

Spread. No matter how long your position stays open, the difference will be the same. A scalper takes most of the benefits.

Technical problems. Slippages, delay in execution of orders, platform failure, etc. In scalping, only a second is sometimes important, and a delay can result in a loss that can exceed a small gain.

In scalping, only a second is sometimes important, and a delay can result in a loss that can exceed a small gain.

Market noise. Random price changes, insignificant for long-term periods, can close the order with a stop in short-term periods.

Limited choice. Only liquid currency pairs with moderate volatility are suitable for Forex scalping trading. Exotic pairs are not appropriate.

The problem of precise quotations and broker restrictions. Some companies prohibit scalping or there is a restriction on the minimum waiting time for negotiation.

Stress, you must be constantly focused on the small details. You must control your operations all the time and make your decisions quickly. At any time, a reseller may feel emotionally exhausted and lose concentration. This dilemma could be solved in some way by scripts and robots.

To have profitability in the scalping, it is very necessary to use high leverage, and this significantly increases the risks. But even so, despite all the downsides of scalping trading, scalping is, in the first place, satisfaction and excitement. That’s why many traders like it a lot.

Best currency pairs for scalping:

Knowing how to choose the right instrument of negotiation is very important for scalping, but, in scalping where, you fight for each point, and a sudden change usually translates into losses, its importance is fundamental…

Basic requirements for a better currency pair for scalping:

The narrowest and most floating spread possible. This condition is fair for highly liquid pairs and large transaction volumes: EUR/USD, GBP/USD. If you want to compare differentials for the pairs offered by the different brokers, you can use the data from the MyFxBook portal.

Moderate volatility. Liquidity and volatility have a kind of reverse correlation. It is difficult to buy/sell a currency pair with high volatility. And vice versa, high-liquidity currency pairs have low volatility. It is very important to maintain balance, the volatility calculator can help you to do so. According to the calculator, the best currency pair for scalping is EUR/USD.

For night scalping (flat), you can trade the pair with relatively low volatility USD/CAD, AUD/USD. I want to emphasize that the meaning of the best currency pair for scalping is subjective. Price movements depend as much on external macroeconomic factors as on foreign exchange manipulations by large investors (market makers). Then, depending on the time, the different currency pairs of major currency pairs or cross pairs can become the best for scalping. So, there are some tips on how you can select the best pair for scalping:

You must feel comfortable when you operate. Find your own trading style and the most suitable currency pair, investing all the time you need in training in a demo account.

Be flexible. Today you get positive results by trading in one currency pair, tomorrow, in another currency pair.

Manage foreign exchange risks. In addition to the general rules on the volume of open positions, there is one more rule regarding scalping: you should not open transactions for the two increasing currency pairs at the same time. While it can double your profits, it also doubles your potential risks, as both pairs can be reversed at the same time.

There are no recommendations on the best indicators and technical tools for scalping. Everything is individual here. Someone is satisfied with the standard MT4 indicators, someone installs unique authoring tools. Trading performance does not depend as much on the tools as on the ability to use them.

Forex scalping strategies: practical examples

Scalping requires the trader to be monitoring permanently trades and open positions. The strategies described below are based on technical indicators but are used as complementary tools for intuition and practical experience. Therefore, before you start using these strategies in a real account, practice them over and over again until they are fully automatic. And remember that there are no perfect strategies and the suggested ideas are just the basics. ¡ Don’t be afraid to perform certain experiments by adding something of your own, create something of your own, unique based on this basis!

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Forex Basics

Is It Safe (and Wise) to Trade Forex? Let’s Discuss…

The global Forex market has more than $5 trillion in daily trading volume, making it the largest financial market in the world. The popularity of Forex attracts traders at all levels, from novices learning about financial markets to more professional and experienced veterans. Because it is so easy to do Forex trading – with all-day sessions, access to high leverage, and relatively small costs – but it’s also very easy to lose when trading Forex. In this article, you will see 10 ways in which traders can avoid losing money in the competitive Forex market and can safely make Forex investments.

Do Your Homework

Just because it’s easy to get into the world of Forex doesn’t mean it’s easy to operate in this area. Learning about Forex is fundamental to a Trader’s success in foreign exchange markets. Although most of the learning comes from live trading and experience, a trader must learn everything possible about Forex markets, including geopolitical and economic factors that affect the currencies to be traded. The task is a continuous effort as traders need to be prepared to adapt to changing market conditions, regulations, and global events. Part of this research process involves the development of a trading plan.

Choose a Reputable Broker

The Forex industry has less oversight than other markets, so it is very likely to end up doing business with a reputable Forex broker. Because there is a concern about the security of deposits and the overall integrity of a broker, Forex traders must only open an account with a member company of the National Futures Association (NFA) and which is registered with the U.S. Commodity Futures Trading Commission (CFTC) as a futures commission merchant. Every country outside the United States has its own regulatory body with which legitimate Forex brokers must be registered.

This is basic and indispensable and cannot be emphasized further, only duly regulated Forex brokers should be traded. Traders should also investigate each broker’s account offers, including leverage amounts, commissions and spreads, initial deposits, and account withdrawal and financing policies. A representative of useful customer service should have all this information and be able to answer all questions regarding company services and policies.

Using a Practice Account

Almost all trading platforms have a demo account to practice, sometimes called a dummy account or demo account. These accounts allow traders to place hypothetical transactions without a funded account. Perhaps one of the most important benefits of a demo account is that it allows the trader to become an expert in order entry techniques.

Few things are as harmful to a real account (apart from the trader’s overconfidence) as pressing the erroneous button when opening or exiting a position. This is quite common, for example, for a new trader to accidentally add to a losing position rather than close the trade. Having many errors in order entry can lead to having large losses without protection. Apart from the devastating financial consequences, this situation is incredibly stressful. Practice makes perfect: experiment before placing real money online.

Keep the Graphics Clean

When a Forex trader has hired an account, it can be tempting to take advantage of all the benefits of technical analysis offered by the trading platform. Although most of these indicators are perfectly adapted to foreign exchange markets, it is very important to consider keeping analysis techniques to a minimum to be effective. The use of the same types of indicators-such as two volatility indicators or two oscillators, for example, can be redundant and may even give opposite signals. This must be avoided.

Any analysis technique that is not routinely used to improve the performance of the company must be removed from the table. In addition to the tools used for the chart, the overall appearance of the workspace should be considered. The colors, fonts, and types of price bars chosen (line, Japanese candle bar, distribution bar, etc.) should create an easy-to-read and interpret chart that allows the trader to respond more effectively to changing market conditions.

Protect Your Trading Account

While there is a lot of focus on making money in Forex trading, it is very important to know how to avoid losing balance in your account. The most appropriate techniques of monetary management are a very important part of successful negotiation. Many experienced traders would agree that anyone can enter a position at any price and still earn money – the important thing is how he leaves trade.

Part of this is knowing when to take your losses and move on. Using stop-loss protection is always an effective way to ensure that losses remain reasonable. Traders may also consider using a maximum amount of daily losses beyond which all positions would be closed and no new trading will start until the next trading session. While plans must be made to limit losses, it is equally essential to protect gains. Money management techniques, such as the use of stop drags, can help preserve profits.

Start Small

Once you’ve done your homework, spent time with a practice account, and have the Trading plan instead, it may be time to start live – that is, start trading with real money. No amount of trading in a demo account can accurately simulate actual trading, and as such, it is very important to start with a small amount when going live.

Factors such as emotions and slippage cannot be fully understood and accounted for until live trading is performed. In addition, a trading plan that was used as a champion in backtesting results or trading practice could, in fact, fail miserably when applied to a live trade. Starting small, the trader can evaluate your trading plan and emotions, and gain more practice in executing order entries – without risking the entire trading account in the process.

Use of Reasonable Leverage

Foreign exchange trading is unique in the amount of leverage offered to its participants. One of the reasons why Forex is such an attractive market is that traders have the chance to make high profits with a small investment – sometimes as little as 100 US dollars. Properly used, leverage provides growth potential; however, leverage can easily amplify losses. A trader can choose the amount of leverage he wants to use when basing the size of the position on the account balance. For example, if a trader has 20,000 USD in a Forex account, a position of 200,000 USD (two standard batches) would use leverage 1:10. While the merchant might open a larger trade if he were to take maximum leverage, a smaller position would limit the risk.

Leverage is you have a chance to use something small to control something bigger. In short, Forex trading means that you can have a small amount of balance in your account and be able to control a much larger amount in the market. In trading currencies, there is no interest charged on the margin used, and it doesn’t matter what kind of Trader it is or what kind of credit it has. If you have contracted an account and the broker offers the margin, you can trade on it.

The most obvious advantage of using leverage is that you can earn a significant amount of money using only a limited and small amount of capital. The problem is that, in the same way, you can also have a loss of a considerable amount of money in leverage trading. Everything depends on the prudence with which it is used and the conservativeness or aggressiveness of its risk management.

You have stricter control than you think; The advantage makes a pretty boring market incredibly exciting. Unfortunately, when your money’s on the line:

Exciting DOES not always = Good

But that’s exactly what leverage has brought to FX. If there was no leverage, traders would be surprised to see a 15% move in their account at a year. However, a trader who uses too much leverage can easily see 15% moving in his accounts in a day.

While typical leverage amounts tend to be too high, leverage trading five times more; it is very important for you to know that much of the volatility you experience when trading is mainly due to leverage of your Trade than the same movement in the underlying asset.

Amounts of Leverage Provided

Leverage usually occurs in a fixed amount that may vary depending on the broker. Each broker grants leverage based on its rules and regulations. The amounts are usually 1:50, 1:100, 1:200, and 1:400.

Leverage of 50:1 Percent

Leverage of fifty to one means that for every $1 you have in your account you can place a value of $50. For example, if you deposited $500, you could trade amounts up to $25,000 on the market using leverage 50:1. It’s not that you should trade the full $25,000, but you would have the ability to trade up to that amount.

Leverage 100:1 Percent

Leverage of a hundred to one means that for every $1 you have in your account, you can place a commercial value of $100. This is a standard amount of leverage suggested in a standard account. The typical minimum deposit of 1000 USD for a standard account would give you the ability to control 100,000 USD.

Leverage 200:1 Percent

A leverage of two hundred to one means that for every $1 you have in your account, you can place a value of $200. This is a frequent amount of leverage suggested in a mini lot account. The typical minimum deposit on that account is around 250 USD. With 250 USD you would be able to open operations up to the amount of 50,000 USD.

Leverage 400:1 Percent

A leverage of four hundred to one means that for every $1 you have in your account, you can place a value of $400. Some brokers offer 400:1 in mini-batch accounts. I would personally take care of any broker that offers this kind of leverage for a small account. Anyone who makes a $300 deposit into a Forex account and tries to trade 1:400 leverage could be wiped out in a matter of minutes. Not that Brokers force the Trader to deposit only $300, but if they make it possible, the suspect doesn’t?

Professional Traders and Leverage

For the most part, professional traders trade very low leverage. Having lower leverage has the ability to protect your balance when you do business mistakes and keeps your returns more consistent. Einstein once said that the definition of Madness is: “Always do the same and expect different results.” Without a business log and a meticulous log book, traders are likely to be able to continue making the same mistakes, minimizing the chances of being a profitable and successful trader in the future.

Understanding Tax Implications

It is very important to have clear tax implications and how it deals with the foreign exchange trading activity that will be prepared at the time of filing taxes. Consulting with a qualified specialist or tax specialist can be beneficial and help avoid surprises when paying taxes and can be great to help people take advantage of an existing diversity of tax laws. As tax rules often change, it is prudent to maintain a relationship with a trusted professional who can handle all tax-related matters.

Treat Trading Like a Business

It is very important to consider foreign exchange trading as a business and to keep in mind that gains and losses are not important in the short term. As such, the operators must avoid becoming overly emotional beings, no matter what the gain or loss, and treat each as one more day at the office. As with any other business, Forex trading incurs losses, expenses, taxes, risks, and uncertainty. Also, just as small businesses rarely succeed overnight, so it is for the vast majority of currency traders. Planning, setting realistic goals, being organized, and learning from both successes and failures are key to achieving a long and successful career as a foreign exchange trader.

In Conclusion

Forex trading around the world is attractive to many traders because of their low account requirements, 24-hour trading, and access to large amounts of leverage. When approached as a business, foreign exchange trading can be profitable and rewarding. In short, traders can avoid losing money in currencies and make a safe Forex trading, as long as they:

  • Are well prepared
  • Have the patience and discipline to study and investigate
  • Apply money management techniques
  • They resemble their trading activity as if they were running a business
Categories
Forex Basics

How To Become a Better Forex Trader In Just 10 Minutes

We all want to be better traders. We want to be more successful and we want to be or be profitable. Being a great trader takes time, a lot of time, it can take years to be in a position where you know exactly what you are doing and are able to adapt properly to the ever-changing markets. So while learning a new skill can take a long time, there are some things that you can do in a very short amount of time, little changes to your trading that can ultimately help to make you a much better trader. So we are going to be looking at some of the things that you can do that will only take you 10 minutes in order for you to become a much better trader.

Start Using Stop Losses

For those that are making the huge mistake of not using stop losses, simply using them will make you a far better trader and will help you to better protect your account. Stop losses are there to protect your account, they work by being a sort of block that will prevent your trade from going any more negative by automatically closing it. You need to use stop losses if you are going to have a proper risk management plan as it is the stop losses that let you maintain the correct risk to reward ratio, ensuring that you do not lose more than you have planned to. If You are trading without them, be sure that you start to implement them into your trading, you will feel far less stress about any losses and it will also help you to become far more profitable than you probably are now.

Keep a Trading Journal

You have probably heard about trading journals, these are records where you jot down everything that you are doing, each trade that you open, the trades that you close, how long they were open, the profit and loss, the reason for the trade, any influencers and more. You are basically writing down everything that you are doing. A trading journal is beneficial for a number of reasons, it can be used for justification for your tradies, it can be used to find out where you may be going a bit wrong and it can be a way that you can check to see whether or not you are following your trading plan. Using it to find your weaknesses will mean that you will be able to make adjustments to your trading based on our findings, ultimately making you a much more consistent trader. We admit that creating a trading journal may take a little more than 10 minutes, however, once you are up and running, it will take mere minutes or even seconds to fill it in before and after each trade.

Continue to Learn

Take 10 minutes a day to focus on learning a little more about forex and trading. You will be learning for the rest of your career, but this does not mean that you need to focus on your learning 5 or 6 hours a day. Instead, break it down into more bitesize chunks, this will make the information that you are taking in a lot easier to absorb and to understand. That 10 minutes a day will mean that you are constantly learning, but you’re also avoiding the possibility of burnout from too much info. Learning is great, but too much learning is not, break it down, learn one thing at a time in small chunks in order to ensure that you are taking it all in.

Take Breaks

Taking breaks can really benefit your trading. Trading can be a stressful thing to do, it has its ups and downs which can cause stress and even anxiety. No matter your experience levels, when you do it for a long time, you will start to feel tired or stressed, so we need to do something about that. Take a 10-minute break, it can be as simple as that. Stepping away from the trading terminal in order to clear your mind or to think about something else will mean that you are able to help your mind and body to destress. A small break can bring you back with a much clearer mind which will make your trading a lot better, with less stress you will be able to better follow your trading plan and ensure that the trades that you are placing are in line with your trading plan.

Review Your Goals

When you started trading you most likely would have set out some goals, some of these would have been long-term goals and others more short-term. It is important that you continue to review these goals throughout your trading career, you need to be able to look at what you are aiming for and to adjust it based on your own ability. This may seem quite trivial, but if your goals aren’t quite set right, it can affect not just your trading but your own motivation too. If you are achieving your goals and targets on a regular basis, it can help you to motivate yourself to put in more effort or to work a little harder to keep going and improving. If you have set them wrong and are not achieving anything, it can demotivate you as you may feel that you are not good enough and not being profitable. So ensure that you review them to keep them in line with your current ability in order to help yourself motivate yourself to continue trading.

Watch the News

The news and economic events can have a huge effect on the forex markets. In fact, any news event has the potential to change the direction or to cause a small jump in the markets so it is important that you are aware of what is coming up. There are a number of different economic calendars out there which detail different economic news events that are coming up. Take just 1 minute a day to look at one before you start your trading, it will give you an idea of how volatile the markets could be at those stages of the day, so it may even tell you to avoid trading a certain currency pair when those events are coming up, which could save you from some potential losses. It does not take long to do this and it should be something that you are doing at the start of every trading or analysis session that you are doing.

Speak With Others

Trading communities can be great, they can give you an outlet to vent some of your own frustrations, to give, and to receive some new trading ideas. Being part of a community can give you that social life when stuck in front of the computer. They are great places to get new ideas and to speak to like-minded people. These communities also give you a place to vent your frustrations which can help to reduce your stress levels, getting new ideas can give you new trades and potential new profits. It doesn’t take long to look through these forums or to place a post, so try and do it, when you have some downtime instead of sitting blankly in front of the charts, utilize your time, even if it is just 10 minutes.

Those are some of the things that you can do in just 10 minutes, it doesn’t have to take a long time to make changes to your trading or to work out what you may be doing wrong. Take a little time each day or week to look at your trading, there are always things that you can do to help improve yourself and your trading, it doesn’t have to take a long time, one small change at a time and you will ultimately become a much better and more successful trader.

Categories
Forex Basics

What Skeptics Need to Know About Forex

There are a lot of people out there that simply do not trust trading or forex, they see it as some sort of money sink that will only result in losses. #If you go onto any sort of social media, you will always get a few people shouting about how bad trading is and that trading as a whole is a scam, maybe they lost some money, maybe they just don’t understand it, either way, it is important that we get all the information before we decide whether something is good or bad. So we are going to be looking at some of the things that the skeptics of forex trading need to know which may just change their minds about it.

Forex Is Real

One thing that you see some skeptics saying is that forex is simply not real, you are not trading with other people, you are trading against the brokers and they control the numbers, not the markets themselves. Well, the thing is that with some brokers this is partly true, for market maker brokers, you are actually trading against the broker and so it is in their interest for you to lose. With many other brokers like STP or ECN brokers, you are actually trading directly on the markets and it is in the interest of the brokers that you do well as they make their money through commissions. When trading with these brokers the markets are very much real, all money being traded are from real people or institutes. Forex is very much real and you can certainly make money out of it if you trade well.

Not Everything Is A Scam

There are a lot of scams out there and if you have been a victim of one, you will most likely lose a lot if not all of your trust in the forex industry. That is perfectly understandable, but not everything is a scam. There are a lot of legitimate brokers out there that are to help you trade, they do everything by the book and can be trusted. Many peoples view of forex is what they see people posting on social media, which is full of exaggerated results, exaggerated claims, and exaggerated promises, not the best place to get any real information, Instead if you go to one of the many dedicated trading sites or communities then you will see the truth, you will see the losers, but you will also see the honest winners, those making money and those showing that trading and forex are not actually scams.

You Can Earn Money

You can certainly make money, this goes along the lines of everything being a scam again, may skeptics who do not believe that you can make money also believe that it is a scam. Yet you can certainly make money, a lot of people do and a lot of people will continue to do so. We have made money ourselves, we know people making a regular income with trading, it is certainly possible, but until the skeptics actually make something they will not believe it, and even then, some will find it hard to actually believe.

Information Is Plentiful

A lot of people are skeptical about things because they simply do not know a lot about whatever it is that they are skeptical about. The good thing about forex and trading as a whole is that there are tonnes of information out there, so much so that you can go to any sort of trading-related site and find out quite a lot about it. There are also a  lot of trading communities around which can give you a great insight into how traders actually think as well as how they are doing with their trading. If someone is skeptical about trading because they do not know much about it it will be easy to help educate them on what trading is with all the information that is available on the web.

It Is NOT Gambling

Front the outside, when you do not know a lot about reading, it can look very much like gambling, we say this simply because, in the end, you are putting money on and then hoping that the markets go the right way, at least that is how it looks. In reality, there is a lot more to it than that, we do a lot of analysis in order to look at the different probabilities and then buy or sell based on those probabilities, so there should be a higher chance of our trades being successful than not. From the outside, they do not see that, they just see the trade and the result. There is an element of gambling, as the markets won’t always go the way they are meant to or we expect them to, but we certainly would not class trading or forex as gambling.

You Are Right

A strange one, but you should be telling skeptics that they are right, they are right to be cautious, they are right to have doubts, and they are right to be interested., You cannot be a skeptic if you do not have any interest in the subject. They are right to doubt simply because a lot of what you see makes things sound too good to be true, some bits are, but some bits are very real. It is always good to question things but you also need to be open to the answers, especially as some of them will go against what it is that you believe.

So those are just some of the things that the skeptics of trading and forex should know about, there is so much out there that can make some doubt, but also just as much out there that should make someone believe, it is all down to which bits of information they are exposed to first as to which opinion they initially build. We need to ensure that those that do not believe are shown the right info to help convert them, but you should not waste your time trying to convince someone who does not believe, instead you should be spending your time and energy on improving your own trading and aiming to be more successful as a trader.

Categories
Forex Basics

Starting to Live On Your Forex Income

It is very common for traders to dream of obtaining financial freedom through online Forex trading. No more boring jobs, no more bosses, no more wasted administration time, meaningless emails, and endless meetings. Is it a realistic ambition? If so, how can it be achieved? In this article, I will try to comment on my own experience and try to give you an idea of the challenges you will undoubtedly face if you plan to make a living in the currency market. Forewarned is worth two.

How Much Money Can You Make With Forex Trading?

This is the first question that people always ask. There’s a simple answer: no one knows! No matter how expert in foreign exchange you are, you cannot control the market. You can be so good that you usually have a winning month and each year is considered a winning year. However, the exact amount you make depends on what happens in the market, and the market cannot be predicted with certainty. For example, look at the main currency pairs in the first 10 months or so of 2012. The market was extremely flat. Even if you weren’t negotiating trends, it was hard to be profitable using a forex strategy. Later, in the final part of that year, there was a huge bearish movement in the Japanese yen that gave traders the opportunity to make a lot of money easily. The point is that financial markets are unpredictable; there may be several months of drought followed by a huge downpour of opportunities to benefit.

A sensible approach to estimating what you can reasonably expect before starting trading is to calculate in terms of probabilities. For example, in 20% of the months, it expects to make 5% profit, in 10% of the months 7% profit, etc.

For the calculation of these probabilities, you should analyze backward by measuring your average commercial return, draw-down and initial capital, and then calculate an average expectation of trade; that is to say, the amount of profit or loss that you will normally get per transaction.

How to Calculate Your Performance

The first point to start is the amount of seed money you have to trade. It is very important to understand that the more money you risk, the less money you have, and the more money you need to pay your bills, the harder things are going to get. Even if it’s all the same on paper, the day-to-day experience of online trading as a livelihood is very hard psychologically for almost everyone, especially at first. There is a huge difference between trading with money you can afford to lose, trying to earn enough money to afford luxury items, you risk your life’s savings by trying to generate income to pay bills.

You should have a very clear idea of your typical commercial performance over the full range of market conditions as if you had been operating continuously for years. One of the best systems to do this is to have a trading simulator installed and/or a Forex strategy simulator software to simulate many years of exchange operations and ideally hundreds of operations. You can then have a good statistical basis on the likely range of returns that you can achieve in a month. Of course, proving this over a long period of live trading is a superior method for determining your trading expectations. By all means, watch Forex signals for business ideas, but don’t rely on them blindly.

Once you have these numbers, you must consider the amount of draw-down that you will be able to tolerate. From here, you can determine the money handling and leverage you’re going to use, and now you can finally calculate the likely range of cash income (and losses) you’re likely to experiment in a typical month. Will it be more than enough to satisfy your financial commitments? You will be able to weather the bad times without going into debt? Don’t forget that your actual performance will probably not be as good as your performance in the simulator, this is because making decisions over long periods of time with real money at risk is more difficult than simulated trading. Remember that the vast majority of retail Forex traders are not profitable, so you have to be at the top of your game.

A very important factor not yet covered is the psychological stress of online trading for a living. It is crucial in commercial success not to become emotional about the results of each operation. When you need good results to pay your bills by the end of the month, maintaining that attitude becomes very difficult. Your “trade psychology” is very important to get it right. A perfectly smooth equity curve gives less stress but is very difficult to achieve, so you will probably have to find a way to cope with the sudden falls of the curve without losing your calm.

