Category: Beginners Forex Education

Educational Articles for Newcomers to the Forex and Crypto World: Forex basics, including structure, assets, a basic definition of the common terms such as lot, bid, ask, price, how prices move, leverage, spread, slippage, basic chart concepts, chart types, timeframes, ranges. Basic money management and position size techniques.

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Beginners Forex Education Forex Basics

The Best Advice Forex Trading Advice You’ll Ever Receive

We all like a little bit of advice, don’t we? The entire point of advice is that it allows us to get better, as other people can see the things that we are doing and point out what we need to improve. Of course, not all advice is actually helpful. Some of it will not […]

We all like a little bit of advice, don’t we? The entire point of advice is that it allows us to get better, as other people can see the things that we are doing and point out what we need to improve. Of course, not all advice is actually helpful. Some of it will not […]

We all like a little bit of advice, don’t we? The entire point of advice is that it allows us to get better, as other people can see the things that we are doing and point out what we need to improve. Of course, not all advice is actually helpful. Some of it will not impact our trading but it is still good to hear. Today we are going to be looking at some of the better advice that you could use to help improve your trading. You may already be doing a lot of these things, or you may not be. If you aren’t, try implementing this information into your trading plans to see if they make an improvement.

Use a Demo Account

First off, we must stress how important it is to test your strategies and any changes that you make. This is something that a lot of traders, especially newer ones, simply do not do. They just chuck the changes into their main trades and hope for the best. Those that do test may still do this on a live account. While the trades are smaller, you are still risking your own money on something that you have no idea whether it works or not. So instead, what you need to do is to trade and test any changes that you make, no matter how big or small, on a demo account. This way you are not risking any of your own money on the changes, and if the change makes things a lot worse, you have not lost anything. As soon as you can see that the change is working consistently, only then should you try and implement that change on your live account where your actual money is.

Have a Risk Management Plan

One of the main elements of any trading plan or strategy is the risk management that comes with it. You can set this up before placing a single trade and you should, it will then be used for every trade that you place. The thing is though, that a risk management plan that works at one point, won’t always, and so you will need to be making constant changes and constantly reviewing the plan. Different market conditions may require you to change the locations of your stop losses and take profit levels. It may even cause you to change your risk to reward ratio. That is fine if you need to, just be sure that you are constantly monitoring the levels they are at and what risk management techniques you are using. You never know when they need to change, just remember our first point, test them on a demo account. Never accept your risk management plan as final.

Do Not Blindly Follow Others

A lot of traders will come into forex and simply follow what others are doing or what they say. While it is perfectly fine to get ideas from others or to trade the same as someone else, (some people make a lot of money by doing that) what is not right is to simply follow their trades blind. This means that you do not know why the trade is being put on or what to do if things go wrong. Each trader that you are following will have a reason as to why they have placed the take that they have, you need to know this too. As soon as you trade without knowing, you are risking your money on a blind gamble, and what will you do if things go the wrong way? That trader may not be there to tell you what to do, you will need to work it out, so if you follow blindly, you won’t be able to. Always work out why someone is placing a trade and what the requirements of that trade are before you place it. If you do not know any of these things, then do not place the trade.

Never Trade With Bill Money

The golden rule of anything to do with trading or investing, do not take any more than you can afford to lose. The best way of doing this is to consider any money that you deposit into your broker’s account as lost money, it is lost to you until you withdraw it back to your account. You also need to consider whether you need that money. We have seen countless traders trade with money they cannot afford to lose, money that they needed for food or for rent. They lost it and so cannot afford their rent that month, or even worse, traders that borrow, get into debt for trading and then lose it, leaving them with the debt to pay. If the money you are using will negatively affect your life if you lost it, then you should not be using it to trade at all.

Research EVERYTHING

This leads on from the previous point, you need to research everything, and we mean everything. If you are looking for a broker, research them. Find the one that has the right features that you need, and that has a good reputation of honoring what they are meant to be doing. If you are looking at signals, research them. Look at how they have done previously, the people behind it, everything. Creating a new strategy? You know the drill, you need to research everything that you can about it, the risk management that comes with it, the best trading conditions for it, your own requirements such as time required. Anything you do in trading, you need to research, this is how you get to know what it is that you are doing and why and it is the best way to ensure that the way you are going to do is correct. Do not do anything blind in forex or trading, that will only lead to losses and potential blown accounts.

That is some of the advice that you will hear quite a lot over the internet. It is all fantastic advice that can really help you to become a profitable and successful trader to at least save you some potential headaches down the road, not to mention some of your capital. Whether you already do them or not, take them into consideration next time you plan on trading and think about what you could potentially be doing differently which could help to improve your overall trading.

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Forex Basics

What NOT to Do When Trading Forex For the First Time

Let’s be honest with each other, we have all made some silly mistakes when we do something for the first time. This is certainly true when it comes to forex trading. We have made a number of mistakes and when we look back at them now, we can see how silly some of those mistakes […]

Let’s be honest with each other, we have all made some silly mistakes when we do something for the first time. This is certainly true when it comes to forex trading. We have made a number of mistakes and when we look back at them now, we can see how silly some of those mistakes […]

Let’s be honest with each other, we have all made some silly mistakes when we do something for the first time. This is certainly true when it comes to forex trading. We have made a number of mistakes and when we look back at them now, we can see how silly some of those mistakes were. We also aren’t alone, many people are making the same mistakes that we were back then. They can be easily avoided, but you need to know what they are first. So we are going to be looking at some of the things that traders should not be doing when they first start trading the forex markets.

Trading Too Soon

Many new traders are excited about actually placing their trades. The problem with this excitement is that it means that a lot of traders do not actually learn enough before they decide to place those first trades. They learned the basics, what a trade is, and how to put it on, but that is about where the learning ended before trades have been placed. The problems that you will not be using a proper strategy with proper risk management, and so you are taking a lot of risks by placing trades too soon. Instead, you need to ensure that you know what you are doing. You need to have a strategy in place that will tell you how to place your trades and you need to have risk management in place in order to ensure that your account is protected and that you won’t be losing too much of your account balance with a single trade that goes wrong. Take your time, there is no need to start placing trades as quickly as possible.

Diversifying Too Early

There are a lot of currencies and a lot of assets available to trade, the variety is great and can really help us to be profitable as we can always find something to trade. There are however downsides to it, each and every currency and asset behaves slightly differently and is affected differently to real world events and news events. So there is a lot to learn. What a lot of newer traders do is that they start to pick a lot of assets at once and try to trade them all, this can be really confusing and ultimately overwhelming as you cannot learn about all of them at the same time. Instead, it is always recommended that you take your time to learn a single currency or asset at a time. Learn everything that there is to do with it, master it, and only then should you look at trading another asset. Of course, just one at a time until you learn all that there is about it and then another. Continue like this and it will help to keep you from overwhelming yourself or getting mixed up between a number of different currencies or assets.

Not Continuing to Learn

Forex is ever-evolving. Things are always changing. The markets are always changing and what you need to know is always changing. There is also an incredible amount of information, so much so that not a single person will know everything about everything when it comes to trading. So it is always a mystery why some people think that they do not need to learn anymore, and this is more often than not those that are newer to trading. They have learned their first strategy, they have placed some winning trades and so they believe that they know all that they need to know. You need to keep learning though. Every day you can learn something new, as soon as you stop, the market conditions will change and this will basically throw off anyone that is not learning anymore. They will not know how to adjust in order to match the markets and so they will begin to make losses. One major rule of trading is that you never know everything, you need to always be on the lookout for new things to learn.

Devoting Everything to One Trade

Something that newer traders don’t necessarily take as seriously as long term traders do is risk management. What we see a lot of traders do is to place trades that are far too large for their account size. This can be due to a lack of understanding, or it can be due to the fact that they want to make more money or that they are desperate to make more. Either way, it is not a sensible thing to do and it will ultimately only lead to losses or even completely blown accounts, especially if they are not using the proper risk management techniques in their trades. It is always better to trade too small than too big, at least that way your account will be safe should the markets turn against you.

Trading Too Much

Another thing that a lot of new traders do along with placing trades that are too large is to simply place too many trades. Whether or not someone is using a strategy for their trades, when you begin to place a lot of trades it can only lead to disaster. When we place a trade we use up a little bit of our available margin, as we place more we use more and more up, as we begin to use up a lot of it. It won’t take much for the markets to move against us and for the account to blow. We will also be placing trades that may not be considered as good trades, trades that are on a hunch or that are not in line with any strategies, we need to avoid doing these. More is not always better, you need to place trades that you are more sure of, rather than lots and hoping for more wins than losses.

Not Using Stop Losses

Stop losses are amazing things. These can be set for each trade. When the markets reach that level they will automatically close the trade at a loss. Why would we want to close a loss? To protect our account. If you do not use them, then a single trade could potentially blow an account. The stop losses are there to ensure that we only lose what we are prepared to lose on that single trade. Any more will be prevented which is how a trader remains profitable, by controlling how much they lose with each trade. Yet we see a lot of newer traders trading without them. Maybe they do not know about them or fully understand the importance of them, or some just don’t want to as they do not want to lose. Instead, they hold trades until the markets turn, if they turn. This is dangerous and not something we would recommend. Always use stop losses when trading,with every single trade.

Those are just some of the things that newer traders do not seem to do. There are, of course, other mistakes that are quite common. Consider whether you did or still do some of the things mentioned above. If you do, what do you think you can do to help change this? Try ad work on your trading to take out some of these things that you probably should not be doing.

 

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Forex Basics

The Most Hilarious Complaints We’ve Heard About Forex

There are a lot of people that like to complain about things when it comes to trading. Some of them are genuine complaints, while others are pretty funny to look at and are clearly made up in order to try and justify the reason why they have lost some money or to cover up their […]

There are a lot of people that like to complain about things when it comes to trading. Some of them are genuine complaints, while others are pretty funny to look at and are clearly made up in order to try and justify the reason why they have lost some money or to cover up their […]

There are a lot of people that like to complain about things when it comes to trading. Some of them are genuine complaints, while others are pretty funny to look at and are clearly made up in order to try and justify the reason why they have lost some money or to cover up their misunderstanding of what it is that they are actually doing. Today we are going to be looking at some of the most hilarious complaints that we have heard about trading forex.

“It’s Fake!”

One of the best that we have heard and we have heard it quite a few times is the fact that there are people out here that are claiming that forex trading is fake. That the entire system that we use is fake, something made up by some people in order to take all of our money. That million of traders are all falling for something that isn’t even real. You can probably tell how silly this is, and yet people still complain about it. They complain that forex even exists.

While we can see their point of view when it comes to certain things, like the people promising ridiculous income or the fake brokers, calling the entire industry a trillion dollar industry fake is just a little on the absurd side. Normally when there is enough proof out there to clearly show that something is real, the people claiming it to be fake often stay quiet, but when it comes to forex trading, they like to be vocal, which ultimately just ends up making them a spectacle to be laughed at.

Look on social media, you will constantly see people telling others to stop because it is fake, completely ignoring the fact that the people they are telling to stop are actively trading the thing they are calling fake…

“My Strategy Was Right…The Markets Were Wrong.”

There are some very stubborn people out there, some that seem to think that everything that they do has to be right. This could be a form of narcissism where someone is completely on their own side, they know best and they are right. We see people basically telling us that the strategy that they have used is right, the trade that they put on should be a win, but it ends up losing. Is this their fault, no, a good strategy will still have losses, no matter how good it is, but when you start to blame the markets, saying that the markets are wrong, it just gets silly. The markets are not wrong, they never will be, you are trading the markets, the markets aren’t moving for you If your trade loses, it is not the jets fault, you just put on the wing trade you need to accept that, but that is something that a lot of people do not seem willing to do.

We have seen the complaints of someone asking why the markets didn’t move up. They had placed a trade and it should have gone up. They just couldn’t accept the fact that he did not control the market.

“My broker scammed me!”

We Have to make it clear – for some, this could actually be true. There are some very underhanded brokers out there that are created for the simple reason of taking your money. Yet we see people shouting about being scammed by some of the major brokers, the biggest and most trustworthy brokers. When in reality, they just traded badly and lost their money, but of course it is not their fault, it is the brokers fault, using foul play to take their money. If you are to ask them for evidence of this, the only thing that they can ever show you is their blown account or some losing trades, which only confirms the idea that they traded badly, nothing to do with the broker. They very very rarely have any proof that the broker did wrong, making their excuses and complaints pretty pointless and worthless.

People have complained about brokers calling them up and asking for more money. They have then paid them, only to never see the money again. We are not sure how you can complain about that. If that happened to us, we would be keeping our mouths shut out of embarrassment.

“There is too much info out there.”

There is a lot of information when it comes to forex trading. The good news is that you do not need to learn about all of it. In fact, you probably don’t even need to know even 5% of it in order to be a very successful trader. There is loads of stuff when it comes to trading that we know very little about, that is not a problem. Yet some people come into trading forex thinking that they need to know everything, that if they do not learn it all they won’t be able to be successful. They see all the information that here is and decide that there is too much, complain about it and then leave. Yet they do not want to listen to the answers given to thm which clearly tell them that they don’t need to learn everything, instead they simply want to complain rather than actually giving it a proper go. 

One of the best complaints we’ve read was when someone claimed to have spent hours learning everything they can, but they still didn’t understand what a PIP was. When asked if they had looked it up and they simply answered no, stating that there was too much other information clouding their ability to find the answer. 

“It costs too much.”

Trading forex costs a lot if you lose, that is the simple fact behind it. Some traders are fixated on using just one or two brokers that they may have used before or that were recommended to them, these brokers may require a larger deposit in order to start trading with them, but not all brokers do. There are some very good brokers around that allow you to open up an account for as little as $10, making it very cheap and very accessible. Of course you won’t be able to make much with that amount and it is easy to lose it, so it is recommended to have more, but the opportunity is there and it does not cost much. Some brokers also offer larger than usual commissions or spreads, something that you should avoid, but you can certainly find ones that offer low deposit limits, low spreads and recent commissions. Yes it costs money to trade, and the more money that you have the more you can make, but it is certainly not costing too much to trade at all.

We have seen complaints from people saying they need $10,000 to open an account and that they are being charged $20 per lot traded…The solution is simple. Choose another broker, there are enough of them out there.

Those are some of the complaints that we hear quite a lot. Some of them are legitimate, however, they are more often than not blown vastly out of proportion, to the extent where they just become ridiculous and you can’t do anything but laugh at them. We are sure you have heard some of them and we are sure that you will hear them again, that is just the nature of people and forex trading.

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Forex Basics

Tips for Increasing Your Forex Productivity

Forex trading can take a long time. In fact, in order to place a single trade, it could take you up to a few hours of analysis before you actually place it. That doesn’t sound like the most efficient thing in the world and you would be right, it isn’t. Traders are always looking for […]

Forex trading can take a long time. In fact, in order to place a single trade, it could take you up to a few hours of analysis before you actually place it. That doesn’t sound like the most efficient thing in the world and you would be right, it isn’t. Traders are always looking for […]

Forex trading can take a long time. In fact, in order to place a single trade, it could take you up to a few hours of analysis before you actually place it. That doesn’t sound like the most efficient thing in the world and you would be right, it isn’t. Traders are always looking for things that they can do that will help them to speed up their trading abilities. To improve their productivity and to basically make trading forex quicker and simpler. That is why we are going to be looking at some of the things that you can do that will help speed up your productivity when it comes to forex trading.

Have A Predefined Plan

Having a plan already set out can make things incredibly simple and a lot quicker when it comes to actually placing your trades. This predefined plan basically means that you have your entry requirements already set up, a set of rules that dictate what trades you are going to be putting on and how you are going to put them on. These rules should be set in stone and go inline with your strategy. Having them there clear and simple means that you do not need to think as hard when you are there to place a trade which can increase your productivity as you are no longer needing to work out whether it is a good trade or not, you know whether it is or is not based on whether it matches your rules. If it does, then place the tread, if it does not then do not place it, as it would be a bad trade. Having these rules are paramount for being efficient, as well as profitable.

Remove Any Distractions

Distractions can be a real nightmare for your productivity, not just with forex trading but with pretty much anything that you are doing. Distractions can come from a lot of different sources from the TV, a radio, your phone, internet browsers, or even other people. If there is something around that can distract you, try and get rid of it. This may mean that your trading room is a little bare, and that is fine, as long as it enables you to concentrate on what you are doing. As soon as you start to procrastinate, looking at or doing other things, your productivity will plummet. Avoid this as best as you can. Of course some distractions you cannot avoid, the postman at your door for example, but as long as you control the ones that you are able to, you should be able to keep your productivity high.

Avoid Bad Trades

Productivity is not all about placing trades. You could place 100 trades a day, but this does not mean that you are being productive. All it means is that you are placing a lot of trades. Instead, you should try and focus on placing good trades, trades that are in line with your trading strategy, and trades that will give you the best chances of being profitable. If you simply place random or lots of trades, then there is a good chance that some of them will be losers. As soon as you lose a trade, your overall productivity will decrease. So instead you will want to focus on the good trades, each one will have a better chance of profits, which is your overall goal and the overall measurement of your productivity.

Reward Yourself

There is no better motivator to work hard than a reward, so reward yourself. It will help you to want to keep going and to work harder. If we constantly work and don’t receive anything back, why are we doing it? It will demotivate us, make us not want to bother doing too much which will be detrimental to our overall trading productivity, it will drop if we are not motivated to work. So reward yourself regularly. It doesn’t need to be very large rewards. A little bit of your profits or a nice meal out should be enough. Reward yourself, motivate yourself often and you will see your overall productivity levels rise.

Take Breaks

This may seem to be counter-productive. Taking a break means that you will be away from your computer and away from making trades, but this is not necessarily a bad thing. In fact, it is a good thing and can very easily improve your overall productivity. Taking breaks allows you to refresh both your mind and your body. If we do the same thing over and over for a long period of time we will become bored. We will become tired and we will start to make mistakes. That is why taking breaks is so important, it allows us to remain fresh when we are trading. This freshness means that we are able to concentrate more and will be able to better ensure that we are placing good trades, not to mention the speed at which we can place them will also improve.

Get Plenty of Rest

There is nothing better to refresh us than a good night’s sleep. Your brain needs time to switch off and to recover, not to mention the fact that we have all experienced what it is like to not sleep properly. You are sluggish, make mistakes, and are far more irritable than when we have had a good night’s sleep. This is why it is so important to try and sleep. Along with this, it may be beneficial to choose a trading strategy that does not require you to be up in the middle of the night, one that allows you to take advantage of your bed and to sleep the entire way through the night. If not, then at least try to get a minimum of 6 hours sleep a night, at a minimum to ensure that you are up and alert the next day ready to trade.

Set Alarms

Let’s be honest, we have all had those trading sessions where we are sat at the computer for hours and absolutely nothing happens, there have been no trade opportunities available to us. We can avoid this by simply setting up alarms and alerts. These alerts can let us know when the market conditions are favourable for us and this will enable us to get away from the screen and to avoid wasting time simply sitting there. We can take a break, we can do some laundry, cooking anything rather than simply sitting there doing nothing, and becoming frustrated. These alerts mean that we are only actively trading when the markets are in the right condition, which will also keep our mind free and fresh for when we actually need to place our trades. These Arts can also work forever, meaning that we can set them and they will alert us every time in the future when the conditions are right.

Those are just a few of the things that you can do that will help to ensure that your trading productivity remains high. They will enable you to place far better trades at a much quicker pace, will help you to become profitable, and will enable you to be a better trader overall.

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Beginners Forex Education Forex Basics

To People That Want To Start Forex But Are Afraid To Get Started…

Getting started with new things is often the hardest step, and it is no different when it comes to trading and forex. People can sometimes find it hard to actually place that first trade or to deposit that first bit of money. There are be a number of different things that are stopping you from […]

Getting started with new things is often the hardest step, and it is no different when it comes to trading and forex. People can sometimes find it hard to actually place that first trade or to deposit that first bit of money. There are be a number of different things that are stopping you from […]

Getting started with new things is often the hardest step, and it is no different when it comes to trading and forex. People can sometimes find it hard to actually place that first trade or to deposit that first bit of money. There are be a number of different things that are stopping you from starting, from your anxiety, to simply not liking the risks that are involved. We are going to be looking at some of the reasons why people are afraid of starting the whole trading process. We will also look at some of the things that you can do to try and get that jump-start and to actually start trading.

Jump In

Honestly, it may not sound like the most helpful advice, but sometimes you just need to just jump in with both feet. This doesn’t mean be reckless. Don’t jump in and throw your money about, simply get that first trade placed. Yes, you will need to do some learning beforehand, or analyze the markets for potential trades, but getting that first trade out the way will seriously help with your anxiety about placing those trades. It will also give you an idea and feel of what it is that you are doing and how it actually works first hand rather than just from what you have previously read about.

Use A Demo Account

One way of getting around the fear of putting on some trades is to practice doing it. You can do this on a demo account. The majority of brokers will have this service available to you, all you need to do is to sign up for the demo account. These accounts often have the same features and trading conditions the live accounts so they are perfect for testing out your strategies and just simply getting used to trading. Do not worry about using the demo account for an extended period of time. Use it until you are ready to go live. This could be a week, a month, or even a year for some people, but use it to get used to it until you are confident about how things work and that your strategy is effective.

Use Money You Can Afford to Lose

As with anything when it comes to money, you should only use money that you can afford to lose. What this means is that you need to imagine that any money that you put into the account is automatically lost, imagine that you will never see that money again. How Does this make you feel? If you are just a little annoyed then that is fine, but if you are now worried about being able to pay the rest, or that you are going to have to cut back on things then you should not be trading with this money. If losing it will affect your life, then you need to avoid trading with it at all costs. Only use what you can afford to lose, that is a saying that will be around for as long as money exists.

It’s Complicated, But Not Too Complicated

Trading can be complicated. There is a lot to learn and it can be incredibly overwhelming. In fact, we were in the exact same position at the start of our trading careers. There’s so much info out there that it can make you want to simply give up as it can confuse you as to what it is that you actually need to do. Do not worry if you are in this same situation. Take your time. There is no time limit on how quickly you need to learn things. In fact, you can take as long as you need. Go over one subject at a time, learn what there is to know about it, and then move on to the next. As you begin to learn more and more it will all begin to fall into place and it will start to make sense for you. Of course, there is still a lot to learn, and it is still complicated, but it will start to become clear the more you learn, and the more you begin to understand it.

Too Much Risk Is Involved

For many people, risk is a voodoo word. It is something they do not want to think about and something that they would want to avoid. This is perfectly understandable. Afterall, with risk can come loss, however on the other side, with risk can come rewards. That is why we set up strict risk management plans. These plans outline what we will trade when we will trade it, and how much we will trade. It also tells us the maximum loss that we can have with each trade. If you are worried about putting your money at risk, know that you’ll have these plans in place which will prevent you from losing everything at once. In fact, you can set it up so that you only need to win 25% to 30% of your trades in order to be profitable. This is all done through your risk to reward ratio, which is part of your risk management plan. Ensure that you have this in place before you start trading and you will be in a good position.

Plan Your Trades – Plan Your Losses

Fear and being afraid of something is all about your anticipation that something will go wrong or that something bad is going to happen. In the case of Forex trading, this is often the fact that you can lose some of your money. What we need to do is to plan for these losses. It sounds strange saying that we are going to plan for them, as if we want them. Of course, we don’t, but we know that they are going to happen at some point in the future. The very near future. Losses are a part of trading, all traders experience them, even the best in the world. What they do though, is that they plan for them, they know that the losses are coming and so they limit the damage that they cause. Within our risk management plan, they have their risk to reward ratio that we mentioned before. Those prevent the losses from being too large. Some go for a max 1% loss, which means you can lose nearly 100 trades in a  row before busting out. Others a little more, but that means that even though you have made a loss, it is small, and a single win will bring you back to breakeven or even profit.

We understand that it can be hard to get started. As we mentioned, starting is often the very hardest part of it. Once you have your first trade and you understand what you are doing, those worries and anxieties that you had about trading will fly out the window. You will have confidence, you will know what you are doing and you will be able to trade more and more. It is simply getting started that is hard, but push yourself over that hurdle, and you will be on your way to a new career in forex trading.

Categories
Forex Basics

What I Wish I Knew About Forex Trading A Year Ago

One thing that we can all be sure about, hindsight is a fantastic thing. It allows us to look back at what we have done in the past and to then consider what we maybe could have done differently. While we are not able to change the past, although it would be great if we […]

One thing that we can all be sure about, hindsight is a fantastic thing. It allows us to look back at what we have done in the past and to then consider what we maybe could have done differently. While we are not able to change the past, although it would be great if we […]

One thing that we can all be sure about, hindsight is a fantastic thing. It allows us to look back at what we have done in the past and to then consider what we maybe could have done differently. While we are not able to change the past, although it would be great if we could, we can still learn from it and that is what we will be doing today. Now that we have been in the trading game for quite a few years, we have learned a lot of new things, things that would have been very helpful for us back in the past. So let’s take a look at some of the things that we wish we had known a year ago that most likely would have helped us to be far better traders.

Do Not Trade Too Soon

One thing that we did quite a lot a year ago was to trade too soon. This is not in relation to not having the knowledge, we had already been trading for a bit of time before this so we had an idea of what we were doing. What we did keep doing though is putting on the trades too early, we had a trade lined up, did a little bit of analysis, but then did not wait for the additional confirmations that were needed. Instead, we simply placed the trades. Some went well, some did not, and those that went into a loss were easily avoided if we had just waited to place the trade and we would have seen that the markets went against us. So we simply wish that we had a little more patience when it came to policing out trades.

You Will Be Profitable

This is one quite personal to me. A year ago, I had a lot of doubts. I have a lot of thoughts that I may not be successful and that made me go days or even weeks without actually trading. In the position that I am in now, I am profitable month on month. I just wish that I had known that I was going to be successful. I would have had the motivation to trade every day and the motivation to put in more effort along the way. However, I am happy with the position that I am in now and will not dwell on the lost potential that would have been there.

No Single Strategy Will Always Work

About a year ago I only used a single strategy. It was my go-to strategy and it is what I used pretty much all the time, no matter what the conditions of the markets were. This is something that we know now is not the best way of going about things. In fact, it really held us back and prevented us from making quite a lot of profit. What we know now is that we need to have a number of different strategies in our arsenal if we want to really be successful. It will also allow us to trade better in different market conditions rather than trying to always adapt our single strategy, which can only stretch so far. So we just wish that a year ago we have learned a number of different strategies instead of sticking to just the one.

Use Stop Losses With Every Single Trade

We did use stop losses, just to make that clear, but we did not use them with every single trade. Due to this, we made a few losses that are a little larger than they probably should have been. This ultimately would have saved us a bit of money in the long run. We now know that we need to have the stop loss set on every single trade, every single one, no matter how sure we are around no matter how small or big the trade is. Always have one set, regardless of anything else, it will save you money and the one that you miss could be the one that would have saved your account.

Covid-19 Is Coming

If we take the tragedy out of the Covid-19 pandemic, then the pandemic gave us a lot of opportunities as well as a devastating effect on the world economy. A lot of people lost a lot of money when the markets decided to fall. However, while the stock market collapsed, the forex markets were a little more stable. It was, of course, a lot more volatile but it wasn’t blowing accounts every single day. What it did offer though was a lot of opportunities. As different countries went into lockdown at different times, the markets reacted accordingly. We stood back from the markets as a lot of trades did, but this meant that we missed out on some fantastic chances to make a lot of money.

Some traders took advantage of this. As the UK went into lockdown, they shorted the GBP currency. As the USA went into lockdown they shorted the USD currency, the same for Europe and other countries. As the countries went into lockdown, their economies shrunk which in turn made their currencies a lot weaker. The perfect opportunity to profit from them. There were, of course, still a lot of dangers in the as it was very unpredictable, but there was certainly a lot of money to be made and as it happened. We wished we were involved but didn’t want to take the risk. Now though with hindsight, we still wish we were more involved.

Those are some of the things that we wish we knew a year ago. Some of them would have helped to save us a little bit of our profits by reducing losses, others would have helped us to have made a lot more profit, and some would have just made us a more knowledgeable and consistent trader. Whatever you are doing now, think back to a year ago, were you doing the same things? You were most likely not, some of them yes, but some of them no. We are all developing as time goes on, so while hindsight is good. Looking back at how far you have come is good. Try not to dwell on the past or the mistakes that you have made, look to the future and the successes that you can make in the future.

Categories
Forex Basic Strategies

Undeniable Proof That You Need A Trading Strategy

If you are new to trading or are simply thinking about joining and have spoken to another trader, they most likely would have asked you what strategy you are using. While for many it is quite a straightforward question to answer, for others it is not quite so simple. There are thousands of different strategies […]

If you are new to trading or are simply thinking about joining and have spoken to another trader, they most likely would have asked you what strategy you are using. While for many it is quite a straightforward question to answer, for others it is not quite so simple. There are thousands of different strategies […]

If you are new to trading or are simply thinking about joining and have spoken to another trader, they most likely would have asked you what strategy you are using. While for many it is quite a straightforward question to answer, for others it is not quite so simple. There are thousands of different strategies out there, and some traders even trade a hybrid of more than one strategy at the same time. What is important though, is that you have a strategy, no matter what it is, it is imperative that you have one, and we are going to be looking at why it is so important to have a strategy, no matter what it is.

Gambling Is A Loser’s Game

If we are to trade without a strategy, we are effectively just gambling. There is no other way to describe it. You are taking a wild guess at what the markets will do or you are using a hunch, but that hunch is based on no real facts or figures. Due to this, you are simply placing your bet and hoping that the markets go the right way. The problem with this is that the markets like to move how they want to move and they do not always move in one direction for long enough for a gamble to be effective. What’s worse is that if your first trade losses, you will simply place another trade with no real reason behind that one either. You need to lose a strategy, the strategy gives you rules to follow and ensure that your trades have the best opportunity to profit, rather than simply placing trades and hoping that it is a loser’s game through and through.

Strategies Give You Rules

One of the things that a strategy will give you are rules, house rules are there to ensure that your trades are consistent and that the trades that you are putting on have the best opportunity to be profitable. When we have a strategy in place when we place a trade that is not in line with the rules that we have set out we consider it a bad trade. We are trading outside our strategy and so the profitability factor or risk and reward ratio of that strategy is no longer accurate making it far harder for us to keep track of how well the strategy is doing or how well we are doing as traders as a whole. Once you have set rules, stick with them, this is the best thing that you can do in order to ensure that you remain profitable.

Strategies Give You Stability

The rules that we set out above are there to give us stability. Those are the main reasons behind them, and due to that, using a strategy gives us a lot of stability when it comes to our trading. It makes us consistent in the trades that we are making. It ensures that we are always placing good trades and ultimately it can make our profits and overall capital a lot more stable.

Strategies Protect Us

A major part of any strategy is the risk management that comes with it. The risk management part of strategies are there to help protect your account, they include things like your risk to reward ratio, stop loss locations, and other elements like that. All designed to limit the amount that you can lose with each trade and to ensure that you do not blow your account too quickly. We need to trade with risk management within our strategies, if we don’t, no matter how good a strategy actually is, a single trade can actually cause you to completely blow your account.

Strategies Help You to Focus

One fantastic thing that strategies help us to do is to focus, they help us to avoid distractions and they help us to concentrate on what it is that we need to be doing, rather than looking elsewhere. We know what we are looking for in the markets, and exactly what we need to do. This really helps us to focus on what we are doing which in turn can make us a lot more efficient in our trading.

They Can Save You Time

When you use a trading strategy you will know what you have to do. This will help to save you time from analysing or looking at things in the arts that you certainly don’t need to. Much like when we mentioned keeping focus above, using a strategy can help you to save time as you are focused on what you are doing. It also helps you to avoid some distractions. There have been plenty of times then we have wasted a lot of our time by looking at things that are completely irrelevant to our actual trading, the strategy helps you to avoid doing this. At least not all day like we have been guilty of before, ending up with no trades for the entire day.

They Help You Learn

Many people think that strategies are only there to help us to trade, but they also help us to learn. They help us to better understand why the markets may be moving the way that they are and they help us to better understand the way that we trade. The more strategies that you learn and understand, the more of an understanding of the overall markets you will have. Multiple strategies also give you more of an opportunity to trade in different trading conditions, allowing you to be far more profitable throughout the year than you would using just one or even no strategy at all.

Those are just some of the reasons why you should be using a trading strategy, they can be relay helpful in your trading, your results and overall they are what make us traders, as long as you are using one you should be on a positive step towards being profitable, just try to avoid trading without one, that is simply gqambling and will only lead to losses in the long run.

