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Beginners Forex Education Forex Basics

How to Balance Your Forex Investment Portfolio

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

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

Optimising Risk and Profitability

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

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

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

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

There are two approaches to optimising the investment portfolio:

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

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

Criteria for Balancing

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

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

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

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

Frequency of Transactions

How to optimise the risks of an investment portfolio:

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

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

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

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

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

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

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

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

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

  1. Pay attention to the following parameters:

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

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

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

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

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

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

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

Conclusion

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

Categories
Beginners Forex Education Forex Assets

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

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

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

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

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

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

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

What does the dollar rate depend on?

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

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

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

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

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

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

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

Devaluation and Overvaluation at an Exchange Value

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Big Mac: Both cheap and expensive

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

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

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

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

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

Conclusion

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

Categories
Chart Patterns Forex Forex Education

How Important are Chart Patterns in Forex?

Chartist analysis in forex consists of identifying figures on the price chart, these are usually repeated historically so you can practice in their identification, also they are usually formed in different financial instruments and periods of time, and through them, it is possible to predict with some reliability where the next price movement will follow. It is perhaps the most classic form of analysis in Forex and surely one of the most effective, so your knowledge is always very advisable.

Chartist figures are formed because the market makes oscillations and leaves a “trail” which helps to detect these figures. There are chartist figures that allow confirming the changes of trend, to identify opportunities to enter the market as well as to set objectives in the prices. Chartist figures are more effective in operating in high temporality, although in short periods they usually appear more frequently, also the failures are very recurrent.

Price Pattern in Forex Technical Analysis

The analysis of price movements originated exactly when the price chart appeared. The first graphs were drawn on millimeter paper, and it was then that the first analysts noticed that there were some areas on the graph where the price made similar oscillations at different intervals of time. Traders called them price patterns because the first patterns looked similar to geometric objects, such as a triangle, a square, or a diamond. With the appearance of computer screens and the analysis of longer time periods, new patterns began to appear. Traders use chart patterns to identify trading signals, or signs of future price movements, to enter to trade at the right place.

Chart Patterns You Should Know

“Triangle”

There are several different types of triangles, however, all are based on the same principle. In classical technical analysis, the triangle is classified as a continuation pattern of the trend. This means that the trend that has been on the market before the formation of the triangle may continue after its formation is completed.

Technically, a triangle is a lateral channel of narrowing that usually emerges at the end of the trend. Basically, the triangle is resolved when the range of price fluctuation decreases to the limit, an impulse arises and the price penetrates one of the limits of the figure, moves away from the rupture. I suggest analyzing the break scenarios both upward and downward in the given example. Although the triangle is the continuation figure, it is no more than a probability, and therefore it is worth considering an alternative scenario.

When trading with a triangle pattern, it makes some sense to open a buying position when the price, having passed the resistance line of the pattern, has reached and exceeded the local highs, marked before the break of the resistance line (buy zone). Expected earnings must be set when the price passes a distance less than or equal to the amplitude of the first wave of the figure (profit zone buy). In this case, a stop loss can be placed at the local minimum level that preceded the breakpoint of the resistance line (stop zone buy).

A sales position can be opened when the price has penetrated the figure support line, reached, or pressed through the local minimum level that preceded the breakpoint of the support line (sell zone). Expected earnings should be set when the price has passed a distance less than or equal to the amplitude of the first wave of the figure (profit zone sell). A stop-loss, in this case, must be placed at the level of the local maximum that preceded the breakpoint of the support line (stop zone sell).

“Double Top”

This pattern is classified as the simplest, so the probability of its effective implementation is somewhat lower than that of other patterns. In classical technical analysis, the double vertex is classified as a trend change pattern. This means that the trend that has been on the market before the formation of the pattern may change after its formation is completed.

The figure represents two consecutive maxima, whose peaks are at approximately the same level. The pattern can be straight and inclined, in the latter case you should carefully examine the bases of the upper parts which should be parallel to the maxima.

In classical analysis, a double vertex works only if the trend is reversed and the price decreases, if the price reaches the third maximum, the formation becomes the triple vertex pattern.

A sales position can be opened when the price has penetrated the figure support line, reached, or pressed through the local minimum level that preceded the breakpoint of the support line (sell zone). Expected winnings must be set when the price has passed a distance less than or equal to the height of any vertex of the figure (profit zone).

“Head & Shoulders”

The figure represents three consecutive maxima, whose maxima are at different levels: central must be above the other two, and the first and third, in turn, must be about one height. However, there are some pattern modifications when the shoulders are at different levels. In this pattern, we must ensure that the central maximum is higher than both shoulders. Another key feature for identifying the pattern is a clear trend line, which precedes the pattern’s appearance.

The pattern can be straight and inclined, in the latter case, you should be careful to check if the bases of the upper parts are parallel to their maxima. The minimums between these maxima are connected by a trend line called the neck.

A selling position can be opened when the price has penetrated the neckline of the figure, reached, or pressed through the local minimum level that preceded the breakpoint of the neckline (sell zone). Expected earnings should be set when the price has passed a distance less than or equal to the height of the central vertex (head) of the figure (profit zone). A stop-loss, in this case, must be placed at the level of the local maximum that preceded the point of break of the neckline or at the level of the vertex of the second shoulder (stop zone).

“Wedge”

In classical technical analysis, the wedge is classified as a continuation pattern of the trend.

Technically, the wedge, like the triangle is a lateral channel constriction, but another difference between the wedge and the triangle is its size. The wedge is usually much larger than the triangle and sometimes takes months and sometimes years to form. Therefore, in classical wedge analysis, it is usually implemented in the opposite direction to the formation of the pattern itself, in other words, the trend changes. A purchase position can be opened when the price has penetrated the resistance line of the figure, reached, or pressed through the local maximum level that preceded the breakpoint of the resistance line (buy zone).

“Flag”

This price pattern is classified as the simplest, therefore its efficiency depends on numerous factors. In classical technical analysis, the flag is classified as a continuation pattern of the trend.

The pattern indicates a corrective retreat, following the strong directed movement that often looks like a channel, tilted against the prevailing trend. In classic technical analysis, the flag pattern works only if the trend continues its direction. A purchase position can be opened when the price has penetrated the resistance line of the figure, reached, or pressed through the local maximum level that preceded the breakpoint of the resistance line (buy zone). The angle formed between the predominant trend and the flag channel should not be greater than 90 degrees. The flagship channel itself should not revert in price more than half of the previous trend.

Categories
Beginners Forex Education Forex Market

The Legality of Online Forex Trading in South Africa

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

There is however quite a bit of confusion in regards to whether or not forex trading is actually legal in South Africa. On one side of the discussion is the minister of finance in South Africa, Tito Mboweni, stating that forex trading is illegal in South Africa and that residents are not allowed to speculate against the South African currency, the rand. On the other side is the Financial Sector Conduct Authority (FSCA) has stated that it is legal for South Africans to trade in forex, including the rand as long as they are trading derivatives from a fully licensed broker. To add to the confusion more, the minister of finance has also stated that regulated brokers can allow people to trade derivatives, which was contradictory to his previous comments. This has made trading quite a grey area, yet it doesn’t seem to stop people from getting involved in the industry.

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

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

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

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

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

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

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

Categories
Beginners Forex Education Forex Basics

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

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

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

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

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

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

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

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

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

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

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

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

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

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Forex Daily Topic

How Does Trading Forex Differ From Trading Stocks?

Many people think of trading as a giant single entity that comprises Forex, Indices, Metals, Stocks, and more, when in reality each of the elements within the idea of trading is completely separate. Forex and stocks as an example are often thrown into the same bucket, but there are a lot of differences between them. In fact, the only similarity between them is that you are buying or selling them, pretty much that is it, everything else has differences. Some differences are large, others are quite small, but they are there. We are going to be looking at the differences between trading forex and trading stocks, there are a lot so we may not go over all of them, but you will surely get the idea that they are quite different beasts.

The first difference is the opening times of the markets, the time that the markets are open and you are able to place new trades. The forex markets are open 24 hours a day 6 days a week, only closing over the weekend and on certain holidays. This makes it hugely accessible, able to trade from anywhere in the world and at pretty much any time that you want. Share and stock trading are a little bit different, the trading times for stocks are often linked with the opening times of whichever particular exchange that the stocks listed on. These often close in the evening and open again in the morning, meaning that you are limited to trading during the day, extended hours are coming into play that allows you to trade outside these hours, but otherwise, you are more limited in the time that you can trade when trading stocks over forex.

Another major difference is the liquidity in the markets. Liquidity for those that do not know is about how easy it is to place trades, how much money is going through the markets at any one time. The forex markets are the most liquid in the world with over $5 trillion being traded each day. This makes it incredibly easy to put on trades. No matter the size of your trade, you will be able to put it on almost instantly without any issues. When it comes to stocks, there is a considerably lower number when it comes to the amount of money being traded and there are far fewer trades being made each day. Certain stocks like Facebook or Apple will have a lot more trades occurring each day, but other smaller companies will have far fewer which can make it a little harder to trade with potential delays on each transaction.

Volatility is a major difference, the forex markets are known for their volatility, their ability to move and to move a lot, this is where the profit potential comes from, but also the risks. There can be huge movements up and down, it can also move quickly. When it comes to the stock market, the volatility of the markets and the movement are often far more stable than when it comes to forex. This means that there is far more profit potential when it comes to trading forex, but if you are looking for a more stable and safer trading experience then stocks may well be the better option for you.

When it comes to trading, you have probably heard about leverage, this is the ability to kind of borrow money from the broker that you are using in order to trade with larger trade sizes than your account would otherwise allow. Forex is full of leverage, in fact, some brokers are offering as high as 2000:1 when it comes to leverage, which is incredibly high, a little too high. This does, however, give you the ability to make a lot more money than you otherwise would have been able to, it does of course also increase the risk and potential losses at the same time. When it comes to stocks, there are actually some brokers that are offering leverage on stocks, but it is far lower, normally not any higher than 10:1 if even that high. This means that the profit potential is limited when you compare it to forex trading. Many brokers offer no leverage at all when it comes to stocks, so the money that you have in your account is all that you have to trade with, some would argue that this is the best way of trading and the safest way.

The last difference that we will be looking at is the types of trades that you have., When it comes to forex, you can buy or sell, you are able to profit on the markets moving both up and down, it doesn’t matter, you do not have the physical asset so you are simply speculating on the price movements. When it comes to stocks, traditionally, you could only profit when the price rises, buying low and selling high. This has changed slightly these days, with the ability to treat them more like stocks, but you will need to find the right broker that lets you both profit on the buys and sells.

So those are some of the differences when it comes to trading forex and stocks. There are a lot of similarities between them in regards to the way that they are traded, and the opportunities that they give you, but there are a lot of differences. If you are looking for a faster-moving and more volatile trading experience then you would need to look at trading forex due to the volatility, liquidity, and leverage that is on offer. If you are looking for a more stable, slow-moving, and far safer trading experience then stock trading would be the right way for you to go. Of course, would then be limited to trading at specific times when the markets are open. Whatever you choose, you can also diversify and trade both, giving you the best of both worlds.

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Forex Education

Here’s How to Lose Money With Forex

We all, or at least most of us came into the forex trading world in order to make money, it’s a fantastic thing being able to make a bit of extra cash on the side or to even trade as a new full-time job, but for every trade that wins, there is a losing trade on the other side, someone who has taken your offer and the markets have moved against them, these are the losers. Many actually find it quite hard to win and so there are ultimately far more losers than there are winners. Today we are going to be looking at different ways that people lose money when it comes to trading. Maybe you are guilty of doing a few of these things yourself, if you have, that is not a problem, you would have learned something from it and will avoid doing that again in the future, so let’s look at some of the most common ways that people lose money when it comes to forex and trading.

Gambling

Let’s be honest, anyone that likes a bit of risk also probably likes to gamble, gambling can give us that buzz that very few other things can, it also gives us the opportunity to make money, potentially a lot of money without putting in any of the efforts that you would normally have to. The problem with gambling is that it is random, couple that with the fact that the markets are in no way a 50/50 chance, every trade that you put on is a huge risk, and those that have tried it, the markets move in such a way that if you are gambling, you will need to be right at least 75% of the time if you want to be profitable, the odds alone mean that it is far more likely that you will lose money than make it. If you are thinking about trading via gambling, then we would suggest going back to sports bookmakers instead, you have a much better chance of being profitable there.

Thinking You Know the Markets

This is something that a lot of people feel once they have had a few winning trades in a  row, they know how the markets love and so when they place a trade they are sure that they will be successful and will be profitable. If you are in this position then you will have a very rude awakening, no one knows the markets and no one can successfully predict it all the time. It is a mistake that a lot of people fall into and unfortunately it is always a very expensive one. You cannot predict the markets, even with all the analysis in the world, the markets will still sometimes go against what is expected, this is why trading can be so exciting and also so dangerous at the same time. As soon as you start thinking that you know best, you are in a very bad place and need to member that you need to follow the markets, they certainly won’t be following you.

