Tag: Forex Trading

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Forex Assets

Analysing The Costs Involved While Trading The CAD/INR Exotic Currency Pair

Introduction

Introduction

Introduction

The CAD/INR pair is considered an exotic currency pair where CAD is the Canadian Dollar, while the INR is the Indian Rupee. This article will cover the basic elements of the CAD/INR pair that you should know before you start trading the pair.

In this pair, the CAD is the base currency, while the INR is the quote currency. Therefore, the price attached to the CAD/INR pair is the amount of INR that can be bought by 1 CAD. For example, if the price of CAD/INR is 55.059, it means that for every 1 CAD, you can get 55.059 INR.

CAD/INR Specification

Spread

The price at which you can buy a currency pair is different from the price at which you can sell the same pair. This difference is the spread. The spread is considered a source of revenue for brokers and a trading cost for forex traders. The spread for the CAD/INR pair is as follows.

ECN: 39 pips | STP: 44 pips

Fees

The trading fee is the commission you pay your forex broker for every trade you make. STP accounts usually have no trading fees, while the fees charged on ECN accounts vary from broker to broker.

Slippage

Slippage represents the difference between the price at which you place a trade and the price at which your broker will execute the trade. Market volatility and the broker’s efficiency determine the amount of slippage.

Trading Range in the CAD/INR Pair

The trading range in forex helps a trader analyze the extent of a currency pair’s fluctuation during a specific timeframe. As measured in pips, this fluctuation can help determine the volatility of the pair and the expected gains or losses. For example, if in the 4-hour timeframe the CAD/INR pair has a volatility of 30 pips, a trader can expect to either gain or lose $54 since the value of 1 pip is $1.8

The table below shows the minimum, average, and maximum volatility of CAD/INR across different timeframes.

The Procedure to assess Pip Ranges

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

CAD/INR Cost as a Percentage of the Trading Range

The knowledge of the potential costs when trading helps determine the trading strategies to be used. Cost as a percentage of the trading range will help us understand how trading costs vary with volatility under different timeframes.

Total cost = Slippage + Spread + Trading Fee

The tables below show the analyses of percentage costs in both ECN and STP accounts.

ECN Model Account

Spread = 39 | Slippage = 2 | Trading fee = 1

Total cost = 42

STP Model Account

Spread = 44 | Slippage = 2 | Trading fee = 0

Total cost = 46

The Ideal Timeframe to Trade CAD/INR

Depending on your forex trading style, you can use the above analysis to coincide with your trade of the CAD/INR pair with moments of lower trading costs. The 1-hour timeframe for the STP and the ECN accounts has the highest trading costs of 779.66% and 711.86% of the trading range, respectively. Also, notice that the highest costs coincide with the lowest volatility of 3.1 pips.

Trading longer timeframes like the 1-week and the 1-month timeframes are associated with lower costs. However, trading when the CAD/INR pair’s volatility is above average has a lower cost. Another way of reducing trading costs is by using the limit order types, which eliminates the slippage costs. Here’s how it works.

Total cost = Slippage + Spread + Trading fee

= 0 + 39 + 1 = 40

When limit orders are used, the slippage cost becomes zero. Consequently, the trading costs are significantly reduced, with the highest trading cost dropping from 711.86% to 677.97% of the trading range.

Categories
Forex Fundamental Analysis

Everything About ‘Durable Goods Orders’ Macro Economic Indicator

Introduction

Introduction

Introduction

Industrial production contributes to over 62% of the jobs in the goods production industry. Therefore, any changes in this sector’s production activity bring forth ripple effects into the overall economy. Owing to the significant role that industrial production plays in the economy, the investment goods bought for use in the industrial sector offer invaluable insights into the changes in the sector. Thus, durable goods orders as an economic indicator can be used to signal economic growth and businesses’ and consumers’ sentiment.

Understanding Durable Goods Orders

Durable goods are expensive and long-lasting items that have a lifespan of at least three years. These goods do not depreciate quickly. They include; heavy-duty machinery used for industrial purposes, computers and telecommunication equipment, raw steel, and transport equipment.

Core durable goods are the totality of durable goods, excluding data from transportation and military orders. The transportation equipment is excluded to ensure smoothening out the effects it would have on the durable goods data as a result of one-time large orders of new vehicles.

Durable goods orders data is, therefore, a monthly survey that tracks the purchase of durable goods. This data is used to assess the prevailing trend in industrial activity.

How to use Durable Goods Orders in Analysis

Since durable goods are expensive and long-lasting, their purchase is made on an occasional basis. For analysis reasons, the durable goods orders are treated as capital expenditure. The durable goods orders are used to signal near-term and future economic prospects. Let’s see what this data tells us about the economy.

Firstly, durable goods are heavy-duty machinery whose assembly and manufacture takes a long time. Therefore, the duration from when the assembly line of these goods begins to the time they are delivered to the buyers shows a period of sustained economic activity.

Capital expenditure in the industrial sector has a multiplier effect. The data on durable goods orders implicitly shows the level of activity in the industries along the supply chain of making and delivering these goods. Higher durable goods orders imply higher commercial activities in the relevant industries, while lower durable goods orders show reduced activities. So, what does this data tell us about the economy? Let’s take the example of increasing durable goods orders.

Higher durable goods orders imply that more jobs are created in the assembly lines, manufacturing, and mining. The resultant increase in employment levels leads to improved living standards and an increase in aggregate demand for consumer products in the economy. The increased aggregate demand for discretionary consumer products will force producers in these sectors to scale up their production, leading to more job creation and economic growth. Thus, the increase in durable goods orders can have both a direct and indirect impact on economic growth and the growth of other consumer industries.

Durable goods are used to further the process of production or service delivery. Therefore, the data on durable goods orders can gauge the sentiment of businesses and consumers. It is fair to say that businesses and consumers purchase durable goods when they are convinced that the economy is on an uptrend. Durable goods orders can thus be used as a testament to improving economic conditions and living standards. It follows the logic that businesses would not be scaling their productions or engaging in capital expenditure if they did not firmly believe that the economy is growing and a future increase in their products’ demand.

Due to their expensive nature, the purchase of durable goods heavily relies on credit financing. Thus, an increase in durable goods orders can be used to show that lending conditions are favorable. This willingness of lenders can be taken as a sign of improved liquidity in the banking sector, which in itself shows that the economy is performing well.

When capital expenditures are made, it is to replace the existing technology with a better one. Therefore, an increase in durable goods orders can be seen as businesses upgrading their current production means. Consequently, improved technology leads to efficiency in the production process and service delivery. This efficiency not only applies to improved quality and quantity of output but also in the allocation of factors of production.

Impact on Currency

In the forex market, the central banks’ perceived monetary policy is the primary mover of exchange rates. Forex traders pay close attention to economic indicators to gauge the health of the economy and speculate on the central banks’ policy decisions. Here’s how the durable goods orders can be used to this end.

Higher durable goods orders are associated with higher employment levels, increased wage growth, and steady growth in the aggregate demand and supply in the economy. When this trend is sustained for an extended period, governments and central banks may have to step in with contractionary monetary and fiscal policies to avoid an overly high inflation rate and an overheating economy. Therefore, sustained growth in the durable goods orders can be seen as a precursor to higher interest rates, which leads to the appreciation of the currency.

Conversely, a continuous decline in durable goods orders is an indication that businesses and consumers have a negative sentiment about the future. This sentiment could result from higher levels of unemployment, dropping levels of aggregate demand, or a stagnating economy. To spur economic growth, expansionary fiscal or monetary policies will be adopted. One such policy is lowering interest rates to encourage borrowing by making the cost of money cheap. Thus, a continuous drop in the durable goods orders can be seen to forestall a drop in the interest rates, which depreciates the currency relative to others.

Source of Information related to Durable Goods Orders

The US Census Bureau collates and publishes the data on the US durable goods orders. An in-depth and historical review of the US’s durable goods orders is found at St. Louis FRED. Trading Economics publishes global data on durable goods orders.

We hope you got an understanding of what this Fundamental Indicator is all about. Please let us know if you have any questions in the comments below. Cheers!

Categories
Forex Course

156. Why Interest Rates Matter While Trading Forex Currency Pairs

Introduction

Introduction

Introduction

The interest rate is one of the major fundamental indicators of a currency pair. Any increase in interest rate is a positive sign for an economy. However, there are some other factors that a trader should know.

What is the Interest Rate?

The interest rate is the charge that the Central Bank takes on loans and advances to control the money supply. The interest rate is usually revised quarterly based on the economic condition of a country.

The main aim of changing the interest rate is to control inflation and stabilize the country’s currency exchange rate. The interest rate is one of the most significant fundamental indicators for a country that directly affects the country’s economy both inside and outside.

Image Source: https://www.ecb.europa.eu/

When the country’s economic condition is excellent, and the targeted inflation is achieved, the central bank tries to discourage people from taking loans from the Central by increasing the interest rate.

On the other hand, when the economic condition is not right, Central Bank tries to expand the country’s economic activity by attracting people to take more money from the bank with a cheaper interest rate.

How interest Rate Impact on a Currency Pair?

In the forex market, traders usually trade in currency pairs instead of a single currency. Therefore, they should evaluate two separate countries’ economic conditions to determine which country is more reliable. Based on this knowledge, we can say that increasing the country’s interest rate will influence the currency to be strong against other currencies.

For example, we want to take a trade in the USDCHF pair, and we are waiting for the USD’s interest rate decision. When the news came, we saw that the Federal Reserve increased the interest rate from 2% to 2.5%. As a result, the USD became stronger immediately against the CHF, and the USDCHF goes up.

This is how the interest rate impacts on a currency. However, the opposite reaction might happen when the Federal Reserve decreases the interest rate from 2 % to 1.5% instead of increasing. In that case, the EURUSD might be stronger and move higher.

How to Make a Profit from the Interest Rate Change?

Making money from interest rates is an effective and solid way to trade based on the fundamental analysis. However, as a trader, we should focus on other fundamental releases and events to understand a currency pair’s overall structure. The significant economic releases of a country are interrelated. For example, if the inflation and GDP are good, an increase in interest rate is evident for the central bank.

Therefore, before taking a trade based on the interest, we should focus on what the other fundamental releases are telling about the currency.

Conclusion

After the above discussion, we can say that the interest rate is the most significant fundamental indicator of a currency pair. However, as the forex market consists of several uncertainties, we should focus on money management strongly. We may face some market conditions where the price might react against our expectations. So, the only way to make a consistent growth of our trading balance is to follow strong trade management.

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Categories
Forex Basics

Did You Know that Good Traders Often Do Nothing?

The title sounds a little counterproductive, if you are not doing anything, how are you meant to be successful? One of the biggest and most important traits for a  trader is often their patience, the ability to simply sit and way, and to have the self-discipline to not jump at every single opportunity that comes […]

The title sounds a little counterproductive, if you are not doing anything, how are you meant to be successful? One of the biggest and most important traits for a  trader is often their patience, the ability to simply sit and way, and to have the self-discipline to not jump at every single opportunity that comes […]

The title sounds a little counterproductive, if you are not doing anything, how are you meant to be successful? One of the biggest and most important traits for a  trader is often their patience, the ability to simply sit and way, and to have the self-discipline to not jump at every single opportunity that comes up.

The majority of traders fail, and they often fail within their first year, quite a few within their first month. One of the things that can cause them to fail is overtrading, simply putting on too many trades. When you start out you will have your trading plan and your strategy, this will have some rules to follow. If these rules are allowing you to put on 100 trades a day as a day trader, then you are probably trading too much and your rules are not strict enough, your strategy only allows for one or two trades a day but you are putting on six or seven trades then you are not sticking to your rules, you are placing trades outside of it and this simply means that you are overtrading your strategy.

A good trader won’t let this happen. A good trader will always stick to their rules and a good trader will only trade when it is exactly right. You don’t need to take every single trade, even if it does one up with your strategy. It is often said that you should not let your emotions influence your trading, but when you are in a situation where your strategy is good enough, you can allow them to slightly influence you, not on the trades that your strategy allows, but whether or not you take those trades. Sometimes you simply have a hunch that something is not right or you just do not want to take it, use this and do not take it, you will kick yourself if you don’t, yet your strategy stated that it will be a good trade and one that you should take, so it is not the end of the world if you don’t, but you will begin to grow your own sense as to whether you should take it or not, just do not be afraid to say no and miss a trade every now and then.

Learning how to wait is vital, any good trader will understand how to do this. It helps you to keep some self-control and discipline within your trading. Not every single opportunity needs to be amazing. In fact, the majority of them are not. You only want to take the ones that both your strategy and your gut are telling you are right to take. If just one of those things exist, then it may be better not to take it. Of course, being able to train your gut feeling to lean more towards the better trades will take time, quite a lot of time, only through practice and experience will you be able to be sure that you are thinking along the right lines, this does not, however, mean that you should be trying to take lots of trades in order to train yourself.

Many newer traders like to rely on others which in the world of trading is never a good thing to do. You will be taking trades solely based on what it is that they are trading, with no actual knowledge of what it is that you are trading or why you are putting the trades on. This is not a sensible way of doing things, you will be putting on a lot of trades that you probably shouldn’t be, even if they are good trades, you have no idea why so you should probably not be putting them on.

Good traders simply do not need to put on a lot of trades in order to be profitable, they select their trades carefully and only select the ones that have the highest profitability and potential for a good win. So do not feel the need to place lots of trades to make a profit, pick them carefully and you can have quite a successful career as a trader.

Categories
Forex Basics

Can You Trade Forex With Only $100?

With forex trading becoming ever more popular, more and more people are wanting to get involved, the problem is that not everyone has $10,000 to invest into their trading, so instead they are looking to open up accounts with smaller balances. Brokers are now allowing you to sign up from as low as $10 or […]

With forex trading becoming ever more popular, more and more people are wanting to get involved, the problem is that not everyone has $10,000 to invest into their trading, so instead they are looking to open up accounts with smaller balances. Brokers are now allowing you to sign up from as low as $10 or […]

With forex trading becoming ever more popular, more and more people are wanting to get involved, the problem is that not everyone has $10,000 to invest into their trading, so instead they are looking to open up accounts with smaller balances. Brokers are now allowing you to sign up from as low as $10 or even $1 but those balances are just too low to be considered as a profitable starting balance. So if we up things to $100, it is still highly affordable, but it may also offer slightly better profit potential. We are going to be looking at whether or not it is worth trading with a balance of just $100 and whether or not you can be profitable, as well as what it takes in order to be successful with such a low starting balance.

The question of can you trade with $100 is a simple one to answer, yes you can, you can very easily find a broker that will allow you to open up an account with just  $100 and you can very easily trade using 001 lot trade sizes. There are of course a few issues with trading with such a low balance, you are not really able to put many risk management plans in place, as you have such a small balance to begin with, it can be hard to maintain it and to survive any losses. With trading, you need to be prepared for losses, especially at the start, so we indeed consider whether you are able to survive those loose switches with a $100 balance.

So the better question to ask would be whether or not you should trade with $100 rather than can you. So we now know that you no longer need huge balances to trade on the forex markets. We will start with the usual, can you afford to lose that $100, for many that $100 is not a lot of money, but for others that $100 could be a couple of months wages, so think about your own situation, if you can afford to lose that $100 without it affecting your life, then we can move forward. We also need to lower our expectations, much like in life, in order to make money, you need money. So your expectations should be set low initially, you will potentially be making money, but with a balance of $100, the profits will be very low to begin with. So if you are expecting huge returns, you should consider not starting with just $100 as you will most likely over-leverage or over-risk your account.

Let’s imagine that we have signed up with a broker and deposited $100 into our account, how are we going to trade with this balance? There are different types of accounts, standard accounts are the normal account you see in most places, where you $10 is exactly that, $100, there are also then mini, micro, and nano accounts. This is where the broker allows you to trade with eve smaller trade sizes to the usual 0.01 lots. It magnifies our balance, so a $100 account would act like a $1,000 or $10,000 accounts as examples. For the purpose of this article and because it is the most common type of account, we will be considering a standard account, so our balance remains at $100.

Now that we are ready to trade, we are going to consider some of the things to think about in order to be successful with this account balance.

Education

It is far harder to trade with a small account than it is with a large account, there are a lot of things that you cannot do with a small account, so we are going to have to be on point with our education. Ensure that you are up to date, you fully understand the assets that you are trading and what you are looking for, as well as your own rules being in place for when you decide to make some trades.

Leverage

When you have a smaller account, leverage has a much greater effect on your account. Many brokers are now offering huge leverages on smaller accounts, as high as 500:1 or even 2000:1 which is a little excessive and we suggest not going quite that high. If you understand how leverage works, the higher the leverage is the more you can trade, however, it also means that you are able to lose your money a lot quicker. So when you have a large account, going for leverage of 500:1 may be great, but when trading on a smaller account you may want to go a little lower,t this is a way of keeping your account a little safer, preferably around 100:1 should be a good level for a $100 account.

Don’t Think About the Money

We know that you are trading to make money, but when you have a small balance, this should not be your focus, if it is then you will most likely be disappointed as it will not be increasing by a huge amount. Instead, you need to focus on your process and your trading habits, hone them and you will be set to make a lot more money once your account balance does grow. Do not rush decisions, do not rush trades, take your time, use this as a learning process, if you are able to succeed with this small account, you will be able to with a larger one too. This also includes honing your risk management plan, creating some rules for your trading, and then sticking to them.

Realistic Expectations

Do not go into it thinking that you will double your money each well, it won’t happen, instead set some realistic expectations. With a small account these need to be low, consider a couple percentage a week, bo more, the higher you set your goals the more risk that you will be putting on your account, and unfortunately at this stage of your trading career, you cannot afford to put too many risks as it is very easy to blow a smaller account.

Control Your Emotions

Emotions can have a devastating effect on a trading account. Letting them take over can cause you to risk the entire balance and many people have blown their accounts simply due to letting their emotions take over. If you are feeling greedy, overconfident, anxious, or even bored, try taking a step away, there is no harm in taking a break, your account and the markets will still be there when you get back. It is very easy to become greedy, to want that extra percent, but at extra percent that you are running for is an added risk to the account that you have not previously accounted for, so simply don’t do it, walk away and then come back with a clear mind.

Journal Your Journey

Create a trading journal for your trading account, jot down everything that you do and the trades that you make, this will give you some great insight and will allow you to see both the good things that you are doing as well as the bad, use this to develop your style and to ensure that you are staying on top of your risk management and that your account remains safe.

So we asked the question of whether or not you can trade with an account of $100. The answer is yes, you certainly can, this does not mean that you should though. It takes a lot of patience, a lot of dedication, and a lot of self-discipline in order to grow a small account. However, if you are in the situation where you can only invest that $100 and no more, then there is no reason why you cannot, simply reign in your expectations and take things one trade at a time, there is no reason why you cannot be successful with a $100 account.

Categories
Forex Basics

Reasons to Avoid Revenge Trading

Revenge a dish best served cold. That is the old movie quote, but it doesn’t quite have the same meaning when we look at revenge in relation to forex trading. We all have losses, it is a major part of trading and something that you will experience throughout your trading career, no matter how good […]

Revenge a dish best served cold. That is the old movie quote, but it doesn’t quite have the same meaning when we look at revenge in relation to forex trading. We all have losses, it is a major part of trading and something that you will experience throughout your trading career, no matter how good […]

Revenge a dish best served cold. That is the old movie quote, but it doesn’t quite have the same meaning when we look at revenge in relation to forex trading. We all have losses, it is a major part of trading and something that you will experience throughout your trading career, no matter how good you are, you will have losses and most likely lots of them. What we don’t want to do when we do have a loss is to try and revenge trade, to try and win that money back, throwing all risk management out the window, and simply hoping that the next trade wins.

Revenge trading is a situation where your emotions are getting the better of you, they are taking over your thought process and you are trading based on your feelings rather than the markets and your analysis. It takes you away from your rules, it takes you away from your system, and shows a lack of discipline within your trading. We all get these feelings though, the important thing is that you do not act on them, remind yourself why you are here and avoid putting on those revenge trades.

When you decide to trade based on your emotions, you are pretty much just gambling, there is no real reason to why you are selecting certain trades, simply the fact that you want to make back any of the money that you previously lost. The usual form of revenge trading is when you make a trade take a loss, you then place another trade, usually in the same direction but this time with a larger balance size. We have set out some examples of typical revenge trades below.

Jack has placed a trader with $100 based on his analysis, it goes the wrong way and he is currently losing about $95 out of his $100 bet (it has a stop loss placed at $100 loss). Looking at the markets, he still believes that his initial analysis was correct, due to this, he decided to extend the stop loss down to $250, a few hours later that stop loss gets hit and he has now lost $250 instead of the original $100. This form of revenge trading simply creates more losses, he did not want to lose that initial $100, even though it was calculated into his strategy, and so instead he has over doubled the loss incurred.

Sarah has placed a $100 trade, it goes completely the wrong way and she is stopped out losing the entire $100. She is annoyed and so wants to try and win that money back, so she decides to place an additional trade, this one is for $200, double the original amount. Once again it goes the wrong way, this fuels her frustration and so a third trade goes on, this time for $400, another double of the amount. This can continue until going bust. Even if the second trade went the right way, it is often closed once the original amount is recovered, it is still a form of revenge trading and very risky, even if it gets the result that you wanted.

So we know that revenge trading is bad, we know it is something that we need to avoid and we know that it is a feeling that most traders feel at one point or another. So let’s take a look at some of the things that you can do to try and avoid it or to reduce those feelings if it does raise its ugly head.

Take a break: Go outside, do something that has nothing to do with trading. Sometimes all you need to do is to clear your head, get away from it and think about something else. When you come back after the break with a clearer mind, you most likely won’t have that regret and that desire to place larger or trades that are outside of your strategy.

Document and journal your trading: If you are keeping a trading journal or at least documenting each trade, you can use your information to work out why that original trade lost, this will give you a much better insight and can help reduce the desire to revenge trade, as you know what went wrong, you can use that in the future to improve your trading, it will also help you to realise that placing another target trade will be a bad idea as the reason for the loss in the first place is still present.

Trust your trading system: You have your trading system and you have it for a reason, you would not be using it if it did not have a proven track record or at least the potential to be profitable. If You trust in our plan then you will stick to it, if you do not trust in it then you should not be using it, either way, you should be sticking to your plan and understanding why understanding that any trade that is placed outside the rules f the system is bad trade and a trade that should not be made.

Practice proper risk management: This is where revenge trading really hits, your risk management. It completely throws out the window and as soon as you get rid of your risk management, your account is far more open to losses and potential total loss. It can be hard to stick to it, especially if you do not have a lot of self-discipline or patience to begin with. It is a habit that you will need to get into and one that you will learn the more you do it, but if you have a risk management plan in place, then stick to it, this is the best way of avoiding revenge trading overall.

So that is revenge trading, you can probably see why it can be so devastating to your account, many traders have completely blown their accounts from doing it, but stick to the plan, stick to your risk management and take a break when things are getting a bit too much and you should be able to avoid such trades and to remain on your path to success.

Categories
Forex Basics

The Right Way to Lose at Forex

The forex market is so unique in its composition that beginners, cross-market traders, and even some more experienced traders often feel perplexed to an extent that they find it difficult to understand what trading currencies is really about. Risk, big banks, discipline, patience, good and bad indicators are just some of the numerous topics that can help you govern your trades more successfully, but there is also a question that many never seem to think of, despite its profound importance. We all focus our interest on the ways in which we could earn a higher profit, hoping to avoid any risk including losses. Understanding losses, however, comprises such a crucial stage in individual trade psychology growth that it truly requires special attention. Therefore, today we are diving deep into the topic of how to handle a losing streak while trading in the forex market, leaving no stone unturned on the path of making you a better trader. 

The forex market is so unique in its composition that beginners, cross-market traders, and even some more experienced traders often feel perplexed to an extent that they find it difficult to understand what trading currencies is really about. Risk, big banks, discipline, patience, good and bad indicators are just some of the numerous topics that can help you govern your trades more successfully, but there is also a question that many never seem to think of, despite its profound importance. We all focus our interest on the ways in which we could earn a higher profit, hoping to avoid any risk including losses. Understanding losses, however, comprises such a crucial stage in individual trade psychology growth that it truly requires special attention. Therefore, today we are diving deep into the topic of how to handle a losing streak while trading in the forex market, leaving no stone unturned on the path of making you a better trader. 