Categories
Forex Basic Strategies

Three Trade Duration-Based Forex Strategies

In this article, we will analyze the types of existing automated systems according to the duration of the trade. I’ll show you some interesting ideas and teach you how to apply a variety of duration-based Forex strategies.  Scalping Perhaps the most famous method is the so-called scalping, which many of you have already tried. These […]

In this article, we will analyze the types of existing automated systems according to the duration of the trade. I’ll show you some interesting ideas and teach you how to apply a variety of duration-based Forex strategies.  Scalping Perhaps the most famous method is the so-called scalping, which many of you have already tried. These […]

In this article, we will analyze the types of existing automated systems according to the duration of the trade. I’ll show you some interesting ideas and teach you how to apply a variety of duration-based Forex strategies. 

Scalping

Perhaps the most famous method is the so-called scalping, which many of you have already tried. These are really short-term operations. Then the second group is called swing trading, mainly using higher time frames. This is my favorite approach and trading style, I use swing strategies, automated trading systems that make transactions in longer time frames. And the third group, which I also enjoyed working with very much recently, consists of long-term strategies, mainly in daily time frames. We will also consider this group because it has its own advantages that we must not forget.

Scalping is a type of specialized trade taking profits on small price changes, usually shortly after a transaction has been entered and has become profitable. Automated scalping strategies can do dozens of operations during a day and most such trades last only a few minutes. These are very short trades and, therefore, that trading style has its own advantages and disadvantages. Let’s talk about them.

Scalping is a type of trade specializing in taking profits on small price changes, usually shortly after a transaction has been entered and has become profitable As a general rule, scalping strategies are marketed in short time frames using 1-minute candles. So the main advantage is the opportunity to make big profits in a very short time. These automated strategies can be very profitable, but at the same time very risky. Where there is great profit potential, there is also high-risk potential. And, as we said before, scalping has some huge disadvantages.

In general, automated scalping systems are potentially very risky and very sensitive to market conditions. This is because it is almost impossible to perform transactions in a one-minute time frame to simulate with historical accuracy. Then, it is not possible to elaborate an exact subsequent test. We can only backtest a strategy, how it should work in ideal conditions. However, there are situations in the market, when there may be a publication of some important macroeconomic news, for example, that the unemployment rate increased. As a result, the market makes a very strong price movement in a very short time and we may suffer a large slide, something that has not been taken into account in subsequent tests, and that will definitely worsen the results of our strategy.

Where there is great profit potential, there is also high-risk potential. So, in the world of scalping strategies, only one of those unfavorable circumstances can mean that one loss takes ten of our earnings, and this is what we can’t see in our subsequent tests. Therefore, it is very difficult to develop robust scalping strategies, and I personally do not even use them. In the past, I’ve worked with scalping strategies and gotten really good results, but at times, these were due to luck and being in the market at the right time.

The potential benefits can be really huge. However, scalping is so risky and so sensitive that it makes no sense to use it at all. I would not care too much about the complexity of developing such strategies if they are so risky. Here we see big risks that can’t be determined in advance, so if you’re just starting to operate, I don’t recommend scalping.

Swing Strategies

I recommend directing your attention to swing strategies. This is my favorite type of strategy, which is usually marketed in the H1 time frame. In 90% of cases, they will be within one hour, in exceptional cases in M15. If we want to talk about whether to use a time frame of one hour or fifteen minutes, we need to consider the type of strategy. In 90% of cases we will use a time frame of one hour, which has its own advantages, but of course some disadvantages as well.

Therefore, I have chosen it. The main advantage is that it allows you to perform longer operations. Usually, an average trade lasts about 24 hours, it can also take several days, but usually around 24 hours, and it is also one of the factors with which I am satisfied. Such trades are not as sensitive. The number of trades in a month is a maximum of 10, so such a trading style is not as expensive.

Usually, an average trade lasts about 24 hours, it may also take several days. When someone is scalping, they pay a lot of money just for commissions or for spreads. This is not the case with swing strategies, with which you only need to pay commissions for approximately 10 transactions per month. Such a fee is less important and does not have a significant impact on your account.

Of course, swing strategies are not as profitable due to the smaller number of operations that are performed in longer time frames. Therefore, a trader earns less, but with more stability. Because these strategies are not so sensitive, they are not so influenced by the unexpected news of strong market movements. For example, when publishing macroeconomic news, such as the decision of a central bank on rates, unemployment rate, GDP growth, etc. In those moments, we only risk an operation and we are not so afraid of a negative result because it is not a big problem for us. It will not result in a great loss.

Swing strategies help us deal with some difficult situations in the market, and we can also perform backtesting with more accuracy and reliability. This is the main advantage of swing strategies compared to scalping: it is easier to simulate real market conditions for backtests. These strategies, in my opinion, are the perfect combination of the number of trades and stability, and if you’re a beginner, the one-hour window is definitely a good choice.

Position Trading

The third type of strategy is position trading. In general, these are strategies for long-term positions which, in some cases, can be maintained even for a few years. Basically, they are negotiated in daily or even higher time frames. I personally operate all position strategies in the daily time frame, and sometimes very interesting situations and transactions can occur.

The main advantage is that these positioning strategies are very stable, as they are usually used to take long-term trends. To take one example, in the past, we witnessed a crash in the oil market with a price that fell steadily for more than a year, so we could be in this position for a long time.

So position trading can be very stable because we are working with strong trends. I am satisfied with the positioning strategies in the daily time frames. Another advantage is that they can be tested very accurately because economic news has an absolutely minimal impact on their overall results. In many cases, it is only in the short term impact, and from the perspective of the daily time frame, this impact is not something we should fear.

Therefore, we can perform subsequent tests with a very high level of accuracy; however, these positioning strategies generally have lower yields. This third type of strategy has the lowest gains of all these types of strategies. It is necessary to note that position trading gives gains of ten to twenty percent. However, this can be achieved with great stability and can be re-tested with precision.

In addition, these positioning strategies generally work in a wide range of markets, so they can be used to trade indices, commodities, different currency pairs, as well as some exotic currencies such as the Polish Zloty, the Swedish Krona, or the South African Rand. We can do this because it operates on long-term trends, and you can even afford to operate in exotic markets.

This would not be possible when operating in lower time frames and with a greater number of operations; however, positioning strategies are connected with a low frequency of operations and therefore the costs are lower and Therefore, even the high entry costs in trades (usually very high spreads) are secondary due to the duration of our trades.

Categories
Forex Basics

The Seven Deadly Sins of the Forex Trader

Most of us have heard of the biblical seven deadly sins, but few know about the seven deadly sins of Forex. Part of achieving success is knowing what not to do, and these “sins” work to help you understand and avoid potential problems. Without further adieu, let’s get into it! Pride Wow! What a great […]

Most of us have heard of the biblical seven deadly sins, but few know about the seven deadly sins of Forex. Part of achieving success is knowing what not to do, and these “sins” work to help you understand and avoid potential problems. Without further adieu, let’s get into it! Pride Wow! What a great […]

Most of us have heard of the biblical seven deadly sins, but few know about the seven deadly sins of Forex. Part of achieving success is knowing what not to do, and these “sins” work to help you understand and avoid potential problems. Without further adieu, let’s get into it!

Pride

Wow! What a great trading session! There is no one to stop me! Tomorrow I will double my profits! 

Little grasshopper, you’ve had a good day, and yes, you got your positions right, enjoy your joy in moderation, and share with others the reason for those entries, and be aware that tomorrow that euphoria may cloud your vision today. Remember also that the one who calls himself a donkey and who today is crying out, perhaps it will be the genius tomorrow and you will be the one crying out.

Avarice

I’ve achieved my goals, and this looks like it’s going to turn, but there’s another target up there pending, so I’m going to continue with all my positions without partial withdrawal because I’ll gain a lot more.

Small grasshopper, already assures part of your profits, reduces risk situation and leverage, in this way, perhaps you will find opportunity in another market that you can take advantage of.

Sloth

Well, I’ve already won a TrADE today, and although this one I’m looking at now is very clear, I’m going to stOP. tomorrow will be another day.

Little grasshopper, if this new operation is clear, do it! And do it now!, do not leave for tomorrow what you can do today, but not simply by following the proverbs, but because tomorrow may not present you any clear opportunity in the market, And maybe you’ll force an entry of dubious signal, causing you losses in the end.

Gluttony

Today I will catch all of the price movements. Not one will escape me! Today I will recover everything that I’VE lost RECENTLY.

Little grasshopper, that’s called overtrading. It’s not advisable, you’re gonna get obfuscated. You’re gonna spiral into wanting to put a pulse on the market, and this one’s a lot stronger than you.

Envy

Wow! Look at this guy with the big profits. It’s just dumb luck. He has no real idea of how to trade Forex. 

Little grasshopper, congratulate him and share his joy, get in touch with him, maybe there’s something he can teach you. Keep in mind that trading is not only about skills but also about attitudes.

Lust

look how good that XD directive is! Go all out! I would hit with it XD. Wow, look how good that XD support is! Go all out! I would hit with it XD. (This is a joke, By THE WAY!)

More seriously, after a good run, your worst enemies will be overconfidence and self-confidence that can be lethal in trading, as well as excessive leverage. Minimal risk control and uncontrolled GM management can lead to failure.

Anger

they’ll be cursed! They’ve got me going in all directions. I don’t know where to turn any more! And look how stupid they all are, everyone buying! Do you not see that this has to fall?

Little grasshopper, don’t fight the market, the market must be your friend, listen to him, understand him and everything will go smoothly, be receptive, get in tune with him, and don’t get angry. It won’t lead to anything positive, you’ll only aggravate your lack of control. Enjoy trading. And don’t marry any position, after all, they don’t want you forever either.
Categories
Forex Market

What Is the 70/20 Rule in Forex?

Experts believe that 70 percent of market movements occur only during 20 percent of all time. What does the trader need to know about this to maximize the performance of their trades? Have you ever noticed that sometimes when you open a position and enter the market, it seems to freeze? Or, for example, do […]

Experts believe that 70 percent of market movements occur only during 20 percent of all time. What does the trader need to know about this to maximize the performance of their trades? Have you ever noticed that sometimes when you open a position and enter the market, it seems to freeze? Or, for example, do […]

Experts believe that 70 percent of market movements occur only during 20 percent of all time. What does the trader need to know about this to maximize the performance of their trades? Have you ever noticed that sometimes when you open a position and enter the market, it seems to freeze? Or, for example, do you sometimes open your trading platform and note with frustration that the price does not move in the next few hours?

How Do I Catch the Big Market Moves? 

To answer this question, you must first know why these moves even happen. If you have ever asked this question the answer is found in the simple 70/20 Rule. According to experts, almost 70 percent of market movements are manifested in only 20 percent of the time. In other words, large movements do not occur all the time, only at very specific times. Therefore, the trader is not required to sit all day watching the market to take advantage of them. This principle has a very significant implication in Forex trading. Therefore, it is important for currency traders to be aware of how they can apply the 70/20 rule.

Observe the Market at a Specific Time

Take a little time and think about it. If 70 percent of the market movements in the FX occur only 20 percent of the time, then you don’t need to look at the graphs all day. This implies the following: in case a trader wants to capture the widest range of movements of a currency pair, he only needs to concentrate on the market for a specific period of time. That said, you will need to see the main sessions of the Forex market in case you want to do day trading. In fact, some of the sessions bring much more volatility. In addition, they are more likely to generate large market movements.

Price trends may change in different time frames. The first implication of Rule 70/20 is related to day trading operators. However, there is something about this rule that should be known to swing traders. By analyzing a price chart with a high time frame, swing traders can often spot a clear trend. However, a particular time frame trend does not imply that the price will continue to move in the same direction in lower time frames.

Only large movements take place 20 percent of the time in one direction. Because of that, the trader must make sure to enter the market at the right time. To do this in a proper way, you may want to use multiple time frame analysis. This can help you understand where the market is most likely to increase movements. In addition, it can help you capture those changes in the overall market outlook.

Entering the Market At the Right Time

However, the key here is to enter the market in the right place. For example, if we enter one of the limits of a price range, we may suffer an unpleasant surprise and get stuck on the wrong side of the start of a new trend. This is because instead of bouncing in the upper or lower limit of the range, the price can break that range in the opposite direction to our operation and initiate a trend movement. Although many times the breakdowns of ranks are false and the price ends up being returned, this is not always the case, hence one must be careful.

The 70/20 rule should decrease the pressure felt by many traders who believe they should be in front of a screen throughout the day. Well applied, it captures most of the market movements in a small period of time.

An important point is that the trader should make sure not to open a trade in a shorter time frame solely based on a trend in a longer time frame. The location of your entrance matters more than you think.

Categories
Forex Market

The Inflation That Will Never Really Come

The sole objective of the entire Keynesian economy is to generate inflation. That is what the Keynesian shamans call economic growth, inflation. People often don’t understand what inflation means or why it exists and that makes them fall for the generally false belief that inflation makes debts evaporate.

The sole objective of the entire Keynesian economy is to generate inflation. That is what the Keynesian shamans call economic growth, inflation. People often don’t understand what inflation means or why it exists and that makes them fall for the generally false belief that inflation makes debts evaporate.

The sole objective of the entire Keynesian economy is to generate inflation. That is what the Keynesian shamans call economic growth, inflation. People often don’t understand what inflation means or why it exists and that makes them fall for the generally false belief that inflation makes debts evaporate.

This is a crucial point where your incorrect analysis leads to a completely erroneous vision and predictions. I will try to clarify this fundamental error because although it is a rather abstruse and technical matter, it is essential to understand it because on this depends everything that is happening and everything that is going to happen.

The fundamental error comes from blind faith in the power of shamans: the shaman, in the fanciful world of Keynesians, can cause rain whenever he wishes and, therefore, whether it is raining or not, or whether it will rain tomorrow depends only on a certain correlation of political forces between a certain group of pro-rain shamans and another group of anti-rain shamans. If it doesn’t rain, it is because for now, the anti-rain shamans are resisting the pressures they are subjected to by those who want it to rain.

The fact that the yen’s monetary economy has been crushed for 20 years by powerful deflationary forces, incapable of generating any inflation, should, according to the Keynesians, in the face of the group of pro-inflationary shamans, supporters of pressing the red button labeled “INFLATION” There would be certain very powerful groups that have been opposing the push of that button. The problem with this explanation between mythology and gibberish is that these “powerful groups opposed to an inflationary monetary policy in Japan” do not exist.

The explanation is another: if there is no inflation it is because the laws of the economy do not allow it to exist. This button, which allows the Central Bank to trigger inflation “when it is convenient” (when it is convenient for the State), works until it ceases to function and it is precisely this “which stops the inflation button” that marks, as a symptom, the death of a Keynesian economy.

The Keynesian growth model that we have experienced for the past 40 years is an economic farce that simulates creating wealth when what it actually does is consuming (destroying) capital (“capital” in the economic sense). This suicidal escape, analogous to the scene of “more wood, that is war,” in which Marx scrapped the train to feed its wood to the boiler of the locomotive, ends when there is no longer capital that can be consumed. This is what you have to understand, to understand what is happening.

The fact that consumers, businesses, and states appear severely over-indebted is not important, it is only a symptom. The fact that nominal interest rates are capped at their decline with the “zero limits” preventing the big clown from generating negative real rates, is not important, it is just a symptom. The fact that the financial system is deliriously leveraged and severely broken is also only a symptom. The fact that rich countries roll out insane trade deficits with poor countries and rich economies depend on loans from poor countries, that national pension systems are bankrupt and unable to pay pensions, are also symptoms.

All these are just symptoms that the capital that had been progressively consumed has already disappeared. It must be understood that the golden age of wine and roses was not a time of genuine economic prosperity, based on the ability of society to create economic wealth, but was a mirage in which we seemed to be rich because, in an insane orgy of consumption, We were destroying the capital that previous generations took 200 years to accumulate.

It must be understood that large monetary bubbles do not appear by chance, as an accident, or as a social pathology consisting of an epidemic of speculative greed. Monetary bubbles are just an exaggerated version of what a Keynesian economy always does, and in the midst of panic, is to consume capital while generating inflation, money, and unpayable debt. A process based on consuming capital is inherently unsustainable and the more advanced the Keynesian pathology, the less real capital remains in the world and the more gigantic the states have become and their appetite to consume capital (The sole purpose of the Keynesian toy is to satisfy the insatiable appetite of the State and to guarantee its unlimited growth). 

The succession of large-scale monetary bubbles, which condemn large sections of the population to be crushed by debt, always marks the agonizing end of the Keynesian experiments. They are a last flight forward and are characterized by the glamour and splendor of consumer orgies in which the last real savings available are destroyed. (See the “Happy 20s” that preceded the Great Depression)

Bubbles, and in a particular house or land bubbles, are just a terminal episode of a much broader disease called Keynesianism. When, for example, the leverage of Japanese banks soared, it was perfectly foreseeable that they would suffer a housing bubble and when the housing bubble materialized, it was perfectly foreseeable that their economy would collapse amid desperate and futile attempts to “beat the deflation.” The cliché “inflation ends up wiping out debts” is only true in the early stages of Keynesian disease, when “inflation” can take the form of a “wage-price spiral.”

Debtors, whether States, consumers or corporations, have a fixed-rate debt, which means that both the value of that debt and the value of the debt service are fixed in nominal terms. Also, the savings of savers is fixed nominally. A price-wage spiral is a change in the scale of the nominal value of the currency. As the value of the currency shrinks, debts and savings shrink to the same extent. Debtors see their debts evaporate because savers see their savings evaporate. It is a transfer of income from savers to debtors and is part of the general scheme of making the economy present some joy by consuming existing capital. (The real savings are transferred by the State to the debtors who consume it. Then the debts are erased and a new lot of savings can be transferred for consumption)

In the current situation, where wages are falling, and variable mortgage rates and prices are rising, it is obvious that “inflation” will not evaporate any debt. The one who made 1,000, paid a mortgage of 600 and bought a shopping basket for 400. If the mortgage rises to 700, the shopping basket to 450, and the salary is lowered to 900, this wage earner will not have the slightest feeling that “inflation” is helping him pay off his debts.

That these debtors have loans at variable and not fixed rates, that the installments of these mortgages are 60% of wages even when the rates are at 1.25% and that these loans have been granted by banks with leverage of x60, that they obtain a gross margin of 0.4% of those loans that they finance with the saving of some investors in fixed income willing to lend their saving for the 1.25% minus a differential of 0.35%, is not a set of misfortunes that have coincided accidentally. They are all features of the same phenomenon and express the terminal phase of a Keynesian economy based on capital consumption. The various “Band-Aids” that try to alleviate some of these superficial symptoms will not cure the disease because the cause is deeper: it is an explosive growing state that literally devours its subjects.

 

Categories
Beginners Forex Education Forex Basics

Top 5 Qualities the Best Forex Traders Tend to Have

If you want to make it to the top as one of the forex industry’s most successful traders, you’ll need to learn to act like one. While being educated is one of the most important steps on the road to success, possessing certain qualities is yet another crucial requirement that can make or break your […]

If you want to make it to the top as one of the forex industry’s most successful traders, you’ll need to learn to act like one. While being educated is one of the most important steps on the road to success, possessing certain qualities is yet another crucial requirement that can make or break your […]

If you want to make it to the top as one of the forex industry’s most successful traders, you’ll need to learn to act like one. While being educated is one of the most important steps on the road to success, possessing certain qualities is yet another crucial requirement that can make or break your trading career. If you’re wondering if you have what it takes, take a look at our list below – and don’t worry if you’re missing any of these qualities because we’re here with tips and tricks just in case.

The Best Traders are Disciplined 

Self-discipline is a major must-have for forex traders. The fact that you get to be your own boss is just the start, considering that you have to make the choice to get up and get online every single day when you could be sleeping in with nobody to answer to but yourself. Self-discipline also comes in when you want to deviate from your trading plan by making mistakes like risking more money than your plan allows, entering a trade without solid evidence you should do so, overtrading, and so on. Traders need to be able to stay focused and follow their trading plan at all times, or else they put themselves at risk of losing money. 

TIP: Here are some of the top tips for practicing self-discipline:

  • Set realistic goals and make a plan to meet them
  • Practice healthy trading habits
  • Hold yourself accountable if you don’t stick to your plan
  • Set a schedule around your most productive times
  • Figure out what your weaknesses are and find ways to overcome them

Patience is Key

There are a lot of ways that patience can benefit forex traders. To start, you’ll need patience when you’re learning to trade. It’s important that you don’t rush out there and open a trading account too quickly, or else you may not be prepared and you could lose a lot of money. Learning everything step-by-step can be a long process and creating a detailed trading plan can take quite a while as well. Once you start trading, patience can help you to avoid making emotion-based decisions, to wait for the right market setups, entering and exiting positions at the proper time, and so on. Many people have claimed that they feel that trading can be boring, therefore, patience comes in handy when things are moving slowly. 

TIP: If you’re generally an impatient person, the first step is realizing that and dealing with some of that anxiety so that it doesn’t spill over into your trading decisions. Try relaxing activities before you trade, like yoga, listening to music, going for a jog, or whatever helps you relax. You can also commit to your trading plan and promise yourself that you will not make trading decisions that don’t fit, even if you’re feeling overly anxious or don’t feel like waiting for the right market setup. 

Being Well-Educated

You can’t become a successful trader without pursuing a well-rounded education of everything that has to do with the forex market. Only learning beginner concepts like terminology, simple facts about the market, and how to use a trading platform just aren’t going to cut it. The best traders invest a lot of time into research and education, even those that have been trading for decades. Some of this time is spent researching more complicated strategies and techniques, watching videos, and participating in discussions with traders that have alternative views, and so on. It’s also important to stay up to date on important news that might affect the market, otherwise, you could be left behind. Successful traders always make time to do these things and never assume that they know everything there is to know about trading. 

TIP: If you want to get a good trading education, you’ll need to be willing to invest time into research. Fortunately, the internet offers a wide variety of educational websites and content like YouTube videos that focus on all types of trading subjects, from beginner materials to trading psychology, strategies, news, and other important material. 

Thinking Realistically 

You can’t expect to take up forex trading with little knowledge of the market and become a millionaire in a week. Having unrealistic goals and expectations can be a huge downfall for beginners because many of them get an idea of the results they want to see and feel discouraged or disinterested once they realize how much time they actually need to put into trading to reach those goals. Successful traders set realistic goals and think rationally when trading decisions need to be made.

TIP: The best way to get yourself into this mindset is to set reachable goals that focus on improving your trading abilities, rather than trying to reach a certain dollar amount. Here are a few examples of realistic goals for beginning traders:

  • To spend a certain amount of time each day learning about forex topics
  • To practice trading on a demo account x hours per week
  • To keep a detailed trading journal and review it often

These are just a few examples of positive goals traders can have that will help with self-improvement. If you set your mind to accomplishing these kinds of goals, you will see increases in the amount of profit you bring home because you’ll be a smarter trader at the end of the day. 

The Ability to Let Losses Go

The unpredictability of the forex market makes it impossible to avoid losing money every now and then. Even the best forex traders lose money at times. Some traders handle these losses much better than others because they understand that it is unavoidable, but other traders have a hard time letting this go. They might feel like they’ve taken a hit to their ego and try to blame others, they may become depressed, or they might begin to risk even more money in an attempt to gain back what they’ve lost. Meanwhile, professional traders aren’t losing any sleep over their losses and they are able to stay level-headed without deviating from their trading plan when this occurs. 

TIP: It’s understandably difficult to lose money, but there are some things you can do if you’re having trouble coping with forex losses. Here are a few ideas that could help:

  • Never risk more money than you’re willing to lose so that losses don’t seem like such a big deal
  • Remember that coming out with some type of profit is still worth celebrating.
  • Review what happened when you lose money and try to diagnose the problem. If it was your fault, think of it as a learning opportunity rather than a personal failure.
  • Don’t beat yourself up over losses. Remind yourself that this happens to every trader in the world.
  • Never succumb to revenge trading – which is the act of risking larger amounts of money to win back money you’ve just lost. 
  • If you feel upset every time you lose money, try risking less on each trade.
Categories
Forex Basics Forex Brokers

Tell-Tale Signs You Need to Get a New Forex Broker

Are you here because your forex broker hasn’t been meeting your expectations lately? If so, then you don’t have to settle. New brokers open their doors every single day and hundreds of options have probably popped up since you first signed up for that old trading account. Finding a new broker can offer multiple benefits, from reduced fees to a wider selection of trading instruments, the chance to make extra money through bonuses, and more. If you’re seriously considering switching, then take a look at our list of tell-tale signs that you need to find a new forex broker.

Are you here because your forex broker hasn’t been meeting your expectations lately? If so, then you don’t have to settle. New brokers open their doors every single day and hundreds of options have probably popped up since you first signed up for that old trading account. Finding a new broker can offer multiple benefits, from reduced fees to a wider selection of trading instruments, the chance to make extra money through bonuses, and more. If you’re seriously considering switching, then take a look at our list of tell-tale signs that you need to find a new forex broker.

Are you here because your forex broker hasn’t been meeting your expectations lately? If so, then you don’t have to settle. New brokers open their doors every single day and hundreds of options have probably popped up since you first signed up for that old trading account. Finding a new broker can offer multiple benefits, from reduced fees to a wider selection of trading instruments, the chance to make extra money through bonuses, and more. If you’re seriously considering switching, then take a look at our list of tell-tale signs that you need to find a new forex broker.

Sign #1: You’re Paying Too Much in Fees

You’re likely paying commissions, spreads, and possibly withdrawal fees for trading through your broker. In some cases, you might not be paying commissions but you’re dealing with a higher spread to make up for it. If you’ve been trading with the same company for some time, you may not have been paying much attention to these fees, but have you compared them to any other brokers lately? If your broker is charging you a spread that is above 1.5 pips on EURUSD, we can almost guarantee that their other prices are too high, which means that you could be walking away with more of your own money in your pocket at the end of the day if you simply switch to a broker with cheaper fees. There’s also a good chance you could find a broker with no withdrawal fees for debit cards versus the 7% fees we’ve seen listed through several brokerages. 

Another thing to watch out for are extra charges, like inactivity fees or account maintenance charges. Some brokers do charge small inactivity fees to clear out balances that are left behind forever, but others charge high fees after about a month of zero trading activity. Account maintenance charges are basically like made-up charges that your cell phone provider would come up with to make a few extra dollars. Now is a good time to check your broker’s terms & conditions to see if any of these fees apply. If so, you might want to switch, especially if you’ve been hit with inactivity fees before. 

Sign #2:LacklusterCustomer Service

When it comes to customer service, a good broker offers flexible hours, quick and convenient contact methods, and polite service representatives. Sadly, you won’t find this available with every broker and you’d have an easier time pulling teeth than getting in touch with an agent through some shadier brokerages. Imagine having an issue where you never received a withdrawal you desperately needed, but you couldn’t get in touch with anyone to find out what happened. Or perhaps you simply get locked out of your account and can’t reset your password, so you’re stuck missing out on trading opportunities for days while you wait for an agent to respond to you. If you haven’t been there before, there’s always a chance that this will affect you in the future. Rudeness is another thing that you shouldn’t have to tolerate and is a sure sign that you’ll do better with another company. 

Sign #3: Limited Trading Opportunities

If you’re a trader that is only interested in currency pairs, then this one might not matter to you as much, as long as your broker offers a good selection of majors, minors, and exotics. However, many traders do look to diversify their trading portfolio over time, even if they started out focusing only on currency pairs. If this is the case for you, then you’ve probably outgrown your forex broker if they don’t offer much in the way of commodities, stocks, or cryptocurrencies. If you’re in this situation, you might want to switch to gain access to a wider diversity of investment options – or you could open a secondary account through another broker and continue to trade currencies on your current account if your broker offers competitive prices. 

Sign #4: An Unsatisfactory Trading Platform

Some brokers offer access to award-winning platforms like MetaTrader 4 and/or 5, or they have their own trading platform for users to trade on. If you’re dealing with a broker that lets you trade on MT4 or MT5, then you already have access to one of the best platforms out there, but don’t hesitate to switch if you don’t personally like those options. If your broker offers their own platform, you’ll need to think about how satisfied you are with the features and tools within it. Does it seem basic? If your trading platform is missing out on all the tech you’re looking for, consider switching. Also, know that more popular brokers are more likely to offer outstanding platforms, while smaller shadier brokers are likely offering up more basic trading platforms. 

Sign #5: Your Broker Is Too Basic

Some brokers have a lot to offer in the way of extra perks, like bonuses and promotional opportunities, a wide selection of assets to choose from, a wide array of educational resources, trading tools like calculators, amazing trading platforms, and etc. Others only offer a basic trading platform with zero resources or extra perks on their site. Obviously, the latter is rather boring when there are so many companies offering so much more out there. If your broker only offers the bare minimum, we highly recommend looking at other options so that you can benefit more from the trading experience.

Categories
Beginners Forex Education Forex Basics

The Ultimate Checklist for First-Time Forex Traders

Congratulations on your decision to become a forex trader! This self-made career path can really open the door to a lot of financial opportunities in your life and might even help you through retirement or hard times later on. You might have had some doubts when you started considering trading as an alternative way to […]

Congratulations on your decision to become a forex trader! This self-made career path can really open the door to a lot of financial opportunities in your life and might even help you through retirement or hard times later on. You might have had some doubts when you started considering trading as an alternative way to […]

Congratulations on your decision to become a forex trader! This self-made career path can really open the door to a lot of financial opportunities in your life and might even help you through retirement or hard times later on. You might have had some doubts when you started considering trading as an alternative way to make extra money, especially if you’ve heard the rumors that most traders fail, but we’re here with good news.

There are guaranteed ways to start off on the path to success, so long as you complete all the necessary steps BEFORE you actually open your very first trading account. If you follow along with our ultimate checklist, we can guarantee that you’ll start off on the right path with an advantage over other beginner traders. 

Start with Beginner Education

If you want to trade, you need to start by educating yourself, or else you won’t know what’s going on. Here’s a list of some of the first things you’ll need to know:

  • Terminology 
  • Factors that affect prices in the forex market and how the market works
  • Information about the different currency pairs and instruments
  • Forex trading sessions and hours
  • Leverage and margin
  • How to manage risk as a beginner
  • Tips for beginners
  • Trading psychology
  • Navigating a trading platform

Of course, there’s a lot more to know, but these are some of the first topics you’ll want to tackle as a beginner so that you can understand more complicated topics later on. If you don’t understand common trading terms like leverage, pip, or spread, then you will be lost once you move on. 

Fortunately, all of this information can be found on the internet for free. You can simply perform a quick Google search for “beginner trading topics” to get started, or head over to YouTube and type the same thing into the search bar if you’d prefer to watch educational videos. Once you think you have beginner education covered, we’d suggest taking some online quizzes to make sure you fully understood all of the content, then you’ll know you’re ready to move on.  

Move On to More Advanced Material

Once you understand beginner related content, you’ll be more prepared to learn about more complicated subjects without becoming frustrated. Here are a few examples of the kind of content you should be looking for:

  • Trading strategies
  • Candlestick patterns
  • Using indicators, signals, EAs
  • Fibonacci tools
  • Reading charts
  • Technical and fundamental analysis

Once again, there’s a lot to learn here, and you’ll want to pay extra attention to content that teaches you how to develop and manage a trading strategy. Reading articles or books that have been written by expert traders is a great way to learn, as you might be able to find trading tips that inspire you. Also, be sure to research multiple types of trading styles and strategies so that you’ll be more knowledgeable when it’s time to develop your trading plan. 

Choose a Forex Broker

At this point, you need to find a broker. This isn’t a decision that should be made with haste, as your choice will affect your entire trading experience. You should know that there are hundreds of options out there, but each broker wasn’t created equally. Here are some things to research and consider when it comes to choosing the broker that is best for you:

  • Deposit minimums and associated account types
  • Fees and charges (spread, commissions, withdrawal fees, inactivity charges, etc.)
  • Available assets (currency pairs, commodities, stocks, cryptocurrency, etc.)
  • Available trading platforms
  • Customer service (hours and contact methods)
  • Extra perks like bonuses and promotions
  • Access to educational resources 
  • Regulation status

It’s a good idea to compare some of your favorite options and always lean towards regulated brokers to keep yourself safe in the event that your broker was to go out of business. One of the best ways to get an idea of whether a broker is trustworthy is to read user reviews online, but make sure these are coming from other websites besides your broker and take some of the bad reviews with a grain of salt, as some traders may blame the broker when they lost money at their own fault. If you can’t find any reviews online, you’re probably looking at a less established broker or possibly a scammer. 

Develop a Trading Plan

One of the biggest beginner mistakes is opening a trading account with no plan. If you don’t know when, why, or what you want to trade, then you’ll be making random moves that don’t make much sense. Fortunately, you should know a lot about different types of trading plans and strategies from step 2, but you might need to do a little more research as you work to develop your plan. This is what your plan will need to cover:

  • How often you will be trading (part-time, full-time, etc.)
  • Rules for entering and exiting trades
  • Factors you’ll look at when deciding to make a trade
  • Goals you want to meet
  • The types of instruments you want to trade
  • How much money you’re willing to invest and risk on each trade
  • Steps you’ll take to limit losses

It’s crucial to ensure that your time schedule will fit with your trading plan. Some plans require a lot more time in front of the computer screen, while others will allow you to remain less active. Remember that you’re setting yourself up for failure if you try to set a plan that requires you to trade during times when you may not be able to or if your plan is too complex for your skill level. Often times, the simplest plans produce the best results. 