Greed

Greed is a very powerful emotion, wars have been started over the emotion of greed, murder, stealing, and trading badly. All of these things are associated with greed at some point, we of course are thinking about trading badly rather than the murder… we hope. Greed will make you want more, and it will often make you want more very quickly, when we trade we trade with a trading plan, a plan that details our entry, exits, risk management, and more, but when greed takes over we often throw that out the window and instead trade recklessly. Often using trade sizes that are too large for our trading account, placing too many trades at once in the hope to make a bit of extra money, or simply ignoring the plans that we have in place. Whatever it is that you do, it is not a good idea. If you ever feel that greed is starting to take over, you need to take a step back and get some fresh air in order to clear your mind and to get rid of those feelings. You Are here to make consistent profits, not to make a bit and then try to make more, only to end up losing it all.

Indecision

While many people look at the opposite, they see people who trade too much as an issue or that place trades afar too quickly as a problem, it can also be the other way around. Those that are not able to make you cannot decide whether to put on a trade, either through uncertainty, worry, anxiety, or the fear of the risk, then you are not in a great place to be a trader. You need to accept that you will be putting on trades and those trades will come with risks, but they are calculated risks. If you take a long time to put on trades, you may have a good trade septum but by the time you put the actual trade on, the opportunity may have passed and you have now actually put on a bad trade. When The opportunity is there it is important that you take it, otherwise, you will be putting yourself at some additional risks of losing some of your capital.

Chasing Losses

One of the worst things you can do with anything that is financial is to try and chase losses, you need to be able to accept them, they are a part of trading and a part of it that you will experience over and over again. What many people, unfortunately, do though, is that they try to chase those losses, what this means is that if you placed a $10 trade which lost, you would then most likely place a $20 trade in order to make back the money that you lose plus a little bit extra profits. The problem is that if this one loses you are $30 down, and so you need to place another trade larger than both of those combined to try the same, as this goes on the trade sizes continue to grow and so does the risk, as you will most likely not be following your trading plans anymore. This leads to a spiral that ultimately leads to very large losses or even the total loss of an account. If You make a loss, accept it, move on, and certainly do not try and change it to make it back.

Not Learning Your System

It is very easy to get a new strategy or trading plan, there are loads of them posted all over the internet, this makes it very easy and accessible but does come with some issues. If you are using someone else’s plan, then do you really understand it It may work initially but as the market conditions begin to change, you will encounter some issues, those issues will mean that you need to adapt your strategy, but if you do not fully understand it, then you won’t be able to adapt it properly, meaning that it will no longer be as effective and could lead you down the road of some losses. If You are going to use a strategy, be sure that you learn everything that there is about it and how it actually works.

Those are some of the things that many traders do that loses them money, there are of course other things and even if you are the perfect trader, you will still experience losses, that is just the nature of the forex markets, you cannot control them, so don’t try to, accept your trades, use the proper risk management and you will be on a good track for profits.

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Beginners Forex Education Forex Basics

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

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

The Profits

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

The Highs…And Lows

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

It Gives Us a Feeling of Belonging

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

Hitting Milestones

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

It Gives Us A Better Life

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

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

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

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

Categories
Beginners Forex Education Forex Basics

Top 15 Undeniable Reasons to Love Forex Trading

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

1- You can make money.

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

2- Anyone can do it.

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

3- It’s very accessible.

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

4- You can do it on your phone.

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

5- It doesn’t take long.

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

6- It provides good reading material.

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

7- There is a great community.

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

8- You can work from home.

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

9- You don’t have a boss.

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

10- There are a lot of assets to trade.

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

11- It’s never boring.

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

12- Helps you control risks in life.

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

13- It’s a profitable hobby.

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

14- You can trade at any time.

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

15- It provides a shot of adrenaline.

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

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

Categories
Beginners Forex Education Forex Basics

How Much Can You Really Earn from Trading Forex?

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

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

Education

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

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

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

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

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

Discipline and Patience

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

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

Starting Balance

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

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

Categories
Forex Education

Top 8 Common Misconceptions About Forex Trading

Forex is an incredibly complex beast, there is so much information out there. Unfortunately, a lot of the information being thrown around is not exactly correct, it is not exactly true. Due to this, there are a lot of misconceptions as to what trading is, what forex is, and what is actually involved in the process of trading forex. We are going to be looking at some of the misconceptions that are out there about forex and why they aren’t true.

Trading is gambling.

This is one that a lot of people that do not really have an understanding of trading think. Due to them not knowing what is going on behind the curtains, they see trading as a 50/50 chance, either the markets will go up or then they will go down. You will place your money on one and hope. While in reality it is far more complicated and it is far less of a 50/50 gamble. Trading forex is all about probabilities, you need to analyze everything about the markets and even the real world. Each bit of information that you look at will move the probability meter up or down, eventually, it will sit in one corner, which is what you will trade. Of course, it is still not that easy, you set up your strategy to protect your account, you limit your losses while increasing your profits, so even with a loss, you will still end up profitable in the long run. Trading is certainly not gambling, even if it looks that way on the outside.

It’s easy to double your money.

If you go on any sort of social media, you will probably see people posting how they can double your money overnight or that they can get you some ridiculous terms, tempting right? Yes, but it shouldn’t be, as those people are either massively exaggerating their returns or they are simply out there to take your money, both of which you should avoid. Yes, you can make money, a lot of money, but it is not easy, and doubling your money is one of the hardest things to do, once you achieve it things get a lot easier, but getting it is hard, many many traders lose thor initial deposits trying, so while it is possible, it certainly is not easy, and certainly not quick.

Leverage can make you rich.

Leverage can certainly help in the quest to make you rich, but it certainly won’t do it on its own, and if you use it wrong, it will make you poor long before it makes you rich. Leverage lets you use some of the broker’s money in order to trade larger trades that you otherwise would have been able to. So with a 100:1 leverage, a $100 account could trade as if it was a $10,000 account. So you can place larger trades, unfortunately, it also means that while your profit potential is higher with the high trades, so is your loss potential, the markets will not need to move anywhere near as far in order for your account to blow. So ensure that you understand the leverage that you are using, and it is not a guaranteed way to make you extra money.

Broker bonuses are great.

Many brokers are now offering new clients bonus funds, these are extra funds that you can trade with on top of your deposit, some even state that you can withdraw it, sounds amazing, well not quite. More often than not, those bonus funds will come with some pretty hefty requirements, things like trading 10 lots per $1 in order to withdraw. So if you had a $100 bonus, you would need to trade 1,000 lots just to withdraw it, a feat that many expert trades do not do in a year. That is on the extreme side, but you get the drift. Those bonuses look good in principle, but they are more often than not just a tactic to get you drawn in with very little chance of ever actually withdrawing it.

You can predict the markets.

No, you can’t, it is as simple as that, the markets cannot be predicted, at least not completely. You can get a good idea of what the markets may do, with probabilities, news events, and so forth all pushing the markets in certain directions. What you cannot do though is a guarantee that the market will move in one direction or another. In fact, there have been many times where the news events have come out, they have indicated that the markets should cruise sharply, but instead they decided to fall. This proves the unpredictability of the markets and shows why they cannot be predicted. So if you think that you know the markets and that you understand how it moves, you will at some point, be in for a rather large shock.

You do not need stop losses.

You need to stop losses, it is as simple as that. Some traders say you don’t, some people say that certain strategies do not need them, but the truth is that you always need to stop losses, always. Theta r there to protect your account, without them a single trade can completely wipe out an account. They let you limit your losses and allow you to be profitable even with more losses than wins. Trust us when we say that you need to use stop losses, if you don’t eventually you will lose everything.

You can’t make money with trading.

Let’s be honest, if you could not make money with trading forex, why would there be so many people doing it and why would the markets even exist in the form that they do now? Of course, you can make money, in fact, you can make a lot of money, it is just hard. A lot of people who get into it will trade, find it difficult, lose some money and then simply brand it as a scam or state that it is impossible to make money, simply because they did not. Just because one person can’t, does not mean that another can’t either. England lost to Croatia, but that doesn’t mean that they can’t even beat them.

Brokers need to be regulated.

You will hear many people telling you that the only barkers that you can trust are the regulated ones. While regulations do help in a way, they give you some additional protection when it comes to your funds, they don’t really do much more than that. In fact, there have been a lot of incidents in the past where regulated brokers have done some pretty shady things like manipulating the markets or refusing withdrawals, similarly, there have been a lot of unregulated brokers that have gone far and beyond what is expected of them to help their customers. So just because something is regulated, does not necessarily mean that it is better.

So those are 8 different misconceptions that a lot of people have about trading, we are sure that there are a lot more out there. There will always be people who are skeptical or who will reduce to believe even with the truth in front of them, they are not important. What is really important is that you understand what trading is, if you are doing well it doesn’t matter what others think or what others are doing, you are the important one so stick to your trading and go and be successful.

Categories
Beginners Forex Education Forex Basics

10 Things Steve Jobs Can Teach Us About FX Trading

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

  • Clear Vision & Focus

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

  • Results & Reinvention

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

  • Passion

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

  • Personal & Career Development

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

  • Perseverance

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

  • Leadership

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

  • Confidence

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

  • Facing Challenges

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

  • Tech-savvy 

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

  • Talent

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

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

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

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

Categories
Forex Forex Education

Become an Expert on Forex by Watching These Videos

Let’s be honest, becoming a pro takes time, and an irreplaceable experience you cannot have just by watching videos. On the other hand, videos can set you on the right track vastly shortening the time needed to get to the top of the forex game. As we live in the digital age where information exchange is speeding up it also makes things change very fast. There is also a problem of having too much information that does not really matter, or even set you back. Therefore, here are 7 videos that will help you see how deep the rabbit hole truly is. Once you are done you will need some courage to start walking the traders’ way. 

Ray Dalio Principles

The author of one of the best economy pieces “Principles” tells a lot more than just about trading forex. We consider this book to be the base about how the global economy should be looked at, and forex just being a small part of this global capital system. Understanding how things work and the experience of a giant such as Ray Dalio will be a valuable lesson and will change how you perceive the economic world around you. Many videos take the gist out of his book, and we recommend the ones that feature Ray himself as the speaker. YouTube is full of his videos but you can start with the one titled “Principles for Success from Ray Dalio: Founder of the World’s Largest Hedge Fund” posted by Summit group. Of course, this is just one eye-opener for many common folks, and we believe it sets pillars that will hold your mindset as a forex trader

Robert Kiyosaki Lessons

The next video we recommend encompasses what is going right now and intrinsically wrong with the system, and what the majority of people think about money. Forex trading is the money field but you will need to understand the micro-level where individuals, be it traders or restaurant waiters manage their wealth. The video channel from the best-selling author “Rich Dad, Poor Dad” is a great window to jump into the real world that requires lessons not taught by your parents or teachers. The video is also on YouTube and it is fresh, from 2020, titled “8 Most Popular Lessons from Robert Kiyosaki in 2020! – The Rich Dad Channel”. These are just highlights of the basic but important views you need to know as a beginner entrepreneur – forex trader. We are certain that it will inspire you to learn more as the channel holds more secrets for a takeaway than any book you may have read in school. 

Stansberry Research

Time to get serious, with this channel we are diving into what is going on with specific markets. From precious metals, commodities, stocks, real estate, banks, and more, the Stansberry Research channel hosts major smart investors of the world that have a very professional opinion you need to hear out. It is not directly tied to forex, but it is to many forms of capital, including money. Forex is actually currencies we all have but money is just a parking lot for investors, and they do not stay put for long in this form. The flow of capital and money that essentially affects the value of a currency is easy to follow with this channel. But as a beginner forex trader looking to become a pro, we recommend one video from this channel posted long ago under the title “The Most Important Thing Ever Said About Trading” on YouTube. The video is short but explains one of the must-haves every professional trader implements to their trading – cutting losses and letting winners run. 

The No Nonsense Forex Channel

VP is the author and a professional forex trader that has something to say about trading that you cannot find easily. Whatsmore, the value of his work shared to the public is now slowly becoming a must for anyone looking to enter the world of forex. We can say it is almost a one-stop for technical trading guides, psychology, and money management that can transform beginner losers into profit machines. Aside from setting you on the right path of trading, despite a specialized methodology, you will learn how to use your trading knowledge not only for forex but for other things as well. One of the most interesting revelations could be that you do not need to have a lot of money to get to the top. The series is going deeply about how to set up your strategy using a structure to the extent it can be regarded as a free forex trading school program. We are going to recommend a video that is covering where to begin since it is not VP’s first video on his channel, it is titled “Trading Forex For Beginners – The No-Nonsense Forex Way” on YouTube.