The forex market is so unique in its composition that beginners, cross-market traders, and even some more experienced traders often feel perplexed to an extent that they find it difficult to understand what trading currencies is really about. Risk, big banks, discipline, patience, good and bad indicators are just some of the numerous topics that can help you govern your trades more successfully, but there is also a question that many never seem to think of, despite its profound importance. We all focus our interest on the ways in which we could earn a higher profit, hoping to avoid any risk including losses. Understanding losses, however, comprises such a crucial stage in individual trade psychology growth that it truly requires special attention. Therefore, today we are diving deep into the topic of how to handle a losing streak while trading in the forex market, leaving no stone unturned on the path of making you a better trader. 

When you think about losses you have experienced in the past trades or the potential of taking losses in the future, how do these images make you feel? Feelings might, understandably, make many grown-ups think of chick flick movies, but to be able to generate a comprehensive idea about the manner in which you are trading, and improve every aspect of your forex career as a result, you should give yourself the opportunity to explore this topic thoroughly. The notion of feelings is so intricately connected to that of trading currencies precisely because our emotions can at times get the best of us, blurring our vision and dulling our senses. Whenever people are losing, they tend to start behaving impulsively by making a series of extremely hazardous moves. The danger behind these reactions to losses is not the emotions traders go through, but real chances for them to ruin practically everything they have struggled to build up until that moment. 

Many traders make the same mistake of not recognizing the true nature of this market when approaching forex trades. The forex market is inherently prone to losses, so what we need to do is make ourselves less susceptible to their impact. To achieve this stage of understanding, we primarily need to acknowledge the fact that it is we who give value to any event. Our chance of making the most of any circumstances will vary depending on how we react to different events. This is such a paramount lesson because until we allow for this shift in consciousness to take place, we will not move from the stage of making fatal mistakes due to feeling weak and imbalanced. Trading psychology is the very foundation of trading, without which one cannot expect to go much further.

Losing can easily take its toll on you unless you decide to push against the need to undergo pressure. The moment you reach the professional level, you will see these losses in a different light and the degree of their impact will change. The uneasiness may never disappear completely, but your skill of handling losing streaks will make all the difference in the world. Some forex experts have shared their experiences of how losing affected them in the past and how their own reactions have pushed them much farther from their goals, ultimately endangering the opportunity to trade in the future. The learning curve may be steep in this respect, but the results are astoundingly transparent and tangible.

If at the moment of experiencing a loss traders demonstrate an inability to stop overreacting, they should be aware that this is an indication of a dangerous loop that has only one outcome. The professionals whose stores on social media inspire traders across the world have clearly explained how their accounts have once gone down in no time only because of their rash responses to losses. These events are the moments that uncover all of our fears, hopes, and dreams, and such disclosure can potentially lead to an enormous hole you may never get yourself out of. Many of these prominent figures on forex platforms say that had they known these lessons at the time, they would have reached the professional level considerably faster. 

Some people, unfortunately, never manage to recover from the aftermath of their reactions. We naturally assume that the stronger a person is in terms of their mental and emotional capacity, the less likely they are to be triggered by some unexpected events. When traders see how their accounts are growing and how everything is unfolding to their benefit, they immediately start making big decisions and larger moves. Trading in this market can affect your mind quite easily and you need to prepare so that you do not succumb to your impulses. Now that we know that traders tend to exhibit uniform reactions despite some major differences in their trading styles, we must adopt the steps and incorporate the lessons that will limit the volatility of our own minds.

In order to secure your future trades and maintain consistency from the very beginning, you need to ensure that the entire testing process is managed in a precise manner. Aside from sharp thinking, you do not need to invest in meticulous testing methods and procedures, as these are vital steps that will allow you to understand your progress. Due to previous inconsistency and a degree of carelessness, some professional traders nowadays express regret for not having tackled this phase more diligently in the past. The common cause of such remorse lies in the understanding that, instead of allowing the system to carry the weight of the trade, these individuals let their emotions get in the way.

This part of trading is so precious that you must do whatever it takes to eliminate any holes within the testing phase. You can primarily achieve this by aiming to conduct thorough analyses without missing any of the steps. Testing can be a detailed process, but you must perceive it as a chore and feel discouraged to proceed. Instead of feeling demotivated, find comfort in knowing that by measuring everything you can, you will be able to see exactly what you have before you; for example, you can immediately find out whether your trade is going to be a win or a loss. By taking on the viewpoint of understanding how relevant precision and conscientiousness are, you will never feel like a powerless trader whose efforts have not been supported by the results achieved. 

In terms of testing stages, we should first differentiate between backtesting and forward testing, which are both indispensable elements that provide invaluable information to the trader. If you do not engage in the backtesting process properly, the forward testing part will never reflect the reality. Since forward testing should be carried out in the same way that you would trade real money, you do not wish your results to be flawed at this point. Therefore, if you do not handle testing properly, you will inevitably suffer the consequences down the road.

Laziness to store information so meticulously will be exposed in the form of losses, probably taking place at some very peculiar points when real money is involved. To prevent this from happening, you may need to put the effort into rehearsing as many times until it becomes a natural part of your routine. That way, when your own money is invested, you feel more inclined to keep trading feeling safe and equipped with sufficient information. If you still decide not to do much at this point, understand that once the real money – whether it belongs to you or a firm that solicits your services – the entire trading will certainly become increasingly serious and complex. Help yourself, or the future version of yourself, do the job properly by putting in the effort now instead of needing to salvage your account despite having been cautioned against being sloppy or reckless.

Many traders become extremely excited when they feel that they are on the verge of a breakthrough that they unintentionally make some of the worst mistakes there are. Many a time have beginners, in particular, experienced such exhilaration that they started analyzing the losses trying to find a reason why they would not have taken the trade anyway. By blaming a faulty indicator’s underperformance on some market activity or a negative news event, you are not forthcoming with yourself and such superficiality will cost you your money sooner or later. Many traders may feel tired from searching for the perfect solution to complete their algorithm, but they repeatedly fail to understand the key meaning of this process. Constant justification of a tool’s malfunction through the assessment of which external factors could have impacted the trade in question clearly reveals that traders act as if nothing has happened, turning a blind eye and choosing falsehood instead of the truth.

What traders should strive to do, first of all, do exactly the opposite from the example above, record everything, and, despite the excitement that they have felt before, accept the harsh truth because it is what will prove to be the best option in the long run. Should you discover a system that functions extremely well during the backtesting phase, be ready for your forward testing to reveal a different picture. Nonetheless, getting results that are not as great as they were in the previous phase should not deter you from completing the forward testing stage. Traders should not let themselves be charmed by the results that they get before they finalize both stages of the testing process because, despite the bitter taste of sobering up, they should understand knowing and having all the facts at their disposal will prove to be their main weapon in the future.

The forward testing part is generally believed to last between 6 and 12 months, so if you happen to discover a great system in the first go and you are certain that it is the best system you have found until that point, you can now present these statistics to a potential client or future employer. Hence, any results you gain from the testing process need to be clear and devoid of mistakes as much as possible, especially since you will be trading someone else’s money, should they feel equally impressed with the results you have come up with. Therefore, if your starting point is 50,000 USD and your losses take you down by 3,000 USD, you cannot ignore that something is missing and simply hit the reset button. Even if after starting all over your second take proves to be significantly more prosperous, you will have nothing but fraudulent data to present. Due to the fact that such information does not mirror the reality, you will be exhibiting deceitful behavior before the people to whom these results are presented.

If you are not ready to present some genuine results, you are in fact unprepared to take any losses. However, without accepting the losses, you will hardly know how to get to and maintain your wins. There is little you can do about losses in trading, apart from striving to come up with the best possible system. If you are dissatisfied with the results you get upon the completion of the 6—12- long testing period, you need to accept the fact that whatever you have put together will simply not generate any positive results in the future either. Starting over at this point is a sensible and a necessary activity, although it still might feel slightly discouraging. Nonetheless, bear in mind that if you decided to proceed with such a defective system and enter any trades with (your or other people’s) real money, the unrealistic results you chose to ignore would hunt you down and you would not be able to escape the losses.

Traders deserve nothing less than killer results that they can truly use in the future, but they will never get these unless they put in the effort into recording every step (e.g. currency pairs, indicators, number of wins and losses, and winning percentage) and accept the losses for what they are. Losing streaks are an inevitable and inherent part of trading currencies. If it happened early in the testing process, what you definitely should refrain from doing is to exit the trade and start a new one. Let the trade run for as long as it needs to and allow your system to take care of any current misfortunate events. Stop panicking about the losses and rather allow yourself to adopt a much healthier, realistic point of view. 

You need to understand the rules of acting on the long-term strategy because only when you set your priorities straight will you in fact be able to adopt a more objective standpoint. If you keep reacting to losing streaks, which will naturally keep happening more or less unpredictably, you will hardly get the opportunity to reap the rewards. And if you do not get to the part of enjoying your wins, you will lack the one thing that can mend the blow that you previously got from the loss. The losses and the wins are then two polarities that make this game run and by distrusting the system you are proving that you are a weak individual who reacts to a string of losses instead of seeing the bigger picture. If you let yourself be slightly more relaxed and open to these natural oscillations, your next win will compensate for the upcoming loss. 

Also, be mindful of the need to be realistic as a 10% return to which you have grown your account after several months cannot lead to you to a 40% return year after year. On a more objective and genuine note, you can actually expect to use up the 10% and return to the point where you first started. After you see your hard work turn to dust, you may naturally feel disappointed and upset. However, gather your strength and allow yourself to think in a more long-term manner. Many of the wins you come by will shield you against the losses, so strive to see the bigger picture. When the time comes for you to invest real money, you will be prepared to accept both the good and the bad together with all the in-between shades.

The forex market entails going through both the highs and the lows, so the way you respond to these opposites will ultimately determine the result you are going to get. In order for you to absorb the losses, you cannot start making changes in the system whenever you feel like the plot is not unfolding the way you wanted. Many experienced traders have confessed how they tried to get away with tweaking the system in the past, so they ended up suffering greatly when real money was involved in the game. Assuming that these changes are going to make your end result better is what responding to the market looks like. Just because you are experiencing losses at this moment should not push you to alter any setting or part of the system in which you invested so much time to test.

If you are looking for advice on how to survive losses then the best action you can take is to refrain from making any move. Do not engage in making any changes and simply stay put until you see that string of losses through. If you gather the courage and be an adult about his part, you will provide yourself with a real chance to successfully move on. The greatest professionals in the forex market are those individuals who know how to take losses regardless of how it makes them feel. They have, in fact, invested in putting their emotions on the side and learned to stop when the time comes. Instead of putting all the action after experiencing losses, you should strive to be less avoidant during the testing phase. Insist on being proactive rather than reactive, as the losses will naturally come and go.

To willingly desist from reacting to a seemingly negative event, you need to practice withstanding the blows. Your nature, that is the nature that you share with all human beings, will probably always tell you to do more and ideas may start surging up in your mind, but you need to realize that being controlled and disciplined at this stage is the only thing that can stop you from completely destroying your account. Taking a step back does not however imply that you can take a break from trading at any point. Should you feel that a certain currency pair is not working out for you at this moment, you cannot press pause on it until a later time. Resisting from making adjustments and tweaking the system does not imply the mentality of picking through the charts as you please.

The mentality which involves either making changes in the system or stepping out of the game before time is increasingly dangerous and downright wrong for this type of business. The theory of natural chaos entails that these periods of order, where the market consolidates or stands, and chaos when the market starts to trend once again, alternate naturally. If you, then step out of the game during the quiet phase, you will inevitably miss out on the big runs because it is where the market is heading. The runs that are always around the corner need to be patiently waited out so that you can cover up the losses that preceded this stage. Unless you let this happen in its natural order, you will in fact let yourself take the losses without reaping the rewards.

If you have not engaged in a similar activity during the testing phase, why would you not let yourself participate in a big win now? Do not erase the losses regardless of how many times they have already occurred because you will not earn those pips that you are meant to have. When trading real money, remember how testing felt like because it might remind you of the feeling of gratification and fulfillment that stemmed from earning those wins. Since you did not give up the moment you encountered a loss before, strive to recall the sense of persistence and urge that led you to the winning stage.

If you encountered a currency pair or market activity that appeared to be acting rather choppily or disorderly, thereby knocking all of your trades, you probably started to panic. The fear coming from seeing such hectic activity and its demoralizing outcomes could have turned you into a completely reckless, short-term player. In your mind, you probably had thought rushing through with anxiety telling you that these misfortunes will never cease and that your account is doomed. So, you thought that some action on your behalf could mend the severity of the situation and get you to a better position. Unfortunately, you soon learned that this was a really bad decision.

The only step that you should make at the time of consolidation or choppy periods is to stay put because your efforts are not logical. The only thing that makes sense at this stage is the understanding that the market will soon start trending again so that your losses will have the chance to be replaced by wins. If you have already worked toward creating a system that evades losses, learn how to trust it. If you constantly get in the way and try to innocently pull a trick on your own system, you are not letting it prevent you from experiencing losses, but quite the contrary.

Do not interpret losing streaks as your own fault because your system is made to block and evade most of them, which it will successfully do if you allow it to. By stepping away from the role of the master controller, keep your system active so that it can do the math instead of you. The only other expectation you will need to have is for your system to take notice of the big runs as successfully as it can escape the choppy and unfavorable parts of the chart. If you find it hard to do so, ask yourself what the purpose of trading and creating a unique system is. If you cannot enjoy the process and if you keep interrupting the natural flow of the market because of some micromanaging tendencies, you should be aware of the impact it is going to have on your overall success.

What you should feel responsible for is giving in to the fear and preventing your system from leading you properly. You cannot expect to design a car which you will then keep inspecting every single moment for gas, changing its parts to see whether another engine works better in the middle of driving. In terms of guilt, despite it being a very bad choice of feeling in general, you should understand that you are the only one to blame for missing out on big runs due to the previously mentioned reasons. Your end result will inevitably reflect the way you address trading and your entire attitude. Unless to choose a disciplined approach, you will need to face some rather gloomy outcomes where those 500-pip runs are not going to appear in your account. You should simply never let these happen as your entire forex trading career is at stake.

The only way to survive a string of losses is to simply gather courage and have faith in your technical and psychological support – your system. As reactive trading never brings any positive or lucrative results in trading, strive to try out these reactions and adjustments in the testing phase. If you are serious about your intention to earn money, rather than lose it, your goals need to be reinforced by controlled activity, not some panic-stricken repossess to what the market is giving you at the time. Although it may go against everything you have been taught so far, you will secure and increase your finances only by simply sitting back and doing nothing apart from allowing your system to do its job.

Always keep in mind the idea that you are playing the long-term game and this alone should help you distinguish between instant gratification and the ultimate prize. Stop sabotaging your success by getting in the way of your system. Finally, do away with the need to exercise control at the stage when you are not meant to do that. Separate testing from the real game and step up to meet the expectations of the stage you have reached. The requirements imposed on you as a trader will change from one stage to another, but emotions are the one thing you should eradicate as early as possible. If you wish to know the factor which makes all traders lose, you should simply observe the outcome of giving in to all (ir)rational fears and impulsive inclinations.

Once the testing part is over, one of your greatest tasks will be to acknowledge its primary function and consistently take the same steps based on which you developed your algorithm and your approach to trading. Even when times are tough, you are to just soldier on and take a leap of faith. The moment you step into the big game, everything must stay absolutely the same. You have a major weapon that you have tested backward and forwards, which further entails that losses must not obstruct you from utilizing its potential. 

And, when the day comes for you to present a client or a prop firm with your achievements, you will naturally be aiming at their interest in growing their profit. Nevertheless, you should never let them assign short-term price targets or accept any price-related requests because this should be a clear indication that the individual or company in question does not truly understand the nature of trading. By imposing price targets, the offer you receive will not come from the place of comprehension of the ever-alternating behavior of the market and it will get in the way of your attempts to play the long game. Whatever the surrounding circumstances, you should never allow any external factor, even if that is your client, determine your overall style, dissuading you from applying long-term strategies. Rather let them find another person, whose hyper personality and trading style can easily fit, respond, and adapt to such requirements. 

Keep in mind that, once the time comes, your main duty will be to make the people who are investing their money satisfied. The happiness should last as long as possible, so if you surrender to their hunger for making money fast, you will inevitably jeopardize your long-term vision and style. You should speak for yourself and defend your idea of trading. The client you should be looking for is, therefore, a person or a place that can provide you with enough room to do what you do best – trade. Avoid any tendencies in other people that you would naturally avoid in your trading, and do not let anyone tell you which steps you should take. You must, thus, look for a company or a person that knows how to stand aside and let you carry out your trading routine.

Finally, we should reflect on the main lessons this article proposes. Firstly, assume that testing is your most crucial step one as it will help you build a stable foundation upon which you will then be able to keep growing your career. Steer clear of reactive trading and rather rely on the solid system in which you have invested your time and effort. When you are free to start trading professionally, you will want to have completed all testing processes and said goodbyes to emotional responses to the market’s natural highs and lows. Stop assuming that strong people never get trapped and tricked by the emotions game and start working on your trading psychology as soon as possible. Trade your system, not your emotions and, by all means, do not let all the work you have put in so far go to waste. 

Now that you know how to test your system properly, how losing impacts traders, and the way in which you should approach these difficult times in trading currencies, you are equipped with some of the most vital pieces of information. The lessons are, as it appears, quite straightforward – if you react to passing losses, you will see lasting consequences and vice versa. Your own unpredictability and lack of control must never hinder your real chance to grow as a trader, so discard all facets of your personality that cannot constructively facilitate your progress and financial gains.

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The FX Problems with the USD: Yesterday, Today & Tomorrow

As one of the major currencies on the globe and a currency that holds such importance for the rest of the world, the USD has always posed as a topic everyone is interested in. Due to these reasons, it is crucial that we understand the economic situation worldwide and grasp which role the official currency […]

Businessman sick of money. Illustration pop art retro vintage vector. Business and Finance

As one of the major currencies on the globe and a currency that holds such importance for the rest of the world, the USD has always posed as a topic everyone is interested in. Due to these reasons, it is crucial that we understand the economic situation worldwide and grasp which role the official currency […]

As one of the major currencies on the globe and a currency that holds such importance for the rest of the world, the USD has always posed as a topic everyone is interested in. Due to these reasons, it is crucial that we understand the economic situation worldwide and grasp which role the official currency of the United States of America has to play. Currently, we are seeing many changes in various aspects of existence as we know it and, despite the vastness of the media sources, many are still vague or unsure about what is going to happen down the road. Naturally, it is essential for these reasons to delve into the knowledge we have accumulated so far both on the USD and its connections to other spheres of life, discuss its relevance outside the realm of forex, and, last but not least, list some of the most thought-provoking predictions proposed by prominent prop traders in the market.

From the perspective of technical analysis, we are safe to state that the USD is one of the most difficult currencies to trade. Generally, the currency is often portrayed as such owing to the involvement of the big banks that have a tendency to flock towards the greatest concentration of money. As the USD is the currency of preference among traders across the globe, the big banks, understandably, desire to maintain more control over the USD-based currency pairs. What is more, since currencies are always traded one against the other, the USD as the currency encumbered with more news events is often going to bear the responsibility of whether the currency pair goes up or down.

In the past, we have seen how the USD frequently acted as a determinant of which direction the pair it is part of is going to take and both news and banks play a major role in how this typically plays out. In addition, history has shown how any event taking place in the United States appears to have an impact on the rest of the planet and, as such, they assign more importance to the USD over any other currency. The USD is also known as a safe-haven currency towards which people of various backgrounds are naturally driven. This currency is additionally the world’s reserved currency and countries all over the world tend to hold the dollar as a hedge to protect their systems.

Trading the USD is a particularly important topic due to the vigilance of the big banks and increased risk for the traders. Forex experts generally advise traders to apply the same strategies as with any other currency but also insist on exercising caution especially early on. Should traders with more experience show interest in trading a USD-based pair, they are advised to proceed with the use of their tested systems and combinations, whereas forex beginners are warned about the possibility of facing some unfavorable circumstances dissimilar to any other currencies. It appears that most traders face challenges with the USD. In addition, as it appears, many end up losing everything because of a deadly combination of negative factors: highly risky currency, poor money management, and lack of knowledge on trading psychology. Therefore, when trading the USD, it is important to involve a variety of skills and maintain awareness of other factors that can potentially affect the trade.

When trading the USD, or any other currency for that matter, most traders focus all of their energy and attention on the offense in the attempt to extract the greatest possible amount of money from the market. However, on the other end of the spectrum, there is defense as an equally important determinant of the success a trader can experience. Many assume that the acquisition of skills, tools, and systems will render them the most accomplishments in this world, but even the best technical traders can experience a great loss if they fail to grasp the need to see both sides of the coin. The defensive part of the strategy is, at times, probably less exciting, yet it is at the same time the necessary addition to the offense, complementing and rounding out the comprehensive approach every trader needs to be take in trading currencies. 

Upon learning about money management, trading psychology, and technical analysis, as the three pillars of offense, traders are left with the additional task of figuring out how to hold the fort on the other end of the continuum. Long-term defense strategies that any forex enthusiast should list as a top priority include the diversification of money and protection from a major economic downturn. If a trader manages to assemble the two constituent parts and put effort into satisfying both criteria, success is guaranteed no matter what events are taking place in the market. By following these pieces of advice, challenges can be successfully mitigated with even difficult currencies such as the USD.

The next level of trading involves the questions of what happens to any trader’s money once a trade is completed, what is in the cards with regard to the future of investment, and which plan of action a trader has developed to further conquer new goals and/or challenges. Some forex experts greatly criticize the financial news sources, despite their popularity and presence, in relation to their ability to give information on world economics. Sources such as CNBC and Bloomberg are some of the most prominent sources of financial-related information, yet forex connoisseurs claim that these companies always seem to be bullish on the economy because they are paid to maintain this positive flair by various sponsors. Banks, companies selling financial products, and brokerage firms are some examples of sponsors who have an interest in maintaining and preserving a positive outlook on the market regardless of what is currently happening.

While these sources do provide correct facts or numbers, traders still need to consult with some other sources to obtain additional information and get the full picture, as some theories or pieces of information can never be found in the mainstream media. The sources providing information on gold, for example, provide an excellent sample of how detailed and useful the media can be, as they are both bearish on the economy but they still give out real and relevant data. In order for traders to have a good defense, they need to see beyond biased media and get as much information as possible to see the whole picture.

In order for any trader to play defense in trading the USD, the information on the status of this currency as a safe-haven, the reserved currency of the world is extremely important. US citizens, for example, rarely diversify their money, which can be particularly dangerous in times of recession that are simply unavoidable. Recessions are a recurring theme in any market that preserve the overall health of the economy. As we can see from the table below, recessions always happen, sooner or later, lasting for a minimum of one year and usually a few years apart (see the number within brackets). Now, more than a decade after the last recession, we are witnessing the major impact the COVID-19 pandemic had on the world economy, putting more stress on the importance of learning how to protect one’s finances thoroughly.

Recessions in the United States
1953—1954 (4) 1980 (5)
1957—1958 (3) 1981—1982 (1)
1960—1961 (2) 1990—1991 (7)
1969—1970 (8) 2001 (10)
1973—1975 (3) 2007—2009 (6)

 

While the results of any recession can be truly devastating, it is important to note how the forex market is practically impervious to their damaging effects owing to the fact that fiat currencies simply have no intrinsic value. As traders in the spot forex market trade one currency against the other, what they can expect is for the market conditions to potentially dictate whether a currency pair goes up or down. The profit, however, is not something traders need to be concerned with in these cases, as the negative state of the market does not affect trading in this manner, especially if the ones doing the trade are knowledgeable and experienced in terms of trading currencies. While this is a trait unique to the forex market, it is vital that traders understand that as long as the trade is shielded from the damaging effects of a recession, they are not. 

Many traders are quite diligent and well informed with regard to the variety of methods of earning money and their financial endeavors may often range between stock, bonds, IRAs, real estate, and businesses to trading currencies. With the increased number of sources of money, traders understand that even if stocks decrease in value, bonds may go up, which understandably brings them a heightened level of security. Therefore, from a financial standpoint, traders feel fully covered because they have secured financial income from multiple sources that can bring them profit. Nonetheless, this plethora of revenue streams may still not be an indication that traders are sufficiently diversified, and the lack of understanding of what proper diversification means can potentially endanger all trader’s efforts.