Practice on a Demo Account

At this point, you’re almost ready to open your first trading account! You’ve learned beginner and intermediate content, chosen a forex broker and developed a comprehensive trading plan. You’re probably feeling eager to get started, but you don’t want to skip out on using a demo account. This is the most hands-on tool you’ll have used so far and will help you to gauge your preparedness for trading on a real account. 

You’ll want to start by opening a free demo account through your chosen broker’s website (Almost every forex broker offers this option). This will allow you to practice trading under the broker’s current conditions, become more familiar with navigating their trading platform and tools, and most importantly, to test out your trading plan with no financial risk. 

As you practice on your demo account, you should keep a record of each trade just as if you were using a live account. Check for any issues that might need to be addressed so that you can tweak your strategy to perfection before you put any money on the line. Once you have a consistently profitable strategy that works, you can move on with confidence. 

Open Your Trading Account

Congratulations! Once you reach this point, you’ve done everything you need to ensure that you’re starting off on the right path. Your broker will likely ask you for proof of identity and proof of address documents, so you’ll want to be sure to have these handy. Most people simply use a copy of their driver’s license and a utility bill for this step. 

Of course, you should never stop pursuing a trading education along the way, and be sure to keep a detailed trading journal to keep a good record of your profits/losses. Now, get out there and open your first trading account!

Categories
Forex Money Management

How Much Should You Be Spending on Forex Trading?

There’s a lot to figure out once you make the decision to become a forex trader. What broker to use, when and how to trade, and managing risk is just the tip of the iceberg. One question that many beginners actually find themselves struggling with involves figuring out how much money to initially deposit into […]

There’s a lot to figure out once you make the decision to become a forex trader. What broker to use, when and how to trade, and managing risk is just the tip of the iceberg. One question that many beginners actually find themselves struggling with involves figuring out how much money to initially deposit into […]

There’s a lot to figure out once you make the decision to become a forex trader. What broker to use, when and how to trade, and managing risk is just the tip of the iceberg. One question that many beginners actually find themselves struggling with involves figuring out how much money to initially deposit into their trading account and how much they should risk on each trade from there. 

Making an Initial Deposit

There are a few advantages to making both smaller and larger initial deposits. Fortunately, most forex brokers offer different account types that can appeal to traders that are looking to deposit different ranges of money, so you shouldn’t feel pressured to deposit hundreds of dollars if you don’t want to. 

Small Deposits 

Most brokers do offer cheaper account types for beginners, so this is definitely an option if you aren’t comfortable depositing a larger amount of money at first. Plus, you can always go back and deposit more money later on. Here are the perks to making a smaller first deposit of around $10 – $100:

  • You can open a micro/mini/cent account, which allows for smaller lot sizes to be traded, making them good starter accounts.
  • You can test the broker’s deposit methods and conditions without putting a lot of money on the line.
  • If you aren’t comfortable making a bigger deposit, this will allow you to become more familiar with the broker’s conditions so that you can deposit more later on.
  • This is a good way to get started trading with minimal risk and makes opening a trading account more of a realistic option for more timid beginners. 

While a smaller deposit might be a better option for beginners, there are also a few disadvantages to consider:

  • Account types that accept smaller deposits typically come with higher spreads and fees, so you’ll wind up bringing home less of your profits. 
  • Some brokers don’t allow mini/micro/cent account holders to partake in promotional opportunities and you might miss out on other perks.
  • Your small deposit won’t be enough to trade with for a long period of time, meaning that you’ll need to top up your account more often if you run out of funds. 

Large Deposits

Perhaps you’re leaning in the opposite direction and considering that you should make a larger deposit of a few hundred or thousand dollars. As long as you’ve done your research and chosen a trustworthy broker, then this can be a great decision that offers several benefits:

  • Making a larger initial deposit will open the door to better account types that offer tighter spreads and lower commission charges through most brokers.
  • Some brokers offer special perks on these better account types, like fee-free withdrawals, larger bonuses, and more. 
  • Your deposit should provide you with enough money to trade for quite a while without needing to turn around and deposit more money quickly. 

A Quick Tip

There’s one important thing to remember as a trader: you should never deposit more money than you can personally afford. Larger deposits may come with more benefits, however, there’s no reason to put yourself into debt when it’s possible to open a trading account with less than $100 through several online brokers. There is no guarantee you will get that money back, so don’t pull out of money that is meant to be spent on groceries, bills, or other necessities. Having the discipline and financial wisdom to only risk what you can afford is one of many qualities that are necessary if you want to be a successful trader. 

Conclusion: How Much to Risk?

You probably have an idea of whether you’re looking to invest a small or large amount of money at this point, but there’s still another question left to answer: How much will you risk on each trade? This is really more of a personal decision, but there are a few things you should know before you decide:

  • Some of the most common beginner mistakes involve risking too much on each trade, trading with too high of a leverage, and failing to take precautions to minimize risk.
  • The more you risk, the faster you could drain your account, especially in the beginning.
  • Experts actually recommend risking around 1% of your total account balance on each trade. If you have $100 in your trading account, this means you’d only risk $1 per trade. 

Perhaps you wanted to risk a larger amount of money so that you could profit more quickly. One professional tip states that you should calculate the risk you should take based on your confidence in each individual trade. For example, you could stick with the 1% account balance rule on trades that you’re only fairly confident about, but risk slightly more on trades that you feel much more confident about. This will allow you to make slightly larger profits while remaining careful. Of course, this is only a suggestion, so you may want to look for other tips online if you’re looking to do things differently.

At the end of the day, only you can decide how much to deposit and risk based on your personal financial situation. However, there is one rule you should always follow: never invest or risk more money than you’re willing to lose.

Categories
Beginners Forex Education Forex Basics

These Small Changes Will Make a Huge Difference in Your Profits

It’s no secret that every single forex trader wants to make as much money as possible, otherwise, what’s the point? Even if you’re already bringing in consistent profits, you might be surprised to learn that there are some very simple changes you can make to put more money in your pocket. If you’re a beginner, […]

It’s no secret that every single forex trader wants to make as much money as possible, otherwise, what’s the point? Even if you’re already bringing in consistent profits, you might be surprised to learn that there are some very simple changes you can make to put more money in your pocket. If you’re a beginner, […]

It’s no secret that every single forex trader wants to make as much money as possible, otherwise, what’s the point? Even if you’re already bringing in consistent profits, you might be surprised to learn that there are some very simple changes you can make to put more money in your pocket. If you’re a beginner, this could even be the difference between having a positive or negative profit ratio. Would you put in the effort to make the difference? 

Change #1: Use a Simple Trading System

It might seem like more complicated trading plans bring in more money. After all, these plans seemingly account for more factors and are more technical, so it’s easy to think that they’re better. In reality, simplicity is key to making consistent profits and avoiding all that unnecessary confusion. If you know what you’re doing, you’ll be less stressed and you won’t have to spend as much time in front of your computer screen, so this is definitely a win-win for everyone. If you’re currently using an overcomplicated plan, do yourself a favor and switch to a simpler version.

Change #2: Trade During the Best Times

Did you know that there are certain times when it’s better to trade? The best trading times occur whenever sessions overlap and things tend to heat up towards the middle of the week. Mondays and Friday evenings are slow, and nobody wants to trade on the weekends, so you should give yourself the much needed time off when there aren’t good trading opportunities. Other times to avoid trading? Major holidays and whenever big news is expected to be released. If you trade during the best times and avoid the worst ones, you’ll be able to profit more efficiently without making the mistake of trading in more volatile market environments. 

Change #3: Check Your Broker’s Costs

Whether you recently signed up with a broker or you’ve been using the same one for years, it’s a good idea to go back and check out their rates, then compare them with a few other options. You might find that switching to a new broker will save you a ton of money, plus, several new companies have probably opened up since you opened that old trading account. Say your broker charges a 5% withdrawal fee for withdrawing via card but you’re able to switch to a broker with no withdrawal fees. Or perhaps you could save 0.5% or more on the spread or commission charges. At the end of the day, these small changes will really add up and leave you with more of your money. Another added bonus is that your new broker may offer some extra perks like a deposit bonus that will add to your money when you switch over. 

Change #4: Limit the Pairs you Trade With

Some traders like to trade a variety of assets, which can be profitable, but it might be more helpful to stick with around three pairs so that you don’t have to keep up with as many factors affecting prices across different markets. If you’re able to focus more clearly on what you’re trading, your profits are bound to increase as you’ll avoid missing out on important news or becoming overwhelmed. 

Change #5: Make Smarter Leverage Choices

The more leverage you use, the more money you might make…or lose. If you’re looking to increase your profits, now is a good time to consider the leverage you’ve been using and to think about your profits. If you’ve been losing money, you might want to lower the leverage you’re using, as this will lower the amount of losses you take from losing trades. On the other hand, those that are making consistent profits might want to increase their leverage slightly, as these traders are more likely to benefit from doing so. Every now and then, you can increase your leverage in increments as long as your profits stay consistent. 

Change #6: Be Patient

Some traders have a difficult time sitting around without entering trades, especially after some time has passed. However, you shouldn’t trade for the sake of doing so. If the market isn’t throwing out any good opportunities, simply don’t trade. Otherwise, you run the risk of losing money on a trade when you could have opted not to trade at all. In times like these, remember to stick to your trading plan and know that the market will give you more opportunities later on. 

Change #7: Never Stop Learning

It’s easy to start thinking you know everything you need to once you’ve been trading for a while with consistent profits; however, you should never stop seeking out more trading knowledge. Learning about trading psychology and reading about different or new kinds of strategies are a couple of examples of topics you can look up, but you shouldn’t stop there. The more you know, the more chance you’ll have to increase your profits, and you might even find a better trading system along the way.

Categories
Beginners Forex Education Forex Basics

Top 7 Biggest and Most Embarrassing Forex Blunders

When it comes to forex trading, there are a few factors that can make or break your career. Beginners are very prone to making these mistakes, but even intermediate level traders are susceptible to some of the biggest forex blunders out there. If you’re looking to increase your profit margin while dodging unavoidable mistakes, keep […]

When it comes to forex trading, there are a few factors that can make or break your career. Beginners are very prone to making these mistakes, but even intermediate level traders are susceptible to some of the biggest forex blunders out there. If you’re looking to increase your profit margin while dodging unavoidable mistakes, keep […]

When it comes to forex trading, there are a few factors that can make or break your career. Beginners are very prone to making these mistakes, but even intermediate level traders are susceptible to some of the biggest forex blunders out there. If you’re looking to increase your profit margin while dodging unavoidable mistakes, keep reading. 

Forex Blunder #1: Blindly Trading

When we say refer to blind trading, we mean trading without the proper knowledge needed to make informed decisions. This could stem from opening a trading account too soon without learning all of the components that actually go into trading or failing to keep up with important news and other factors that can affect the forex market. Traders that don’t know what’s happening with the forex market are bound to feel confused and fall behind their colleagues that keep up with world events. Fortunately, you can avoid this mistake by ensuring that you have a proper education and by keeping up with forex news through an economic calendar and other means of acquiring that important information. 

Forex Blunder #2: Risking too Much

From the beginning, forex traders need to work out how much money they can afford to invest in their trading account. From there, it’s crucial to manage that money by deciding how much you are willing to risk on each individual trade and by taking measures to limit your risk, like placing a stop loss. One of the biggest mistakes you can make involves using high leverage amounts, failing to use risk management precautions, and simply risking too much money on each trade. Together, these mistakes can blow through your account balance and leave you feeling defeated, which might even cause you to give up on trading for good. One simple tip is to stick with an average leverage (many experts use a 1:100 ratio) and to risk about 1% of your account balance on each trade. 

Forex Blunder #3: Emotional Trading

Forex trading is often compared to a rollercoaster ride because of the range of emotions that traders can go through. Feelings of anger, frustration, doubt of one’s ability to be a good trader, and panic over the loss of funds are common, especially with traders that don’t have a lot of experience. This leads to irrational decisions and issues like revenge trading, which involves risking too much in an attempt to gain back funds that were lost quickly. Since traders are already feeling the adrenaline and aren’t thinking clearly, these types of measures usually end with even more losses. If this sounds familiar, some of the best tips are to lower the amount you’re risking on each trade so that losses won’t have as much of an impact on you, stick with your trading plan, and take a break when you need to calm down. 

Forex Blunder #4: Choosing the Wrong Broker

There is an overwhelming number of forex brokers out there, each of which offers its own unique conditions and perks. Some traders might not realize just how much goes into choosing a broker, as you need to compare account types, funding methods and fees, leverage options, tradable assets, and more. If you choose the first broker that pops up on your search engine, there’s a good chance that you could have found an option that was better suited for your needs with a little research. It’s also important to know that your choice affects the amount of your profits that wind up in your pocket at the end of the day once broker and withdrawal fees are subtracted.  

Forex Blunder #5: Not Having a Trading Plan

What types of instruments will you trade? How much money will you risk? What type of evidence are you looking for before you enter a trade? At what point do you plan to exit trades? All of these questions and more are addressed in a trading plan. Without one, you’re essentially just making random moves and trading all over the place. Even if you make money with some of these random trades, your history will be so inconsistent that it will be impossible to pin down what is causing you to win or lose money. Meanwhile, trading with an organized plan helps you to know exactly what you’re looking for and you will be able to figure out what is and isn’t working much more easily. 

Forex Blunder #6: No Trading Journal

We mentioned that you might need to review your trading plan at some point in the event that you start losing money or whenever you’re looking to increase your profits. The best way to do this is by keeping a trading journal where you detail each trade you make, why you entered the trade when you did, how much money you made or lost, and etc. Whenever you need to go back and check on something, your journal will serve as a map that shows how well your plan is working, point out issues, and show you what you should keep doing the same. Unfortunately, many beginners never start a journal at all and feel lost when they start losing money because they can’t figure out the problem. Others might start a journal and abandon it after a few entries because they don’t realize how helpful it can be. 

Forex Blunder #7: Setting Unrealistic Goals

When you first opened your trading account, you probably had an idea of how much money you wanted to make. Traders that set realistic goals and accomplish them feel a huge sense of satisfaction, however, having the opposite experience only sets traders up for disappointment. When it comes to trading goals, this is why it is important to have a realistic outlook based on your experience and the amount of money you’ve invested. Rather than focusing on the exact amount of money you want to make in a period of time, you can set short-term and long-term goals that focus on improving your abilities as a trader. You’ll see an increase in profits in return, and you’ll also avoid beating yourself up because you couldn’t meet the unreachable expectations you placed on yourself.

Categories
Beginners Forex Education Forex Basics

Tips for Avoiding Forex Burnout

Has forex trading left you feeling tired, frustrated, and just plain burnt out lately? Some might be under the impression that trading is an easy job. After all, you just sit in front of your computer, make a few trades, and sit back while the money comes in, right? True forex traders know that this […]

Has forex trading left you feeling tired, frustrated, and just plain burnt out lately? Some might be under the impression that trading is an easy job. After all, you just sit in front of your computer, make a few trades, and sit back while the money comes in, right? True forex traders know that this […]

Has forex trading left you feeling tired, frustrated, and just plain burnt out lately? Some might be under the impression that trading is an easy job. After all, you just sit in front of your computer, make a few trades, and sit back while the money comes in, right? True forex traders know that this is far from the truth. The reality is that trading can actually become quite stressful once the constant risk, undesirable market conditions, overtrading, pressures to succeed, and failing to meet your own expectations all set in. Add a string of losses to the mixture and you’ll find yourself with one stressed out trader. 

Experiencing mental burnout is something that nobody wants to deal with, but it can be especially harmful when it happens to forex traders. This is because we need to be awake and alert so that we can make the smartest financial decisions. Once we become tired and frustrated, our cloudy head might lead us to overlook things, enter trades we shouldn’t or leave trades open too long, overtrade, practice revenge trading when we’re losing – you get the picture. Think about the things you were told when it was time to take a test in grammar school. You were advised to get plenty of rest, eat a big breakfast, and show up feeling energized to get the best results. Are you treating yourself the same way as a forex trader? 

Step 1: Recognizing Burnout

Mental burnout is not something that will hit you right off the bat once you start trading. In fact, you might be able to go a long time without experiencing it. This is because it is something that sets in over time once a variety of stressful factors start to pile up on you. Did you know that some of the signs that you’re burnt out can even be physical, rather than only mental? If you want to avoid becoming a total trading zombie, you can start by recognizing the signs and symptoms of mental burnout:

  • You’ve started to deviate from your trading plan and no longer care about your trading rules.
  • You’re experiencing headaches or other physical symptoms like muscle aches or generally just feeling sick with no real explanation.
  • You’re falling into a depression that leaves you tired and unmotivated.
  • You become frustrated at everyone and everything for no real reason, both in everyday life and while trading.
  • You begin to doubt your abilities as a forex trader, even though you’ve been successful before.
  • You just don’t care much about trading anymore and you consider giving up despite past success.

If this sounds familiar, you are probably already dealing with mental burnout as a forex trader. Fortunately, there are some things you can do to get your head back in the game and to overcome those debilitating symptoms.

Step 2:  Take Yourself Back to the Beginning

Do you remember how you felt when you opened your very first trading account? Were you an eager, starry-eyed beginner that had big plans and dreams? Try to take yourself back to those feelings. Think of the way you felt the first time you entered a trade, made money, and when you made your first withdrawal. Over time, trading probably became a habit and you no longer felt the excitement from those little things, but this doesn’t mean that you can’t renew your happiness with trading. Every dollar made is worth celebrating, so give yourself some credit for coming so far and try to soak in the small victories. 

Step 3: Find Other Traders to Confide In

If you’re dealing with trading burnout alone, it only makes it that much more overwhelming. Having other traders to talk to who can say they’ve also been there and give you advice about how they overcame it is a great way to remind yourself that you aren’t the only trader that has experienced this. It can also be reassuring to talk with someone else that has experienced physical symptoms from the stress because you may feel more validated. If you confirm that this is happening to others and they’ve overcome it, then you may feel more confident that you can pull yourself out of the slump too.

If you personally know someone that trades, you should ask them if they’d like to get together and become trading buddies. Don’t worry if you don’t know anyone in person because there are online forums and communities designed just for this purpose. You shouldn’t have an issue finding one (or more) traders that relate to the way your feeling and your trading style. You can probably even find a more experienced trader that will also give you great advice that goes above and beyond dealing with trading burnout. 

Step 4: Relax and Refresh

Whenever you’re dealing with stress from forex trading or anything else going on in your life, the best thing to do is take some time for yourself to unwind. Of course, this looks different for everyone. Some of us would prefer to sleep in or take a nap, relax on the couch, and maybe watch a movie. Others might be more into exercising or partaking in yoga or meditational activities. Sometimes, a night out can really do the trick, so consider treating yourself to a nice dinner, heading to the movies, or doing anything else you find fun. The key is to find something that you really enjoy doing and to do it often enough to keep yourself calm. If you start to feel stressed, simply take a break from trading, unwind, and come back with a clear head and zero frustration. It might seem unproductive to stop trading, but you will find that you get better results because you won’t be making trading decisions out of sheer frustration. 

Categories
Forex Basics Forex Daily Topic

The Trading Log: Key Component for a Pro Trader

At forex.academy, we understand that a trading record is a decisive component to be successful in Forex. That’s why we took the time to create a free trading log on an Excel Spreadsheet. It was designed to present all the needed information at a glance. Here we present its guide.

At forex.academy, we understand that a trading record is a decisive component to be successful in Forex. That’s why we took the time to create a free trading log on an Excel Spreadsheet. It was designed to present all the needed information at a glance. Here we present its guide.

At forex.academy, we understand that a trading record is a decisive component to be successful in Forex. That’s why we took the time to create a free trading log on an Excel Spreadsheet. It was designed to present all the needed information at a glance. Here we present its guide.

The Stats Section

The top of the spreadsheet shows the Main statistics of your trading record. 

Total net P/L: The net profits after the trading costs. You can set an average cost in the bottom right cell named “LOT Costs”. If you enter the lot cost, the sheet will compute every trade cost by multiplying it by the actual lots of the trade. Of course, you can set it manually on every trade with the exact costs your broker charged.

Gross P/L: The total profit without costs.

Total R won. R is the measure of your risk. The “R multiple” column converts the net profit into a ratio Net Profit/$Risk. R is a measure of the profit/loss for every dollar risked.  This helps you plan your objectives and calculate the risk needed to achieve them. For example, if you find that you are making 20R per month and plan to earn 3000$ monthly, you will need to risk $3000/20 = $150 on every trade.

% Winners: The winner percent figure.

% Losers: The percent of losers

AVG P/L per Trade: The average dollar won/lost. It is the Total net won/lost divided by the number of trades.

Avg % loss on losers: The average percent capital lost on losing trades.

Avg % profit on winners: The average percent capital won on winning trades.

Expectancy: A measure of what you can expect to gain in the next trade for every dollar risked. The example shown is 0.79, which means you can expect to earn $79 every time you trade if your risk is $100.

Expectancy’s Standard Dev: A statistical measure of the variability of the expectancy figure. You can expect that 95% of  Expectancy’s values are plus and minus two stdev from 0.79.

#winners: The number of winners.

#losers: the number of losers.

Hours Spent: this is a manual input of your time spent in trading.

P/L per hour: It will compute your profit per hour spent in trading.

Net Profits: These are the net profits on winning trades.

Net Losses: The losses on losing trades.

% Gains on account: The total sum of the percent gained on winning trades.

% Losses: The sum of the percent lost on losing trades.

Reward:risk: The average reward/risk of your trades.

LOT Costs: This is a manual entry for the average costs per lot your broker charges you.

Running Balance: The initial capital ( Cell B17) plus the total net P/L amount (on closed trades).  Please note that this balance does not take into account open trades.

Total costs: The sum of the cost of spreads and commissions of your trades. This parameter will help you understand how much of your money goes to your broker. It could be handy if you want to negotiate rebates or shift your business to another cheaper broker.

The trades

The cells in columns with a yellow heading are for you to enter manually. The rest were filled with the needed formulas to get the stats figures, so there is no need to touch them when trading.

The exception is The Trade Cost column. This column is also filled with the formula to approximate your costs if you supply the average cost per lot in the B12 cell. But you can also manually enter your true cost.

Entering a Trade

We have designed the sheet so that you have total control over your risk on every trade. Therefore, we should begin to enter the desired percent risk for the coming trade. Let’s say 1%.  With this figure, the sheet computes the dollar-risk based on your current account balance.

After entering the entry price and stop-loss level, it will also compute the recommended trade size in lots. You should then input the real lot number in the following column, “Real lots.” It was designed that way because we must take into account several open trades at the same time.

How the sheet computes the risk of the next trade?

When allowing several simultaneous trades, the model chosen to compute risk is to subtract the risk of the previous open trades to the available capital. That way, you risk a percent of the money not currently at risk.  But when you close a trade and record it, the sheet recalculates all cells. Thus, the sheet needs the “Real Lots” column, so the record does not get modified every time an open trade is closed.

After the trader decides the percent of his account to risk on a trade, the real lot size, and the entry and stop-loss point are set, the sheet also shows the leverage of that trade. That way, all the risk information is displayed. Please, beware that a risk of 3 percent corresponds with a leverage of 10, and that leverages over 10:1 should be avoided, especially when several trades are open on major currency pairs.

JPY pairs

The column JPY? was added for the right calculation of JPY pairs’ values, as these pairs’ pip value is in the second decimal place instead of in the fourth decimal. You should input Y on these pairs to get the right trade size, profit, and leverage. Please, note that pip values on non-USD quote currencies are approximate.

Entry and exit date and time

These are optional entries, but it is advisable to register these values to get observations about the average time on a trade and the average time for a trade to hit stop-loss and take-profit levels.

Trading results

Once the Exit price has been entered, the sheet displays the profit/loss (P/L), Net P/L, %P/L and R multiple of the trade. This will help assess essential parameters, such as the average Trade profit, the usual percent obtained, and the real reward/risk values (R), which is also the profit on a one-dollar risk.

Trade quality

Alexander Elder recommends traders value the quality of the trade based on one objective parameter: The percentage of the available profit you could obtain from the trade.

One possible scale is 0: less than 10%, 1: from 10 to 25%, 2: from 25, to 50%, 3: from 50 to 75% 4: from 75 to 90%  5: over 90%. This will help you see if, over time, you’re improving, maintain, or decrease the quality of your trades. It will reveal the best times of the session to trade.

MAE/MFE

These are to annotate the Maximum adverse excursion and Maximum Favorable excursion. These two parameters are important clues to improve stop-loss and take-profit levels. It will help you also analyze if your entries are too early or too late and take measures to correct them. For more on this subject, please read an MAE/MFE explanation here.

Summarizing

We hope this spreadsheet will help you be a better trader. Please modify and complete it at will for your purposes.  This trading log is not perfect, but it is a starting point.

Categories
Forex Basic Strategies Forex Indicators Forex Service Review Forex Services Reviews-2

Market Profile Singles Indicator Review

Today we will examine the Market Profile Singles Indicator (we could also call it a single print indicator or gap indicator), which is available on the mql5.com market in metatrader4 and metatrader5 versions.

Today we will examine the Market Profile Singles Indicator (we could also call it a single print indicator or gap indicator), which is available on the mql5.com market in metatrader4 and metatrader5 versions.

Today we will examine the Market Profile Singles Indicator (we could also call it a single print indicator or gap indicator), which is available on the mql5.com market in metatrader4 and metatrader5 versions.

The developer of this indicator is Tomas Papp, who is located in Slovakia, and currently has 7 products available on the MQL5 market.

It is fair to point out that four of his products are completely FREE and are in a full-working version. These are: Close partially, Close partially MT5, Display Spread meter, Display Spread meter MT5. So it’s definitely worth a try.

Overview of the Market Profile Singles 

This indicator is based on market profile theory. It was designed to show “singles areas.” But, what exactly is a singles area?

Theory of the Market Profile Singles

Singles, or single prints, or gaps of the profile are placed inside a profile structure, not at the upper or lower edge. They are represented with single TPOs printed on the Market profile. Singles draw our attention to places where the price moved very fast (impulse movements). They leave low-volume nodes with liquidity gaps and, therefore, the market imbalance. Thus, Singles show us an area of imbalance. Singles are usually created when the market reacts to unexpected news. These reports can generate extreme imbalances and prepare the spawn for the extreme emotional reactions of buyers and sellers.

The market will usually revisit this area to examine as these price levels are attractive for forex traders, as support or resistance zones. Why should these traders be there? Because the market literally flew through the area, and only a small number of traders got a chance to trade there. For this reason, these areas are likely to be filled in the future.

The author also adds: “These inefficient moves tend to get filled, and we can seek trading opportunities once they get filled, or we can also enter before they get filled and use these single prints as targets.”

The author points out: Used as support/resistance zones, but be careful not always. Usually, it works very well on trendy days. See market profile days: trend day (Strategy 1 – BUY – third picture) and trend day with double distribution (Strategy 1 – SELL- third picture).

Practical use of the Market Profile Singles Indicator

So let’s imagine the strategies that the author himself recommends. Of course, it’s up to you whether you use these strategies or whether you trade other strategies for the singles area. Here we will review the following ones:

  • Strategy 1: The trend is your friend
  • Strategy 2: Test the nearest level
  • Strategy3: Close singles and continuing the trend

The author comments that these three strategies are common and repeated in the market, so it is profitable to trade them all.

The recommended time frame is M30, especially when using Strategy 2.

It is good to start the trend day and increase the profit, but be aware that trendy days happen only 15 – 20% of the time. Therefore, the author recommends mainly strategy 2, which is precise 75-80% of the time.

 

Strategy 1 – BUY :

  1. A bullish trend has begun.
  2. The singles area has been created.
  3. The prize moves sideways and stays above the singles area.
  4. We buy above the singles area and place the stop loss under the singles area.
  5. We place the profit target either according to the nearest market profile POC or resistance or under the nearest singles area. We try to keep this trade as long as possible because there is a high probability that the trend will continue for more days.

Strategy 1 – SELL :

  1. The bear trend has begun.
  2. The singles area has been created.
  3. The prize goes to the side and stays under the singles area.
  4. We sell below the singles area and place the stop loss above the singles area.
  5. We will place the target profit either according to the nearest market profile POC or support or above the nearest singles area. We try to keep this trade as long as possible because there is a high probability that the trend will continue for more days.

 

Before we start with Strategy 2, let’s explain the Initial Balance(IB) concept. IB is the price range of (usually) of the first two 30-minute bars of the session of the Market Profile. Therefore, Initial Balance may help define the context for the trading day.

The IBH (Initial Balance High) is also seen as an area of resistance, and the IBL (Initial Balance Low) as an area of support until it is broken.

Strategy 2 – one day – BUY:

This strategy will take place on a given day.

  1. There is a singles area near IB. (a singles area was created on a given day)
  2. The price goes sideways or creates a V-shape
  3. We expect to return to the singles area or IB. We buy low and place the stop loss below the daily low (preferably a little lower) and place the target profit below the IBL (preferably a little lower).

 

Strategy 2 – one day – SELL:

This strategy will take place on a given day.

  1. There is a singles area near IB. (a singles area was created on a given day)
  2. The price goes sideways or creates a reversed font V
  3. We expect to return to the singles area or IB. We sell high and place the stop loss above the daily high (preferably a little higher) and place the target profit above the IBH (preferably a little higher).

 

Strategy 2- more days- BUY:

This strategy takes more than one day to complete (Singles were created one or more days ago)

  1. After the trend, the price goes sideways and does not create a new low (or only minimal but with big problems)
  2. Nearby is a singles area (Since the price cannot go to one side, there is a high probability that these singles will close).
  3. We buy at a low, placing a stop-loss order a bit lower. We will place the target profile under the singles area.

 

Strategy 2- more days- SELL:

This strategy takes longer than one day (Singles were created one or more days ago)

  1. After the trend, the price goes to the side and does not create a new high (or only minimal but with big problems)
  2. Nearby is a singles area ( Since the price cannot go to one side, there is a high probability that these singles will close ).
  3. We sell at a high, and we place a stop-loss a bit higher. We will place the target profile above the singles area.

Strategy 3 – BUY:

  1. The current candle closes singles.
  2. Add a pending order above the singles area and place the stop-loss under the singles area or the candle’s low. (whichever is lower)
  3. Another candle must occur above the singles area. (If this does not happen, we will delete the pending order) .
  4. We will place the profit-target either according to the nearest market profile POC or resistance or under the nearest singles area.

 

Strategy 3 – SELL:

  1. The current candle closes singles.
  2. Add a pending order under the singles area and place the stop-loss above the singles area or candle’s high (whichever is higher).
  3. Another candle must occur under the singles area. (If this does not happen, we will delete the pending order) .
  4. We will place the profit-target either according to the nearest market profile POC or support or above the nearest singles area.

Discussion

These strategies look really interesting.  As the author himself says:

It’s not just a strategy. There is more to it in profitable trading. For me personally, they are most important when trading: Probability of profit, patience, quality signals with a good risk reward ratio (minimum 3: 1) and my head. I think this is the most important.

In this, we must agree with the author.

 

Service Cost

The current cost of this indicator is $50. You are also able to rent the indicator. For a one-month rental, it is $30 per month. There is also a demo version available it is always worth testing out the demos before purchasing. Though.

After purchasing the indicator, the author sends two more indicators to his customers as a gift: Market Profile Indicator and Support and Resistance Indicator.

Conclusion: There are only 2 reviews for the indicator so far, but they have 5 stars and are very positive.

For us, this indicator is interesting, and it is a big plus that the author shares his strategies. The price is also acceptable since the indicator costs 50 USD = 5 copies (10-USD / 1 piece), and since the author sends another 2 indicators as a gift, this price is really worthwhile.

The author added:

By studying the market profile and monitoring the market, I came up with an indicator and strategies we would like to present to you. Here you can try it for free :

 

MT4: https://www.mql5.com/en/market/product/52715

MT5: https://www.mql5.com/en/market/product/53385

 

And here you can watch the video:

 

 

Also, a complete description of the strategies and all the pictures can be seen HERE :

Other completely free of charge tools:

https://www.mql5.com/en/users/tomo007/seller#products

 

Categories
Beginners Forex Education Forex Assets

The Connection Between Crude Oil and the Climate Emergency

About ten thousand years ago in the world, there were about five million people; 9,000 years later, the figure was over 300 million. And just as we started consuming large amounts of oil, the world’s population increased by 5 billion people in 80 years. We can easily see that the population increase, the eradication of […]

About ten thousand years ago in the world, there were about five million people; 9,000 years later, the figure was over 300 million. And just as we started consuming large amounts of oil, the world’s population increased by 5 billion people in 80 years. We can easily see that the population increase, the eradication of […]

About ten thousand years ago in the world, there were about five million people; 9,000 years later, the figure was over 300 million. And just as we started consuming large amounts of oil, the world’s population increased by 5 billion people in 80 years.