The Big Banks

This is the video that started the VP’s channel and it comes next on our list since it is another type of revelation that directly relates to forex trading. The contrarian trading theory and VP’s way is augmented in this video. Most people say it is an eye-opener however, it should motivate you to see what this very different trading strategy has to offer. Some might just consider this a conspiracy but it is really hard to ignore the realistic points presented in this video. Whatever you choose to believe, the information you receive will change the way you look at forex. Be warned though, if you want to follow VP’s way expect a lot of work that has to be done on your side even with all the guidelines. The title of this video is “Best FX Trading Strategies (THE Top Strategy for Forex Trading)” by the No Nonsense forex channel.

Understanding the Forex Industry

If you are a trader then you will have to have a broker to have access to the market. It is essential to understand how they work right? Our next video has an interesting topic, it does not explain the basics about brokerage, but something about the industry no one talks about openly. The video is made by a broker, so one might question the validity, however, it does not take long to realize it is not really a marketing video. It is an interesting criticism of the current industry state featuring one of the biggest brokers in the industry. Be prepared to know one more thing that no one is focusing on and to demask anything a bad broker could try to gain your trust. This video will give you good motivation to start searching for a good brokerage. It is also found on Youtube under the title “A-Book vs B-Book ! How Forex Brokers Make Money” by Global Prime and it has two episodes.

Becoming a Pro Alternative

If you cannot really digest what VP videos teach, try this alternative channel. Inner Circle Trader is somewhat different from VP but it still focuses on the most important things. His videos are not that easy to consume and they are longer. However, ICT is a different type of trader, a scalper strategy that you could also develop in case the VP’s course does not prove to be good for you. If you decide to listen to both you would still need to understand the basics of trading such as how to open trades, general strategies, terminology, and so on. The opener series for the ICT traders on YouTube goes by the title of “ICT W.E.N.T. Series”. 99% of what you learn here will be the groundwork that will stay for life if you continue the journey, or turn you away for good. 

Categories
Beginners Forex Education Forex Basics

Check Out These Go-To Forex Resources

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

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

BabyPips.com

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

Statista.com

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

finviz.com

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

dailyfx.com

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

fxcodebase.com

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

barchart.com

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

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

fxssi.com

Another interesting website featuring the sentiment type indicators like on DailyFX except there are a few additional tools to complement it. These tools are about Stop Loss clusters, similar to what some crypto exchanges feature with their charting. Then the OrderBook indicator, CurentRatio, and more. Some of these are not for free but the strategies that can be made with these are something not seen elsewhere. FXSSI is a specialized website for such contrarian trading strategies made for the MT4 platform, on top of that you will also see additional MT4 utilities for forex trading such as Sessions, Spread warner, Calendar (events), etc. Combining these will transform how your platform looks and more importantly, add analytical value to your trades. 

desynced.net

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

The Secret Mindset YouTube Channel

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

Categories
Beginners Forex Education Forex Basics

Why You Should Focus on Improving Your Trading Skills

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

In case you didn’t know…

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

Now, we have two major contemplative questions for you:

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

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

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

Trust the process and trust yourself

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

Good luck!

Categories
Beginners Forex Education Forex Basics

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

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

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

Can we beat the big banks?

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

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

Are there any indicators forex traders shouldn’t use?

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

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

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

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

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

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

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

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

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

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

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

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

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

Can we fix any old indicators?

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

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

Is the USD the best currency to trade?

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

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

Categories
Forex Technical Analysis

The Link Between Interest Rates and Forex Trading

Although there are many elements that influence the appreciation of a currency, one of the most important factors to consider is a country’s interest rates. In fact, assuming everything else stays the same, forex traders need to focus on interest rates more than anything else. In this article, we will explore what interest rates mean and how they impact the value of a country’s currency.

What to Look For

If we have a stable economic and geopolitical situation around the world, the foreign exchange market will favor a currency that is seeing an increase in the interest rate and more increases in the future. Even so, the interest rate is not the only factor affecting a currency. Other factors, such as war, geopolitical concerns, inflation, correlation with other markets, and many other things can be relevant.

When the interest rate is higher, it tends to attract a lot of foreign capital. The explanation is because money always wants to go to the place where it is “best treated.” For example, if you manage a large investment fund, you will look for greater returns for your clients. If country A pays 5% in bonus while other country B pays 2% in the same type of bonus, country A is the favorite with respect to where to invest. With the intention of buying that bond or investing in that financial asset, you need to buy in that country’s currency. (Some countries will take bonds or another currency like the American dollar, but we won’t talk about that in this article)

A Case Study

Let’s say you manage a large fund outside the UK. You have the instruction to put the money somewhere, and the most natural place you can put it is to go where we can find the largest growth. Generally speaking, central banks will realize an increase in interest rates if the economy is performing well. It’s a matter of time, but sometimes you might decide to enter a stock market, where you would have to shop in the local currency. The reason for having higher interest rates is that they are worried that the economy will overheat but at the same time there is a proclivity of financial assets to go up in that situation. Looking elsewhere in the world, you make the decision that Germany is the country where you plan to invest as many of the German multinationals are enjoying a big increase in exports. To buy stocks in the DAX you will need to buy euros.

Interest rates on Forex. In this scenario, you will need to purchase the EUR/GBP pair. If the European Union has a strong economy it will not only seek to buy shares in that market, it will also seek to buy bonds. Again, you will have to buy them in Euros. In that scenario, it is the natural flow of money to go after the highest yield. You could be in a situation where the UK has an interest rate of 1%. while Europe has an interest rate of 2.25%, for example.

But, a while later the situation in the world changes dramatically. We’re on the verge of a global recession, and you need to do something with your money. This was the situation during the financial crisis, which began in a way that most people would see as counter-intuitive. When the bubble burst, the initial movement was that the other currencies won. However, the US dollar began to win rapidly over time after the initial shock. The reason for this is that there are few places in the world that can absorb the kind of transactions that the treasure market can in the United States.

In that scenario, we had an exodus of capital from countries around the world in the treasure market, which brought up the value of the dollar. This was counter-intuitive because interest rates were being lowered quickly, but frankly, people were looking to keep their money in a safe place. It didn’t matter that possibly the money was going from New Zealand which had a 6% rate at the time to the United States which was lowering its interest rates. At the time, it wasn’t about getting some kind of return, it was about protecting the briefcases.

When things began to calm down, money managers began to buy other currencies such as the New Zealand dollar, the Australian dollar, and even emerging-market currencies such as the Turkish lira or the South African rand. Emerging market currencies were particularly attractive because some of the interest rates in those countries, despite being historically low for those areas, were still five or six times higher than those in developed countries. Once people thought it was safe to invest again, this was the first place that a lot of money went.

Interest rates are the main factor affecting the value of currencies. But much of it has to do with what traders think on a political and economic level. The general rule is that when people feel comfortable, they buy assets with a higher return, including currencies that have a higher return. When they are not comfortable, currencies with a lower interest rate such as the Japanese yen or the Swiss franc have historically performed better, alongside the dollar. Be sure to first understand the market risk, so you can follow interest rates in both directions.

Categories
Forex Fundamental Analysis Forex Market

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Categories
Beginners Forex Education Forex Basics

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

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

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

What is Day Trading?

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

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

What is the Profitability of Day Trading?

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

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

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

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

Day Trading Benefits and Risks

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

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

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

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

Categories
Forex Risk Management

Are Risk and Volatility One In the Same?

According to the dictionary, someone or something is volatile when it changes or varies easily and unpredictably. Speaking of a financial asset, its volatility or standard deviation is a statistic that describes simply with a number how much the price moves over time. That is the more volatility an asset exhibits, the faster and more extreme its unpredictable fluctuations are.

“That morning no one could imagine that John Appleseed would decide, instead of going to his office, to go to the mall with his AK-47 and murder for no apparent reason a dozen of his neighbors. Later, a friend of his commented in tears to the news channel: We don’t understand what happened to him, he seemed so normal, so non-volatile…”

The adjective “descriptive” here is key, as volatility only gives us observable information of past price variations. It tells us nothing about the nature and risk of the underlying process that produces it. This distinction is essential and is often ignored, mistakenly identifying risk with volatility. The adjective “descriptive” here is key, as volatility only gives us observable information of past price variations.

Risk is a difficult, complex, and multidimensional concept. Meanwhile, volatility and other descriptive statistics are a comfortable attempt to reduce their many faces to a simple number. As if the speedometer of the car gave us all the necessary information regarding the risk of driving. Even the CNMV uses a risk scale between 1 and 7 depending on volatility to classify IFs. Thus, a “1” fund has virtually no risk, and a “7” fund is very risky.

“Even the CNMV uses a risk scale between 1 and 7 depending on volatility to classify investment funds… This doesn’t make any sense.”

This doesn’t make any sense. If we imagine a fund that loses exactly -2.00% every month, its volatility according to the standard deviation formula would be zero (it has no volatility) and could be considered “risk 1” on the scale. Perhaps avoiding these contradictions, on the CNMV website they heal in health and hide saying that even if a fund is classified as “1”, it does not mean that it does not have risk. But they don’t explain why.

The Volatility of the Crocodile

Investors seized on the back of a financial product of low volatility. To better understand why it is a mistake to make equivalent risk and volatility, let’s look at the example of the pelican and crocodile. If we observe for a long time the quiet movement of a crocodile by the river, it transmits to us the information that there is no danger, that its movements are slow (little volatile) and we can predict and adapt to them easily.

So, our sympathetic pelican can ask the crocodile to take him to the other end of the shore and trust that he will continue to behave as he has done so far. In this example, the pelican is equating the very low observable volatility of the crocodile with very low risk.

Why does the pelican think there’s no danger? Because if we do not know its underlying nature and only know its volatility (which is observable), the risk of not getting safely to the other shore should be minimal. But all who know the nature of the crocodile know that there is a great and silent (unobservable) danger.

“Why does the pelican believe there is no danger? Because if we do not know its underlying nature and only know its volatility (which is observable), the risk of not getting safely to the other shore should be minimal.”

Crocodiles move most of the time very slowly (they are very few volatile), but occasionally and unpredictably, their behavior changes radically: they move extraordinarily fast (much faster than its past volatility could even make us imagine) to trap in its jaws its trusting victim. Therefore, the mere empirical observation of the behavior of an asset, product, or strategy (its track record) is not sufficient to know the risks we face when investing.

The volatility of a fund or product is not a good measure of risk because it only tells us how much it moves over time, not about the nature and risks of that movement or where the underlying strategy can take us. Risk is too complex and profound a concept to be reduced to a simple and comfortable (for clients and quantitative analysts) number.

The volatility of a fund or product is not a good measure of risk because it only tells us how much it moves over time. It is in the nature of the underlying strategy that the risk of investment funds and products lies, not in their volatility. There are very risky and non-volatile strategies (investment crocodiles). An extreme example is the sale of options out of money.

This strategy produces positive monthly returns over long periods with hardly any volatility, which makes them very easy to pack and market (its track record of continuous increases without volatility, for example of approximately +1% per month, sells very well). Eventually, a crash happens in the markets, causing the investor to lose, if not all, virtually everything previously invested and earned in the fund.

High volatility stock market investment, but harmless in the long run. On the other hand, there are very volatile strategies with little risk, which we might call the Chihuahua investment in our zoo: They move a lot and make a lot of noise, but they are totally harmless.

The trivial example is the investment in diversified stock exchange globally through ETFs or low-cost fund, considered as very risky because of its high volatility (we can temporarily lose half of the investment), but that in the long run will give us a return around double the world’s GDP growth. Paradoxically, it is the risk-averse investors who give up profitable and low-risk long-term investments, preferring low-volatility products that sometimes hide crocodiles.

The reason is more psychological than rational: they can’t bear to see that they are losing money for a while (a key point I already talked about in Volatility and Emotional Accounting). The industry knows this and gives the customer what he asks for, even if it’s not what’s best for him. That is, mostly crocodiles of low volatility instead of (noisy) chihuahuas of high profitability.

Categories
Beginners Forex Education Forex Basics

What Should I Expect With Regard to Forex Commissions?

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

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

Commissions and Their Importance in Our Outcomes

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

How Do Commissions Impact Our Trading?

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

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

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

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

More Frequent Commissions When Trading

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

Bid and Ask:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Categories
Forex Basic Strategies

Specification Risk: The Advantages of Diversifying Your Trading Systems

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

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

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

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

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

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

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

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

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

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

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

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

Specification Risk In the Long Term?

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

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

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

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

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

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

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

Specification Risk: Conclusions

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

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

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

Categories
Forex Forex Psychology

What You MUST Know About Psychology In the Financial Markets

It’s cloudy. Every minute, the number of clouds doubles, and in 100 minutes the sky will be covered. How many minutes will it take the clouds to occupy half the sky? 50 minutes. It is the answer that is usually heard in this version of the riddle. However, if the clouds double every minute, when they cover the whole sky it means that the minute before they cover just half. So the correct answer is 99 minutes.