A Realistic Plan for Second Income and Capital Growth

If you really want to trade Forex for a living, I strongly recommend that you consider a plan that will allow you to transition to this gradually. You may believe that you will do much better when you can devote all your energies to work and live on the operations of change, but this may not be the case

You may be able to automate your trading, at least in part, by using a Forex robot, say for trading entries. You can then decide on commercial departures every few hours or even on a daily basis. This way you can keep your income or primary salary and that, added to what you can do about exchange operations will look a lot like what you would do if you devoted yourself to this activity every minute of your day.

It is a very good idea to have both a significant stable income and a reasonably long history of profitable trading. What it can do is to grow its capital and gradually increase risk by increasing leverage. So, little by little you’ll get used to pressure and stress.

If you move forward this way, you should be able to earn enough money to quit that job you hate within two or three years of “transition” commercial success. It is tempting to think that it will become much more profitable if you dedicate yourself to this full time and without distractions, but many traders have discovered that the opposite is the case. Trading for capital gains is much easier than doing it to pay the monthly bills.

Categories
Forex Basics

Everything You Need to Know About Islamic Forex Accounts

There are many Forex brokers that offer today the option to open an Islamic account. To understand how these accounts work, you first need to understand the principles of Sharia (Islamic Law) and how it is applied in a compatible way to banking and finance. Sharia laws do not allow the acceptance of interest for monetary loans (known as riba or usury) if the payments are fixed or floating.

In 2009, there were more than 400 banks and 300 investment funds worldwide that were compliant with Islamic principles. As of 2014, Sharia-compliant financial institutions accounted for approximately 1% of the world’s total assets, totaling about $2 trillion in funds. Not all Muslims follow the laws of Sharia. According to the well-known accounting firm Ernst & Young, Islamic banking represents only a fraction of Muslims’ banking assets, but has been growing at an annual rate of 17,6% between 2009 and 2013, faster than bank assets as a whole and is expected to grow by an average of 19.7% per year until 2018.

Unlike conventional banking, Islam prohibits simply lending money with interest, so specific Islamic rules have been established in transactions to prevent this from happening. The fundamental principle of Islamic banking is based on risk-sharing, which is a component of the risk transfer view in conventional banking. Islamic banking employs concepts such as custody, profit sharing, cost pluses, and leasing.

The Islamic Accounts

Under normal commercial conditions, commodity and foreign exchange transactions are executed on the spot market throughout the day. At 17:00 New York time, all open positions will be renewed within the next 24 hours, and interest generated daily will be added to the company’s accounts every day. The broker can then pay the interest or collect the customer’s account to cover what is considered rollover fees. For traders holding overnight positions, rollovers can have a significant impact on the profitability of an account.

In an Islamic narrative, the concepts are different. This is because there should be no interest (Riba) for the entire duration of the Islamic account contract, any open transaction which at the end of the trading day automatically passes through the rollover poses a problem for those who follow Islamic Law because such transactions are considered usury. Therefore, conventional rollovers are simply not allowed.

Over the years, Islamic rules have been slightly adjusted to allow Muslims to participate in currency markets, without violating Sharia law. Most brokers now offer No-Swap accounts that can be used under certain conditions in order to allow traders, either trade as much as their money allows or take a loan from the broker on the condition that the institution does not receive any interest on the loan. In most cases, no commission or interest is charged on contracts that last more than 24 hours, and zero interest on the rollover is a constant.

The question of whether Forex trading is permissible under Islamic law is a difficult question to answer conclusively. Although the Islamic authorities certainly agree that Forex trading under certain conditions is halal (i.e., permissible under Islamic law), there is some controversy as to exactly what conditions. Let us examine the topics one by one after knowing the saying on this subject by the prophet Mohammed (peace be upon him):

“Silver for silver, gold for gold, barley for barley, wheat for wheat, dates for dates, salt for salt, as for equals, equals for, hand to hand. If guys are different then sell whatever you want, as long as it’s hand-to-hand.”

So, is there halal currency trading? Is it halal forex or haram?

Forex Trading – Halal or Haram Fatwa

Of course, as we have already mentioned, usury is completely prohibited in Islam and is broadly defined. This implies that any type of agreement or contract involving an element of interest (riba) is not permissible under Islamic law. For some time, retail Forex brokers reflected the market policy of charging or paying the trader the interest differential between the two participants of any currency pair whose transaction remained open overnight. Finally, almost all Forex brokers responded to market forces (and the demands of Islamic traders) by becoming “Islamic Forex brokers” and offering “Islamic Forex accounts” that operate without standard interest payments. You could ask how they did it and maintained the profitability of their trades.

This was achieved through increased commissions on spot forex trades, and this practice has become the hallmark of almost all Islamic Forex brokers. Possibly, this in itself is just a component of camouflaged interest, and if you take this view, it makes trading Forex problematic under Islamic law. This interesting problem also discourages any possibility of trading with Forex, as on all occasions there is an element of interest involved in these transactions. However, the “regular” forex trading offered by Forex brokers, without payments or one-day interest charges, could remove the hurdle of riba.

What Islam Says About Online Forex Trading

After having reduced the problem to one of spot trading Forex and assuming that there is no element of interest is considered to be involved, we move on to the next issue. It seems to be permissible only “as long as the exchange is hand-to-hand”. So very clearly, the prophet Mohammed (peace be upon him) took into account the exchanges of different kinds of goods to be made between two parties, recognizing that this was a natural and fair aspect of trading.

The question here is what is considered “hand-to-hand”. In the old days, of course, there were no computers or phones, so the look of making a face-to-face (or hand-to-hand) deal was not a big question. In fact, it could be said to be natural and well accepted for an agreement made between two different parties. In current times, it can be argued that as far as Forex trading is concerned, the agreement is made between a Forex broker and a trader, so it would be qualified under the definition of two different parties, which would be admissible under Islamic law.

A widely recognized stipulation is that the actual exchange must take place during the same “session” in which the contract is made, that is, the transactions must be concluded more or less immediately. We seem to be on solid ground here, as when a trade is done with a Forex broker, which takes effect immediately. Curiously, this might suggest that all non-market trades (i.e., stop or limit orders) are haram!

This is where we come up with the biggest hurdle in trying to answer the question “Is Forex halal or haram?” In general, Forex traders do not expect to take real delivery of the currency they are “buying”, and never actually the currency itself they are “selling. They’re simply speculating that one’s value will go up and another’s value will go down.

Is such speculation permissible under Islamic law? This is a question that is not easy to answer and may be one that must be discussed with its own religious leader rather than being decided based on an Internet article. However, we have researched the topic thoroughly and will outline some points of thought below.

We can begin by saying that Islam recognizes that almost all adults focus their efforts to improve their financial investments and that life involves a great element of uncertainty. In life, we face many choices, the outcome of which is not clear, and we strive to use intelligence and the ability to choose the available option that will produce the higher result. However, we must continue to say that gambling is strictly prohibited by Islamic law, even as a form of recreation or entertainment when it is done with small funds that the player can be said to be able to afford to lose.

By measuring these two competing components, it can be concluded that it is the system of speculation that makes the difference. One author has thoroughly examined the topic and has categorically stated that speculation based on fundamental analysis is accepted, but the technical analysis is not permissible; and there is interesting reasoning: Placing operations based on technical analysis essentially amounts to betting on the bets of others and Relying on the behavior of the crowd to influence their speculation is steeped in the essence of the game, which is prohibited by Islamic law.

However, this argument can certainly be criticised as spurious in relation to market realities. To take an example, it is a speculator who has the belief that the US dollar will rise against its euros because of the economic fundamentals required to simply trade immediately, and forbidden to take any action for time trading entry to a psychologically opportune time?

Once you have done your research carefully, you can decide whether the Islamic forex accounts are right for you. A stronger argument might be that a Muslim has no business speculating on foreign exchange markets unless he or she has a firm foundation to anticipate success. This clearly means that trades must involve either some component of technical or fundamental analysis in which the trader really has a strong reason to believe.

An example could be, following trends that have an academically established track record as a cost-effective method of trading in financial liquidity Markets and trading these trends using Islamic brokers FX.

A trader can argue that a strong technical trend is easier to understand – and also likely to have an underlying reason (though invisible) behind it – a classic fundamental economic outlook that could be discussed by professional economists.

Creating a Muslim Forex Account

There is virtually no doubt that Forex trading is permissible in Islam, as long as there is no element of interest, it is done hand in hand (although this phrase can be translated in many ways), and that the exchanger has a valid reason to anticipate a probable profit based on an analysis that is not based on the psychology of the game. On a solid basis, Islamic Forex brokers can be hired for trading, which should at least possibly eliminate all riba challenges. As we have already analyzed, there are certainly gray areas within this rating that must be thoroughly investigated in good faith and conscience by anyone who wishes to start halal Forex trading with a Muslim Forex account.

Revenue from the Spread

So how does a broker win on Islamic accounts? Broker income comes strictly from spreads, which is the difference between Ask and Bid prices in a currency pair. Many brokers that offer No-Swaps accounts increase the spreads on these accounts or request an additional commission or charge so, at the end of the day, it is like paying interest earned in night positions, but very often at a higher pace.

Other brokers offer the Islamic account without commission or additional charge and maintain the same spread as in swap accounts. There are also brokers who usually offer additional benefits for Hibah-shaped No-Swap accounts. Hibah is donations or gifts given voluntarily; for this reason, the broker does allow its Muslim customers to donate a part of their profits to charity.

Conclusion

It should be emphasized that, although we have investigated the subject of Islamic trading and its validity within Islamic law in length, we are in no way trying to provide religious guidance to you, the readers of this article, or their acquaintances. As evidenced by the research presented here, there are certainly many people who believe that, under the right circumstances, Islamic currency trading is allowed. But, there may be some who are not comfortable using these solutions, and this is a completely valid approach as well.

If you are excited to further investigate this issue or consider how each Forex broker implements their Muslim Forex system, our recommendation is to evaluate the leading Islamic Forex brokers and talk to their commercial partners if you have any questions, questions, or concerns about how their practices relate to Islamic law. A solid and respectable Forex broker must have concrete and accurate answers and will make you feel comfortable, not uncomfortable.

With the expansion of the Muslim community into business, Forex brokers are doing their best to accommodate Islamic accounts. Not all brokers have gotten on the cart for the moment, but if they want to stay competitive they will have to add this feature to their offers.

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Forex Basics

Should You Be Spending Your Valuable Time in Online Forex Communities?

There are a  lot of trading communities out there, some of them offer fantastic places to get to know other traders while some of them can be a little on the toxic side, things that you really don’t want to get involved in. We are going to be looking at whether or not you should be spending some of your time in the online communities and the advantages and disadvantages that they may bring to you and your trading.

Social Interaction

One of the major advantages of being part of a trading community is that it is a source of social interaction. Those that have been trading for any period of time will be able to tell you that trading is quite a lonely endeavor. You are by yourself in front of your trading terminal, and that is it. It takes your time away from things like your family and your friends. So many people will begin to feel quite lonely. The trading communities offer an outlet for you to get back in touch with people and people who have the same interest as you which is a fantastic thing. It will help you feel more involved and will help prevent you from suffering from some of the psychological issues that can come with trading by yourself.

Get Trading Ideas

Trading communities can be a fantastic source of information when it comes to trading ideas. A lot of the communities have dedicated places within them where people can talk about and discuss the different trading ideas that they are having. This can either give you some inspiration for your own trade ideas, or it can be a way of getting complete trades from people that you have spoken to and that you know are only putting out good signals. Use the ideas that you find to broaden your own view of the markets, it may well help you look at your strategy from a different point of view which would, in turn, help you to develop your own strategy better.

Feedback On Your Ideas

Another great thing that communities provide is feedback on your own trading ideas. You can post up what your trade idea is, and what you are thinking of trading. The community will then give you some feedback, perfect for putting something up before you place the trade as others will often see flaws in what you have done (if there are any) or they can offer some suggestions to make it better, it can also be an added confirmation of your trade. Use the communities to get as much feedback as you can, whether you listen to it is another matter but getting the feedback is a good start.

Learn About Trends

More often than not, someone in the community will be posting up when different trends are starting or potentially ending, they will do all of the analysis for you, saving you a lot of money. It is a good way of finding out what potential trends are available and are coming up that you can trade.

News Analysis

Along with trend analysis, a community will also offer you a great way to get free analysis from multiple different viewpoints about the upcoming or past news events including things on the economic calendar. Learn what effects it may have on the markets or what it had done in previous years. Sometimes it can take a long time to analyse all the markets, so seeing what other people have done can save a lot of money. Not to mention the fact that the news can be quite confusing, you may not understand what it all actually means, so you could use the communities as a way of working out what the news actually means and what it will potentially do to the markets.

False Rumours

There are however downsides to the communities, one of those things is false rumours. You need to be on the lookout for these. Traders love rumours, and they love to spread them without actually looking into them. Much like many things in life people love to spread gossip and rumours, regardless of what it is or if they actually know anything about it. The same happens with trading, someone somewhere on the internet posts about something, others then spread it. These end up in the trading community and often have large discussions about it, you need to take care. Do not believe everything that you read, rumours are rumours, there is no solid information behind them and so you should not base your trades on what you have seen people posting, not without any proof or evidence anyway.

Scams

There are a lot of scams out there and a lot that are related to forex and trading. You always need to be vigilant as the trading communities also have them there. A lot of the good communities are doing a good job of preventing them from posting, but they still manage to squeeze through the gaps. Just like anywhere else, if anyone is posting things that are too good to be true, they probably are, if they are asking for a tie to do with money avoid it at all costs, and do not share any account details with anyone. Scams are out there and they are a part of the communities, so keep an eye out for them.

Exaggerated Egos

People love to make out that they are better than they are. The majority of traders lose, yet you will see people posting about how great they are doing, or how they just bought their 15th Ferrari. You need to be cautious of people posting about how well they are doing, or posting up fantastic results. People love to exaggerate and to make themselves look a little better than they actually are.

Those are some of the pros and cons that come with different trading communities, they can be a fantastic way to get to know new traders or to get new trading ideas as well as feedback on your own ideas. There are some negatives also, the people there are not always the nicest. They can try and scam and they can exaggerate results, overall it is a good idea to try and get involved in one, the worst that will happen is that you do not like them and you can stop visiting, but the best thing is that you find a new place to call your trading home and you become a part of the community.

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Forex Basic Strategies

Is There Really a 100% Winning Strategy in Forex?

The short answer to this question is simply, no, there is not a 100% winning strategy, the only way that you can avoid losing is to simply not trade at all. It is actually a good thing that there isn’t a 100% winning strategy as if there was, there would be no trading as everyone would be going for the same thing. It is simply impossible for there to be a 10% winning strategy, if there was then trading would not exist, so the fact that reading has been around for so long is testament to the fact that you cannot win all the time, but surely there are some strategies that are almost right all the time? Again no, each strategy has its merits and its downsides, the person trading it has an effect, and more. We are going to be looking at why there isn’t a 100% winning strategy and also why there never will be one.

Let’s get the risk out the way straight off the bat, if you are planning on having a profit with every single trade that you make, then it would be a better and much more profitable idea to not trade at all. As soon as you plan to profit with every single trade, you are basically throwing any sort of risk management out the window and are technically risking the entire account balance with each and every trade. This is simply due to the fact that you will be reluctant to close any trades down when they are in the red, waiting for them to return, if they do not return then you will eventually lose your account. So do not go into trading with any sort of strategy and think that you will have each trade come back as a profit, losses are inevitable and they are a part of trading.

You need to accept that there will be losses and you also need to plan for them, planning for losses may sound pretty negative, but it is in fact one of the most positive things that you can do as a trader. Planning for losses also means that you will be minimising them, a planned loss will cause you to lose a certain amount of your account, say 1$% or 2% of it with each trade, an unplanned loss could be 10% or 20%. You need to plan the maximum loss of each trade, yes you will be making losses, but they are controlled and you can decide before even placing the trade, the maximum amount that you are able to lose on it, one of the primary ways that we stay profitable is by doing this, and we can technically be profitable with more losses than wins.

You may have seen people advertising their strategies as a guaranteed win or as a strategy that has a 100% winning rate, but there are a number of different factors and reasons as to why this is not the case. Simply put, no strategy can account for all market conditions and no strategy can account for natural disasters or certain news events. If the markets moved like the ocean, simply moving up and down in a predictable manner then yes, there probably would be a strategy that could win 100% of the time, the problem is that this is not how the markets move and work. Some strategies work for a few days, others for a few weeks, and others even a year, but at some point, the markets will do something that is unexpected and this will cause the strategy to start to lose.

Forex is partly about planning, but it is also about adapting, when the markets move with a natural disaster or simply go against expectations and trend the other way, you are required to adapt, each strategy has been set up for a particular scenario and market condition, as soon as that changed, if the strategy is left as it is then it will incur losses, you need to be able to adapt it to better suit the new and changing conditions. Of course, you will still be expected to take losses, especially when experimenting with changes, although that is what demo accounts are for.

So while there is not a strategy that will get you a 100% win rate, there are some things that you can do to help improve those odds or at least to improve the chances of you being a profitable trader. To start, you need to manage your money, the losses that you will take need to be managed and they need to be controlled. You need to have a set risk management plan in place that will detail the maximum loss of each trade as well as your risk to reward ratio, so you can ensure that you are more likely to remain profitable overall. The traders that do really well also have multiple strategies that they use, if you stick to one, the markets will eventually turn into a situation where you cannot trade properly with the strategy. Due to this, having multiple different strategies available for you to trade with will enable you to trade better in different conditions and be more profitable in multiple different market scenarios.

If you try to go for a 10% strategy it will only end in disaster, the first thing that will start to disappear is your account balance or equity, as trades start to fall into the red and you refuse to close them. The second thing that will start to deteriorate is your psychology, you will begin to become stressed, you may even become greedy or overconfident depending on how the trading has been going. What is important to understand is that as you try for this 100% win rate, you will begin to really feel the strain of trading, something that can be avoided by cutting losses early on, it helps to take away the stress of holding and seeing red trades as well as protecting your capital. Many traders who go for a 100% strategy and end up losing, will simply deposit more and try again, resulting in even further losses, so the best thing to do would be to accept that there will be losses from the get-go.

To summarize what we have spoken about, the markets simply do not allow for a strategy to be a 100% winning strategy, it just won’t happen, things are constantly changing and most strategies are set up for a single market condition, you should also not leave trades in the red and close them early in order to protect your own balance and capital. So don’t go out there looking for the perfect strategy, instead look for a number of different ones that can be used to help you trade in multiple different conditions, and most importantly, expect losses.

Categories
Forex Basic Strategies

These Are Widely Viewed As the Most Powerful Forex Strategies

Any novice in currency trading will soon find out that there are a lot of different currency trading strategies. Therefore, any novice trader will always wonder, what is the best strategy for currency trading? Any foreign exchange trader wants to know which trading strategy should be selected (or created) for the most profitable trade. Indeed, much will depend on the type of trade you prefer, as some strategies are best in short-term trading, swing trading or currency scalping or day trading or positional trading. Certain strategies may be adapted to a day trader or long-term investor. This article explains three currency trading systems that have proven to be working in financial markets.

Number 3: Business Strategy of Trend Line Break

This is one of the oldest currency strategies that is based on trend reversal. The strategy indicates depending on price movements that a particular price level where the current trend will be reversed. This strategy also employs levels of resilience and support, and I understand that it is correct for all assets and all investors, ranging from currency pairs to CFDs or commodity stocks.

Well, let’s see how you can open positions to buy and sell with this strategy:

Find a clear trend and draw the trend line along with its highs/lows. We just need a single line that will break in case of a trend reversal. In the bearish trend, we need the resistance line (red), and in the bullish trend, we need the support line (blue);

Now, we have to wait until the market moves for the price chart to break this trend line. Only the moment when the price breaks and crosses the line is necessary for us to have a negotiating signal;

If the bearish trend breaks, it will be followed by a bullish trend, and so, let’s go into a buying operation (Buy). If there is an upward trend breakdown, the price will be reversed downwards and we will enter into a sale transaction (Sell);

You must enter a purchase transaction when the 2 main conditions are met: the price has been broken through the resistance level (red line), and the price reached the level of the most recent peak of the broken down bearish trend (level of purchase);

A sale transaction is introduced when the 2 main conditions for sale are met: the price has been broken through the support level (blue line), and the price reached the level of the most recent lowest of the decomposed bullish trend (sales level);

By the time the two conditions are met, we can already open a selling or buying position immediately if the price has reached the level we have discussed in steps 4 and 5;

A take profit is set at the maximum/minimum of the previous trend before the low/high where we open a position (Take Buy/Sell);

A stop loss is put on the low/high of the previously broken trend (Stop Buy / Sell);

As you see, this is a simple and cost-effective currency trading strategy that can be used at any period of time and provide a sufficient level of signal accuracy. Statistically, the benefit/loss ratio is approximately 65/35.

Number 2: Three EMA Rupture Strategy

This strategy is one of the basic strategies of the indicator and, like the previous ones, is quite simple and applies the principle of a trend reversal. This is a currency indicator strategy, so you will need to attach three moving averages to the chart.

Well, let’s see how you get into trading according to this trading system.

Place three EMA on the price chart. For convenience, they should be in different colors. In the first EMA, the displacement is -2 and the period is 21. In the second EMA, the displacement is -3 and the period is 14. The in the third EMA displacement is -4 and the period is 9;

Therefore, the blue EMA will be slowed down and when satisfied by other faster EMAs, input signals will be delivered;

A selling sign appears when the green EMA breaks through the red from above and the two lines cross the blue line from above (Sell 1,3,5);

A buy sign is sent when the green and red Mas cross the blue from below, and the red must be crossed by the green MA from below (Buy); The strategy does not suggest particular levels to put a Take Profit and Stop Loss, so, you leave the transaction depending on the market situation, you should be very careful to keep risk management under control;

You should close the position (with a profit or with a loss) when the green and red EMAs cross each other back in the opposite direction after they have entered the trade;

As you can see, this Forex trading strategy is also very simple. A simple average indicator provides clear signals with a profit/loss ratio of approximately 70/30.

Number 1: Commercial Strategy Based on Triangle Pattern Break

I assure you that this is one of the most optimal currency strategies. When you operate with this strategy in currency markets, at least know the main ideas of technical analysis, because you will need to find a triangle pattern on the price chart and mark your legs (limits) with trend lines, which are the levels of support and resistance ( blue lines). The triangle looks like a narrow side channel.

Well, let’s see how you enter operations based on the signals of this commercial strategy:

This strategy hardly offers signals to enter the market at the current price, it suggests the use of pending orders, purchase limit or sale limit order;

When you have already found a triangle pattern, you can start placing pending orders. You must place the order at the price level that will indicate that the price has broken down one of the pattern trend lines;

A purchase limit must be set to the maximum before the pattern resistance line break (buy 1). If a new high arises, the limit order must move a lower high (Buy 2), and it does so until the resistance line is broken;

A Sell Limit order is placed at the minimum before the break in the support level of the pattern (Sell 1). If a new bass emerges, you must move the pending order to the next minimum, and this will happen until the support line passes through;

When one of the pending orders works, you put a Take Profit at the maximum (if you buy) or at the bottom (if you sell) of the pattern;

A stop-loss will be set to the contrary end (low/high) relative to the end that entered an operation. For example, for a sale transaction (sell 2), a stop loss is set at the level of a possible trade purchase Buy 2);

This business strategy is a bit more complex and needs you to have experience in detecting a triangle formation in the price chart, but provides greater trading opportunities. Complexity is compensated with the high accuracy of trading signals with a profit/loss ratio of approximately 85/15.

So, now you know the three best currency strategies that any forex trader should try. We recommend that you test them out on a demo account for a while in order to get the hang of them first. After that is done, feel free to move to a live trading platform and start collecting your profits!

Categories
Forex Basics

10 Books That Can Definitely Make You A Better Trader

What’s the best trading book? This answer will depend on where you are and where you want to go deeper, whether you are starting, whether you have experience, whether you are looking for a more long-term or short-term approach.

If you are reading this article you will surely be looking for a book that can help you as a trader. There are good books about trading, some focus on the technical part, and others do it more in experiences.

I have made a list of the trading books that have brought me the most and that I think they can bring to you the most. Something like the trader’s library. Surely some of these books you didn’t know, how is this possible? If you do a quick search, most of the books you’re going to find are loaded with aspirational messages and smoke. I tell you that, as you know, my approach is quantitative and this can be seen only by looking at the books I have chosen, but I recommend to you what has served me and helped me on my way.