We can easily see that the population increase, the eradication of a large percentage of global poverty, the increase in life expectancy, the reduction in hours worked, and the increase in the quality of life with the consequent increase in per capita energy consumption, It has only been possible to achieve this by burning huge quantities of oil.

At the present moment, humanity is at a crossroads and has to choose between two paths that seem very different, but, curiously, the end result will be the same in both cases.

Let’s look at the two possibilities:

1 – We believe Greta’s grace of the climate emergency. We start shutting down coal-fired power plants, of course, nuclear power plants, we reduce CO2 emissions a lot, we put an expiration date on fossil fuels and we increase the prices wildly for the rights to pollute.

2 – Or, on the contrary, in a short time Greta goes out of fashion and nobody does anything of everything proposed (most likely option). Even if the subject is still on TV, people are likely to talk a lot and do nothing. It may become a fashion very similar to slimming: everyone says that when the holidays are over they will take the diet seriously, but obesity figures are increasing every year.

As I said before, whether option 1 or option 2 occurs, the result is that the world’s population will collapse in the next 30 or, at most, 50 years. If fossil fuel consumption is drastically reduced and CO2 is severely reduced, the world’s population will plummet. Then we will talk about the possibility that renewable energies can replace fossil fuels. If the climate emergency fails to reduce crude oil consumption (the most likely option), the result will be the same, as crude oil will reduce itself anyway.

Look at the Problems of Renewables

Given that sooner or later the decline of oil will come, we will have to analyze whether renewables will be able to sustain the current model of society with the world population growing at a rate of 80 million consumers per year.

Hydropower is the best renewable energy of all, but it suffers from an unsolvable problem: at present, there is almost no increase in production, because you cannot put reservoirs where there is no abundant water. We cannot, therefore, trust that this type of energy can greatly increase its production and will solve our problems of scarcity.

Solar energy has several problems that I will list below:

1 – It is an economically unviable energy. This serious problem is now solved with subsidies; increase in the price of electricity; budget allocations from taxes to make this energy viable; cheap credits for facilities; negative interest for those investing in solar farms to settle for a miserable return; bad loans for the manufacturing industry, which is also happening with the debt of shale oil companies, that will result in the largest debt default since the subprime.

People do not relate that, to pay for everything said in the previous paragraph, you have to consume abundant and cheap energy that creates wealth with which to pay for the losses produced by renewable energy. Nor does anyone think how and where the wealth will be obtained to pay those subsidies when there is no oil to burn.

Logically, the manufacture of solar panels and the machinery that makes solar panels is done by burning oil. Can they still be produced when there is no oil? People have assumed as a dogma of faith that science advances that it is barbarity and that soon they will invent something that is able to circumvent the laws of thermodynamics. 

2 – The permanent supply of renewable energy (except for hydropower) cannot be assured. To cover the cuts in the supply of renewable energy, there is no choice but to double the installed power with fossil fuels. How will this problem be solved when the only fossils left are the usual politicians and do not produce energy?

Doubling the facilities doubles the investment, and when you double the investment with the same profits, the return drops by half.

We return to the same vicious circle: the State subsidizes electricity companies to invest in unprofitable facilities. Subsidies are paid from taxes. Taxes are a part of the benefits or wages of individuals or businesses. And those benefits come from burning a lot of cheap, abundant oil. At a time when oil is neither abundant nor cheap, the circle is broken and all the lies of politicians (who even believe themselves) clash head-on with the bitter and crude reality.

3 – Battery safety is another difficult problem to solve. When it comes to increasing the energy density of batteries, the danger of fire or explosion increases too much.

4 – Who will invest in solar gardens when interest returns to 5%? And if the cost of electricity increases exponentially, will it be possible to generate wealth by producing products with such a high cost of electricity? Look, I’m talking about wealth, not paper money.

5 – Agricultural tractors and heavy machinery are currently not powered by electricity. So, is there a possibility of trading in the future? After reading point 3, I am not clear.

Most of these points are for windmills.

It is unlikely that the current standard of living can be maintained; the welfare state, which is another way of saying the welfare of the State; the 80 million annual increase in the world’s population, in addition to the increase in life expectancy. All that without oil is unsustainable.

Oil has enabled an increase of 5 billion people in 80 years. Without oil, the world’s population will fall to at least half of what there is now. The sharp decline in the world’s population brings us good news and bad news: the bad news is that future pensioners will be paid just enough not to go hungry but without whims. The good news is that the climate emergency will have cured itself. If there are only half the people consuming energy and polluting, everything goes back to its natural course.

Once we admit that the world’s population is going to be in the middle, we still have two options to choose how we want the population reduction to happen. We can choose to reduce the population to good or bad. As I know the human species, I have not in vain related to bipeds since I was born, my prognosis is that they will not choose either option, and reality will lead us to the bad option.

The bad option is to do nothing, to continue living in an unreal world of dream fantasies, and when the reality of the oil shortage is imposed and everyone exclaims stupefied who would imagine it? It’ll be too late to plan anything. The population will shrink with an exponential increase in resource wars, violence, looting, vandalism, hunger, misery, and deforestation from the cutting of wood for cooking and heating.

The good option is planning. It’s not about killing people, it’s about encouraging people to have fewer than 2 children. What happens is that no politician ever accept or propose to lower the birth rate, because of the following:

“People have been embarked on the pyramid scheme of pensions, also called the Ponzi scheme. All pyramid scams are based on the shape of the pyramid: there has to be a large base of people paying and a small peak of people collecting.”

Categories
Forex Basic Strategies

Optimization Vs. Over Optimization

Today we discover the dangers of optimization: over-optimization. That’s the secret to making our system robust, consistent, and quite durable over time, or a quick way to lose your capital. It’s a fine line we shouldn’t cross. Let us then see what requirements we must take into account and what precautions we must take during […]

Today we discover the dangers of optimization: over-optimization. That’s the secret to making our system robust, consistent, and quite durable over time, or a quick way to lose your capital. It’s a fine line we shouldn’t cross. Let us then see what requirements we must take into account and what precautions we must take during […]

Today we discover the dangers of optimization: over-optimization. That’s the secret to making our system robust, consistent, and quite durable over time, or a quick way to lose your capital. It’s a fine line we shouldn’t cross. Let us then see what requirements we must take into account and what precautions we must take during the creation of a system, either automatic or 100% manual. At what point does optimization appear?

When we are creating our trading robot, the first thing we do is determine how it starts making market entries, when it will come out with its corresponding motives (crossover, RSI, MACD, different timeframes, etc). Once this is done, we start with optimization.

Right now we are going to adjust the robot to each market, as it is quite difficult for them to behave in similar ways. Therefore, if hypothetically our robot enters by moving averages when we are optimizing, the program will tell us that moving averages have gone better and which ones have gone worse. It’s just in that instant that we’ll have to be very careful, because it is when the joys of seeing a system that has multiplied our capital by 4 in 6 months come, forgetting the rest of optimizations. Error.

What do we have to look at in optimization?

In the graph of the evolution of our capital. Capital should not have any operation that excelled from the rest notably. Trading is a work of constancy; we must never seek the ball, the trade of your life… if it comes, it will come. Imagine that our profit after a year (500 operations) amounts to 1,800€, but we see that with a trade or two we have made 2,000€. We are in front of a system that will rarely get super trades, but that for the rest of the time, will be a negative or near-zero profit system.

Another point that can help us identify whether or not we are over-optimizing will be to look at the values of nearby means and see what results there are. If the results are very uneven, be careful, it is very possible that we have over-optimized. It may be that the means 10 and 20 go very well and that the means 12 and 25, fail miserably. A good system has to keep these values quite similar, the more subsystems (system configurations), the better the overall result.

It is necessary to be careful that when we decide to optimize a variable, it must be directly related to the market, that is, that it is something measurable, some numerical value.

As an example of this point, we could optimize our trading system by the hour. The market does not know what time it is, nor is it sleepy, the market is there. We must draw a pattern of behavior from indicators, or whatever, that depends directly on the market. Not because it’s 9:00 in the morning the market is going to move or the other way around; not because it’s 10:00 at night, the market is going to be flat. There are trends day and night, although it is true that there are more during the day. If we decide to optimize by eliminating certain hours of the day, the days that for some unknown reason there is no trend, our system, if it is tendential, will probably suffer.

Time for backtesting and subsequent optimization. If our strategy is long-term, we must have at least 200 trades, at least. With less, it is impossible to get reliability from that system. It is estimated that the robot continues to operate for a period of approximately 1/3 to 1/8 of the total simulation. If we do a test of 8 months, at least the system should work from one month to almost 3.

If after optimizing the system does not work, nothing happens. I know, it’s nice to see how your system in the past could have made a killing, but now it’s no good. It was a combination of trades that might happen again, but maybe 20 years from now. Are you going to be losing money for that long?

The last thing, I was looking for images to illustrate the post and I remembered the most over-optimized systems that exist, the trading robots that are sold online. 95% are scams. With phrases like this: “I doubled the capital, in 6 months” and a guy smiling with money, people go crazy. The final part of the advertisement says: “For only 29,95€”… If the programmer had a system that doubled the capital in 6 months, it would be cheaper for him to go and ask for money in the bank or wherever. I put the photo here, so you can see the graphic they show on their websites. Good and functioning robots make money in the long run, but they are not exponential and perfect trend lines, without any failed trade.

Categories
Beginners Forex Education Forex Basics

Myfxbook: The Definitive Guide

What is Myfxbook? How do I create an account? What can I find on this platform? What should I do if I want to be a provider of trading signals? In this guide, you will find everything relative to how to handle Myfxbook, a platform that has given a turn to social trading. More than […]

What is Myfxbook? How do I create an account? What can I find on this platform? What should I do if I want to be a provider of trading signals? In this guide, you will find everything relative to how to handle Myfxbook, a platform that has given a turn to social trading. More than […]

What is Myfxbook? How do I create an account? What can I find on this platform? What should I do if I want to be a provider of trading signals? In this guide, you will find everything relative to how to handle Myfxbook, a platform that has given a turn to social trading.

More than 100 online Forex brokers offer the services of the Myfxbook platform. It is a tool that has gone beyond social trading to become a provider of services related to the world of world-class short-term financial investments.

But what is the novelty of this platform? Until now, social trading communities had simply been confined to a particular broker. Thanks to Myfxbook, the community is growing. It is a multi-broker platform, with which signal services, Experts Advisors, programmers, PAMM accounts, copy trading, and more.

This feature, together with the number of parallel services it offers and the reliability it provides to copy traders, has made Myfxbook one of the reference trading pages. Through these paragraphs, you will discover how this platform works and what it can do for you.

What is Myfxbook?

This website was born as a trading account analysis system, a community created for traders in which transparency in the operation of those service providers took precedence. In turn, making the learning process easier for other less-experienced traders. Myfxbook is one of the first websites dedicated to social trading.

As we can see, everyone wins: expert traders can make profits by being followed (in the form of commissions) and novice traders can develop their knowledge thanks to the monitoring of other traders. A collaborative project where ideas are shared.

The main difference between Myfxbook and other platforms, also dedicated to social trading, is its ability to work with different intermediaries and the security it brings by showing real and verified results.

Myfxbook puts at your disposal the following benefits:

-Analyze your trading systems automatically and in one place, without the need for manual calculations.

-You can observe (and copy) other traders to discover how they do their trading and, in this way, develop your skills.

-You can share your system and your results to find customers and become a fund manager.

-Likewise, you will also have access to the audited results of other traders in cases where you need to hire some social trading service (copy trader, signal system, PAMM accounts, etc.).

-You will have the possibility to buy and sell trading systems.

-You will be part of a community, Myfxbook is a great social network dedicated to trading.

-You’ll access a wealth of news and market information services to make trading decisions.

How Do I Access Myfxbook?

The first step is to register in Myfxbook (in myfxbook.com), this page is available in Spanish. To be able to use the platform you need to have a trading account with one of the more than 100 brokers that are compatible with its use and allow you to participate in its program. The trading platforms supported are:

The process is very easy, what you should do is fill out the form that you will find on the left side of the home screen, after accessing the page (myfxbook.com). You must define:

  • Your username
  • A password
  • Provide an email address

They’ll send you an email from which you must confirm the newly created account and you can now access Myfxbook by logging in (i.e., entering your username and password).

After this first step, the next step is to connect your trading account with Myfxbook. This option is available in the “Portfolio” menu, by pressing the “Add Account” button. You can also do this task in “Settings” in the user menu (where your username appears).

With MetaTrader, you can link your account through Publisher or by downloading an Expert Advisor (EA) specially designed for this purpose. After that, you will have to install the app, after it is downloaded. It will ask you to select a specific account from the chosen platform (it is advisable to select an account that already has a history).

The following steps are done from the trading platform itself, we can anticipate that, in MetaTrader 4, these tasks are performed from the “Options” command, within the “Tools” menu.

In the “Activity” menu of Myfxbook (top of the screen), you will be notified that your trading account has been linked to your Myfxbook account.

Once your trading account is linked to the platform, in the “Portfolio” menu you can get a view of your trading statistics and associated account information. This will be of great use to carry out a thorough analysis of your profitability, your percentage of winning trades, drawdown, and other variables that you will have to take care of as a trader. Especially if you have multiple accounts, so you can monitor your entire operation.

Prepare Your Profile

On the right side of the screen, at the top, at the aforementioned user menu, you have everything to leave your profile ready in this new social network of which you are already part.

Your profile is your cover letter to other traders and will be essential if you intend to initiate or participate in any conversation, debate, ask questions, or market any social trading service.

To fill your profile you must select the “Edit Profile” submenu or enter “Settings” and select the “Profile” tab (both options are located within your user menu at the top right of the screen, where your name appears).

What Can You Find in Myfxbook?

It is necessary to say that some of these services are available without the need to create an account in Myfxbook, that is, without the need for previous registration on the page. However, once created, you will have full access to all the utilities that this platform has. As we have seen, the process of creating an account is simple and fast: it is worth taking this step. Among the menus of Myfxbook, you will find all this amount of tools that we show you below, menu to menu.

This first menu is related to the latest market news, very useful to keep you up to date. The menu is composed of:

News: access to the latest news related to the Forex market.

Economic Calendar: economic publications that move currencies.

Recent Posts: Last threads in the Myfxbook forum.

Forex Calculators: In this command, you have available a series of calculators designed to make your trading easier (for example, pips calculator, margin calculator, Fibonacci, etc.).

Portfolio: From this menu, you can link your accounts and access their statistics. In short, you can analyze your trading to improve it.

Then we’ll see how we can perform this data public so that other traders can assess if it is advisable to contract some product or service that is intended to offer.

Autotrade: The Autotrade menu is the corresponding menu for replicating operations. When a trader is a signal provider and carries out a trade, Myfxbook sends a signal to all those trading accounts that follow it (that is, the accounts of its customers). In this way, the same position as the aforementioned supplier is opened or closed.

The menu consists of a submenu with the frequently asked questions of this service (FAQs), the help submenu, and a simulator that we can test the strategy of any provider before making the decision to follow it.

Soon we will see the requirements to be able to be a signal provider in Myfxbook.

Charts: Charts are one of the tools that Myfxbook provides to members of its community. Any user can create an analysis and post it so that other traders can view and comment on it. It is possible to see the most followed, the most recent, or the most commented charts (among others). Everything depends on the specific option you choose in the submenu.

You also have the opportunity to create your own analyses and share them in this social network, in this way analysis is shared and learned through shared opinions. It will also help you boost your personal brand as a trader.

Markets: In this section, we will find several sub-menus with information about the Forex market useful for making trading decisions:

Technical Analysis Patterns: shows the different Japanese candle patterns that follow each other in major currency pairs. The temporality in which they appear and the implications they have (bullish or bearish) can be defined. You can also comment (and see the corresponding comments).

Volatility: you can visualize the volatility, in pips, of the main currency pairs (in several seasons).

Heat Map: Do you want to know which are the hottest currencies? Here you are indicated the strongest and weakest in different time periods.

Correlation: The relationship between currency pairs is important to avoid overexposure to the risk of a particular currency pair. There are also trading strategies based on correlation. In this command, you can have it under control.

COT (Traders’ Commitments) Data: data obtained from Commodity Futures Trading and in which you can read the positions of the participants of the forex futures market, to get an idea of what they think.

Liquidity: You can look at the estimates of trading activity in the market in this subsection.

Systems: This menu is only visible to all users who have created an account in Myfxbook. In it, you will have the opportunity to visualize the different trading systems and strategies of those users who have made this information public, in order to be followed. Through the statistics provided by the platform (and that we have already seen in a previous image).

Also, you have the option to follow any of them that you find interesting, by clicking on the button “Autotrade”. You can have direct access to the most popular ones by selecting the corresponding submenu. You can also compare different trading systems.

Remember that one of the advantages that Myfxbook provides is the transparency and reliability in the statistics of the different historical data, the accounts are audited at the time they are linked to this platform.

Community: This is a communication space, where you will be able to ask, share, debate, and learn about any topic of trading in the Forex market.

Beyond the general forum, this section is composed of several sub-menus, in which you can see conversations regarding:

  • New traders
  • Experienced traders
  • Investment systems
  • Strategies
  • Programmers
  • Suggestion box
  • Contests
  • Technical patterns
  • A feeling of community

Any user can open a new discussion thread. Being proactive in this aspect improves our visibility within the platform and, therefore, we will be more transparent and reliable traders. In addition, it is a good meeting point to share ideas and market products and/or services related to currency trading.

Comments: In this section, you can access, in addition to participating directly, various comments, reviews, ratings, etc. about:

  • Brokers
  • Automatic systems
  • Signal providers
  • VPS services
  • Programming services of EAs
  • PAMM services
  • Reimbursement programs
  • Trading platforms

As we can see, once again, Myfxbook stands out for the transparency it offers. On this occasion, the users of the platform are the judges of any service offered. There is nothing like seeing the ratings and reviews to check the reliability of any product or service.

Competitive examinations: As its name suggests, this menu will help us to be aware of the different trading contests organized by different sponsors. We will be able to see, also, the contests that at that time may be active.

If we access the menu, we will have the relevant data to decide whether or not we are interested in participating in a trading contest. Data such as:

  • Sponsor
  • Number of competitors
  • Whether it’s a demo or real
  • Awards
  • Winners (if the contest is over)
  • Start and end dates of the competition
  • Statistical analysis of the operations carried out

Without a doubt, it is another advantage of Myfxbook: to have under control the trading contests and all the information about them.

Brokers: This section is a comparative table of the different online financial intermediaries trading in the currency market. From it, we can see, compare, analyze, and decide which broker is the most interesting for our operation, depending on our trading style and our preferences. We will be able to undertake a follow-up of the spreads they offer, swap commissions, as well as other costs and promotions they can offer us.

Hiring a broker adapted to your needs is essential to develop a good trade. Through this menu you can see all the information of interest in this sense: one more reason to have Myfxbook among your favorite trading pages.

How Can I Become a Trading Service Provider in Myfxbook?

As mentioned above, Myfxbook gives you the opportunity to promote yourself as a trader, offer a range of services, and develop all your skills in the currency market. However, to market any social trading service you need to make public the statistics of at least one of the accounts you have linked to this platform.

Myfxbook stands out for offering a real, verified, and transparent information of the different traders, so, to have the opportunity to be a top trader, you must make a good operation and this contributes to the professionalization and regulation of this professional activity.

To make your trading account data public, simply click on the “Invitations” tab (in the “Settings” or “Portfolio” menu) and mark all options as public.

Trading providers earn a 0.5 pip commission on each account subscribed for each winning trade. If you are content to be a successful trader, you must first learn and take experience in the markets. In this respect, Myfxbook will also be of great help to you thanks to the information and possibility of communication it offers.

To access the Autotrade service and to be a signal provider, the following requirements must be met:

-Only real accounts with MetaTrader 4, verified and connected to Myfxbook, are accepted.

-The account must credit a minimum balance of USD 1,000.

-You must have a history of at least three months and at least 100 operations.

-The historical drawdown must be less than 50%.

-The historical return should be greater than 10% and greater than the historical drawdown.

-You must have earned an average of 3 pips per operation.

-As for the duration of operations, the average will be more than 5 minutes.

-The system should not use any martingale technique.

In other words, it is necessary to demonstrate some value in trading in order to be a provider of social trading services. It is another feature that defines Myfxbook as a secure and reliable platform.

The Reality of Myfxbook

The reality of this platform is that you will find many martingale systems and hidden scams. Most of them may look very promising but then they have a big fall and they get out of the way. In the end, most are hidden under a username.

So, all that being said, in my case I take advantage of this tool to get statistics from my accounts and little else. You can access profitable systems and they can give you an idea of how they work if you’re smart looking at some of their statistics, but remember that it’s a mine of martingale and grid systems, which we already know ends up blowing up accounts. So far all this guidance on this well-known tool within currency trading and trading systems, forex brokers.

Categories
Forex Basic Strategies

How to Measure Your Trading Strategy with “R Square”

Chances are if this is the first time you’ve heard that square R, you have no idea what exactly I mean or where the thing is going. It is normal, there is much written about supports, resistances, chartist figures. but not so much about more objective indicators. The subject is a bit technical, based on […]

Chances are if this is the first time you’ve heard that square R, you have no idea what exactly I mean or where the thing is going. It is normal, there is much written about supports, resistances, chartist figures. but not so much about more objective indicators. The subject is a bit technical, based on […]

Chances are if this is the first time you’ve heard that square R, you have no idea what exactly I mean or where the thing is going. It is normal, there is much written about supports, resistances, chartist figures. but not so much about more objective indicators. The subject is a bit technical, based on mathematics and statistics, but I’m going to (try) explain it in a practical and straightforward way. In the end, everything is easier than it looks.

What is the R Square?

First, let’s start by defining and understanding the concept of R Square. R Square is a coefficient of statistical determination, also represented as R2, which allows us to predict some results or test a hypothesis. In other words, when we analyze a statistical model, the square coefficient R determines the efficacy of the model (which is so good) and also expresses the percentage or proportion of variation results that are explained by this model.

With this definition clear, in order to use this coefficient R square in practice, it is necessary to understand two important concepts:

Linear Regression: In statistics, a linear regression, also known as linear dependency, is a mathematical model used to approximate the dependency relationship between a dependent variable (for example Y), independent variables (X1,X2,X3,ǐ.Xn) and a random term ɛ (associated with any process whose outcome is only foreseeable in the intervention of chance).

Pearson correlation coefficient: Speaking of statistics, the Pearson correlation coefficient is a linear measure of the degree of relationship between two quantitative random variables, that is, two variables that can be measured or observed and also represented by numerical quantities.

Now, defined these concepts, you may be wondering: How to use this to evaluate my trading system? Step by step.

Each trading strategy or system needs an objective assessment of its effectiveness. In order to achieve this goal, we could get to use an extensive range of ratios, some more complex than others, both in their calculation process and in their interpretation. Despite all this variety, there are very few quality metrics to evaluate something very important: the regularity of the system’s balance line or trading strategy.

To do this, let’s manage the coefficient of determination, R square, to calculate the quantitative estimate of that ascending straight line that all traders want to see in our results.

Characteristics of an Assessment Criterion for Trading Systems

Each criterion or ratio used to evaluate the effectiveness or robustness of a trading system has its limitations in application. There are no ideal or pre-established criteria that allow us to determine with absolute certainty the robustness of a trading system. However, some properties or characteristics may be formulated that must have:

Independence in relation to the duration of the probationary period: Many parameters of the trading strategy or system depend on the duration of the trial period, for example: the longer the trial period for a profitable strategy, the greater your net profit. Independence from the time period is necessary and essential to compare the effectiveness of different strategies in different trial periods.

Independence of the end point of the test: For example, if the strategy «plays» with which simply exceeds the losses, the end point of the test can considerably change the final balance. The criterion or indicator should be immune to such machinations and provide a clear picture of the trading system’s work.

Simplicity of interpretation: All indicators of a trading system must be quantitative, that is, they must be represented by a certain number. It is important that this number is intuitively understandable. The simpler the interpretation of the value obtained, the easier the parameter to understand. It is also desirable that the value of the indicator is within a set range or a defined range, as it is more difficult to understand the meaning of extremely large numbers.

Representative results with few transactions: This is probably the most complicated requirement to meet in the list of features for a good metric because all statistical methods depend on the number of measurements. The higher the measurements, the more stable the statistics obtained. It is virtually impossible to fully solve this problem in a small sample, but you can soften the effects that arise due to a lack of data.

Linear Regression Application

To calculate the coefficient of determination R square, we must calculate or determine the linear regression. As explained above, there may be several independent variables, however, for a better understanding we will use the simplest case: A single independent variable.

In the case of an independent variable, the linear regression or dependence of a dependent variable (Y) on an independent variable (X) can be expressed by the formula Y=aX+b. This formula graphically represents a line in the XY plane, hence the name linear regression.

Now we will choose on our trading platform a chart of a currency pair, of our preference, with a clear upward trend in a given period of time. We download and save this data, then build a chart in Excel with closing prices. On the Y-axis we will have the closing prices and on the X-axis the dates that we will replace by order numbers (for convenience: 1, 2, 3, A). In doing so, we’re going to get a chart with a clearly bullish trend, but we’re interested in a quantitative interpretation of that trend.

The easiest way to reach the target is draw a line that will be more precisely adjusted to the trend obtained in the chart. This line is linear regression. If the graphic is fairly uniform one or more straight lines can be drawn that fit or describe our bullish graphic. Then a question arises: which of these lines is correct? The correct line shall be that straight line where the sum of the distance of the existing points to the line is the minimum distance.

It is also important to note that the regression line must always pass through the center of gravity of all the data that make up the point cloud. The coordinate of this point of gravity would be on the x-axis, the mean of the x-variable, and on the y-axis, the mean of the y-variable. Knowing a point of the line we can use the slope point equation to determine the line equation. By getting the correct line we can calculate the coefficients of the linear regression.

Pearson Correlation Coefficient

Once the linear regression is calculated, we have to calculate the correlation between the line obtained above and the data on which the line was calculated. Let us remember that correlation is the statistical relationship between two random variables. The correlation can take values ranging from -1 to +1. A value close to zero means that there is no relation between the measured values, a value of +1 (or very close to it) means a direct relation of the variables and a value of -1 (or very close to it) means an inverse relation of the variables.

The Pearson correlation coefficient could be calculated by means of the following formula:

Where: XY – is the covariance of (X, Y)

X: is the standard deviation of the variable X

Y: is the standard deviation of the variable Y

Covariance is a value that indicates the degree of joint variation of two random variables with respect to their means. In other words, it is the common variance between the variables and the standard deviation is the square root of the variance.

The Pearson correlation coefficient shows how far the line describes the data. If the data points are at a large distance from the line, the dispersion is high and the correlation is low and conversely, if the data points are at a small distance from the line, the dispersion is low and the correlation is high. A value of zero says there is no relationship between linear regression and data.

Importantly, in Metatrader there is a metric called LR Correlation and shows the correlation between the balance line and the linear regression found for that line. However, in the statistics, they do not usually directly compare the data and the regression that describes them.

Calculation of the Coefficient R Square

In the case of linear regression, to calculate the coefficient of determination R squared is sufficient by squaring the Pearson correlation coefficient that we calculated in the previous step.

This coefficient can take values ranging from 0 to +1, being a result equal to zero or very close to zero pure random unpredictable and a result equal to or very close to one a market in which all quotes are placed on the line. R square shows us what percentage of the price movement follows a definite trend, while the rest of the percentage will be due to random movements.

Limitations On Use

Each statistical metric has its advantages and disadvantages and the coefficient of determination is no exception. Some disadvantages are:

  • They depend on the number of trades. Exaggerate indices with few trades.
  • For calculation, complex mathematical computations are required.
  • It is applicable exclusively for the estimation of linear processes, or systems trading with a fixed lot.

Application in Trading Systems

In trading systems you can see this ratio represented in percentage, which the closer to 100% the better (in theory) is the quality of our system. In my experience, a system with a score above 65 usually has a fairly stable performance over time. It’s one of my favorite filters.

Conclusions

After analyzing and studying the process of calculation of the coefficient of determination R square I can tell you that this coefficient is one of the few measures that calculate the regularity of the curve both of the line of the balance sheet, and of the unrecorded benefit of the strategy (among others).

R² is easy to use because its range of values is fixed and is within the limits of -1 to +1. Values close to -1 alert us or warn us of the negative trend of the balance of the strategy. A value close to zero warns us of the lack of trend in the balance sheet of the strategy. Values close to +1 warn a positive trend.

As I have told you, the square R, like any other ratio, has its limitations that you must take into account. In my case I use it as a top 3 ratios to measure if I have a valid trading strategy or if instead it goes to the trash.

Categories
Forex Basics

The Most Interesting Myths and Truths About Forex Trading

There are many myths about Forex that need to be left behind well in the past and here we will tell you exactly what these are because in reality there are many more myths than truths. In this article, we tell you everything! So let’s dive into the good, the bad, and the ugly.  The […]

There are many myths about Forex that need to be left behind well in the past and here we will tell you exactly what these are because in reality there are many more myths than truths. In this article, we tell you everything! So let’s dive into the good, the bad, and the ugly.  The […]

There are many myths about Forex that need to be left behind well in the past and here we will tell you exactly what these are because in reality there are many more myths than truths. In this article, we tell you everything! So let’s dive into the good, the bad, and the ugly. 

The myths about Forex that circulate in the network do damage to this type of investment. Currency speculation has always been, especially in recent years, the victim of false news and rumors. In order to succeed in speculating or investing with this trade, investors need to leave behind these myths that affect the image of Forex and its expectations.

Forex gives monthly returns or interest.

Another false myth. As in the equity market, the return generated by the person investing in this product depends on the movements of the currencies the investor buys. In other words, profitability only depends on the fluctuation of prices, something that also happens with other investments (raw materials or stock markets, for example).

Forex is a pyramid.

Forex is an electronically controlled market where all foreign exchange transactions are carried out worldwide. Its usefulness is incalculable for international trade since it is in this place where the currency needed to pay or collect money from import or export products is bought or sold.

Forex makes you rich in a few hours.

Another falsehood. While it is true that anyone can access this market and accumulate strong profits in a short period of time, to invest in Forex and accumulate profits it is recommended to form in markets. That is, it is advisable to take a course to invest in a stock. With this course, we will be able to strengthen the knowledge we have and, on the other hand, learn more about Forex techniques.

Giving up our job to invest in Forex.

Investing in Forex does not mean giving up our job. We can test trading as a part-time job, at least entry, but never leave other sources of income and always learning from investment or currency speculation and receiving continuous training.

The intermediaries only want to con you.

From a few illegal experiences, many people think that the brokers who allow us to speculate on Forex are scammers. We must be clear that there are corrupt companies, but they are a clear minority. Forex is the largest market in the world, which has existed for many years.

There are two fundamental points that show why intermediaries don’t want to rip you off:

-Current licensing and regulation make it impossible for intermediaries to commit fraudulent activities. If you have opened an account with an authorized broker, the current regulations will protect your capital.

-Brokers earn money with the buy or sell spread. That is, they do not need to steal the investor’s capital to make a profit.

On Forex, you bet.

Forex trading is speculative, but to a certain extent: it is not a casino. The strategies and tools in this market are like those in the stock market. Forex traders have different trades, but they don’t work randomly. If an operation is carried out as if in a casino, this is the responsibility of each investor only.

I can make profits whenever I want if the Forex market is open 24 hours a day.

Again, you will not be sitting in front of your computer throughout the day to be able to operate for 24-hours. I would need automated trading software to take advantage of the 24-hour trading market.

I need to accurately predict the outcome of the market to succeed in Forex.

Unfortunately, there is no scientific method for us to have the knowledge of what is going to happen in advance on the market with 100% certainty. There would be no foreign exchange market if the exact exchange rates could be known in advance. Trading will never be an activity of certainties, but of probabilities. New traders tend to think in terms of odds, and this is one of the first things they learn and risk-reward relationships.

Many times you tend to think that you need to use an extremely complex strategy in order to succeed in Forex trading. It’s a popular myth that many online marketers want to create. The main requirement for success in Forex is self-discipline and money management. There are many traders who make profits consistently with simpler and older strategies.

A large amount of initial capital is required for Forex earnings.

A large capital investment will not help you with Forex. You don’t need much money to diversify into currencies and you can’t move exchange rates with your orders (you would need billions of dollars to do that). You can actually trade in forex with very little capital because forex trades are almost always leveraged with the money of the broker.