Fast and Slow Thinking

It wasn’t a complicated riddle. But to solve it you had to think slowly. In his excellent fast-thinking, slow thinking, D. Kahneman, father of behavioral finance, described the two ways we process information:

A quick, emotional and intuitive one. It gets stuck before problems that require evaluation and logic. Professionally known as System 1, colloquially Homer.

A slow and rational, requiring higher energy expenditure. Known as System 2 or Mr. Spock for friends.

We are Homer by default. It is enough for the day-to-day. With Spock in charge, it would take hours to solve simple operations, like buying food or choosing the color of the tie.

System 1 is efficient and consumes less energy. In return, it takes a series of shortcuts that cause mental traps. For example, how many times do you think you could fold a sheet of paper? It seems a simple task, but I bet with you you wouldn’t be able to do it more than 12 times. Just take the test.

In fact, it was thought impossible to fold a sheet more than 8 times until in January 2002, B. Gallivan explained how to get there at 12 in his book How to Fold a Paper in Half Twelve Times. You read it right: a book.

Incredible, isn’t it? If it wasn’t for the fact that mathematics assures you that it is, you wouldn’t believe it. It’s not something you can imagine: you have to do an exercise in faith in science.

We Are Fooled

Imagine that we found a way to bend it more than 12 times. For example, 20. What will be thicker: the pipe of a pipeline or our sheet?

A folio is about 0.1 mm thick. If we fold it in half, we will have 0.2 mm. We fold again and have 0.4 mm. At the seventh, the thickness will be similar to that of a notebook. Around 23 times we will reach 1 Km. In 42, our folded folio would reach the moon, in 52 to the sun. 86 folds later, it will be the size of the milky way and 103 folds the size of the universe. Math, son.

We can’t imagine it. Mathematics claims it’s true, but the mind resists it. Only with experience, knowledge, and the right tools will we know when System 2 needs to be implemented to reach successful conclusions.

Credit: Real Investment Advice

Confused by the Randomness

You will agree with me that any good operation is one that you would repeat time and again provided that certain conditions are met, regardless of the outcome of a particular trade. This statement implies that any operation, despite being perfectly planned, can end badly. That is to say, investment in financial markets requires us to face important doses of randomness.

And the bad news is that the deceptions of System 1 are multiplying in activities whose results are influenced by probability. Actually, Homer thinks he can influence her.

A few years ago, a BBC reporter showed that at many Manhattan traffic lights there is no connection between pressing the “green wait” button and the time it takes for the record to change color. Corroborated by the New York Times, it was noted that it occurred in other cities (e.g., London). As pedestrians feel they can control the situation, they tend to cross less in red.

This trap is known as the “illusion of control”: we believe we can influence things over which we have no power. For example, when we blow into the fist or shake the dice vigorously before throwing them. Or when we attribute to our superior analysis the winning operations and to the unlucky losers (something that also fits with another mental trap known as “attribution bias”).

In this sense, a 2003 study by Fenton-O’Creevy et al showed that traders more prone to the illusion of control had lower performance, worse analysis, and worse risk management.

Correlation, Causality, and Chance

This need for control leads us to look for cause-effect relationships to explain random phenomena. Unfortunately, Homer is not a scientist identifying patterns and there are few sites like financial markets to find ridiculous patterns. Thus, there are hundreds of published books that are authentic compendiums of false correlations.

It is important to understand that correlation does not imply causality and that it is not enough that a system has worked in order to extrapolate it to the future. The system, besides being useful, must make sense.

Chalmers, inspired by B. Russell, explained it well in his inductive turkey story. A turkey, from its first morning, received food at 9 o’clock. As it was a scientific turkey, he decided not to assume that this would always happen and waited for years until he collected enough observations. Thus, he recorded days of cold and heat, with rain and with the sun, until finally, he felt sure to infer that every day he would eat at 9 o’clock. And then, Christmas Eve arrived, and it was he who became the meal.

In 1956, Neyman (later corroborated by Hofer, Przyrembel, and Verleger in 2004) showed that there is a significant correlation between the increase in the stork population in a given area and the birth rate in that area. Cause?

Depends on the Question

Most of the decisions we make are often influenced by how we are presented with information, or how the question is asked. For example, we will be more willing to sell a share priced at EUR 50 if we buy it for EUR 40. However, if the previous day’s closure was EUR 60, we will be more reluctant to do so.

Imagine you have to choose between these options:

800 USD with security.

Do not lose anything with 50% probability or -1,600 USD with 50% probability.

Although the expected value is the same (0.5 x -1,600 + 0.5 x 0 = -800 USD), the second option is usually chosen.

Let’s put it another way:

+800 USD with security.

Do not earn anything with 50% probability or +1,600 USD with 50% probability.

Many people will now choose the first option. By showing the same exercise as a gain rather than a loss, the mental process leads to different paths.

Aversion to the Loss

The above example also demonstrates the “loss aversion bias”. We are more pained by a loss than by a gain of the same magnitude. This is one of the causes of the well-known “disposition effect”: the tendency to close profits ahead of time and let losses run away.

We cannot avoid the Disposition Effect. In fact, it is rooted in our primate nature, as demonstrated by K. Chen and L. Santos of Yale University, studying a group of capuchin monkeys.

These monkeys had been educated to exchange small coins for fruits. When they “bought” a grape, one of the researchers would throw the coin in the air, and if it came out face up he would give it two grapes, if it was a cross, then only one. Another researcher, when given the coin, showed two grapes. Then he threw the coin in the air, and if it came out expensive, he gave both grapes, and if it came out, he gave one and kept the other.

On average, they received the same number of grapes with both researchers, but one showed them as a potential gain and another as a potential loss. Soon, the monkeys began to exchange only with the investigator who did not show the two grapes. The suffering of losing a grape was greater than the satisfaction of winning it.

We can’t help it. But L. Feng and M. Seaholes showed in a 2005 study how the experience allowed for significant attenuation.

Aversion to the Losses

Perhaps because we do not know how to decide in an environment of uncertainty, we do not know how to evaluate the decisions made by others. In a 1988 study, J. Baron and J. Hershey asked a subject to choose from:

  • Get 200 USD for sure.
  • Get 300 USD with 80% probability or 0 USD with 20% probability.

A priori, the most logical thing is to take risks since its expected value is 240 USD (300 x 80% + 0 x 20%), higher than 200 USD insurance. But what was sought was not to evaluate the wisdom of the one who chose, but how others valued the choice. Therefore, once the result was known, different people were asked what they thought about the decision taken, being -30 the worst and +30 the best.

The valuation was +7.5 when the subject took risks and won and -6.5 when he lost. This implies that the subject is valued not for making the most logical decision, but for its result.

External Influences

When we make decisions, we are also influenced by what others think, by what others expect of us, and even by what others order.

Asch showed the difficulties of going against the tide. In his classic study, he showed tokens with three lines of different sizes to groups of students. They were all in cahoots except one, the subject of the study. It was asked to select the largest line. The accomplices had to say sometimes right and sometimes wrong answers. When they said the right answer, the subjects did not usually fail. But when the group gave the wrong answer, the subjects failed almost 40% of the time, even though the lines were several centimeters apart.

Stanford’s terrible prison experiment shows the influence of what others expect of us. A group of young people were selected and randomly divided between prisoners and prison guards. Prisoners were required to wear robes and were designated by numbers, not by name. The only rule of the guards is that they could not use physical violence.

On the second day, the experiment went completely out of control. The prisoners received and accepted humiliating treatment at the hands of the guards.

Even more terrible is the study of Stanley Milgram, from Yale University. This experiment used three people: a researcher, a teacher (the subject), and a student (an accomplice actor). The researcher points out to the teacher that he must ask the student questions and punish with a painful punishment every time he fails. Initially, the discharge is 15 volts and increases for each failure for several levels up to 450 volts.

The student, as the downloads rise level simulates gestures and cries of pain. From 300 volts it stops responding and simulates seizures.

Normally starting at 75 volts, teachers would get nervous and ask to stop the experiment. If this happened, the investigator refused up to four times, noting:

  • Go on, if you please.
  • The experiment requires you to continue.
  • It is absolutely essential that you continue.
  • You have no choice. You must continue.
  • On the fifth attempt, the experiment stopped. Otherwise, it continued.

All subjects asked at some point to stop the study, but none passed five attempts before the 300 volts. 65% of the participants, although uncomfortable, reached up to 450 volts.

If you think that you would never fall for something like this, keep in mind that both studies have been repeated at different times with different modifications, reaching similar results.

What Can We Do?

Now you know. Your mind deceives you and conspires against you. You can’t help it, but you can avoid falling into its traps if you understand how you are deceived. There are hundreds of resources (books, articles, etc). Use them. And remember: to be brave it is indispensable to be afraid.

Categories
Forex Assets

A Comprehensive Guide to All Forms of Gold Trading

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

Gold as Merchandise

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

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

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

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

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

Investing in Physical Gold

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

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

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

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

Buying Gold Futures

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

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

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

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

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

Invest in Gold ETFs

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

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

Investing in Gold Mining Companies

An investment in gold mining companies offers gold exposure, but exposure is sometimes limited. These companies carry operational risks, which can break the correlation with the price of gold. Gold miners are at risk of default and their shares may be quoted lower in case of an operational problem with the company, regardless of the price of gold.

ETFs seem to be the best way to invest in gold. If you don’t like to own futures and control initial and maintenance margins, you can buy shares in an ETF and follow the price of gold bullion. GLD is a liquid instrument and does not have high transaction costs. Futures are sometimes difficult to handle, so ETFs can be the right move.

Invest in Gold CFDs

If you don’t want to open a futures account or don’t have that much capital, you can buy gold CFDs at a regulated broker. In these cases, the investment can be from about 1000 euros in a regulated broker. The fundamental aspect that you have to pay attention to is in the Swap, which is the daily cost that the broker will charge you for keeping a CFD from one day to the next.

Categories
Forex Forex Fundamental Analysis

How to Profit from Trading the News

News is a fundamental part of the analysis that every Forex trader must make before placing a position. There are several ways to operate based on news and not all are efficient.

Many Forex traders like to trade in the news. They review the economic calendar of major scheduled economic data, such as the famous non-agricultural payrolls, and prepare to trade these currencies shortly before or shortly after one of these key economic events for foreign exchange markets. Of course, if something unexpected happens and they’re alert at the time, they might try to jump on it and seize the opportunity. Different trading methods are usually used to deal with the news. Let us take a look at each of them and analyze the advantages and disadvantages of each, before drawing a conclusion.

Predicting the Outcome and Operating Before Publication

This might not be as naive as it sounds, depending on what you’re predicting. For example, if you believe that, after an extensive analysis of the economic data and background of the personalities involved, the Reserve Bank of Australia will almost certainly cut the interest rate tomorrow, While the market acts as if this is a very unlikely outcome, then you could have a good reason to open a short deal on the Australian dollar, i.e., sell it. Otherwise, I would simply be betting as in a game of chance, with the odds against you even below 50%.

The advantage of taking an intelligent view ahead of a key economic report is that you will most likely get a good price for your operation without a high spread or slippage. The biggest disadvantage is that you will most likely experience a period of high volatility in the minutes leading up to the announcement that will either cause your position to touch the stop-loss or force you to have a wider stop to be sure that your position will survive, which in turn limits your potential risk relationship – reward.

Operating Immediately in Publication

This sounds logical: discover what the market expects and, the instant you see that expectations have been largely exceeded or lost, place a position accordingly. This will almost never succeed, for different reasons: the liquidity will be very low, there will be a huge slippage, the spread will be very high and your broker may very well not even have been able to give you a price. Normally, when a retail trader can enter the market following the most important market news, the price is very poor. This may not matter if the event is a real game-changer, like the US non-farm payroll, but it will work only sometimes. This trading method is always very poor.

Opening Of Pending Orders Before Publication

It may seem an excellent idea to wait for some very important economic news like the US non-agricultural payroll. or the Minutes of the FOMC Meeting and just before publication place outstanding orders with your broker to acquire maybe thirty pips ahead and sell maybe 30 pips below. Actually, it is a very bad idea, as liquidity is greatly reduced in the seconds before and after a major press release, so the price and spreads may not go anywhere. You can easily see that your two operations open and close in a second or two, a very unpleasant experience! Even if you do well, it is still very likely that you will suffer a large slippage in an activated position if the result is strong.

Waiting for the Market to Digest the News

This trading method requires some discipline, intellectual work, and market analysis, but it is really the only efficient way to trade forex with the news. You should compare the outcome of the press release with market expectations and decide whether the market’s confidence in that currency has fundamentally changed. When you’ve made that decision, then you must wait a few minutes and see where the price goes.