The ranking is divided by levels so you can choose the one that best suits your level. Although it may seem that they all deal with the same topics, what makes the difference is the focus of each of them. There really are a lot of pearls and gold nuggets. Some of these books are only available in English but are usually fairly easy to read with terms similar to Spanish in some cases.

When you start, what you read can mark you for better or worse. That’s why you won’t see any titles in all these books that are kind of “how to get your first million in 30 days”. These books are the ones I think can really bring you value and a good basis to start with realism:

Quantitative Trading Initiation Guide – Martí Castany

This book has been published recently and as its name suggests it is a very complete and basic guide if you are starting in quantitative or algorithmic trading. I have recently recommended it when you ask me because it makes a good review of all the basic concepts and explains the day-to-day of a quantitative trader (necessary equipment, programs, etc.).

Martí Castany is the author and has been able to condense the information very well and make its reading very enjoyable. It’s not a long book and you can read it in no time. I especially like the realistic approach it gives to trading as a business.

The New Life of Trading – Alexander Elder

This is one of the best-known and recommended books, especially the previous version. This is a new one that has recently come out. There is a lot of interest in psychological factors and emotions within trading and relates it to technical analysis and risk management. It deals with issues as important as they are basic.

In this book, you won’t find backtest or operational statistics, as Alexander Elder is constantly relying on technical analysis for trading and manual trading. Recommended if you’re starting out.

Be Successful in Trading (Trade Your Way to Financial Freedom) – Van K Tharp

This book focuses on the aspects that the author considers to be important to create a good trading system. He constantly points out that input is only a small part of the strategy and explains how outputs and stop-loss affect their results.

The strengths it deals with are money management (position size) and the psychology to succeed in trading. There are two versions: “Trade your way to financial freedom” (in English) and “Being successful in trading” (in Spanish).

Now yes, we get into trouble. If you master the basics of trading and want more chicha, these books can help you a lot:

Quantitative Trading Strategies – Lars Kestner

This is one of the books I liked the most in my day. Although I might have qualified it as uninitiated, I think it can also contribute to people with experience. Lars Kestner talks about basics yes, but also about the types of trading strategies in detail and following order according to their behavior (trends, reversion to the average, and with price patterns).

In this book, you will also find system evaluations, their optimization, and risk management (a classic, as you will see in most). I read it in English and I did not find it in Spanish, but if you find this or any other translated, write it to me in the comments and I can add it.

Quantitative Trading Systems- Howard Bandy

Howard Bandy is one of the best authors on quantitative trading today. He writes in a very simple and enjoyable way. In this book, he explains what quantitative analysis is, how to treat data, interpret different ratios, create detailed strategies, analyze or test systems.

The book is quite complete and every concept is explained in detail. Of course, the strategies are done by the author on the Amibroker platform. Even so, the concepts and explanations do not change and are general.

Cybernetic Trading Strategies – Murray Ruggiero

Murray Ruggiero is for me a reference in the creation and development of trading systems. In this book, he touches on classic topics such as technical analysis and more advanced ones (neural networks, fuzzy logic, genetic algorithms) to demonstrate the power of trading systems based on computation. It is the common idea of the book, to make us see that with a computer we have many tools and power to do incredible things.

It is a book that is worth it for the range of topics it deals with and how it treats them, as they are accompanied by examples and practical cases that will make you understand everything better.

Building Reliable Trading Systems – Keith Fitschen

Keith Fitschen is another author I quite admire. He gives a different perspective and a twist to the creation of systems in a traditional way. In this book what he does is that he proposes a method to build and test systems in an alternative way to avoid our worst enemy: over-optimization. This method is called BRAC (“Build, Rebuild, and Compare”).

In addition, to do all this in a practical and visual way, he constantly compares two totally different trading systems that he is modifying throughout the chapters.

Technical Analysis Based on Statistics (Evidence-Based Technical Analysis) – David Aronson

The main objective of this book will be able to demonstrate the effectiveness of technical analysis with numbers. What really works and what doesn’t objectively. It has a first theoretical part and a second part where it makes the demonstrations (I warn you that it can become denser).

Although it was written in 2007, it develops very well how to statistically measure the reliability of a trading system. It deals with concepts like statistical analysis, data mining, and techniques for analyzing information, but it’s nothing basic. Its author is David Aronson.

Quantitative Trading – Ernest Chan

This is one of the first books that read about quantitative trading. It brings interesting ideas about statistical arbitration. It develops the concept of seasonality and generates a quite original mental framework.

The systems that Ernest Chan usually proposes are quite theoretical and are not easy to implement. Still, you can get a lot of ideas from everything you transmit. It also talks about risk, backtesting, cointegration, correlation, and many concepts that are important.

[Extra]: Books that can help you in your trading

Now we’re going with books that, although not trading, can help you improve it. How is this possible? Because they deal with topics that are perfectly transferable to the world of investment and trading.

Principles – Ray Dalio

Ray Dalio is one of the people who has inspired me the most. I found this book brutal, as the title indicates, it reflects principles not only at the working level but as a philosophy of life. Open-mindedness, transparency, and the ability to stand up are some of the messages it transmits and teaches. He also defends the union algorithms and people to work with and explains how he performs it.

In the book, Ray Dalio constantly shares experiences and situations that make his reading quite enjoyable, especially in the early part of life. If you didn’t know him, he’s the founder of Bridgewater, the world’s largest hedge fund.

Antifragile – Nassin Taleb

Nassin Taleb has become quite popular in recent years and you probably know him because he has other very good books like, “The Black Swan” which develops the idea that it is positive or preferable to stress something constantly to not do and when an unlikely event happens it will take everything ahead. The concept of robustness is important in trading.

It basically tells us that anything that is not exposed to that fragility will not thrive and will end up incurring greater risk. It gives many examples of the day-to-day that will make you reflect.

I know there are very good stock market books that can be more general or focus on other areas such as fundamentals, value, or finance that you may have missed, but I have selected only those that I find interesting in trading.

Categories
Forex Basic Strategies

How to Become a Pro At Averaging Down

I have seen in several forums that many investors practice the risky sport of averaging down. This strategy is nothing more than investing more money every time the stock/ ETF/ Fund, etc goes down, so we get a reduction in the initial cost by buying more shares at lower prices. 

This strategy has several problems…

– Each time we average to lower the average cost we add more money, therefore we add more risk.

– “Money Management” or money management strategy is a martingale (I buy when I lose, that is when I lose). This strategy is perfect when our capital to invest is infinite, which is not very likely.

– It is not recommended unless you know how to do it, because if you do not do the strategy well or do not choose the underlying well, the losses can be very painful.

– We are invested in a broad ETF (there are many companies and good ones) and the ETF has downward swings because of the feeling of the market, and not because of the quality of the companies that compose it, so it is an inefficiency that we could take advantage of if we have liquidity.

– Exactly the same as the previous point but with an individual company. Here I have to say that you do not do it, do not lower your average in individual companies, unless you know how to read a balance sheet and trust very much in your judgment that the company is good and will continue to make profits.

If you still want to average down we’ll see how we can do it. The example I am going to give with a company, and this example can be extrapolated to an index. The company XZY is a large company, what’s more, I would say it is a very large company, with annual dividend increases of around 7% on average, improved margins has an impeccable balance sheet, etc, etc, etc. Ultimately a really good company with very little chance of going into losses, although this is never 100% reliable.

Once we know that the company is very good and its balance sheet is difficult to get worse enough we want to enter it to take advantage of its current price and be able to get quite good returns. The intrinsic value of the stock is €100, and it is currently listed at €60, so it is trading at a 40% discount. I think it’s enough of a discount to go in and have a good long-term return.

I have 10,000€ to invest in the value, and at 60€ I will buy 100 shares of the company, so I will invest 6,000€ initially. Now, because of the current market situation, because of the phase of the cycle in which we are, because the political situation of the country is this or that, etc… it is likely that the market will punish the quotation and we will see it below, even though it is an incredibly good company, which gives us the possibility to buy more shares (more risk) in exchange for lowering the average cost (more profitability) and when quoted at prices close to its intrinsic value, get a few more points of profitability.

Then let’s try to figure out what a super price would be. The super-price is the price at which the company is a very clear investment opportunity and will give us really good long-term returns. For our example I estimate that a super-price for the company is 40€ per share, that is, we shouldn’t care if it goes any lower, because at the price I buy the company, earns enough so that the money invested in it has all the possible guarantees of getting the full return on my investment plus high returns.

At this point, I have 4,000€ in liquidity and a difference of 20€ between the current price of the stock and my super-price. Now the price difference between the current quotation (60€) and the super-price (40€) we have to divide in equal parts, and in the same way our capital in liquidity. Therefore we can divide our capital into 4 parts of 1000€ each and the 20€ difference into 4 parts of 5€ each and in this way we already have the levels in which we will invest additional 1000€ each time the quotation drops 5€ and we will have enough liquidity until he goes down to our super-price.

A rule for you to do well is not to average a price that is less than 8% difference between the initial purchase and the next purchase to average, that is, I will not buy the company at 60€ and at 59€ I will re-invest. Such a small difference between the different prices will not excel in the returns of this long term. In the example I have explained the difference is greater than 8%, so it compensates for the risk with the possible long-term reward.

If instead of having bought 6.000€ initially we had bought less, 3.000€ for example, we would have 7000€ in liquidity to average, we would again divide the difference between the current price and the super-price and divide it into 3, 4, 5 equal parts (to the taste of the investor) and buy when it comes at the price we agreed. This is the standard way of averaging.

We can also increase or decrease the risk by doing the average in different ways…

– Increase the risk: Instead of dividing our capital into 4 equal parts I will give more money to the latest purchases, for example: Instead of buying 1,000€ each time I lower 5€ the quotation, the first 5€ I lower (the quotation would be 55€) I will buy 500€ only (I have left in liquidity 3,500€, the second purchase at 50€ I buy for 800€, the third for 1200€, and the fourth and last for 1500€.

– Reduce the risk: Exactly like the previous point but in this case, the first purchase to average is the most money we invest, and the last one the least, we would invest 1500€ first when the quote reaches 55€, 1200€ when it reaches 50€, 800€ when it reaches 45€, and finally 500€ when it reaches 40€.

By reducing the risk, I am not referring to the operation in general, but to the strategy of averaging downwards. Another day we will talk about selling a part of the portfolio to reduce the risk of the transaction in general.

-It is different from the average if we invest 6.000€ in the first purchase than 4.000€, the more money you invest in a certain price, the more the average cost will approach this.

– We can use the 3 ways of averaging, we just have to know what our profile is and if we will find ourselves doing this high-risk strategy.

– Never weigh at prices below 8% distance between several purchases. The risk does not compensate for the reward.

– It is not the same as a super-price for our example of 40€ that 59€, here it is clear that I will not average, it is not higher than the minimum 8%.

– In companies it is very risky, I would not advise you, you must be almost professional to do it in companies. In indices, it is different, although not all indices, choose one with large companies, and enough, SP500, Eurostoxx300, the VT would be perfect, etc. An idea to know a super-price of an index is to see the return for a dividend that gives and with which you would agree.

This is all, a risky strategy, but using it with a lot of heads and a lot of care can give us joy. As a last remark I repeat that I do not advise this technique in companies and in indices if you do not know how to use it well, it is very dangerous, but now you’re a little more knowledgeable about how to do it and avoid serious mistakes by buying too soon or in an underlying evil.

Categories
Forex Assets

How Much Is Google Worth? A Trader’s Guide to the Search Engine Giant

I will first comment on the balance sheet and its risks but I hope I will not go too far, as it is a company with few debts, with very strong financial health, and with quite limited risks in my opinion. After this, we will move on to its valuation by multiples, by discounting cash flows, and its valuation of the sum of the parts.

Balance Sheet

Regarding its financial health, it has a Current Ratio (remember that they are current assets/current liabilities) of 3.37 and a Quick Ratio of 3.35 that is the same but subtracting the inventory from the assets, although as we see this item is practically insignificant. Around 1.5 is usually a good ratio, in this case, we see how the weight of its assets far exceeds liabilities.

Profit and Loss

With respect to its consolidated income statement, in 2018 and 2019 it made profits in excess of $30 billion, although in 2017 it was quite lower, about $12 b. This is largely due to the provisioning of taxes for the sanction it had for monopolistic practices. After seeing the profitability and margins we will look at what are some of the risks of Alphabet.

Profitability and Margins

Except for the exceptional situation of Alphabet in 2017, the ROE is usually around 16%, obtaining more than 18% in the last 2 years. Something similar happens with the ROA, around 13%. While the ROIC tends to be most of the years between 30-40%. In the case of margins, they are not as high as in previous years, but they still have a gross margin of more than 55% and a net margin of more than 21%, which is very good.

Trading Risks

Of course, as with any investment, there are always risks, and these are some of the ones that the company itself comments on. If you think they’re missing something, leave it in the comments. 83% of sales come from advertising. If advertisers’ spending is reduced, or limitations appear when displaying ads or personalizing them, the business could suffer a lot.

Competitors

Disruption, interference, or failure of our information technology and communications systems could damage our ability to provide our products and services effectively, which could damage our reputation, financial condition, and operational results. The occurrence of a natural disaster, the closure of a facility, or other unforeseen problems in our data centers. 

  • Regulatory Risk. Antitrust, privacy, tax laws.
  • Privacy and data protection. Any scandal here would affect the company.

Rating by multiples of Alphabet

As we have already said, for a business of the magnitude and quality of Alphabet it is almost impossible to compare it with other competitors. This is because there is no other Alphabet that competes directly, instead, we have multiple competitors fighting for different business segments. Therefore, it is most likely reasonable to compare with Alphabet’s own historical multiples. Here I will focus only on two multiples that for me would be the most important in this case, such as P/FCF and EV/EBITDA.

Review of Google based on Price to Free Cash Flow (P/FCF)

Number of shares = 688.8 M

Median over the last 15 years 33.45

Price per share = 1206,57€

Market Cap = 831,085 M (price per share*number of shares)

Free Cash Flow (FCF) = 28.457 M

P/current FCF = 29,20 (Market Cap/FCF)

How much is Google worth according to its EV/EBITDA?

If we take the historical median of 15.89 as a reference and expect it to return to that level of EV/EBITDA we would have:

EV/51.506 = 15.89 –> EV = 15.89 * 51.506 = 818.430 M

Estimated EV = 818,430 M

EV per estimated share = €1,188.20

Dividing 818,430 M by the number of shares we would have an estimated EV per share of 1,188.20 €.

And what would be the safety margin in Google?

Safety margin = [ 1 – (Market price / Intrinsic value) ] * 100 [ 1 – (1055,78 / 1.188,20) ] * 100

Safety margin = 11.14 per cent

Valuation by Alphabet Cash Flow Discount:

We have an estimated EV per share of about $1,333 and an estimated price per share of $1,501.  This represents a safety margin of 20.80% and 19.62% respectively. In this case, we see how the margin has been increased with respect to the multiple valuation methods, although here only by increasing by 1% up or down the return we demand on this investment (Personal required rate of return) the valuation changes substantially.

Valuation by the sum of the parties:

I will take into account both profit and free cash flow and assign other multiples. In addition, I also include an estimate of the debt since it has historically been very small but in recent years it has experienced a growth that we should take into account. First, we’ll see how much Google is worth based on your cash flow, then we’ll add your cash and Waymo’s rating. Then we will deduct the debt and finally divide it by the number of shares. So we will have the estimated price of Google to 3 years seen.

Why change multiples?

Well, Google has historically quoted around 20-25 times benefits or FCF, but as we’ve seen before we get around 33 times compared to FCF and 28 times benefits.

Considering this, let’s leave it at 25-30 times FCF and 24-28 times benefits.

How much is Google’s 3-year cash flow seen based on its profits?

1) Expected growth rate between 10% and 15% over 3 years

Historically it has traded around 28 times the benefits. We will take a conservative range of between 24 – 28 times.

2) Your benefits in three years will be:

  • 34 B current at 10% for 3 years are 45b.
  • 34 B current at 15% for 3 years are 51b.

3) How much this will be worth in 3 years by applying multiples of 24 and 28 times:

  • 45B x 24 times/# of shares = 1,568 € per share or Market Cap of 1,080,000 M
  • 51B x 24 times/# of shares = €1,777 per share or Market Cap of 1,223,998 M
  • 45B x 28 times/# of shares = 1,829 € per share or Market Cap of 1,259,815 M
  • 51B x 28 times/# of shares = €2,073 per share or Market Cap of 1,427,882 M

How much is Google’s 3-year cash flow seen based on its Free Cash Flow?

1) Expected growth rate between 15% and 20% over 3 years.

Google’s FCF growth has been 17.5% in the last 10 years, 24% in the last 5, and 34% in the last 12 months. We remained in a conservative range of 15% – 20% FCF growth and multiple of 25-30 times.

2) FCF in three years will be:

  • 28 B current at 15% for 3 years are 42.5 B.
  • 28 B current at 20% for 3 years are 48 B.

3) How much this will be worth in 3 years by applying multiples of 25 and 30 times:

  • 42.5B x 25 times/# of shares = 1,542 € per share or Market Cap of 1,062,130 M
  • 48B x 25 times/# of shares = €1,760 per share or Market Cap of 1,212,288 M
  • 42.5B x 30 times/# of shares = 1,851 € per share or Market Cap of 1,274,969 M
  • 48B x 30 times/# of shares = 2,090 € per share or Market Cap of 1,439,592 M

Obviously not, everyone must make their own analysis and we have seen that by varying the valuation method we get different prices. I personally am not buying at this price, as I see it likely to buy at a better price with a higher safety margin.

Categories
Forex Market

Investing in China: Opportunity Or the Next Crisis?

In the S. XV, at the time when the so-called Silk Road had its decline, a network of trade routes that from the 1st century B.C. crossed all of Asia to trade goods through territories such as present-day China, Mongolia, Turkey, even Europe, and Africa. At the end of the intermediate period, destination prices were much more inflated than at the beginning, so cheaper maritime alternatives began to emerge. This weekend gave me a chance to reflect a little more on this great country, which also has a great cultural interest.

Is it a good decision for us to invest in China?

We continually hear that China is a superpower and that its growth rates are incredible so that it can overcome the global hegemony that hosts America today. It also has a barbaric population, of which historically the majority has belonged to the lower class but there are more and more middle class with greater capacity for consumption. All this is true but… Is all that shines gold?

Understanding the Chinese Economy: Shadow Banking

We know that in the Republic of China the Communist Party rules and the Communist Party controls the big banks of the country. These big banks do what the party dictates, so in the end, they are obliged to offer loans to companies and sectors that the party wants to benefit from, and the same but on the contrary, they are forbidden to finance other companies or sectors.

In this context, there are companies that need financing and cannot resort to traditional Chinese banking, so their alternative is to resort to so-called “shadow banking”. Shadow banking (which we will refer to as non-banks) are banks that do not comply with banking regulations. In other words, the requirements are lower than the traditional banking system.

Differences between Shadow banking vs traditional banking

In general, non-banks lack access to central bank funds and other features such as deposit insurance and debt guarantees. These non-banks have fewer leverage constraints so in times of bonanza like these last few years they make more money but are more fragile when problems such as defaults appear.

The current situation in China

China has aggressively stimulated its economy in 2019 Q1 and Q3. Again, it is something that has been repeated in the Q1 of 2020 as a result of the Coronavirus (injecting money and lowering interest rates). They indicate that there is a debt saturation that is close to not being assimilated and that while the debt continues to grow, growth has stagnated.

In 2018, the hole in the Chinese deficit stands at 5%, but considering shadow banking it would rise to 11%. In 2014 it was 1% and 5% respectively. In addition, there is most likely a huge amount of loans that are not being repaid, and that will be a problem on the balance sheet of Chinese banks.

China’s GDP (GDP) is growing less.

China’s GDP is growing less and less, and now along with the impact of the Coronavirus the growth forecasts for 2020, which are forecast to be around 5-6%, are still shrinking further, in any case below the 6.1% that there was in 2019.

The debt of China

Since 2008, China’s GDP debt has doubled, surpassing 300% of GDP in 2019. This trend is not exclusive in China, since high indebtedness is something global, and here in Spain, we are not to shoot rockets either. In addition to this high level of indebtedness and the fact that the granting of financing is not based on criteria of the probability of being able to repay the money but on the interest of the scheme, We still have to add to the equation the probability of distorting the data that comes to us as there is a great deal of mistrust within Chinese audit firms.

All this helps illustrate why there is greater concern about China’s banking system. While it is difficult to have a solid view of China’s true economic strength, there are strong reasons to believe that the country is facing a complicated situation with a highly leveraged banking system full of questionable quality loans and growing defaults. While the media prefer to focus on the figures of Trump and trade, the biggest threat to the Chinese economy may be a massive financial bubble from within.

What if it’s not a big deal and we’re looking at a great investment opportunity?

The truth is that leaving aside Chinese macroeconomic issues, today there are renowned investors who tell us that there are many investment opportunities in Chinese companies and other data that can make us believe that it can be a good investment. For example, last week Charlie Munger commented in his “2020 Daily Journal Annual Meeting” that ” the most reliable and strong companies in the world are based in China and not in America”.

On the other hand, if we look above two large ETFs representing the USA and Chinese market:

And if we make the comparison we see that the average PER of the USA market is at 23.87 and that the average PER of the Chinese market is at 13.14. It is clear that the PER has many limitations and we should not rely too much on this ratio when investing, but it can serve as a little guide to compare markets. Leaving aside all its limitations, this photo comparison of these two ETFs seems to tell us that there is a big valuation difference between China and the USA. Is it possible that the USA is expensive? Or maybe China is cheap?

On the other hand, there are giants like Tencent or Alibaba that seem unstoppable to this day. We will have to continue investigating…

Categories
Forex Basics

Struggling With Forex? Read These Quotes Today…

Today we bring you a small collection of famous phrases of traders and personalities that with their words have helped us to improve, we hope that they also help you a lot. Then we’ll leave you with the great truths of the rockers.

– If you want to double your money the quickest, then what you should do is double the bills and put them back in your pocket. (Will Rogers)
– I soon realized that men who have succeeded ( Lawyers, Doctors, Scientists… ) have spent years of study and research in their respective fields, before trying to make money from their professions. (William Gann)
– Success is an ATTITUDE, not a matter of luck. (Anonymous)
– Luck does not exist; God does not play dice with the universe. (Albert Einstein)
– What separates the 5% you earn from the other 95% you lose is an enormous amount of effort. It’s perseverance. You have to like it. (Tom Baldwin)

For us these phrases make one thing clear, investing in the markets is a reality, a fact that anyone can do whenever he invests (and never better said) time in doing it, you need constancy, desire, and training correctly, the rest will come.

It is clear that markets are not a magical place where you double the money, the people who earn here are thanks to their personal effort and their dedication.

We also include some of the most famous and famous phrases of the famous Trader Jesse Livermore.

– When I’m not right, only one thing convinces me of it, and that’s losing money. That’s speculating. (Jesse Livermore)
– They say you never get poor by taking profits, that’s right, but you don’t get rich by taking a four-point profit in a bullish market either. (Jesse Livermore)
– We all know that prices go up and down, it happened in the past and it will happen in the future and that’s all we need to know. It is not advisable to be too curious about the causes that cause price movements, as you risk filling your head with irrelevant aspects. All we need to do is try to find the movement and try to follow the flow. Don’t argue with the trend, and especially don’t try to fight it. (Jesse Livermore)
– If you have a little moment I’ll tell you how to make money on the stock market. Buy with low prices and sell with high prices. If you’re 5 or 10, I’ll tell you when prices are low and when prices are high. (Jesse Livermore)

And, without a doubt, the best of so many who said:

– When my driver tells me he’s going to buy some stock, I rush to sell mine. (Jesse Livermore)

These phrases perfectly summarize the trading, the professionals operate with great trends and movements, holding the position until exhausting that trend, never pay attention to the advice of others, only of what they read in the market, In fact, many people believe that they lose in the market because the professionals manipulate it to their liking, this is not so, they simply place themselves on the right side. On the other hand, it refers to the difficulty and time it takes to learn to read the market, this is not a matter of 2 days, you need time and dedication.

Categories
Forex Trade Types

Short, Medium or Long Term Trades? Which Is Best?

For anyone interested in Forex trading it is vital to know the correct time frame to invest in and then today we’re gonna talk about it. Is there a better time to invest than another? Is it a matter of taste?

First, I want to define each of the deadlines according to our own criteria:

Short term – Operations are opened and closed on the same day or week.

Medium term – Operations can last a few weeks, even a month.

Long term – Operations are opened to be closed within a few years, dividends can be part of the long-term investment strategy.