It’s a risky market.

One could say that it is a market with a lot of risks. The ability to leverage, or buy up to 100 times as much money as you have for investment and high volatility, or the sheer speed with which prices change every minute, can mean big losses to the investor.

The advice for those who decide to enter this market is to know the market before entering it, look for a broker’s platform, if someone will advise you to look well at the experience and set and respect the limits of loss per operation, by day, by week and by month.

Is completely legal.

Although it is not regulated, anyone can legally access Forex through a simple mechanism, looking for a broker. The recommendation, in this case, is to invest in a recognized broker, with trajectory, and use the formal channels to deposit the money to the account in which you will trade.

There Is No need to fear the Forex market.

Once we have established that it is possible to predict the market, why are there so many traders who, understanding and agreeing with this point, have trouble exploiting the market profitably? It is here that psychology is most useful. The trader should not be scared or afraid of not being able to win the market, as the market is changing, nor should he fall into despair because the trade he is waiting for right now seems unworkable, etc. The list of psychological problems that can be identified is quite long, and almost everyone identifies with fear or fear.

“Don’t be afraid of financial markets, just respect.”

The experience and knowledge of how they work will gradually turn us into traders with better mental control and more prepared to face any eventuality in our operation with total normality.

You can earn a lot, YES, but can you lose a lot? YES.

For example, if you open a new account with $10,000 in a broker that allows you to buy currency for 30 times more than you have in your account. Now buy 200.000 euros at a price of US$1.20 per euro, which is investing in total is US$240,000.

In this situation two possible scenarios may occur:

  1. The price of the euro grows to US$1.30. In that scenario, it would earn US$10,000, because it obtained a profit of US$0.1 for each euro it bought.
  2. The price of the euro drops to US$1.15. This is the side of history that no investor likes, but that usually happens to starters. In this scenario, I’d lose $5,000. And if you do this several times in the day, trying to make up for what you lost, chances are your account will be zero at the end.

The scenario that is illustrated, is something that usually happens on a daily basis in the Forex market. Then we already know the importance of learning and knowing how to choose an appropriate strategy to limit losses once a trade has taken place.

Categories
Forex Market

Purchasing Power Parity Theory

Traders, who operate in the foreign exchange market, read such news every day as: “the consolidation of the dollar led to the fall in the price of gold” or “the price of the euro backed the price of oil”. Although this news is usually published after an event, the relationship between the goods market and […]

Traders, who operate in the foreign exchange market, read such news every day as: “the consolidation of the dollar led to the fall in the price of gold” or “the price of the euro backed the price of oil”. Although this news is usually published after an event, the relationship between the goods market and […]

Traders, who operate in the foreign exchange market, read such news every day as: “the consolidation of the dollar led to the fall in the price of gold” or “the price of the euro backed the price of oil”. Although this news is usually published after an event, the relationship between the goods market and the foreign exchange market is felt independently whether we trade in the foreign exchange market or have nothing to do with it.

Theoretically, inflation serves as a correlation between the value of money and the prices of goods, and in this case, the currency does not matter (whether dollars, euros, rubles, British pounds, or Indian rupees). If a week ago the price of gasoline cost 40 rubles per liter and now it is 50 rubles, this means that the ruble in a week was lowered by 25% and the gasoline, on the contrary, increased in price. If gold cost $ 30 per gram in June 2009 and in June 2019 was $ 43, this shows that in 10 years the value of gold in US dollars increased 43% and the dollar, the other way around, fell in price.

Correlation between the goods market and the foreign exchange market. How does it work? They are simple and easy to understand (and also applicable to trading) examples of how money and goods are related and why the correlation between the goods market and the foreign exchange market is a fundamental rule that determines the price of a currency. Let’s try to decipher this theory.

Purchasing Power Parity Theory

Purchasing power parity theory states that the cost of goods in one country should not exceed the cost of goods in another country more than the price of the transport of goods between the two countries. The price of transportation also includes the profit margin of the trader and the change of the standards of one country by the standards of the other. It is also theoretically assumed that there are no artificial trade barriers.

When most of Europe and Asia, back in 1944, were in ruins, a conference was held at the Bretton Woods spa where, for the next twenty-five years, the fate of all the world’s currencies was determined, among which the United States was chosen as the international reference currency. The currencies of other countries were beginning to be traded in dollars, the same dollar was convertible into gold and the troy ounce was worth $ 35. That agreement at that time seemed fair, as the US had 70% of all world reserves and, thanks to the Second World War, it had an international advantage.

The Bretton Woods monetary system existed until 1971 when United States President Richard Nixon unilaterally terminated the agreement, and on 16 March 1973, the treaty is known as the “Jamaica agreement” was signed, which formed the Forex currency market. According to the “Jamaica agreement”, exchange rates would be set in the market on the basis of supply and demand. Since then and to this day the dollar is the main reserve currency, occupies a leading position in the calculation of energy, goods, and gold, and is the main currency used in many financial instruments.

At present, the US dollar position is well described with the word “petrodollar”, and the main volumes of trade in goods, including oil and gold, take place on US exchanges such as NYMEX, COMEX, CME, and ICE. The United States leads in the trade of oil, gold, grains, and many other goods, and the quotations of productive resources are valued in US dollars: gold/dollar (GOLD/$), oil/dollar (WTI/$), corn/dollar (Corn/$), wheat/dollar (Wheat/$), coffee/dollar (Coffee/$), etc.

For the determination of the value of the market of goods or a group of goods there are different indices of raw materials. The best known among them are: Thomson Reuters/CoreCommodity CRB Index (CRY) and Deutsche Bank Commodity Index, which are calculated based on parameters of futures traded on the exchanges indicated above. The exception is for aluminum and nickel prices, which are based on quotations from the London Metal Exchange, calculated in US dollars. Gold prices are also valued in US dollars.

The quotations of foreign currencies are also translated through the value of the dollar: pound/dollar (GBP/USD), euro/dollar (EUR/USD), dollar/ruble (USD/RUB), dollar/franc (USD/CHF), dollar/yen (USD/JPY), etc.

The best known of these is the US dollar index (USDX) measured in relation to the value of a basket of six currencies: the euro (57.6%), the Japanese yen (13.6%), the pound sterling (11.9%), the Canadian dollar (9.1%), the Swiss franc (3.6%) and the Swedish krona (4.2%). The index began in 1971 with a base of 100, and values since then are relative to this base. Therefore, the current rate of index 97 indicates that the exchange rate of the US dollar, relative to the basket of previous currencies, represents 97% of the level of 1971. ¡ A completely insignificant change in 48 years!. But the reality is that it hasn’t always been like this, and in recent years the index has changed considerably from the level of 70 percent in 2009 to the level of 128 percent in 1985.

Do we say “oil,” but do we really mean “dollar”?

As we have already mentioned, the US dollar is used in goods and currencies; the exception is inverse currency pairs, but it is only a mathematical casuistry for the ease of quotation of these currencies. It is very logical to think that at the moment when the dollar rises, the exchange rate of goods decreases, and vice versa, the depreciation of the dollar leads to the rise of currencies and goods markets.

Between July 2014 and July 2017, oil and the dollar correlated with each other with a coefficient of -0.75, that is, they were inversely correlated. Thus, at that time the linear correlation between EUR/USD pair and Brent-type oil in certain periods of time can reach the coefficient of 0.9, that is, it can be very high.

In the preceding paragraph, I purposely emphasized the phrase “in certain periods of time”. The ability to detect periods, in which one or the other factor impacts on quotes, depends on the competition between traders and the level of his training. In this case, there are no clear examples and schemes, everyone has to take this path on their own. But what we do have to warn about is the effects of oil prices on foreign exchange rates increases over time, when the difference in interest rates is small, as in the years 2014-2017, and decreases, when interest rate potential increases, as in the years 2018-2019.

Analysing the correlation between the prices of goods, oil, and the foreign exchange market, it should be noted that the study of the correlation between these assets has a low efficiency. It is better that traders, who ultimately decide to study the issue on their own, focus on monitoring quotes by oscillators, for example, the stochastic indicator or RSI that allows absolute values to be left by the percentage change of some assets compared to others.

We live in the era of hydrocarbons, and oil and its derivatives are the main product whose price affects all other sectors of the economy, which is reflected in the indices. Energy carriers account for 33% of the composition of the Thomson Reuters/CoreCommodity CRB index, regardless of natural gas. As a major part of the Deutsche Bank’s commodity index, petroleum products, and oil amount to 50 percent.

In this way, the change in the price of oil leads to changes in the entire market of goods, from which some dependencies can be deduced: the decline of the dollar leads to the growth of the price of oil and foreign currencies; and vice versa, the rise of the US Dollar contributes to the depreciation of the price of oil and foreign currencies.

It is impossible to predict the beginning and the end of this correlation. For example, the price of the euro may fall, causing the rise of the US dollar, which in turn will contribute to the fall in the price of oil; or if the price of oil begins to rise, the price of the dollar begins to fall, which in turn causes the growth of the euro.

Purchasing Power Parity Assumptions

Purchasing power parity theory takes into account a world in which there is no single reserve currency, assuming many world trade points, which is not in keeping with the current situation. However, the crisis of the world’s dollar-based currency and the trade wars that have been unleashed as a result of Donald Trump’s presidency have forced the governments of major emerging power centers to try to find a gradual replacement of the US dollar as a universal equivalent value.

Thus, for example, in the calculations of Asian goods, the Chinese yuan has already left the Japanese yen behind and is gradually displacing the US dollar from trade. At the St Petersburg Economic Forum in early June, China and Russia agreed to eliminate the US dollar from reciprocal payments and arrangements; Iran and Turkey take the same path.

The tendency to renounce the dollar is barely growing, but it already seems impossible to stop it. The more trade tariffs the US applies, the more the dollar will shift in financial calculations and the faster the US currency will lose its position as the dominant global currency. Trade wars will inevitably lead to the fragmentation of the world economy in several monetary and customs zones, where the theory of purchasing power parity will be in force in a forceful manner, avoiding the intermediate link that is the US dollar. Of course, there is no one who knows for sure when it will happen, but there is no doubt that one day it will happen.

Purchasing power parity theory, like interest rate parity theory, is the fundamental basis of the currency market. In turn, the study of the relationship between the goods market and the foreign exchange market is an important element in the “authentic” fundamental analysis, unlike the studies of different “relevant” economic indicators or informative, which are very often difficult for private traders to analyse due to a lack of their knowledge and resources. However, knowing how it works and thinking nimbly, we will always find a way to apply the basic rules of the currency market to make a profit, even in complicated situations. He who seeks finds!

Categories
Forex Basic Strategies

What Is the Best Strategy for Forex Trading in 2021?

2020 is over and we must prepare our best Forex strategy to start the year 2021 in the best possible way. Undoubtedly, to define the future of our Forex operation we must take into account the most relevant events and news that we will encounter. Let’s define below some of those we think will most […]

2020 is over and we must prepare our best Forex strategy to start the year 2021 in the best possible way. Undoubtedly, to define the future of our Forex operation we must take into account the most relevant events and news that we will encounter. Let’s define below some of those we think will most […]

2020 is over and we must prepare our best Forex strategy to start the year 2021 in the best possible way. Undoubtedly, to define the future of our Forex operation we must take into account the most relevant events and news that we will encounter. Let’s define below some of those we think will most influence when designing the best strategy for Forex next year 2021.

What should we pay attention to? Highly effective news about Covid vaccines can lead to a decrease in the extreme levels of market volatility we saw in 2020 and a return to normality faster than expected. Investors should also consider the need for fiscal stimulus to save the economy before the global availability of vaccines, the increase in cybercrime, the relationship between the United States and China, and the risks to market leadership. Many investors may want to diversify to find high-return assets that can provide a stable source of income. There is broad consensus that the infrastructure sector will be one of the main beneficiaries after potential economic stimuli.

Then, looking at the market outlook for 2021, following the pandemic and the global crisis, next year will present both opportunities and risks for investors, as markets and sectors will rebound unevenly. This has been an unprecedented crisis, with winners and losers, that has entrenched current market trends, accelerating Internet disruption, and worsening the disinflation of the service industry. Therefore, it will be advisable for investors to diversify into different assets to search for their income.

In the year 2020, we have experienced a deep recession and the consequent bearish market, but it has not affected all sectors in the same way. Many companies are at their worst, and others have never really been better. This situation has led to an incredible dispersion in equity yields and credit spreads. In addition, the rebounds of different assets should remind us all that their valuations have as much to do with the discount rate as with the benefits.

The Current Economic Recovery Will Continue

In 2021 we see that the economic recovery will continue, as the latest sanitary innovations allow the normalization of private sector activity. However, with negative real interest rates in all advanced economies and likely to remain so for 2021 and several more years, investors will have to do more to find attractive returns.

The attractiveness of opportunities in alternative assets could increase in this low-return environment for longer. And as we have already mentioned, the infrastructure sector will be one of the main beneficiaries of the global economic stimulus packages and, within the universe of the instruments listed, the low level of return on a fixed income in developed markets will mean that investors will have to have a more global view. For example, dollar-denominated emerging market debt, including Chinese government bonds, can be particularly attractive.

What to Look for In 2021

The COVID-19 pandemic shocked us all during this year 2020, so investors need to consider what surprises the year 2021 could bring and what this will mean for their investment decisions.

1- The rise of cybercrime: the virus and the associated economic shutdowns have led to significant adjustments in telecommuting, which can make some sectors or businesses more vulnerable to the negative effects of a cyber attack.

2- 2021 will be the year of vaccines: highly effective and rapidly distributed vaccines would allow a return to normality sooner than expected. This, coupled with monetary stimuli, can trigger a strong rally in the markets.

3- Fiscal paralysis: Despite low interest rates and economic needs, paralysis in Washington, D.C., and reduced fiscal appetite in Europe mean a bridge to the vaccine is missing in the coming months. This could lead to a double-dip in the economy and markets.

4- Threat to monopoly: A possible change in the tax code and stricter regulation for large technology companies can bring about a major shift in market leadership towards small caps.

5- Improving US-China relations: the new US leadership lays the groundwork for a new engagement with China, including a reduction in tariffs and a reduction in restrictions on technology exports. Reducing uncertainty and improving the business landscape catalyse a significant shift in the flow of assets from developed to emerging markets.

Best Strategy for 2021?

The search for the “best strategy” in Forex is eternal. Most new “traders”, even some of the most experienced spend their whole lives looking, unsuccessfully, either in forums, books, and seminars, for the superior strategy to all the others.

We think what you should know about “the best” strategy is this:

It doesn’t exist!

Not only is there a way to do that, but there are many ways. This applies to successful strategies or methods of trading currencies as well. The different negotiating styles used by professionals specializing in making money consistently in the market are countless; just as each individual has his own type of DNA. That makes a lot of sense, as trade numbers and indicators, oscillators, and concepts are infinite as well as how these can be combined. Therefore, long searches for perfection in the buying and selling of currency sooner or later lead to disappointment.

Have you ever heard the saying “the best attack is sometimes a good defense”? This is a great truth that applies not only in the legal field but also in the currency market. Even an excellent entry strategy (what would be the offense) becomes weak if it does not have a good exit plan (what would be the defense). All traders employing strategies such as Martingale (a strategy that continues to increase losing transactions, thereby anticipating a setback) or other flawed exit methodology that keeps large open losses waiting for the market to return, are doomed to failure.

The best strategy can quickly become the worst if traders’ minds are not attuned to success. You will have heard experts say over and over again: “Trading is mostly mental”, this is a universal truth based on the law of attraction (which has become a buzzword because of the movie “The Secret”).

In Conclusion… 

The search for “the best” strategy to trade on Forex is useless. Instead, the trader should focus on the above three points to maximize their success in buying and selling currency. The best Forex strategy is a personal decision for each trader, but we must always understand it perfectly and we must identify with it. It should be consistent with our resources, and, speaking of resources, it should be cost-effective. And most importantly, we should feel comfortable with the strategy.

It becomes obvious because it is important to practice on a demo account, the possibilities are many and the more options, the greater the indecision. When testing on demo accounts, it’s time for the truth, and that’s where we can find our best Forex strategy. In a demo account, we have total freedom to experiment and test with many different strategies. Then, we can circumvent any limiting aspect and make attempts with everything we desire. It is now that we can make mistakes, refine small details, polish what is needed, and learn as much as possible.

Categories
Forex Money Management

What Are SWAPS in Forex?

I see many people, even those who already invest in the foreign exchange market, who don’t know what forex swap is. Also known as swap points, swap commissions, or rollover on forex. Although it is true that it does not affect scalping or intraday operations, it is a charge to account when a position stays […]

I see many people, even those who already invest in the foreign exchange market, who don’t know what forex swap is. Also known as swap points, swap commissions, or rollover on forex. Although it is true that it does not affect scalping or intraday operations, it is a charge to account when a position stays […]

I see many people, even those who already invest in the foreign exchange market, who don’t know what forex swap is. Also known as swap points, swap commissions, or rollover on forex. Although it is true that it does not affect scalping or intraday operations, it is a charge to account when a position stays open overnight. A charge that can be both in your favor (you get paid) and against you (you get paid).

I’m a person who likes to always count all my expenses. That’s why I’m going to explain to you what a swap is, how it affects you, how you can benefit or hurt yourself, and most importantly, how a swap is calculated in forex.

What is the Swap?

There are those who call it currency rollover. Swap is the difference between the interest rates of two countries. It would therefore be correct to say that this is the difference between countries’ interest rates. However, since «currency pairs» are played on forex, it is best to say that the difference is between two countries. The two countries involved in a particular currency pair.

This annual interest must be paid on every operation we keep open from one day to the next and every day. And it exists because the interest rates to finance a country are not the same among them. We have areas with very low and even negative rates, such as the Euro area (EUR currency), Switzerland (div. CHF) or Japan (div. JPY), and higher ones, such as Russia (div. RUB). There are isolated cases of countries with huge interest rates, such as Argentina, which for example in 2019 had an interest rate of 50%.

Where Does the Swap Come From?

The difference in the central bank interest rate to which each currency corresponds. So that we can understand it, let us look at the example of the Australian Dollar (AUD) and the Swiss Franc (CHF). Among others, because the AUD/CHF pair is very interesting for trading.

Remember that the first currency of the currency crossing is the base currency, in this case, AUD. The second, is the quoted currency, in this case, CHF.

AUD is subject to an interest rate of 1.50%, and CHF has the rate at -1.25%. Its total spread is 1.50-(-1.25)=2.75%. This would be an interest in our favor if our position is bought. If, on the contrary, we sell, this interest must be paid.

If we take the crossing backward (CHF/AUD) we would have a difference of (-1’25)-1’50=-2’75%. So, in a purchased position, we would pay for that swap, and in case of a sale, we would receive it.

Remember that from the first currency if you buy it you receive its interest, and from the second when you detach it you pay. On the contrary, if you sell, from the first currency you pay the interest, and from the second you receive it. Interest rates tend to vary over time. There are very stable interest rates, to very unstable ones.

So far, you can see the logic behind the swap. If you take as reference the interest rates of the currencies involved in each crossing, you will see how in your broker you are paid or charged depending on the ones you have looked at.

The Swap/Rollover at the Broker

This is important. The broker does not express a percentage but does it in pips (for or against you). And besides, you’ll see that it’s not proportional, a long position is not the same as a short position. Shouldn’t it be the same? Yes, it is indeed. What happens in this case, is that the broker charges a commission on each and its liquidity providers. And it is understandable because it is your business and we benefit from your services.

In my case, my broker pays me for a long position (Swap Long) in AUD/CHF, 0’44 pips per day. Then, in case I opened a short position (Swap Short) I would pay -0’71 pips per day. If we did not charge a commission, we would see perhaps more accurate pip figures, such as 0.55 and -0’55 for example, depending on whether it was purchase or sale.

I explain. The first time I had any notion of the swap, my first impulse was to look for the currency that paid me the most pips to keep an open position. «I will leave my position open… Every day I will get more pips… And I will be the master of the universe». Don’t even think like that!

You can search for yourself how the quotes of these foreign exchange crossings have been with high long-term swaps. If you look for them, which I encourage you to do, you will see some graphics that are scary. Does that mean that we should forget about the swap? No, far from it! But it’s a double-edged sword, and I have to warn you. Interests don’t vary because they do, but that’s another story.

A swap can benefit you, or help you, without being a guarantee of total success, in making decisions for long-term forex trades.

How Do I Benefit from Swap Points?

I don’t like «complicating» my life. I start from a very simple base, I can’t anticipate the short term. For me, the short-term market is irrational. I don’t know what something will do in less than 1 month, and although I am suggested in forex by my way of investing in value, I do not flee this market, but I do not analyze it with more depth than I think it deserves.

There are those who can tell me: «Try this indicator», or, «Look, I have discovered that such a thing works and you can get a good monthly performance». No way, I tried a lot of things back in the day, and I wasn’t convinced by any of them. That’s why I use the swap to my advantage, only in trades I know I can have open for the long term.

To do this, I don’t buy large amounts, my forex investments are minimal but multiple. Looking for pairs without strong oscillations and that in case of having them can support them, and are in points that I consider, are favorable. Always analyzing, in the long term. And when I say long-term, I mean years and even decades.

Long term + Small multiple trades + Swap + Market oscillations = I have generated a satisfactory return. I could even say, on a regular basis.

How to Calculate Swaps

We imagine that we want to trade a purchase with the EUR/USD, and to make the numbers simple, let’s imagine that we buy a mini-lot, which is equivalent to 10,000 USD. Each pip, or what is the same, every 0’0001 EUR/USD quote, is equivalent to 1 $. U.S.A. interest rates tend to be higher than in the euro area.

Imagine this example, in the United States, for example, they are 2.25%, and in the Euro Zone 0% (As an example, I am not saying that these are now). When we buy EUR we will receive 0%, and as we part from USD we will pay 2.25%. This means we will pay 2.25% per year of 10.000$. Equivalent to $225. $225 a year, that’s $0.62 a day, which in pips would translate to -0.62 pips. Negative because in this case, that’s what we should pay. And adding, that the broker will add us commissions, can come up with a higher value of 0’9 or 1 pips.

In order for the pips/swap points to be in our favor, we would have to make a sale instead of a purchase, in this case. In case you use another currency pair, pips will always be paid for the quoted currency. Then just do the conversion to your currency, to know the exact amount you will receive.

Final Conclusions

We have seen that swaps are not a complicated issue, beyond the relevant calculation to know how it affects us. That can benefit us as well as hurt, depending on our decisions. And that is something to keep in mind, especially in long-term forex trading.

Categories
Forex Market

WARNING: The Economy Has Become a Zombie!

A year after the repo explosion, Cantillon Effect, Minsky Moment, the economy has become a zombie. A year ago there was one of the greatest events of liquidity scarcity in history, for a moment the world economy was on the verge of collapsing fatally, forcing the Central Banks, especially the FED to print money in […]

A year after the repo explosion, Cantillon Effect, Minsky Moment, the economy has become a zombie. A year ago there was one of the greatest events of liquidity scarcity in history, for a moment the world economy was on the verge of collapsing fatally, forcing the Central Banks, especially the FED to print money in […]

A year after the repo explosion, Cantillon Effect, Minsky Moment, the economy has become a zombie.

A year ago there was one of the greatest events of liquidity scarcity in history, for a moment the world economy was on the verge of collapsing fatally, forcing the Central Banks, especially the FED to print money in an accelerated manner, since the Eurodollar or reserve currency system, the dollar, had dried up and there was a demand for dollars above normal, everything was triggered by a shortage of liquidity, by excessive leverage of companies and Banks. 

This shortfall in liquidity caused enormous volatility in the US Treasury bond market, which acts as a basis and liquidity for the other markets, leading to real phases of extreme volatility in the equity markets. With extreme volatility and falling rates, all brought about by the Fed’s decision to reverse QE and the printing of currency the market was collapsing like a house of cards, this shows a fragility never before seen. This could prove that we are dealing with a zombie economy.

This was just the symptom that the economy is not going well and in fact still not going well, the virus is still the perfect excuse to lead the economy and societies to a new feudal system, where a transfer of wealth from the less affluent classes to an elite that uses the virus for social engineering experiments occurs, plus the greatest monetary experiment in history with record prints of paper money or credit money as I call fiat money, to impose a series of reforms leading to a less free and more docile society, in a new regime of semi-slavery.

And as we see to build a new world order you have to do a hard reset or a great reset, you can only get it by destroying the old system and that is why the Fed has kicked ahead and prints as if there was no tomorrow. And before the minimal reduction of its balance sheet the markets are staggering and staggering because we are; we were a year ago in Minsky with an economy in a Ponzi debtor state, which defines Minsky.

The Ponzi debtor, that before any fall will not be able to pay even the interest and this is the consequence that it is based almost mainly on the increase of the prices of the assets to continue refinancing the debt.

We have zombie companies that only survive if the stock price keeps going up, as they are still without liquidity. The Fed has to print so that the Ponzi scheme in which the world economy has become collapsed, thanks to the MMT and its idea that you can have deficits unlimited and that you can print without consequences when it is false. This is when we come across the Cantillion effect and how the economy is directed towards a feudal system.

It is precisely what describes the monetary speed, which is neither more nor less the times when money changes hands, and which has a very strong influence on the real economy, say when there is a collapse of the times when money changes hands, It is telling us directly that the real economy is freezing, and therefore inflation in the real economy is cooling, that is, apparent deflation. But when you print so much money, you get a drop in purchasing power, so you don’t directly have inflation from price hikes, you have inflation from currency devaluation, even if prices fall and technically there’s deflation, the reality that the value of credit currency falls faster than prices fall and we actually have an inflation rate for loss of purchasing value. This is what is known as the Cantillon effect.

As defined by Economipedia: The Cantillon effect explains the uneven effect that monetary policies can have on the economy. For example, if a central bank injects money into the economy, the resulting inflation (the price increase)  is not reflected uniformly. Richard Cantillon (1680-1734) became the first economist to assert that any change in the money supply distorts the structure of an economy.

This is because newly created money is not distributed simultaneously or uniformly throughout the population. The process of monetary expansion therefore involves a transfer of wealth. This basically means that those closest to the central banks take advantage of this new money and buy consumer goods or capital at a better price, that is, elites and governments. While the rest of us mortals are at a disadvantage because with less purchasing power and without access to that new credit we cannot acquire assets and when we can the asset prices have already skyrocketed, showing that the money supply is not neutral, is harmful, and produces a transfer of purchasing power from the less affluent to the wealthier classes, a reverse Robin Hood. A neo-feudal system or as they call it a new world order.

A new world order where puppet elites and governments do not allow the less affluent classes to enter the markets as they cause hyperinflation of shares, and a fall in the purchasing power of the less affluent classes, that the elites compensate by having before anyone access to the newly created credit currency. This means that the chances of the poorest people escaping are diminishing, we are facing a slave system. And it is not because of the (non-existent) free market, but because of ideas closer to the Marxism of the MMT.

And this is how the economy and the free market dies, it becomes a great Ponzi scheme, where a privileged few turn into a casino the world economy, full of zombie companies living on the cost of issuing new debt and stealing purchasing power from citizens. The Cantillon effect is the weapon that these elites use to maintain the status quo and that the great reset is the new neo-feudal system that they have prepared for us.

Categories
Forex Basics

Let’s Discuss the Ethics of the Modern Investor

I recently read in a forum an interesting debate about whether there are more speculators or citizens in the economic forums, that just by the way of putting it as if the speculators were not also citizens already makes clear certain prejudices that many people have… and this gives rise to a small article to […]

I recently read in a forum an interesting debate about whether there are more speculators or citizens in the economic forums, that just by the way of putting it as if the speculators were not also citizens already makes clear certain prejudices that many people have… and this gives rise to a small article to […]

I recently read in a forum an interesting debate about whether there are more speculators or citizens in the economic forums, that just by the way of putting it as if the speculators were not also citizens already makes clear certain prejudices that many people have… and this gives rise to a small article to clarify many prejudices, and also apparent contradictions and other very interesting topics.

Ethical Investments

This is a tremendously difficult concept to start with, as we each have our ethics, and I could consider as unethical investments companies like McDonald’s (unhealthy food), Mediaset (TV-trash) or Bankia (preferential and others), whereas for you it may be Inditex (for its factories in Asia) or Shell (pollution), and for another, it may be Uber (management more than doubtful) or Indra (armament)… and in the same way, several companies also have programs such as the university scholarships of Santander or programs to help children with autism of Inditex that are “the other side of the coin”, and that we can not forget when valuing ethically a company.

But even if we agree that a certain “X” company is morally reprehensible, should we avoid investing in unethical companies? As a general rule, NO.

Our money goes to the company itself only when it sells us the shares: when it goes public, or when it makes a capital increase. In these cases, it IS justified not to invest in unethical companies, so as not to finance things that are bad for society. But when you buy shares on the stock exchange, your money does not go to the company, but to another investor who sells them to you, and refusing to buy them will not put any pressure on the company to act properly.

And in fact, in general, I’m in favor of investing in unpleasant companies… let’s say you’re going to set up a business, what do you prefer, a bar, a funeral home or a children’s ballpark? Very few people prefer the funeral home, so it is to be expected that there is less competition and is, therefore, a more profitable business… don’t you think that more bars and ballparks close than funeral homes? Well… and for the same reason, as a disgruntled investor, I know it’s probably going to be more profitable to invest in oil than in renewables.

Does This Mean I Have No Ethics?

No, what it means is that I believe that wanting to make “ethical investments” is of no use, and it is also unprofitable. And since it will not serve to improve society to choose one stock or another, it would be foolish not to look for the most profitable!

However, we do have it in our hands to put pressure on companies to be socially responsible, but not as investors, but as consumers and customers of such companies. If I don’t like the brainwashing they do on certain TV networks, I don’t go through them zapping and I stay half an hour watching it and then in the bar I comment with colleagues everything they said there “although I don’t normally see it”, but I limit zapping to the ones I like or I put on movies or series… which will not prevent me from buying shares in that chain: the flies eat shit, and in Europe, the flies are not in danger of extinction! If I invest in it and others are giving them an audience, who is the culprit here that they emit garbage? It’s certainly not me…

What Comes First? Ethics or Investment?

We can focus the debate a little more with a very good question:

“Those of you who run banks, for example, would you approve the introduction of a bank fee for every empty floor they have on Balance?”

This starts from the premise that a tax on banks for empty flats is good for society and bad for the bank… and this is a very interesting issue because again people assume certain things that are worth thinking about before stating them simply:

It is good for society that banks rent or sell their empty flats: They would certainly lower the prices of both flats and rents; and I think this is good, in general, although those who have been saving to have a flat with whose rent to supplement retirement might not agree…

Harming the banks will not harm society: If, for example, there were talk of asking for compensation from the banks that issued preferential loans, I would agree that this would not harm society, but quite the contrary: the message is sent that the payer, And it keeps them from being tempted to rip off their clients again. But what we are talking about here is a measure that will make it more difficult to recover delinquent credit, just like “stop evictions” and so on… and if the bank has difficulty recovering delinquent credit, what will it do? For the same thing that anyone would do: 1.- give less credits, and 2.- give them more expensive, with what the average citizen will have much more difficult to have in property a decent housing. And frankly, I think that’s bad for society.

Applying penalties retroactively will not harm society: If something characterizes a banana republic is that where I said one thing now I say the other; in Argentina or Venezuela, this is our daily bread. In truly democratic and serious countries, when a standard has been set, it is, and so it must be, here too; creating instability by changing the rules of the game on the fly causes far greater harm than applying a bad rule. If we think it is good to penalize empty foreclosed flats, let us apply a tax, but let it apply to new mortgages that are given and not to old ones, and let us respect the law… or we will have a better law but it will be wet paper.

And after this huge detour, I go back to the essence of the question: I think that banning advertising for unhealthy foods would be good for society, and I would be glad that such a measure would apply even if I had shares in McDonald’s and Mediaset, who would be harmed by it. So I guess I count as a citizen…

Categories
Forex Economic Indicators

What Are Forex Boost/Impulse Indicators?

Impulse indicators measure the rate of change in closing prices and are used to detect weakness in trends and potential points of turn. Often not taken into account for their simplicity, but the importance of the boost in the forex market should not be overlooked. They can be a great way to make a profit […]

Impulse indicators measure the rate of change in closing prices and are used to detect weakness in trends and potential points of turn. Often not taken into account for their simplicity, but the importance of the boost in the forex market should not be overlooked. They can be a great way to make a profit […]

Impulse indicators measure the rate of change in closing prices and are used to detect weakness in trends and potential points of turn. Often not taken into account for their simplicity, but the importance of the boost in the forex market should not be overlooked. They can be a great way to make a profit by identifying a strong movement that is already underway.

In this lesson we will learn some valuable additional tips that will be useful when using impulse indicators: momentum trading can be as profitable as S/R trading (support and resistance).