When we compare all sources of income listed above (e.g. stocks, forex, etc.), there is one shared characteristic, or one common trait, that makes the difference in terms of diversifications – the means of payment. When a trader receives compensation for all his/her business endeavors in one single currency, they are likely to suffer from any external factor that affects the currency in question. This is a particularly important topic for the United States, whose currency has never truly depreciated to the extent of the question of its stability to arise. While the currency fluctuated up and down as part of its natural tendency, it thus never raised concerns that would propel the US citizens to truly think of the need to diversify the list of currencies they rely on. 

While the USD is still perceived as a safe-haven or reserved currency, the period of its glory may be slowly (or not so slowly) coming to an end as the hierarchy in terms of production and finances is changing on a global scale. Although the USD has not lost its position as the strongest currency, we have seen how risky certain situations concerning the US economy and currency were in the past 10 to 15 years, when the US government took extreme measures in order to preserve the stability. In each of such difficult stances in history, the US would typically decide to print more money, making it the only country on the planet to rely on quantitative easing as much.

As an extreme method of boosting the economy, the time may come when all dues may have to be paid eventually in this respect, which will in effect have quite terrible effects on anyone who has ever put his/her hopes in the USD alone. Coupled with the past moves of the US against other world countries in the attempt to dominate or maintain its strength, we can expect them to use every opportunity to get themselves out of the inferior position. While from the perspective of history many such wars were carried out through the involvement of the military, we are starting to see a new form of battles taking place on the financial plane.

Whether any decision the US has made in the past can ricochet right back and affect anyone involved or not, we can all agree that taking necessary precautions is very much a need today. While extending your portfolio to other business deals and endeavors is most definitely a favorable decision, long-term your finances do depend on the diversification of the currencies you depend on in the sense of remuneration. As the US is known for its tendency to hold one currency and traders are very much accustomed to enjoying the stability of the currency, the best choice to be made in this case is to include other currencies as well. Traders should, then, discover another currency on which they are long-term bullish and use them to half the risk that comes with putting all eggs into one basket. Some forex experts for example state that gold, as well as silver, is another extremely useful way to protect oneself from limiting options a single currency brings.

Generally, the precious metals market has proved to bring more benefits and one can compare them to stable coins from the crypto market, while the downside is quite small. The crypto market too is said to have an amazing upside and can help a trader stop depending on the USD, or any other currency alone for that matter. Therefore, if traders rely on other currencies as well, hold metals, and invest in cryptocurrencies as well, they both protect themselves and reduce the downside of trading/holding one currency alone.

With regard to where a trader should invest his/her finances, we can compare some events currently taking place with some of the forex experts’ views. The EUR, for example, may not be a good option because many countries are now making decisions to leave the European Union and, interestingly enough, EUR/USD may be one of the worst pairs to trade out of all 28 combinations with 8 major currencies. Moving towards another European country, the United Kingdom also proves to inspire little confidence in forex traders, as many believe that the downside of investing long-term in the GBP is too great at the time.

The AUD is another currency with a poor long-term outlook for investment due to the reduced exchange between Australia and China, poor housing market conditions, and the expectation of the economy to enter recession soon, supported by the facts and numbers given in some alternative sources other than mainstream media. In terms of economy, the NZD successfully withstood the last elections, which only confirms the health of the currency and the country’s economy, yet experts still are still doubtful with regard to investing in the currency, alike in the JPY. The Canadian political climate seems not to be pro-money at the moment, which is the last of the currencies that traders should not consider in terms of long-term investment. 

One of the most prominent forex personalities shared that he used to hold the following three currencies: the USD as his homeland currency, the CHF due to the unique neutrality and banking system in Switzerland, and the CNY because of the country’s continuous efforts to improve their economy. He also shared that he decided to invest his finances into other currencies as well, so he kept asking the question of which currencies he is bullish on. While making the decision where to put his money, the question of which countries represent the values that are reflected in their official currencies arose. At the same time, he started to notice how both rich people and big companies all shared the same inclinations to move from the West and turn to countries that have fewer taxes, serve as a nice place to live, offer a great business climate, and avoid liber politics that are believed to be damaging for the world of finance. This forex expert also shared how he eventually decided to split the amount of money invested in the CNY and allocate the second half in the RUB, since he strongly feels that Russia is on a good path, in addition to some smaller countries’ currencies due to their budding markets.

Forex experts are slowly revealing their beliefs that the world power is shifting to the East, supporting their view with the facts regarding some events that are already taking place. We are seeing a strong determination of many countries in the East to purchase precious metals, reflecting a significant gold-buying program that may reveal more than a desire to grow a country’s capital. Russia, China, Iran, and Azerbaijan significantly increased their gold reserves, while India showed a greater interest in silver for its central reserves. As quite a pricy move, the purchase of precious metals is rather interesting, especially on such a large scale involving so many countries. What is more, we know that precious metals are indeed precious for their intrinsic value and are unlikely to depreciate in value, especially since their supplies are limited. In the case of a currency war, currencies would be the first in line to drop in value as a result of a poor economic downturn, whereas any country with heavy reserves of precious metals would not only be safe but could easily move the center of power in its direction.

With such a massive move towards precious metals that is noticeable in several countries, the lessons are there for the taking. If wealthy people and countries having more money than any forex trader can ever imagine are deciding to start buying gold to this extent, why should forex traders refrain from making the same move themselves? What is more, precious metals are always a good commodity to have regardless of exterior factors and current circumstances. Nevertheless, especially now, at these uncertain times, holding precious metals can be perceived as a smart business investment that can provide you with added security.

Investing in the crypto market also appears to be a tremendous opportunity for sustainable financial growth and security. However, even the most immersed crypto enthusiasts do not actually know where this market is going to go and how it is going to develop. In addition, while the downside of trading cryptocurrencies can be quite dramatic, taking you right down to zero, the upside is very likely to be extremely good. Nonetheless, despite the danger it involves, the crypto market still offers much value as a form of diversification, protecting you even if all of your other business ventures fall apart.  

 If traders secure themselves by entrusting their finances in different markets, i.e. forex, crypto, and metals, it will provide a great source of security and prove to be an extremely wise decision, especially in times such as the ones we are currently living. The return on such investments can double in the sense that once any recession is over, which often last approximately one to two years, a trader can buy any stock ties for example for a much cheaper price and thus increase his/her finance increasingly fast. That way, these individuals will easily find themselves on top, as most people are unable to do the same due to the effect the recession had on them. What is more, with such a vast variety of instruments for making money, traders can feel comfortable in case any one of them goes down because, as it often goes, another source of income will start to increase in value to substitute for the loss experienced in some other market.

In conclusion, although the USD is still seen as one of the strongest currencies worldwide and a currency of choice in terms of country reserves across the globe, traders need to think of diversification outside the forex market. Invest in techniques, methods, and systems that you use in trading currencies and, by all means, combine these experiences with other instruments that will provide you with security and stability should the USD or the US market start to depreciate in the future. And, lastly, even if you are just a beginner, or even more so, choose to invest your money no matter how small the amount is elsewhere because defense is equally important to offense.

Categories
Forex Market Analysis

Prop Trader’s Take on the Depth of Market Tool

The number one concern professional traders have about trading is if their emotional and mental state is adequate for trading. To technical prop traders with systems for decision making, these two states are of less importance, because all they have to do is follow the signals. Now, this feat is not as easy as it […]

The number one concern professional traders have about trading is if their emotional and mental state is adequate for trading. To technical prop traders with systems for decision making, these two states are of less importance, because all they have to do is follow the signals. Now, this feat is not as easy as it […]

The number one concern professional traders have about trading is if their emotional and mental state is adequate for trading. To technical prop traders with systems for decision making, these two states are of less importance, because all they have to do is follow the signals. Now, this feat is not as easy as it sounds. Our minds and emotions tend to stay in the way in front of the proven trading system we have created. Most of the time, trader improvement is psychological, rather than technical improvements to the system. However, technical topics are still more popular, more interesting, and more important to beginner traders. Creating the system is important, although if you have a great system and mess with its decision signals, all that greatness means nothing. Depth of Market or DOM tool is one of the popular searches when looking for a “golden” indicator. 

The interest comes from the fact it is not the usual indicator that uses the price action data to calculate a line or generate some other trading signal. Whatsmore, it is a tool the big banks use. If the big banks use it then it must be a good thing, right? It also looks like a secret window into the market data visible only to the big players. The DOM indicator almost sounds like a VIP only tool. When we ask a professional trader about it, we get another picture, something is missing here to be really useful. But this is not going to stop the exclusivity, the search for a secret signal with half information. The popular lure to this indicator included in the MT4 platform by default is ever-growing, yet the information on how to use it in trading systems is almost non-existent. Now, if traders only focused similarly on psychological and money management aspects of trading, we would have much better percentages of traders making it in this business. 

The DOM indicator can be found within the context menu in the MT4 platform, not in the Indicators section. This tool shows a table with the bid and ask levels on a currency pair or other asset, provided by the broker the platform is connected to. Also, the volume is shown to these bids and ask levels to provide information about what is going on behind the chart. When you see higher volume at one of the price levels, you can see where most of the traders have set their positions. If you are not familiar, big banks tend to use these clustered levels to trigger stop losses and also move the price in a direction contrary to the sentiment. Logically, the most popular assets are the big banks’ targets for this activity whereas alternative currency pairs and assets do not show as much sentiment negative correlation to the price. If the DOM tool provides all the information the big banks use, just trading as them is a very good recipe for forex success. 

Before we give an opinion on the DOM, let’s see how it is used. Most of the traders will use the DOM for trade entries. Some might find it easier to use the DOM window to set stop loss, take profit, and have a glance at the price range. However, when technical traders look for indicators to include in their systems, they have a role. The roles cover several aspects of forex such as volume measurement, trend entry signals, exit signals, and money management tools that define how much risk (trade size) we put into every trade.

When a tool does not provide any information about these categories, traders are not interested. At least the ones using technical systems to trade. The DOM indicator seems not to cover any of these categories, unfortunately. It is a good tool to see the volume structure across price levels, but how you can use this information in trading is very limited. Whatsmore, if you have a dealing desk type broker, the volume part is not available. ECN brokers, on the other hand, should provide this information. 

Even when you have the volume of information from the broker, the DOM tool still does not provide completely useful information. The range to which the volume is shown is just too short. You do not know if that volume is sustainable in the longer term (day). You will need this info to determine the strength of a movement. Volume or volatility need to be high enough for a trader to enter a trade, otherwise, the signals you have from your system will not be reliable enough. So if we want to put the Dom into the volume meter category, it does not provide us with enough range. Additionally, the volume presented in the table does not show what kind of orders make that volume at that price.

Are people going long at that price or short? What is the percentage of traders long and short right not for that asset? How does this volume cluster effect that percentage or sentiment? If the volume cluster structure has the same long to short ratio, it will not change the price direction much. Finally, are the banks going to react to that cluster? The answers to these questions are withheld with the big banks. When all is said and done, the DOM indicator does not give you much, probably the best use of it is for trade entries and typing the stop loss / take profit levels. For making trade decisions, you will need more data this DOM tool integrated into the MT4 platform does not provide. Even if you deal with a broker who provides level 2 quotes, you cannot know how Market type orders will affect the price action. 

So let’s pretend you have the ultimate DOM tool, with all the volume ranges, sentiment ratios, and other useful insights. The tool can easily become a trader deception tool by the big players. For example, big banks can split the high volume position they want to be realized into smaller pieces, making the position invisible as it blends with other volume levels. Then, we have EAs or robots that do not have to place pending orders on the broker servers, they have them in their memory and trade market orders as seen by the broker when the memorized level is reached.

Another form of manipulation is deliberate placing high volume (trade position) on one price level by the big banks to make traders see it and attract more trades in one direction. The big banks then cancel the order and place it on the other side, triggering traders’ orders and pushing the price in another direction again. If you want to trade like the big banks you will have to differentiate institutional positions from retail or traders’ positions, which is not possible without a very deep insider insight. 

Curiosity is a great trait, exploring other indicators and tools you can use for your system is key to success. However, it also means you will find better ones less and less. Often, you will spend time testing tools and indicators that fail to beat your current best, but this should not avert your quest to improve your system. Maintaining this curiosity as you discover unorthodox tools will be rewarded in many ways. Unfortunately, it looks like efforts to make use of the Depth of Market tool the way we want is in vain. As with many indicator types, there are versions based, mixed, and upgraded with different elements, ultimately creating a tool that can be one of the best on your list.

The DOM indicator has a few variants made by enthusiasts, most of the time it is not for free, but even these have not found a place in our systems. You might find one by the name of the Volume Profile Index, Sentiment tools, etc. If we try to trade the big banks way, we will always be one step back, we lack the information and the power only the big banks have. Instead, prop traders like to stay under their radar, their monitoring for the trader position clusters, and trade only high percentage setups. This is done by trading less popular currency pairs, avoid news trading, popular tools, and focusing on what matters the most – money management and psychology. Hopefully, this article will save you a lot of time when it comes to the DOM tool.

Categories
Forex Fundamental Analysis

Importance Of ‘Existing Home Sales’ Forex Fundamental Indicator

Introduction

Introduction

Introduction

In any economy, the real estate market provides insights about households’ sentiment of the future and their present welfare. Policymakers, central bankers, businesses, economic analysts, and individual consumers track real estate data. They do so, to deduce, in one form or another, information about the state of the economy. The Existing Home Sales figure is estimated to account for up to 90% of total home sales. For forex traders, existing-home sales data provides an invaluable insight into the economy.

Understanding Existing Home Sales

Existing homes are homes owned and occupied before being listed in the market. Therefore, existing home sales as an economic indicator show the data on the sale of homes pre-owned and pre-occupied before being listed in the market.

Existing home sales data captures the prices and sales volume of existing homes in a country. It is worth noting that the existing home sales data strictly records transactions that have been completed. This record is unlike the new home sales, which includes data on partial payments and agreements of sale.

Calculating Existing Home Sales

Each month, a survey is done to determine the volume of existing-home sales and their prices. In the US, for example, a survey is done by selecting a nationally representative sample of 160 Boards and Multiple Listing Services. This sample represents about 40% of the total existing-home sales.

A non-seasonally adjusted data on existing home sales is derived by aggregating the raw data from the sample. The aggregated data is then weighted to represent the national existing home sales accurately.

A seasonally adjusted existing home sales data is arrived at by annualizing. This adjustment helps to smoothen out the disparities that arise due to seasons. Here’s how the disparity comes along. Research has shown that home resales are higher during spring and summer and slows down during winter. Therefore, from November to February, the resale of homes is lower. Typically, it is assumed that people tend to search for homes when the weather conditions are more agreeable, thus increasing demand and, with it, prices of homes. This seasonal difference is removed with annualizing, creating a more realistic trend in the existing home sales.

Note that the annualized existing home sales for a particular month show the resales the month represents if the resale pace for that month were to be maintained for 12 consecutive months.

Using Existing Home Sales in Analysis

As an economic indicator, existing home sales are regarded as a lagging indicator. However, since the data shows the changes in the number of home resales and the prices, it can provide invaluable insight into the trend of households’ welfare and the general economic health.

Most of the transactions in real estate involve mortgages. Let’s take an example of an increase in existing home sales shows that more households can afford and service mortgages. This increase could be for a number of reasons.

Source: St. Louis FRED

Firstly, it could show that the welfare of the households has improved. The improvement could result from an increase in disposable income or an increase in the rate of employment. Increasing disposable income means that households have more money to invest in the real estate market, whether speculatively or not. An increase in the employment levels, on the other hand, means that households who previously could not afford to buy a home are now eligible for mortgages. I both these instances, the existing home sales data shows that the economy is expanding and the welfare of households is improved.

Secondly, increasing home sales imply that interest rates are low, allowing more households to borrow cheaply. The availability of lower interest rates shows that the demand in the economy is bound to increase, which leads to economic growth.

Thirdly, since existing home sales involve the current homeowners selling their property, it means that they believe they can get better rates in the current market. This is especially true for speculative investors who participate in real estate to profit from price fluctuations over time. Now, a speculative homeowner buys a home at a lower price to resell when prices are higher. An increase in the price of homes means the economy is currently performing better than it previously did. Thus, an increase in the existing home sales shows economic improvement.

Similarly, current speculating home buyers offer the sentiment that they believe the economy is going to perform better in the near term. Therefore, existing-home sales data can be used to show periods of economic recoveries and forestall an impending recession.

Source: St. Louis FRED

Impact on Currency

As we have seen, existing home sales can be used to gauge how the economy is performing. Although it is lagging, it can be used as a leading indicator for the aggregate demand in the economy as well as the general economic health. Let’s see how this analysis affects the forex market.

An increase in the existing home sales shows that the economy has been performing well. It also indicates that households’ welfare is improving, with higher employment levels and increased disposable income, which can further influence the growth of the economy. Similarly, since an increase in the existing home sales offers the sentiment of a perceived economic improvement, it translates to the increasing value of the country’s currency.

Conversely, a country’s currency will depreciate as the existing home sales reduce. Continually dropping existing home sales imply worsening economic conditions for the households. These adverse conditions could result from increasing unemployment levels, higher income taxes, or general anticipation of challenging economic conditions that force households to cut back on discretionary expenditures.

Sources of Data

The National Association of Realtors is responsible for the survey and the publication of the US existing home sales data. An in-depth and historical review of the existing home sales data, both seasonally and non-seasonally adjusted, is published by St. Louis FRED. Trading Economics publishes global existing home sales data.

How the Monthly Existing Home Sales Data Release Affects Forex Price Charts

The most recent existing-home sales data in the US was released on September 22, 2020, at 10.00 AM ET and can be accessed at Forex Factory.

The screengrab below is of the monthly existing home sales from Forex Factory. To the right is a legend that indicates the level of impact the fundamental indicator has on the USD.

As can be seen, this is a low-impact indicator.

In August 2020, existing home sales were 6m compared to 5.86m in July. The sales were lower than analysts’ expectations of 6.05m.

Now, let’s see how this release made an impact on the Forex price charts.

EUR/USD: Before Existing Home Sales Release on September 22, 2020, 
Just Before 10.00 AM ET

The pair was trading in a new-found steady downtrend. This trend can be seen with the 20-period MA steeply falling with candles forming further below it.

EUR/USD: After Existing Home Sales Release on September 22, 2020, at 10.00 AM ET

After the news release, the pair formed a 5-minute ‘Doji’ candle. Subsequently, the pair continued to trade in the earlier observed downtrend.

Bottom Line

As expected, the existing home sales release had a negligible effect on the EUR/USD pair. Therefore, we conclude that in the forex market, existing-home sales data is a negligible indicator.

Categories
Forex Assets

Asset Analysis – Trading The CAD/PHP Forex Currency Pair

Introduction

Introduction

Introduction

CAD/PHP is an exotic Forex currency pair where CAD is the Canadian Dollar while PHP is the Philippine Peso, the Philippines’ official currency. This article will cover fundamental aspects that you should know about CAD/PHP before you start trading the pair.

Understanding CAD/PHP

In this currency pair, the CAD is the base currency, and the PHP is the quote currency. The CAD/PHP pair price represents the quantity of the PHP that can be bought by 1 CAD. If the CAD/PHP price is 36.181, it means that for every 1 CAD you have, you can buy 36.181 PHP.

CAD/PHP Specification

Spread

In forex trading, the spread is the difference in the value at which a trader can buy a currency pair and the price at which they can sell it.

ECN: 10 pips | STP: 15 pips

Fees

There are no trading fees associated with STP accounts. However, for the ECN accounts, the trading fees that you will incur per transaction are determined by your forex broker.

Slippage

When trading forex, slippage occurs when there is a difference between the price at which you place your trade and the price at which your broker executes it. Slippage in forex frequently happens at times of higher volatility or when significantly larger orders are made.

Trading Range in the CAD/PHP Pair

Forex traders should know how a given currency pair changes within different timeframes. This change in terms of pips is referred to as the trading range. It is used to analyze the historical volatility of a given pair across different timeframes. Therefore, the trading range can be used to determine the amount of profit that a trader should expect to earn.

The Procedure to assess Pip Ranges

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

CAD/PHP Cost as a Percentage of the Trading Range

Slippage, spread, and brokers’ fees amount to trading costs to a forex trader.

Total cost = Slippage + Spread + Trading Fee

Therefore, forex traders should be aware of how these costs vary during different timeframes depending on the pip change of the currency they trade.

The tables below are of the percentage costs that can be expected when trading the CAD/PHP pair under the ECN and STP account types. The costs are expressed as pips.

ECN Model Account

Spread = 10 | Slippage = 2 | Trading fee = 1

Total cost = 13

STP Model Account

Spread = 15 | Slippage = 2 | Trading fee = 0

Total cost = 17

The Ideal Timeframe to Trade CAD/PHP

From the above trading range cost analysis, the most cost is incurred at the 1H timeframe at 220.34% for the ECN account and 288.14% for the STP account. These costs imply that it is not ideal to trade during times of low volatility of about 2.3 pips. However, the trading costs associated with the 1H, 2H, 4H, and the 1D timeframes are lower when the market volatility is above average. Intraday traders can time their entry when the volatility of the CAD/PHP is above average.

The longer timeframes for both types of accounts have lower trading costs associated with them. Thus, longer-term traders can get to enjoy lower costs.

Forex traders can also significantly reduce their trading costs by employing limit order types to ensure they do not experience slippage costs. Let’s look at the total costs when slippage is zero with the ECN account.

Total cost = Slippage + Spread + Trading fee

= 0 + 10 + 1 =11

With the ECN account, the highest trading cost reduces from 220.334% to 169.49%, showing that using the limit order types significantly reduces the trading costs.

Categories
Forex Course

155. Getting Started With Forex Fundamental Analysis

Introduction

Introduction

Introduction

Fundamental analysis and technical analysis are an essential part of Forex trading. A Forex trader cannot be a profitable trader unless he knows this analysis. Fundamental analysis provides a logical reason for the upcoming movement of a currency pair based on economic releases. Traders evaluate these releases to determine the exact movement of a currency pair.

What is Fundamental Analysis?

According to finance and accounting, Fundamental analysis is the process of analyzing the business’s financial statement, including the competitor and market analysis. Moreover, it considers the core feature of a country’s macroeconomic factor, including the interest rate, inflation, GDP, manufacturing index, export, import, etc.

However, in forex trading, the fundamental analysis focuses on macro-economic factors mostly. The currency pair in a forex market represents the economy of two separate countries. In fundamental analysis, traders usually focus on major economic events and releases and their impact on a currency pair. Moreover, most professional traders consider both technical and fundamental analysis to get the best output from the market.

Elements of Fundamental Analysis

The fundamental analysis has two major elements- the fundamental releases and the fundamental events.

The Fundamental Releases

Fundamental releases are economic news of releases of a country that is published at regular intervals. Among the fundamental releases, the primary 4 economic releases are most important as it creates an immediate impact on a currency pair. Let’s have a look at four major economic releases:

  • Interest rate: The interest rate is how much we have to pay to the central bank if we take any loan. Central banks raise the interest rate if the economic condition is excellent. On the other hand, the central bank reduces interest rates if the economic condition is terrible.

Image Source: https://www.ecb.europa.eu/

  • Inflation Rate: Inflation is the buying power of the money. The increase in inflation indicates a rise in the consumer product’s price that reduces the buying power of money. Any increase in the inflation rate is terrible for the economy.

Image Source: RBA

  • Gross Domestic Product: Gross Domestic Product or GDP refers to the country’s products and services’ total value. Any increase in GDP is positive for a particular currency.
  • Employment: The number of employed and unemployed persons for a country works as a crucial fundamental indicator. Any decrease in employment is bad for the economy, and any increase in employment is reasonable.

Image source: https://www.bankofcanada.ca/

Fundamental Events

Besides fundamental releases, some essential fundamental events put a significant impact on a currency pair as mentioned below:

  • Central Bank Meeting: Central of a country meets once a quarter and discusses its economic condition. Any dovish tone negatively impacts the currency, while a hawkish tone creates a positive impact.
  • Geopolitical Events: There is some condition when one country meets another country to discuss the trade deal or conflict. Any positive news from a country’s geopolitical event may create a bullish momentum of the country’s currency.

In fundamental analysis, traders usually evaluate these releases and events to measure the strength and weaknesses of a currency pair.

Conclusion 

Traders usually gather recent economic releases and compare the result with the previous result. Any better than expected result indicates a buying opportunity on a particular currency. On the other hand, traders often evaluate fundamental releases to measure the volatility of a currency pair.