His reasoning should then be something like this: if the market news has changed the outlook much to be much more optimistic and the price moves strongly upwards, then expect a setback and enter long. If the news is very bullish but fails to change the fundamental picture – a much more common result- and the price is fluctuating very bullish, expect a recoil and then place a reverse operation. This method avoids slippage problems, poor liquidity, spreads, and poor execution of orders.

The Secret of Trading in Forex with the News

Here’s a little secret about how to trade in Forex with the news: most of the time, the news doesn’t change the movement of the market: it just speeds it up. When you link this with the fact that the market tends to move in a price range almost all the time – very especially after a strong movement in one direction – realizes that most opportunities to trade forex with the news are actually in negotiating against the initial movement, rather than waiting for a follow-up.

Categories
Forex Risk Management

Simple Trading Advice That Can Save Your Forex Account

Are you losing control of your trading? Do you feel lost in your own analysis and despair in the markets because your trading goes nowhere? You are not alone. Many other forex traders suffer from “analysis paralysis” because they use overly-complicated trading strategies. One of our problems is that almost everything we learn in our lives shows us how to survive at work and how to survive in the “real world”. The foreign exchange market is a different world for which you are unprepared and, of course, we apply what we know about the workforce to the forex markets.

As you have probably already discovered: the two worlds do not fit together very well. Forex requires a different approach, one of mental strength, one that forces us to show iron discipline. Sometimes “doing nothing” is the most cost-effective approach. Does it sound counter-intuitive? Most things in the forex market are like that. Based on my experience, most traders do not find success until they simplify their trading strategy.

Today, I will show you some simple steps you can follow to change your trading strategy to operate with a “simple forex” method of trading. Forex requires a completely different look, one of mental strength, one that forces us to teach iron discipline.

Remove All Unnecessary “Extras” From Your Graphics

It is normal that you want to take advantage of every possible advantage to try to put the odds of success at your side. For a trader initiated, it usually means to leave on the hunt for all the “shiny new objects” as indicators, other graphics tools, and anything that seems exotic enough to offer you a “selective view” of the financial market that not everyone is aware of.

Those who pursue trading strategies that use indicators are generally satisfied with the performance provided by the system in the longer term. The natural internal workings of most forex indicators respond very slowly to the movements of the organic market. The indicator can therefore offer a sign of purchase or sale only when most of the movement is finished, thus putting you at a very bad price to enter. Indicators also don’t work very well in the markets they are consolidating, generating bad commercial signals that can cause a decrease in their balance.

Take a look at the stochastic – a popular forex indicator that comes with most graphics programs. Stochastic is simply designed to operate under specific financial market conditions. Unfortunately, it does not work properly in trend markets – it is the main requirement to make money.

What traders do then is to look for another indicator that “fixes” the problem, one that “filters” the bad signals and gets the original indicator to work better. Despite having the best intentions, this only adds more problems to the chart. Rather than offering us an easier analysis, it makes it more frustrating, as the two indicators will probably offer contradictory signals and will never coincide to offer a clear trading opportunity.

The trader will then look for more “graphical aids” to remedy this, but the situation will escape his control and the graph will end up looking like something like a nuclear power plant control panel.

This is a very frustrating work environment to operate in because you can’t even see where the real price is and the price is the most important item on your chart. Once a trader reaches this point he usually ends up cleaning the chart and starts again. Most traders will find themselves back with the flat price chart and there is nothing wrong with it. At this point, you should have your moment of inspiration.

Trading with a flat price chart is the simplest, most effective, and most commonly used trading method in today’s trading industry. If you notice that the graphics are escaping your control, then do yourself a favor and remove all unnecessary data from your chart and start learning how to trade directly with price action.

Do Not Over-Complicate with Support and Resistance

Even with a flat price chart, the trader can still get carried away and get into a frustrating mess and that’s literally what happens most of the time. Marking support and endurance levels on the chart is one of the most basic and vital skills you need to succeed in any forex trading strategy. Even the core traders, who follow and operate according to the news, need to have a good understanding of how to draw supports and resistors to “complete” their market analysis.

Surprisingly, many traders – new and experienced alike-continually move the line of support and endurance and “defecate in their own nest” as they go crazy with the way they set levels on their chart.

Levels in the Chart

It is time to focus here again on the lesson and learn how to keep trading simple, which also applies to support and endurance levels. Do this and your Forex system will benefit quite a lot from it. At the time you are plotting markets in a price range, limit yourself to marking the top and bottom line of containment. You don’t need the lines to coincide fully, where all the shadows and bodies align perfectly, as this is very rarely going to happen.

Just mark the general area where the price is spinning. Everything you need to focus on the most important turning points, where the price is going to change course and create a decent price movement that you can take advantage of for profit. Operating in the center of the range is risky, the price can be very erratic, unpredictable, and volatile, as it is like a high rotation area that can make you lose a lot of money. But the traders still try to operate in that area: don’t be one of them.

Probably the best place to get into a price range is at the price range limits, so we just have to mark these limits. It’s as easy as that, if you can’t see a sign to buy or sell at these major turning points, then keep waiting. Sometimes, doing nothing is the most cost-effective strategy we can use and it is also one of the less easy decisions to take and follow.

Markets in a range are easy to negotiate, all you need is two levels. The markets in motion, however, are a little different. I work with turning levels in a trending environment.

As you can find out, even when we have good trends in the daily chart that look like they will last forever and offer clear buying/selling signals, many traders continue to lose money despite how obvious things are in that environment. Honestly, I think the main problem comes down to time. Losing traders are not getting into the trends at the right time and are being pushed out of the market by trend fixes.

Marking simple strength and support levels can protect your trading account from these errors. During the trends, I frame and concentrate on turning points, where the old resistance becomes the new support and vice versa. Time and again, the turning points of the trend will end with the counter-trend movements. This is where we will most often see the trend shift and move towards new highs or lows again. Start looking for and marking these spin levels and check them for signs of purchase or sale that align with the trend.

It is the turn levels that you must watch for to catch signs of buying or selling in forex. In this case, we have some upward rejection candles that told the trader that the lowest prices were denied by the financial market at the giro level. Just keep in mind that, with a financial market that is on a trend, you really just need to worry about spin levels.

Remember what I said before: these levels will not always align perfectly, so just mark the overall area that you anticipate will act as a main turning point on the chart. Also don’t forget to mark the main weekly turning points, as they can stop strong trends and trigger big turns in price. The same must be done: analyze the weekly graph and mark the strong and clear turning points.

I hope you’ve begun to show him the power of simple trading. There was no need for any complicated indicators or complex graphics tools. It’s just about working with a flat price chart and being very minimalist in marking levels of support and stamina.

Once you simplify the way you mark levels, technical analysis will become much clearer, less frustrating, and you will begin to learn to anticipate future price movements on a flat price chart.

Learn A Simple Forex Strategy That Keeps Your Trading Simple

If you are using a trading strategy you need to use indicators, complex math, or even one that requires spending hours and hours in front of the computer screen. I would recommend that you have the psychiatric hospital in your speed dial numbers! There are many trading strategies that allow us to use our heads only as an external observer. Most of us have busy lives and we really can’t afford to spend hours in front of the graphics by scalping or day trading.

Swing trading can be a very good alternative for those traders who want to be able to trade easily and adapt it to their lifestyle. For example, you may want to operate “full-time”, while keeping your job or studying full-time. How best we can do this is using “end-of-day trading strategies”, where you only have to analyze the market once a day and spend about 20-30 minutes analyzing the financial markets to make your trading decisions.

I use price share trading strategies combined with swing trading as part of my end-of-day trading strategy. The use of some of the examples I’ve shown in today’s tutorial can be seen in the daily chart at the close of New York to identify low-risk and high-reward business opportunities within the daily time frame. This system only takes us about 15 minutes to set up operations and forget about it.

We have a good bullish tendency and we can see that a turning level has stopped a corrective movement against the trend. This is a classic sign of “buying” stock from the end-of-the-day price, right at the hot spot where we anticipate it will act as a turning point of the wider trend. The bullish rejection candle informs the spin trader of the price share that we will probably see higher prices from here.

Actually, it’s as easy as counting 1, 2, 3. You can set your purchase order, complete it with stop and take profit levels, and then let the market follow from here alone. The best conclusion we can draw from all this is that don’t have to stand in front of the screen for hours, as you are free to move on with your life while the financial markets take care of the rest.

I hope today’s tutorial helped you remove all the complicated elements from your chart and trading system, to seal something simple. If your trading system is too “complicated” or needs too much of your day, then you should consider switching to the end-of-day trading strategy that exploits the benefits of price share and swing trading.

Even if you like intraday trading, I strongly believe that you will benefit if you remove the indicators from your chart and learn to “read” a flat price chart to anticipate price movements directly from the same candles. Once you remove all of these complications and start working with plain price charts, your trading strategy will be less stressful, will offer more clarity, and will be a more profitable enterprise.

Just trading the few major currency pairs like EUR/USD, GBP/USD, and USD/JPY and following the long-term trends when the market moves comfortably in the direction of trends is a simple and cost-effective way of trading, and doesn’t need any support or resistance or indicators at all. Give yourself a break and at least give him a chance.

If you liked some of the graphic patterns we saw in today’s lesson and would like to learn more about keeping trading simple, minimalist, and profitable, then you can take a look at my Forex trading strategies.

In my experience, currency traders don’t usually succeed until they learn to read the markets by analyzing price action. Make things simple and logical and trade with a logic that you can understand. Don’t be greedy and chase money, use your energy to become the best possible trader and money will flow naturally to you.

Categories
Forex Basic Strategies

This Information Will Help You to Beat the Forex Market

Traders and investors often think about how important it is to read and read books, websites, and all kinds of material in order to improve trading. We spend a lot of time reading, but how much time do we spend on real learning?

I’ve already talked about How to win the market and the trap of the best and it is very important to practice and learn from the market. In trading the phrase “An expert is the one who has made all the possible mistakes in his field” is fulfilled and therefore we must devote ourselves to learning from them.

The problem of the human being is that he tends to minimize the bad things of the past and then we forget that we have done well and that we have not. To solve this problem Thomas N. Bulkowski decided to make himself a kind of complete statistic of each and every one of the formations from the chartist analysis you found. His conclusions and statistics are found in a book of more than 1000 pages called Encyclopedia of chart patterns.

Bulkowski was investing in the stock market while working as an engineer until at the age of 36 he had earned enough to retire. I think teaching a little of your book will be a good way to understand how statistics are made to achieve a trading system with positive mathematical hope.

Always study the bullish and bass breaking patterns separately. In this case, study the pennants that have a bullish breaking. Translating a little we have:

  • Break-even failure: Percentage of false breakages of chartist figures.
  • Average Rise: Average growth after the figure is completed.
  • Volume trend: Volume trend (either increasing, decreasing, or constant).
  • Percentage meeting price target: Percentage by which the target price of the figure is reached.

Surprising findings: Surprising discoveries. I must admit that this part is my favorite, the detail of counting down to the smallest appreciation says a lot about their way of operating and understanding the market. In this case, he tells us that the pennants that look big and tall are better than the small and short ones. He also comments that pennants with decreasing volume have a better performance. Bulkowski devotes a section to determine that it is considered a pennant and not before giving numerous examples.

For a trend to have the strength the volume must be growing with it, if there is a movement against the trend and the volume does not follow it, then it is a movement that is not supported by professional money and therefore is a FALSE trend. Now it turns out that the chartist analysis tells us that the pennants are pauses in a trend and one feature of it is that the volume is decreasing. If you look at both branches have seen this peculiarity of the market and therefore it is foolish to study each of them thoroughly, the information is duplicated with other words.

Dedicate yourselves to doing things like Bulkowski, studying patterns, studying indicators, studying yourself in front of the market, but stop reading gurus books, blogs with magic indicators and work!

Don’t be afraid to be wrong!

Categories
Beginners Forex Education Forex Basic Strategies

Top 8 Real-Life Lessons About Forex Trading

If you ever decide to go the traders’ way, know the only boss you will have to listen to is you. Also know listening to yourself is the harder part of trading. Sounds funny but true. When an established trader thinks about foolish beginnings he can only smile and realize how much he has changed since. Becoming a trader is a lot of work, but it is one that gives many life lessons with a tremendously good outlook for young people. There is one trait that each successful trader has – they are wise. Wisdom requires experience and work, just no way around that. The sooner you start working the better the odds you could retire early. What a trader learns on this path is all about actually becoming a better person and how he sees life around him. Here are the biggest lessons that await you if you decide to become a professional trader.

“Do, or do it not. There is no try”

This line is definitely familiar to the movie series fans but it holds true to trading especially. Hopefully, it also motivates you. The initiative has to be strong, simply because forex loves to cut quitters. This market will test your mettle psychologically above all else. All those who seek to get in for the easy money will be disappointed. Making forex a sort of casino is possible, most people take it like that. Gamblers are hard to stop, only a zero on their account can until they put some more money if they have it. it does not matter how high they went, unfortunately. Those that keep researching ways to beat the casino might be the ones that find their holy grail. There is a crucial turning point here, do you want to be a gambler or a trader. Is this you in the next few years?