What Are Impulse Indicators Used For?

Impulse indicators are useful to solve the following types of common traders dilemmas that S/R indicators cannot answer. For example:

A currency pair has broken past all previous S/R points and is making new historical highs or lows, so there are no S/R levels telling us if it is a good time to place or withdraw a position. Is it worth getting on the ride, or would it be better to get out of the way?

He didn’t place positions in time on a trend that’s been working for a while. How can you tell if there is still time to follow the trend? How can you reduce or eliminate the risk of buying at maximum or selling at the minimum? It could expect a setback, but while it waits, it risks losing even more of the movement. This is a natural human error, to assume that one is too late when in fact some of the safest benefits you can take on the market are at this time of apparent “over-buying”.

You have a winning operation open and want to keep it as long as possible, but you don’t want to risk staying too long and losing part of your winnings. Or it’s approaching the resistance and its intended point of exit. Do you take profits or leave part or all of the position in the hope of letting the profits run with a trailing stop?

If we look at what happened to gold from May 2009 to August 2011, from May 2009 to August 2011 it was making new historical highs and showed only 8 months down from a total of 27, rarely regressing to anything but very short-term levels of support.

Those who expected significant setbacks never saw them arrive and missed the biggest trend of the year, while gold consistently reached new historical highs. Expecting a setback in the upward trend here was not a good idea!

We, traders and investors, earn our living by correctly predicting what will happen in the future, even though we don’t have to be exactly right to make money – we just have to be roughly right. However, the S/R indicators we have covered so far tell us about what happened in the past. While that’s helpful in predicting the future price action, S/R indicators can only tell us about the strength of S/R levels. The other half of the image is lost as they cannot tell us if a trend is strong enough to break beyond a certain level of S/R. In addition, cannot tell us anything about future price movements when a currency pair or other assets have broken beyond all levels of S/R to new historical highs or lows. Fortunately, there is a way around this, apparently, very difficult problem.

What should traders do? Employ a style of impulse trading using impulse indicators.

The Advantages of Impulse Indicators

These indicators can give us a better idea of future price movements because:

  • Show whether a trend is strengthening or weakening.
  • They can tell you if an asset is overbought or oversold according to the price range for a certain prior period.

That helps us decide whether the trend is likely to continue or change direction. Knowing this can help us predict changes and have greater profitability. In short, impulse trading with impulse indicators can offer additional clues to assess the odds of hitting even more in your favor.

There are many indicators of momentum, but at the moment we will present you with only a few of the most effective and easiest to use indicators:

  • Double Bollinger Bands.
  • Mobile Stocking Crosses (MA).
  • Three types of basic oscillators: Convergence/Divergence of Moving Mean (MACD), Relative Force Index (RSI), and Stochastics.

Why the Gold Chart? Brief Introduction to Market Relations

Are you wondering why we use a gold chart in a foreign exchange article? The reason for this is that, for a number of reasons, currencies and raw materials are often related to each other and are therefore sometimes traded as substitutes for each other.

For example, because Canada is a major oil producer, the DAC often moves with the price of oil. Under certain conditions, it’s more sensible to negotiate a DAC currency pair than oil and vice versa.

Although different types of goods, such as stocks, commodities, and currencies have some notable differences in their behaviour – for example, Forex currency pairs tend to fluctuate in value in relatively small amounts compared to commodities, that tend to be more volatile – can illustrate truths about successful trading methods by using them all interchangeably.

Gold is a special case because it is considered the main hedge against currency devaluation. When investors are concerned about the decline in the value of one of the most widely held currencies (especially the USD and the EUR), gold can rise.

Therefore, at a time when the fundamentals for both the EUR and the USD are not good, but it is not clear whether to go long or short with the USD, the traders play it safe and just have to go long with the gold. We will see that happen at a time when there is a great deal of anxiety about the stability of large parts of the global financial system. For example, gold has tended to rise during episodes of great concern over the EU’s sovereign and bank debt crisis. At times like these, traders often buy gold en masse because:

  • It seems that the EUR might not even survive.
  • The Fed may be printing massive dollars in order to help Europe and steer the US economy away from the possible consequences of an economic crisis in the EU.

In fact, if you compare a timeline of the EU crisis and a weekly gold chart covering those years, you will notice that gold often rose to new highs. Later we will cover this and other relationships between markets and know how to use them.

How Do Impulse Indicators Work?

As its name indicates, the impulse indicators focus on the price exchange rate, that is, if the price goes up or down by more than it used to. While exact mathematical calculations and emphasis vary between different impulse indicators, they all attempt to provide some perspective on:

  • If the price is changing at a faster or slower pace
  • If the exchange rate indicates the strength or weakness of the trend

For example:

  • A steady increase in the speed at which price goes up or down suggests trend strength
  • However, too rapid acceleration is often interpreted as a sign of “trend exhaustion” or a maximum turn (or minimum turn in bearish trends) suggesting a final drastic increase in optimism (or pessimism in bearish tendencies) that drains the remaining buyers (or sellers in the downward trends) and prepares the end of a trend and turn of it.

When this happens, you will hear analysts saying that the pair is:

  • “Overdrawn”, if the price has gone up too fast or for too long, and therefore is expected to turn and start to fall.
  • “Overwritten” if the price has fallen too fast or for too long, so it is expected to rise.

It is important to be careful, however, because sometimes these terms are used too easily. ” Over-buying” and “over-buying” are sometimes used when the price has just gone up or down a lot, when it is really the speed with which the movement has occurred that is the crucial factor.

Categories
Beginners Forex Education Forex Basics

Why We Love Forex Trading (And Think You Should, Too!)

Forex and trading are becoming an ever-popular activity. For many, it is just about making a little extra money on the side, while for others, it is about the enjoyment that they get out of it. There are a lot of ups and downs when it comes to trading, but overall, those that trade it […]

Forex and trading are becoming an ever-popular activity. For many, it is just about making a little extra money on the side, while for others, it is about the enjoyment that they get out of it. There are a lot of ups and downs when it comes to trading, but overall, those that trade it […]

Forex and trading are becoming an ever-popular activity. For many, it is just about making a little extra money on the side, while for others, it is about the enjoyment that they get out of it. There are a lot of ups and downs when it comes to trading, but overall, those that trade it for a hobby seem to love it. There are plenty of reasons to love it too, from the ups, the profits, the thrills, and more, so we are going to be going through some of the reasons why we love trading and the reasons why you probably will too.

The Incredible Highs

For many people, anything to do with money can give you some serious highs when you win. This is exactly the same when it comes to Forex. When you are winning, or on a winning streak, you feel like you’re on top of the world, you feel like you are on cloud nine and pretty much everything is great. If You have been trading forex for a long time, you will have experienced this a number of times, there isn’t a feeling like it and that is one of the reasons why we love it so much, that feeling is created by something that you have done, which makes it all the better.

The Adrenaline

There are many things in life that can fill us with adrenaline. When we are in charge of our money, and that money is actually doing something, that is one of those situations. When you see the markets moving up and down and your balance moving with it, you will gain a huge boost of adrenaline. This is true for when the markets are going both up and down, you want to win, you don’t want to lose. Whichever way it is moving, it will be playing with your emotions and filling you with adrenaline. It is basically what keeps bringing us back. There are, of course, some traders that are more methodical. They don’t get the emotions that the majority of us do. Instead, they are there simply for the money, but the majority, when things are going really well or really badly, will be filled with this emotion and the feeling of adrenaline going through their veins.

The Money

Let’s be completely honest, we are only trading because we can make some extra money, and the majority of other people are in the same boat. In fact, we have not yet met a single trader that is not taking part in trading for anything other than the money that can be made. Each month we withdraw a little bit of money that we can use to help us live a better life, to pay off debts, or to simply be a little better off. If the money was not there and you did not get any benefit, we certainly would not be trading. So we love trading for the simple fact that it allows us to make a bit of extra money each month.

You Don’t Need A Lot to Start

When I first started out with my trading, we started with about $100, which was great. It meant that we didn’t need to break the bank in order to start our trading journey, this made it very accessible for us. These days you can start with even less, some going as low as $10 or even $1. Of course, you will find it hard to be profitable with such a small amount, but it just shows that anyone can get started as you do not need thousands in order to join in. That is such a great thing for forex when you compare it to other things like stocks where you need a lot more in order to make any sort of decent money.

It’s Highly Accessible

Trading forex can be done from pretty much anywhere. We use our desktop computers, our laptops, and even our mobile phones to do it. The fact that you can use pretty much any platform that you want to access your accounts and the markets means that no matter where we are, we will be able to trade and potentially make money. It also means that far more people can get involved, many do not have a computer or a laptop, but they do have a mobile phone that is compatible with the trading platforms, meaning that they can now trade. A few years back when these platforms were not as easily accessible and so many people just couldn’t trade, that is simply not the fact now and those that missed out can quite easily get involved.

You Can Do It From Home

Normally, when we want to make a little bit of extra money, it will mean that you need to go out and get a second job, and you need to leave the house to do it. This is thankfully not the case with trading forex, you can do that from home, from in your underwear with no need to leave the house at all. This means that there is no commuting, no traffic, no other people annoying you on the way to work.

There Is No Boss

When we trade, we trade for ourselves, we are in charge of what we are doing and there is no one to tell us what to do. We have no boss, something that so many people strive for and something that a lot of people get into trading for. It will take a while to get to this stage, you need to be consistently profitable before you even think about leaving your job, but once you do, you will have all the freedom to trade when you want rather than when you are told to, freedom to choose.

Helps Us Manage Our Risks

When it comes to money, a lot of people are worried about losing it, this is why we use so much risk management when we trade and for good reasons too. The good thing is, that the cautious approach that we put into our trading we can take out into the real world too. Looking at more information before investing any money, before making decisions that will affect our lives. It helps us to better analyse the decisions that we are going to be taking.

It’s Always Changing

The forex markets are always changing, and due to that, we are very rarely bored. There are, of course, slow times when the markets are not really doing anything and our strategy is not relevant, those are times to take breaks. The rest of the time it is always evolving, due to this there are always things for us to do and for that reason, we simply do not get bored with it. We can always develop our own knowledge, we can always try and trade something else, either way, we are simply not bored by the forex and trading markets.

Those are some of the reasons why we simply love trading and the forex markets. It gives us so much freedom, teaches us a lot, and allows us to take part in it pretty much anywhere in the world. There is nothing quite like it, we love it and we are sure that you most likely will too.

Categories
Beginners Forex Education Forex Basics

The Most Pervasive Problems in Forex (#2 Might Surprise You)

From the outside, trading and forex look like a pretty green field, full of people getting rich, and everything going really well. When we delve deeper into it though and actually start trading ourselves, we find that there are a number of different problems, problems that a lot of traders experience on a daily basis, […]

From the outside, trading and forex look like a pretty green field, full of people getting rich, and everything going really well. When we delve deeper into it though and actually start trading ourselves, we find that there are a number of different problems, problems that a lot of traders experience on a daily basis, […]

From the outside, trading and forex look like a pretty green field, full of people getting rich, and everything going really well. When we delve deeper into it though and actually start trading ourselves, we find that there are a number of different problems, problems that a lot of traders experience on a daily basis, problems that pretty much every trader goes through. These problems are easy to get into and easy to fall into their pitfalls, but there are ways to avoid them or to at least reduce the effects that they have on your trading and your accounts. Today we are going to be looking at some of the most common problems that many traders go through.

1) A Lack of Training

Anyone that trades without knowledge and experience can easily blow an account, or even multiple accounts if they do not learn from their experiences. Trading without the required knowledge and without any idea of what it is that you are doing is a recipe for disaster, yet it is something that a lot of people do and will continue to do so. When we trade without proper learning we are pretty much just guessing at what the markets may do. In fact, it could even be compared to simple gambling.

If you are planning on trading, then you need to put in the time and effort that it takes to learn the basics. Learn about different strategies, learn about risk management, and learn about how the markets move and are affected by things like the news. If you do these basic things, you will have a much better understanding of what it is that you are doing which will help you to develop a  better trading ability and also to keep your accounts and capital safe from silly mistakes of simply not knowing what you are doing.

2) Using Emotions

We all have emotions. They are powerful things, they can make us happy, sad, or even do stupid things, and when we trade without our motions we are often doing just that, stupid things. Two of the most powerful yet damaging emotions that we can have when trading are greed and overconfidence. They often come from different events, greed when we lose and overconfidence when we profit. They both, however, have the same effect on us, as they cause us to throw out our trading strategies and our risk management and then they cause us to place trades that we know we shouldn’t. Either too large for our account or without doing the proper analysis, this can lead to larger losses or even a completely blown account.

If we get to a point where we can feel our emotions coming up or even getting the better of us, it is important that we do something about it. It can be as simple as walking away, taking a step back from your trading terminal, and going out, having something to eat, just doing something that has nothing to do with trading at all. This is the best way to clear your mind. You could even try talking to someone about it, often we can get more rational by talking to someone else rather than just thinking about it ourselves. Once you have cleared your mind you will come back refreshed, with a clear view of what is going on, allowing you to better follow your plans and to place much better trades again.

3) News Events

News events happen. There are calendars out there that will tell you what news events are coming up as well as the potential impact that they could have on the markets and which currencies it may affect. What they do not tell you though, is about the sneaky news events that are not on there. They come out of the blue, maybe something has just been developed or announced or there is a natural disaster somewhere in the world. These sorts of events cannot be predicted, they cannot be on any calendar and when they do happen, they often cause the markets to jump about in very unpredictable ways. They can be a real pain, as you could have just done a lot of analysis, put on the perfect trade, and then BANG, an unknown news event comes out and the markets fly in the wrong direction. We have all experienced it and most traders will in the future too, there is nothing we can do about it but to manage the trades that are affected.

4) Unpredictable Results

We mentioned the news events just above, but there is another side to them, even the news events on the economic calendars can play with us. If there is a positive result then the expected movement in the markets would be up. However, there are times when the markets just do not see to follow what the results would expect. Even things like the Non-Farms Payroll news events, which is historically one of the ones that can influence the markets the most can go a bit funny. There have been times where it is very positive, yet the markets moved down. For those following the news, a buy would have been placed but then the markets went down which would cause a loss as well as a lot of confusion, so the markets simply cannot be predicted even when all the indicators are there.

5) Dodgy Brokers

Unfortunately, when it comes to money, any form of money, there will be people out there that will do what they can to get as much money out of you as they can. From the outside they look like any other broker, offering some great features and trading conditions, but once you have deposited your money, it is very unlikely that you will be able to take any of it out. They will take it and even try and convince you to put more in, either way, your money will be gone. You can try and avoid this happening to you by checking reviews, going for the bigger named brokers, or by using brokers that you know people who already use them and have successfully withdrawn money from them. Choosing the right broker is important, so make sure you take your time to choose the right one for you.

Those are just some of the issues that many traders experience. In fact, many of them every single trader will experience at one point or another in their trading career. We can do what we can to try and reduce the effects that they are going to have on us and our accounts, but for many of them they are out of cour control and we will experience them at one point or another. There are of course a lot of other problems out there, but with every single problem, there will be solutions, or at least a way of reducing the impact that they are having on our trades and accounts.

Categories
Forex Basics

Tips For Keeping A Truly Helpful Forex Trading Journal

This is being written with the assumption you have looked into forex trading before, and in doing so have come across the term ‘trading journal’ previously. There is no way that you wouldn’t have because any website that you go to that is related to FX trading would have told you to get one, and to get one right from the start. That is just how important these diaries of sorts actually are. 

This is being written with the assumption you have looked into forex trading before, and in doing so have come across the term ‘trading journal’ previously. There is no way that you wouldn’t have because any website that you go to that is related to FX trading would have told you to get one, and to get one right from the start. That is just how important these diaries of sorts actually are. 

This is being written with the assumption you have looked into forex trading before, and in doing so have come across the term ‘trading journal’ previously. There is no way that you wouldn’t have because any website that you go to that is related to FX trading would have told you to get one, and to get one right from the start. That is just how important these diaries of sorts actually are. 

They may have told you to ensure that you have one, but they may not have actually explained to you what a trading journal actually is or what the best practices are when keeping one. So that is what we are going to do now. We are going to look at the purpose of the journal, reasons why you should keep one, and then a few tips to help you keep one properly to ensure that you have included all the important bits of information that could help you improve and analyse yourself as a trader.

What Is a Trading Journal? 

What exactly is a trading journal? A trading journal is basically what it sounds like, it is something where you are writing down everything that you are doing. It is full of your trading activities. You can then use it to learn quite a bit about how you are trading, the things that you are doing right, the things that you are doing wrong, what you need to work on and how you can make your strategies better.

Many people feel that there is actually no need for a trading journal, yet 99% of all successful traders will certainly have one in one form or another. The main point behind having a journal is the idea that you are never perfect, there is always room for improvement within all aspects of your trading. If you do not feel that you can still improve, then a journal will not help you, but you will also stagnate in your trading results. Keeping a journal can be one of the best and most beneficial decisions you can make as a trader.

The first reason to keep trading journals is that it will help you to find the trading style that suits you the most. When first starting out you are probably not aware of the majority of trading styles, you most likely would have seen one or two, or seen multiple different ones but not recognised them as different trading styles. It is a good idea to try out each one, but simply trying them will not really help you, unless of course, you are keeping a journal.

There are a few different things to think about. Try to jot down the reason you entered the market, the time you entered it, the price at which you entered it, how long you held the position open, the reason you exited the market, and how much you made or lost. With just those bits of information, you will be able to work out which style of trading you are naturally accustomed to. If you hold trades for days or weeks, then maybe swing trading is right for you. If you hold them for an hour and take small profits, then scalping may be the style for you. Include as much information that is right for you, at this stage we are trying to work out the right style for you.

The trading journal can be used to find your trading style, it can also be used to help improve the style that you are currently using. You need to remember that trading and learning to trade is a never ending process, you will never know everything, even the most successful traders are still learning new things, they are still keeping their journal as it is that journal that lets them know what it is that they need to learn next or that they are slacking behind in. One of the things that a trading journal is best at is letting you know exactly how consistent you are. It will tell you whether you are following your rules, whether you are entering and exiting the markets at the right times in line with the style that you are using. 

Having said that, even if you are keeping a trading journal, it will be completely useless if you are not analysing it properly. Set yourself a bit of time out from trading where you can properly go over the journal. Do this at least once a month, as this timeframe seems to work for a lot of traders. Many traders find it beneficial to put their trades into a spreadsheet, this way you can easily see the similarities between those trades that have been successful and those that have not been.

The trading journal is there to let you know whether your strategy is working, which parts are and which parts are not. By looking through your results, you are able to see which variables within our trading are causing you issues, they may even be habits. These are the things that you can then work on getting rid of and you can also see the variables that are working well, allowing you to enhance them further. If you are not tracking your trades with a trading journal, you will have no idea what it is that you are doing well or not well. You won’t even be able to work out your overall pips and profit and losses. It will also help you to hone your risk management.

So we now know how to use the journal and what it is that we are looking for when using it, but simply having one is not always enough, so we are going to be looking at some tips that you can use when creating your journal, different things that you should be doing to ensure that your journal will actually help you and that you are putting in the right sort of information.

Be Honest

It’s human nature to try and make yourself look as good as possible, but you need to remember that the only person that is going to be seeing your trading journal is you. So you need to be honest when putting your data in, this is the only way that it is going to be at all beneficial to you. What this means is that you need to ensure that you are recording your data completely accurately, down to the pip, do not fool yourself by making it look like you did better than you did. Having said that, you should also not underestimate what you are doing or what you have achieved, you may actually be doing slightly better than you think. By being honest, it is the only way that you can actually be sure of what you are doing well and what you need to work on. Don’t forget that it is not only about the numbers, you also need to be looking at the reasons behind your trades, both entering and exiting them. Each trader is different which is why you need to be honest with yourself, as you will certainly need to improve on aspects that others do not and vise versa.

Don’t Worry If You Miss and Entry

You won’t always remember to use your journal. There will be times when you are so excited to trade or simply do not have time, so there will be times that you forget to use it entirely. Don’t punish yourself simply because you forgot it, it happens to everyone at one point or another. Just try to move on and try to remind yourself to use it next time. If you do forget, there is still some information that you can jot down, things like the entry and exit prices. Of course, the info won’t be as accurate as doing it at the time, but it will still be better than simply having a blank trade. Whatever you do, do not consider leaving the journal entirely simply because you forgot to put in a trade or two, you still need the journal if you want to carry on improving.

Track Your Emotions

Emotions are a huge thing when it comes to trading and they can actually make and break a strategy in certain situations. Many people though do not feel the need to record them, but they actually have quite a large role in how successful you will become. Knowing whether you are successful or not during different motions could help you to decide in the future when to trade or not. If when you are feeling a bit down you constantly lose trades, then try not to trade in the future when feeling that same way. The same goes for when you are successful. Try and trade more during times when you feel the same way.

Remember to Analyse the Markets

Most people when filling in their journal will only put down what it is that they have done and the decisions that they have made. The markets sometimes behave in quite strange ways, you may have done everything exactly right but then the markets decide to go a little crazy. This isn’t your fault, but your journal will make it look like you did something wrong, so be sure to jot down when it is the markets behaving badly rather than yourself. This would also mean including any important or major events that could have caused the markets to move, things like political speeches or natural disasters should be included within your journal.

So those are some of the hints that should help you complete your journal. It seems like a lot of work, and when you are just starting out it will be, but you will get used to doing it, it will end up taking seconds to fill out instead of minutes. Get used to making one, get used to analysis and referring back to it and it will make your trading journey a much smoother and a much more successful one.

Categories
Forex Market

What Can FX Traders Learn From Alexander Kearns’ Death

Many of you may have heard of Alexander Kearns, but for those that have not, it is a sad situation where a young man, just 20-years old took his own life due to an error in a trading system which showed him in approximated $730,000 debt with a broker. When the Covid-19 pandemic hit, Alexander […]

Many of you may have heard of Alexander Kearns, but for those that have not, it is a sad situation where a young man, just 20-years old took his own life due to an error in a trading system which showed him in approximated $730,000 debt with a broker. When the Covid-19 pandemic hit, Alexander […]

Many of you may have heard of Alexander Kearns, but for those that have not, it is a sad situation where a young man, just 20-years old took his own life due to an error in a trading system which showed him in approximated $730,000 debt with a broker.

When the Covid-19 pandemic hit, Alexander Kearns decided to take up trading. He took advantage of the fact that many brokers are offering their clients leverage, which is basically the act of lending you money in order to make larger trades than your account would otherwise be able to make. It was due to this leverage on offer that this mistake took place. His account showed a negative balance of $730,000, something that he believed he would have had to pay back in one way or another. Due to the immense stress of the situation, Alexander sadly took his own life. Of course, this was totally avoidable. Even worse, the balance was a mistake by the app, and the account wasn’t actually in the negative.

For those active in the trading community, they know that this sort of tragedy could have been easily avoided. Alexander came into trading with very little knowledge of how certain areas work, which is why it was so avoidable. Had he known that accumulating this sort of debt so quickly would be extremely hard to do, even for the worst traders out there, it would have helped him to understand the fact that many brokers now offer negative balance protection, preventing you from owning anything should you lose your account.

It is important that we learn from this tragedy in order to help ensure that nothing similar happens again in the future. In order to do this there are a few things that we can take away from this which could help prevent any further tragedies, so let’s take a look at some of the things we have learned.

Understand Leverage

Leverage is a wonderful thing, as it can give you the opportunity to make a lot of extra money. It basically increases the trading power of your account, but it also has its downside. While it increases profits, it can also increase potential losses. Remember you are now trading with larger trade sizes, so if things go the wrong way, you will ultimately lose more. You need to have an understanding of how this works before you begin to trade. Learn the ups and downs and ensure that you are not trading with leverage that is simply too high. Some brokers offer 2000:1 leverage, this is simply too high and very dangerous for a new trader.

Negative Balance Protection

One of the most important things for a new trader is negative balance protection. This is simply where a broker does not allow you to go into a negative balance. Instead, as things go the wrong way and your account equity lowers, the broker will automatically close all trades that you have open in order to prevent you from going into a negative balance. Of course, those trades will be closed at a loss and you will have lost the majority of money in your account, but at least you do not owe anything extra on top of that. The majority of brokers now offer this service, so be sure that when signing up for a broker you make sure that this is on offer. While we hope you will never have to use it, if you do, it could save you a lot of money and also help to avoid any situations similar to Alexander Kearns.

Understand the Risks

It is not only about understanding what the risks are, but also how you can manage them and potentially reduce them. There are a lot of different risks involved when it comes to trading, things like leverage, the markets going the wrong way, different risk to reward ratio, no stop losses or taking profits, and more. What we need to do is to get a good understanding of how to reduce them. Stop losses are a great way to prevent risk, so is using the appropriate lot size and trade size. When you create your strategy you also need to create a set of rules for entering trades as well as exiting them, you also need to decide on the trade size and anything else like this. Having all of this predetermined is a great way of ensuring that you stick to them.

Use Stop Losses

Stop losses are there to protect you and to prevent you from losing too much. Without them, a single trade could potentially make you lose your entire account. Instead, having a stop loss in place will mean that your loss for each trade will be fixed, this will help you to prevent huge losses with each trade and ultimately save your account. Ensure that with every single trade, you have a stop loss in place to help protect you, you should never be trading without one, under any circumstance.

Only Trade What You Can Afford

This is one of the big ones. You have probably seen this warning out there as you look through forex and trading related sites. You should only trade what you can afford to lose. If you think about the money that you are putting in, if you were to lose that money, would it hurt you? Would it prevent you from paying rent or anything like that? If the answer is yes to any sort of question like that then you should not be trading with it. You need to only trade with your expendable income and not any funds that you need.

Avoid Volatility

Volatility can be a trader’s best friend, but as a newer trader, you should try and avoid it. When there are big news events coming out or the markets are simply jumping up and down, you should try and avoid trading in this situation. Yes, it can increase your profit potential, but it can also increase your loss potential, which as a new trader, is far more likely to get you at one point or another. It is far better to simply avoid these situations rather than to risk trading.

Choose The Right Instrument

As a new trader, you need to be careful which assets you decide to trade. Some of them are far more volatile than some of the others. In fact, some should be avoided at all costs. As a new trader, you should probably try trading the major currency pairs rather than anything else, at least until you are used to trading and how it all works. Going for something different will simply mean that you are trading higher volatility which can be more dangerous.

So those are some of the things that we have learned from the tragedy of Alexander Kearns. It is important that we do what we can to try and avoid anything similar happening again in the future. Using what we have learned can make it safer for us to trade. As a new trader, learn from what we have written above and understand the risks before you put any money into your trading account.

Categories
Beginners Forex Education Forex Basics

Forex Pros Do These Things (And You Should Too!)

We forex traders like to look up to those that have come before us and been successful. We do this for a number of reasons. These individuals have been successful, so they clearly know what they are doing. This means that they are great people to learn from. They also have the experience to know […]

We forex traders like to look up to those that have come before us and been successful. We do this for a number of reasons. These individuals have been successful, so they clearly know what they are doing. This means that they are great people to learn from. They also have the experience to know […]

We forex traders like to look up to those that have come before us and been successful. We do this for a number of reasons. These individuals have been successful, so they clearly know what they are doing. This means that they are great people to learn from. They also have the experience to know what is a good thing to do and what is a not so good thing to do. They are the people that we wish to copy, to learn from, and to be just like. So we are going to be looking at some of the things that professional traders do in order to be successful, and why you should be doing the same things.

Sticking to the Plan

One of the things that any professional or even successful trader will tell you is that you need to stick to the plan. There is no point in having a trading plan in place if you are not going to be following it. Even breaking the plan in a tiny way is basically meaning that you are placing bad trades. They will tell you that you need to stick to it and you need to stay disciplined. That is one of the most important steps to becoming a successful trader.

Don’t Be Afraid to Take Risks

Contrary to the above, a lot of traders will tell you that if you want to be successful then you will need to take risks. This does not, however, mean that you should be placing more trades or placing larger trades. Those are bad risks and will put your account in danger each time you do it. Instead, the sort of risks that they are referring to are things like taking trades on an asset that you do not usually trade. So if you are an avid EURUSD trader but a great trade opportunity comes up on the GBPUSD pair, then there is no harm in trading that pair, as long as the entry requirements and all other aspects of your trading plan are still being met. Do not limit yourself to that one pair.

Remove Your Limits

We mentioned this briefly in the above point, but you need to be able to remove or at least expand your limits. Sticking to a single currency pair or asset will greatly limit your opportunities to trade and to be profitable. It is, of course, not a good idea to expand too much. Going from one pair to 100 will put your account in danger as you cannot monitor or fully understand all 100 currencies. Instead, expand slowly, moving from one to two, then two to three, and so forth. You are still expanding your limits, giving yourself more opportunities, but you are doing it in a controlled manner which is exactly what you need to be doing.

Get Into the Right Mindset

Being in the right mindset is vital. In fact, it can make or break a trader. If you believe that you can trade, if you are able to control your emotions, if you know when to take breaks then you can keep your mind in the right place and remain free from the distractions that are around you. If you have the right attitude towards your trading then things like sticking to your trading plan and staying disciplined will be a lot more straightforward and easier to maintain. Those that are not in it with the right attitude will soon find themselves making bad trades or making losses, so it is important that you get the right mindset and then try to remain there.

Know When to Take Breaks

A good trader will not spend all day everyday in front of the monitor. If they did, they would simply burn out and start to make losses. A good trader will know when they need to take breaks. This can be a break when your emotions are starting to build up, or you are simply getting a little tired. There is no wrong time to take a break. Getting out and clearing your mind is paramount to being a successful trader. If you don’t take breaks you will burnout and make losses. So learn when to take them, and even set designated times for breaks if you need to.

Risk Control

Risk control is the foundation of any forex trading strategy. If you do not have a risk management plan in place then you’re setting yourself up for failure. You need to create a risk management plan that has a number of different elements to it. These will include your risk to reward ratio, your stop loss size, take profit sizes, trade sizes and more. These are the foundation of your trading plan, you need to have them in place before you make a trade. Any professional trader will simply laugh at you if you are trading without a plan in place.

Not Always Trading

You do not always need to trade. You do not need to trade every minute or even every day. In fact, some professional traders will go a whole week without putting on a trade. This is often due to the fact that the markets are not in the right condition for the strategy that they wish to trade. They will only trade when the conditions are right and this is something that you should be doing. Do not trade just for the sake of trading. Trade when the setup is actually there. If you trade outside of your strategy it is considered a bad trade, so having patience is key to sticking to this rule. Have patience and wait for the right trade to come and certainly don’t try to force it.

Not Focusing on Wins and Losses

Advertised all over the internet are those strategies that are promising you a 99% win rate. These are just not realistic and are playing on the strings of those that are there to simply make money, yet do not fully understand how forex or the markets actually work. Professional traders do not care about how many they win or how many they lose. They are simply interested in the returns. With a proper risk to reward ratio in place, you can be profitable with a 25% win rate. This is what the professionals focus on, being profitable no matter whether they win or lose. Due to this, they do not focus on whether their last time won or lost, and neither should you. Trust your strategy, trust your risk management and you will have a far less stressful time.

Professional forex traders are people that we look up to, yet they do not do anything different to what we should be doing. If we want to be successful traders then we need to mimic some of the things that the professionals are doing. It is easy to do, as they aren’t doing anything magical. There really isn’t an excuse that we can use that will make it acceptable to avoid following them. Stick to some of the actions that we have mentioned above and you will be on your own path to becoming a professional trader at some point in your career.

Categories
Forex Trade Types

What is the Difference Between Orders, Trades and Positions in Forex?

For someone with very little knowledge of forex or trading as a whole, the terms order, trade, and position all probably sound quite similar and may seem to pretty much be the same thing. However, for those of us that have actually traded before, we know that there are a few differences between them. They […]

For someone with very little knowledge of forex or trading as a whole, the terms order, trade, and position all probably sound quite similar and may seem to pretty much be the same thing. However, for those of us that have actually traded before, we know that there are a few differences between them. They […]

For someone with very little knowledge of forex or trading as a whole, the terms order, trade, and position all probably sound quite similar and may seem to pretty much be the same thing. However, for those of us that have actually traded before, we know that there are a few differences between them. They are, of course, all related to actually putting in a trade, but we are going to be looking at the subtle differences between the three terms in order to ensure that you know exactly what people are talking about when they mention these terms.

Orders

Let’s start with orders. By definition, the term order simply means an authoritative command or instruction, and it is very similar when it comes to trading, as we are simply telling the broker what we want. Simple right? Well not quite, as there are actually a number of different orders that you can make, quite a few in fact and some are a little more complicated than others.

The first type of order is simply a market order. This is basically you telling the broker that you want to put in a trade. For the majority of brokers, this order would then be executed immediately and the trade would be put in at the current market price. This works for both buys and sells.