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Categories
Forex Basics

How Too Much Information Can Destroy Your Trades

It may seem a strange question, but people have asked this before: “Will too much information ruin your trades?” While it might be somewhat unlikely, the truth is that too much information can complicate your trades, and even end in losses. From my experience, there is a possibility of having an information overload. This is […]

It may seem a strange question, but people have asked this before: “Will too much information ruin your trades?” While it might be somewhat unlikely, the truth is that too much information can complicate your trades, and even end in losses. From my experience, there is a possibility of having an information overload. This is […]

It may seem a strange question, but people have asked this before: “Will too much information ruin your trades?” While it might be somewhat unlikely, the truth is that too much information can complicate your trades, and even end in losses. From my experience, there is a possibility of having an information overload. This is also known as “analysis paralysis.” In other words, you have too much information that prevents you from making a clear and precise decision.

Even though it may look a little strange, the fact is that too much information can overwhelm the trader, making him afraid to open a position. The idea of putting up a trade is too stressful, but when you have conflicting information, it can make things a little difficult. As the main rule, I tend to say that when there is too much conflicting information, it is better to stay out of the market. I like to be safe enough when I put money on the market, but I also recognise that my security in a trade does not necessarily mean it will work. There is one thing you should remember when you place a trade: it is important to pay attention to crucial information, not to all information.

Pay Attention to What Matters

One of the main problems for traders is that they can be influenced by any news, tweet, or rumor they might hear. Unfortunately, reporters and people on social media commenting on politics or economics generally have very little knowledge or are not experts on how markets move. The truth is that reporters are just that: reporters. Your job is to give the best possible information, not so much give their opinions. Economic ads are important and should be read and analyzed by traders. I simply question whether reading an analysis of the economic ads counts as reading the news, and I don’t think it does.

The trend is also something important to which you should pay attention, you must accept and learn that the fact of if a currency pair has a rising trend, it has it for a reason. It doesn’t matter how “right or wrong” news is, because price action is what makes you money. If you buy during an upward trend and the market continues to grow, you are making money. Fighting the collective wisdom of the markets will lead you to lose a significant amount of money. Too much trading information.

It is also important to read economic ads along with trend analysis, not as an individual story. Economic advertisements may vary in their importance and you should think about the general trend of economic advertisements for a particular currency. For example, if America’s economic announcements have been strong over the past few months then it makes sense that the US dollar is going to strengthen. A particular ad rarely makes a difference in the trend.

Everyone Has an Agenda

When you inquire about available information, you should keep in mind that everyone has an agenda. Your broker, for example, wants you to imagine that there is a huge amount of money waiting for you every moment of the day (which might be true). Because of this, the brokers publish news that they expect them to take to action. Why is this? Because they make money with a difference, and they make money when you lose in a trade. Don’t let broker news be the only information responsible for your trading decisions, as there is a lot of information.

The forums are also a place where I have seen much destruction done to the accounts of retail traders. Unfortunately, in the beginning, when you start trading one of the first things that notice is that there are a couple of forums that many people visit. A little common sense can vanish when it comes to the conversations you have in those forums, and they should not be seen as more than just entertainment and nothing else. If the old adage that 90% of traders lose money, in the long run, is true, then that means 90% of traders in the forum are losing money. If that is the case, why bother to listen to their opinions?

Conclusion

I cannot stress enough that you need to be very cautious about the information you take into account before making a trade. For example, I’m a technical trader. It’s because of this that I rarely pay attention to news or economic ads, and I just follow what prices do because, in the end, that’s what matters to me. Even if you are a trader who relies on fundamentals must be careful to read other people’s analyses and be sure to do your own research without relying on outside opinions. You should also look at economic data such as GDP, interest rate decisions, employment, and the like.

What you won’t find particularly useful will be the opinions of other people. It doesn’t mean they can’t be correct, but the reality is that when you put in a trade, you and only you may be responsible for it. The universe is full of people who are not able to accept responsibility for their own decisions, and in the commercial vortex that can ruin it. However, we must also think about the fact that optimizing the process not only simplifies the process, it also keeps it connected to what interests it.

Decide what is truly crucial in your trades and focus on it. Understand the fact that you will have occasional losses but in the end, you must earn more than you lose. Unfortunately, if you have too much information affect your trading decisions you could start to go in and out and make bad decisions based on concern. Even worse, it could move quickly between the sale and the purchase. Most of the time this type of event causes you to incur losses. Much more important is not to let other people dictate how to trade with your account, as they have nothing to lose with their trades.

Categories
Beginners Forex Education Forex Basics

Is Forex Trading Actually Profitable?

You probably know that most retail Forex traders lose money. In this article, we examine the statistics reported by Forex brokers on the profitability of customers under ESMA regulations, as well as the conclusions of the research on this topic, to answer the question of which traders lose or earn money in long-term Forex trading, […]

You probably know that most retail Forex traders lose money. In this article, we examine the statistics reported by Forex brokers on the profitability of customers under ESMA regulations, as well as the conclusions of the research on this topic, to answer the question of which traders lose or earn money in long-term Forex trading, […]

You probably know that most retail Forex traders lose money. In this article, we examine the statistics reported by Forex brokers on the profitability of customers under ESMA regulations, as well as the conclusions of the research on this topic, to answer the question of which traders lose or earn money in long-term Forex trading, and why.

We’ve all heard statistics cited as 95%, 90%, or 80% of people opening an account with a Forex/CFD Broker exploit their account within six months. Some traders may think this out of respect for the Pareto principle, which says that 80% of profits are made only in 20% of cases. There are ways to know with some certainty if any of these estimates can be true? Yes, according to the new ESMA regulation in the European Union, which force Forex/CFD brokers to prominently disclose on their websites what is the percentage of loss or profit of their average retail investor.

Profitability of the Clients of the Largest Brokers

All major Forex/CFDs retail brokers report very similar data, so it is reasonable to assume that approximately 70% of all CFDs retail operators lose money. The percentage of losers is very similar among brokers, suggesting that is the market and other traders, and not the brokers, those responsible for the long-term losses of their customers.

Although these data include customers operating non-French products, there is no reason to believe that the results differ between customers operating CFDs Forex and non-French. Even Forex retailers appear to be more profitable than expected, as traditional estimates of 80% to 90% as losers appear to be an overestimate.

Why do 70% of Forex retailers lose money? Now that we know that for 70% of people who try, Forex trading is not profitable, we should ask ourselves why. Finally, if markets are changing as the well-known “efficient markets” hypothesis says, then the winners and the losers should not be divided into approximately 50 – 50?

A fair division between winners and losers could make sense if Forex were a zero-sum game, as there has to be one loser for each winner, and vice versa. However, the Forex / CFD retail trade is not a zero-sum game, but a negative-sum game, because the Forex retail trader:

-You must pay a spread, a commission, or both to get in and out of an operation.

-You should normally pay a one-day commission for any open transaction that takes place around 5 pm New York time.

This means that the odds stack up against the Forex/CFD retailer. But, if it is possible to overcome these probabilities, as 30% of profitable retailers can testify. A few years ago, a large Forex retail broker published data showing two distinct differences between profitable traders and losers. Traders who:

  • Made larger deposits in their accounts
  • Used the lowest real lever they were more likely to be profitable

We will study each of these elements separately, although they are related because traders with lower deposits tend to use greater leverage.

Why are the best-capitalized Forex traders more successful?

Retail Forex traders who deposit more money are more likely to take their trading seriously, because they have more money invested, and they know instinctively that their chance to make a significant profit is also greater. For example, an operator who deposits 100 dollars and gets a return of 20 dollars should be as proud of himself as an operator who deposits 10,000 dollars and gets a return of 2,000 dollars, since this is the same business achievement: a return of 20%. However, very few people anywhere in the world can be excited to make $20. So, to some extent, this could just be a matter of focus and meaning.

Why are Forex traders with less leverage more successful?

A feature of retail Forex operations is the relatively high leverage offered by many Forex / CFDs brokers, specifically those outside the European Union (Australia allows Forex leverage of up to 500-1). Many brokers also allow accounts with deposits even below $100 to be opened. This means that many Forex retailers can deposit $50 and use leverage of 400 to 1 to make a $20,000 transaction. This operator will then delete your account or perhaps triple it, which would probably lead to another excessive leverage operation with a similar result. Although there is some logic at stake here – a series of winning and highly leveraged operators would be a way to get a huge return quickly in theory – the odds that such a bet will result in anything but a bankrupt account after a few operations are very small.

It is also worth recalling that lower leverage facilitates risk control and limitation, which is a key factor in long-term profitability. This issue of risk is best illustrated by the fact that once a trader has decreased more than 20 percent from its maximum capital, it becomes exponentially more difficult to recoup the loss. A loss of 20% requires a gain of 25% to be recovered; a loss of 50%, a gain of 100%.

How Is It Possible to Be a Profitable Forex Trader?

Use very low leverage or do not use it. Now that we’ve looked at the evidence, the odds look better for you. 30% of Forex traders are able to be profitable, and that number would probably be higher if not all traders using too much leverage were taken into account. So the first thing you can apply is to use a low leverage or even invest without leverage. In reality, this means not risking more than 0.5% of your account in a single transaction. Don’t try to be greedy, in the Forex trade, it’s counterproductive.

Make a significant deposit: If you can only deposit 100 USD, that’s fine, but you have to respect that $100 without getting greedy. If the $100 doesn’t mean much to you, you’re almost certainly not motivated enough to negotiate well.

Use a realistic trading strategy: You can’t expect to start doing business and make money. You have to wait for the opportunities when you think the market is putting the odds in favor of long or short trades, and then take the trades according to your plan. If you don’t have a strategy to identify those opportunities, then you’ll be groping in the dark.

It is fairly well established that markets are not efficient and that trend-tracking strategies if carefully executed, are profitable in long-term liquid markets, and that includes major Forex currency pairs such as EUR/USD and USD/JPY. One of the best-functioning strategies in the Forex markets in recent decades is to operate in these two major currency pairs up to new peaks or lows of 50 days, using relatively tight loss stops and some sort of downward profit-taking. Drawback strategies can also be used to trade Forex currency pairs profitably while on a strong trend.

Most of the time, Forex pairs have a range: if the price goes up one day, it will most likely go down the next day. It is hard to take advantage of this, but when it seems obvious that the price of a Forex pair goes nowhere, you can try to trade the bounds of the range in short terms, using adjusted stops to increase the risk-reward in winning trades.

It can be said that business strategies based on fundamental analysis are less successful in Forex, but fundamental analysis can be used to filter commercial entry signals generated by technical business strategies effectively.

Follow your trading strategy and be consistent.

Having a good and profitable business strategy will not help you use money if you don’t execute it correctly. It is essential not to be frustrated by the loss of trades, remember, it is all part of a plan to have something to lose operations, and it is not a big problem as long as you keep the sizes of small individual operations. You must expect the lost legs to be more than compensated during the winning legs. However, you must be consistent, because if you stop trading, you will probably miss the winners who would have made the difference. It is important to control your emotions: most operators are excited, but profitable operators find a way to prevent their emotions from ruining the execution of operations.

How much money can you earn by trading in Forex? In Forex trading, profits tend to arrive unevenly, so it is best to look at long-term performance as the most profitable possible performance. The results can be changing and there is no guarantee of profit, but good Forex traders tend to outperform stock market benchmarks. I’ve seen the best ways to turn $10,000 into $1 million trading Forex before.

Conclusion

Although investing in Forex does not bring benefits for most retailers, you can put the odds of return in your favor by using very little or no leverage, keeping the maximum risk for trading, and following an effective trading strategy without becoming greedy or impatient.

Frequently Asked Questions

Can you get rich trading with Forex?

It is possible to earn a lot of money trading on Forex, but it is very difficult to do so unless you start with a lot of money, as 70% of Forex retailers lose money in the long run. However, overcoming long-term stock markets is a realistic goal.

How much do Forex traders earn a day?

A Forex trader can earn or lose any amount of money in a single day without worrying about it, as long as the losses are not excessive. What counts is the long-term performance, as one-day trading is statistically irrelevant.

Is negotiating in Forex a good alternative?

Trading in Forex can be a good idea if you capitalize properly and trust in a good long-term business strategy, limiting risk, as it is accessible and can be a diversified investment.

Categories
Forex Signals

USD/CAD Managed to Extend Its Previous Session Modest Gains

During Tuesday’s early Asian trading session, the USD/CAD currency pair managed to extend its previous session modest gains and remain well bid around closer to 1.3200 level due to the declines in the crude oil prices, which tend to undermine the commodity-linked currency the Loonie and helps the currency pair to put the fresh bids during the early Asian session. 

During Tuesday’s early Asian trading session, the USD/CAD currency pair managed to extend its previous session modest gains and remain well bid around closer to 1.3200 level due to the declines in the crude oil prices, which tend to undermine the commodity-linked currency the Loonie and helps the currency pair to put the fresh bids during the early Asian session. 

During Tuesday’s early Asian trading session, the USD/CAD currency pair managed to extend its previous session modest gains and remain well bid around closer to 1.3200 level due to the declines in the crude oil prices, which tend to undermine the commodity-linked currency the Loonie and helps the currency pair to put the fresh bids during the early Asian session. 

On the contrary, the broad-based U.S. dollar weakness, triggered by the combination of factors, could be considered one of the key factors that kept the lid on any additional gains in the currency pair. As of writing, the USD/CAD currency pair is currently trading at 1.3190 and consolidating in the range between 1.3148 – 1.3195.

The optimism over the coronavirus (COVID-19) vaccine/treatment was recently overshadowed by the concerns about the second wave of coronavirus infections, which keep fueling the doubts over the global economic recovery. Besides this, the renewed conflict between the U.S. and China also weighed on the market trading sentiment. It is worth mentioning that Mike Pompeo has stated that ‘We are sanctioning mainland-China and Hong Kong entities and individuals for conduct related to the sanctioned proliferator the Islamic Republic of Iran Shipping Lines. He further added that our warning is clear: If you do business with IRISL or its subsidiaries, you will face U.S. sanctions.” This recently exerted downside pressure on the trading sentiment and contributed to the currency pair losses.

Despite this, the broad-based U.S. dollar remained depressed as the investors continue to sell U.S. dollars in the wake of the renewed hopes of additional U.S. fiscal stimulus measures and hopes of a coronavirus vaccine at the end of this year, which tends to undermine the safe-haven U.S. dollar. Elsewhere, the U.S. dollar losses were further bolstered by the doubts over the U.S. economic recovery amid rising coronavirus cases. Thus, the U.S. dollar losses become the key factor that cap further gains in the currency pair. Simultaneously, the U.S. Dollar Index that tracks the greenback against a bucket of other currencies dropped by 0.04% to 93.672.

On the bullish side, the WTI’s weakness restricts the USD/CAD bearish moves as oil is the biggest export-item for Canada. However, the WTI crude oil prices failed to extend its previous day gaining streak and remain depressed on the day mainly due to China’s GDP grew less than expected in the third quarter (Q3), which fueling concerns over the demand for crude oil from the world’s second-largest oil consumer. This, in turn, undermined the sentiment around the crude oil prices. The concerns over the sharp rise in new coronavirus cases, which could trigger renewed lockdown restrictions and damage the global economy’s ongoing recovery, continued challenging the crude oil bulls. Thus, the crude oil prices’ losses undermined the commodity-linked currency the Loonie and contributed to the currency pair gains.

Looking forward, the market traders keeping their eyes on the Housing Starts and Building Permits data. In the meantime, the updates surrounding the fresh Sino-US tussle, as well as the coronavirus (COVID-19), could not lose their importance.

Daily Support and Resistance

S1 1.308

S2 1.3141

S3 1.3166

Pivot Point 1.3202

R1 1.3226

R2 1.3263

R3 1.3323

The USD/CAD is trading mostly sideways over the 1.3170 level, and recently, it’s trying to a bullish engulfing pattern that may drive upward movement in the market until the 1.3250 level. Conversely, the bearish breakout of 1.3175 level can drive selling bias until 1.3095. Overall, the RSI and MACD are in support of selling bias until the 1.3095 level. Let’s consider taking a buy trade over 1.3170 and selling below the same level today. Good luck!

Categories
Forex Signals

AUD/USD Violates Bearish Flag – Bearish Bias Dominates!   

The AUD/USD pair was closed at 0.70685 after placing a high of 0.71144 and a low of 0.70685. Overall the movement of the AUD/USD pair remained bearish throughout the day. The AUD/USD pair extended its previous day’s losses and dropped for the third consecutive day on Monday as the market sentiment soared after the reports from the US dampening hopes of a US COVID-19 stimulus deal.

The AUD/USD pair was closed at 0.70685 after placing a high of 0.71144 and a low of 0.70685. Overall the movement of the AUD/USD pair remained bearish throughout the day. The AUD/USD pair extended its previous day’s losses and dropped for the third consecutive day on Monday as the market sentiment soared after the reports from the US dampening hopes of a US COVID-19 stimulus deal.

The AUD/USD pair was closed at 0.70685 after placing a high of 0.71144 and a low of 0.70685. Overall the movement of the AUD/USD pair remained bearish throughout the day. The AUD/USD pair extended its previous day’s losses and dropped for the third consecutive day on Monday as the market sentiment soared after the reports from the US dampening hopes of a US COVID-19 stimulus deal.

The upbeat Chinese GDP data for the third quarter gave strength to the Australian dollar and helped AUD/USD pair to open its week on a strong note. The Asian giant’s economy and the largest trading partner of Australia expanded by 4.9% in Q3 and showed strong industrial output and consumption figures that pointed out a strong recovery from the pandemic that hit Q2 hardest.

The China-proxy Aussie gained traction after the upbeat data from China, and the US dollar became weak, ultimately pushing the AUD/USD pair on the higher side in the early trading session on Monday. However, the gains were short-lived, and the AUD/USD pair’s movement reversed as the hopes for a US stimulus package faded away.

During the Weekend, the statement from Nancy Pelosi that a deal might be reached before elections over the US stimulus package gave strength to the risk sentiment. The improved risk sentiment pushed AUD/USD pair to open on a strong note, but the upward momentum was broken after hopes deteriorated on Monday.

The Republicans added another 0.1 trillion dollars to the previous $1.8 trillion stimulus package that failed to get approval. The US President showed his willingness to approve more stimulus before elections; however, he needed to deal with Republicans first. The US House Speaker Nancy Pelosi provided a 48-hours deadline to Republicans to reach a deal to pass the coronavirus stimulus package before elections. 

The mixed situation has weighed on the risk sentiment as the stimulus hopes are fading with the passage of time and the risk perceived Aussie suffered that reversed the direction of AUD/USD pair on Monday.

The pair AD/USD started moving in the downward trend because of the rate differentials between 10-year government bond yields of Australia and the US. The US 10-year Treasury yields were around 0.77%, and the Australian counterpart was at 0.750%. 

The market participants will be looking forward to the release of monetary policy meeting minutes from the Reserve Bank of Australia on Tuesday and will keep following the bearish bias until finding some fresh clues for future trading.


Daily Technical Levels

Support Resistance

0.7078 0.7101

0.7064 0.7110

0.7056 0.7124

Pivot point: 0.7087

The AUD/USD is trading at the 0.7043 level, having violated the bullish flag pattern on the 2-hour timeframe. On the lower side, bearish trend continuation can lead the AUD/USD pair towards the support area of 0.7014 level. At the same time, the support continues to stay at the 0.7068 level. The bearish bias remains dominant today; therefore, we should look for selling trades below the 0.7067 level today. Good luck! 

Categories
Forex Psychology

Behavioral Finance: How Can it Help Us in Our Trading?

Due to recent developments at the global level, which led to “abnormal” behavior in the financial markets, I consider it very opportune to insist on the main contributions made by the discipline in charge of studying the behavior of investors in the financial markets, commonly known as Behavioral Finance. Behavioral Finance: Recent Moves in the […]

Due to recent developments at the global level, which led to “abnormal” behavior in the financial markets, I consider it very opportune to insist on the main contributions made by the discipline in charge of studying the behavior of investors in the financial markets, commonly known as Behavioral Finance. Behavioral Finance: Recent Moves in the […]

Due to recent developments at the global level, which led to “abnormal” behavior in the financial markets, I consider it very opportune to insist on the main contributions made by the discipline in charge of studying the behavior of investors in the financial markets, commonly known as Behavioral Finance.

Behavioral Finance: Recent Moves in the S&P 500

The discipline responsible for studying the behavior of investors in financial markets, commonly known as “Behavioral Finance”. This discipline is the one that has had more transcendence in these years and it is the one that has been making great contributions to be able to explain what previous theories could not. Recall that previous theories based their analysis and conclusions considering or assuming that investors were rational, It is precisely where this new theory of behavior tries to focus and therefore allows us to better explain many of the events we see in the markets and that rational theories cannot.

Although historically there were contributions and ideas about the behavior of individuals, It was only at the beginning of the 21st century that this new trend gained strength when Daniel Kahneman was Nobel Prize in Economics for Study and Analysis psychology concepts in the economic area. Shiller and Thaler later received the same award for contributions that considered aspects in this regard to the economic academy.

Ultimately, academics and analysts have focused in recent years on aspects of investor behavior and psychology. Daniel Kahneman was Nobel Prize in Economics for incorporating psychology concepts in the economic area. Shiller and Thaler later received the same award for contributions that considered aspects in this regard to the economic academy.

In order to simplify, the theory of “Behavioral Finance” holds that most decisions of human beings are carried out thanks to “shortcuts” This means that many decisions are made without carrying out a strictly rational analysis process. Based on personal experience and characteristics, individuals make decisions without each of them involving a thorough analysis of decision-making based on a purely rational process.

The theory holds that there are inefficiencies or market failures, either due to errors in the valuation of assets or in non-rational decisions. The origin of these inefficiencies is, according to the theory, due to the fact that individuals have limited rationality that is produced by how they perceive the problem to be solved, the cognitive limitations, biases, and the time available. These issues lead individuals to make decisions that are not optimal from the rational and analytical point of view of the problem, but that allows them to reach a decision that satisfies them, explaining then why many times individuals do not behave in a rational way as expected by previous theories.

“This article is not intended for in-depth study into the theory but rather to take its main contributions and apply them to current reality.”

The aim of this article is not to delve into the theory but rather to take its main contributions and apply them to current reality. After many years of outstanding performance in the stock market, we face an extremely uncertain scenario, a significant increase in volatility, and a reaction from major central banks that leaves them feeling that they sense a recessive scenario.

We can’t be absolutely sure how much the real impact of the coronavirus will be or for how long, but what we can begin to conclude is that it triggered a change in expectations and behavior on the part of investors, consumers, and entrepreneurs. As much as the effect of the virus is temporary, it caused damage in more fundamental matters, remember that we are in the longest economic cycle in the United States and the actions were recording historical highs.

It is for the above mentioned that we have seen a chain reaction that was aggravated by the precipitous fall of oil, generating a 30% drop in a day, because there is no agreement between the oil producers and also the psychological effect of negative rates that seem to be arriving in the United States. In other words, these are events that were in the making but that were reinforced by the sequence of episodes that we marked earlier.

Behavioral Finance: Oil Price Developments

Evidently, these events impact all investors, from anywhere in the world, and who invest in any kind of asset. In addition, there was a strong impact on the currencies of several emerging economies that will undoubtedly lead to consequences that these countries will have to manage. In this scenario, where no one escapes, investors must make decisions and as we marked it at the beginning, we are all subject to our own biases, characteristics, and cognitive limitations.

That is why everything is complicated because investors feel they have to react to the behavior of the market, they sense that the time is limited and all this leads to the investor’s decision-making process not being optimal or even making mistakes when obtaining unwanted results. It is not easy to tolerate market sessions where on average 4% to 7% of the value is lost, this is precisely the factor that conditions us.

“Therefore, everything is complicated, because investors feel that they must react to the behavior of the market, they sense that the time is limited and all this leads to the decision process on the part of the investor is not optimal.”

We could list a huge number of biases that arise in a very marked way in adverse market situations such as inability to make losses, acting on what others do or what the media say, confirmation bias, Selection bias, etc. During the fall of the market, we have seen how investors are more aware of the evolution of the market, of the news and we have seen how they are prone to take decisions adjusting their portfolios.

“We could list a huge number of biases that arise in a very marked way in adverse market situations.”