“Discipline equals freedom”

This is the title of a book by Jocko Willicks. The book is not about forex trading yet it is an essential life lesson that applies to forex too. There is no trader with results without discipline. By giving an example of a book that actually addresses general life problems with practical guidelines, we want to point out that forex punishes those that lack discipline as life itself. Now forex is not dangerous per se, but it can be to your financial status if you do not have rules that stand in the way to complete disaster. What you want to become is one thing, but the way to that goal is what will define you. Forex does not have feelings, do not expect mercy, mistakes will be made. But that is a good thing, you discover your psychological weak points that would need discipline to patch. 

Understanding the Concept of Risk

You have done so many foolish things when you were young, so many songs have been written about that period of human life. Simply, people take irrational risks when young. Why is this so is explained by science but that is not important since you cannot avoid it. Forex is all about how you manage risks and if you stick to the rules you set. If you are on the way to become a forex trader, it is time to make stupid mistakes. Make the hell out of them, however, we strongly advise you to do them on a demo account. Just pretend that demo is the real one. Interestingly, some young traders lack the patience or mentality to accept what they are doing on a demo does not work and go to live trading anyway. This leads us to another lesson.

Patience

Again, one more interesting result of a science experiment, more precisely the Stanford marshmallow experiment showed that willpower has a dramatic effect on the quality of life. Now, patience does not mean you have to wait for something but to keep searching for ways to improve your trading, be it through researching other traders, strategies, indicators, or reading books. Have the willpower to persist despite the failures that could set you back emotionally, feel like it is a “waste of time”. But it is not, it is just another lesson. The results do not happen overnight. According to some experts, the results may come even after two years of everyday work. Patience is also needed in practical trading, however, this is just a smaller scale of this lesson. Now when you know it takes time to get to that holy grail the question is are you willing to do the right trading approach.

Knowing Yourself

On your journey of forex trading, you will discover your personality or better said, accept who you truly are. The sooner you accept your flaws but also your advantages the better. You now know where the potential reason for losses lies. Forex will demand you to cope with the bad habits, and this lesson will translate to real life. These habits exhibit life as well, and when you think about it this lesson improves how you manage your urges that lead to events you do not want to happen. Special skill traders have developed just by trading forex, yet this skill is evident in every elite professional. 

Decision Making

This skill is so in demand because it carries responsibility not everybody can take. When the time comes to decide and accept the consequences then it takes a special skill. Sometimes this skill is attributed to leaders. In sports, this is especially evident in the last lap, the last-second shot, the final point in a match that decides the winner. Are you the one who makes it despite the failure consequences? Actually, decision-making is a stealthy skill that just makes noise when it is apparent. Elite professionals are deciding all the time by scaling the upsides and downsides of the decision. In forex, these decisions define trading, but traders eliminate the stress by knowing their strategy or a system work in the long run. They are very cool when it is decision time because they know it is just a matter of probability. In the long run, they win. 

Staying Cool

Controlling emotions is a skill and closely tied with good decision-making. You may have the methods and tools that can tell you the odds or what is a good decision. But if emotions mess that up, what good it is? Handling emotions can be done in various ways, it does not mean you need to be emotionless to make the right decision. Many will tell emotional decisions are bad ones. However, it does not mean you need to take a “pill” to stay cool. How about just staying true to your rules? If you have a plan that works in the long run, let it choose for you, there is no reason to change your mind just because you feel like it. In time, you become cool in even the most stressful moments because you strongly believe in something that just works. Now, in life, it is not recommended to be emotionless of course, but every time you need to decide about something important, you will have that attuned, cool, analytical mindset that helps. 

Wisdom

The magnificent harmony of what you have learned by forex trading is the most precious part. At this point the results are inevitable. This is the point where you accomplish and turn to higher goals by reaching out to others and sharing what you know. Now you have the responsibility to make a better future for others. Forex trading made you a better person on many levels, not just financially free. The lessons and values learned is just another lesson your personal accomplishments do not mean much if it is not reflected in the life of others. 

Categories
Forex Education

The Absolute BEST Twitter Accounts for Learning How to Trade Forex

Twitter has emerged as one of the key places where trading enthusiasts gather. Famous for both the information it provides and the negative effects it may have, this social media outlet seems to be loved by its trading community and today we will see exactly why. Look at this diverse list of Twitter accounts you can rely on to learn more about trading.

No Nonsense Forex (@This_Is_VP4X)

Patrick, who is more commonly known as VP, is (mainly) a forex trader and educator known for his dominant attitude and practical advice he generously shares with his followers. His Twitter account has a following of 20.1 thousand that appears to love his “no-nonsense” approach to trading. He loves to debunk trading myths and equip traders with the knowledge that he gathered all the way from being a penny stock trader to diversifying to different trading markets. VP shares advice, his personal trading-related decisions, and moves as well as announcements of upcoming YouTube videos. He teaches traders how to improve their technical skills as well as money, risk, and trade management. This account also provides some personal comments on current events without unnecessary hype.

Peter Brandt (@PeterLBrandt)

As he personally explains on his account, Peter has been around in the trading world for quite some time. Apart from having a massive Twitter following of almost 400 thousand people, this man is actually a published author and the CEO of his global trading company, Factor LLC. Peter is a trend trader which also something he likes to share through his account. Although he is a professional commodities trader, his account is a versatile collection of comments, advice, and facts that people love to like and share.

Charlie Bilello (@charliebillelo)

Charlie Bilello is a founder and CEO of Compound Capital Advisors who is commonly praised for his financial statistics, not to mention that 211 thousands of Twitter accounts follow him at the moment. He loves posting charts as well as facts many seem to find useful, and it appears that his heart-felt messages of support during the pandemic revealed much more than his trading insight. 

Mohamed A. El-Erian (@elerianm)

Educated and in the know, this man has one of the greatest followings there are with just over 350 thousand people reading his frequent posts. As a businessperson, the previous chair of President Obama’s Global Development Council, a columnist for Bloomberg View, and a contributing editor to the Financial Times, among others, he seems to be a good individual to follow. Besides his impressive resume, his account reveals different economic facts and information as well as advice for traders on how to tackle current challenges. 

WhalePanda (@WhalePanda)

You may not find a name on his Twitter account, but he describes himself as an “angel investor” and a “toxic monetary bitcoin-adjacent maximalist.” A major following of almost 250 thousand and an attentive audience that likes, comments, and shares his post may tell us a thing or two about the content provided through this account. If you visit this crypto influencer’s profile, you will discover an attempt to provide a realistic review of the market. What is more, if you love daily updates and information on trends, this is your man.

GoldTrader_Jay (@GoldMarket)

Don’t be taken aback by a slightly smaller following than the previous accounts because here you will find news on all four precious metals. This stocks and commodities trader will post a few times a day so you won’t feel like you are missing out. 

Wheaton Precious Metals (@Wheaton_PM)

Don’t look at the followers’ list because it doesn’t matter here. If you are looking for news on silver, look up this Vancouver-based mining company’s account. In the midst of business-related posts, you will be able to discover some really amazing insights into the silver bullion market.

Robert T. Kiyosaki (@ PeterSchiff)

This is another popular account created by an educational investment program that aims to help average investors increase their returns. Frequent and insightful posts will probably make you keep reading, as you learn more about commodity-related investment along with some personal views on different matters. 

Rick Ferri (@Rick_Ferri)

This retired US Marine Corps officer and fighter pilot, a former stockbroker, adjunct college professor, a former advisory firm founder, and a vigorous investing consultant aims to help traders achieve their financial goals. Rick’s area of expertise in terms of trading includes ETFs, on which he also wrote a book (The ETF Book: All You Need to Know About Exchange-Traded Funds). His account is increasing in flowing by the day, as his followers seem to love his mindset and motivational posts as much as the trading-related ones.

John McAfee (@officialmcafee)

The impressive 1 million followers view and share this British-American computer programmer, businessperson, and cryptocurrency enthusiast’s daily posts. Learn about this man’s personal history and views on different matters through his Twitter account, where you can see how successful individuals voice their opinions to make changes outside the trading community. 

Rudy Havenstein (@ RudyHavenstein)

Rudy Havenstein is known for his witty approach as well as his insightful market analysis. Through this financial historian’s profile, you will get to discover more about his specialty – inflation. You will probably get to read many analyses on Central Bank monetary policies and how inflations impact world economies. Moreover, if you love pictures and videos along with more serious and straight-to-the-point facts, this one is a good account to follow.

Joe Kunkle (@OptionsHawk)

If you are looking for an option-trading expert to follow, this is the account you should definitely bear in mind. Read plenty and enjoy detailed descriptions of past, current, and future-related news on options trading. He even developed his own methodology, explaining how “the options market has consistently proved a leading indicator of future price movement in stocks.” 

CNBC (@CNBC)

If you’d like to receive daily official trading news, follow this 3.8 million live financial news network. If you are interested in business and finance, you will discover a variety of posts that can help you make informed decisions on your trades.

Downtown Josh Brown (@ReformedBroker)

The CEO of Ritholtz Wealth Management has 1.1 million followers who seem to appreciate his diverse choice of topics that range from politics to the economy, companies, and news. This is one of those accounts that consistently grew from a minor following owing to consistently providing quality content.

Paul Krugman (@paulkrugman)

Paul Krugman was awarded a Nobel Prize in Economic Sciences for his contributions in the field of economics. Apart from being a professor, this intellectual’s tweets mainly about the US economy and policy decisions. Providing his academic perspective, he manages to provide a different perspective on major market trends, supporting his statements with relevant numbers and facts.

Which Twitter accounts do you like to follow? Do you read about one market only or do you like to keep informed about other markets as well? 

Categories
Beginners Forex Education Forex Basic Strategies

Forex Strategy: A Simple Definition

We can debate how to define a forex trading strategy but in the end, is it really important? We believe it is more important what elements are crucial and how to use them so you know you have a strategy. It is needless to say that without one you are blind and not make very far in forex trading. 

The Definition

We can find many definitions online but here is one that is simple but covers what is important: A strategy is a set of skills, tools, and information that consistently generate profitable trading decisions. We emphasize the word – consistently, so only when you have something that works over a long time you know that strategy has a meaning. It does not mean every trade or month has to be a winner, professionals usually take several positive months to conclude their trading strategy is consistent. The goal is to have profited from trading, however, we would not plan to gain percentages as goals right away simply because pursuing them might set beginner traders to think about winning only, whereas the true effect on the bottom line is about eliminating losers. Here is how to know you are on the right track to having a good strategy.

The Skill Element

Before all else, you need to be true about it. Follow your plans or everything you designed goes to waste. Your mindset has to be right to pursue any strategy or you are just playing games with yourself. Now, some traders do not rely on tools such as indicators, but they look at the charts at different timeframes and look at how the price is moving. Patterns, volume, and other aspects of the market are considered but they also consider what is going on with other markets, currencies, and any information that moves the upside/downside scale in their heads. This is the skill element of the strategy, and it takes a while to learn fundamental analysis and chart reading. Of course, there are other ways to trade where other skills are developed and could be used in a strategy. 

The Tools Element

One example is the use of indicators and rules for them. Technical traders do not want to rely much on their subjective analysis of the charts or events that drive the markets. They may have an opinion or predictions but they do not trade until their indicators confirm it. Even if they think otherwise, they listen to their tools. Their skill is to be able to create a setup of different indicators that jointly create consistently good decisions. This skill to combine the right tools also requires a lot of work. 

Technical traders are focused on indicators research and how they can make for a better overall performance with the others. They understand probabilities, statistics, and gauge what tools could mitigate losses. Also, when it is better to create a rule, like closing all trades on Fridays, they implement them into the strategy mix. Technical traders even use indicators for their money management if needed. It could be said that Price Action traders rely on fuzzy values while technical traders prefer precise points where they put Take Profit and Stop Loss orders, for example. 

The Consistency Element

Consistency is probably the hardest strategy element to achieve. You can have a strategy with inconsistent results but we regard that as an inconclusive trading solution. It is not a strategy that works in the long term. A car that does not move is not really a car, just a pile of materials. 

No strategy works every time on every market. And that is why traders spot the best market behavior for their strategies or develop different strategies for different market conditions. They look for ways to attain consistency with their strategies since they make losses in certain situations. That can only be avoided if they wait for a new period of right market conditions. Traders then implement rules to their strategies. The right market conditions have to be spotted. Technical traders have tools or indicators for that while plain chart readers just observe the candles. Forex trading is directional trading so traders of both kinds often look at the volatility and volume. They make rules based on these measurements and pick only volume/volatility levels where their strategies work best. That is why forex, precious metals, stocks, commodity traders have different strategies. 