We need to highlight a number of basic short- and long-term advantages and disadvantages before discussing this issue further:

In Favour of Short Term
  • Low initial capital is needed to achieve significant objectives.
  • Possibility of leveraging without taking significant risks.
  • There is the option of working with compound interest (reinvesting capital on a daily basis).
Against Short Term
  • Find enough time to operate every day for a few hours.
  • Fundamental analysis is useless.
  • Decision-making is much faster and should be very automated, we are very bad at thinking under pressure. (Today automatic trading can supply this and the previous point).
  • The stock market is often either too volatile at the beginning of the session or too quiet for the rest of the day. The currency market is more constant and has trendy and interesting movements most of the day.
In Favour Long Term
  • It offers great tranquility, we have several days to decide what we do.
  • Volume analysis takes on great importance by exposing the next price movements.
Against Long Term
  • Difficulty to get returns with compound interest, reinvestment becomes slower.
  • It is not very appropriate to leverage our money in the long run.
  • We need large initial capital and consequently, the risks in absolute value are much greater.

If you have more arguments against or for the short/long term do not hesitate to comment on them.

After putting forward these arguments I think the solution to the initial question is simple. If you have a small capital but you have time and knowledge it is best to invest in the short term (speculate in full rule) and seek an exponential profit. If what you really have is a large capital, knowledge, and little time, it is surely better to invest in the medium/long term looking for dividends and trends of several months.

Be that as it may, NEVER invest on your own if you do not have before you the experience and knowledge that allow you to invest calmly. Reading newspapers is a ruin, buying “cheap” shares are often expensive, reading forums and posts called, “Menudo pelotazo en tal acción” or “I assure you that the euro will fall” is even less lucrative. I’m sorry, guys, this is a lonely job where you have to form your own system, whether it’s short, medium, or long term. In fact, with creating a system there is not enough, you should have at least 5 or 10 to be able to diversify your operations in a smart way. If you don’t have so many systems, you can always copy free from other traders! 

Another option available is to try to find a way to have your capital well managed and that means not letting your bank invest it.

Categories
Forex Basics

Is the Effort of Forex Trading Actually Worth It?

This is quite a big question, yet it is one that you need to ask yourself before you jump into the world of trading. The forex markets are the biggest marketplace in the world and offer the most liquidity and profit potential anywhere in the world, but with all of that opportunity comes a cost, as there cannot be an opportunity with some form of risk. So if you have ever asked yourself questions like, “Is it worth trading?” or “Should I start trading?” this article will give you some insight into what trading is and whether or not it is worth taking it up as a hobby, or even as a potential future career.

To answer the question of whether or not it is worth being a forex trader is simple, the answer is yes, but it is also no. The answer to this question will depend entirely on who you ask and what their own experiences of trading have been. If you were to ask someone who had pulled in all their savings into trading and then lost, the answer will of course be no, they would advise you to run a mile, however,r if you were to ask a very successful trader for one of the multi-million dollar companies, then they will most likely say yes, simply based on their own experiences. So asking others won’t really give you a clear picture or idea as to whether or not you should be trading.

So we know that you will need to find out first hand whether it is right for you, but you first need to get an understanding of why you are thinking of being a trader in the first place. What is it that has made you think about trading? Are you looking to become rich quickly? Are you looking to make a little extra on the side of your job? Are you looking for a completely new career? Knowing this will give you an idea of what your aims are and whether trading will be able to offer what you want. Are you willing to learn? To spend hours and hours reading, analyzing, and practicing? If yes, then it may be something that you can work with. If you already think you know it all, or simply want to get rich overnight, then there may be a rude awakening when you actually begin to trade, overconfidence is one of the most dangerous emotions when it comes to forex trading.

What does it mean to be a forex trader?

Forex trading is all about buying and selling currencies, you try to buy low and sell high, that is all there is to it. Of course, it is a little more complicated than that. There are tonnes of variations to trading, multiple different account types, lot sizes, dozens of pairs to trade, each with its own influences and influences. With that, here are hundreds of different styles and strategies for trading, some of which you may have heard of, others you may never hear of no matter how much you trade. There’s so much variation and so many options that you should be able to find something that fits you well.

Trading can also be used to help diversify your portfolio, any investor will tell you not to put all of your eggs into a single basket, well trading and forex is an additional basket, and a potentially very good one to be involved in. It does provide the opportunity to change your career or to build a second income, but it won’t be easy.

Does forex make money?

Yes, that is the simple answer, but only if you are doing it properly. For every penny that you can make, you must also risk some, so those that come into it simply wanting to make a lot of money, will risk far too much and most likely lose it all, while those coming in with the expectation of a long term investment, over the period of years, will properly maintain their accounts and their risk and will then be on the right track to be profitable.

The problem is that we cannot actually tell you how much you will make, there are a lot of different factors which would influence this, your starting balance, the risk that you take, the market conditions, your strategy, and more. There are a lot of factors that will influence how profitable you are. If you think about it, make 5% to 10% per month for 10 years, you will be looking at a small fortune, but try to push that to 50% per month as an example, you will probably only last a month before you have lost it all, think long term, not instant profits.

One thing that you need to consider when looking at trading is the comparison to a normal career. With a normal job, you have stability, you know how much you will be bringing in or at least what the minimum amount will be, when it comes to trading there is no guarantee. In fact, you could even lose money in a month, the volatility is there, you can make a lot, and we mean a lot, but you can also not make anything, so if your current financial situation is quite tender, trading full time would not be a sensible option, however, doing on the side of a normal career job is certainly an option, and a good one at that.

Should I become a full-time trader?

Another question a lot of people ask, but they normally ask this one after having traded part-time for quite a while, there are however some exceptions who jump straight in and go full time. If You are thinking of going full time then there are a few considerations that you will need to take. Do you have enough capital to sustain things, if you have a bad month, two months, three months, will you still be able to survive? Are you currently making as much if not more than your actual job with your trading? Do you have the discipline to keep yourself on track when doing it full time? These are just some of the things that you need to consider, if your answer is no to any of them, then you should probably hold off going full time for the moment. You will also need to consider whether you actually enjoy trading, if you do then great, but many people find it boring to sit by the computer looking at graphs for hours on end, so if get easily bored, you may begin to struggle after a while.

What are the risks?

When there is the opportunity to make money, there is also a risk involved. When it comes to trading this risk can be pretty high, people have lost entire accounts on a single trade, others have lost an account over a longer more drawn-out time period of months or even years. This is why it is always stated that risk management is key. Risking 1% per trade as opposed to 10% per trade can save your account, the profits won’t be as high, but again, we are going for long-term profits rather than overnight riches. If you are planning on trading, then you will need to stay disciplined, create a risk management plan and then stick to it, as soon as you deviate, you are putting your account in danger. It is of course also possible to lose even when doing everything right, so you need to go into trading knowing that there is risk involved.

So let’s assume that you have decided that this is something that you want to do, how would you go about starting? The first thing that you want to do is to find somewhere to get a basic forex education, there are plenty of places out there in order to do this. You will then need to start reading and read a lot, there is an endless amount of information out there. You will also want to get yourself a demo account, somewhere where you can practice, if you have not got one yet, get one, it will give you an idea of what you need to do to place trades and a little insight into how the markets move, all valuable things to know. Once you have gained a bit of knowledge, put it to practice within the practice account, then eventually you will be ready to go live as a forex trader.

Categories
Forex Forex Basic Strategies

How To Earn $398 Per Day Trading Forex

How does earning $398 a day sound to you? Good right? Many of us can only wish that we will eventually make this much, for some it is a reality, but for most, it is a distant dream. Yet it is achievable, but the real question that you need to be asking yourself is whether or not you should be aiming for that amount, and what stage you are currently at. Yes, it is achievable and we will be looking at how you can achieve it, but also why you probably shouldn’t be aiming for something so high straight away.

Should You Aim High? 

Ultimately, yes you should be aiming that high, but you should not be aiming that high straight away. In fact, your first goals should be to simply be consistent or even profitable, those are good targets to aim for. If you think about your current trading and your current strategies, what level are you currently at? How much are you making? You will need quite a large balance and a lot of experience in order to make so much per day. Yes, it is certainly achievable, but it is achievable once you have a number of years of success under your belt. Aim high, but do not aim too high too fast.

Start Low

It is important that you start with more realistic targets, start thinking about simply being profitable, that should be your first goal and the first thing that you aim for. Even something like $10 a month is still a positive result and is still a good step in the right direction. Then once you achieve that, increase it, to $20, then $50, then %100, then start looking at weekly targets, $50 a week, $100 a week, and so forth. While many like to look at daily targets, we would actually advise against this, simply because it can force you to make mistakes or to trade when you shouldn’t, but we will look at that shortly.

Daily Targets

We mentioned earlier about daily targets, sometimes people like to set daily targets but we like to think that these can actually be quite dangerous. If you are trying to make a certain amount each day it can lead to over-trading or larger, more desperate trades. This is why we try to place longer-term trades, it takes away a lot of the pressure that you may be putting yourself under. So instead of placing daily targets, try placing a weekly one, this will mean that you can still have bad days and you won’t feel that you need to make additional trades just in order to meet your targets. Weekly or monthly targets are best, just don’t try and put yourself under too much pressure with large and short goals and targets.

It Takes Money to Earn Money

Let’s be honest, if you want to make a lot of money you are going to need a lot to begin with. Otherwise, you will be using ridiculous amounts of risks which could very easily lead to you blowing your account. If you want to be making $398 each and every day then you will either need to be placing some rather large trades or an awful lot of them, either way, you just can’t do this with a small balance, even with a balance of $10,000 you will most likely struggle to get near to this figure. So the simple fact is that if you want to make a lot of money you will need to have a lot of money in the first place. This does not however make the target unachievable, as it will just mean that you will need to build up your account balance first, start small but aim high.

Take Your Time

You need to remember that you aren’t actually in a rush to make his amount, yes we want to get there as quickly as possible but there is no reason to rush and no reason to put your account under any additional risks by trying to get there as quickly as possible. Instead, take things slowly, the markets aren’t going anywhere and so there is no rush to get to your targets as quickly as possible. Use the time it takes to get there to build up your account balance and to learn, learning is a never-ending endeavor within the trading world and so take your time, do not rush, and try learning a little bit extra along the way.

It can be very tempting to rush your way to achieving such a good target, making that much each day is a dream for many and it would allow them to quit their job and work from home. That amount could solve the majority of a lot of our money issues, but it is not something that you will achieve straight away. You need time and money to get to that stage, a lot of time and a lot of money. Set your goals high, but ensure that you do not rush and that you plan your journey there, do not put your account under risks that you do not need to.

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Forex Money Management

How to Save Money on Broker-Related Fees

When it comes to trading forex, from the outside it looks like it is a fantastic and quite straightforward way to make money. In reality, there are a lot of hidden costs that your broker may be adding to our trades. We are talking about spreads, commissions, swap charges, deposit fees, withdrawal fees, and more. All of these fees will add up over time and if you are not careful they can really eat into your profits. We are going to be looking at a few of the things that you can do that could help you to reduce the fees that you are paying and to help you save some of your profits from going into the broker’s profits.

Find the Right Broker

There are a lot of brokers out there, with so many being available, there is also a lot of variety when it comes to the fees that are being charged. Some have high, some have low and some do not have any, but you will need to weigh up the benefits between the fees and the features that you will receive. A broker with very low fees may not be offering the same features as one that charges higher fees. However, if you are paying too much on all fronts, then it may be time to look for another broker. There are industry standards when it comes to the fees, so if you are with one that is far higher than the rest of the market, then you should probably think about changing brokers and going for one with slightly lower overall fees.

Swap Charges

A swap charge is a fee that your broker charges when you hold a trade overnight, these charges are applied directly to the trade that is being held. You won’t find many brokers that do not have swap fees, but there are some out there and some brokers also offer Islamic accounts which do not have swap fees, but the spreads on those accounts are often higher. For many brokers there isn’t much you can do when it comes to the swap fees, they are something that you may need to accept, but you can of course reduce the amount of money that you are paying by trying to close out your trades before the cut-off point in the evening. You will need to weigh up whether it would be worth closing our trade early to avoid the swap or to accept the swap if your trade will make more profit.

Spreads

Spreads are a big one, the spread is the difference between the buy price and the sell price, if a broker has a big spread then the markets will need to move a lot more in order for you to make the same profit than you would with a broker with a lower spread. Brokers often offer different account types, accounts like ECN accounts will have generally lower spreads, so these accounts are good ones to go for If you have a high spread account, there is no harm in getting in touch with your broker to ask if they can lower your spreads, most can do this on an individual account and if you are a good customer of theirs, many will b happy to give a little discount to your spreads.

Commissions

The average commission being charged these days seems to be around $6 per lot traded. Some accounts have commissions and some do not, those without commissions often have large spreads as the commission is often charged as a way of reducing h spreads on the account. If you are being charged anything more than $6 per lot traded then you are most likely being ripped off, either look for a new broker with a lower commission or get in touch with your broker in order to ask that your commission is reduced, if you have a high trade volume with the broker, they will most likely be happy to reduce your commissions a little bit.

Deposit Fees

A bit of a dinosaur this one, but some brokers actually still charge for depositing money into your account, that is right, they charge you to put your money into their accounts. If your broker does this, get out, that is the only advice, there is no place in the forex trading world for brokers that charge you for putting your money into their account.

Withdrawal Fees

Just like the deposit fees, some brokers will charge to withdraw your money. This can be a bit of a pain especially if it is not advertised on the site. There are a few things that you can do, you could look for a broker that does not offer withdrawal fees, there are a lot of them out there but this can be a bit of a hassle, moving all your money into another trading account. You could also check which withdrawal methods are available as some brokers will charge for one method but not for another, so it may be worth changing the method used in order to use one of the ones that do not have a charge. If you are a big player, with a high trade volume, get in touch with your broker, some may be willing to waive any fees that you would otherwise have to pay for your withdrawals.

Rebates

You may have heard of rebates, this is a way of getting back a bit of the money that you are paying through your commission or spreads. There are a number of reputable companies out there that offer you rebates for your trades through a number of different brokers. You will have to sign up for a new account through their introducing broker link, but apart from that, it is a completely automated process. There are also some brokers that will offer rebates directly from them. There will often be a trade volume requirement on these rebates, but if you manage to achieve them, it will save you money getting back a percentage of the commission that you are paying, well worth it if the commissions and spreads are already quite low or at least in line with the industry standards.

Interest

Some brokers will offer you interest for simply having money in your account, a fantastic way to make a little extra money and to help counter the effects of the fees that you are paying. Of course, you are not going to be making thousands a month through interest, but even a few extra dollars per week or month will help to offset some of the fees that you are paying. There aren’t as many brokers offering this sort of thing, but if you are able to find one with other decent features and fees, then it is a great way of making a little more.

Those are some of the things that you can do to help reduce or counteract the fees that your broker may be charging. For many, there may be nothing you can do about them, but for others, it may be worth at least getting in touch with your broker in order to ask whether or not they can reduce any of the fees that you are being charged. There is no harm in asking and many brokers will be happy to offer you something new if you are a good customer of them.

Categories
Forex Basics

Problems Everyone Has With Forex (and How To Solve Them)

When it comes to forex trading, every single trade will have its own individual experiences, however, there will also be a lot of things that are similar, simply due to the nature of the markets. Some of those similarities unfortunately will be problems, problems that the majority of traders will experience. Some may see them as problems, others though may not actually class them as a problem, even though they experience them. We are going to be looking at some of the problems that every trader will experience and the different things that you can do to try and get past them.

Too Much Risk

When you are doing anything with your money, there will be risks involved, risks that could result in you potentially losing any money that you have put in, this is certainly the case when it comes to trading forex and this is a problem for many people. Not necessarily the money that you are putting in, but the emotions and stress that the potential losses can cause. Some People are simply not able to handle risk as well as other people, this is known as their risk tolerance. If you have low levels of risk tolerance then you will find it hard when trading, each and every trade that you put on is increasing the risks to your money and each trade can result in a loss. Some people will struggle with this and so they will end up closing trades early or imply not placing them.

What we need to ensure is that we have a proper risk management plan in place, one that will allow us to reduce the risks for each trade and so that we can see exactly what is being risked with each trade. Things like a risk to reward ratio will allow us to plan the maximum amount that we can lose with each trade through the use of stop losses. These will automatically close the trade when it hits a certain point, this way we can reduce and manage the losses that we are going to take. It keeps our account safe and knowing what the potential loss is before we even place the trade can help give people with lower risk tolerance a lot more confidence in their trade and can help to take some of those worries away. So ensure that you have a proper risk management plan in place to help reduce the issue of trading being a risky endeavor.

It Takes Too Much Time

Another thing that a lot of traders coming into the industry do not fully understand is the amount of time that it takes to learn and to actually begin trading. The initial periods can take a lot of your free time, you need to learn the basics, you need to create a trading strategy, you need a risk management plan for that strategy, and more. This can take a lot of time, more than most people expect as some come into it thinking they will set up an account and then trade, you can of course do that but it will ultimately result in loss.

So yes it does take a long time to get ready, however, it doesn’t always stay like that. Once the initial learning has been completed and you have a strategy ready. Depending on the strategy that you have created, they take up different amounts of time when we look at actually placing trades. If you are the sort of person that does not have a lot of free time, then you can create a strategy that only requires you to place trades once a week, this way you do not need to spend a lot of time placing trades. So yes the initial learning and starting out, but once you have passed that stage, it does not actually take too much time to trade itself. Of course, you will be constantly learning more, but that can be done in bitesize chunks.

It’s Hard to Track

Let’s be honest, when you are placing a lot of trades, not many of us think that we have the time to track everything, to write down everything that we are doing and why. One of the things that are thrown at us when we first start trading is the fact that we are supposed to be keeping a trading journal. A journal where we write down everything that we’re doing, the trades, the results, the reasoning behind it. We just don’t have time to do it all or to even keep a track of the trades we have running.

The good news is that it is a lot quicker than you might think, yes it can be a pretty slow process when you first start out, but it speeds up. It now only takes us a few seconds to write down what we are doing and why, our trading platform also shows us most of the information that we need such as the times of trades, the profit and loss, and so forth. It seems like it will take a long time to build the more that you do it, the quicker it becomes. At the start, it may be a hassle, but it really does not take a lot of time at all once you get used to doing it.

You Need A Lot of Money

When it comes to things like investing, you often hear the phrase “You need money to make money”, while to some extent that is true, if you want to make a lot, then you need a larger balance, but you certainly do not need a lot when you are first getting started. In fact, many brokers allow you to join from as little as $10, making it pretty accessible to most people in the world. Those that were once priced out of the markets can now very easily get involved. It will be hard to make much with such a small balance, for that you will need more, but it just shows that you do not need a lot in order to get started and to actually make anything.

Those are just some of the problems that a lot of people run into when they trade forex. There are others, plus there will be problems that are very individual, that only you may experience. What is important to remember, is that things that look difficult or look like they may stop you in your tracks now, may not actually be as big of an issue as you may think and there will always be ways to get around and to solve the problems that you come across.

Categories
Forex Basic Strategies

WARNING: You’re Losing Money by Not Using this Forex Strategy

What if there is a solution to keep your account afloat no matter the strategy you are using? Would you follow it to the letter? Well, such strategies already exist, the issue is beginner traders cannot resist not to stray away from it. Ridiculous as it sounds, most traders lose because they start gambling instead of trading, even though they have something that already works. Apply this strategy and it would be very hard to blow an account. 

Money Management (“Oh no, that again”)…

You will find many strategies online, ready to be implemented. However, rarely you will find information about how big your trade or position should be. It is a risk management strategy. Yeah, the thing “no one” wants to listen, it is not as cool as some pimped indicator you can plug in. It is the same rule you need to follow when on a diet. You can eat this and this much every day. The desire to eat forbidden food may get the best of you, but if you persist, positive results are unavoidable. 

The brain just wants excitement…

Except in trading, you feel the gambling desire. The idea you can double your account tomorrow is very exciting and lucrative. The truth is it may happen, it can happen more than once. The feeling gets you moving. Unfortunately, everything will end badly. Excitement will be replaced with rage or depression. This game has no good ending unless you cash out and never return after a successful account doubling. But again, you will have to stop thinking about doing it once more, the idea of getting rich quickly. 

Fundamental, technical, it does not matter…

Fundamental analysis, all the news, and events that you think might get the price of some asset going are answering the question of when and in which direction. Technical analysis does this but more strictly. Money Management answers the how much question. No analysis will help you if the Money Management plan does not exist. Spend so much time developing a good entry and exit strategy, all is for nothing without this boring MM plan. Luckily, once you set it up, it is done, just follow it. Oh, yeah, you have to follow it to the letter. 

Your strategy should work…

Finding new ways to trade is great. However, now you know that a strategy needs optimal capital allocation for each trade. If you do not spend much time finding indicators and like to draw support and resistance, Fibonacci, and so on, that strategy is good too. The good news is money management makes any strategy work, essentially it is this thoughtful position sizing that drives your account value up and down. The even better news is that once rounded up, money management does not require you to work on it, just repeat the same for every trade you do. 

Easy MM with Ratios…

Ratios are easy to set up. Once you understand the Stop Loss and Take Profit idea, try to go with the generally accepted approach of having at least a 2 to 1 ratio. This just means your TP is two times away from the trade entry price than the SL. Where to place TP and SL is something we have discussed a lot before, but initially, you can take any channel-type indicator that measures volatility. Place TP at the top or bottom of it, depending on which direction you are trading. SL point is easy to place now, just halve the TP distance for a 2 to 1 ratio. 

Easy MM with Price Action pivots…

Simply said, pivots are price tops and bottoms you see on the chart. These extremes are used to place support and resistance lines, especially if they are repeatedly appearing at the same price levels. These lines are easy picks for your SL positioning, and if you follow the ratio rule TP is also defined. You can experiment with your ratios, extending them to 3:1 or higher. Now when you know how to protect and capture profits at the basic level, the only thing that remains is how much money to put into every trade.

How much to put into a trade…

Technical traders like indicators and indicators are really good at precisely telling you how much to invest. Volatility indicators usually produce a number to tell how something is volatile. You can try and open fixed-size trades. For example, if you have a $10000 account always open $500 positions. That can be 5% per trade. However, when an asset is really moving, more than others and more at that particular time, that 5% can suddenly become a serious loss, even with a proper SL. Of course, we can simplify things. Currencies or assets that are more volatile, such as the GBP, are not going to follow the same 5% trade saying rule. Simply have it to 2.5%. If you see chart candles that are higher than usual, do the same. Now if we really want to get nerdy and precise as technical traders, we can use volatility indicators to calculate precisely how much to invest. One such indicator is now a standard issue on many trading platforms, the ATR indicator.

Strategy example with Keltner Channel…

The picture below contains two indicators, the mentioned Keltner channel and a simple volatility indicator using the TradingView platform. The strategy uses the Keltner channel to set the SL level, at the bottom for long trades and the top for short. Since the channel can be used for breakouts and reversal trading, and it also shrinks if the volatility is getting lower, we have a universal tool for placing SL and TP. Mix in the ratio rule and the position sizing rule and your Money Management is all set. The green vertical line is our long entry moment. We enter a trade when the price breaks out of the channel AND the volatility indicator is rising, but also we consider if the price has broken previous resistance marked with a red horizontal line. The middle channel line is our SL and TP is twice as far from the market with the green arrow.

As you can see, our TP was hit almost at the top of this small trend. Now, the price action went into consolidation, new support and resistance levels are formed until we notice a new breakout of the Keltner channel. It was a short trade that pierced the support line but failed to make the way to the TP level, we were stopped at the SL. Even though we have 1 win and 1 loss, we are still in the money since the TP to SL ratio was 2 to 1. If we fail again, only then we are at breakeven. Testing your strategy, you will aim to be better than 50%, right? Because 50-50 is just coin-flipping. Even then you will be profitable just because you have a money management plan in place. Now you can do the fun stuff. Find a winning strategy of your own.

Sources of knowledge…

On your way to finding a winning strategy suitable to your lifestyle and psychology is fun, it is like finding parts of a money-making machine. On this very website is a whole library of strategies, concepts, and indicators. Of course, consider tweeter and youtube but also dedicated forums where people share ideas. You will notice that something could blend into your strategy. The best part is you do not have to worry about losing. Even if you are very bad, Money Management will give you many more chances to slowly get it right. It is one universal thing that can be used in many other markets.