In my experience, a lot of investors tend to make decisions at the worst time, in situations where the current scenario distorts and influences decisions. More than ever, and the recent fall is a demonstration, the investor must have a clear investment strategy in advance and what adjustments will be made to difficult market conditions. After having a plan, it is essential to generate a habit of discipline. It is logical that strategies or plan can be improved, but should never be modified in adverse scenarios.

The plan has to be designed so that: the investor can fully consider the options, analyse how the plan would have worked under complicated conditions, how it fits personal characteristics and, if possible, simulate different scenarios. Having a plan allows you to cope better with these events because the investor is prepared, already knows what to do, and is aware that it is not time to make discretionary adjustments.

“A lot of investors tend to make decisions at the worst time, in situations where the current scenario distorts and influences decisions. More than ever, and the recent fall is a demonstration.”

They seem simple but the reality shows that they are not habits that are incorporated in a generalized form in the retail investors nor is it usually measured what is the cost of losses that must be assumed for not implementing a plan and carrying it out in form disciplined.

It is very apt the phrase that many experts point out regarding the fact that the main “enemy” of an investor is himself, this phrase points to the fact that the problem is not the market but how we react to it.

Categories
Forex Fundamental Analysis

What Should You Know About ‘Public Sector Net Borrowing’ Forex Fundamental Indicator

Introduction

Introduction

Introduction

Every government runs a budget. It is rare to find a scenario where a government has a balanced budget, i.e., its revenues match expenditures. Economists, policymakers, financial analysts, and consumers pay close attention to budget analysis figures. This interest in the budget is helpful to determine if the government is running a surplus or deficit. This information is vital in determining the country’s global credit rating, which will impact future investment decision-making, trade, and value of the currency.

Understanding Public Sector Net Borrowing

Public sector net borrowing refers to the government budget deficit. The budget deficit occurs when the income earned by the government is less than the public expenditures. Thus, the government can be said to be spending more than it collects in the form of taxes and trade. Governments fund their budgets, primarily using debt and taxation. While different governments have different lines of expenditures, they can all be summed up under three categories: current expenditures, capital expenditures, and transfer payments.

The budget deficits run by governments can tell us a lot about the health of the economy and possibly the cost of future funding. The budget report might be a complicated and tedious document for the average forex trader to analyze in its entirety. Thus, while there is a relationship between budget deficits and the economy’s health, it is advisable to compare the budget deficits with other economic indicators to get the full picture.

Increasing the budget deficit can tell us two things, either revenue collection is decreasing or the government expenditure is increasing rapidly. Here’s a look at how the budget deficit occurs. It starts with a decline in revenue. It is worth noting that exceedingly high budget deficits are connected to worsening economic conditions. When the economy is performing poorly, job losses become prevalent, leading to decreased aggregate demand forcing most companies to scale down while some discretionary consumer firms collapse entirely. Consequently, fewer people pay income tax, and corporate tax declines since most companies are making losses or bankrupt.

Naturally, most people will have to depend on social security programs to get essential needs. This overdependency forces the government to increase its expenditure on such programs. Furthermore, to bring the economy from recession, the government will be forced to increase capital expenditure to create more jobs and spur demand in the economy. Expansionary monetary policies, such as lowering interest rates, can also be used to make cheap loans available to the public.

Using Public Sector Net Borrowing in Analysis

Increasing budget deficit implies that the economy is slowing down, and the government is attempting to revive it. Budget deficits differ for different countries and may not necessarily give the entire picture of the economy’s health. Therefore, it is prudent to combine budget deficit analysis with the analysis of other fundamental economic indicators to determine if the expanding budget deficit is justifiable. For example, using a combination of unemployment levels and the aggressive government expenditure is creating the intended multiplier effect in the economy. More so, it can be used as a scorecard for the government’s fiscal policies’ efficiency and the public sector financial management.

With this strategy, we can spot if the budgetary allocations are going into viable capital expenditures or being spent on non-income generating activities such as paying for a bloated civil service wage. Furthermore, this approach can help stem out corruption in the public sector and seal any public monies’ leakages.

Source: St. Louis FRED

If the government employs expansionary fiscal policies year after year, it may result in a continually increasing inflation rate. Pumping more money into the economy continually increases the rate of inflation. In the flow of income, government spending is an injection. The resultant increase in the aggregate demand drives up prices since demand changes faster than producers can increase their production. It may be more challenging to keep the rising inflation in check if the central banks do not counter the expansionary policies. If the central banks do not implement contractionary monetary policies, the resultant inflation will distort the real wage and real interest rate levels in the economy.

Impact on Currency

As we mentioned earlier, forex traders should analyze the public sector net borrowing data along with other fundamental indicators to get a more comprehensive outlook of the economy. However, here is how the budget deficit affects the forex market.

An expanding public sector net borrowing is negative for the currency. An increasing budget deficit means that the government has to rely heavily on debt to fund its expenditure. With debt accumulation, repayment burden, especially the annual interest rates, weighs heavily on the revenues. If this trend persists, a significant portion of the government’s revenues will end up being used for debt servicing instead of development projects. The government may also be forced to restructure its debts, which come with increased costs. More so, if the growth of debt exceeds that of GDP, it would imply that the budget deficit is reaching unsustainable levels.

Source: St, Louis FRED

In the international markets, the country’s credit ratings will deteriorate. The country’s bonds may be downgraded from investment grade to junk bonds. Consequently, taking debt from the international markets will be more expensive since investors will demand a premium for taking higher risks. Borrowing from the domestic markets using treasury bills will be expensive since investors will demand higher discounts. Similarly, multilateral lenders will insist that the government implement a series of stringent austerity measures to qualify for loans and grants. All these factors come with severe economic and financial consequences for the country.

Sources of Data

In the United Kingdom, the Office for National Statistics (ONS) publishes the UK public sector net borrowing in its monthly Public Sector Finances report. Trading Economics publishes an in-depth review of the UK’s public sector net borrowing along with historical figures. A list of a country’s debt to GDP is also available at Trading Economics.

How Public Sector Net Borrowing Data Release Affects Forex Price Charts

The most recent release of the UK’s public sector net borrowing was on September 25, 2020, at 6.00 AM GMT and can be accessed at Investing.com.

The screengrab below is of the monthly UK public sector net borrowing from Investing.com. To the right, we can find a legend that indicates the level of impact this fundamental indicator has on the GBP.

As can be seen, this low volatility is expected.

In August 2020, UK’s public sector net borrowing worsened to 35.2B from 14.72B in July. This data was worse than analysts’ expectations of 35.05B.

Now, let’s see how this release made an impact on the Forex price charts.

GBP/USD: Before Public Sector Net Borrowing Release on September 25, 2020,
Just Before 6.00 AM GMT

Before the news release, the pair was trading in a neutral trend as shown by the above 5-minute GBP/USD chart. The 20-period MA was flattened with candles forming just around it.

GBP/USD: After Public Sector Net Borrowing Release on September 25, 2020, 
at 6.00 AM GMT

The pair formed a 5-minute bullish candle after the data release. This trend is contrary to the expected negative impact on GBP. Consequently, the pair adopted a bullish stance as the 20-period MA started rising with candles forming above it.

Although the Public Sector Net Borrowing is considered a vital indicator of economic health, public sector net borrowing data has an insignificant impact on the forex price charts.

Categories
Crypto Cryptocurrencies

Crypto-Addiction: When the Bubble is Not the Only Risk

Volatility in the markets is indissoluble from human passions and influences that mass psychology that also computes in stock prices in the markets. With it came the sense of risk, emotion, borderline situations, compulsive follow-up, and also brought that some investors fall into a stock market gambling addiction where the bets are named after listed […]

Volatility in the markets is indissoluble from human passions and influences that mass psychology that also computes in stock prices in the markets. With it came the sense of risk, emotion, borderline situations, compulsive follow-up, and also brought that some investors fall into a stock market gambling addiction where the bets are named after listed […]

Volatility in the markets is indissoluble from human passions and influences that mass psychology that also computes in stock prices in the markets. With it came the sense of risk, emotion, borderline situations, compulsive follow-up, and also brought that some investors fall into a stock market gambling addiction where the bets are named after listed companies.

No asset is really oblivious to this type of dynamics, in which there are people more and less prone. But after the crypto-active fever that seems to be in remission (for the moment), new forms of this particular addiction are now emerging in specialized clinics. Yes, the particular characteristics of crypto-currency trading lend themselves in a special way to end up betting what is not due to a token when betting on a horse at the racetrack.

The red line that divides the inversion of the bets is often indistinguishable.

Popular capitalism gave the small shareholders the possibilities reserved until then only to the big capitals, not without the due dose of “dirigisme” of mass money that can make rich and can trigger crises. Markets arrived (theoretically) to bring liquidity and transparency to quotes from companies that could also be financed by mechanisms such as VOPs or by issuing new securities.

But there is much more background than it seems on this issue and its relationship to investment and markets. After all, crudely put, isn’t any investment ultimately nothing more than a simple bet? However much we put it behind us, however much we embellish it, however much we try to disguise it, even for the most pragmatic and systematic investors, guessing the future is impossible, and risking your money to a future possibility, The answer is no other than that investors bet.

If there is risk in the future, it is a gamble; and there is always risk, since an unwavering market maxim is that without risk there is no benefit. They can bet in the short, medium or long term, they can bet rationally or compulsively, they can use indicators or based on hunches… whatever, but the union of chance and money, when it is unhealthy, has a name reliably defined by the Royal Academy of the Language: “Pathological addiction to electronic gambling or gambling”.

Crypto-assets were not to be an exception, but rather the assets that reinforce the rule.

After the previous definition, be it professional or mere amateur, we must say that in reality there is no asset that escapes the rush of adrenaline segregated before the fluctuating quotes, being able to make us pass in a matter of days or even hours from wealth to ruin. And crypto-assets are not just one of the assets that can be played like in a casino, but they have several features that make them especially prone to developing certain pathologies.

There are several factors that influence a potential ludopath to develop a pathology. Often the condition arises from the confluence of these exogenous factors with weak points in their internal and particular psychology. But it is very true that there are a number of factors common to all gamblers and all gamblers that make it possible to bring out potentially more dangerous assets than others.

It is the sense of risk that often ends up hooking these patients. A risk that is often borderline, and that causes your glands to release adrenaline and other hormones. As you may know, hormones often act as a natural drug to keep us (or drive away) certain behaviors. And in gambling enthusiasts, that loyalty involves continuing to gamble savings (and debts) on anything that looks like a winning horse. In the end, with a disproportionate and uncontrolled risk, comes psychological dependence and almost certain economic ruin.

Crypto-assets have always been (and have been) advertised to us as high-risk assets. And not only because of their unreliability as an investment value and because of the bubble we have warned them about so many times, but also because of their high volatility in the markets. That volatility means only one thing in the gambler’s glands: more hormones in the bloodstream with every operation, with every look at quotes, minute after minute, hour after hour.

To the volatility, we must add other dangerous companions of travel (or investment). They are liquidity (also called Immediacy) and ubiquity (also known as compulsiveness). These two friends make the temptation not live upstairs, but live on the smartphone that we all carry around 24 hours a day. Once the pathology is developed, whether diagnosed or not, it is difficult to escape it.

And the two most important factors go through believing what you want to believe, not what you are.

Crypto-assets have a remarkable feature in terms of addiction. Often the gambler deceives himself with philosophies or pilgrim ideas, which basically only seek to reinforce him in his incessant search for hormones (and profits). The whole philosophy surrounding crypto-economics can be a perfect disguise to be used as an excuse to convince oneself that one is not risking one’s life savings, but is investing in the future that only a few know how to see. Thus the patient can easily exonerate himself and continue to be plunged into blindness, reinforced by the fact that others have already made crypto-coins immensely rich in the past.

And one last ingredient for this poisonous potion, to which many are nevertheless immune, is the natural technical opacity inherent in crypto-economics and the halo of exciting and (something) mysterious future that surrounds it, at least as far as the general public is concerned. The reality of “Main Street” is that most crypto-asset investors do not have enough training to understand them 100% (or 50%).

With the latter, the sentence is handed down, and those likely to fall victim to this type of gambling addiction find it much easier to hide irrational passions and impulses behind crypto-tickers than after other assets. They don’t understand in detail what’s behind these token names, but in their minds, they shine like decisions of the future in the darkness that to their understanding surrounds everyone who has not seen the light of the crypto-coins.

The (relatively few) pathologically affected will not want to see it, but the therapies are there.

The best proof that crypto-addiction is more a reality than a theory (of course nuanced than only in certain cases), is that hospitals specializing in the treatment of gambling addiction have launched specific programs for the case of addicts to trading with crypto-assets.

This is the case of the Castle Craig Hospital in Scotland, where they say that this addiction can either be framed within a general addiction to gambling of any kind or be a dangerous obsession with its own entity. In this center, they treat both facets of the addictive pathology. Various specialists have already described how crypto-active trading is a veritable neurological roller coaster, which carries with it dangers such as developing a dangerous addiction (or ruined, don’t forget).

The new treatment of Castle Craig Hospital only represents the response of the center to the significant increase in the specific demand for crypto-trading, which were observed by numerous addicted patients. However, the same sources say that it is relatively rare to encounter pathologies focused exclusively on trading with Bitcoin or other cryptocurrencies because the underlying problem is usually a more general gambling addiction.

In any case, they also state that the data points to the fact that crypto-trading’s exclusive pathologies have been showing a clear upward trend for months. And they also remark that, although they treat it as a type of gambling addiction, the reality is that it is a particularly addictive and aggressive modality.

The reasons why they understand this to be the case are in line with what we told them before: this type of gambling addiction is available to those affected 24 hours a day, it is continuous, permanent. And this impossibility of disconnection is precisely what most “hooks” (and likes) gamblers in general. In the end, for the patient, it is no longer even a matter of winning or losing, but of repeating again and again and thus getting the hormonal response of the emotion that invades them after each crypto-trading operation. What investor has not experienced this emotion to a greater or lesser extent on more than one occasion? Well, you know what we talked about in this article.

A potential psychological profile that in some cases becomes pathological.

The reality is that many crypto-addicts are also “hooked” on trading with other traditional currencies other than crypto-currencies, but it is no less true that crypto-trading gives them an extra dose of adrenaline as it is a very volatile market with large fluctuations. From this specialized hospital, they point out that they believe that there are enough crypto-traders who have already developed a certain degree of addiction, but that, not only have they not become aware of it, but that being permanently and obsessively aware of the crypto-market seems normal to them.

What’s more, these traders are often convinced that they are especially smart to have entered this crypto-market and that they almost always believe they are doing very well. To this particular point in the previous Motherboard article, we would add from these lines that, in addition, crypto-addicts are characterized by reacting viscerally and very aggressively to everything that challenges their grand vision of the future, and do not listen to reasons or to the experience of the most veterans of the markets (dispute with that classic “this time is different”).

The best prevention is yourselves.

We cannot close this analysis without qualifying that what is written here is only intended to warn of a very common pathology in the markets, but significantly more dangerous in the case of crypto-assets. This does not mean that, in their theories of the future, these crypto-addicts may be quite right at certain points. In fact, from these lines, we have shown ourselves on more than one occasion as crypto-enthusiasts declared. The problem is not that. The most serious and difficult thing about this addiction is to realize when crypto-economics is a theory or a way to disguise a gambling addiction.

From here we can no longer help them to distinguish between the one and the other. And in the initial stages of this addiction, only you and your ability to see reality and make self-criticism can help you before it’s too late and your savings have already volatilized.

Even on the assumption that the crypto-currency operation will give you a positive balance on your current account, if you are one of those who spends 14 hours a day glued to crypto-quotes on the screen of your smartphone without it being your professional activity, You should seriously consider whether you have already crossed the diffuse red line separating normal from an addictively compulsive operation. To go to the specialist only when one sees that one is ruined is to go for help when it is already too late.

Be cautious and always try to put barriers of containment in the face of the burdensome terrain that already enters addiction. In this type of swamp, it is much easier to avoid entering than then leaving. As in many psychological conditions, it is really complex to realize (and even define a diagnosis for specialists) when something is normal and when it is no longer normal.

The best therapy is the one that does not need to be applied, so it is best to always stay alert, control exposure to stimulus, monitor anxiety, be attentive to your body’s responses, and, above all… of his mind. And think about whether devoting so much time to earning (and in many cases losing) money is worth it in front of being with your children, talking to your partner, or hanging out with friends… Especially when, in your right measure, you have the life to devote yourself to all of it (and also for a little trading without excesses). Enjoy in the markets (yes, also in crypto-markets), but do not live for it.

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Forex Course

153. The Affect Of Monetary Policy On the Forex Market

Introduction

Introduction

Introduction

Fundamental analysis is one of the most reliable forex trading strategies in the world that considers economic releases and events. In fundamental analysis, many indicators provide a possibility of upcoming movement in a currency pair. Besides the economic release, some events like monetary policy decisions create an immediate impact on a currency pair.

What is Monetary Policy?

Monetary policy is an action or decision taken by the central bank to control the money supply and achieve the economic sustainability and macroeconomic goal. Every country has a strategic goal based on the current performance and upcoming economic growth of the economy. Therefore, most of the central bank changes the interest rate based on the economic condition.

Usually, the central bank sits quarterly for a monetary policy meeting to discuss the following four core areas:

  • Guideline for the money market
  • Interest rate decision.
  • Monetary policy measurement.
  • The outlook of the economic and financial developments.

How Monetary Policy Affects the Forex Market?

In a monetary policy meeting, the central bank discusses the present economic condition of a country. Therefore, any hawkish tone may create an immediate bullish impact on a particular currency. On the other hand, a dovish tone may create an immediate negative impact on a particular currency in any trading pair.

Besides the immediate effect, there is a long-term impact on the price of a currency pair. We know that any strength in an economy indicates a stronger currency. For example, if the ECB (European Central Bank) provides some consecutive outlook of the European economy saying that the inflation is under control, and the interest rate increased, which is likely to increase again in the next quarter. In that case, the influential European economy may create a Bullish impact on EURUSD, EURAUD, or EURJPY pair.

Moreover, there is some case where the central bank cut the interest rate where traders and analysts were expecting a rate hike. In this scenario, investors may shock at the news, and the effect might be stronger than before.

How to Trade Based on Monetary Policy Statement?

There is two way to trade based on the monetary policy decision. The first one is based on the immediate market effect, which is known as news trading. On the other hand, traders can evaluate the economic condition based on the recent monetary policy statement and see how the economy is growing in the long run. Based on this market scenario, traders can find a long term direction in the market based on economic performance as per the monetary policy statement.

Another way of trading based on the monetary policy decision is the fundamental divergence. If one fundamental indicator does not support another fundamental indicator, it creates fundamental divergence. For example, the US interest rate is increasing based on the strong employment report, but inflation does not support the rate hike. In this situation, traders can take trades with the possibility that the rate hike’s effect will not sustain.

Summary

Let’s summarize the effect of monetary policy in the forex market:

  • Monetary policy meeting happens quarterly where the central bank takes interest rate decision.
  • In the monetary policy meeting, the central bank provides an outlook of the economic and financial developments.
  • A hawkish tone makes the currency stronger, while the dovish tone makes the currency weaker.
  • Traders can identify the fundamental divergence based on the decision on monetary policy meeting.
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Beginners Forex Education Forex Basics

Forex Trading: Still a Smart Investment?

In today’s world, it’s a good idea to make wise money investments as we face uncertainty in the future. Investing while you’re young can help keep you afloat if you face any unexpected crisis or if you find yourself with a retirement fund that just isn’t sufficient enough to live on. If you’ve ever worried […]

In today’s world, it’s a good idea to make wise money investments as we face uncertainty in the future. Investing while you’re young can help keep you afloat if you face any unexpected crisis or if you find yourself with a retirement fund that just isn’t sufficient enough to live on. If you’ve ever worried […]

In today’s world, it’s a good idea to make wise money investments as we face uncertainty in the future. Investing while you’re young can help keep you afloat if you face any unexpected crisis or if you find yourself with a retirement fund that just isn’t sufficient enough to live on. If you’ve ever worried about any of these problems, you’ve probably tried to think of a few ways to bring in extra income. Sadly, some options, like working a 2nd job, just aren’t feasible with many of our schedules, especially if we’re raising children or attending school. Other options, like leaving money in a savings account to build interest accumulate so slowly that they can’t solve the immediate problem or won’t for a very long time.

This is where forex trading enters as a possible solution. It’s easy enough to get started and there aren’t many requirements, aside from having access to a device with a working internet connection and being 18 years or older. The investment threshold is even low – some brokers will allow you to get started with as little as $10, which is a great way to test the waters to see if trading is something you’re good at. However, we’re still talking about an investment risk were more than 50% of those that try fail. The low success rate is enough to leave one wondering whether trading is actually a good investment.

The answer is that the success of a forex trading investment depends on you. If you enter the market with no real knowledge of what you’re doing and expect to become rich practically overnight, you’ll be setting yourself up for failure. This is the real reason for those low success percentages, as many traders start out with unrealistic expectations and don’t want to put in the work. We can thank movies and flashy advertisements for the altered perception of what forex trading really is. Those that start with short-term goals without focusing on making a certain amount of money have the best outlook for their future success as a forex trader. Your goals should focus on improving your skill as a trader in the beginning, and you’ll want to remember that any profit is good, even if it isn’t as much as you’d expected to make. Over time, you’ll be able to bring in more money and you’ll be able to thank your improvement as a trader for these results. 

Forex trading can be a lucrative investment if you put in the effort to learn how to do it, spend time devising a trading plan and strategy and keep track of your performance by keeping a trading journal. This does take a lot more effort than simply moving your money over to a savings account and leaving it alone, but your efforts can pay off much more quickly with trading and you’ll find more money in your pocket if you’re doing it correctly. Don’t get us wrong – if you don’t feel like putting in the time to learn or you think you’ll get bored with trading and give up, then you probably shouldn’t start. However, if you’re willing to put in effort in some of your free time to make more money right now, then forex trading is the best thing you can do for your future.

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Forex Money Management

The Top 5 Reasons Why Forex Traders Lose Money

It’s no secret that becoming a successful forex trader can be an uphill battle. After all, we are speaking about a field where reported numbers suggest that 70-90% of those who try fail. While the statistics can seem bleak, the truth is that anyone can profit as a forex trader, but most of those who give up do so because they are making one of these mistakes: 

It’s no secret that becoming a successful forex trader can be an uphill battle. After all, we are speaking about a field where reported numbers suggest that 70-90% of those who try fail. While the statistics can seem bleak, the truth is that anyone can profit as a forex trader, but most of those who give up do so because they are making one of these mistakes: 

It’s no secret that becoming a successful forex trader can be an uphill battle. After all, we are speaking about a field where reported numbers suggest that 70-90% of those who try fail. While the statistics can seem bleak, the truth is that anyone can profit as a forex trader, but most of those who give up do so because they are making one of these mistakes: 

Mistake #1: Not Being Prepared

One of the main benefits to opening a trading account is that it’s pretty easy, as long as you have a device with an internet connection, at least $10, and you’re 18 or older, you could open a trading account right now. However, this is also a downfall for many traders that decide to open an account before they’re truly ready. If you can’t read key indicators, don’t have a good understanding of how the market works, when to trade, how to trade, and other important concepts, then you’re going to be confused once you jump into everything. There’s a lot to learn, so be sure to educate yourself beforehand. Many traders give up because they start too soon and don’t want to put the effort into learning, but it’s important to remember that it takes time to learn to trade just like with any other job. 

Mistake #2: Not Having a Solid Plan or Strategy

Let’s assume that you’re educated enough to begin trading, so you open your trading account. What now? You have to have a plan in place that tells you what assets you’ll trade when you’ll decide to enter trades, how much you plan to invest and risk on each trade, and so on. You should also have an idea of a strategy you want to use, like scalping, day trading, swing trading, and so on. If you simply open trades without a plan, then you’re bound to lose. Fortunately, the internet is filled with free resources that can help you craft a plan and choose a strategy. Know that you might have to tweak your ideas a bit as you grow more accustomed to trading, but it’s still important to have a roadmap to follow. 

Mistake #3: Risking too Much

Some traders are in a hurry to make money and might risk as much as 10%, 20%, or more on each trade. Doing so can put you on the fast track to wiping out your trading account. Instead, you want to risk around 1-2% on each trade or calculate how much money you’re willing to risk on each individual trade. Losses are inevitable, so it’s better to stick with smaller position sizes and to risk less so that there will be less fallout if you lose. Many beginners start out risking too much and quit once their account shows a $0 balance.