It is not rare to see mixed strategies, technical indicators with fundamental analysis. These traders take into account more data but often they come up with conflicting signals and therefore need more time for a good setup. Does it mean it is better to mix different analyses to attain consistency? Not really, you can see pure PA or indicator traders that perform exceptionally well. 

Consistency can be achieved with a certain strategy, but as said in the beginning, a trader has to be consistent first. This side of trading is not in focus by beginners because working on the psychological part is not fun and you will not see it by reading strategy definitions. Therefore, we would also widen the consistency strategy element to the trader psychology too. This is also a skill, a rule, a tool, name it how you wish, but it is a requirement for any strategy to work. Traders that attain consistency with themselves and with the strategy are the elite in forex trading. They have one of the best “jobs” when we speak financially but also about their free time, stress, and resistance to side effects like different crises. 

Building a strategy does not stop when it becomes consistent. A trader explores any ways that the strategy becomes either more consistent or more profitable. It does not mean a trader has to change what is already working well, but exploring other markets where such a strategy with small changes could work. More opportunities open where more profits could be made. A strategy like this is evergreen and could be regarded as a holy grail in trading. 

To conclude, you have defined a strategy when you have educated yourself about how different strategies work and then design your own with specific rules, tools, or PA patterns. Have a plan for each trade this way and consider consistency building with loss elimination, money management, and having the right mindset. Only then you know you have a strategy that could be built upon as you advance. 

Categories
Forex Money Management Forex Risk Management

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

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

The Old Problem

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

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

Pro Approach 

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

FOMO and Risk Fear

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

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

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

The New Problem

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

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

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

Categories
Forex Market

Dirty Little Secrets About the Forex Industry

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

Forex Gods

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

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

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

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

Credit: Reuters

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

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

The Brokers

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

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

Review Misleads

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

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

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

Marketing

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

Forex is a Scam?

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

Categories
Forex Market

What’s Holding Back the Forex Industry?

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

Forex Views

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

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

Forex Broker Agents

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

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

Broker Business Model

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

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

The Big Banks Game

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

Regulators

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

Media and Marketing

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

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

Real Forex Trading Benefit

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

Categories
Beginners Forex Education Forex Basics

Fundamentals of Forex Trading You Didn’t Learn in School

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

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

Who runs the world?

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

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

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

What’s money worth?

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

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

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

Where did everybody go?

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

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

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

Become rich in 30 days

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

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

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

Who are you? 

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

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

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

Do you put all of your eggs into one basket? 

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

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

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

How can traders lose the right way?

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

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

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

How can you become a pro?

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

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

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

And, finally…

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

Categories
Beginners Forex Education Forex Basic Strategies

How to Get Better Results Out of Your Forex Strategies

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

Strategies that Work

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

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

The Iron Mind Strategy

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

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

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

Keeping the Mind Open

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

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

Find Good Resources

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

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

Connect with Other Traders

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

Categories
Forex Daily Topic

Meet the Steve Jobs of the Forex Industry

Traders that make money are rare. Traders that become famous have a unique advantage few can actually replicate. Listening to what they do when trading can be difficult, their trading is self-designed to suit them, not you. But, these giants have a thing or two that could inspire you on your quest to make a great strategy. The guy we are going to present in this article is not famous, does not use popular trading methods, and does not have any interest to make money out of his forex trading portal, it is all free. He is, of course, a professional trader with a proprietary company but there is something very different with him compared to all other popular traders in the forex industry. He is almost a completely technical analysis trader, still, this guy has a lot to offer to any beginner or veteran traders using arguments and easy content that can be applied right away. His name is Patrik Victor, or just VP as he likes to sign his blog articles on nononsenseforex.com

VP Trading Approach

As mentioned, his trading is based mostly on indicators of various kinds. However, he emphasizes the analysis itself is far less important than the rules you have to make. Rules are an essential part of the strategy that together create easy to follow money management principle. Additionally, VP places focus on psychology, the right mindset all traders need to get above breakeven. Interestingly, psychology topics are his least popular content. Despite this, VP still decided to publish a book on trading psychology in 2020, not about his, now known, technical analysis structure. As he likes to point out, technical analysis and even great money management cannot realize if your head is not right. 

His first material about forex is about the contrarian approach to trading, doing what the majority does not, going against the masses, and criticizing the most popular tools used in chart analysis. The arguments for this are mainly about big banks’ activity on their playground called Forex. They know how the masses are trading and would just move the market in the other direction. He exposes this by using the sentiment indicator on the most liquid currency pairs, while assets or markets not completely in the big banks’ control, such as crypto, do not exhibit this phenomenon. Some could say this soft conspiracy approach is good clickbait, however, the true value of his selfless know-how sharing is making professional traders with beginner-friendly guidelines.

VP Style

Our trader of choice for anyone who needs some guidance does not sound like the guys from TV. His portal and other channels do not have anything fancy, everything is done by him from his home studio. Once you hear him there will be no question he is a charismatic and down-to-earth guy. His style is easy-going just like his trading, and that is what is a very good recipe for making people listen to you. VP certainly did his homework to get noticed but we could not say anything he does not blend to his nature.

The blog has humor, but more importantly, he does not go around the bush. You get a flow of information that does not twist much and can be easily used in your trading. Each subject is deep without withholding anything that could make you a better trader. VP likes to back up his claims and opinions, however, be ready to drop anything you might know about trading if you want to follow his ways. Even though the content is easy to consume, it is not for anyone who likes to use some of the more popular trading styles. 

VP Background

According to his story, VP started as the rest of the beginner traders, they want to make some additional income aside from the average Joe jobs. He followed sports and did some betting so he has a knack for the upside and downside probabilities gauging. Rest assured, he did not become the top dog overnight, he lost a few accounts before starting his slow way of building the system. Only after a few years, the results became visible and yet a few lessons had to be learned the hard way. All of his mistakes made him a master of risk management and developing a universal technical system eventually spreading out to many other markets besides forex. More importantly, the mindset followed by experience paved the way to many other goals. 

The best part of his sharings is that the structure he developed resembles the idea that could be characterized as a contrarian. A kind of movement against the globally accepted systems where you work your 9 to 5-day jobs and do it all over again for the next few decades. Until you retire and pass on the same mindset to your children. Go to school, learn how to work the same 9-5 day job, and do a similar loop. According to the VP, this realization was a game-changer in what he wanted to do, inspired by the book “Rich Daddy Poor Daddy”. He quit his waiter job and focused on forex trading relentlessly for a few years before becoming pro. 

VP Teachings

VP gained experience and translated to other markets but he wanted to share his findings of the forex market where he felt at home. His channel starts with the contrarian view, criticizing popular tools most traders use even though there are much better gadgets and strategies. Obscured but not hard to find, he layouts a structure after very well explanations of how to prepare for trading psychologically. In the podcast series, he also answers the followers’ questions and goes deep into what is the right mindset that essentially answers their other issues too. One of the most valuable lessons is his precise and practical money management plan which is backed up by measurements of volatility. He does this using the Average True Range indicator and the volatility index for the Euro, the $EVZ. Some of this structure is covered on our website in detail. 

The technical side of his trading is about controlling the optimal risk, but also having dedicated indicators for each part of the trading. So he sets the structure with exit indicators, trend confirmation, and also volume and volatility indicators that blend in as trade filters and position size referents. The list of his worst and most used indicators will likely turn away some traders that have experience with them. 

Additionally, VP advocates trend following type trading on a daily timeframe. The daily timeframe is how he eliminates the psychological pressure and allows more free time to do other things – no more working till sunset. If you like trading reversals and do the price action things you could listen to him why he thinks this is nonsense before scratching his method altogether. Lately, he is on to other markets like cryptocurrencies and portfolio investing, mixing long and short-term trading with other markets. The advice and the resources are a gold mine for every trader, not to mention the discord community made by his followers. After a few months, VP teachings made several professionals according to the testimonials list on his blog. 

VP Motive

Many do not quite understand why one would share very deep knowledge about forex, analysis, and the resources for free, without any obvious interest to become famous. Actually, becoming famous would elevate his way of trading which is not quite good for a contrarian trader. The motive is to share what rarely anyone does – free knowledge about trading without any makeup, nonsense, and marketing. Also, say what nobody is telling about forex trading. A hard-to-dig true trading resource that will ultimately change the game. However, only the most persistent will endure and apply his methods, but that hard work translates into an unlimited upside.

Categories
Forex Market

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

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

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

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

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

A Word or Two about the Market

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

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

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

Currencies and Currency Pairs

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

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

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

The Magnificent Seven

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

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

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

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

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

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

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

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

Demographics

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

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

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

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

Categories
Beginners Forex Education Forex Basic Strategies

Apply These 5 Secret Techniques To Improve Your Forex Trading

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

#1 Use Personality Tests

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

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

#2 Achieve Consistency With Indicators

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

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

#3 Custom Formulas

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

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

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

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

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

#4 Have a Schedule

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

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

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

#5 Using Volume and Volatility

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

Categories
Beginners Forex Education Forex Assets

Gold As Part of a Diversified Investment Portfolio

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

And the cleaning of the market came:

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

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

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

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

Categories
Forex Risk Management

Hedging and Coverage: What Forex Trader’s MUST Know

If you’ve heard the word hedging or hedging mentioned and you’re not sure exactly what this is about when trading, this article can help. As is normal in my posts, an example to bring it down to earth. Imagine you have bought a car or a house. When we buy an asset of this type we usually want to protect our investment from possible accidents or situations that may occur against us.

One of the simplest ways to protect these assets is to take out an insurance policy that allows us to reduce the possible losses we might have if some unexpected situation occurs that we sometimes cannot avoid. In trading, hedging works similarly. It is simply an investment to compensate or protect our funds, reducing the risk of price movements against us. In this way and simply put, investors or traders use hedging to reduce and control their risk exposure.

A very important aspect when using a hedging strategy is the fact that as you reduce the potential risk you also reduce potential earnings. This is because, as an insurance policy, coverage is not free. Hedging can also be achieved by opening a position in another financial asset that has a negative correlation to the vulnerable asset, that is, the initial investment we want to protect. In the case of Forex, we say that two currency pairs have a high negative correlation if the correlation is negative and above 80 generally, in this case, the pairs move in opposite directions.

For example, in the foreign exchange market, the pairs with a high negative correlation are usually the EUR/USD pair and the USD/CHF pair. Anyway, I leave you a complete article that I wrote about forex correlation and how you can consult it at any time (you don’t have to do the calculation manually). It’s an important concept.

Before you continue, it’s important to know that hedging is not allowed in the United States. This is because brokers operating in that country must comply with the “no-coverage” rule known as FIFO (First in, First out. First in, first out) of the NFA (National Futures Association).

This “no cover” rule only allows for an open position on the same symbol. If, for example, we open a purchase position on an instrument and then open a short on the same instrument with the same volume, the initial position is closed because one order cancels the other. Because of this limitation, typically brokers that are regulated by NFA have international subsidiaries for their customers outside the United States.

Advantages and Disadvantages of Hedging

Like any strategy, hedging has its advantages and disadvantages. Depending on your trading system it may or may not make sense to apply it (I don’t use it, I’ll tell you later). One of the main advantages we find in having to negotiate with hedges is that they limit your losses, but as I was saying, it also erases a portion of our profits. Although it is a fairly conservative trading strategy (a priori), it allows us to have a high hit rate, although the profit/risk ratio decreases.

Hedging increases liquidity in the market because it involves the opening of new clearing operations. However, this represents a disadvantage as a trader because you will pay more commissions. Although we can do it on almost any platform, some brokers do not allow you to do it, bear in mind before applying it. A clear disadvantage that we must always bear in mind is that not all risks can be covered.

Types of Hedging Strategies in Forex

The types of hedging strategies are varied and although they all seek to reduce risks and limit losses, each of these strategies can achieve its goal in different ways. Let’s look at the most common trading strategies used:

Total Coverage: As its name indicates, when we make a total coverage we keep open the same volume in long and short operations. Full-coverage allows you to block your exposure in the market, that is, raise or lower the asset in question will not affect your account. Be careful because a trade with a fixed profit and loss level could reach its stop or take profit and close (and you can keep the contrary trade open with a negative float and no coverage).

Partial Coverage: With a partial coverage strategy you have open long and short positions, but with different volumes. Here already if there is risk (the difference between the volume of one and another position of the same asset that you have opened.

Correlated Coverage: The correlated hedging strategy is one of the best known in trading. Although I mentioned this strategy at the beginning of the post, let’s go a little deeper. It consists of covering an open operation with another operation in a correlated currency pair. The correlation between both currency pairs or assets can be positive or negative.

In Forex, an alternative is to trade “strong” currencies against “weak” currencies and thus maintain less exposure with strong ups or downs. Suppose for example you decide to go short on the pair EUR/USD. Currency pairs such as AUD/USD and GBP/USD have a high positive correlation with EUR/USD, so their price is likely to fall as well.