Categories
Forex Basics

The One Question EVERY Forex Trader Should Know How to Answer

We are always attracted to the lives of successful people and eager to find out what personal traits and course of action paved their way. There are dozens of books and countless Internet pages dedicated to listing and explaining things outstanding individuals do. Continuous reading, focusing on single tasks, having SMART goals to name a few. On the other hand, such people don’t procrastinate, don’t complain and they certainly don’t give up.  So, it is not only what they do, but what they don’t do that actually counts.

Applied to trading, it poses the question: “How to be in 5-10% of traders that make money consistently?” Grasping the forex market will only get you so far. Understanding your oversights and misjudgments will get you further. Being able to avoid all the tools and behaviors that do not serve you will actually do the trick.

If your trading account is not where you want it to be, it isn’t a matter of chance. If you are doing things as instructed and it has not brought you closer to the prize, those things have to change. Set aside some time to assess where your trades go wrong and define the behaviors and instruments that are holding you back from a brighter future.  

Stay Away from Forecasting

Many wonder where a certain currency is heading as they would like to trade accordingly. Predicting the direction a currency will take is unwise and therefore not something you want to dabble in. Once they asked the elder J.P. Morgan to deliver his opinion on stock prices. His prognosis was “I think they will fluctuate”. This is the only true answer and it pertains to the forex market as well.

Political changes (such as elections of major world countries) or economic ones (like breaking down of international trade agreements) will reflect on a currency. Sometimes the “how” is clear as day like with Britain leaving the EU. Ever since 2016, the very mention of Brexit made the Pound struggle. After the Brexit withdrawal agreement and ten months of transition, the new UK – EU partnership agreement was put into force on January 1st, 2021. Once again the British Pound dropped by a percent against the Euro and 0.75 % against the U.S. Dollar. Many analysts expected a post-Brexit surge that never happened, which illustrates the volatility of the market. Still, it remains to be seen what the Bank of England intends to do about it.

Unless you are Pythia, the famous high priestess of the Temple of Apollo at Delphi, you neither have to consult the oracle nor develop the gift of prophecy. Dwelling on things you have no control of is both time-consuming and unprofitable.

You Don’t Need to Be in the Pack

Herd mentality is a well-known psychological phenomenon where individuals embrace and mimic the actions of a larger group. They rely on proverbial two (or more) heads to be better than one and, despite their knowledge or experience, blindly go where the masses take them. Financial markets are no different. There it connotes a tendency to follow and copy what other traders are doing.

Countless traders racing towards an opportunity can trigger various emotional responses, but the following are most prominent:

Greed appears when the thoughts of easy money rush to your brain. The underlying belief is that others have done the research, so it isn’t imperative that you do too.

Self-doubt is sparked in situations when novices lack confidence especially when independent analysis does not coincide with the estimation of the majority. In such cases, they are more likely to believe the opinion of the many and go with the crowd.

Fear is the pervasive market-related emotion, the most common being the fear of loss. Once you lose some money, you start fearing greater losses and as a result trading less.

People also fear that the profit they’ve made may turn into a loss. If you enter a trade that is going your way and it is stagnating, you may suppose that it is coming to a halt and exit too soon. Falsely believing that the pair is overbought or oversold is dangerous for your future endeavors. In case you are right, you may start believing that you should always trust your instincts instead of reason. If you turn out to be wrong, it’s a whim that will cost you all those pips that will accumulate on someone else’s account when you leave.

Finally, there’s FOMO. Fear Of Missing Out is a syndrome usually prompted by the feeling that you might pass on a good opportunity. It happens when a trader sees a signal but does not follow up on it. He enters a trade later, after a period of being indecisive, and starts trotting after the profit. The odds turn against him and these trades invariably fail.

Stick to Your Guns

Remember Glock, a chunky, black piece that features in every other movie. It became the most sought-after gun among US police officers in the late ‘80s. Today, over 30 years later, over 65% of US law enforcement still carry it. The reason being, it is safe and dependable.

When you enter a trade you want to be covered. You do not want your pistol to shoot blanks like a superfast indicator. For one, it could be too old for modern trading. Shooting to kill a trade with it, is like aiming at a moving target, with the money moving further and further away from you. 

Despite it being among the four most used indicators, RSI is no better in our opinion. It does not present a clear picture of when a price is overbought or oversold. This is particularly true when a market exhibits a strong trend. RSI loses its value which renders it is inaccurate. It works best in oscillating markets since it is, like CCI, a momentum oscillator

These two indicators are just examples of things you have been taught to use as helpful but are at best mediocre. Even if something was there from the onset of your career, it doesn’t mean you have to keep using it if it brings sporadic results. If a tool cannot be utilized to your satisfaction, simply stop using it. 

In day-to-day practice, numerous instruments are not as good as advertised. Thankfully, there are hundreds of others to try from. Arm yourself with patience to find the combination of indicators that is just right for you.

A fine example of ammunition your smooth and slick semi-automatic weapon should fire is the Average True Range indicator. ATR tells you the average number of pips per 14 candles (default setting) for the given currency pair.  You can use the daily chart in the last thirty minutes before the candle is closed owing to greater accuracy, and then decide whether to trade. Provided you trade different currency pairs if the movement is slow for one pair you can risk more money whereas if it is fast for the other you will risk proportionately less. That is the true beauty of ATR – it keeps your money and risk management in check. Of course, this is just one way of many.

To revise, you grow as a trader not only knowing what to do but also realizing what to avoid. Your game will become way better if you steer clear of unreliable indicators. Refraining from forecasting will save you money. Staying away from herd mentality, FOMO, and generally keeping your emotions from over-interfering will aid your trading overall.

You will abundantly benefit from exchanging your bad habits for sound routines. Having a firm strategy in place and your risk and money management in check guarantee success.

How to Cultivate the Winning Answer

“If there’s somewhere you need to be, you have to plan how to get there.”

Maybe the saying wasn’t meant for traders, but it fits like a glove.  If we want to cultivate the winning outlook, we need to determine prerequisites for up-and-coming traders.  

Trading is not merely being acquainted with existing market conditions. Besides the knowledge and skills necessary to trade, there is a great deal of psychology involved. Trading psychology is no less a vital part of trading than having a good strategic approach.

One’s beliefs concerning intelligence and talent shape their mindset. When we perceive such qualities as inborn and unchangeable we speak of fixed mindset. This kind of perspective makes it hard for people to tackle problems and they are easily blocked by their mistakes. If you recognize yourself in any of these, you are on the wrong track.

What you believe to be true about yourself as a person and a trader has a bearing on achieving or failing to accomplish your goals. Have faith in yourself and stand firm in your belief that commitment and due diligence develop and strengthen your abilities over time. This is the basis of a growth mindset, a valuable tool for all true professionals. It is crucial for traders to develop one, as it will teach them how to focus on constant personal improvement, view obstacles as learning opportunities, try out different tactics, analyze the way they trade, and use their findings to refine their trading skills. 

As Cool As A Cucumber

Other than a mindset of growth, traders should have a mindset of poise. At the onset of your trading career and later on from time time, the market will throw you a curveball. It is only human to react to winning and losing, but the way you react will determine what kind of trader you are. You have to be aware that everyone loses occasionally. Loss is but a setback to be overcome with a new approach.

Instead of being apprehensive, a trader should exude the air of tranquility. That is not easy to accomplish as there is often a lot at stake. Emotions frequently interfere with making rational decisions, especially fear, impatience, greed, and anger. Impatience is particularly bad because it triggers rash behavior and envelopes the other three. It is in the trader’s best interest to stay impartial to the market. It will help increase gains and minimize losses.

Trading goes hand in hand with taking chances. As a trader, you acquire a high-risk tolerance, but it has nothing to with being hazardous. Pro traders take calculated risks, the ones that are more likely to turn into profit. They are simultaneously aware of the inevitability of losses. There’s no profit without a loss, they are just two sides of the same coin. Having that in mind, they never succumb to being exceedingly exultant about winning trades or overly despondent about losing them.

Two things that work wonders for keeping you composed are sleep and meditation. It is well-known that good sleep improves your concentration and maximizes your productivity. It is advisable for traders to start their day well-rested which benefits their attention and making a better judgment.

A trader’s internal memory is crammed with thoughts of past losses, future gains, and different kinds of trade-related anxiety. Introducing meditation, even as short as 5-minute ones, resets this computer of flesh and blood. The cache memory has to be cleared in order to stay focused on the present. Meditation dials down all the mind wandering, increases the concentration of gray matter in the brain, and is responsible for clearer information processing and better decision-making.

Loving What You Do…

The only thing you should be passionate about is the job itself. Trading works best when it generates a combination of euphoria and fascination. You start going deep into things because you find everything interesting and, before you know it, you breathe it, eat it, you even dream of candles and spikes at night. A drive to learn and be truly good at it will make it seem less like a profession and more like a hobby.

Finding mentors or role models is a big yes. Once given the chance, observe and absorb the way they operate until you become one with it. Deconstruct their actions until you master them, then implement them in your routine. As an alternative, follow other successful traders on social media, blogs, or youtube and read books on the subject. Always bear in mind the ratio of successful and unsuccessful traders, so not everyone will be the person you copy or look up to.

Be aware that the path is one of solitude and perseverance. There is no such thing as being over-prepared, so study the charts and do all the necessary background work. Be willing to try out new things, test new indicators and strategies. In that respect, trial and error are your new best friends.

Meticulous Planning and Execution

You will not learn only from others, but also from your own experience. Keeping a trading journal will help you with that. It is an indispensable tool for every aspiring trader who wants to evaluate their work objectively. Journal should contain daily entries starting before the trade and finishing after. It ought to incorporate all the minute details like date, the time frame that you trade,  the currency pair being traded, the direction of the trade, entry and exit points, two types of exit rules (one for taking profit and another for limiting your risk aka stop loss) and so on.  Apart from the factors mentioned above, you should make a note of all the indicators you are using, slowly building your algorithm.

You should also decide on the strategy you are using, whether it’s a trend following or a trend-reverse, news strategy, or a scalping one. Note down your go-to strategies and be equally prepared for profit and loss. The rudimental purpose in the core of your strategy is to keep you on course towards your long-term goals.

Jot down the result of the trade and include remarks about the forex market. Pay close attention to your emotions and write them down as well. All this data is invaluable for your growth because you can always turn to it to get feedback on your trading.  Retracing your steps can give a slew of information about one’s good or bad trading patterns. Having a neatly laid out plan will allow you to dissect each trade to see what, if anything, could have been done differently. In terms of losses, breaking down what went wrong may prevent future ones.

As you can see, a trader does not go headstrong into a challenge. Integrating journals into the daily trading routine is like having navigation for smoother sailing. It’s a reminder that you came prepared since there is no serious trading without a plan in place. Having a methodical approach to conquering the financial market is well worth the time and effort invested into making it.

The most important thing about a trading plan and this can’t be stressed enough, is adhering religiously to what you’ve outlined. You don’t enter a trade unless all those indicators with immutable signals coincide with one another. You exit neither before nor after you stop loss because you put it there for a reason. You similarly follow the book on your profit-making rule, because you are too smart to let your profit turn into a loss.  

All these things require commitment. If you’ve read this far you are ready. You have the drive necessary to strive to continually improve your game and the determination to enhance your prospects for success.

Categories
Forex Basics

Is There Such A Thing As Risk-Free Forex Trading?

Risks are the first thing to consider by anyone who wants to undertake a role as a trader/ investor. The risks of losing money due to force majeure, due to manipulations of Forex by market makers, this is due to a mistake of technical analysis or if lose something in the fundamental analysis. It is not possible to avoid 100% risk, but it can be optimized or minimized. Read the article and learn how to minimize/optimize trading risks and how to create a balanced investment portfolio.

On Thursday, 15 January 2015, the Swiss Central Bank shocked the market when it announced that the fixed exchange rate of the Swiss franc could no longer be maintained against the euro, as it had for more than 3 years. After the announcement of the Central Bank, the rate of the franc rose by more than 30% against the US dollar and the euro, the Swiss stock market, on the contrary, plummeted by 10%, which affected the exporters. The consequences for traders were catastrophic. Those who made short on the franc (keeping the pair in short positions), simply in a second lost their deposits due to the stop out. The brokers also had a hard time, because a good number of them announced liquidity problems.

On Saturday, September 14, 2019, Saudi Arabia’s oil facilities were attacked by drones, which reduced approximately 50% of the country’s total oil production, which is more than 5% of the world’s oil supply. At the start of Monday’s day, the futures of Brent oil skyrocketed by 19-20%. The intraday jump was the largest since the Gulf War of 1991. Those who failed to close short transactions before the weekend lost a lot.

Both examples are trading risks. It is impossible to fully foresee them, because, as always, there is the probability of force majeure. But it is possible to minimize the risks. Also, as the risk increases, the probability of profit is higher. Let’s take the same example of oil: if short traders made losses, those who bet on growth earned about 20% in a single day.

From this summary, you will learn:

  • What are trading risks and what types of risks exist.
  • Methods to minimize trading risks,
  • Types of diversification of the investment portfolio.

In the summary, I will try to present two main aspects of risk minimization: errors in employing technical analysis and general risks in foreign exchange trading and the creation of an investment portfolio. My opinion is partly subjective, so I suggest addressing it and discussing it in the comments.

Types of Trading Risks

Trading risk: The risk of losses arising from market factors affecting price direction or errors in the analysis (forecasting) of the market situation.

Technical risks: Risk of loss due to technical problems: platform failures, order failures, broker fraud, etc.

Psychological (behavioural) risks: Risk of error due to a person’s emotional state: stress, emotion, fatigue, euphoria, fear, greed, etc.

Trading risk is uncertainty about future price movements as a result of market and non-market factors. So, if we have an open position, we are facing a unique risk, that risk is that we have erred in identifying the price trend. If the price is directed in the opposite way to the open trade, the trader will lose.

If the transaction has not yet been opened, the risk is in the incorrect prognosis of the trend direction or its reversal. We have to admit there’s no clear definition of the concept of “trend”, so traders understand it in their own way. Traders themselves determine the value of the critical amplitude (price reversal), which is called the risk limit and this risk will always depend on the amount of capital in the deposit. In other words, a trader is willing to endure, for example, a 100 point reduction, another no more than 20 points. They all determine the level (limit) of risk themselves but must understand the nature of the trading risks.

Where Risks Come From

Error in analysis and prognosis. Any publication of statistical information, the publication of the results of the Fed meeting, and meetings of other central banks have their effects. The best question we have to solve first is whether the investor knew how to correctly examine the importance of this or that news item. And the forecasts, made by the majority, were justified? Traders should consider these and other factors in the forecast. And there can often be mistakes. Traders often ignore or lose something important, which can result in an incorrect forecast.

Force majeure: It can be presented in different ways: a humanitarian disaster, an unexpected political decision, or a terrorist attack, discovery of new mineral deposits, release to the market of a new product that has not been previously announced, sudden bankruptcy. Force majeure often leads to immediate and generally long-term consequences. Examples of long-term force majeure include the collapse of “dotcom” and the mortgage crisis in the United States, which has become a global crisis. It must be said that there are people who were able to make a profit from the crisis. (I recommend watching the American film “The Big Short”, which describes this situation quite well).

The human factor: Incorrect interpretation of patterns, signs due to fatigue, lack of attention, stress, etc.

Another classification is the simplified division of the causes of trading risks into forecasting errors in technical, fundamental, and human analysis. We have already said what are the reasons for the most important risks in the section we call “Force Majeure”, and I will dwell on more details on the risks resulting from errors in technical analysis.

High volatility at the time of opening the transaction. The greater the volatility, the greater the breadth of price changes and, therefore, the more and faster you can gain from it. It seems reasonable, but the risk lies in assessing this volatility because if the price goes against you, you must be psyched that you can lose more than you usually win. The data of the indicators are relative, as well as the data of the volatility calculators.

Tip: Identify volatility visually. The price range can be referred to as the distance between opposite fractal ends or candle accumulation. For starters, you can train on the history. At first, it will be difficult for beginner traders (know from experience). Second tip: greater volatility, different from the daily average, is observed at the time of the appearance of fundamental factors. Just don’t open any transactions at this time.

The trading strategy of trading by levels individually: someone opens positions expecting a level rebound, someone tries at breakup. For someone that’s a loss limiter. There is the so-called zone of turbulence around fractal levels in short-term time frames, where the price moves in different directions with a narrow amplitude. Predicting price movements in this area is inefficient.

Tip: Use the levels only as a guide. Open transactions out of levels and try to avoid staging at levels of resistance and stop support, as it can be used by large traders (market makers, which will be discussed below). If the transaction is already open in the direction of levels, then it is better to leave before reaching the level. Otherwise, there could be a rebound with the possible slip, which will worsen performance.

Basically, the analysis is reduced to determine whether the break/rebound of a level is true (the trend) or false (the correction). Does it really make sense to put him at risk?

Opening of transactions in overbought and oversold areas. This is the risk of opening a position at the end of a final trend. A classic mistake is trying to enter when the trend is already underway. At the peak of growth, large traders abandon trading, reaping some less intelligent traders.

It seems reasonable to employ RSI or stochastic, but they are not efficient at minimizing risks. They are often lagging behind, they invest in extreme price zones, and so on. So even if you use the indicators to determine the zones, you can still make a mistake.

Tip: You can identify signs of trend depletion as follows. The amplitudes in the three fractal sections are compared side by side in the time frame M1 (the exhaustion of the trend is clear there before). If the amplitude is shrinking (the amplitude of each subsequent fractal is shrinking), this suggests that the trend is exhausting.

And the simplest and wisest advice is that when starting an operation at the beginning of the trend, don’t do what most. Be careful when interpreting the signals of the indicators, there are no perfect and impeccable indicators.

Opening of transactions where there is no clear trend. There are situations where a trader makes a correction or a local price change for a new trend, which often occurs on flat. It is difficult, especially inexperienced. To identify the flat end, as it often does not have a clear beginning or end.

Tip: I suggest again using the comparison of price amplitude within the flat trend. If in the short term, there is a price movement whose amplitude deviates sharply from the average value, you should be alert. Do not enter an operation immediately, the first price change could be a correction. Analyze multiple time periods at a time: the signal period is М1-М5, confirming longer periods.

Incorrect indicator parameters: This will lead to an incorrect interpretation of the signals.

Council: Before starting to use an indicator with adjusted parameters in trading on a real account, try the system (tester МТ4, FxBlue). More detailed information about testing and optimization strategies in this summary.

Application of pending orders: Outstanding orders are used in trading strategies based on the opening of transactions when the price exceeds the consolidation area. Orders are placed in opposite directions, betting that one of them will work. The risk arises from the fact that outstanding orders are set on the basis of intuition, rather than actual price movements. The distance is calculated, for example, in percentages of the average value of the price movement in the consolidation area. We will always have to take the risk that the price will leave the area, touch the order and then move in the opposite direction.

Tip: To reduce risk, avoid using pending orders.

Abrupt reduction of contributions when a long position is opened. There are several examples when the price changed by 800-1000 points in just a few minutes. Of course, hardly anyone could react, make a decision and make a compromise.

Tip: Always use a stop loss.

Market makers. A particular trader is only a tiny part of a much bigger game. The creators of the market are therefore great players, who can influence price through their huge capitals. They can create a necessary repository of information by manipulating media, forums, and other resources through forecasting, analysis, and information.

But this is not his only means. They could see levels where purchase and sale orders are concentrated, that is, stop losses and pending orders established in advance. As practice shows, most traders set stop loss in the area of the local ends, being tied to strong or rounded levels of support/resistance. Pending commands can be configured the same way. The market makers oppose the majority, push the price to the area where the orders are accumulated, then, even taking into account all the forecasts, most traders are activated to stop.

For example. Market makers want to sell a certain currency at the best possible price. You see multiple stop loss higher than the current rates (green horizontal line at the bottom of the screen), which are basically the orders requested. On the other hand, market makers see many orders pending in the same price area, which does not allow the price to rise (volume equilibrium).

The price is pushed with small orders to the necessary level, after which it satisfies your sales volumes through purchase requests (stop loss). Given the number of short requests, it is unlikely that the price will go further.

Tip: There is no point in fighting with market makers. Therefore, you should learn to identify potential areas of command concentration and try to avoid them. It should also bear in mind that indicators cannot anticipate the possible actions of market makers. Therefore, it makes sense to rely less on indicators and pay more attention to levels, patterns, and exchange of information (trading volumes, order table).

You can suggest any other risk of technical analysis, write in the comments. Let’s look for more ways to minimize and optimize trading risks together. With regard to reducing the risks of erroneous forecasts based on fundamental analysis, there are few recommendations:

  • Do not blindly trust everything that is reported in the media and be especially careful with “expert” forecasts. Check the official data reported by news agencies and official resources.
  • Use complementary analytical tools: economic calendar, action analyzers.
  • Evaluate dynamics statistics, comparing them with analysts’ expectations and previous reports.
  • And prepare to react instantly to a force majeure.

Hedging and Blocking

Coverage and blocking mean the same thing, go into two opposite operations (I won’t dig too deep into the big difference between them). Let’s imagine that a trader opens a buying position, but unfortunately, the price drops. Then, the trader has opened a selling position with the same volume. The loss from the first position is offset by the gain from the second operation.

Advantages of blocking a position:

If you set the locks correctly and unlock the positions on time (cancel the unprofitable or secure position), you can even make profits this way. There is even a trading strategy based on the creation of an order grid.

The lock allows you to manage the floating loss that does not affect the balance or spoil the trading statistics. But, there is always a defect in the locking positions. In the event of incorrect opening and closing of insurance and major positions, the trader is more likely to receive the loss resulting from both the transactions and the spread. Therefore, blocking is a high-risk strategy for a novice trader, such as trading in a similar way to Martingale, but an advanced trader can protect against unprofitable trading employing blocking and hedging.

The strategy and blocking rules should be highlighted in a separate article. If you want to do so, write in the comments.

How to Minimize Trading Risks

Diversification: So far, this is the best recommendation you can take into account when protecting your investment from certain business risks. But it is a kind of art to properly diversify its portfolio of investments and rebalance it regularly.

Types of diversification:

Asset division: It is the most widespread among the community to make a diversification. In addition, you can allocate your funds not only between different currency pairs or shares but also between deposit accounts, precious metals, cryptocurrencies, antiques, real estate, etc.

Diversification by risk level: There are assets that, in case of force majeure, increase in price (for example, gold). There are assets that, even in the midst of strong market fluctuations, hardly change prices. We have assets at our disposal with volatility, for example, of 5% per day. The way we distribute investments among assets with different volatility rates, risk (and, consequently, profitability) is the diversification of risks. I suggest you read the article on protective assets.

Applied diversification: Distribution of investments between strategies with different levels of risk: Martingale and conservative negotiation, scalping and long-term strategies, manual and algorithmic negotiation.

Institutional diversification: Here it is about working with multiple counterparts: Forex, Exchange and different brokers, trust management, etc. If we’re in a force majeure situation (we already discussed the case of the Swiss franc) a counterparty fails, it can withdraw at least the rest of the money from the second.

Statistical diversification: This is a direct and inverse correlation. For example, corn and wheat futures often have the same price direction, USD and gold trends often go the opposite way. A portfolio composed of reverse-correlated assets. will be logically less profitable, but safer because at the time when a low-priced asset, an increase in the price of a different asset offset the loss.

The diversification of investments is limited only by the imagination of the trader and his ability to conduct a market analysis, as well as the appetite for risk. The greater the risk, the greater the potential benefit. That’s why trading risks are often intertwined with psychological risks.

Trade risk insurance:

Stop-loss placement: At this point, we could comment on an example of drivers who ignore the mandatory driving rules of fastening seatbelts. It’s not easy to guess because some people don’t want to use means of protection. On the one hand, market makers can determine the areas where many stops are concentrated and can deliberately push quotes to catch them. Also, a stop loss will be very helpful if a large price difference happens as a result of a force majeure event. We can find another argument, that a trader is not able to react in a volatile market, and a stop loss may save at least part of their deposit.

Close transactions before the weekend: Sometimes, the situation in the Forex market changes drastically for an hour. From Monday to Friday (suppose a trader works 24 hours a day), one could still react to a force majeure. But the weekend, when markets are closed, can bring unpleasant surprises. One example is drone strikes in Saudi Arabia. And it’s even worse if the market opens with a price gap after the weekend.

The moderate use of leverage: That’s logical. If you use high leverage, a negligible force majeure will close your positions due to the stop out.

Calculation of the volume of the lot according to the volume of your deposit, level of risk of the transaction and deposit, and other factors More information in this article.