Mistake #4: Being Emotional

There’s a whole host of factors that go into the way that your emotions can affect your trades. If you’ve never researched this before, all you have to do is Google “trading psychology” and you’ll find a ton of information. Understanding the ways that emotions can affect trades negatively is the first step to ensuring that this problem doesn’t affect you. If an emotion like fear or anxiety starts causing you to make bad decisions, you’ll be much more likely to realize this if you’re educated about it beforehand. Then, you can find ways to deal with these emotions rather than allowing them to continue to cause you to lose money.

Mistake #5: Trading When They Shouldn’t 

Those that are workaholics might not feel right if they go a day without trading, after all, it would seem as though you’re losing money by doing so. However, there are times when the market just isn’t right for trading, or when it should be avoided, like when big news is scheduled to be released. There’s a saying that trading less is more because of this – so it’s important to know when to avoid trading. In the end, it’s better to avoid trading on a bad day and to keep your balance the same, than to trade and lose money.

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Forex Basics

Exploring the Psychological Differences Between Demo and Live Accounts

Opening a demo account is an important first step to becoming a trader, as it allows one to practice trading in a simulated environment without risking real money. While trading on a demo, traders can become more acquainted with a trading platform, practice different strategies, gauge their preparedness to move on to a live account, […]

Opening a demo account is an important first step to becoming a trader, as it allows one to practice trading in a simulated environment without risking real money. While trading on a demo, traders can become more acquainted with a trading platform, practice different strategies, gauge their preparedness to move on to a live account, […]

Opening a demo account is an important first step to becoming a trader, as it allows one to practice trading in a simulated environment without risking real money. While trading on a demo, traders can become more acquainted with a trading platform, practice different strategies, gauge their preparedness to move on to a live account, and so on, which is why demo accounts are often recommended as one of the best free hands-on tools for beginning forex traders.

While these accounts offer many benefits, there are some psychological differences between the simulated and real accounts that beginners might not realize. Understanding these differences is important so that it doesn’t catch you off guard and cause you to lose money when you decide to move on to a real account. 

Difference #1: Emotion

When you’re trading on a demo account, you use virtual money, meaning there are no consequences. If you take your demo results very seriously, you might care a little when you lose, but this still doesn’t compare to the way you’ll feel when real money is on the line. Once you could really lose your hard-earned money, you might become anxious, paranoid, or fearful. When you’re winning, emotions like overconfidence can lead to problems like overtrading. The best way to prepare yourself for this is to start by reading up on trading psychology so that you will more easily recognize it if your emotions begin to interfere with your trading decisions. 

Difference #2: It’s More Difficult to Stick with Your Plan on a Real Account

On your demo account, it will be easy to stick with your plan because you know that real money isn’t on the line and you need to know if the plan actually works. Once you move over to a live account, you’ll be more tempted to deviate from your plan and commit trading “sins”, like moving your stop loss, cutting off winning trades early due to anxiety, or revenge trading. 

Difference #3: The Reset Button

If you don’t like the results you’re getting on your demo, it’s easy to simply create a new one and start fresh. If you run out of funds, support might also be willing to top up your account with more funds. Knowing that you have the ability to start over without consequences can provide a sense of comfort because there isn’t aren’t any real repercussions. Things are much more different on a live account, however, where a blown account balance might be enough to make one want to end their career. Otherwise, you’ll have to pull more money out of your pocket to keep going. There is no reset button when it’s real and that can take away from one’s sense of safety. 

 

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Forex Basics

A Reality Check for Modern Forex Traders

Forex trading can seem glamorous, as it is often promoted with images of a luxurious lifestyle that’s fit for the rich and famous. That isn’t to say that you can’t get there someday, but trading is also surrounded by a lot of myths and misconceptions Today, we will explore some of these uncomfortable truths so […]

Forex trading can seem glamorous, as it is often promoted with images of a luxurious lifestyle that’s fit for the rich and famous. That isn’t to say that you can’t get there someday, but trading is also surrounded by a lot of myths and misconceptions Today, we will explore some of these uncomfortable truths so […]

Forex trading can seem glamorous, as it is often promoted with images of a luxurious lifestyle that’s fit for the rich and famous. That isn’t to say that you can’t get there someday, but trading is also surrounded by a lot of myths and misconceptions Today, we will explore some of these uncomfortable truths so that traders can start trading with realistic expectations.

Reality Check #1: You Have to Invest Money to Make Money

One of the advantages of trading is that you can start out with a small deposit – some brokers will allow you to deposit as little as $10 (or less!). This can be exciting for beginners because it makes it possible for everyone to start trading without requiring you to be rich in advance. However, traders need to realize that the amount they invest does matter. For example, if you want to make a living trading, one study suggests you’d need to deposit at least $30,000 to make around $3K a month. Most of us don’t have that amount laying around, meaning that we would need to trade for some time to make enough money to bring in a large enough profit to support ourselves.

On the bright side, you can make money off your initial investment, even if you do start as small as possible. We’ve heard stories where great traders have made themselves rich off a few hundred dollars, so don’t let this fact discourage you. Simply remember that it is important to start with realistic monetary goals without expecting to become rich instantly. 

Reality Check #2: Trade During the Action

We often promote the fact that you can find a trading strategy that supports your lifestyle, whether that’s part-time trading, trading during the morning, in the afternoons, or whenever you have free time. However, the best time to trade is actually when the market is experiencing the most action, which is typical during the New York and London sessions. If you can, you should try to trade during these times because there is more opportunity, even if it means rearranging your schedule. This isn’t absolutely required, but it can help to improve your results. 

Reality Check #3: There is No Magic Answer

As a forex trader, you will come across claims that something is the magic answer to becoming rich at some point. These claims could be referring to an indicator, trading strategy, forex robot, or something else. Don’t fall for this – especially when the product that is being advertised costs money. You have to remember that the market is unpredictable and nobody knows what will really happen, no matter how smart they claim to be or how convincing they are when explaining that their system is “foolproof”. This doesn’t mean that these systems can’t be profitable, but you should always be skeptical and never put all your faith into something that claims to make you rich. Instead, focus on perfecting your plan while taking proper risk-management precautions as this is the real key to success. 

Reality #4: You Can’t Always Win 

Losing trades are an unavoidable part of forex trading. The truth is that if you begin with the idea that you’ll never lose a single trade, you’re living in a fairy tale. The good news is that this doesn’t mean you’re out of luck because it’s possible to be profitable with low win rates, as long as you make enough money on the trades that you do win. You also might wind up with a high win percentage and only take a losing trade every now and then. For most people, this is perfectly acceptable, but some traders do struggle with these losses and blame themselves way too much when things don’t go according to plan. This is why it’s important to understand that this will happen from time to time so that it doesn’t take you by surprise. 

Reality #5: Trading Isn’t for Everyone

It’s pretty easy to set up a trading account, deposit a few dollars, and get started trading. Unfortunately, trading is not for everyone. That doesn’t mean that everyone couldn’t make money doing it, but some people just don’t want to put in the time, effort, and patience that it takes to stick with trading. Those that easily give up are more likely to walk away if their expectations aren’t met or after one or two bad trades. If you want to be among those that do make it as successful traders in the long-run, you have to be willing to work hard and understand that trading isn’t a scam, but that it isn’t always easy.  

 

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Forex Signals

USD/CHF Downward Channel in Play – Quick Update on Signal!

The USD/CHF extended its previous session losing streak and hit the intra-day low around the 0.9130 regions in the last hours. However, the reason for the currency pair prevalent bearish bias could be attributed to the risk-off market sentiment, which underpins the safe-haven Swiss Franc and contributes drive selling in the pair. Hence, the market trading bias was being pressured by the fears of the steep rise in new coronavirus infections in Europe and the U.S.

The USD/CHF extended its previous session losing streak and hit the intra-day low around the 0.9130 regions in the last hours. However, the reason for the currency pair prevalent bearish bias could be attributed to the risk-off market sentiment, which underpins the safe-haven Swiss Franc and contributes drive selling in the pair. Hence, the market trading bias was being pressured by the fears of the steep rise in new coronavirus infections in Europe and the U.S.

The USD/CHF extended its previous session losing streak and hit the intra-day low around the 0.9130 regions in the last hours. However, the reason for the currency pair prevalent bearish bias could be attributed to the risk-off market sentiment, which underpins the safe-haven Swiss Franc and contributes drive selling in the pair. Hence, the market trading bias was being pressured by the fears of the steep rise in new coronavirus infections in Europe and the U.S.

Moreover, the risk-off market sentiment was further bolstered by the prevalent impasse over the next round of the U.S. fiscal stimulus measures, which further pessimism around the currency pair. On the flip side, the broad-based U.S. dollar weakness, triggered by doubts over the U.S. economic recovery, also played its major role in undermining the currency pair. At this particular time, the USD/CHF currency pair is currently trading at 0.9134 and consolidating in the range between 0.9130 – 0.9164.

The market risk tone has been shaky since the day started, possibly due to the worsening coronavirus (COVID-19) conditions in the U.K., Europe, and the U.S., which keeps fueling the worries over the global economic recovery. Meanwhile, the renewed conflict between the U.S. and China and the China-Australia tussle also exerted downside pressure on the market risk-tone and underpinned the safe-haven Swiss franc. As per the latest report, the daily new cases increased past Thursday’s record level of 6,638, with 7,334 new infections leading to 348,557 total numbers. The death toll seems to ease from the previous day’s 33 to 24 while marking a total of 9,734 deaths. As in result, the investors remained cautious that the rise in new coronavirus cases could lead to renewed lockdown measures.

Apart from this, the U.S. policymakers’ inability to offer the much-awaited COVID-19 stimulus also played its major role in weakening the market trading sentiment, which exerted some additional pressure on the market trading sentiment. At the US-China front, the renewed concerns over worsening diplomatic tensions between the world’s two largest economies also exerted downside pressure on the market trading sn time, which keeps the USD/CHF currency pair under pressure. Check out the trading plan below…


Daily Support and Resistance

S1 0.9083
S2 0.9113
S3 0.9128
Pivot Point 0.9142
R1 0.9158
R2 0.9172
R3 0.9201

Entry Price – Sell 0.91405
Stop Loss – 0.91805
Take Profit – 0.91005
Risk to Reward – 1:1
Profit & Loss Per Standard Lot = -$400/ +$400
Profit & Loss Per Micro Lot = -$40/ +$40
Fellas, now you can check out forex trading signals via Forex Academy mobile app. Follow the links below.
iPhone Users: https://apps.apple.com/es/app/fasignals/id1521281368
Andriod Users: https://play.google.com/store/apps/details?id=academy.forex.thesignal&hl=en_US

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Forex Course

152. Knowing The Fundamental Factors That Affect The Currency Values

Introduction

Introduction

Introduction

Many fundamental factors affect currency value. Therefore, whether we trade based on technical analysis fundamental analysis, we should know these factors to understand the currency markets.

Important Fundamental Factors That Affect Currency Values

Fundamental factors are economic releases and events that have a direct impact on currency value. If we want to trade based on fundamental analysis, we should focus on these releases and make a decision based on the result. Let’s have a look at the important fundamental factors that affect currency values

Interest Rate

Interest rate is the amount that a central bank charges if anyone takes loans from the bank. Central banks change the interest rate to control the country’s money supply; therefore, it directly affects the currency value.

Inflation Rate

Inflation is the buying power of money. Lower inflation means higher buying power, and higher inflation, the lower buying power.

Consumer Price Index (CPI)

CPI or CPI inflation is the price of consumer needs. Any increase in CPI is bad for the currency, while a decrease in CPI is good for the currency.

Producer Price Index (PPI)

PPI is the price of products or elements of businesses. An increase in PPI means businesses need additional money to buy raw materials that may increase the finish product rate.

Retail Sales

Retail sales indicate the number of products and services bought by consumers. An increase in retail sales indicates higher consumer activity in the market that is good for the currency value.

Foreign Exchange reserve

Foreign exchange reserve is the amount of money that is reserved in the central bank. An increase in foreign reserves is positive for a country’s economy and currency value.

Non-Farm Payroll (NFP)

On the first Friday of every month, US Labor Statistics releases the number of unemployed persons in the USA. As the US dollar is the most used currency globally, any change in NFP affects the overall forex market.

Central Bank Meets

In every quarter, central banks of every country provide an outlook of the domestic and international economy. In this meeting, any hawkish tone creates a positive impact on the currency value, while any dovish tone creates a negative impact on the currency value. We should keep an eye on how central banks are reacting to the central banks meeting to get an outlook of the currency value.

Conclusion

Besides the above-mentioned fundamental factors, there is a political movement, trade natural disaster, etc. also impacts the currency market. Moreover, in an uncertain market condition, no trading strategy works well, whether based on technical or fundamental analysis. Let’s dig deeper into each of these fundamental factors and more interesting aspects in the upcoming lessons. Cheers.

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Forex Signals

AUD/CAD Trimmed Its Eary-Day Gains & Dropped – Downward Channel In Play!   

The AUD/CAD failed to extend its early-day modest gains and edged lower around the 0.9362 level. However, the bearish sentiment around the currency pair could be associated with the on-going tussle between the US-China and stimulus deadlock in the U.S., which leads to the decline in U.S. stock’s future. This, in turn, undermined the perceived risk currency Australian dollar and contributed to the currency pair losses. The acceleration in the coronavirus (COVID-19) wave 2.0 also played a major role in undermining the market trading sentiment, which added further burden around the Australian dollar’s perceived risk currency and dragged the currency pair low. 

The AUD/CAD failed to extend its early-day modest gains and edged lower around the 0.9362 level. However, the bearish sentiment around the currency pair could be associated with the on-going tussle between the US-China and stimulus deadlock in the U.S., which leads to the decline in U.S. stock’s future. This, in turn, undermined the perceived risk currency Australian dollar and contributed to the currency pair losses. The acceleration in the coronavirus (COVID-19) wave 2.0 also played a major role in undermining the market trading sentiment, which added further burden around the Australian dollar’s perceived risk currency and dragged the currency pair low. 

The AUD/CAD failed to extend its early-day modest gains and edged lower around the 0.9362 level. However, the bearish sentiment around the currency pair could be associated with the on-going tussle between the US-China and stimulus deadlock in the U.S., which leads to the decline in U.S. stock’s future. This, in turn, undermined the perceived risk currency Australian dollar and contributed to the currency pair losses. The acceleration in the coronavirus (COVID-19) wave 2.0 also played a major role in undermining the market trading sentiment, which added further burden around the Australian dollar’s perceived risk currency and dragged the currency pair low. 

On the contrary, the weaker crude oil prices, triggered by the combination of factors, tend to weaken the demand for the commodity-linked currency the loonie, which becomes the factor that helps the currency pair to limit its deeper losses. The AUD/CAD currency pair is currently trading at 0.9362 and consolidating in the range between 0.9357 – 0.9386.

Intensifying restrictive measures such as lockdowns and curfews in Europe and the U.K. to control the 2nd-wave of coronavirus outbreak pushed global equity markets down. As per the latest report, the daily new cases increased past Thursday’s record level of 6,638, with 7,334 new infections leading to 348,557 total counts. The death toll seems to ease from the previous day’s 33 to 24 while marking a total of 9,734 fatalities. Apart from this, the U.S. policymakers’ inability to offer the much-awaited COVID-19 stimulus also played its major role in weakening the market trading sentiment, which in turn exerted some additional pressure on the perceived riskier Australian dollar and contributed to the currency pair losses.

Elsewhere, the intensifying tensions between the U.S. and China added additional burdens around the global trading market. The tension between the world’s two largest economies fueled further after China aggressively warns the U.S. to step back from Taiwan Strait. However, these lingering Sino-US tensions kept challenging the risk-on market sentiment and contributed to the currency pair losses.

Access the pond, the reason for the downbeat market trading sentiment could also be associated with the latest report suggesting that the World Health Organization (WHO) said that the previously cheered corona-vaccine from Gilead Sciences Inc., Remdesivir, did not affect COVID-19 patients’ length of hospital stay or chances of survival. These negative headlines exerted some additional pressure on the market sentiment. The S&P 500 Futures dropped as it currently marks 0.15% intraday losses to 3,472.

The reason for the crude oil losses could also be associated with the latest reports suggesting that the Organization of the Petroleum Exporting Countries (OPEC) decided to ease supply cuts despite rapidly falling fuel demand in Europe and the U.S. amid rising numbers of COVID-19 cases in both regions. Thus, the decline in oil prices undermined the demand for the commodity-linked currency the loonie and became the key factor that helps the currency pair limit its deeper losses.

In the absence of the major data/events on the day, the market traders will keep their eyes on September month’s Retail Sales and Michigan Consumer Confidence for October. Meanwhile, the USD moves and coronavirus headlines will also closely followed as they could play a key role in the crude oil. 


Daily Support and Resistance

S1 0.9242

S2 0.9303

S3 0.9341

Pivot Point 0.9364

R1 0.9402

R2 0.9426

R3 0.9487

Entry Price – Sell 0.93594

Stop Loss – 0.93994

Take Profit – 0.93194

Risk to Reward – 1:1

Profit & Loss Per Standard Lot = -$400/ +$400

Profit & Loss Per Micro Lot = -$40/ +$40

Fellas, now you can check out forex trading signals via Forex Academy mobile app. Follow the links below.

iPhone Users: https://apps.apple.com/es/app/fasignals/id1521281368

Andriod Users: https://play.google.com/store/apps/details?id=academy.forex.thesignal&hl=en_US

Categories
Forex Basic Strategies

Low-Risk (Yet Profitable) Forex Trading

One of the main things that attract many people to Forex is the potential to make significant gains in a relatively small time due to the use of leverage. However, the profit potential comes a significant potential for losses that should not be overlooked. To protect your account, it is a good idea to look […]

One of the main things that attract many people to Forex is the potential to make significant gains in a relatively small time due to the use of leverage. However, the profit potential comes a significant potential for losses that should not be overlooked. To protect your account, it is a good idea to look […]

One of the main things that attract many people to Forex is the potential to make significant gains in a relatively small time due to the use of leverage. However, the profit potential comes a significant potential for losses that should not be overlooked. To protect your account, it is a good idea to look at the big picture, which means not only looking for potential benefits but looking for ways to operate in a way that is less risky. Its rewards may be smaller in the short term, but with a low-risk Forex trading strategy, we expect you to be more successful in the long run.

There’s always a risk, and that’s okay. Think about it this way: there’s no business you can get into that doesn’t have a certain risk. For example, if you decide to open a convenience store, there is also the possibility that you may not be able to earn enough money to keep your doors open. But, if you conduct a proper investigation and consequently make the right business decisions, it increases your chances to build a profitable business. In this sense, your business is very similar. You should conduct proper market research to make sound trading decisions. You will still have some risk when you make transactions, but the risk will be diminished by its own understanding of financial markets and the way they move.

A great thing about Forex trading is that it can be in or out of the market at its own time of choice. For example, if the markets are too erratic and too volatile for you to feel comfortable, you just don’t do trades. Unfortunately, most novice Forex traders don’t understand what it is okay to put aside when needed. But if you make the decision to manage your risk, don’t be afraid to sit down. You may miss some winning trades, but you will probably also skip the lost trades.

Another way to manage your trading account and operate with less risk is to properly manage the size of your position. At the same time that Forex traders can use leverage to increase their earnings on winning trades, leverage is also a tool that can cause excessive losses and has to be used with care. Don’t let your desire for quick cash drive you past your account. You are in control and should always be careful to trade responsibly. Low-risk Forex trading.

Finally, you can control the size of your position and the time of your trades to take a lower risk. For example, if you work full-time and don’t have much time for forex trading, you can reduce the size of your position and the trade of the daily deadlines. You only need to devote a few minutes a day to setting loss stop settings and limits, and this trading strategy will allow you to continue your normal life while your money works for you. If you have time to sit on the computer for hours and hours, short-term trading may also be a possibility.

Pay attention to the psychology of commerce. Forex psychology is probably the most underrated tool a Forex trader has. The longer I trade, the more I realize this is true. For example, a market will rise or fall in the long run. That being the case, it would theoretically have about a 50% chance of success in any particular trade. What do you do with these odds? Take an example: you decide to shorten the USD/ CHF pair. When you press the sales button, the market spins and goes up almost immediately. You got a 50-pipe stop loss that’s in danger of getting hit pretty fast.

Do you let it happen? Or does he move his stop loss even higher in the hope that the market will back up in his favor? Unfortunately, too many traders will do the latter. You should remember that you set your loss limit for a reason, and the reason is still no matter how the market moves.

The worst thing is that the biggest mistakes often occur immediately after the initial loss. Too often too many people seek to “get their money back” from the market. Not only will they reverse the trade, but they will also double the size to get that money back quickly. Murphy’s law explains almost 100% of the time that trade will not work. You have increased your losses rather than minimized them.

Risk management is crucial and the key. Risk management is by far the first trader’s job. You must understand that losses are part of the game and that you must be able to tolerate them. For example, if you have a loss as described above and risk 10% of your account, you need to get 11% just to make up for the next transaction. You have also received a significant amount of damage to your account. However, think of trading in terms of risk of 1%. You still have 99% of your seed money, which is a lot easier to digest. In fact, I know many merchants who will risk only 0.5% per operation.

It is not the established trade. There is no magic trading configuration that creates high-profit, low-risk trades. The reality is that your trading system is not the only thing that will dictate your success. You must also manage your risk, pay attention to psychological triggers, and keep abreast of the market, even with an established business plan. The best way to keep a low risk in your foreign exchange operations is to keep your leverage reasonable, focus on your objectives, and not let stress or greed dictate your business decisions. With these gold keys, your low-risk strategy should deliver solid results in a long commercial career.

Categories
Forex Signals

AUD/USD Breaks Below Upward Channel – Braceof Sell Upon Retracement! 

During Thursday’s early European trading hours, the AUD/USD currency pair failed to stop its previous session bearish moves and took further offers near well below 0.7100 level, mainly due to the disappointing release of employment details, which showed that Australia’s economy lost 29.5K jobs in September. This, in turn, undermined the Asutliann dollar and contributed to the currency pair declines. Apart from this, the increasing probabilities of an interest rate cut by the Reserve Bank of Australia in November also played its major role in undermining the Australian dollar. Across the pond, the prevalent risk-off market sentiment, triggered by the worsening coronavirus (COVID-19) conditions in Europe and the U.K., exerted some additional pressure on the perceived riskier Aussie and dragged the currency pair below 0.7100 mars.

During Thursday’s early European trading hours, the AUD/USD currency pair failed to stop its previous session bearish moves and took further offers near well below 0.7100 level, mainly due to the disappointing release of employment details, which showed that Australia’s economy lost 29.5K jobs in September. This, in turn, undermined the Asutliann dollar and contributed to the currency pair declines. Apart from this, the increasing probabilities of an interest rate cut by the Reserve Bank of Australia in November also played its major role in undermining the Australian dollar. Across the pond, the prevalent risk-off market sentiment, triggered by the worsening coronavirus (COVID-19) conditions in Europe and the U.K., exerted some additional pressure on the perceived riskier Aussie and dragged the currency pair below 0.7100 mars.

During Thursday’s early European trading hours, the AUD/USD currency pair failed to stop its previous session bearish moves and took further offers near well below 0.7100 level, mainly due to the disappointing release of employment details, which showed that Australia’s economy lost 29.5K jobs in September. This, in turn, undermined the Asutliann dollar and contributed to the currency pair declines. Apart from this, the increasing probabilities of an interest rate cut by the Reserve Bank of Australia in November also played its major role in undermining the Australian dollar. Across the pond, the prevalent risk-off market sentiment, triggered by the worsening coronavirus (COVID-19) conditions in Europe and the U.K., exerted some additional pressure on the perceived riskier Aussie and dragged the currency pair below 0.7100 mars.

However, the global risk sentiment was further pressured by the fading hopes of additional U.S. fiscal stimulus. On the data front, the economy has lost 29.5K jobs in September against expectations for 35K losses and down from August’s 111K additions. The seasonally adjusted Unemployment Rate surged to 6.9% against expectations for a rise to 7.1% from 6.8%. In the meantime, the part-time jobs dropped by 9.4K in September against 74.8K additions in August. At the same time, the full-time employment sank by 20.1K against 36.2K additions in August. 