Then there are pending orders. These are orders that you are putting in but asking the broker to place the trade when it gets to a specific price. There are a number of different order types that fall into the category of pending orders, let’s take a brief look at what they are.

Limit orders are pending orders that can be both sell limits and buy limits. The way that this order works is that we, for example, are wanting to buy but the price is moving downwards. We would put in an order for a price that is below the current value. Once the price reduced down to the level that we have set, a buy trade will be placed. The same works for a sell. We place our order at a price higher than the current value, and the price rises and reaches our order price a sell trade will be placed. These work well when placing them on resistance or support levels where you expect the price to reverse.

To recap: A limit order set as a buy will be at a price lower than the current market price will be executed by the broker at a price equal to or lower than the specified price in the order. A limit order set as a sell will be at a price higher than the current market price and will be executed by the broker at a price equal to or higher than the specified price in the order. 

We then have stop entry pending orders. These work in the same way yet the opposite way at the same time. The stop order is basically a stop on the market. A trade won’t be opened until the price reaches that price and once it does a trade will be opened. So it works in a similar way to the limits, but this time when the markets are moving upwards and they reach the stop entry level, a buy trade will be opened in h hope that the price continues to move in the upwards direction. The same for a sell, you place it below the current price with the hope that it will continue to fall once it reaches the stop limit and the trade opens.

To recap: You would place a buy stop at a price above the current market price. When the price reaches the set level, a buy trade will open. For a sell it is exactly the same, you place a sell stop below the current market value and when the price reaches this level a sell trade will be placed.

Trades

Now let’s look at trades. This is quite a simple one to explain. A trade is simply the act of putting on a buy or sell order and executing it. As soon as the order has been executed, it is now a trade. Trades comprise of both buy and sell trades, but buying when you are expecting the markets to rise and selling when you are expecting the market price to fall. You can place multiple trades at the same time, and depending on the regulation, you can place both buy and sell trades on the same pair at the same time. So in short, a trade is simply an order that has been executed by the broker and is now live.

Positions

Positions are a little more complicated to explain, but they are basically an accumulation of all the open trades at any moment in time. Your position is based on the exposure that you have with any given currency within a market. So let’s assume that we are trading the EUR USD currency pair, and we have a trade of 0.01 lots as a buy trade. That is the equivalent of $1,000 on a buy. We place another 0.01 lot trade which makes out a total 0.02 lots or $2,000. Our position is now $2,000 going long. If we were to place a 0.05 lot sell for $5,000 this would give us 0.02 long and 0.05 short, or a total 0.03 lots short, our position would then be $3,000 short.

Your position is basically an indication of how exposed you are to market movements. The more trades that you have going in one direction the larger your position is on that currency pair and so the more open you are to risk and exposure when the markets move.

That is a little overview of what orders, trades, and positions are when it comes to forex trading. Hopefully, this has given you a little insight into their meaning and may have also cleared up any potential confusion that there may have been regarding these terms. 

Categories
Beginners Forex Education Forex Basics

Even More Frequently Asked Forex Trading Questions Answered!

Our previous question and answer article was so popular that we decided to add another round! What follows are some of the most popular questions (and answers, of course) as asked by novice Forex traders. Education is the key to success, so read on! Question #1: Why is Forex a Bad Idea? There are some […]

Our previous question and answer article was so popular that we decided to add another round! What follows are some of the most popular questions (and answers, of course) as asked by novice Forex traders. Education is the key to success, so read on! Question #1: Why is Forex a Bad Idea? There are some […]

Our previous question and answer article was so popular that we decided to add another round! What follows are some of the most popular questions (and answers, of course) as asked by novice Forex traders. Education is the key to success, so read on!

Question #1: Why is Forex a Bad Idea?

There are some statistics out there that suggest that 70% or more of first-time traders fail. Those that come across these statistics are often scared away from trading because it seems like it just isn’t worth it. In reality, many of these traders walk away over simple problems that could have been avoided, like opening a trading account with zero knowledge of the market, not using risk-management precautions, and so on. As long as you start well-prepared, you’ll be among the traders that succeed. 

Question #2: Is Forex a Good Career?

There are certainly several benefits to becoming a trader, including flexible work hours, the ability to work from home, and being your own boss, just to name a few. Of course, you would need to invest a good chunk of money to make enough profit to be able to trade full-time. Those that still need another source of income often trade part-time. 

Question #3: Is Forex Trading Difficult to Learn?

While there is a lot of information you’ll need to know before you get started trading, we wouldn’t consider it to be difficult. You will need to invest some time into learning, but the good news is that all of this can be found on the internet for free. You can also avoid strategies or indicators that seem overly complicated and stick with things you understand. 

Question #4: How Do I Start Trading Forex with $100?

If you have at least $100 to invest, you’ll find a lot of brokers that are willing to let you open an account. Some brokers even waive a deposit requirement altogether or ask for as little as $10. You’ll simply need to shop around to find an option that offers an account with a $100 (or less) deposit minimum. 

Question #5: Can a Beginner Make Money Trading Forex?

Yes, but your chances of success depend on a few factors, most importantly that you start prepared and choose a trustworthy broker. Beginners are more prone to avoidable mistakes because they simply haven’t had the chance to learn from them. One of the best things you can do to avoid this is to spend time reading articles that provide tips and tricks specifically for beginners. You can also read about common beginner mistakes to ensure that you don’t follow the same path.

Question #6: Can you Start Trading Forex with No Money? 

Sort of. You could start out with a demo account, which is like a practice account that allows you to trade without using real money. If you’re a beginner, you should start with a demo anyways while you work on saving up an initial investment. If you want to open a live account with no money, it is possible if you can find a broker offering a bonus to new traders. However, it may be difficult to find such a bonus that doesn’t require you to deposit anything at all, and these offers often come and go periodically.

Question #7: What is the Best Currency to Invest in?

This depends on the times, but currently, many traders would recommend the British pound. In particular, the GBP/USD and EUR/GBP. Of course, you’ll want to ensure that this is still a smart investment in case the recommendation goes out of date. 

 

Categories
Forex Market

The Economic Calendar and Why It’s So Darn Interesting

Today we’ll go with an entry about a tool that interests a lot of you, the economic calendar, and its impact on Forex trading. It is constantly updated so that you have access depending on the day you are looking at it. To get started, let’s see what this tool is and why I tell you that it is a tool that should interest you a lot if you trade in currencies (or any other type of asset).

Today we’ll go with an entry about a tool that interests a lot of you, the economic calendar, and its impact on Forex trading. It is constantly updated so that you have access depending on the day you are looking at it. To get started, let’s see what this tool is and why I tell you that it is a tool that should interest you a lot if you trade in currencies (or any other type of asset).

Today we’ll go with an entry about a tool that interests a lot of you, the economic calendar, and its impact on Forex trading. It is constantly updated so that you have access depending on the day you are looking at it. To get started, let’s see what this tool is and why I tell you that it is a tool that should interest you a lot if you trade in currencies (or any other type of asset).

Index

  • What is the economic calendar?
  • Is a Forex calendar important?
  • When should I look at the economic agenda?
  • What is important in a macroeconomic calendar?
  • Trading based on macroeconomic data.
  • Technical analysis, fundamental analysis, and the economic agenda.
  • Where to look for Forex news data
  • Publication of macroeconomic data
  • Global indices and commodities
  • How do I use the economic calendar?
  1. What is the economic calendar?

An economic calendar, as its very name indicates, reflects when and what economic issues will be published globally. It can be the decision of interest rates on the part of a country, indices production prices, balance of trade, economic events. In short, it shows you any event that could affect the economy and the financial markets.

  1. Is a Forex calendar important?

As you know, in the Forex market (as in all) price movements are impacted by the news, macroeconomic data, government decisions, and more. Therefore to follow an economic agenda allows us to know when the greatest movements in the market will take place. We can even use this to not do trading or even as some traders do, do news trading.

  1. When should I look at the economic agenda?

Depending on the frequency of your trading, if you do swing trading (trades that last several days) it may have little relevance in your trade and just look at it once or twice a week. If on the contrary, your operation is more aggressive, reviewing the economic calendar each day can give you an optimal point of view of the market. You know, more day trading, more focus, which is something that doesn’t sell much but that’s there.

  1. What is important in a macroeconomic calendar?

If you take a look at the agenda above you will see that many days have published enough data and many of them are not very important. This you can set to stay only with those that are really important. Even sometimes, those that are a priori important generate little movement in the market. Still, don’t trust yourself.

  1. Trading based on macroeconomic data.

It is very popular to read or listen to some traders say they trade forex with news. What they look for with it when there is high volatility is to gain a lot in a very short time. Careful, the message sounds very nice but the reality is not so much. High risk is also something to calibrate well, in addition, to stop loss sweeps, landslides when entering the market. You must keep these issues in mind.

  1. Technical analysis, fundamental analysis, and the economic agenda.

Whether you do technical analysis or fundamental analysis, the economic agenda really matters. You might think that since you do technical analysis, you don’t care about this whole macroeconomic news thing. You can really do that in part, but to follow the market keep them present or you can get some upset. If you’re in a pretty big position within the pound and there’s news about the UK Brexit referendum, this may annoy you, to put it mildly.

If you focus or are focused on fundamental analysis to make buying and selling decisions you will know the importance of following the macro calendar and will work with economic data as a source to make your decisions. 

  1. Where to look for Forex news data

On this very page, up. In addition, there are other well-known ones such as Investing, FXstreet, and different portals where you can see these types of calendars, each with a different style. In the end, it’s a matter of taste, choose the one you like the most and where you feel comfortable. The source of the data is usually the same.

  1. Publication of macroeconomic data

Some people are obsessed with when this data is published to buy or sell based on how good or bad this data has been. Error. Two points:

In free portals the publication of the data is done with some delay and to avoid this we should hire platforms like Bloomberg (it is a paste to keep them for the independent investor and do not make much sense). But even so, today the execution of orders mostly goes by algorithms. In the time it takes to observe the data, you open the broker and place an order, the algorithm may even have already closed the position. Focus your goal on other more profitable patterns.

Another thing, do you think that just because a piece of data is better than expected, it’s gonna benefit an asset that goes up or vice versa? The answer is no. Sometimes this is discounted on the price already or the data is good but worse than expected. If you are a retail trader, I recommend that you do not enter this war unless you are very clear about it.

  1. Global indices and commodities

You may wonder if this agenda is only for the Forex market or has any use in the case of trading in indices or commodities. Macro data from China without going any further are moving most of the world indices. Events in the United States cause major markets, including European indices, to be affected both positively and negatively.

Another example is oil, which in turn has a direct relationship in some currency pairs due to the countries where it is traded and where there are large reserves. The publication of oil inventories is very important data that is taken into account by investors and traders. In the end, they affect the asset or country in question, either directly or indirectly, and it is important to have control of its publication so that you do not get caught out of play.

  1. How do I use the economic calendar?

I’ll tell you how I use the economic calendar and how you can use it yourself. If you do algorithmic trading as is my case, that is, you have automated in and out of market operations, you can carry out different actions:

-Create strategies that avoid operating at times where high-impact news is published for markets (for example, on Fridays at midday).

-Adjust systems to market volatility. We can calibrate the amount and distance to stop loss based on price variability. If it is high, it is advisable to leave more distant stops so that you do not jump at the first change with strong movements. Indicators like the ATR (Average True Range) for example can help you in this.

-Disconnect systems when there are Brexit events or important government decisions at any given time.

Beyond that you can design them yourself according to your preferences, here are some ideas. In a habitual way, apart from this type of facts, I use the economic agenda like this: the weekend where I usually look at what publications there will be in the next days and every morning when I wake up where I review only the data and the next hours (of that day).

Don’t worry if you can’t stay on the screen because you work or are busy. In addition to the Internet browser you normally use, there are mobile apps that allow you to view them. In fact, you can already do it from your smartwatch. It’s not that you’re obsessed with constantly refreshing the page or app to see what’s going on, just remember that it’s all about having control.

Categories
Beginners Forex Education Forex Basics

What Sports Can Teach Us About Success In Forex

The forex world can seem very isolated as if it is something that you can do with skills that are only used with trading. However, there are a lot of other things that we do within our lives that can help us to be better traders and can even teach us a little about it. […]

The forex world can seem very isolated as if it is something that you can do with skills that are only used with trading. However, there are a lot of other things that we do within our lives that can help us to be better traders and can even teach us a little about it. […]

The forex world can seem very isolated as if it is something that you can do with skills that are only used with trading. However, there are a lot of other things that we do within our lives that can help us to be better traders and can even teach us a little about it. Some of these things are sports. These sports can help to give us an edge when it comes to trading, either through the development of much needed skills or to give us a better understanding of what we need to do as traders. Today we are going to be looking at some of the sports that could benefit us as traders and can give us a better understanding or skill set when it comes to being a forex trader.

Patience Is Key

When it comes to sports, it may not seem like patience plays an important role, but it certainly does. You cannot simply force a play if you are on the football field, a boxing ring, a hockey pitch, or even a tennis court. You cannot simply force a play, your opponent simply won’t allow it, otherwise it would be a pretty boring and one-sided affair. So instead you need to show patience, you need to be able to sit back, to observe what is going on in the game and to then strike only when the time is right, only when the opposition presents you with an opening. The same thing happens with trading and forex, you cannot force a trade. If you try to do this, the markets will simply punish you, it will take your trade and throw a large loss out at you. You need to wait for the right moment in sport, just as you need to wait for the right trading opportunity and conditions when it comes to putting on a trade. Simply don’t try to force a trade, just like you wouldn’t force a play in sport.

Accept Losses

Losses are a major part of trading, just like they are in sports. You won’t go through your career as a sportsman without a loss (apart from the very few in things like MMA) just like you won’t go through your trading career without a loss, so it is important that you learn to accept them. A loss is not the end of the world. The majority of sports teams that win their leagues or seasons, will suffer losses along the way, but those losses did not hold them back, and those losses did not stop them from being successful. We need to look at trading the same way. When we have a loss, as long as it is controlled and we only lose what we expected to lose, it will not prevent us from being successful. In fact, all the successful trades that you see out there regularly take losses. They are a small step back yes, but they are certainly not anything that you should be incredibly worried about or that will prevent you from being profitable and successful.

You Won’t Win All the Time

This is kind of in line with our previous points. A sports team needs to go into the next game with the idea that they can be beaten, as they cannot win every single game. If they go in with this mentality then they will be going in with their guard down and this is more often than not when they experience their losses. The same has to go for us with trading too. We need to know that the next trade is not a guaranteed win, and due to this we need to make sure that our risk management plans are in palace and that we are prepared for the possible loss. This will allow us to limit the damage that it will do. Sports teams cannot win every single game, it would be boring if they could, the same way that we cannot win every single trade. If we could, we wouldn’t need to trade as we would already have everything that we could ever want.

Look At Your Own Performance

More often than not you get sports people and teams looking at the wrong thing. They focus so much on the opposition that they completely forget to look at their own performances and neglect to work on what they need for themselves. The same thing can go for forex traders. They focus too much on what is happening in the markets or what other forex traders are doing rather than looking at their own trading performance. To look at what they have done and to analyse what they have done right and wrong, that is how you improve. However, if you are solely looking at the markets or other traders, you will not be able to work out what you need to work on or what you need to improve in order to be a better trader. So while looking at the opposition is important, you need to be able to look at your own performances from the start in order to become a better trader overall.

Work Smarter, Not Harder

When you watch your favourite sports team, what is one of the things that you notice when they do well and win? They may be working hard, but there is something else. They are most likely outsmarting the opposition. You can work as hard as you want, but if you are doing it in such a manner that also uses your brain, you will be able to pick the pockets and to make a difference. Both teams can work hard, but the one working smarter will have the advantage. This works the same for trading too. You can put as much time and effort in a you want, but if you do not put it in the right places or do not also think rather than just work, you will not make good trades and won’t be as profitable as you should be. Analyse what you are doing, work on your strengths, and take time to look at your performances to make sure that you can adapt things to get better results. Work hard, but also work smart, just like the most successful sports teams and players do.

Those are some of the things that are very similar between your favourite sports team or athletes and trading forex. You can learn a lot as they often do a lot of the same things or have the same things. Whether you want to be a successful trader or a successful sportsman, you will need to put in the effort. To have the right mindset, you analyse yourself and the opposition and play the game the way it is want to be played. Next time you watch your favourite sport, look at what the team is doing, you will most likely be able to take something away from it that you can then implement into your trading on the forex markets.

Categories
Beginners Forex Education Forex Basics

The Truth About Why You’re Failing at Forex

There are a lot of traders out there. A lot of them are experienced and a lot of them are completely new. The one thing that the majority of them have with forex is that they are simply losing. Yes, they are losing money. You have probably seen the warning signs from pretty much any […]

There are a lot of traders out there. A lot of them are experienced and a lot of them are completely new. The one thing that the majority of them have with forex is that they are simply losing. Yes, they are losing money. You have probably seen the warning signs from pretty much any […]

There are a lot of traders out there. A lot of them are experienced and a lot of them are completely new. The one thing that the majority of them have with forex is that they are simply losing. Yes, they are losing money. You have probably seen the warning signs from pretty much any forex related site, stating that the majority of people that trade forex or any sort of CFD will lose money. So why do we still trade? It is because of the potential, but in order to achieve that potential, we are going to need to work out why it is that so many traders are failing when it comes to forex trading.

Some reasons are based on the individual, some through inexperienced and some through simply making mistakes, common mistakes that a lot of people make. We are going to be looking at some of the main reasons why people fail at forex trading.

Lack of Risk Management

Something that should have been cemented into your mind when you read any sort of trading course or help site is that you need to have a risk management plan in place. Yet it is something that a lot of traders still fail to do, and when you fail to do this, you are failing to trade properly. The risk management plan outlines a number of different things including trade sizes, stop loss distances, your risk to reward ratio, and more. It is paramount that this is in place, its sole purpose is to protect your account and to help you prevent yourself from making large losses. So we really don’t understand why people trade without one, either through lack of understanding or simply being too lazy to follow one. Get a risk management plan and stick to it, you simply cannot be successful without one and will fail if you don’t use it.

Not Using Stop Losses

Part of the risk management plan that we mentioned above is your stop losses. These are basically automatic stops that you can place on your trades. When the price of the markets move up or down and hit these levels then your account will automatically close. They are there to help protect you from bigger losses than you planned for, yet so many people refuse to use them. Again, this may be through simply not understanding their use, but for many. It is simply the fact that they do not want to and for this reason, they often lose their accounts. You need to have them set, every single trade needs to have one, no matter what your strategy is. If you are the sort of person that doesn’t set them and instead wants to manually watch your trades then we would suggest you rethink, these are hard stops, they protect you, use them. Otherwise, a single trade could be enough to blow an account, and it has happened many times in the past.

Trade Sizes Too Large

The size of the trade that you place relies on a number of things. It is decided based on your strategy as well as your current account size. If you place trades that are too large, then you are placing your account under an increased amount of risk, not something that you want to be doing. If you have an account size of $1,000 and place a trade size of 0.01 lots then you have a lot of room for movement. However, if you use your leverage to place a 1 lot trade, then it won’t take much movement in the markets to simply blow your account. You need to place your trade sizes responsibly, yes the larger the trade size the larger the potential profits, but the losses are also potentially larger. Stick to appropriate trade sizes and do not try to push them too far.

Overleveraging Your Account

Leverage is a wonderful thing. The brokers are basically lending you money to place trades larger than your account would otherwise be able to place. It is something that you should take advantage of, but unfortunately, a lot of people do not understand the darker side of leverage, the side that can cause you to simply blow your account. When you leverage your account, you will be placing larger trade sizes, and these give more profit potential but also more loss potential. We see $100 accounts with a leverage of 2000:1 placing 1 lot trade sizes. The markets only need to move a few points before the account will blow. You need to use your leverage appropriately, even with a leverage of 2000:1, you do not need to use it all with every single trade. Remember to follow your strategy and do not place trades too large just because you have the leverage to do it.

Quitting Too Early

People don’t like to lose, and that is understandable, but people also should not quit at the first hurdle. Many people from many walks of life have tried things, but do you think that any of the successful ones have quit after their first lesson or two? When you leave after your loss, you are basically accepting that you have lost that money and have walked away. It should be that you were never serious about trading and never serious about wanting to make the money that you are upset that you lost. You cannot quit too early, losses are a part of trading, just because you experienced one does not mean you are a failure or that you should give up. You need to keep going, even the best forex traders fail, but they are the best because they did not quit, and neither should you.

Being Distracted

Let’s be honest, it is easy to be distracted, and far easier in these modern days than it was before with all the different devices that we have to entertain us. Yet when we trade, we need to try and get rid of everything that we do not consider essential. Get rid of the TV in your trading room, get rid of your phone, get rid of anything that can distract you. We have made losses through distractions in the past, we are sure that the majority of traders have, but it is something that we can very easily deal with. Distractions will take your mind off your trading, placing wrong stop losses or take profits, trades too large, and so forth. You need to be focused when you trade, if not, mistakes will happen and you could ultimately fail if you experience too many of those mistakes.

Those are some of the reasons why people fail. If you make a loss to begin with, do not panic, that is pretty much expected of all new traders. In fact, if you are profitable in your first few months, either you are amazing or simply lucky. However each time you make a loss, take a look at the trade, try and work out why you lose, some you will be able to make adjustments, others may have just been unlucky, but use it as a learning experience. Doing this with each trade will enable you to be better, and the better you are, the less likely you are to fail.

Categories
Forex Chart Basics

If EUR/USD Buying is High, Does That Affect the Fluctuation/Swing in the Chart?

The EUR-USD cross is an intriguing one. With a total of 9.6 million traders in the world, approximately 37% of all volume at the global level is held by this currency pair alone. In fact, not only are the EUR and the USD two of the most traded currencies individually but they also comprise the […]

The EUR-USD cross is an intriguing one. With a total of 9.6 million traders in the world, approximately 37% of all volume at the global level is held by this currency pair alone. In fact, not only are the EUR and the USD two of the most traded currencies individually but they also comprise the […]

The EUR-USD cross is an intriguing one. With a total of 9.6 million traders in the world, approximately 37% of all volume at the global level is held by this currency pair alone. In fact, not only are the EUR and the USD two of the most traded currencies individually but they also comprise the most liquid pair.

Traders from all corners of the planet seem to love the EUR-USD because of tighter spreads and less slippage, but this currency pair is, at the same time, the Holy Grail for major players in the market.

There are no Coincidences

Forex is dominated by the Interbank Market, which is used by various financial institutions to trade currencies between themselves. Interestingly enough, 50% of this Interbank Market is controlled by the largest banks.

Out of approximately 25 000 banking institutions existing in the world, Deutsche Bank, Citi, JP Morgan Chase, and HSBC are some of the most prominent. And, you should know that their interest lies where yours does as well – profit.

How come?

Well, big banks love to manipulate the prices. Have you ever noticed how the price suddenly changed when everyone was certain that it would keep on going in the same direction? There’s the catch.

Big banks focus on the concentration of activity and they step in right where most traders are to take the cream off. To be specific, it is not just where traders are in the chart at that moment but where most of them are headed. 

How the Big Banks Interfere

It is unfortunate what sentiment can do. Many traders keep using the same tools and indicators and they, logically, end up losing. We may not know the extent of tools the big banks use to maintain control and insight, but the same information is accessible to everyone through IG Client Sentiment Indicator or FXCM SSI. 

While the big banks have the power to detect market activity, they cannot see your specific order. They can, however, discover if the majority of orders were long or short, based on which they can manipulate the price.

So, the more the orders push the market in a specific direction, the more likely are the banks to interfere and turn everything around.

USD is a Magnet

The choice of currencies can have an equally strong influence on the trade as well. As the USD is always in demand, it is more likely to be always on the big banks’ radar. Any news events concerning the currency will also stir up the market and set the ground for major turbulence.

The USD is, in fact, so prone to react to any news that any tweets of the previous US president, Donald Trump, caused a commotion in the market. Major US economic reports (GDP, employment, producer and consumer price index, retail sales, and trade deficit reports) are also perfect opportunities for the big banks to take their share of traders’ money.

The EUR is specific because the number of reports concerning the currency is higher due to the number of Eurozone member states. Although related economic reports (especially those of France and Germany) are valuable for traders, EUR pairs seem to do well even when they do come out. 

Since any currency combination is determined by both currencies, the EUR-USD (as the most traded and liquid pair) is that more monitored by the big banks.

The big banks’ involvement can be seen in other crosses involving this pair. For example, the EUR-USD pair has historically exhibited a high correlation with the S&P500 as they both involve the US economy. Interestingly enough, these major banking institutions have no significant dominance over precious metals, which typically dictate what will happen with the pair.

Manipulation at its Best

The number of individual orders, as we can see, does not have the power to drive the market. Individual requests cannot affect market movement per se. The only power that can create an imbalance between buying and selling orders is the big banks. 

Anyone trading the EUR-USD can see these sudden changes in prices, which leave behind many unfilled orders on the supply or the demand level. The big banks will use any opportunity to cause such friction to have their orders filled after the price returns to the zone.

These are the reasons why some forex professionals advise beginners to start trading some other currency pairs that are less susceptible to such interferences.

Indicators’ Predicting Power

Many traders use the sentiment to predict future activity in the market, which is a highly volatile and unpredictable tool. While we cannot control the big bank’s involvement, we can limit their impact by not focusing on the number of orders in the market and avoiding circumstances that these major players deem inviting. 

Any indicator is a result-oriented tool that has no power in predicting the future. News will come out and changes will occur in the world, but our task as traders is to adopt the skills that can raise us above the level of sentiment and provide us with stability.

Instead of focusing on the quantity of orders, supply levels, rather strive to determine the overall market direction and evade the banks’ radar as successfully as possible.

Own your Share of Responsibility

It is important to understand also that if big banks ever disappeared, the nature of this market would change entirely. Maybe the volume could change or forex might start to resemble the stock market. That is why it is important to shift the focus from losses and adopt an opportunistic and proactive mindset. How can you take advantage of the big banks’ existence?

The best solution to this challenge is building your own strategy and learning to trust that system. It should help you avoid the patterns the majority of traders keep repeating. This is a classic contrarian trader view of forex.

Trading currencies requires each trader to let go of the herd mentality. You need to become as independent as possible, especially when it comes to heavily monitored and liquid pairs such as EUR-USD. Your best bet is to invest in learning about trading psychology and letting go of the belief that individuals can impact the market.

Knowledge is Power

If you are still unconvinced that sentiment is not your point of reference, at least aim to use credible sources. 

Twitter, for example, offers an excellent pool of information – you can explore updates about IG Client Sentiment Index on DailyFXTeam, learn about more SSI currency pairs on FXCM_MarketData, or discover some invaluable educational materials on www.forex.academy, and build your unique way of trading. 

Finally remember that it is your skillset and toolbox that will allow you to trade the EUR-USD currency pair successfully – not the news, not the orders, and certainly not the sentiment. Use the traders’ sentiment only to see if there is enough “profit space” for you to take that contrarian trade direction. If 90% of traders are long on EUR-USD, it is hardly going to get higher, do not go into the wall. As the flow in the market is directly managed by external factors, you will primarily benefit from having a system in place that will guide you through any potential volatility caused by news events and the big banks. 

 

Categories
Forex Market

Is Market Analysis a Must for Trading?

Imagine that you are a doctor and a patient visits you. Instead of conducting a full check-up, you just put the person on the table and start operating. This doesn’t sound good, does it?

Imagine that you are a doctor and a patient visits you. Instead of conducting a full check-up, you just put the person on the table and start operating. This doesn’t sound good, does it?

Imagine that you are a doctor and a patient visits you. Instead of conducting a full check-up, you just put the person on the table and start operating. This doesn’t sound good, does it?

      …well, neither does trading without any analysis.

The thing is…we may choose between thousands of different ways to start trading, but there are always a few crucial points to consider. We have all heard stories about people who approach trading as if it were gambling. They rely on emotions, luck, and intuition to determine the future of their finances. However, although this method is wrong and dangerous, what do you believe is the missing component?

If you just took a coin and chose the head as a sign to go long and the tail to go short, you would have a 50-50% chance of succeeding, right? Well, it depends. With knowledge of the market and indicators, a developed toolbox, and proper analysis, this ratio would immediately change.

We need to have a clear idea of where we are going to set our take profit and stop loss and what our risk-to-reward ratio is going to be. These points cannot be determined randomly. We need money management to know how to manage any trade, from entry to exit. 

Many professional traders will condemn any vague, unclear approach because, as traders, we can have a much greater chance of winning with the precision and clarity that come with knowledge, analysis, and money management. 

No matter which strategy you apply in trading, money management should come first. Calculate your risk properly and do not let the trade run loose.

Traders may prefer lower or higher time frames, trying to make the most out of the chart analysis. Technical traders are going to rely on different tools to gather information about the market. However, to know whether you should enter a trade or not, you can do the naked chart reading as well and still know exactly what you should do to succeed.

Naked chart traders do not use algorithms but focus on what candlesticks are telling them about current market activity. Although these traders do not use any indicators in this case, they still need a developed skill set to generate wins and limit losses. 

As naked-chart strategy requires traders to interpret price action signals, they need to determine the overall market direction and read various patterns. Indicators may not be relevant in this trading approach, but managing one’s emotions and attitude is as important as in any other trading style.

Some aspects of trading are universal. Whether you are a technical trader or a naked-chart one, you will need to learn to analyze the market and yourself.

We know how the trading world offers abundant possibilities. Needless to say, trading comes with its own set of risks. That is why some affluent people are keen on seeking advice from experienced traders to ensure a good return. Nowadays, we are also seeing a rise in automated trading (i.e. expert advisors or trading robots) that aims to alleviate the entire trading conundrum and achieve profit without breaking a sweat.

With this approach, traders are free of having to manage each step of the trade themselves. They, however, need to invest in this ready-made system and, preferably, consult with a trading manager as well. 

Now, regardless of any easing that comes with purchasing EAs, people still need to understand the strategy that their robot is using. These traders may not be complete or independent, but they must analyze how the EA they chose works.

You may not care about who is running the state or which report is coming out next, but you still have the task of realizing how you are going to manage a new trade. How do you know that something is a signal or not? How are you going to tell if you are in an uptrend or downtrend? Which strategy brings you the best results? The questions may go on and on, and you are the only one who can answer them.

Based on everything we said above, there is no trading without some form of analysis.

To earn a profit, you need to know the key points in your trading, including your maximum risk and potential reward. What is more, earning a sustainable income should also push you towards understanding what triggers you to behave irrationally. For example, your leverage may be too high or too low, but without assessing the whys, you cannot progress any further. Any algorithm you develop can also help your trades run smoothly and prevent future losses.

Some professional technical traders will say how trading is based on three key concepts – money management, trading psychology, and technical analysis.

Now, even if you are not a really big fan of indicators or prefer a different approach, you need to build experience, as it will help you eliminate future mistakes and manage your emotions better. Yet, to get to the point of having a comprehensive perspective of your personality and the market, you still have to carry out thorough testing. 

You need to see in advance if your chosen strategy is going to yield results. And, even if it does, you might react differently once you start investing real money. Try to obtain a 360 vision of everything – the market, your involvement, and any tools you may be using.

This is why, whichever time frame or strategy you are using, you need to backtest, forward test, and real-life test your system. 

Imagine a situation where you finally started making money, but you suddenly, out the blue, take a few really bad losses with the price hitting your stop loss. 

What do you do? 

You must assess what went wrong – was it emotions, technical analysis, or something else. How can you improve your trading without recording what you were doing? The only thing that matters at the end of the day is the bottom line. Compare your total wins and losses and see if there are any loose ends. 

Trading is more about protecting your account from losses than about sole winning.

You can always use a demo account to see how your approach is working out for you. Any trader with experience will advise you to take notes on every trade you take, including all entry and exit points, indicator settings, and other key information concerning the trade.

Personality tests are also an invaluable tool for traders to get the gist of some negative beliefs that are deeply rooted in your subconscious. You do want to know if there is a part of you that is blocking your prosperity and growth. Finally, understand that whichever approach you take, trading is all about analysis, of yourself and what you do.

You are free to make your own selection of your trading style or even entrust a trading robot with your finances, but do not for one second believe in easy money with no involvement on your side.

Your trading is like a flower bud – you need to devote time, effort, and energy to see it grow, and bloom. Sometimes, you will use less water and more fertilizer to accommodate the changing seasons, but you will always be present, monitoring the development from the seed to the full-blossom stage. If you wanted to take yourself to the next level, you might consider attending a florist competition. That is when you would further build your skills and might even learn how to cut and decorate flowers. 

Still, the one thing that connects all the different stages of this process is analysis. Some people are blessed with a green thumb, so they know intuitively what to do to help the flower grow. However, to be an expert, everyone needs to include a detailed assessment of factors affecting their success in their chosen field.