Conclusion

No risk-free Forex strategies. Is it necessary to minimize Forex trading risks? My opinion is no. Those who want to eliminate or minimize risks cannot participate in trading and invest their capital in a bank deposit. Risks must be optimised by properly assessing their opportunities and the capacity to withstand losses. The risk limitation and balancing policy is a risk management policy, which must be drawn up before trading in a real account begins. Only you can develop a risk management system yourself because in reality there are no recommendations that are good for everyone and that can be perfect for all investors regardless of their condition in all cases.

Categories
Forex Market

The Functions of the Financial Market

The role of the financial market in a modern civilized society is enormous. Its aim is to mobilize capital, distribute it among industries, control and maintain the reproduction process and improve the efficiency of the overall economic system.

The main functions of the financial market, performed by its participants, are as follows:

  • Facilitate efficient relationships between all market participants, from individuals and individual investors to large institutional investors.
  • To supervise and regulate the processes carried out in the financial system: regulation of the money supply, control of compliance with the rules established by market participants, licensing, development of legal provisions.
  • Mobilize and allocate capital to be used more efficiently and generate added value.
  • Minimise risks, including fraud prevention (combating money laundering). Ensure transparent prices and avoid price manipulation.
  • Provide liquidity to the market.
  • Guarantee the privacy and transparency of transactions made.
  • Provide necessary information.

Financial market activities are based on the liabilities of national banks to control exchange rates and to set interest rates. Foreign exchange markets and stocks, as well as commercial banks, are directly related to the development of the financial asset market. The stock market is the most interesting segment of the financial market in terms of return on investment.

Financial Market Participants

Each investor is a participant in the financial market in some way. Each of us works somewhere, making our own contribution to the GDP rate, buying something, which indirectly affects inflation and the level of consumer prices. Someone becomes an investor, buys a foreign currency or collectible currencies, or invests in bank deposits, investment companies, using loans.

But still, economic science classifies financial market participants according to their segment. This means that the financial market, simplifying a lot, is a relationship between two categories of participants: buyers and sellers The third category includes intermediaries who are directly involved in transactions, providing assistance, facilitation, and guarantees. The same financial market actor can act simultaneously as the seller, the buyer, and the intermediary.

Foreign Exchange Market

Sellers – The main sellers are the state and the banks. The country that sells a currency does so through authorized agencies and then performs a regulatory function. Sellers may also be companies engaged in foreign economic activity (sale of profits in foreign currency) and individuals.

Buyers – All agents, even sellers, can interact as buyers.

Intermediaries – This category may include commercial banks, bureaux de change, etc.

The Credit Market

Borrowers – They work internationally, borrowers are States, and the ratio of GDP to external debt is considered one of the best statistical indicators of the state of a country’s economy. At the national level, borrowers are businesses and individuals, local governments, etc. A clear example of a multilevel credit market structure is the US mortgage system, where banks issued mortgage securities to accumulate new capital for later loans.

Lenders – These market participants have reserve capital and want to increase it: individuals, investing their funds in deposits that will then be used for loans, buyers of debt securities (insurance, pensions, investment funds). Certainly, any investor can be called a lender, since it gives extra money with the aim of obtaining a percentage that is destined for development. The state can also be called a lender, which creates liquidity and distributes the money to borrowers through the central bank.

Middlemen – They are all involved in the organization of the distribution of money: banks, brokers, concessionaires, investment management companies. Insurance and pension funds can also be attributed to intermediaries, accumulating and distributing capital.

The credit market is closely related to stock and investment markets. For example, corporate bonds are a tool to raise money and security at the same time. Government bonds are one of the favorite investment options with the lowest risk for investment funds.

The Insurance Market

Insurers – These are companies, duly authorized to provide insurance services. There are open-ended insurance companies (they provide services to all market participants), captive insurers (they are owned and controlled by their policyholders), and risk reinsurance companies.

Insured – Individuals, companies, institutions, who purchase insurance services to minimize risks.

Intermediaries – There are no intermediaries, the transactions are made directly between the insurer and the insured.

All markets are closely intertwined. As mentioned above, insurance companies also participate in the investment market. It also includes insurance instruments (for example, several swaps) used by securities market agents.

Investment Market

Every person who invests his capital in a particular asset is an investor. Intermediaries can be banks, stock exchanges, different types of funds, etc.

The Securities Market

Emitters – These include organizations and companies that issue certain securities: shares, bonds, etc. When issuing, issuers agree that they must comply with all specified (agreed) requirements at the time of issuance.

Investors – They are all those who buy securities to generate income. There are strategies (buying a majority stake) and minority (making up a portfolio, buying securities in order to generate revenue only).

Middlemen – Stock exchanges, banks, insurers, rating agencies, auditors, and other participants involved in the organisation of the issue and placement of securities.

The classification described above can be grouped as follows:

The state and central banks (regulatory and supervisory organisations). Managing the largest amount of capital, these agents mainly perform the supervisory and regulatory function.

Regulators (regulatory and supervisory institutions). Establishments that do not participate directly in transactions (that is why they cannot be referred to intermediaries), but perform a control function. The oversight function is also carried out by the central bank and the state government, but it can also be a separate institution, such as a self-regulatory organization (SRO).

Financial services companies (organisations providing services to the financial market and financial intermediaries). We are talking about institutions that are often involved in organisational work: currency exchanges, stocks and raw materials, brokers, insurers, auditors, depositors, registrars, compensation companies, and consulting.

Banks (financial intermediaries). They are intermediaries involved in the distribution of capital, market regulation, and supervision of compliance with established rules.

Legal entities (lenders, investors, borrowers). The largest group of participants: companies dedicated to the placement of clients’ pension savings, investment, insurance, hedge funds, trust management companies, brokers, concessionaires, individual loan organizations, companies involved in any type of financial activity, participating in the return of money.

Natural persons (lenders, borrowers, investors): traders, speculators, individual asset managers, long-term investors, and ordinary persons, as mentioned at the beginning.

Important Financial Market Indicators

As a general rule, experienced traders actively use the economic calendar, which is provided free of charge by the broker. I recommend making this a habit if you haven’t already. Here is a short summary of some of the most important indicators in the economic calendar and tips on how to analyze them:

Interest rate – One of the main economic tools that allow managing the volume of money supply, thus also adjusting inflation. The interest rate grants loans to commercial banks. A higher interest rate increases interest rates on loans and deposits and therefore encourages consumers to invest. This, in turn, reduces the inflation rate. Influence, when the interest rate is raised, is exclusively dependent on the economy of a given country. For developed countries (e.g., the US), a higher interest rate increases the exchange rate of the national currency. In the least developed countries, raising the interest rate can be seen as an attempt to curb stagnation and thus increase investor interest.

Non-agricultural payroll (Non-Farm Payrolls) – Report on changes in the number of jobs in the US non-agricultural sector. It is considered one of the most important reports, but its impact on the dollar price lasts a relatively short time (few hours). Goes public on the first Friday of every month at 12.30 (13.30) GMT. The statistics are based on data from more than 400 households and are published by the US Department of Labor. In theory, the factor that influences the rate of the US dollar will be the deviation of the fact of the forecast by more than 40 thousand. In practice, much depends on accompanying statistics and investor sentiment.

Consumer price index – It is calculated for a specific group of goods and services that are part of the consumption basket of the average resident of the country. The index analysis for the current year is carried out in comparison with the base (baseline). The IMF, EBRD, and the United Nations recommend the statistical basis for the calculation, but there is no single approach, each country has its own calculation peculiarities. The calculation methodology can be based on the price indices of Lowe, Paasche, and Laspeyres. If the index decreases, it means that consumer purchasing power (real demand) also decreases and may partially suggest a higher rate of inflation growth.

With regard to indicators such as GDP, inflation rate, unemployment, I think everything is clear: the better the indicator, the more positive is the feeling of investors in the currency and stock markets.

Important point: the economic calendar is only a complementary information tool and in no way can it serve as the main tool to base trading strategies. At the time of news release, the market is especially volatile, therefore, the calendar is often used upside down to exit trading.

If you are still willing to try to negotiate with the economic calendar, here are some tips:

Compare the actual value with the forecast. If, for example, GDP growth was 2%, given a forecast of 2.5%, it will have a negative influence on the market. Please note that the data can be reviewed.

Evaluate the chances of an event and the expectations of investors. Let’s take an example, if what is anticipated is that the Federal Reserve increase the rate of federal funding at the next meeting, investors will consider it beforehand and will not undergo major changes at the time of the news release.

Compare the importance of news with other factors. For example, if in times of silence, the publication of statistics on US oil reserves has a significant impact on quotes, then during the peak of the US-China trade war, these data were hardly noticed.

Categories
Forex Basic Strategies

Create a Powerful Forex Strategy In Only Five Steps

One of the first things that can happen to you when you start trading forex is seeing that it is possible to earn money without having a fixed course. This will create a false feeling that trading is easy and you don’t need anything else. Then, the market will put you in your place. But of course, you’ll get pretty high for the previous gain and then the fall will be harder. Then the frustration will be such that you will want to quit trading and think that everything is manipulated and against you. Does it ring a bell?

Why is this happening? You were lucky to start and you don’t have a clear strategy that allows you to trade without those ups and downs as if you were on a roller coaster. If you spend time creating one or more strategies and adjust the risk so that market movements don’t leave you with KO, you can put the odds in your favor.

How can you create a trading strategy? It is very simple, nowadays there are many tools that allow you to create systems and automate them without learning to program. As easy as having to follow a series of steps to make sure you have everything defined and that you don’t leave anything in the air. I tell you the five steps to set up a trading strategy.

Define A Time Period

Your trading strategy needs to be well defined over time. Set when to open a position and when to close it. The exact moment in time or circumstance. In addition to the frequency. if for example will not operate on Fridays or during a strip at night. This is especially useful in some intraday strategies to limit that no trades are made during rollover, as spreads are usually higher and we pay more for each trade. Also interesting not to trade for example on Sundays at the opening or when there is volatility as when macro data is published.

If you do day trading you will look for small time frames trades with the aim of looking for intraday movements in the price, while if you do swing trading you will look for wider ranges in the price and your time horizon will be wider.

Input and Output Indicators

Indicators, as their name indicates, will act to give an input or output signal from a position. An indicator can be simple as a moving average or more complex and personalized. Really indicators with very simple rules work very well over time. For example, we can define in our trading strategy that when the opening price in an hour of EUR/USD exceeds its 20-period weighted moving average, buy and close the position when subsequently, the opening price in one hour is below this average.

The objective of an indicator is to serve as a reference, for example, to detect a trend. Indicators are not the panacea or magic, they are just markers on the way to reach our goal. You have to see it as clues so that everything develops in the best way and get an advantage, but remember that the key is to work with different systems.

Defining Risk Strategy

Defining risk in our trading strategy is not that it is important, it is that it is basic and fundamental. Your system should consider how much you will buy or sell an asset and how much is the maximum you can lose. The maximum amount you can lose can be calculated in euros or dollars or you can calculate it in % of your account. I recommend that you do it in percentage terms to avoid constantly adjusting.

Many traders start to consider how much they can lose once it’s happening, as at first, they believe it’s something that won’t even happen. Incredible but true. This puts them at risk for more money than they can actually assume. Set a maximum percentage you can lose in your trading strategy (depending on your actual risk tolerance), it will help you keep your feet on the ground.

Configuration of Parameters

Where will you place the stop loss? And the take profit or target of each operation? What will be the settings of the indicators you will use? For example, if as I said in the previous example you use a moving average. How many periods will it be? It is important that all of this is well-set, clear, and objective. This way you will have a perfectly defined trading strategy that will not make you think or doubt its execution.

Write Your Strategy

Could you explain your strategy to someone in a simple way? One thing that is often said is that your strategy should be able to enter a post it. Maybe it’s a little radical, but in essence, the shorter and simpler, the more robust and more likely it will work over time.

Writing your strategy is something that will help you understand it. Imagine if you had to tell someone to program it for you. You should be very objective and avoid statements like “much, high, little or low”. You will have to define very well how much is that much, that high, that little, or that low. That will help you not to sabotage yourself and to have the mental clarity to act accurately in reality. Whether you’re operating manually or automated.

[Extra] Keep Track of Your Operations

Many traders create a strategy and simply execute it. If it goes well they raise the amount until they can’t take any more risk, the position goes against them by little, and by going so exposed they blow the account. Others simply carry it out and if it is not profitable at first, abandon it.

Winning traders do not do this, they work with different strategies that monitor proper risk management. This means that your perception is not focused on a single strategy and that you will play everything to one card. You will have a more panoramic view, but remember that you must follow your strategies.

This point is important because it will help you establish criteria where you disconnect strategies that are not working. It’ll help you limit your losses considerably. Many traders live clinging to the idea that they need to be strong no matter what and stay true to your system. But of course, what if your strategy is no longer profitable? This is nothing new, there are trading systems that no longer have a statistical advantage in the market. That’s why working with a wallet is the smartest thing. So you can have some on the bench to replace the headlines when they flounder.

If you operate manually and you are starting to apply a system, quiet, it is good to start, but keeping control of each operation and its result can help you a lot and is basic. You can do this by connecting your account with platforms such as myfxbook, fxblue, etc.

Now you have a roadmap to follow to create your own system (without forgetting to monitor it). Remember that there are tools that make life easier for us and that can do all this for us.

Categories
Forex Assets

The Definitive Guide to Forex CFD Trading

Although it is a basic term within trading and forex, in this article I will explain what CFDs are and what they are not. I begin almost necessarily by telling you that CFD, as you know, corresponds to the acronym “Contract For Difference”, which translates into Spanish as “Contract For Differences”. It is a financial product in which the differences between the purchase price and the selling price of a financial asset are settled. When we talk about Forex specifically, about a pair of quoted currencies.

Yes, a CFD is a derivative instrument, or what is the same, it is issued on the price movements of an instrument listed in a market (referred to as the underlying asset), but without being able to physically purchase that asset. Only the benefit or loss of the transaction is charged or paid, but ownership of the asset is never acquired. CFDs have no maturity, the open position in the market can last as long as the trader deems necessary.

Index
  1. How CFDs are valued
  2. How to operate CFDs

2.1. Why an expert trader chooses to trade CFDs

  1. Why trade CFDs instead of shares
  2. Trading platforms to trade CFDs
  3. Characteristics of CFDs
  4. Trading strategies with CFDs

6.1. Risks of trading CFDs

6.2. Learn how to calculate the profits and losses of your CFDs

  1. Who can trade CFDs?
  2. Advantages and disadvantages of using CFDs
How CFDs are Valued

In case you are wondering how CFDs are valued, they are contracts with a broker who issues them, unlike for example the shares that are acquisitions of assets in the market. Typically, the broker offers two prices around the asset’s quotation, one for the purchase (which the trader is supposed to sell) and one for the sale (when the trader wants to buy); these prices are what you can see as “bid” and “ask” respectively.

In forex, standard contracts are called lots and are equivalent to 100000 units of the base currency. Although there are also mini-lots (10000 units) and even micro-lots (1000 units).

For example: if we buy 2 CFDs (2 lots) of the currency pair EUR/USD, it means that we are carrying out an operation of 200000 euros. If the pair is quoted at 1,1200, according to the ask price of our broker (one euro equals 1,1200 dollars), the value of our position would be 224,000 dollars.

How to Operate CFDs

To operate CFDs you only need to establish a contract with a broker that issues these financial products, opening an account with it, and providing an amount of initial capital. Generally, the whole process is done online. When opening an account, the broker usually provides all the tools necessary to trade CFDs, including the trading platform where market analysis is performed, purchase orders are issued and the capital contributed is managed.

Trading with CFDs is as easy as buying, launching a purchase order on the aforementioned trading platform when a price increase is expected. As well as selling when you expect a decline. CFDs are bought and sold as if they were the asset on which they are issued, with the advantage that it is not necessary to own them in order to sell them. It is possible to sell first and repurchase later to close our position (this operation is called “short investing”, “short position opening”, etc.).

To undo the operation, you just have to throw an order opposite to the opening one, even though the platform itself allows you to do it in a simpler way, simply by choosing the option “close position” (or similar).

Why Expert Traders Choose to Trade CFDs

A skilled trader knows how to handle financial markets (which doesn’t mean he always makes a profit), handles risk well, and is able to control his emotions. In this sense, trading through CFDs is an option if your goal is to use leverage. Trading with CFDs has a number of advantages and a number of risks that we will see below. Risks are controllable if you have the knowledge and a necessary methodology (an expert trader has these two characteristics). Once these two skills are achieved, trading CFDs can be an option to consider.

Trading and trading with CFDs requires:

  • Protect capital at all costs, managing the risk of each operation.
  • Think of trading CFDs as a business and not a hobby.
  • Create a strategy and follow it with absolute discipline.
  • Don’t overleverage yourself.
Why Trade CFDs Instead of Shares

When buying shares in a company, a part of the ownership of the company is acquired. In other words, we are shareholders and we are linked to the business of this company. However, we can only sell the shares if we have previously purchased them (unless they are requested on credit). Short transactions are therefore difficult: we can only have a profit if the shares are revalued. With CFDs this changes, it is possible to make money with upward and downward movements.

With the cash shares, we will not have leverage, we must disburse 100% of the purchase price of the same. This means that the volume of operations is limited to our capital in the account. In this case, the investments will require more maturation time, because they need more price travel to obtain an acceptable profit. Intraday trading, even short-term trading, becomes almost impossible unless a high amount of capital is available. Finally, when buying shares a physical purchase is made, you have ownership of them and this fact requires incurring commissions and additional costs.

Trading Platforms to Trade CFDs On

There are many trading platforms to carry out trading through CFDs. Generally, it is the broker himself who provides this tool to the trader when opening an account. There are brokers that have designed their own platform, others, on the contrary, offer it under a customer terminal, but it is not their property and can be used by various intermediaries. Some platforms you can find to trade with very popular CFDs are Metatrader 4 and 5, Visual Chart, Pro Real-Time.

Characteristics of CFDs

The main characteristics of CFDs are the great flexibility they provide, added to the leverage capacity. As I have told you before, are financial products with leverage, the trader does not need to deposit the entire value of the investment. Simply by providing a percentage of it as a guarantee to cover possible losses (margin required) it is possible to open a position with a much larger volume. The potential profit is increased because it is operated with the capital in excess of that actually available.

Liquidity is another of its characteristics, we can buy and sell at the desired time (the Forex market is always operating from Monday to Friday, 24/7) without worrying about the counterpart.

Trading Strategies for CFDs

A trading strategy is about maintaining rules, both for the analysis and for the execution of the trade. The strategy determines the purchase and sale decisions of CFDs, as well as the time, the asset, the volume of the transaction, the potential profit, maximum allowed loss, etc.

To establish a trading strategy with CFDs, the first thing we must decide is the tools we will use for our operations in the market:

Price action.

  • Trends: follow-up and rupture of these.
  • Use of technical indicators to determine market momentum or depletion.
  • Operate according to economic news and other key data.

In addition, the trader must define its style when trading (according to the time duration of the investments in CFDs):

  • Day trading
  • Swing trading
  • Position trading
Risks of Trading CFDs

The risk of trading CFDs comes precisely from the use of leverage. Trading with more than available capital means that each market fluctuation has a greater impact on the trader’s account, whether in favour or against.

An unfavorable operation, if you don’t have proper risk management, can damage your money. When the margin runs out, the broker will require a new contribution or close the position. Be careful because here you must already assume the corresponding loss.

The maximum leverage level for CFDs on the Forex market for major currency pairs and for retail traders under the ESMA regulation for European customers is 1:30 (which means providing a margin of 3.33% on the volume of the actual trade), in accordance with current regulations. So, in this way, the risk of CFDs is limited.

How to Calculate Profits and Losses

To calculate the profit or loss when trading with CFDs, the first thing that will be necessary is to take into account the costs of the transaction.

The main fees charged by CFDs brokers are:

Spread: the difference between sales and offer prices (mentioned above). They are usually a few points and are usually loaded at the time of opening a position. For this reason, trading with CFDs starts with a small loss.

Swap: also called “rollover” or “night premium”. This commission has as a concept the daily interest of the money that the broker lends us for leverage. It is a charge or credit to our account each day, depending on the difference in the interest rate of the two currencies of the pair in which you trade.

Once the costs are known, the factors to take into account to calculate our profit or loss from the position with CFDs are the following:

The contract size or volume of the position (in the base currency).

  • The opening price of the position.
  • The closing price of the position.
  • Gains or losses are determined: (Contract size*Closing price) – (Contract size*Opening price) – Commissions.

In Forex, the minimum price move is called “pip”. A pip is a variation in the fourth decimal place of the currency pair, except for the pairs involving the Japanese yen, which will be the second decimal place. The number of pips earned or lost by the value of each pip (depending on the volume of the position), less the commissions applied, results in the gain or loss.

Then we will have to convert profits or losses into the local currency at the exchange rate.

Who Can Trade CFDs?

Basically, any person with the ability to contract and who has available capital to invest is in perfect disposition to trade with CFDs. In other words, simply by being of age (and not being legally incapacitated) and contributing an amount as capital, it is possible to open an account with a CFD broker and start trading. Trading CFDs is within the reach of anyone because it is not necessary to have a large sum of money.

Advantages and Disadvantages

The advantages of operating with CFDs come from the characteristics of these products, as we have seen above:

-We will only have to deposit a part of our capital as a guarantee, being able to increase the amount of our trading operation.

-The liquidity of the profits obtained is immediate, we can withdraw the profits once obtained.

-They offer the possibility of short trading with the same ease of long trading. The trader can make profits even when the market drops.

-They are extremely agile, it is possible to perform operations of a few minutes duration. Thanks to CFDs and the leverage they offer the trader can take advantage of the slightest movement of the market.

-They require, in most cases, lower commissions than the sale of physical assets.

-They are available to anyone, it does not require much capital to trade with CFDs.

With regard to the disadvantages of:

-Leverage is the risk factor for CFDs, which can be both an advantage and a drawback at the same time. Comprehensive risk management is needed; for this reason, expert traders choose CFDs: they are masters in risk management.

-Although these products do not lack reliability and transparency, they are not quoted on an organised market.

-Daily interest payment is required due to the money borrowed by the broker in the leverage.

Categories
Forex Basics

The Correct Way to Set Objectives in Forex

Every time I have read in the various forums dedicated to foreign exchange markets to Forex traders describing their trading methods, it has reached my ears that it is very common to try to gain control over the entire negotiating process by setting targets for virtually all variables. While this could be productive, it may also be too rigid when trading in Forex. In this article, I will try to examine the trading areas to which objectives apply and evaluate the advantages and disadvantages of each to help you define a flexible negotiating strategy.

Number of Operations

It is very common to listen to traders who say they will stop trading after losing or winning a certain number of trades per day. Whether this makes sense or not depends to a large extent on what kind of trading they are conducting. If we are talking about reselling or short-term trading, then this is a psychological defense mechanism that will probably only limit the profitability of an effective trader. However, for the longer-term swing trader or traders, such a rule is probably useful, since if the first three or four patterns fail quickly, forming a winning pattern becomes increasingly unlikely. Moreover, if the loss-making operations take place in the same price area, it is likely not a fruitful area in the near future.

Of course, psychological defense mechanisms can protect us against large losses, even if they are not statistically acceptable, and if the nerves of a trader are altered by the loss of a number of consecutive trades, It’s probably a good idea to stop operating at least for the rest of that session, until you can recover psychologically.

Stop Loss

I often hear traders say that they apply a fixed stop loss of X number of pips, sometimes different from what is defined between currency pairs, and sometimes not. Although this may work, is an error, as the stop loss must shall be defined by technical measurements or only by volatility, both will vary. For scalpers, who usually use a tight stop loss this may not matter as much, but for longer-term traders, it is crucial to have the right stop loss. While I’m on the subject, I’m going to say that in Forex the goal of stop loss is not necessarily going to be the “correct”, but the one necessary to ensure that we get the transactions with the most adjusted profits possible even at the expense of losing a greater number of operations in general.

Objectives of Profits

The objectives of having a certain benefit can be sensible as a good trading method must provide a certain number of winning trades over time. The most important thing is that the profit targets are neither too small nor too large. Something in the range of twice or triple the risk per operation (from the entry point to the stop loss) is usually a good option. However, it may also make more sense to keep up with the pace of the market and let the operations that are doing very well keep running, at least until they show signs of turning. A productive commitment could be to make a profit when targets are reached very quickly, as such moves in Forex are often spikes that fall apart easily, but otherwise, we can apply a trailing stop, if only once the price is close to the goal. It is also very reasonable for-profit objectives to be based on volatility, for example, if a stop loss is more or less a true middle range of any time period being used so that the profit-taking is two or three times the same amount respects the current pattern of market volatility and the instrument it trades.