Considering the recent condition of the economy, the RBA’s Governor Lowe said that the benchmark interest rate could be cut down to 0.10% from the current record low of 0.25%, which undermined the Australian dollar exerted some additional pressure on the currency pair. The market trading sentiment remains depressed during the early European session as the condition of the second wave of coronavirus infections in Europe and the U.K. getting worse time by time, which suggests that the local lockdowns cannot tame the pandemic, which in turn suggests fresh national activity restrictions. 

In the meantime, the fears of a no-deal Brexit and the dovish tone of major central bankers pushing for further fiscal help also exert downside pressure on the market trading sentiment, which in turn undermined perceived riskier Aussie and dragged the currency pair below 0.7100 marks.

Additionally, the long-lasting inability to pass the U.S. fiscal package also weighed on the risk sentiment, which eventually undermined the perceived riskier Australian dollar and contributed to the currency pair gains. Despite U.S. President Donald Trump’s recent push to break the coronavirus stimulus deadlock, the opposition Democratic Party remains up in its demands. As per the latest report, the U.S. Treasury Secretary Mnuchin recently blamed the opposition to put obstacles for the much-awaited aid package before the presidential election to keep President Donald Trump lagging the election polls. 

At the US-China front, the renewed concerns over worsening diplomatic tensions between the world’s two largest economies also exerted downside pressure on the market trading, which keeps the AUD/USD currency pair under pressure. Other than the US-China tussle, Australia and China are also loggerheads with each other.

As a result, the broad-based U.S. dollar succeeded in extending its Asian session loss gains es and took some further bid during the early European session as investors still prefer the safe-haven assets in the wake of the risk-off market sentiment. However, the U.S. dollar gains seem rather unaffected by the intensifying political uncertainty ahead of the upcoming U.S. presidential election on November 3. However, the incoming polls tend to recommend a clear-cut presidential success for the Democrat nominee Joe Biden, which might cap additional upside momentum for the U.S. dollar. However, the U.S. dollar gains become the key factor that kept the currency pair under pressure. At the same time, the U.S. Dollar Index that tracks the greenback against a bucket of other currencies inched up 0.02% to 93.398 by 9:58 PM ET (1:58 AM GMT).

Looking forward, the traders will keep their eyes on the weekly U.S. Initial Jobless Claims, which is expected 825K versus 840K prior. Apart from this, the continuous drama surrounding the US-China relations and updates about the U.S. stimulus package will not lose their importance. 


Daily Support and Resistance

S1 0.7095

S2 0.7133

S3 0.715

Pivot Point 0.717

R1 0.7187

R2 0.7208

R3 0.7245

The AUD/USD pair has violated the double bottom support level of 0.7150 level, and below this, the pair may drop further until the next support area of 0.7098 level. On the higher side, the pair may find resistance at 0.7150 and 0.7190 level. The bearish bias remains solid today, especially below 0.7150.

Entry Price – Buy 105.245

Stop Loss – 105.645

Take Profit – 104.845

Risk to Reward – 1:1

Profit & Loss Per Standard Lot = -$400/ +$400

Profit & Loss Per Micro Lot = -$40/ +$40

Fellas, now you can check out forex trading signals via Forex Academy mobile app. Follow the links below.

iPhone Users: https://apps.apple.com/es/app/fasignals/id1521281368

Andriod Users: https://play.google.com/store/apps/details?id=academy.forex.thesignal&hl=en_US

Categories
Forex Market Analysis

Daily F.X. Analysis, October 15 – Top Trade Setups In Forex – ECB President Lagarde Speaks

On the news side, the economic calendar is likely to offer another round of central bankers’ speeches worldwide. BOC Gov Council Member Lane, U.S. FOMC officials, is due to speak today. Simultaneously, the main highlight of the day is likely to be ECB President Lagarde Speaks and Unemployment Claims from the U.S. economy.

On the news side, the economic calendar is likely to offer another round of central bankers’ speeches worldwide. BOC Gov Council Member Lane, U.S. FOMC officials, is due to speak today. Simultaneously, the main highlight of the day is likely to be ECB President Lagarde Speaks and Unemployment Claims from the U.S. economy.

On the news side, the economic calendar is likely to offer another round of central bankers’ speeches worldwide. BOC Gov Council Member Lane, U.S. FOMC officials, is due to speak today. Simultaneously, the main highlight of the day is likely to be ECB President Lagarde Speaks and Unemployment Claims from the U.S. economy.

Economic Events to Watch Today  

 

EUR/USD – Daily Analysis

The EUR/USD pair was closed at 1.17459 after placing a high of 1.17708 and a low of 1.17197. Overall the movement of the EUR/USD pair remained flat yet slightly bullish throughout the day. The EUR/USD pair followed its previous day’s bearish trend and extended its decline in the first half of the day but started to recover losses in the second half of the day as the U.S. dollar became weak. However, the gains were also limited due to the increased uncertainty in the market related to Europe’s coronavirus situation.

The risk sentiment in the market supported the consolidated movement of the EUR/USD pair on Wednesday and turned the prices on the upside after the European Union agreed to pay more than 1 billion euros, about 1.2 billion dollars to Gilead GILD.O. The amount will be paid for a six-month supply of its antiviral drug Remdesivir shortly before the publication of the coronavirus medication’s biggest trial. This news helped EUR/USD pair to recover some losses of the day on Wednesday.

Other than that, the U.S. dollar was weak across the board on Wednesday after the Federal Reserve Vice Chairman Richard Clarida said that the U.S. economic data since May has been surprisingly strong; however, it will still take another year for output to reach back to its pre-pandemic level. 

The rising uncertainty about the economic recovery weighed on risk sentiment and dragged the EUR/USD prices on Wednesday to the downward direction.

On the data front, at 14:00 GMT, the Industrial Production from Eurozone dropped to 0.7% from the expected 0.8% and weighed on the Euro currency. At 17:30 GMT, the Core PPI & PPI data from the U.S. for September raised to 0.4% from the projected 0.2% and supported the U.S. dollar. The macroeconomic data from both sides weighed on EUR/USD pair and kept the pair under pressure on Wednesday.

On October 14, the European Central Bank President Christine Lagarde said that European countries would need to invest 290 billion euros each year to meet their commitments under the 2015 Paris climate agreement. 

The little gains in EUR/USD could also be attributed to the latest Brexit optimism that emerged after U.K. Prime Minister Boris Johnson suggested that the U.K. continue to work on Brexit deal past the October 15 deadline. This raised hopes that no-deal will be out of option soon and raised EUR/USD pair on Wednesday.

Furthermore, the downward pressure on the EUR/USD pair was due to the latest moves from Eli Lilly and Co. to halt the government-sponsored clinical trials of its coronavirus vaccine. This move after a day when Jonson & Johnson halted its vaccine’s clinical trials due to an unexpected illness found in one participant raised economic recovery concerns and weighed on the riskier EUR/USD pair.

Daily Technical Levels

Support Resistance

1.1720     1.1773

1.1694     1.1798

1.1668     1.1825

Pivot point: 1.1746

EUR/USD– Trading Tip

The EUR/USD pair traded sharply bearish to break below a solid support area of 1.1780 extended by an upward channel. On the lower side, the EUR/USD is gaining support at the 1.1732 level, and the bearish breakout of the 1.1732 level may lower the EUR/USD price further than the 1.1697 level. The MACD and RSI favor selling bias, but we may see a slight upward movement until the 1.1764 level before seeing further selling in the pair.

GBP/USD – Daily Analysis

The GBP/USD closed at 1.30113 after placing a high of 1.30642 and a low of 1.28627. Overall the movement of the GBP/USD pair remained bullish throughout the day. The currency pair GBP/USD raised on Wednesday amid the renewed hopes of a Brexit deal and the U.S. dollar weakness. On Wednesday, the U.S. dollar was weak as the U.S. Treasury Secretary Steven Mnuchin said that the U.S. stimulus package would not be delivered before November Presidential elections. The hopes for stimulus measure faded away and weighed on the U.S. dollar, ultimately helping the GBP/USD pair’s upward momentum.

Meanwhile, the upward trend in GBP/USD pair was also supported by the latest extension to the reach a Brexit deal by PM Boris Johnson. The U.K. government allowed Brexit talks to extend beyond the former deadline of October 15, announced by the PM Boris Johnson.

The extension raised renewed hopes to reach a Brexit deal and supported the local currency that favored the additional gains in GBP/USD pair.

However, the gains were limited by the rise of coronavirus cases in the United Kingdom, as it reported almost 20,000 new coronavirus cases on Wednesday. PM Boris Johnson said on the issue of coronavirus spread that the latest three-tier regional approach was productive in controlling the spread as the aim was to avoid the nationwide lockdown.

Moreover, the Brexit headlines overshadowed the coronavirus threats, and the pair kept moving in the upward direction on Wednesday. The main operator of the GBP/USD pair on Wednesday was the optimism about the Brexit deal in the market. On the flip side, the Bank of England chief Andy Haldane said that he was hopeful that Britain’s economic recovery from coronavirus’s initial impact would persist despite the risks. He said it because of the adaptability of businesses and households in the region.

He said that the consumption patterns and work practices of Britain’s had been changed since March lockdowns. This positive comment also raised the British Pound bars that helped the GBP/USD pair’s upward movement. The Core PPI for September and the PPI data rose to 0.4% from the forecasted 0.2% and capped further gains in GBP/USD pair from the U.S. side.

However, the comments from Federal Reserve member Clarida that it will take another year for economic output to reach its pre-pandemic level weighed on the U.S. dollar that helped additional gains in GBP/USD pair on Wednesday.

Daily Technical Levels

Support Resistance

1.2894     1.3098

1.2777     1.3183

1.2691     1.3301

Pivot point: 1.2980

GBP/USD– Trading Tip

The GBP/USD is trading at 1.3020 level, having supported over 1.3005 level. Above this, the next target is likely to be found around 1.3050 and 1.3070 level. At the same time, a bearish breakout of the 1.3005 support level can extend selling bias until 1.2959. The bullish bias remains strong over 1.3005. The leading indicators, such as MACD and RSI, support selling; therefore, it’s worth taking a selling trade below 1.2944 today. 

USD/JPY – Daily Analysis

The USD/JPY currency pair successfully stopped its previous day losing streak and took some fresh bids near two-week highs, around the 105.30 regions in the last hour. However, the reason for the pair’s prevalent bullish bias could be attributed to the stronger U.S. dollar. Hence, the U.S. dollar remained supportive on the back of fading hopes over additional U.S. fiscal stimulus measures and surging COVID-19 cases in the leading European countries, which keeps the market trading sentiment under pressure and increase demand for traditional safe-haven assets. Apart from this, the latest halts in the COVID-19 vaccine trials are also weighing on the market risk tone. On the contrary, the prevalent risk-off market sentiment underpinned demand for traditional safe-haven assets, including the Japanese yen, which could be considered one of the key factors that kept the lid on any additional gains currency pair. At this particular time, the USD/JPY is currently trading at 105.25 and consolidating in the range between 105.10 – 105.30.

However, the market risk sentiment extended the previous two-day slumps to 3,478, down 0.08% intraday on the day. The market trading sentiment was being pressured by the fears of no U.S. stimulus ahead of the U.S. presidential election. Moreover, the S&P 500 Futures’ losses were further bolstered by the intensifying coronavirus (COVID-19) conditions in Europe amid pauses in the (COVID-19) virus vaccine trials. In the meantime, the on-going Brexit woes and downbeat U.S. inflation also exerted downside pressure on the market trading sentiment, which underpinned the demand for traditional safe-haven assets, including the U.S. dollar and Japanese yen.

As per the latest report, the U.S. Treasury Secretary Steve Mnuchin blamed the opposition Democratic Party to stop the stimulus package from keeping President Donald Trump lagging the election polls. Across the pond, the rising COVID-19 cases in notable European countries, such as Spain, France, Germany, and the U.K., orders for strict local lockdowns in recent days. Whereas, Johnson and Johnson’s pause in vaccine trials and Eli Lily also dragged the market sentiment down.

Moreover, the market risk-off sentiment was further bolstered by the reports suggesting that no deal was signed between the European Union (E.U.) and the U.K. Furthermore, the intensifying tussle between the U.S. and China also exerted downside pressure on the market. This, in turn, underpinned the safe-haven Japanese yen, which becomes the key factor that kept the lid on any additional gains in the currency pair.

The broad-based U.S. dollar managed to keep its gains throughout the Asian session as the traders still cheering the risk-off marker mood. However, the U.S. dollar gains seem rather unaffected by the intensifying political uncertainty ahead of the upcoming U.S. presidential election on November 3. However, the incoming polls suggest a clear-cut presidential victory for the Democrat candidate Joe Biden, which might cap further upside momentum for the U.S. dollar. However, the U.S. dollar gains become the key factor that helps the currency pair to stay bid. Simultaneously, the U.S. Dollar Index that tracks the greenback against a bucket of other currencies inched up 0.02% to 93.398 by 9:58 PM ET (1:58 AM GMT).

Looking forward, the traders will keep their eyes on the weekly U.S. Initial Jobless Claims, which is expected 825K versus 840K prior. Apart from this, the continuous drama surrounding the US-China relations and updates about the U.S. stimulus package will not lose their importance. 

Daily Technical Levels

105.05 105.70

104.82 106.12

104.40 106.36

Pivot point: 105.47

USD/JPY – Trading Tips

The USD/JPY traded sideway, with a neutral bias within a narrow trading range of 105.600 level to the 105.250 mark. Most of the selling triggered following the USD/JPY disrupted an upward channel at the 105.900 mark on Monday. The USD/JPY is trading at 105.459 marks, the support that’s was prolonged by double bottom mark on the two-hourly charts. A bearish violation of the 105.450 mark may encourage additional selling unto the 105.070 support level as the MACD, and the 50 periods EMA are in support of selling sentiment today. Let’s consider opening sell trade beneath 105.60 and buying over 105.050 level today. Good luck!  

Categories
Forex Basics

How Much Money Does It Take to Start Trading Forex?

Although some Forex brokers will allow you to start trading with just USD 1, you will need to deposit at least USD 20 with a broker offering nano lots or USD 150 with a broker offering micro lots to be able to trade safely during the day. Strategy for Risk Management To trade in Forex […]

Although some Forex brokers will allow you to start trading with just USD 1, you will need to deposit at least USD 20 with a broker offering nano lots or USD 150 with a broker offering micro lots to be able to trade safely during the day. Strategy for Risk Management To trade in Forex […]

Although some Forex brokers will allow you to start trading with just USD 1, you will need to deposit at least USD 20 with a broker offering nano lots or USD 150 with a broker offering micro lots to be able to trade safely during the day.

Strategy for Risk Management

To trade in Forex effectively, you need a Forex broker. Trying to trade in Forex using a normal bank account or money changer is too costly and slow to be a realistic option. Therefore, the starting point to answer this question is, what is the minimum deposit required by a Forex broker?

How much do you need to invest to start trading in the currency market? Forex brokers will not let you trade real money until you have deposited your minimum required deposit, which is usually around $100 these days. However, there are Forex brokers that do not require a minimum deposit, so theoretically you could start trading in Forex with just $1. Unfortunately, if you try to trade in Forex with such a small capital, you will quickly have several problems, starting with minimal position sizes and maximum leverage.

Minimum Position Size and Maximum Leverage

Many Forex brokers will not allow you to execute a transaction of less than 1 micro lot size (0.01 lots) worth 1,000 units of the base currency. For example, 1 micro-batch of the EUR/USD currency pair is worth 1,000 dollars. This means that you will need leverage to perform any transaction in the EUR/USD currency pair with an investment of less than 1,000 USD. If a broker offers maximum leverage of 1:30, typical in Europe, you will need to make an income of at least $33.50 just to make a transaction in EUR/USD. If a maximum leverage of 50 to 1 (typical in the United States) is offered, you will need to deposit at least 20 USD to perform a transaction in EUR/USD. If a maximum leverage of 500 to 1 is offered (typical in Australia), you will need to deposit at least $2 to perform a transaction in EUR/USD.

Just because you’re offered a lot of leverage as a trader, doesn’t mean it’s wise to use it. The minimum deposit that is necessary to make a single Forex transaction is determined by:

-The greater leverage your Forex broker offers you in what you want to trade (leverage is different from asset to asset and from country to country);

-The minimum size of the position you can trade with your broker on what you want to trade (usually 1 micro lot).

There are some Forex brokers that allow trading in a minimum position size even less than 1 micro lot. This lower size is 1 nano batch, which is equal to 0.001 lots. Continuing with our example of placing a transaction in the EUR/USD currency pair, 1 nano lot would equal a cash position size of 100 dollars, so with leverage of 100 to 1, a deposit of 1 dollar would be enough margin to open that transaction.

Forex Brokers Offering Nano Batch Trading

There are several brokers that offer trading nano lots, and they allow you to place an operation with a position size as low as 1 USD or 1 unit of any other base currency, which means you can trade with 1 USD without using any leverage.

So far, we have only considered the limitations imposed by the broker that affect the amount of money you need to start trading in Forex. We still have to consider the issues of risk management, stop loss, meaning benefits, and different negotiating styles, which are key factors to answer this question.

How Risk Management Affects the Repository Size

We have seen before the minimum amount of money needed to enter a single trade. However, trading Forex involves taking a large number of trades. Even a position operator that could aspire to be in the winning trades for a long period of weeks or months you should probably perform at least fifteen trades for a year; and short-term operators, such as swing traders or scalpers, a lot more operations than that.

Trading in foreign exchange involves losing operations. There is virtually no way around it: any trader, even the best Forex trader, will lose at least one-third of all trades they make. We all know what to win and lose operations are not evenly distributed: markets tend to go through winning and losing streaks. This means that each operator should plan for the worst-case scenario a losing streak of at least 20 losing operations in a row. Each operator must also plan its worst drop (decrease of bill from peak to valley). Once the account has dropped by more than 20%, it becomes increasingly difficult to return to the top, because the profit required to achieve it increases exponentially. For example, if your account has dropped 50%, you need to earn 100% of what’s left to resume the point where you were prior to the loss of 50.

Suppose you don’t want your trading account to drop more than 20% and your worst loss run will probably be 20 losing operations in a row. This means you should not risk more than 1% of your account per operation. But wait, you may only lose 20 trades in a row, but your net loss trades within any major downsizing are likely to be roughly double, with some winners mixed up. This means you probably shouldn’t risk more than 0.5% of your account in a single operation. So, if you’re going to need, because of the minimum position size, leverage, and stop-loss requirements, let’s say $1 for a single operation, you’ll have to multiply it by 200 to reach the minimum amount you need to trade in Forex. You’ll also need to think about the size of your typical stop-loss operation.

Traders must worry about a sudden and wild price movement that causes a massive slide beyond the loss of a trade. This usually occurs only with fixed or currency that can be manipulated, such as the Swiss franc in 2015. This is another reason why it is a good idea to risk only a small part of your account in a single operation. It should also help to trade with major liquid currencies such as the US dollar, the Euro, and the Japanese yen.

How Stop Loss Affects Tank Size

You should never enter an operation without introducing a hard stop loss. The loss of hard stop orders your runner to at the time when the trade has gone against you for a certain amount, close the operation immediately. Although stop loss will not be executed exactly at the price determined when the markets are very volatile, it is the best and very effective way to limit your risk and have control of losses.

The stop loss must always be determined by technical analysis, not by the magnitude of the stop loss you can “afford” because of the amount of money you have in your trading account.

For example, let’s say you want to risk 0.5% of your account on an operation and want your typical stop loss to be 100 pips. The smallest size of trading position your broker allows is 1 micro lot, which in a USD based currency costs 0.10 dollars per pip. This means that your stop loss of 100 pips will require you to risk 100 X 0.10 dollars, which is equivalent to 10 dollars. You want this 1 USD to be no more than 0.5% of your account – and that means you’ll have to make a $2,000 deposit to start trading in Forex with enough money to make the 100 pip stop loss work if your broker only size as micro-batches.

Never make a stop loss smaller than you really want it to be just because you can’t “pay” it with the size of your account. Put more money into your account, find a Forex broker that allows you to trade nano lots, or thinking about changing to another style of trade that typically requires tighter loss stops. The three traditional Forex trading styles are position trading, scalping, and swing trading, and we will consider them each in turn.

How much money do I need to operate in a Forex position?

Position traders look for trades that take several days or even weeks or months to complete, and therefore normally need to use stop losses of about 100 to 150 pips. Assuming that you don’t want to risk more than 0.5% of your account on any transaction and that you will never lose more than 25% of your account, you should start by depositing at least 2,500 USD to 3.750 USD on a Forex broker offering micro-batch trading, or at least $250 to $375 on a Forex broker offering nano lots.

How much money do I need to trade in Forex?

Swing operators search for operations that take one to eight days to complete, and therefore usually need to use stop losses of 30 to 60 pips. Assuming that you don’t want to risk more than 0.5% of your account on any transaction, and that you will never lose more than 25% of your account, you should start with a deposit of at least 700 USD to 1400 USD on a Forex broker that offers micro-batch trading, or at least 70 USD to 140 USD on a Forex broker offering nano lots.

How much money do I need for the Scalp or the Day Trade Forex?

Climbers or day traders look for operations that take only seconds, minutes, or maybe a few hours at most to complete, and therefore usually need to use stop losses of about 5 to 10 pips. Assuming that you don’t want to risk more than 0.5% of your account on any transaction, and that you will never lose more than 25% of your account, you should start with a deposit of at least 120 USD to 240 USD on a Forex broker offering micro-batch trading, or at least 12 USD to 24 USD on a Forex broker offering nano lots.

Can I start with 100 bucks?

The above calculations show that it is absolutely possible to trade in Forex safely starting with an initial deposit of 100 dollars, if you use a Forex broker that offers nano lots or smaller, and is operating in the day, in scalping or swing trading.

Is it worth trading in Forex with a low minimum deposit?

One last thing to keep in mind is, even if you can safely trade in Forex with a small amount of money like $50 or $100, is it worth it? It all depends on what these sums of money mean to you and how much time and effort you will invest in Forex trading.

For example, let’s say you’re able to double your investment in a year. This is a great result for any merchant and will probably require a lot of work. However, if you start with $100, you’ll only get $200 after this big score. It may not be is worth it if you are able to save that amount of money by making a series of changes in your life (for example saving more) without risking your capital. It may be smarter to wait until you have a larger amount to start with because then that benefit would make more sense to you and you would feel worth the work you’ve done to get it.

No one should ever trade in Forex with money they can’t afford to have losses, but normally you won’t be motivated for too long if you trade with too little money and for you, you don’t feel you care much about the outcome. You need to find a balance that works for your negotiating style, emotional style, and financial situation.

Categories
Forex Signals

USD/CHF Failed to Extend Previous Session Gains – Downward Channel In Play

Today in the European trading session, the USD/CHF currency pair stopped its previous session bullish momentum. They edged lower below the 0.9150 level, mainly due to the risk-off market sentiment, triggered by lack of additional U.S. fiscal stimulus and the US-China tussle, which eventually underpinned the safe-haven Swiss franc and kept the currency pair under pressure. Moreover, the market trading sentiment was further pressured by the downbeat reports that Johnson & Johnson paused the coronavirus vaccine trails, which also burdened the currency pair. 

Today in the European trading session, the USD/CHF currency pair stopped its previous session bullish momentum. They edged lower below the 0.9150 level, mainly due to the risk-off market sentiment, triggered by lack of additional U.S. fiscal stimulus and the US-China tussle, which eventually underpinned the safe-haven Swiss franc and kept the currency pair under pressure. Moreover, the market trading sentiment was further pressured by the downbeat reports that Johnson & Johnson paused the coronavirus vaccine trails, which also burdened the currency pair. 

Today in the European trading session, the USD/CHF currency pair stopped its previous session bullish momentum. They edged lower below the 0.9150 level, mainly due to the risk-off market sentiment, triggered by lack of additional U.S. fiscal stimulus and the US-China tussle, which eventually underpinned the safe-haven Swiss franc and kept the currency pair under pressure. Moreover, the market trading sentiment was further pressured by the downbeat reports that Johnson & Johnson paused the coronavirus vaccine trails, which also burdened the currency pair. 

Across the pond, the bearish tone around the currency pair could also be associated with the fears of national lockdowns in Europe, which add further burden to the trading sentiment and dragged the currency lower. On the contrary, the broad-based U.S. dollar strength, backed by the market risk-on tone, becomes the key factor that kept the lid on any additional losses in the pair.