Categories
Forex Basics

10 Incredibly Surprising Stats About Forex Trading

Both aspiring and expert forex traders can benefit from learning informative statistics about the forex market; however, you’ll often find a long list of boring facts and numbers when you look up the subject. We wanted our readers to have the chance to learn something new without feeling bored, so we scoured the internet to […]

Both aspiring and expert forex traders can benefit from learning informative statistics about the forex market; however, you’ll often find a long list of boring facts and numbers when you look up the subject. We wanted our readers to have the chance to learn something new without feeling bored, so we scoured the internet to […]

Both aspiring and expert forex traders can benefit from learning informative statistics about the forex market; however, you’ll often find a long list of boring facts and numbers when you look up the subject. We wanted our readers to have the chance to learn something new without feeling bored, so we scoured the internet to find the most surprising stats about the forex market out there. 

Statistic #1: Only 10% of forex traders succeed

Our first statistic is both depressing and surprising, but the good news is that it isn’t difficult to avoid becoming one of the failed traders we’re speaking of. The majority of this percentage is made up of aspiring traders that either opened a trading account without proper education or with unrealistic expectations. The misconception that forex trading is just a quick way to get rich draws in traders, then they give up quickly when they realize that they may have unrealistic expectations. 

Statistic #2: 51.6% of traders prefer Android smartphones over iPhones

People across the world have been arguing over whether Android or iPhone is better for more than a decade. We’ve heard a lot of arguments supporting the iPhone for all of its unique features; however, iPhone users might be surprised to hear that Android not only sells more phones than Apple, but the smartphone brand is also preferred by forex traders by approximately 14.3%. 

Statistic #3: A Whopping 90% of successful forex traders claim to use expert advisors

An expert advisor is a trading robot that executes trades on behalf of the trader. There are a lot of different types of EAs out there that enter and exit trades based on different principles. Although there are highly profitable trading robot options out there, many traders can be apprehensive about using them because they may fail and also because many EAs cost at least a few hundred dollars, meaning that you’ll be out of a decent chunk of money if you invest in an unprofitable robot. This is why it’s surprising to hear that so many successful traders actually depend on these services. 

Statistic #4: 27% of forex traders are aged between 18 to 32 years old

When you picture a forex trader, your mind might think of someone in their forties or fifties, or maybe even older. However, forex traders are getting started at much younger ages these days. Another 28% of forex traders are between 35 to 44 years old, meaning that younger traders make up more than half of the total forex traders in the world.  

Statistic #5: More than $5 trillion is traded in the forex market each day

It’s surprising enough to hear that an almost unheard of amount of money passes through the forex market every single day, but did you know that forex trading has more money flow through it than the stock market? It can be harder to find exact figures, but price points seem to fall more in the range of billions when you’re looking at the stock market, which gives forex a substantial lead. 

Statistic #6: 41% of all forex transactions occur in the United Kingdom

The most popular currency pair is the United States Dollar, so you might be shocked to learn that almost half of all forex transactions actually occur in the United Kingdom. If you’re wondering how many transactions take place in the United States, the answer is only about 19%. 

Statistic #7: Only 7% of traders have 10 or more years of experience

If you’re feeling like you’re at a disadvantage because you have little experience trading forex, you might be surprised to hear that traders with 1-3 years of experience make up 39% of forex traders, while another 31% have less than one year’s worth of experience. 

Statistic #8: 40% of forex traders choose to trade because they want to be their own boss

The number one reason why people decide to trade comes down to being their own boss, with almost half of all traders claiming this to be their top motivation, even more so than simply making money. Of course, forex does offer a lot of perks that you can’t find with a regular job.

Statistic #9: More than 45% of traders don’t spend money on learning resources

When you become a trader, you can find a lot of resources online for free, but some may believe that the resources you pay for would offer better educational opportunities. This isn’t necessarily the case, as nearly half of all forex traders opted not to pay a cent for any learning resources in the past year. 

Statistic #10: Approximately 89.1% of forex traders are men

You might have assumed that the number of male traders outweighs the number of female traders, but it’s surprising to hear just how much larger that percentage is. Of course, this is a great incentive for aspiring female traders to get out there and even out those stereotypes. 

Categories
Forex Market

Fixed Forex Spreads vs Floating Spreads: Which is Should I Choose?

When you’re searching for a broker, you’ll find many different account types and options when it comes to fees, available assets, funding methods, and so on. One of the major things that traders look at are the spreads offered by various brokers, as the differences in these fees can be large and will make a […]

When you’re searching for a broker, you’ll find many different account types and options when it comes to fees, available assets, funding methods, and so on. One of the major things that traders look at are the spreads offered by various brokers, as the differences in these fees can be large and will make a […]

When you’re searching for a broker, you’ll find many different account types and options when it comes to fees, available assets, funding methods, and so on. One of the major things that traders look at are the spreads offered by various brokers, as the differences in these fees can be large and will make a big impact on the amount of profits that you actually bring home. Brokers generally profit through two different fees – commissions and spreads. The spread is the difference between the bid and ask price on an instrument. For example, on the pair EURUSD, an average spread is around 1.5 pips. 

However, some brokers widen the spread to 2 pips or even higher, which puts clients at a disadvantage. Much like comparing car insurance, traders need to be able to compare the spreads offered on different account types and through different brokers to find the best deal possible. Otherwise, they will lose a great deal of profits to inflated fees when they could have chosen a broker that offered more competitive pricing.

As mentioned above, you want to look for spreads of around 1.5 pips on the pair EURUSD. Don’t expect to see this on every available instrument, as spreads on exotics and some minor currency pairs can climb much higher. If you see a good spread offer, you still aren’t done, as you’ll need to know whether the spread is floating or fixed. 

Floating spreads are more common in the forex market and this means that the difference between the bid and ask price is constantly changing. If a broker advertises floating spreads from 1 pip on a currency pair, you still might see a spread of 1-2 pips or higher for that same pair. Brokers are also likely to charge commission fees if they offer a floating spread. You’ll want to check to see if the broker lists each instrument they offer and the starting spreads for each pair on their website so that you can see the different starting spreads. If a broker advertises starting spreads from 1 pip but doesn’t go into more detail, you should expect to see this on some major currency pairs with higher spreads on other instruments.  

Unlike floating spreads, which constantly change, fixed spreads are set at their exact value and give traders a more solid foundation of knowing exactly what they will pay. The downside with this type of spread is that it is usually higher than the lowest point with a floating spread. For example, if the broker offers floating spreads from 1 pip on EURUSD, you might see a fixed spread of 2 pips or higher for the same pair. Low fixed spreads are advantageous, while higher fixed spreads mean you will wind up paying more money to trade. 

When it comes to deciding which type of spread is better, you’ll have to take a look at each broker’s specific offer. You also might have to look around if you prefer a certain type of spread, as many brokers only offer one type or the other, while some offer different account types with different kinds of spreads. In our opinion, the best kind of spread is fixed, but it must be narrow. If the spread is fixed at a high value, it is usually better to go with a floating spread.

Categories
Forex Basics

You Need to Know These True Pros and Cons of Trading Forex

If you’ve ever considered becoming a forex trader, you have undoubtedly wondered if it would be a lucrative investment. Forex trading has helped many traders to amass a great deal of wealth, while it has caused others to wipe out their investments altogether. There are good and bad aspects to trading and considering those factors […]

If you’ve ever considered becoming a forex trader, you have undoubtedly wondered if it would be a lucrative investment. Forex trading has helped many traders to amass a great deal of wealth, while it has caused others to wipe out their investments altogether. There are good and bad aspects to trading and considering those factors […]

If you’ve ever considered becoming a forex trader, you have undoubtedly wondered if it would be a lucrative investment. Forex trading has helped many traders to amass a great deal of wealth, while it has caused others to wipe out their investments altogether. There are good and bad aspects to trading and considering those factors is important before deciding if trading is something that you should try.

Below, we will start positive with the plus sides of opening a trading account, before moving on to the cons.  

Pros

Flexibility

 Forex traders never have to worry about a stressful boss standing over their shoulder. They get to be their own boss, set their own hours, and work from anywhere with an internet connection. There’s no need to commute to work or even to change out of your pajamas if you don’t want to. You could work from anywhere in the world because traveling is no issue. This is one of the main reasons that many people dream about ditching their desk job to become a forex trader.

You can get a free education

Learning everything you need to be a successful forex trader is right at your fingertips, online for free. The internet is filled with articles, videos, and other resources that can be accessed free of charge. It’s true that this will take some effort on your part, but anyone can accomplish this with a little hard work and determination. Remember that investing time into your forex education is one of the most important things you can do before you get started trading. 

Leverage

Forex traders use leverage to increase the size of their trades. This gives traders with a smaller amount of capital the opportunity to make bigger profits. This is another one of forex trading’s main draws. 

It doesn’t take much to get started

You don’t need much to become a forex trader. Simply sign up with a broker from any device with a working internet connection, make a deposit, and you’re ready! Of course, you’ll want to be well-educated before you start, but even acquiring an education is free. Anyone that puts their mind to it can do this – it doesn’t require having a lot of money already or other difficult steps. 

Cons

You need a starting investment

Just to be clear – you can get started with as little as $5, but this isn’t going to leave much room for trading. Those who can afford to deposit a few thousand (or more) dollars are going to make more significant profits. If you’re just looking to make a little extra cash here and there that shouldn’t be a problem, but those that want to support themselves purely by forex trading need to have a larger investment to start with. Sadly, most of us don’t have $20,000 or in disposable income just so sitting in our bank accounts. This means that it will take a while to work up to making larger profits. 

Trading is risky

Trading involves investing your hard-earned money with no promises that you’re going to see any profits. Or even worse, you could lose it all. In a way, it involves the emotions one would feel with gambling, that trading decisions are less based on chance. Traders consider a variety of factors, like technical or fundamental analysis, which makes their decisions more founded. Still, at the end of the day, nobody can 100% predict the way the market is going to go. 

Leverage

We know that we listed leverage under the pros, but it can also be a con. Many beginners make the mistake of trading with too high of a leverage, which can quickly end your career. Leverage is often referred to as a double-edged sword because it can go both ways. If you’re a beginner, you don’t need to use the highest leverage your broker has available just because you can. Start small and work your way up, or leverage could be your downfall. 

Scammers

Scammers can be avoided if one knows what to look for, but many beginners do fall victim to shady brokerages. Whenever you’re looking at companies, check for regulation, and do further research before you give out any personal information or open an account. Some brokers have impossible withdrawal conditions, have customer support teams that you can rarely get ahold of, and so on. New brokers pop up every single day and only some of those options are legitimate. Choosing a forex broker is not a quick decision, choosing the right one takes thought and comparison.

The Bottom Line

Anyone that is interested can become a forex trader with some know-how and a small investment, but one really needs to consider the pros and cons first. You might make a lot of money, or you could lose everything you invest. The good news is that some of the downsides can be avoided. If you secure a good forex education, research your brokerage before opening an account, use a leverage that suits your skill level, and take risk-management steps, then you’ll be more likely to succeed.

The ultimate downside to Forex trading is the risk involved. Even if you’ve been practicing on a demo account, switching to a live account can feel overwhelming and you might not realize the way that your emotions, slippage, or other live conditions could affect you. If you are willing to put in the work to learn, then we fully recommend opening a trading account, just be sure that you’re investing from your disposable income, not from the money you need to live on or support your family. It can also help to adjust your expectations if you’re starting with a small investment.

Categories
Forex Basics

Why It’s Easier to Succeed with Forex Than You Might Think

Those that decide to pursue forex trading fall into two categories: those that go on to make a profit and continue trading, and those that lose money and quit. While everyone hopes to become one of the traders that finds themselves on the path to success, many people simply don’t realize the simple factors that can make you or break you when it comes to trading in the forex market. First, you need to start by understanding the basics of forex trading. 

Those that decide to pursue forex trading fall into two categories: those that go on to make a profit and continue trading, and those that lose money and quit. While everyone hopes to become one of the traders that finds themselves on the path to success, many people simply don’t realize the simple factors that can make you or break you when it comes to trading in the forex market. First, you need to start by understanding the basics of forex trading. 

Those that decide to pursue forex trading fall into two categories: those that go on to make a profit and continue trading, and those that lose money and quit. While everyone hopes to become one of the traders that finds themselves on the path to success, many people simply don’t realize the simple factors that can make you or break you when it comes to trading in the forex market. First, you need to start by understanding the basics of forex trading. 

An Introduction to Forex Trading

The term forex refers to the foreign exchange market, which is an online global exchange market where people buy and sell different currencies. This includes regular people and professional traders, along with bigger entities like banks, hedge funds, brokers, specific companies, and other high-stakes investors. The value of the currency that people are buying and selling changes based on several different factors, including but not limited to:

  • Interest rates and inflation rates
  • The country’s current debt
  • Unemployment data
  • The housing market
  • Politics
  • Supply & demand
  • Economic factors 

As you can see, the value of each country’s currency is primarily affected by factors that are associated with money, government, and economic data. In order to make informed trading decisions, traders keep up with news events and look at economic calendars for updates that tell them a currency’s value may change. Other methods that are used to decide what currencies to trade include technical and fundamental analysis. 

What Is a Currency Pair?

A currency pair includes two different currencies that are paired against one another. For example, EUR/USD. This means that the (base currency) Euro is being traded against the (counter currency) United States Dollar. This is the most used pair in the world, but there are also several other major, minor, and exotic pairs that can be traded. 

  • Major currency pairs include EUR/USD, USD/JPY, GBP/USD, USD/CHF, AUD/USD, USD/CAD, GBP/EUR, EUR/CHF, EUR/JPY, and the NZD/USD. 
  • Minor currency pairs don’t include the United States Dollar. The most common examples are the British Pound (GBP), the Euro (EUR), and the Yen (JPY). 
  • Exotic currency pairs are made up of one major currency, traded against a currency from a developing country. The Turkish Lira (TRY) is one example of an exotic currency. 

Traders choose which currency pairs to buy or sell based on the change in price with the goal of making a profit. It’s generally considered the safest to trade major currency pairs, while exotic currency pairs can be more volatile and riskier to traders, so be sure to choose wisely. 

Must-Follow Tips for Success

Now that we’ve covered the basics of forex trading, it’s time to dish out some of the most helpful tips that can help you reach long-term success. Simply being aware of this information can help to ensure that you get started on the right foot without falling victim to common trading mistakes. 

  • Choose the Right Broker: There are a lot of choices out there, but you’ll need to do some research to make sure you’re working with a reputable broker. It’s also important to compare account types, fees, funding methods, and other important aspects before you open a trading account. Know that choosing a broker with fewer fees means that more of your profits will wind up in your pocket. 
  • Develop a good trading strategy: There are a lot of different strategies out there that appeal to all kinds of different traders. You’ll need to choose one that fits with your schedule and determine the reasons why you will enter trades, how much money you’re willing to risk, etc.
  • Don’t open an account until you’re ready: You shouldn’t rush to open a trading account until you understand the market and you’ve developed a solid trading plan. Some brokers will even charge you for inactivity if you deposit funds but choose to hold off on trading until you feel ready. Instead, open a demo account for practice. 
  • Try to limit distractions in the place where you plan to trade. Background noise, music, television, conversation, and other noises can cause you to lose your focus. Also, try turning off your phone or at least put it on silent if social media keeps pulling you away from your work.
  • Never risk more than you can afford to lose: Don’t get caught up using extremely high leverage options or risking large amounts on your trades in an effort to make a large profit quickly. It’s better to be safe than sorry when it comes to forex, especially if you’re a beginner. 
  • Don’t enter a trade if there isn’t a good reason to do so: Even if you haven’t entered any trades for the entire day, don’t enter one for the sake of doing it just because you’re bored or feeling unproductive. It’s better to choose not to trade at all with no money lost than it is to enter a trade and lose money you could have spared with patience. 
  • Never stop learning: Even once you have a good understanding of the forex market and strategies, there’s always more to know. Be sure to spend time reading about psychology-related trading material, checking out tips and tricks from other traders, watching educational videos, or anything else that helps to expand on your knowledge as a forex trader.  
  • Keep a trading journal: Trust us, you’re going to refer back to your trading journal more than once, so don’t take the lazy way out on this one. Be sure to log specific details about the trades you take and check on your progress from time to time. 
  • Don’t give up: If you start to lose money, don’t panic and start risking more to make up for it. The best way to handle this is to take a step back and look at your trading journal to see if you can figure out what’s going wrong. If you think your strategy is to blame, try making changes and testing on a demo account before you go back to your live account. Staying calm and figuring out the problem is what separates successful traders from the large percentage of those that give up.
Categories
Forex Basic Strategies

Social Trading: What are the Advantages and Disadvantages?

Social trade is a fairly new concept in Forex retail and its popularity has been growing considerably in recent years. Let’s see the pros and cons of this trading modality that is very similar to social networks. The concept that drives social trading, especially in Forex, is that the process offers online traders the opportunity […]

Social trade is a fairly new concept in Forex retail and its popularity has been growing considerably in recent years. Let’s see the pros and cons of this trading modality that is very similar to social networks. The concept that drives social trading, especially in Forex, is that the process offers online traders the opportunity […]

Social trade is a fairly new concept in Forex retail and its popularity has been growing considerably in recent years. Let’s see the pros and cons of this trading modality that is very similar to social networks.

The concept that drives social trading, especially in Forex, is that the process offers online traders the opportunity to obtain information about operations and strategies of other traders and thus use the knowledge and experience of other professionals in combination with their own experience.

Social trading works very much like the most popular social networks, such as Facebook and Twitter, where individuals communicate directly with each other continuously from wherever they are. And, as with other social networks, there are advantages and disadvantages in their use.

Advantages of Social Trading

One of the reasons for the success of social commerce is that it is easy. By monitoring the activity of other traders, novice or intermediate-level operators can base their movements on the professional decisions of more experienced traders; there is no need to conduct its own fundamental or technical analysis. It’s like when you have the answers to a test before the date and even taking a look at the test questions!

With social trading, Forex traders can have an immediate association with many other traders in an environment where it is possible to interact with each other, discuss points of view and then copy the most successful trades. At the same time, the beginner and the more experienced traders can learn how elite operators get to the decisions they make, what strategies they use, and which ones work better than others in their efforts to make profits, while at the same time limiting the risks to your entire portfolio.

Another important advantage of Social Forex Trading is that, when trading as a member of a community rather than as an individual, it is often easier to avoid personal biases that often result in loss of positions. As part of the package, it becomes much easier to observe the change in market activity from a more impartial perspective. For example, a transaction that starts showing losses can trigger emotional reactions in a trader that can often lead to wrong decisions. When operators work together as a unit, it is easier to discuss and analyze market activity as it develops and make more wise decisions.

Finally, the opening to the public of transactions through social trading has made Forex trading no longer an instrument that is normally restricted to the best brokers and multinational banks. And, since all transactions placed on a social trading platform are copied directly, no one can intervene in such transactions, generating more transparency.

Disadvantages of Social Trading

Social trading provides an exchange of information for individual and retail investors. And although this seems an advantage, it can also become a disadvantage. This is because there is only a small number of successful traders in this market, by using social trading networks an operator can follow the wrong trader and end up losing instead of increasing their profits.

Copy Trading represents a greater threat, as even novice traders, without the prior knowledge of Forex, are allowed to replicate the commercial behavior of successful traders. Therefore, they basically become helpless in case the “leader” fails.

The execution of trades, based on collective wisdom, remains an impressive proposition – in the beginning. However, some initial successes might even deny the danger that you will become totally dependent on others. You may be able to generate huge benefits by integrating other ideas into your own game plan. However, there is no guarantee that these strategies will work infallibly in the long term.

Choosing the Right Platform

One of the main disadvantages of social trading is that it is still relatively difficult for an operator to select the right social platform. Etoro, Zulutrade, and Signaltrader, (to name a few) are the main Social trading platforms of Forex. There is no shortage of social platforms and this makes it difficult to choose. And, even though social trading operations are not a scam, there are scam platforms that do not comply with the rules and there are some social trading scammers willing to cheat and an unsuspecting trader can be easily surprised. Some of them even end up claiming that they offer the best signals for you. Therefore, it is very important for you to choose your platform carefully. Choosing the right trading platform is key, but it is complicated, and you need to be informed and alert enough to tell the good from the bad.

Copy Trading represents a greater threat, as even novice traders, without the prior knowledge of Forex, are allowed to replicate the commercial behavior of successful traders. Therefore, they basically become helpless in case the “leader” fails.

We can’t just fall into the hands of dishonest racers. Traders should also be careful when choosing the individuals they want to follow, as there are people with little confidence. Defining several indispensable criteria before opening a trading account helps traders select the best operators to follow from a list that may include hundreds of them.

There are several social trading networks that offer different features, many of which are not fully understood by a novice Forex trader. Some networks reward their operators not only for the benefits they get but also for their low-risk management approach. This makes traders in these types of companies more aware of the risk than operators in other networks that reward only for profit and may encourage risk-taking in the process. This approach might not be a good start for novice operators.

In addition, traders who have just started trading may not fully understand the ramifications of various social trading networks. To take an example, there are social trade networks that place a limit on the amount that a trader can assign to 20 or 30%, which is certainly an advantage as this forces the trader to spread his risk. On the other hand, an operator can be allowed to run a risk of up to 100% in a single operation, and can technically lose everything in a single move.

Future of the Market

Last but not least, the presence of too many traders without prior knowledge is not advisable for the market itself. As in that case, (the market) runs the serious risk of running out of “leaders” in the long run. Only a continuous recycling of ideas will help to prevent a “substantive” future.

In Conclusion

There are advantages and disadvantages in all types of investment and this also applies to social trading. The key to success in any enterprise is knowledge; the more the trader knows about how a particular financial instrument works, the lower the risk you run and your chances of winning will increase substantially.

Categories
Forex Basics

What You Don’t Know About Forex Regulation Could Hurt You

The forex (FX) market is the largest and most liquid market in the world, with around $5.3 billion traded daily. Day trading is the most common among Forex traders, but many of the investors depend on the creation of trading accounts and the execution of their transactions through Forex brokers. There are hundreds of new […]

The forex (FX) market is the largest and most liquid market in the world, with around $5.3 billion traded daily. Day trading is the most common among Forex traders, but many of the investors depend on the creation of trading accounts and the execution of their transactions through Forex brokers. There are hundreds of new […]

The forex (FX) market is the largest and most liquid market in the world, with around $5.3 billion traded daily. Day trading is the most common among Forex traders, but many of the investors depend on the creation of trading accounts and the execution of their transactions through Forex brokers.

There are hundreds of new Forex brokers and brokers constantly opening their doors to the public. This makes it difficult to choose the best broker and leaves traders at the mercy of the broker when we talk about transparency and honesty. The Forex market is huge, but regulation in this market is scarce and there is not a single global body to monitor it 24/7.

There are no specific statistics, but the amount of foreign exchange brokers and binary options working under a regulatory authority is minimal (estimated at 5 percent) and that gives many companies the opportunity to take advantage of their customers and engage in abusive practices without consequences.

The Risk of Non-regulation

For retail forex traders, the biggest disadvantage of most brokers’ lack of regulation of the forex market is illegal activity or outright fraud, as well as losses in a market increasingly dominated by speculative activity and large institutions. After a series of scams related to the forex market during the period 2001-2008, the CFTC to create a specific task force to address the problem, and stringent forex regulations were introduced several years later to protect retail currency traders.

Under the Commodity Trading Act (CEA), the CFTC assumed jurisdiction over leveraged Forex transactions offered to retail clients in the United States. This Act only allows regulated entities to act as counterparties for forex transactions with US retail clients and requires all online US forex brokers to be registered and comply with the strict financial rules applied by the National Futures Association (NFA).

At the institutional level, banks, which are responsible for 95 percent of daily foreign exchange trade, are heavily regulated. The United States Federal Reserve and the United States Department of the Treasury are very attentive to the regulation of the Forex industry and carefully monitor brokers for evidence of manipulation.

Forex Regulation: Why not?

Why is Forex regulation so important? The aim of regulation is to ensure fair and ethical business behaviour. Under the current regulatory contracts, all forex brokers, investment banks, and signal providers are obliged to trade in fair compliance with the regulations and regulations established by the forex regulators or their activities may be considered illegal. These bodies must be registered and authorised in the country where they operate, ensuring that quality control standards are met. Brokerage houses are subject to audits, reviews, and periodic evaluations that force them to maintain industry standards.

In addition, regulated Forex brokers must hold a sufficient amount of funds to be able to execute and complete foreign exchange contracts performed by their clients and also to return clients’ funds in the event of bankruptcy.

If a regulator finds a broker infringing its guidelines, it can use a wide range of powers – criminal, regulatory, and civil  – for the protection of consumers and take action against businesses or individuals that do not meet acceptable standards. It may publish notices that are important to ensure the transparency of the decision taken by the authority and to inform the public, thereby maximizing the deterrent effect of enforcement action.

Some regulators issue alerts about financial services companies and individuals, both abroad and in their local areas. Of course, there can be no guarantee that any action taken by a regulatory agency, such as the FCA in the United Kingdom, translates into a payment or return of funds or securities, even when formal disciplinary action is taken and sanctions are imposed.

Many of the measures taken by regulatory agencies against brokers covered by their authorities may also apply to unregulated brokers in similar situations by police and other enforcement agencies, but its mandate is limited and less likely to be imposed, leaving investors with few resources in the event of fraudulent practices.

Forex regulators work within their own jurisdictions but often work together to search for suspicious activities. In fact, in the European Union, a single Member State licence covers the whole continent.

Over the years, regulators around the world have sought to organize some kind of universal body of regulation. The Mifid (Markets in Financial Instruments) Directive was introduced in the United Kingdom in 2007 and has been the cornerstone of Europe’s financial regulation regime ever since.

The Mifid Regulation is being revised to improve the functioning of financial markets following the financial crisis and to strengthen investor protection. The changes entered into force on 3 January 2017, although discussions are under between the European Commission,  the Council of the European Union, and the European Parliament. The new legislation is called Mifid II and includes a renewed Mifid and a new Financial Instrument Markets Regulation (Mifir).

There are, however, powerful voices working to pressure the wholesale forex market to have a broad regulatory base. The Association of European Financial Markets (AFME), a body in the sector, has spoken out against the strict rules of MIFID II and has recently published a document highlighting “unforeseen consequences” that could lead to excessive regulation of the Forex sector that would not allow brokers to serve their traders comfortably.

Local Approaches

At present, there is still no uniform approach to the global level when it comes to this market. The regulatory industry continues to operate locally with each broker requesting regulation at a chosen location and some organizations being more active than others. In Japan, one of the most active retail foreign exchange markets in the world, the Financial Services Authority (FSA) oversees all markets, including retail trade. The FSA is proactive in regulating retail foreign exchange trading and has reduced several times the maximum leverage that can be used by retail currency traders in recent years. In the UK, where the FCA (formerly the FSA) is the main regulatory body, and in much of continental Europe there are very few limits to the level of leverage offered.

Cysec, the financial regulator of Cyprus, is part of the European Mifid regulation, but it has attracted a number of foreign companies who wish to take advantage of what is seen as light regulation and an easy way to obtain a licence without having to comply with the strict requirements imposed by other European financial regulators.

In Latin America, there is no regulatory agency, and traders are protected by the regulatory authority that regulates the broker, depending on the country from which the broker originates, for this reason, it is very important that if you are going to carry out trading in Latin America, do so only with a broker who is regulated by a globally recognised authority.

Currently, the lack of regulation of the institutional foreign exchange market continues to pose continuing risks for the retail investor, including increased currency volatility and discrepancies in available public information.

Despite the difficulty and cost of brokers to be under an authorized regulatory body, there are many worthwhile brokers who choose to do so and these have to be considered ahead of all others. Traders have a large selection of regulated brokers in their jurisdictions or in other countries and will also find the same features -and more- with regulated brokers as with unregulated brokers.

Categories
Forex Basic Strategies

What Happens When an Asset Tests a Level of Support?

He who lives by the crystal ball will eat shattered glass, said Ray Dalio. The ways to analyze the market are increasing by the day, all for the purpose of giving traders the foundation for trading. The more knowledge one has, the less likely he/she is going to rely on sentiment or intuition. Support and […]

He who lives by the crystal ball will eat shattered glass, said Ray Dalio. The ways to analyze the market are increasing by the day, all for the purpose of giving traders the foundation for trading. The more knowledge one has, the less likely he/she is going to rely on sentiment or intuition. Support and […]

He who lives by the crystal ball will eat shattered glass, said Ray Dalio. The ways to analyze the market are increasing by the day, all for the purpose of giving traders the foundation for trading. The more knowledge one has, the less likely he/she is going to rely on sentiment or intuition.

Support and resistance have emerged as two of the most discussed aspects of technical analysis. The two terms refer to the price levels that traders use in the chart to determine certain patterns. These levels are important because they can stop an asset from getting pushed in a certain direction.

Support and Resistance Differences

Although support and resistance may come in many forms, they can be defined as follows:

Support is a price that has not come down for a while. Such a pause in price movement is triggered by a higher demand or buying interest. Support always occurs where we expect to see a downtrend and where buyers tend to enter the market.

Resistance is an indication that an uptrend may pause for a while owing to a concentration of supply. Resistance also signifies that certain asset experiences difficulty breaking through, which may result in a potential fall. The greater the number of times the index or stock has tried to break through the resistance, the stronger the resistance in question is.

Both support and resistance are confirmations of supply and demand levels that can be identified with the use of trendlines and moving averages.

Supply and Demand vs. Support and Resistance

All support and resistance levels result from supply and demand levels. When the price of an asset drops, demand rises, forming the support line as a result. Conversely, prices increase causing selling interest, which leads to the formation of resistance zones.

Price Movement

Whenever a price reaches support or resistance, it can either bounce back in the opposite direction or break through the price level until it reaches the next support/resistance level. These support and resistance zones can thus serve as potential entry or exit points.

Whether the price bounces off or breaks through the support or resistance lines, traders can always get an idea of the direction towards which the price is heading and have their theory confirmed or refuted promptly.

Should the price move in an unfavorable direction, traders can close the position at a small loss. However, if the price moves to the trader’s benefit, the entire trade can turn out to be quite rewarding. This idea gives birth to many reversal strategies.

Concerns

Now that we understand what happens when an asset tests the support line, we need to address possible problems in trades that use support and resistance as a tool to identify price action. 

First of all, support and resistance levels are one of the key concepts used by technical analysts. As their popularity is undeniable, so is the fact that they can create hotspots in the chart. If your support line is easily created by most market participants, you will surely see the heightened concentration in that area of the chart. And, the more traders rely on the use of support and resistance, the greater the chance that the big banks will step in and manipulate the price.

Secondly, many traders like to use support (and resistance) lines for predicting where the price is going to go. Unfortunately, we cannot know if there will be any reversals or breakthroughs in advance. What we can quite often attract, however, is an uncontrollable and unexpected change in price triggered by an elevated concentration of traders in a specific price level.

Thirdly, there is a rise in the number of social media accounts that claim they know where the right support lines are in the chart. These posts and offers are used as fishing hooks intended to lure people to trade based on the information provided for which the authors receive payment. Do not trust all products you find online just because someone claims to know exactly what you want to hear.

Next, support and resistance do not function equally well in different trading markets. These terms may serve stock or crypto traders much better than currency traders for example. Some brokers’ websites contain information on where support and resistance lines can be found in the chart, but do not forget that these companies earn money when the price moves in the exact opposite direction from where you would want it.

Also, if you use support lines in combination with another similar tool, you may increase your susceptibility to external influence (i.e. large banking institutions). The more you rely on the tools the majority of traders prefer, the greater the chance of your trade being whipsawed.

And, if we see several support lines in the chart, which one are we supposed to use? How do I know that I have chosen the right one? 

Last, if there are variations in the degree of my success, how can I know that support (and resistance) is a reliable tool for sure?

Conclusion

When you test how support and resistance works, make sure to take detailed notes of all of your trades, including the total wins and losses. Sometimes, we get a feeling that something is a great tool just because it once brought us some good results. 

Traders need to feel certain that the tools they use in trading are going to give them consistent results – both in terms of wins and losses. If you get one good win and then take five consecutive losses, your account will suffer. You may have a problem even with fewer losses if they end up cutting your entire account in half. No win can compensate for such a loss percentage, and no tool should be trusted if it leaves room for such scenarios.

What is more, the trading community seems to love support and resistance lines, but the fact that there are very few critical observations of this tool should raise questions. 

If you are a beginner, you should definitely pay attention to the testing phase and record every step diligently. You must know if your support and resistance lines are going to serve you or make your account suffer. 

However, if you find your support (or resistance) lines to provide you with continuous success, there is no reason for you to question their worth any further. If you have good results, you need to keep that skill consistent. Having a hunch could be a skill if you can do it time after time, the lingering question remains: is that talent going to vanish as you change psychologically and physically?