Pips Per Day/Week/Month

It is very common to know that traders say they have a goal to make X number of pips daily profit, week or month. This is one of the dumbest attitudes you can possibly have in trading, and it is ruthlessly exploited by scammers who promise all sorts of unrealistic goals. It’s not easy to know where to even begin to break with this approach. First, there are times when you might be able to make 1000 pips in a month and then on other occasions where even the most experienced and fast traders fight powerfully just to avoid a loss. Second, a “pip” could be worth twice as much in one currency pair as in another, not to mention that different operations should have different stop loss sizes, so risk units are a significant measure, while pips are not.

Actually, it makes sense not to have profit goals. What makes even more sense is positioning yourself to take advantage of what the market can offer us and this is made much better by being prepared to face a week or a month of losses if necessary. There are few dumber trading practices than pursuing arbitrary objectives with little or no consideration of market conditions.

Risk Per Operation

Many traders have a rule according to which they risk the same percentage of their trading capital in each transaction. This is an excellent rule and it makes sense. A variation, however small, is to risk a little less in operations that look less promising and a little more in operations that look more promising but not by much. An excellent rule of thumb is to make sure that your risk per transaction is not so great that you suffer too much if the operation turns out to be a loser, but not so small that you don’t care at all what happens. This amount can vary greatly depending on individual circumstances.

Trading with Certain Currency Pairs

Sometimes I hear traders say that they only trade with one or two currency pairs like GBP/USD and EUR/USD, which tend to be particularly favorable. It is true that each currency pair has its own peculiar tendencies and it is also true that, depending on the limitations of the time zone, it may make sense to prefer to trade certain currencies that are more active at the time. However, it is absurd to limit oneself. For example, years ago there was a strong movement of several months in the USD/JPY pair. It was easy to make money by going along with that pair, so why restrict yourself? What if your favorite pair just moves? Would you rather stay out of it?

Conclusion

It is usually counterproductive to limit yourself too much in Forex trading. Traders will find greater success by adapting to market conditions rather than by pursuing fixed objectives, although, as we have already seen, there are numerous exceptions. Beginners can have to limit themselves more as they discover they are too inexperienced to manage flexibility properly. The best answer for all traders is to start slowly and carefully be more flexible as they go along.

Categories
Forex Basics

Top 10 Fun Facts About Forex Trading

When it comes to forex and trading, there is loads of information out there, it also has a very rich history, so when we think about it, there are thousands of facts that could be spoken about trading. Today we are going to be looking at some of the fun facts about trading that you may not really know about. Of course, some are very common knowledge, others will be a little more on the subtle side with fewer people, and some may simply be surprising. So let’s take a look at some of the facts about trading.

It’s Been Around for Centuries

Forex and currency exchange has been around for centuries, of course, it never used to be about trading actual currencies. These days we are trading the GBP with the USD, back then we may have been trading some corn for a sheep. Even in biblical times, the Talmud actually records foreign currency exchanges back in biblical times. They record how moneychangers would set up various stalls where they would then change currencies for another while taking a commission for the change. These sorts of exchanges have also been recorded within ancient Egyptian papyri which date back as far as 260 BC.

The Cable

You may know that the GBP/USD currency is known as “the cable”, but do you know why it is called that? It is known as the cable due to the fact that before we had satellite and fiber optic internet, the information used to be passed between the London and New York exchanges with a giant steel cable that passed under the Atlantic ocean and was used to synchronize the rate between different currencies between the two stock exchanges. While it is no longer needed, it still has some use in modern times, but it is no longer used for the synchronization of data as this can be done quickly through more modern means such as fiber and satellite.

The Worst Currency Inflation

You have probably read about it or seen in the news or even social media sites, that the currency inflation rates in Zimbabwe went through the roof, which is out of sync with the rest of the world which often has very subtle movements in the inflation rates. The country experienced one of the worst inflation in record history where the inflation rate went up 6.56 sextillion percent, to put that into perspective, that is over 6,000,000,000,000,000,000,000%, a number that many probably didn’t even know existed. Due to this, Zimbabwe had to completely wipe out the currency and get rid of it, this happened in 2009 and up until 2014, it had to use foreign currencies as its main currency. During the high levels of inflation, the banks in Zimbabwe actually had to limit back withdrawals to Z$500,000 which equated to just $0.25 USD.

There Has Not Been A Collapse

Contrary to belief, there has not actually been a financial collapse that has affected the forex markets, it has caused a bit of movement but there has never been a collapse. Unlike the stock markets which have had a number of crises where the stock values have plummeted and people have lost thousands or even millions. When those same crises have occurred, the forex market managed to withstand it, this is mainly due to the fact that the markets are made up of traders and the prices rely on them, rather than companies and shareholders, this is why those collapses did not affect the forex markets as much and they can potentially withstand anything that happens.

Printing Money

An interesting fact about American banks, before the US Federal Reserve was established back in 1908, pretty much any bank was able to print their own money. The US Federal Reserve put a stop to this as it had the potential to cause mass inflation within the USD currency should the bank have decided to start printing.

Huge Amounts Are Traded

There is an absolutely huge amount of money traded within the forex markets each day, which is why it is the most liquid market in the world. There is an estimated $6.6 trillion being traded every single day. A number that will most likely never be topped apart from the forex markets themselves. No other market comes close and no other market probably ever will.

Challenged by Cryptocurrencies

The current market prices and trade volume of cryptocurrencies is nowhere near that of forex trading, but if there is going to be any sort of market that can actually challenge that of forex it will ultimately end up being the cryptocurrency markets. Currently, the transaction volume is in the tens of billions, far behind the forex markets, but there has been a substantial increase, and it is continuing to increase each year. It will take a long time, many, many years to get anywhere near the same level, but with the constant increase and exponential growth of the cryptocurrency world, there is certainly a chance that the forex markets will be challenged years down the line.

Forex Will Always Be Here

The markets will always be here in one form or another, even if traditional currencies are no longer available and no longer around, there will be some form of currency exchange. The World will never have a single currency, it just would not work due to the different ecosystems and the different natures of the various countries within it. So even if there are not traditional currencies, there will still be a need for the exchange of currencies whatever they are. Due to this, the foreign exchange market will always be there and so there will always be an opportunity to trade one way or another.

The US Market Is Not the Center

Many people, especially those that have seen some of the Hollywood or bigger films about trading and forex will often think that the USA is the center, it is where the most trading happens. When in reality, only around 19% of trades and trade volume takes place in the US, instead, the center of the trading world is actually London, it is predicted that 43% of all forex trading transactions take place in the United Kingdom, and London, making it the main hub for Forex trading.

Millions Required

Forex trading didn’t use to be as accessible as it is today, many years ago before the rise of retail trading brokers, in order to trade you would need to be an institute with a minimum of at least $40 million in order to trade, not something many individuals would be able to do. These days, you can trade for as low as $10 which makes it highly accessible for people all over the world and from pretty much any location that has an internet connection.

Those are some interesting facts about the forex markets, some you probably knew, others you may not have. The emirate is always changing, different things are always happening within them, but one thing is for sure, the markets will be around for a long time to come.

Categories
Forex Trade Types

Short-Term vs Long-Term Forex Trading: The Comprehensive Guide

There are a lot of different strategies out there including things like scalping, day trading, swing trading, trend trading, and position trading. This can make things quite complicated and hard to work out what strategy and style is best for you. These different styles can be further broken down into two different categories, short-term trading, and long-term trading. By combining them into these categories it is easier for us to analyse the advantages and disadvantages of both which makes it easier for you to decide which style may be best for you, and that is exactly what we are going to do in this article.

When you started trading you were probably told to think long term, that trading is a long term prospect and that you should not be expecting quick returns, this is true, but it does not mean that each individual trade needs to be long term. So let’s take a look at some of the advantages and disadvantages of trading a short-term strategy. Short-term styles of trading are often seen as scalpers and day traders, both of which do not hold trades for more than a day.

Advantages of short-term trading styles: The first and most obvious advantage is the fact that you will get your money quicker, a short-term style of trading means that you won’t be holding the trades for long, so you will close them quickly and will get your profits quickly. There is also a huge earning potential when it comes to short-term trading, due to trades being closed quickly, you can place many more trades, meaning that you have more potential trades to make a profit on. High volatility currency pairs may make this style very profitable. There is also a limit to the amount of your capital that is at risk when trading, due to not holding trades for a long time, your capital is regularly freed up for more trades, this also means that you won’t be holding your losing trades for a long time either, thus reducing the amount of risk that your account is under at any one time.

Disadvantages of short term trading styles: One issue with opening and closing a lot of trades quickly is that it can become quite costly, in fact, each trade that you make will have a cost, either an omission or a spread cost when you open up a lot, commissions can start to add up and can eat into your profit potential. We mentioned that you can have a lot of profit potential, the other side of the coin are the losses that you can get too. Opening up a lot of trades, if they all start going the wrong way, you can potentially have a lot of trades that have gone rd and which end up as losses. It can also be quite stressful, you will need to maintain concentration when trading, these are not set and forget strategies, you need to sit there concentrating and making decisions pretty much all the time. The other disadvantage is that it takes up a lot of your time, you need to be actively trading, you ain’t place trades and then walk away, you need to be there and you need to be constantly analysing the markets and external factors that may potentially affect the markets.

Examples of short term trading styles include things like support and resistance where you buy and sell on the support and resistance levels, candlestick patterns also fall into this category, things like inside bars, triangles, pennants, and flags can all be used to help work out trades that can be closed within a few minutes to a few hours. So those are the advantages and disadvantages of short-term trading, let’s now take a look at the advantages and disadvantages of longer-term trading styles.

Advantages of long term trading styles: Trading longer-term strategies can actually save you time, what we mean by this is that they are often set and forget strategies, you place a trade on and then can easily walk away and let it do its thing, you do not need to sit there constantly watching the markets. It can also be less stressful, due to the fact that you are not constantly needing to do anything such as watching the charts. You can also take your time with your analysis, there is no rush and no stress in placing it quickly. Each individual trade can be much more profitable than short-term trading style, this means that you can make as much with a single trade as you would with 10 or 20 from a scalping strategy. These sorts of styles are also cheaper, as you are placing fewer trades, you are also spending less on things like commission which can often eat into your profits. It is also far easier to adjust your trades when news events come out or economic data, making it slightly safer and more resilient to market movements.

Disadvantages of long-term trading styles: There are of course disadvantages to this style of trading, firstly you will be waiting for your profits, it can take a long time for trades to close, from a day to months. It also requires a lot of research and analysis, with this style of trading you are often putting on larger size trades, and so you need to make sure that it is right, you need to put in a lot of time and effort into analysing the markets and other various data sources to ensure that you are putting on the right trade. Some strategies that are considered long-term are things like swing trading and position trading, both of these strategies hold onto trades for a long period of time, sometimes even weeks or months.

So those are the advantages and disadvantages of short and long-term staples of trading. Which one is right for you will depend on your own personality and time constraints. There is no harm in trying a number of different styles until you find the one that is right for you. Hopefully, this has given you an insight into the differences between the two, whichever you decide to stick with for a while to ensure whether that style is right for you or not.

Categories
Forex Trading Platforms

A Complete Guide to the cTrader Trading Platform

cTrader is one of the biggest competitions to the dominating MetaTrader series of trading platforms, back in 2018 they won the online trading platform of the year award. Created by Spotware Systems Ltd and released back in 2010. It is packed full of features and customisation options. Ctrader has started to be picked up by more brokers that are looking for alternatives to the MetaTrader platforms which in turn gives a bit more choice for traders and customers.

So we are going to have a look through exactly what cTrader has to offer and what we can actually do with it.

When we first load up the platform, we are presented with quite a busy-looking screen, right in the centre of the screen are the charts, sitting just below is the position, order, and history tabs. To the right, there is a selection of panels including orders, calendars, and various information about the symbol currently on the chart. To the left of the platform is the list of symbols available to trade. It is a very busy screen and a lot of information is being presented which can be a little overwhelming, but let’s have a look and break down each individual section.

Trade

The trade tab is where you will be spending most of your time and allows you to actually make your trades and orders, it is made up of a number of different sections which we have outlined below.

Charts

Initially, the charts can look a little confusing, at the top of the chart window are some tabs with any of the currently open charts and the assets within them. To the left is a number of different options. The top two are the zoom-in and out buttons. Below that is the option for the sort of chart that you want, the current options are Bar, Candlestick, Line and Dot charts. Below this is the option for your indicators, there are a lot of built-in indicators that you can add to the chart. Then there are options for cBots which is the equivalent of an expert advisor for the MetaTrader series. You are able to add drawings to the charts and the ability to hide or show them. Finally, there is a selection of timeframes, there are a lot of them ranging from 1 minute to months, you can set seven primary ones as buttons, the rest can be selected on the tab at the top of the charts.

Orders

To the right of the platform, there is an order box, this is where we will be able to place new trades and pending orders. You are able to make market executions, limit orders, stop orders, and stop-limit orders. When making a market execution trade, you can simply put in the desired size that you want, then select the stop loss and take profit levels. The nice thing about cTrader is that you can select the stop loss and take profits based on pips, estimate price, balance, and profit rather than just price, you can also select to have a trailing stop which will follow the price up and down to allow a bit of wiggle room. When making an order it is exactly the same except that you will need to input the desired price for the order rather than just hitting buy or sell. 

Position Monitor

Once a trade or order has been placed, it will move down into the positions monitor at the bottom of the middle of the platform, there is also a tab for the current pending orders. This window will show you all the trades that you currently have open, it displays a lot of information about them and it can be ordered by using any of the titles within it. The panel also shows the current balance, equity, margin used, free margin, margin level, and various other statistics. 

There is an additional tab for the account history which shows past trades and orders that have already been closed or canceled, there is a price alert tab for any alerts that you may have setup. The transaction tab looks at deposits and withdrawals. The final two tabs are regarding the journal and cBot log which details different actions that have been taken, either by you manually or automatically by a cBot.

Watchlist

To the left of the platform is a panel that is currently displaying all of the available symbols or your chosen ones should you wish to limit them. It gives you the bid and ask prices of the ones displayed in a quick and easy access view. You can double-click on any of the assets in order to open up the chart in the middle of the platform. If you right-click you are able to add something to your watchlist, create a new order, or open up the chart.

Calendar

The calendar can be found on the right of the platform, there is a  tab at the top for the extended calendar, otherwise, there is a  smaller version if you scroll down the right toolbar section. This gives you an overview of upcoming news events and can give you an indication of what kings of effect the events may have on the markets. This is useful if you are trading pairs with major news events coming up.

Automate

The automate button which is initially found at the bottom left of the platform allows you to create an automated script of cBot, this is the same as an Expert Advisor when using MetaTrader 4 or 5. You can use a number of different prebuilt bots or you are able to create one yourself as long as you know a little bit about coding.

Copy

The copy tab allows you to launch cTrader Copy, this is a system that allows you to view and then copy other traders, it is similar to the signals section within MT4 and MT5. You can look at the past performances, look at what sorts of risks that you are taking and if you like the look of it, you are able to copy their trades into your own account. If you feel that you have a great strategy, then you can actually apply to have your trades added to the system for people to copy, getting a cut of any commissions for each trade taken.

Analyse

The analysis tab allows you to take a detailed look at the history of your account, it will detail all the different trades and orders that were placed so you can take a look and analyse their performance. It is a great way to work out what is working and what is not, plenty of information is available so it is well worth using.

Settings

The last major section for us to look at is the settings, this is where you are able to alter a few different things about the platform. The General tab allows you to change some colour themes and various other basic interface options. There are also startup options, asset options around lots or units, market watch, notifications, automation options, email, and proxy options. Nothing that will drastically change anything, but some can be useful depending on your preferences.

Anything else?

The only other thing to note is the market hours section which tells you which markets are currently open and when they will open or close, this can be handy for avoiding larger spreads or jumps in volatility. There is also a symbol info panel, detailing a lot of information about the currently selected symbol such as assets involved, commissions, swings, and more.

Summary

There are a lot of fantastic features with cTrader, things like the choice of pips or monetary value for stop losses and take profits, plenty of information about each asset, and many more, the main issue is the overcrowded user interface, however, you should now have a slightly better understanding of what each section does and what is actually available within the cTrader platform.

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Forex Basic Strategies

Top 9 Ideas You Can Steal from the World’s Best Traders

As with anything in life, when it comes to looking at the experts, there are always little parts of what they do that we can steal, or at least we can use what they know. This is no different when it comes to forex trading, they are experts for a reason after all, so why not take what they know or what they do and implement it into your own trading? So we are going to be looking at 10 things that expert traders do or what they think and ways that you can then implement that into your own trading.

“Markets are constantly in a state of uncertainty and flux and money is made by discounting the obvious and betting on the unexpected.” – George Soros

What George is basically saying here is that the markets are constantly changing, you won’t make money by trading what has already happened, instead, you will need to look to the possibilities of what could happen next, if you are able to predict the future movements then you will make money, events that are not expected will help you to make even more as you will be one of hen few trading it.

“Play the market only when all factors are in your favor. No person can play the market all the time and win. There are times when you should be completely out of the market, for emotional as well as economic reasons.” – Jesse Livermore

This is all about patience and discipline, with near traders you often see them placing trades when they probably shouldn’t, this advice and way of reading is great as it means that you will only be placing trades in line with your strategy and avoiding bad trades outside of it. Only trade when the conditions are right and try not to force any trades.

Many investors make the mistake of buying high and selling low while the exact opposite is the right strategy.” – John Paulson

A pretty obvious one but also an important one. Many traders know that you should buy low and sell high, yet so many of them get caught up in a large movement, something has risen a lot, traders then begin to jump on only for it to turn. They go into their position at the top, now the only way is down. Do not jump onto something just because others are or because something is rising, ensure that your analysis is correct and that it is the right time to trade.

“That was when I first decided I had to learn discipline and money management. It was a cathartic experience for me, in the sense that I went to the edge, questioned my very ability as a trader, and decided that I was not going to quit. I was determined to come back and fight. I decided that I was going to become very disciplined and businesslike about my trading.” – Paul Tudor Jones

Risk management is one of the most important things that you can do as a trader. Having the belief in yourself to continue is fantastic after losses, but you can reduce those losses by using proper risk management techniques. So ensure that you use them each time that you trade.

“I’ve certainly done it – that is, made counter-trend initiations. However, as a rule of thumb, I don’t think you should do it.” – Richard Dennis

It is considered a bad move to trade against the trend, hence the saying of trade. Some people do it but if they are successful it often comes down to a bit of luck that the markets turned at the right time. As a rule of thumb, you should be trading the trend, not trading against it.

“I’ve learned many things from him [George Soros], but perhaps the most significant is that it’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong.” – Stanley Druckenmiller

Stanley is right, it is vital that you have the right risk to reward ratio in place. You need to ensure that you are limiting your losses and also having the appropriate winning margins too. If you do, you can technically be profitable with just a 20% or 30% win rate (depending on your risk to reward ratio). So it is not about winning all your trades, it is about ensuring that you are profitable.

“I just wait until there is money lying in the corner, and all I have to do is go over there and pick it up. I do nothing in the meantime. Even people who lose money in the market say, “I just lost my money, now I have to do something to make it back.” No, you don’t. You should sit there until you find something.” – Jim Rogers

Another one about being patient and it is right. You need to be patient, do not try and force your money to make money, in other words, do not try and force trades. You need to wait until the right market conditions are there, you need to wait until the right trade is there, just do not force it. Leave your money alone until the right trade is there.

“Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble” – Warren Buffet

While he is incredibly successful, Warren Buffet does like to take risks as he stated in this quote. He is basically saying that when there is a really good opportunity or a really good trade, you should put more into it than you would other trades. This increases the profitability of that opportunity, but it does also increase the risks, so only do this one if you are absolutely certain, but then again, nothing is guaranteed.

“I believe that the biggest problem that humanity faces is an ego sensitivity to finding out whether one is right or wrong and identifying what one’s strengths and weaknesses are.” – Ray Dalio

Many traders just look at the markets rather than themselves, yet the main area that we can often improve is within us and the actions that we take. You need to look at yourself, work out what parts of trading you are good at and what parts you are not so good at, that will give you a direction and work that you need to do with yourself in order to improve your own understanding and abilities when trading.

Those are some of the things that experts say and do, you can try and implement some of them into your own trading, they could be helpful, maybe you are already doing some of them which is great. Take what you can from the experts, they know what they are doing and they are doing it well, but do not blindly follow them, be sure that you create your own trading style and your own instincts, as you want to be around and successful long after they have gone.

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Forex Basics

The Most Common Complaints About Forex, and Why They’re Completely Bunk

There are a lot of complaints when it comes to forex trading, and we mean a lot. Many of them are completely legitimate while others are based on a single opinion or something that someone may have experienced. Whatever the complaint is, there will surely be ways to get around it or to help out to prevent those things from happening again in the future. It is because of this that we are going to be looking at some of the most common complaints that we hear about forex and the reasons why those complaints probably should not be happening.

It’s Too Hard

Forex trading is not hard, complicated yes, but not hard. We say this even with the knowledge that the majority of people that trade will lose money. People seem to put the term hard on everything these days, forex is not hard, it just takes time, and that’s for some people what makes things hard. Yet in reality, it is not hard at all, all you are technically doing is placing a trade, choosing whether it goes up or down and that is it, it is incredibly easy and quick to do. Yet people refer to it as being hard because of the amount of time and effort that you need to put in in order to be good at it and in order to know which way you should be placing your trade. Yet it is still not hard, it just takes time, time does not make things hard, hard shoulders mean that it takes a lot of effort in order to do the thing that you are trying to do, and that is playing the trade, which we have already discussed, is actually very simple.

People simply do not want to put in the time that it takes in order to be a better trader, they just want to get on with it and that is a mistake. If you try to place trades blind you will make losses, those losses will of course make it harder to make profits, but again, that does not make trading hard, it simply means that you need to put in more time, not more effort.

It’s All A Scam

Forex trading is not a scam, if it was there wouldn’t be over a trillion dollars being traded every single day. Forex is basically just a way of exchanging foreign currencies for each other. It has been happening for hundreds of years in one form or another and will happen for hundreds more. Businesses are run off of it and if it was a scam, the majority of businesses that we have today would have disappeared a long time ago.

We have to admit that within the forex trading world there are a lot of scams, but these are from individuals, people who are setting out to try and take your money. These are the people offering ridiculous Reuters on your investments or certain brokers that have been set up to be predatory, trying to milk money out of you. It is important to know that those are individuals and not the industry as a whole. The industry is completely legitimate, you can do it yourself, go to a foreign exchange shop, buy some currency, hold it for a while, and trade it back, you are doing the same thing on the markets, just in a more convenient way and for more money. Fores is not a scam. It wouldn’t be here if it were, it is as simple as that.

It’s Not for Individuals

Many years ago this would be completely true, you used to need millions of dollars before you could even consider trading on the global forex markets, this made it so that only the biggest businesses and institutions could take part in the markets. These days though, this is certainly not the situation that we are in. These days anyone can trade, all that it takes is a computer or mobile phone, an internet connection, and a balance of as little as $10. That is all that you need to trade which is ridiculous and incredibly accessible. There are no more excuses available for it not being easy to get into. You can go from no account to your first trade being placed in the matter of about 10 minutes with some brokers. There are millions of people trading from their bedroom at home and things will only continue to get easier.

It Takes Too Long

We mentioned above when we discussed forex being hard that it takes time, this is true, but it certainly does not take too much time, if you are finding that it is, then that is something that you as an individual are doing wrong. Actual trading, placing trades, and the analysis for each individual trade does not take a lot of time, this can be done in a few minutes up to 30 minutes, which should be more than enough time to place a trade. What can take a while is the initial learning, but that does not mean that you need to do it all at once which for some reason is what a lot of people try to do. When you try and cram in all your learning into one session then yes, it will take a while and it will be boring. Instead spread it out, learn one thing a day, do not bog yourself down with books and reading for hours at a time. If you spread it out, it will still take the same amount of time in regard to actual learning, but it will be far less boring for you and don’t feel like such a chore or that it is taking up so much of your time.

Those were some of the more common complaints that we see about trading forex, as you can see, the majority of them are simply not true, in the past there may have been a little more relevance to a lot of them, but as things have progressed they are becoming less and less an issue, but they are still things that people like to complain about.