If you open another short in AUD/USD or GBP/USD, you are more exposed in the market because of the EUR/USD short position you already have. In the case of currency pairs with a high negative correlation as the case of EUR/USD and USD/CHF, if we open a short in EUR/USD and go long in USD/CHF we would also be incurring a higher risk.

Here, we can perform a correlated coverage. What must be vital to us is always to maintain in mind the following: if the correlation is positive, to make the coverage you must trade in opposite directions (sale – purchase or purchase – sale) and if the correlation is negative you must trade in the same direction (purchase – purchase or sale – sale).

Direct Coverage: It consists of opening positions in the same currency pair. It may seem a bit confusing or pointless, I explain it better with an example (like not):

Suppose you are long in the pair EUR/USD, the position is green but still does not reach your take profit. You’re coming up with a high-impact story (for example, NFP or GDP) and you want to partially protect your earnings without closing the position. One way to protect yourself from movements due to the high volatility this news may generate is to open a short position in the same pair and when volatility decreases close the hedging position. Minimizing in this way the potential risks of the news.

Direct coverage is also often used to leverage corrective movements in a trend. Anticipating a possible price correction in an uptrend, we can cover a long position by opening a short position. If the correction does occur, we gain in the short position while maintaining the long position.

Coverage with Futures: Hedging operations with foreign exchange futures are one of the hedging more used by the big market operators. Suppose an investment fund, based in the United States, invested in a Japanese company and generated 1 million yen in unrealized profits. Since the investment fund needs dollars instead of yen, it can buy USD/JPY futures contracts on the stock exchange for the total amount of yen it expects to receive (total coverage) or for a percentage of the total to receive (partial coverage). In this way the fund secures a fixed rate for its yen, protecting itself from the risk associated with USD/JPY torque fluctuations.

Hedging: Yes or No?

From my experience, I consider that every trader should know and know how to apply the different strategies around hedging, especially in a market as volatile as the Forex market. What we want to achieve with coverage is to minimize risks of movements against us when making an investment and at no time seeks to maximize potential profits, so we can consider it a purely defensive strategy.

It allows us to manage our positions in a calmer way, reducing the stress of the psychological factor when trading. There are many hedging strategies depending on the financial instrument you are operating.

Robots Using Hedging

We find a lot of systems on the Internet that may seem very attractive but that constantly make coverage by delaying losses and adding more and more positions. You can imagine how this ends. Run away from these kinds of robots. And you’ll wonder, how do you detect them? Easy, don’t buy a forex robot that you don’t know how it’s created, how it works, and you’ve spent time testing. That’s for not telling you straight away not to buy a robot to trade.

My Opinion

As you know, I do algorithmic trading and none of my systems apply hedging. They could tell you that psychologically this technique makes you not close with losses and… I ask you, why not take the loss and delay it by taking more commissions?

Doesn’t make any statistical sense in that case. Applying currency trading systems individually does not. Hedging can make sense in correlation strategies as we have seen between assets or in our stock portfolio to protect us from currency risk. If for example we buy shares in dollars but our account is in euros. I certainly think today it is an excellent tool, not for trading systems.

Categories
Forex Trade Types

Binary Options Warning! Five Risks to Avoid

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

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

What are binary options?

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

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

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

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

A Risk-Negative Benefit Ratio

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

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

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

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

It Is Impossible to Know Price Movement In Advance

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

Do Not Place Orders in Advance

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

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

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

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

A Limited Selection of Instruments

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

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

They Are Not Regulated

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Categories
Beginners Forex Education Forex Basics

Gann’s 20 Rules of Trading

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

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

1 – Always use stop-loss commands.

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

2 – Never over opers.

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

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

This rule is important in 2 respects:

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

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

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

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

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

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

5 – Only active markets operate.

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

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

6 – Do not close operations without a reason.

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

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

7 – Never promise a loss.

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

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

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

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

9 – Avoid taking small gains and large losses.

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

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

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

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

11 – Avoid entering and leaving the market too often.

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

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

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

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

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

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

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

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

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

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

15 – Never change your position without a good reason.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

In Summary

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

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

Categories
Beginners Forex Education Forex Assets

NASDAQ: What Forex Traders Need to Know

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

What is Nasdaq?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Why Invest In Nasdaq?

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

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

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

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

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

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

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

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

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

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

Categories
Forex Basics

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

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

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

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

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

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

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

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

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

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

Categories
Forex Basics Forex Psychology

Weird Hobbies That’ll Make You Better at Forex

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

Reading

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

Jigsaw Puzzles

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

Playing Sports

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

Playing An Instrument

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

Writing

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

Collecting

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

Buying and Selling

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

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

Categories
Forex Trade Types

Let’s Talk About Scalping In Forex

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

Types of scalping and general examples of strategies:

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

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

Types of scalping depending on the time frame chosen:

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

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

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

Types of scalping according to technical strategies:

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

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

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

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

Rules for successful scalping trading:

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

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

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

The instrument should have the best liquidity.

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

Advantages of Forex scalping strategies:

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

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

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

Disadvantages of Forex scalping strategies:

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

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

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

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

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

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

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

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

Best currency pairs for scalping:

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

Basic requirements for a better currency pair for scalping:

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

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

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

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

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

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

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

Forex scalping strategies: practical examples

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

Categories
Forex Basics

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

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

Do Your Homework

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

Choose a Reputable Broker

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

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

Using a Practice Account

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

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

Keep the Graphics Clean

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

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

Protect Your Trading Account

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

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

Start Small

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

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

Use of Reasonable Leverage

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

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

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

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

Exciting DOES not always = Good

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

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

Amounts of Leverage Provided

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

Leverage of 50:1 Percent

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

Leverage 100:1 Percent

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

Leverage 200:1 Percent

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

Leverage 400:1 Percent

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

Professional Traders and Leverage

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

Understanding Tax Implications

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

Treat Trading Like a Business

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

In Conclusion

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

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

How To Become a Better Forex Trader In Just 10 Minutes

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

Start Using Stop Losses

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

Keep a Trading Journal

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

Continue to Learn

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

Take Breaks

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

Review Your Goals

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

Watch the News

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

Speak With Others

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

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

Categories
Forex Indicators Forex Signals

How Do Forex Robots Actually Work?

What’s this about trading robots? Do they work? Are robots bad? Many questions are those that usually roll in the head when you hear the word “robot”. In the article I write today, I will try to expose what is this about Forex robots and everything that affects them, as well as some myths and realities. Let’s discuss…

How Do Forex Robots Work?

Before you start talking about how they work, do you know what a Forex robot is? A robot is nothing more or less than a few lines of code with clear rules of entry and exit to the market that are executed automatically. All this applied to the Forex market would simply be an automated strategy that buys and sells in the currency market. They are also called EA (Expert Advisor).

When I told you what it is, I explained how they work. But hey, can you make money with robots, or are they a scam? The performance or results of these automated strategies will depend on these previous strategies and their supervision, so if they are not profitable from the start, no matter how much they are automated they will not be. But if the strategy that is programmed is good, the result may be better.

Key Advantages

One of its great advantages is to be able to quantify the performance of the strategy that has been programmed. With a programmed strategy, you can perform a backtest and evaluate how that strategy has behaved before. If you have done discretionary or manual trading you will surely have tried different systems without having statistics or results of whether they have worked or not in the past. Come on, you’ve been playing with your money without knowing if what you were doing was profitable or not. Think for a moment, if you don’t quantify, how are you gonna know you’re making progress?

You need objectivity in making decisions when you make decisions. Otherwise, your results will be affected by your interpretation and here you have a good extra factor to make a mistake. How are you going to correct it? Systems or robots allow an objective market approach.

As you know, the accuracy of execution when trading is key. When you trade manually, you analyze wait for the moment and execute the order. When the process is automated, the order is released in less than a second without hesitation or analysis, or thoughts.

Another advantage more than considerable is that to execute the operations you do not have to leave your eyes looking at graphics for hours. You can do it uninterruptedly over time, even if you’re not in front of the screen. If you’re on a trip for a week or you have to do anything to stop you from being there, your operation may be running simultaneously. Be very clear, however, that they must be monitored and that the creation of automated systems requires time and work.

Closely related to the previous one, with robots you can trade in different assets simultaneously. Manually we are limited in this aspect. So you can diversify without problems.

And yes, the psychological approach. As you know, in this trading, psychology is important and it affects a lot. When the strategies are done in an automated way you reduce the psychological component quite a lot since your buying and selling decisions are not biased by your psychology. I say it’s reduced because you have to know that when robots have a negative or positive performance it will still affect you. But the main difference is that the results affect your psychology and not your decisions as it usually happens when operating in a discretionary manner.

Key Disadvantages

Although the advantages are clear, there are disadvantages. Most of the robots that are marketed on the Internet are based on martingales, grid. that reflect very good results and almost perfect performance curves but one day they break. Why? Because of the aggressive risk management rules they use. If you don’t think so, try downloading some for free and look at their results over a long period of time.

Why does this happen? Creating a good, cost-effective automated system is not easy. Programming a martingale or grid is not easy. So before you buy any robot, make sure they don’t use these techniques and that there’s no one hiding under a brand that can disappear tomorrow.

As for disadvantages when trading with robots something important is any technical failure that may arise and cause it not to run well. It is advisable to use VPS (a private virtual server) if this failure can affect your operation. I explain what a VPS is in this video:

Although it’s something that’s never happened to me yet, it is something that can happen. But it is as if the Internet connection fails. Also, failures or errors when programming the strategy (before executing it in real test it in demo or with very little capital).

Disadvantages are anything you might think might affect something that’s running remotely. Many such tasks already exist in different areas today.

What are the Limits of Robots?

We could say that robots do not work (always). I mean, there are systems that work perfectly for many years, but the vast majority die first. So? The solution is to have clear rules to disable these robots. If you don’t have an established plan, what are you going to do if your robot keeps losing money? Learn how to manage them.

Another limitation when using automated strategies is the over-optimization of parameters. What is that? Adjust your variables so that past results are very good. What’s the problem here? That we don’t know what’s going to happen on the market tomorrow, so it’s very likely that that robot won’t work well with new data when you apply it. Solution? Create a strategy and then validate it. Not the other way around. Remember that it is not about looking for perfect results, it is about getting real results.

Robots do not do magic, they have an added value with respect to manual trading that is quite clear, but it is something that you connect and you sit down to see how you drop the money. To take advantage of them is to be intelligent, but to ignore limitations is to be naive.

How to Choose A Forex Robot?

We talked about an important point earlier. Avoid using robots that apply aggressive risk management. If you’re going to choose a robot, spend some time contacting the person who created it, their background.

Don’t buy on pages you don’t know, in fact, I would tell you not to buy a robot as such but have expert supervision. As we’ve already seen, robots need to be managed. Be sure that you are able to learn to do all this by yourself in a simple way. You also have other alternatives in portals like Darwinex.

How to Program a Forex Robot

Today there are many tools to do so. From my experience, don’t get complicated and use those that allow you to start with a short learning curve. Some tips to create a good robot:

Set clear market entries and exits.

These things have to be made as easy as possible. You don’t need a thousand lines to make it work. Use the rule that your logic fits in a post it.

  • Always use stop-loss unless you don’t use any leverage.
  • Do it on assets that have liquidity so as not to pay a surcharge.
  • Schedule them to run in hours where there is volume on the market.

The Best Account Types

The most suitable accounts for trading with robots are the same as for manual trading. Accounts with low spreads, direct market execution, and adjusted swaps. Forex brokers are many, but with these features no longer so many. It is important that no use standard accounts or the behavior on the outcome curve you are going to get will be very different.

The Best Forex Robots

The best robots are the ones you know and create. Those that you can build in a simple way and also do different tests of robustness to know first hand their weaknesses and strengths.

For me, there are no good robots or bad robots. There are robots that work and there are robots that don’t work. I try to apply those who do and discard those who stop. I use more than a hundred strategies that I monitor daily and follow up. In this way everything is dynamic and although there are always strategies that do not work over a limited period of time, which is involved is that there are others that generate more than those.

Manual Trading or Robots?

Within the world of investment and trading, there are defenders of manual trading versus robots and vice versa. To say that manual trading doesn’t work seems very bold to me. In case a person hasn’t worked, why won’t it work?

After all, a robot can be a manual trading system that runs automatically. Provided that there are clear rules and a methodology, it is clear that both can be valid. Now, a forex robot has a number of advantages over manual trading that it doesn’t have. If we have the ability and the judgment that a person can have and the means to carry it out through robots, why not use both?

Categories
Forex Basics

What Skeptics Need to Know About Forex

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

Forex Is Real

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

Not Everything Is A Scam

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

You Can Earn Money

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

Information Is Plentiful

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

It Is NOT Gambling

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

You Are Right

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

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