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Forex Basics

How to Trade Forex the RIGHT Way

There is no actual right or wrong way to trade forex, there are however certain things that you can do that can make things a little easier or a little safer, these are the things that people would consider the right way to trade forex. Each individual trader will have their own ideas as to what it is that they need to do in order to trade things the right way. We are going to be looking at a few of the things that are widely considered as the right things to do when we trade. Some may be relevant to you and some may not be, but they are simply what many consider the right things to do.

The first thing comes down to your education, there is such a thing as too little information, but also too much information. There are three types of traders, those that learn the very basics and then jump in, those that try to learn everything before they touch their trading account, and those that learn as they go along. We would say that there is no right way to do it, but there are certainly wrong ways. Firstly, those that simply jump in with very little information, are setting themselves up to fail, you cannot trade with very little info, you won’t know how to manage your risks, or what certain events or patterns mean.

Then there are those that try to read too much, this can simply confuse you, there is a lot of contradictory information out there, info that makes it hard to work out what is right and what is wrong if there is a right and wrong. But if you try to learn everything, you will end up never trading, there is just too much information out there. You need to find a common ground, you need experience, such as a demo account, but you also need to read and learn a little about trading before going live. So try and find a balance of practical and theoretical learning.

You need to learn about risk management, this is how you will protect your account from losses and from the markets moving against you because they certainly will move against you at one point and on a regular basis. Your risk management plan should contain things like your risk to reward ratio, it should also contain details of where you stop loss and take profit levels are to be set. Your trade sizes should also be noted here, this will mean that you know exactly what size trades you will be making. All of these things combined work together to help protect your account, they enable you to trade in a much safer way. This sort of risk management is what can separate a successful trader from a trader that has just blown their account. So if you want to trade things the right way, you need to ensure that you have your risk management in place for the very start.

Learn one strategy at a time and learn one currency pair at a time. This goes along with the education that we mentioned but it is important that you concentrate on a single strategy to begin with. This will enable you to learn it completely and to properly understand it. If you start trying to learn multiple different strategies at once then it can cause you a lot of confusion. In fact, it can make you completely mess up the strategies when trying to implement them. We have seen this countless times in the past.

The same goes for learning different currency pairs, each one behaves differently, as if they have their own personalities, some of them you can interchange, but others you cannot use the same strategies on one as you can the other. You need to get to know the way they move and the way they react to different news events. Once you have grips of your first strategy and your first currency pair, you can then begin to try and branch out into additional ones.

Set your goals and expectations, many people come into trading with the idea that they will make ridiculous amounts of money very quickly, of course, is not the case and is not realistic. You need to set your goals at an appropriate level, think about things like your current capital and account balance, the strategy you are using, and other risk management things that you have in place. You should combine all of these to make more realistic goals. If you see them too high, then you will be risking too much with each trade, not something that anyone would recommend, so set your expectations at the right level and it will keep you grounded and will help to keep you consistent with your trading and risks.

Keep a trading journal, something you have probably been told before and also one of the things that a lot of people hate doing, simply because it takes a bit of time to do with each trade. You need to write down what you are trading, why you are trading it, and different things like the profit and loss, trade times, and more. Jot down as much information as you can to ensure that you have that information available. You can then use this journal to analyse your trades, to work out what you are doing well and what you need to improve on. It also helps you to work out whether you are sticking to your trading plan or putting on trades outside of it. You won’t know any of this if you don’t have a trading journal, so ensure that you have one, most successful traders have one, so there is no reason why you should not have one either.

The things that we have listed above are simply the basics, here are of course a lot of other things that you can be doing to trade in what you would perceive as the proper way, but this is all relative to the person that is trading. Ensure that you do at least some of them and you will be on the right track to becoming a profitable and successful trader.

Categories
Forex Basics

Signs You’re Actually Becoming a Forex Trading Expert

We all hope that one day we can be considered an expert trader. Being an expert will mean that we know exactly what we’re doing, we know how to profit and we know how to remain safe as a trader. We all want to get there but it doesn’t happen overnight, it takes time and we will slowly start to see signs that we are on the right track and that we are slowly becoming expert traders. So let’s take a look at some of the signs that we may see that will show us that we are becoming expert forex traders.

Profits are not your main priority: When new traders start, there is normally just one thing on their mind, how much money they can make and how they are going to make it. Money is the main driving force behind their desire to trade and it is what will motivate them to learn and trade. For an expert, that priority will begin to shift, you will start to focus on securing and protecting what you already have over making more profits. You will understand that it is more important to stay in the game than to make profits, and you will focus on keeping what you have and adding to it rather than placing too many risks.

You are naturally looking at the news: Looking at the various news sites and economic calendars is not really something that newer traders do, yet when you are becoming an expert trader this should be something that comes very naturally to you. The start of each day, the evening before, anytime is a good time to check the news and the economic calendars. It can provide you with a lot of information. Eventually, you will do it naturally without even thinking about it. 

You follow your rules perfectly: The trading plan that you have created will have a number of different rules setup, these rules are what tells you what you should be trading and when. When we are new we will still get some of them wrong, meaning that we will be placing bad trades. But as we grow as traders and move more towards the title of an expert trader, we will begin to reduce the number of times that we go against them, when we no longer make mistakes surrounding the rules, we can consider that part of our training to be at an expert level.

You maximise the profits on each trade: Sometimes it is not about placing more trades, for many newer traders we see the profits and so close the trades for that profit, only for the market to continue in the same direction. An expert trader will capitalise on this, if a take profit level is set, based on further analysis this can be moved further, you can also use things like trailing stop losses that can help you to maximise profits a little bit more. You will now be trying to squeeze out more from each trade rather than placing more trades.

You no longer blindly follow others: When we start out trading, we don’t really know what we are doing, due to this, we often take the words of others with a little more attention, often we will simply place trades because someone that we think is an expert has placed them without really knowing why they have been placed in the first place. Instead, we no longer blindly follow others now, instead, we make our own trades, or if we do take another’s trading idea, we know why they are trading it and have a full understanding of the trade before we place it.

You find your exit point before placing a trade: When we start all we really think about is the entry, how do we get in, we will then think about getting out once we are in profit or loss. This is simply not what an expert would do, instead, we can sense that we are on our way to becoming an expert when we start to think about the exit point before the trade is made, sometimes before the entry point is even decided. The exit point is what will make our profit, but also to protect the account, so it is vital that we know where this will be before we place the trade.

You no longer dwell on negative days: We all hate bad days, we all hate negative trades. What we often do is find it hard to move on, those negative days or trades stay in the back of our mind, maybe we go to sleep thinking about it and wake up with it fresh in our minds, this can then influence our next day’s trading. An expert trader will not do this, they will accept that the losses were there and that they happen. You now need to move onto the next trade without thinking about the loss anymore, this way an expert trader will not be influenced by their previous losses.

You understand that not having a trade can be a good thing: You do not always need to trade, for a new trader you want to be trading all the time as that is how you make money, what they do not seem to understand is that not having a position is still a position. If there are no good opportunities for a trade, you should not try to force one, instead, you need to be patient. Not having a trade is keeping your account safe from losses, so as an expert you understand this and are happy to sit and wait for the right opportunity to arrive.

You still understand that there is still a lot to learn: You can never know everything, in fact, you can never know a lot, new traders may get the basics and then stop learning, but an expert will do the opposite. An expert will know that there is always more to learn, so much so that they spend a lot of their time still learning. New strategies, new assets or currencies, pretty much every aspect of trading has an unbelievable amount of information that is constantly evolving… So a sign of becoming an expert is the fact that you are able to continue to learn and still have the drive to continue to learn.

You never trade without a stop loss: Stop losses are there to protect your account, you should be using them with every trade. New traders don’t always use them but if you want to be considered as an expert trader, then you need to use them with every single trade, it is as simple as that.

You no longer dream about your trades: A weird one no doubt, but when we first start out we dream about our trading, we dwell on our losses and they often affect our dreams, or we dream of placing that one amazing trade that makes us rich. As an expert, you don’t really have these same dreams, your trading stays with your trading, when you step away from the trading terminal, your thoughts of trading do not come with you and so when you dream, you no longer dream of your trading.

So those are just some of the signs that will help to show that you are becoming an expert trader. There are of course other things and we have to ask ourselves how we would actually define an expert trader. You can never be perfect, but you can certainly start to do things a little more naturally that are in line with your strategy, that protect your account and keep you updated, as long as you are trading well, you can be considered an expert trader.

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Forex Basics

How To Practice Forex Trading Without Any Financial Risk

Let’s make something perfectly clear before we say anything else, you cannot trade without risk, there is no way to make any money without there being any form of risk. Risk is what enables us to have rewards and so when you trade there will be risks. Now that we have made that clear, there are of course a number of different things that you can do to help reduce the risks that you will be taking when you trade. Managing your risk is one of the key elements for being a successful trader and so it is certainly something that you should be putting a lot of emphasis on when you create your trading plans and of course when you actually begin trading.

The first thing that you can do is to work out how large the trades that you are going to be putting on are. Of course, this needs to be decided in line with your overall account capital. If you have a balance of $1,000 and a leverage of 100:1, there is no point in trying to put on huge trade sizes like 1 lot or even 0.5 lots, this will only result in disaster. You need to limit your trade sizes, the lower they are, the less risk you are putting your account under. If you are looking for the lowest amount of risk, then you will want to go for the lowest trade size which for many brokers is 0.01 lots. Of course, this will then limit your profit potential, so really you are going to want to look for a happy medium, somewhere with low risk but somewhere that also offers returns. In relation to just risk though the lower the trade size the better.

You then need to work out where your stop losses are going to be, yes you will be using stop losses. They are the primary way and method that we as traders can use to help limit our potential losses. If we do not use them, then even the smallest trade has the potential to blow an account, it will take a lot but it is possible, so why take the risk? Putting in your stop losses is a sure-fire way to protect your account, when your trade goes the wrong way and reaches the level of the stop loss, the trade will automatically close. Yes, it will be at a loss, but it is a controlled loss and one that was taken into consideration before the trade was even placed. What is important is that we removed any potential risk for further losses and have limited things to be within our strategy criteria.

We spoke about leverage near the start of this article, it is important to get a good understanding of how it works and if you want to keep the risks on your account as low as possible, then you will also want to keep your leverage as low as possible. Leverage allows you to trade with more spending power than the capital in your account, this, in turn, increases the profit potential of the account, which is the main selling point of leverage. What they don’t tell you is how this leverage also increases the loss potential of your trades too, the more leverage that you use the higher the losses can be with each trade and a loss can take away a much larger sum of money than it would have with less leverage. So if you have the balance for it, go for a lower leverage in order to keep risks low.

Pick the right currency pair to trade, it’s probably not a surprise to you that different currency pairs offer different levels of risk, there are three main categories, the majors, minors (crosses), and exotics. The major pairs have the least volatility and the most liquidity, the minors are in the middle and the exotics offer the most volatility and least liquidity. Due to this, it is far more profitable and also risks to trade the exotic pairs, but it takes a lot more skill to do it successfully. Due to this, it is recommended that those looking for lower levels of risk should look to trade the major pairs, things like EURUSD are extremely liquid which means that their movements are less rapid and sudden. They are easier to predict and if something does happen, you often have more time to react than with the exotics. So if you are looking to trade with lower risk, go for the major currency pairs.

One of the riskiest things that you can do as a trader is to trade during times of economic news, there are certain news events that new traders are warned away from, things like the US non-farm payroll, you should not be trading during the times of these announcements. They have the ability to cause large movements in the markets and even economic experts get their predictions wrong on a regular basis, if they get it wrong, then there is a good chance you will too. In order to avoid this risk completely, simply do not trade during the news events Obviously there is unannounced news that comes up every now and then which is unavoidable, but as long as you avoid what you can, you will be reducing the risk that you account is being put under.

The last point that we quill look at is the fact that you need to ensure that your expectations and your goals are realistic. If you have come into trading thinking that you will make thousands each month with a small starting balance then you are mistaken. Many people make it seem like you can and many people probably have, but they are risking a lot with every single trade in order to do this and have most likely lost countless accounts in the process of getting their one successful one. Bring your expectations down and you will remain motivated and feel less like you need to risk more to achieve those goals.

Those are some of the things that you can do to help reduce the risks that your account is being put under, remember that it is impossible to trade with no risks at all, there will always be some otherwise there would be no way to make any money. If you hate risks, then you will need to do what you can to help reduce them, but remember that by reducing your risks you are also reducing your profit potential, so the key is to find the middle ground where you are happy with both the risks and the potential profits that you can make.

Categories
Forex Basic Strategies

Signs You Need Help With Your Forex Strategy

We all need help with things in life, the problem is that it can often be quite hard for us to realise that we need the help, we need someone on the outside to point it out for us. This is no different when it comes to trading and forex, often we think we are doing fine, only to have someone else come along and tell us that we are doing things wrong or to point out the fact that we aren’t actually profitable at the moment.

When we are told we are wrong or we aren’t doing well, it can make us feel pretty down but it is also the first step to improving and the first step towards being a better trader. So if someone tells you or points out something that needs improving, take it on board and put it into action. We are going to be looking at some of the signs that may be there that could be telling you that you need to make changes and that you may need a little help with your forex trading.

You Aren’t Profitable

Sometimes when we are in the driving seat, we don’t actually realise whether we are profitable or not, we are concentrating so much on our actual trading that we are no longer looking at or recording the results that we are taking. We could be months in, with hundreds of trades under our belt, but until someone comes along and looks at those results, we won’t realise that we aren’t actually making any money.

There is an easy solution to this, you need to keep a trading journal. This will allow you to write down pretty much anything that you are doing, and by doing this, you are setting yourself up for success. Simply down to the fact that you will be able to look back at your previous trades and see exactly what you did and the results of that trade. This way you will be able to see exactly what your profits and losses are, and allow you to work out whether what you are doing is effective when it comes to being profitable.

It’s Too Stressful

Many people find trading stressful, that is one of the many natural emotions and reactions that you will get to trading, the problem comes when people find it a little too stressful. Some find it so stressful that they simply need to stop or they just cannot think of anything else, or even function properly afterward. If stress is starting to take over whenever you are trading you most likely need help, but first, you need to look at how you are trading.

Firstly, the money that you are using to trade with, do you need it? Will losing it negatively affect your life when it comes to things like food or rent? If the answer is yes, that is why it is so stressful and that is why you should not be trading with that money, never trade with money that you cannot afford to lose, it will always be a stressful situation. The second thing to look at is whether or not you’re using the correct trade sizes. If you are using trades too big then you will be putting too much of your account in danger, and seeing the trades go into the red can be stressful when the trade sizes are too large. So limit your trade sizes and only trade with money that you can afford to lose, those will instantly reduce your stress levels while trading. There are also a  number of different support groups out there, even just talking to someone, friends, or family works well, can help to reduce your stress levels but getting help from professionals about your stress levels could be an option if it is really getting the most of you.

You Don’t Have Time

Trading can take a lot of time, it also can not take a lot at all, it all depends on you and the strategies that you are using. For many, at the start it can take a long time, there is a lot of learning to do even before you place your first trade, and this can be boring for many who simply want to skip it and start trading, but you need to take the tie to learn. The other thing is that certain strategies take a long time to trade with, there can be a lot of analysis, there can be a lot of trade preparation, and then once you place placed your trades, you need to sit there and monitor them, this is especially true for scalping, where you need to be at the computer during the times of your trading.

If you are someone that does not have a lot of time, then there is not really much point in you trading a strategy that requires you to spend a lot of time in front of your trading terminal. Instead, you should be choosing one that only needs you to place the trade and then the rest will be done for you, these longer-term trading styles are perfect for people who do not have a lot of free time each day to trade. So if you are finding that you don’t quite have enough time, think about switching things up and seeing if you are able to trade more effectively.

Not Knowing What To Do

This is something that is far more common than you may think, yet a lot of people simply do not want to admit it. There will however be situations and times where you simply do not know what it is that you are meant to be doing or how to analyse certain information. Try and get involved in some trading groups and communities. They can really help you out, if you are stuck, ask the question and people will always be happy to help, or even just browsing the community can mean that you find out some information that ultimately helps you to improve and get past your blockage. The moral is to simply ask for help if you are in a situation where you are not sure what to do.

There will of course be other signs that you may need help, if you find yourself in a situation where you are stuck, not understanding something, or cannot see any way to improve, it is important that you talk to people, join an online trading community and talk to people, it is the best way to get around things and people are always willing to help. So if you need help, simply ask for it, it’s the best thing that you can do.

Categories
Forex Basic Strategies

Ways to Completely Revamp Your General Forex Strategy

When you have been trading for a while, you will most likely come across some rough patches, or times where you simply do not think that your strategy is still good enough. Due to this, we will often have to try and change a few things to try and stir things back up and to make a few adjustments. Sometimes, however, you will need to completely revamp your strategy, a complete overhaul to make things more successful. So let’s take a look at some of the things that we can do in order to revamp our strategy and to bring back that spark that it once had before.

Start Over

Sometimes things can become very stale, if you feel your strategy has come to the end of its life then there are still things that you are able to do to try and revamp it. One of those things is to start again from the bottom up. Start with the foundations of your strategy, try and rebuild it based on the current market conditions, this way it will once again suit the conditions of the markets. This may seem a little extreme, starting over completely, but that is one of the ways that you can really tailor your strategy to the current market conditions and one of the ways that you can ensure that it will have the best opportunity to be successful in those market conditions.

Test A New Asset

Sometimes you do not need to actually change or revamp your strategy, instead, you can simply change the asset or currency pair that you are going to be trading. This can put some new life into an already established strategy that you may be using. This once again will enable you to feel as if things are a little fresher even without making any changes. You never know, maybe the strategy will be far more successful on the new strategy than it currently is on the asset that you are trading. So consider this as an option as well as making changes to your current strategy.

Make Subtle Changes

Sometimes you do not need to make large changes, a simple change to one of the parameters or the rules that you use with the strategy could be enough, part of using a strategy is that you need to keep making small adjustments as you go. As the market conditions change, so does your strategy, but the changes do not need to be large. These regular small updates are all things that will ultimately add up to larger changes, so after a year or so of very small changes, the strategy could resemble something that has pretty much nothing in common with the initial strategy that was created. That is the beauty of the small changes, it will create large or completely revamped strategies without needing to spend a long time at once totally changing it up at the same time.

Make Changes to Risk Management

A major part of any strategy is risk management. This is what can potentially make or break a strategy and is the last line of defense for your account balance. Sometimes all you need to do in order to completely revamp your strategy is to change up the risk management that you are using. This may be a change to your risk and reward ratio, a change to the positions of your stop losses, or take profits. Or it could be a change to the size of our trades or even the amount of trades that you place at once. Whatever the change is, be sure to test it first and to ensure that your account always remains safe. Also remember, if your changes to risk management mean that you don’t make as much, you can very easily revert back to the previous plans that you were using.

Be Dynamic

The markets are constantly changing, they are dynamic and will have multiple different trading conditions throughout the year, there will be slow times and there will be times of higher volatility. Due to this, your strategy needs to be dynamic in order to keep up with the ever-changing market conditions. As the markets change, you will need to make adaptations, both big and small changes in order to keep the strategy in line with the markets. This could be changed to your stop-loss levels, your trade sizes, the currencies that you trade, the number of trades being made, and pretty much anything else. Remember that you don’t need to make big changes, but keep track of what the markets are doing, and adapt your strategy and your trading to it.

Look Within

One thing that you also need to do in relation to our strategy, instead of thinking about changing your strategy, there may be something within you that you need to change yourself, or something that you currently do like a bad habit that you need to change. The strategy may actually be working fine, but there is something that you are doing that is causing the issues, or at least reducing the profitability of your trading. So look back at your journal, look back at the trades that you have made in order to ensure that you are following your strategy properly and to help find any bad habits that you may be partaking in, nip those in the bud and your trading will improve without having to make any changes to your trading strategy.

There are many ways that you can change or revamp your strategy, sometimes you only need very small and subtle changes, other times, depending on the market conditions you may need to change the entire thing or even try a new strategy completely. What is important is that you take it one step at a time, and ensure that you are comfortable with the changes, if you are changing something that takes you out of your comfort zone or potentially reduces the profitability of your strategy then there may not be a good reason for making the change. Do not be afraid to make changes though, if one is needed, then it is most likely for the best that you make that change, no after how small it may seem.

Categories
Forex Basics

These Mistakes Will Keep You From Succeeding at Forex

Mistakes happen, we all do them and we make mistakes when we do pretty much anything in life, even things that we have been doing for years and years. So it is obvious that we will also make mistakes when it comes to our trading, that is always going to happen, what is important though is how we earn from them and how we develop after making those mistakes. Some are pretty minor and don’t have a huge effect, some may even benefit us if we are lucky, but some mistakes will hold us back, they will prevent us from being successful and profitable and if we continue to make them, we will consistently lose out and won’t be able to become a successful trader. It is those mistakes that we will be looking at in this article, mistakes that many traders do that can hold their forex trading success back.

Taking Shortcuts

It can be very easy to fall into the trap of taking shortcuts, when we say shortcuts we are referring to the rules and the methods that you use to place trades, your trading plan will have some rules on it, these rules will dictate how and when you place your trades. These can be pretty small shortcuts, like not waiting for additional confirmation, or they can be pretty significant ones like trying to speed up the process by not placing a stop loss with a trade. While they may not seem big, those little things like not placing a stop loss could potentially end up causing some quite considerable losses which will, in turn, put your overall trading results back quite a bit. It is important that you try to avoid these shortcuts, some may work, but when they don’t they can have big effects. Ensure that you stick to your rules and that you do them fully, not doing just half and hoping things are ok, that extra minute that you save is not worth the additional risks involved.

Not Following A Plan

The plan is there for a reason, it is called a plan because it is what you are meant to be following. Yet we see so many people look at their plan and then only follow a few of the things on it. Trading plans should be pretty diverse, they will include the rules for placing trades as well as the risk management plans that are there to help protect our account. Due to this, it is important that you follow them, as soon as you deviate you are placing bad trades and you are reducing the effectiveness and the consistency of your trading. If you have a plan you need to stick to it. The more that you go against it, the more losses and larger effects those losses will have on your account. Stick to your plan at all times.

Increasing Risks

A lot of people don’t seem to stick to their risk management plans, at least not entirely. Your plan will have your risk to reward ratio which will dictate things like your stop loss distance. It will also include things like the trade sizes that you should be using as well as the frequency of your trades. Yet so many go against this, the normal reasons for going against it and increasing things like trade sizes and frequency are a recent loss that they want to win back or overconfidence, things are going very well and so they believe that they can predict the markets. If you ever feel like this, then take a step back, take a break and then come back when these sorts of emotions are not with you. Stick to your risk management plan, you set it up for a reason, it works, so every time you break it you are risking money and potentially your entire account.

Trading Tired

Something that we are all probably guilty of, we love to trade, but sometimes it is better not to and when you are tired, that can be one of those reasons. When we are tired we do not have the same concentration levels, we are far more easily distracted and we are far more likely to make mistakes. Yet we love trading so much or feel that we need to trade that sometimes it doesn’t matter how tired we are, we will still trade. This is where a lot of mistakes will be made, things missed out and potential losses gained. If you’re feeling tired, or that you cannot concentrate fully, then you should try and avoid trading as a whole, including analysing the markets and especially placing any trade.

Being Distracted

Distractions are horrible things when it comes to trading, pretty much anything can be a distraction. When you set up your trading officer room, you should have ensured that a lot of the things that could cause you distractions were removed. Things like a TV, games consoles, things like hats, things that can take your attention away from your trading. Ensure that others know that you are trading and that you do not wish to be disturbed. Distractions can very easily cause you to miss things or to place trades incorrectly, so it is vital that you eliminate as many as you can.

Trading With Emotions

Emotions are wonderful things, they can make us feel amazing but at the same time, they can make us feel pretty rotten. One thing that we want to avoid is trading while our emotions are pretty high. They can cause us to want to do things that go against our trading strategy, things like greed and overconfidence can make us trade large or more often, while things like anxiety and fear can make us not want to trade at all. When we have our emotions high or you can feel something building up then it is important that you take a break, step away, clear your mind and come back when those emotions have died down.

Those are just some of the mistakes that people make when they are trading, some of them may seem pretty small but the consequences that they can have can be pretty big. If you are in any situation, then take a step back and see what you can do to try and rectify things. It’s not the end of the world but what is important is that you are able to recognise them and then do what you can to rectify them.