However, the equity market has been flashing red since the day started. Although, the reason could be associated with the major negative catalysts, including the further delay in the much-awaited coronavirus (COVID-19) relief package and the resurgence of COVID-19 new cases in the U.S. and Europe, which keep fueling the worries over the global economic growth. Apart from this, the fears of the U.K. and the European Union’s (E.U.) Brexit talks and the latest pause in the COVID-19 vaccine trials also add pessimism around the market trading sentiment. This, in turn, provided a boost to the safe-haven Swiss Fran and exerted some additional pressure on the currency pair.

As in result, the broad-based U.S. dollar managed to keep its gains throughout the Asian session as the traders still cheering the risk-off marker mood. However, the U.S. dollar gains seem relatively unaffected by the intensifying U.S. political uncertainty. However, the incoming polls suggest a clear-cut presidential victory for the Democrat candidate Joe Biden, which might cap further upside momentum for the U.S. dollar. However, the U.S. dollar gains become the key factor that helps the currency pair limit its more profound losses. Simultaneously, the U.S. Dollar Index that tracks the greenback against a bucket of other currencies rose by 0.01% to 93.550 by 10:12 PM ET (2:12 AM GMT).

Looking forward, the traders will keep their eyes on the release of the US PPI figures for September. Meanwhile, FOMC members and the RBNZ policymaker’s scheduled speeches will key to watch for some meaningful trading direction. Apart from this, the ongoing drama surrounding the US-China relations and updates about the U.S. stimulus package will not lose their importance.

Daily Support and Resistance

S1 0.9006

S2 0.9069

S3 0.9109

Pivot Point 0.9132

R1 0.9172

R2 0.9195

R3 0.9258


The USD/CHF is trading with a bearish bias at 0.9125, holding below an immediate resistance level of 0.9157 resistance area. Closing of candles below this level may drive selling bias until the 0.9086 level. On the two-hourly timeframes, the USD/CHF pair has formed a downward channel that is likely to drive selling bias, and that’s one reason we opened a selling signal in the USD/CHF pair. Here’s a trading plan… 

Entry Price – Sell 0.91392

Stop Loss – 0.91792

Take Profit – 0.90992

Risk to Reward – 1:1

Profit & Loss Per Standard Lot = -$400/ +$400

Profit & Loss Per Micro Lot = -$40/ +$40

Fellas, now you can check out forex trading signals via Forex Academy mobile app. Follow the links below.

iPhone Users: https://apps.apple.com/es/app/fasignals/id1521281368

Andriod Users: https://play.google.com/store/apps/details?id=academy.forex.thesignal&hl=en_US

Categories
Forex Basics

Trading Forex Without Monitoring the News 24/7

One of the biggest fallacies that traders will encounter when they start trading with Forex is the fact that “news is vitally important”. While news stories do impact financial markets, I think it’s more important to ask this question: “What matters most, why does a market move, or the fact that it does?”

One of the biggest fallacies that traders will encounter when they start trading with Forex is the fact that “news is vitally important”. While news stories do impact financial markets, I think it’s more important to ask this question: “What matters most, why does a market move, or the fact that it does?”

One of the biggest fallacies that traders will encounter when they start trading with Forex is the fact that “news is vitally important”. While news stories do impact financial markets, I think it’s more important to ask this question: “What matters most, why does a market move, or the fact that it does?”

When I started trading, I was constantly looking for the reasons why the currency pair moves in one direction or another. I would have a trade and the market would work against me. I would take some kind of loss and then look for a reason for what happened. Too often, I can find someone on one of the forums or news sites that tell me that “Currency A fell because of the economic numbers that came out overnight”. While this might be true, in the end, it doesn’t matter why it happened. It only matters that it did. Forex trading without seeing the news

Once I began to focus on the WHAT or WHY of a movement, I began to realize that understanding what led to the currency pair in one direction or another was completely irrelevant. What I needed to understand is that, in fact, we broke the support, the resistance, a trend line, or an exponential moving average. It doesn’t really matter what caused it to happen, what mattered is that we have now surpassed that level and the discussion has already taken place. If my trade stopped, I am indeed in the wrong with this equation.

You can always question the market as long as you want about how bad you are, but it’s a great way to lose a lot of money. Too many people worry about whether the market has it right or not. Personally, I know a couple of traders who went bankrupt during the financial crisis a decade ago. They would still be arguing with me about how “this ridiculous drop in stock markets cannot last forever”. In the end, they were right. However, that ridiculous fall lasted long enough to eliminate them financially.

In an even clearer example of how little WHY a market moves in one direction rather than the simple fact that it did, I remember that a pseudo-famous and promising Forex instructor during 2006 was crushed for trying to reduce the USD/JPY pair. His argument was that the money would go back to Japan based on a security trade, an argument that was finally right. Unfortunately for him, he began to shorten that pair of currencies about six months ahead of time. To put us on the worst side, I was so convinced that right that he kept shortening it. He ended up blowing up his account. Even though I was right from an esoteric point of view, the reality is that the pair was going up all that time. In a situation like the one commented, it can be a success, or it can be profitable. It’s your choice.

Anyway, you don’t get the news fast enough. This drives me crazy. When I started trading 13 years ago, many people were involved in news trading. There is a scenario in the world of Forex where I could take advantage of news ads, but algorithmic traders and the machines that have entered the Forex world have tried to exchange economic news when it is launched into the market. There are now programs that analyze news sources for headlines and perform keyword-based trades. Not only is your news supply much slower than you pay thousands of dollars a month, but your running speed is also much slower and the size of your account is not large enough to move the market.

This is not to say that news cannot come into play with its analysis, but it must observe it from a longer-term angle. Let’s take an example, if we have warned of several negative economic announcements outside Canada recently, then you may think that the Canadian dollar is going to be bearish. That’s okay, but that doesn’t necessarily mean I press the sell button right away. What this means is that it has it in as an underlying bullish potential currency. This is what news websites are so good, adding news for the long-term movement. The next five minutes are almost impossible to guess what will happen based on a headline. Liquidity becomes a problem and, of course, machines have made thousands of transactions by the time you even press the button.

Beyond that, I didn’t get into Forex trading to become an economist. Frankly, it’s a little ironic that I’m an analyst. However, the only thing I think you should bear in mind is that we are here to trade and make a profit. It doesn’t really matter why we’re making money, only we are. That’s why there are so many different strategies out there, with such different results from person to person. Because of this, I think what we’re looking at is finding something that’s technically simple for you to follow, and something that you’re willing to follow. In other words, if you get a sales signal, just take it. That doesn’t mean you can’t study the news to observe whether or not a major ad is being published that might cause problems, but you’re there is no spreadsheet trying to guess how many moving pieces are going to move. push the markets around.

Frankly, it’s almost impossible to take all that information to make a good forecast of where a couple of currencies go anyway. This is because there are several competing elements and, of course, competing reasons for people to pass a long or short pair anyway. If we break the resistance, then we go higher. If we break the support, then we’re going down. Why is it really important? Or would you rather trade and have a little profit?

Categories
Forex Money Management

Financial Leverage and Its Importance in Trading

I’m sure you’ve heard of financial leverage, but knowing how important this concept is in trading and what it implies. Let’s get on with it! What is Leverage? When trading on Forex, the broker lends you money so you can trade for more than you have in your account. It’s like an accelerator, it makes […]

I’m sure you’ve heard of financial leverage, but knowing how important this concept is in trading and what it implies. Let’s get on with it! What is Leverage? When trading on Forex, the broker lends you money so you can trade for more than you have in your account. It’s like an accelerator, it makes […]

I’m sure you’ve heard of financial leverage, but knowing how important this concept is in trading and what it implies. Let’s get on with it!

What is Leverage?

When trading on Forex, the broker lends you money so you can trade for more than you have in your account. It’s like an accelerator, it makes the profits and losses in applying it can be greater. The greater the leverage you use will be your exposure in the market.

How does trading work?

If you trade $5,000 in your broker account to trade with a leverage level of 1:10, the margin required is $500. If you have a balance of $3,000 for this, you have $2,500 of available or free margin ($3,000 – $500) to do more trading.

Why is Forex leverage important?

Knowing the leverage you’re using will help you know what potential gains or losses you may have, what margin the broker requires for smooth trading, and how your money fluctuates in your account with each price variation.

New ESMA Regulation

Due to misuse and losses resulting from excessive leverage with CFDs, in 2018 ESMA (European Securities and Markets Authority) decided to limit it to a maximum of 1:30 per account for European customers. In a practical way this means that, if your account balance is $5,000, you will not be able to do operations worth more than $150,000.

A paragraph, if you do not know what CFDs are, are contracts for differences that is their translation of the acronym in English (Contract for Difference). When you trade in currencies and click on the broker tab to buy or sell you do it through CFDs, which is the instrument that allows us to access and exit the market and settle the position easily.

One of the great attractions of CFDs is leverage, especially in currencies where some brokers offer very high levels that have caused some people who are starting to lose a lot of money. Faced with this situation, ESMA decided to act and limit leverage to 1:30 for one year, although it has recently been extended and already seems an unlimited measure. This has generated quite a number of opinions against and in favour of this measure.

Anyway, I have to tell you that the many brokers have looked the other way and offer customers high leverage despite this measure. This is done by changing its headquarters outside Europe, creating another tax residence. The fact is that if you take a look on the Internet you will find intermediaries that offer up to levels of 1:500.

What is the best leverage in Forex?

The best leverage for trading is the minimum that allows you to achieve your goals. If it’s not necessary for you to leverage yourself, don’t, because that will make your risk less. Do you really think that most losing traders are because they don’t have a higher level of leverage?

You may think that since you have a small account, the trick is to leverage as much as possible, but in these years I have seen how many traders open small accounts that later go bankrupt, then open another. and thus entering a vicious circle.

1:30 leverage is more than acceptable. From here, if you have more, you can use it or not. Having leverage of 1:500 does not mean that you will be overexposed in the market or with an excessive level of risk, simply the broker will require you less margin and ready. The key is that you always have the maximum loss of each trade in money controlled and is manageable.

Margin call

At this point, you’ll think leverage is a bargain. You can make use of it in small accounts and if the operation goes well make a good part of the capital and if you leave bad lose what you have in the account. You know, lose a little, earn a lot. Right? No, because you should be very clear that the broker will normally close your operations when you run out of margin in the account (margin call) since it does not interest you to end up owing money to him. But be careful because if not, you can ask for the amount you lost if your account is negative because you do not have the obligation to do so. In other words, you are ultimately responsible. The margin call is the ‘over game’ of trading.

We go with an example, we have a balance in our account of 1,000 dollars and leverage of 1:30. We opened a purchase operation of 0.30 lots in EUR/USD (30,000 dollars in face value). Our margin required to make the trade is 900 dollars. We only have 100 dollars in our account and if the EUR/USD quotation drops the margin will decrease.

That is to say, of the 30,000 dollars of exposure that we have in the market, with only a little more than 0.3% we would be left without margin to face the losses and the broker (is not obliged) would close the operation to us. This is what we called margin call before. In this case, we would assume the loss, but if you take this to the extreme and you do not close the positions or an event occurs that makes the quotes move much in a short time (news, black swan, Brexit type events) the consequences can be worse.

Is leverage bad?

Let’s think a little bit in perspective, is salt really bad? No, as long as you don’t have a disease related to it and take a reasonable amount.

Is leverage bad? No, if you have it and it’s not too high. If you engage in excessive leverage to trade Forex, sooner or later you will end up with big losses. Even if you win at first, you’ll end up losing. Use leverage to get more with less and diversify for better results.

The broker industry sells it as a panacea for beginners, where they announce that you can make a lot of money with very little. As we have already seen this may be true, but what you are not usually told is the B side of the coin.

How to calculate the size of a Forex trade

If you’re starting out on Forex, don’t worry about pips and lots, it’s a lot easier than it looks. An example to look at, with starting data that we need to calculate how much we are going to trade for a reasonable level of risk.

  • Risk per operation: 1%
  • Stop loss: 50 pips
  • Account balance: $1000
  • Currency pair: EUR/USD

We first calculate our risk assumed in dollars: 1% of 1000 dollars, 10 dollars.

Since our stop loss is 50 pips, we will calculate the value of the pip.

$10/50 pips = $0.2/pip.

Now we only have to know how much we’re going to trade so that each pip is worth 0.2 dollars.

Size of our operation = 0.2 dollars/pip / 0.0001

(Pip size) = 2,000 dollars.

Now we know that to take a risk of 10 dollars with that level of stop at EUR/USD we have to open an operation of 2000 dollars, 0.02 lots, or 2 micro-lots.

I know you’re thinking this is all bullshit and that doing it every time you open an operation is impractical. And that’s why I do it, algorithmic trading and I recommend you do it too. No more excuses for not knowing what leverage you’re using and calculating the risk properly. On to success!

Categories
Forex Assets

Costs Involved While Trading The JPY/LKR Forex Exotic Pair

Introduction

Introduction

Introduction

JPYLKR is a forex exotic currency pair, where JPY is Japan’s currency, and LKR is the currency of Sri Lanka. In this currency pair, JPY is the first currency, and the LKR is the second currency. The JPYLKR shows how much LKR is needed to have one JPY. It is quoted as 1 JPY per X LKR. For example, if the value of this currency pair is at 1.7686, then almost 1.7686 LKR is required to purchase one JPY.

JPYLKR Specification

Spread

The spread comes from the difference between the Ask and Bid price that a broker take as a charge. This value is set by the broker. However, it varies on the type of execution model used for executing the trades. Below are the ECN and STP values of JPY/LKR forex exotic pair.

Spread on ECN: 19 pips | Spread on STP: 24 pips

Fees

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

Slippage

Sometimes the entry price and execution price does not match, which is known as Slippage. The reason for slippage is the market volatility and the broker’s execution speed.

Trading Range in JPY/LKR

Procedure to assess Pip Ranges

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

JPYLKR Cost as a Percent of the Trading Range

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

ECN Model Account 

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

Total cost = Spread + Slippage + Trading Fee

= 19 + 5 + 8

Total cost = 32

STP Model Account

Spread = 24 | Slippage = 3 | Trading fee = 0

Total cost = Spread + Slippage + Trading Fee

= 19 + 5 + 0

Total cost = 27 

The Ideal way to trade the JPYLKR

The JPYLKR has enough volatility and liquidity. Hence, trading in this currency pair is straightforward and profitable. The above table’s percentage values are within 300%, which is an indication of stable volatility. Therefore, the costs are low irrespective of the timeframe and volatility you trade.

Digging it a little deeper, there is an inverse relationship between the cost and volatility. In a lower timeframe, the volatility is higher, and the cost is lower. However, in a higher timeframe, the volatility is lower, but the cost is higher. In this situation, traders should focus on trading when the volatility is on the average value. Therefore, it will be cost-efficient for all traders.

Furthermore, traders can quickly reduce costs by placing ‘limit’ and ‘stop’ orders. Because by using limit orders, the Slippage can be totally avoided, and the total costs get reduced. In our example, the total cost will be reduced by five pips, as shown below.

Using Limit Orders

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

Total cost = Spread + Slippage + Trading Fee

= 19 + 0 + 0

Total cost = 19

Categories
Forex Signals

Choppy Trading in USD/CAD – Brace for a Breakout Setup! 

Today in the early European trading session, the USD/CAD currency pair extended its previous session recovery rally and remains bullish around 1.3144 level, mainly due to the broad-based U.S. dollar strength, backed by the risk-off market mood. However, the reason for the prevalent risk-off market sentiment could be associated with the reports suggesting that the U.K. pharma giant, Johnson, and Johnson, stopped its COVID-19 vaccine trial due to an unexplained illness. This, in turn, underpinned the safe-haven U.S. dollar and contributed to the currency pair gains. The on-going uncertainty over the American stimulus package also weighs on the market risk-tone, which gives further support to the U.S. dollar and keeps the currency pair higher. 

Today in the early European trading session, the USD/CAD currency pair extended its previous session recovery rally and remains bullish around 1.3144 level, mainly due to the broad-based U.S. dollar strength, backed by the risk-off market mood. However, the reason for the prevalent risk-off market sentiment could be associated with the reports suggesting that the U.K. pharma giant, Johnson, and Johnson, stopped its COVID-19 vaccine trial due to an unexplained illness. This, in turn, underpinned the safe-haven U.S. dollar and contributed to the currency pair gains. The on-going uncertainty over the American stimulus package also weighs on the market risk-tone, which gives further support to the U.S. dollar and keeps the currency pair higher. 

Today in the early European trading session, the USD/CAD currency pair extended its previous session recovery rally and remains bullish around 1.3144 level, mainly due to the broad-based U.S. dollar strength, backed by the risk-off market mood. However, the reason for the prevalent risk-off market sentiment could be associated with the reports suggesting that the U.K. pharma giant, Johnson, and Johnson, stopped its COVID-19 vaccine trial due to an unexplained illness. This, in turn, underpinned the safe-haven U.S. dollar and contributed to the currency pair gains. The on-going uncertainty over the American stimulus package also weighs on the market risk-tone, which gives further support to the U.S. dollar and keeps the currency pair higher. 

Petroleum Institute data becomes the factor that capped further upside momentum in the currency pair. However, the bullish sentiment around the crude oil prices was being supported by optimism over U.S. President Donald Trump’s negative status for the pandemic. Currently, the USD/CAD is trading at 1.3115 and consolidating in the range between 1.3108 – 1.3144.

However, the market trading sentiment failed to extend its previous day bullish moves and remained depressed by combining factors. Be it the worrisome headlines concerning the Brexit or the tension between the US-China, not to forget the coronavirus woes in the U.S. and Europe, the market trading sentiment has been flashing red since the day started, which ultimately keeps the safe-haven assets supportive on the day. 

As per the latest report, the U.K. pharma giant, Johnson and Johnson, delayed its COVID-19 vaccine trial due to an unexplained illness. Moreover, China’s dislike of the White House arms sale to Taiwan and the recent ban from Beijing to use Aussie coal for power stations adds additional pressure around the market sentiment.

This, in turn, the broad-based U.S. dollar succeeded in gaining positive traction on the day. However, the U.S. dollar gains seem rather unaffected by the political uncertainty in the U.S. ahead of U.S. elections. Thus, the gains in the U.S. dollar become the key factor that kept the currency pair higher. Whereas, the U.S. Dollar Index, which tracks the greenback against a bucket of other currencies, rose by 0.11% to 93.207 by 10:04 PM ET (2:04 AM GMT). However, the bullish sentiment around the crude oil prices could be associated with the positive reports suggesting that the U.S. President Donald Trump’s negative status for the virus infection. 


Daily Support and Resistance

S1 1.3233

S2 1.3272

S3 1.3292

Pivot Point 1.3312

R1 1.3331

R2 1.3351

R3 1.339

The USD/CAD pair is trading sideways within a narrow trading range of 1.3145 – 1.3103 level, which marks double bottom and double top level on the 2-hour timeframe. A bullish breakout of 1.3145 level may lead the USD/CAD price towards the next resistance area of 1.3207 mark, while on the lower side, the support is likely to be found around 1.3040 level today. 

Entry Price – Buy 1.31421

Stop Loss – 1.31021

Take Profit – 1.31821

Risk to Reward – 1:1

Profit & Loss Per Standard Lot = -$400/ +$400

Profit & Loss Per Micro Lot = -$40/ +$40

Fellas, now you can check out forex trading signals via Forex Academy mobile app. Follow the links below.

iPhone Users: https://apps.apple.com/es/app/fasignals/id1521281368

Andriod Users: https://play.google.com/store/apps/details?id=academy.forex.thesignal&hl=en_US

Categories
Forex Technical Analysis

SQN in Forex Trading Systems

When you’ve made up your mind to participate in trading, you should focus on conducting a comprehensive and in-depth study of how your trading systems work. Yeah, I’m pretty heavy on this algorithmic trading and ratios But really, in the end, this is just evidence of whether what you’re going to apply works or whether […]

When you’ve made up your mind to participate in trading, you should focus on conducting a comprehensive and in-depth study of how your trading systems work. Yeah, I’m pretty heavy on this algorithmic trading and ratios But really, in the end, this is just evidence of whether what you’re going to apply works or whether […]

When you’ve made up your mind to participate in trading, you should focus on conducting a comprehensive and in-depth study of how your trading systems work. Yeah, I’m pretty heavy on this algorithmic trading and ratios But really, in the end, this is just evidence of whether what you’re going to apply works or whether you should throw it away and not make your money go away foolishly. In other words, you need to learn how to statistically and objectively evaluate the performance of your trading systems.

As you know, mathematical statistics provide you with a variety of tools that will allow you to correctly evaluate the results of a trading strategy or system. One of these tools is the SQN (System Quality Number) ratio.

The SQN ratio was created by Van K. Tharp, in 2008 in his book The Definitive Guide to Position Sizing, to evaluate or measure the performance of a trading strategy or system. Then some variations in use have emerged such as the market regime indicator, obtaining optimal parameters that simultaneously maximize the average size of the operation, and the standard deviation of results in a sample space of N operations.

The SQN ratio measures the ratio between the average (expectation) and the standard deviation of the profit distribution generated by a trading system. Van Tharp recommends that the number of N trading system trades be at least 100, the more exchanges the better.

The mathematical formula for calculating the SQN is quite simple and is described below:

SQN= (EM/DT)* N

Where,

N: Number of system operations.

EM: Mathematical hope of the system in terms of R (Expectation or Average Benefit).

DT: Standard or standard deviation of multiples of R.

The first thing we must have clarified is the concept of R. R is the difference between your entry price and the initial stop loss, that is, the initial risk. Then all gains and losses are expressed as multiples of R.

The expectation of the trading system can also be defined as the average of the trading system’s R multiples (negative and positive).

How to calculate the expectation, the expected profit, and the SQN ratio according to the value of R.

Suppose our trading system has given us these results:

N° Operations / Buy $ / Stop $ / Value R / Sale $ / Result /Operation $ / Multiples R

  • 1 40 30 10 70 30 1,5
  • 2 50 40 10 75 25 1,25
  • 3 55 45 10 45 -10 -0,5
  • 4 160 150 10 145 -15 -0,75
  • 5 125 115 10 140 15 0,75
  • 6 85 75 10 105 20 1
  • 7 165 155 10 155 -10 -0,5
  • 8 125 115 10 135 10 0,5
  • 9 115 105 10 137,5 22,5 1,125
  • 10 75 65 10 65 -10 -0,5

Based on our results we can obtain the following data:

  • % of winning trades: 60%
  • % of losing trades: 40%
  • Winning Trades Sum: 245
  • Sum of losing trades: 90
  • Average R: 0.775
  • Standard deviation of R: 1.73

In the Van Tharp model the hope (E) of the system is defined as the average of the n multiples of R, therefore, in our example:

System hope: 0.775

The hope of the trading system allows us to calculate the profit we can expect from our system in X number of trades, using the formula:

Expected profit = Hope * Number of transactions * value of R

Knowing the standard deviation of R, we can finally calculate the SQN ratio.

SQN=(0.775/1.73)* 10=1.42

Now we take the same example above, but instead of 10 operations, we will assume that the results were obtained based on 100 operations. The SQN ratio would be as follows:

SQN=(0.775/1.73)* 100=4.49

Once you know how to calculate the SQN ratio, we have one task that is no less important: how to interpret the values obtained? Are they good or bad?

In order to assess whether our trading system is profitable or not, Van Tharp proposes the following scale:

  • 1.6 – 1.9 Good. Below average, but you can trade
  • 2.0 – 2.4 On average
  • 2.5 – 2.9 Okay, OK.
  • 3.0 – 5.0 Excellent.
  • 5.1 – 6.9 Brutal.

Summarizing the table above, a system is considered good when the SQN ratio is greater than 2 and excellent if it is greater than 3.

It is important to take into account when calculating the SQN ratio that when the trading system does not have a fixed loss stop, the value of R can be estimated as the average loss of the trading sequence, provided that this average is sufficiently representative. From there we can see the distribution of multiples of R (standard deviation) and also calculate the expectation as the average of multiples of R.

SQN ratio a parameter optimizer.

Once we know how to calculate the SQN ratio and determine whether our trading system is good or not based on this ratio, the following question arises: Can I increase the value of the SQN ratio? How to do it the best way?

If we analyze the formula to calculate the SQN ratio, we can quickly realize that there are 3 parameters that we can adjust to increase this ratio:

3.1. Improve the average benefit.

To perform one of the most common ways to increase the average profit is to filter operations for fewer operations, but higher quality. Less trading also means less commission.

3.2. Reduce the dispersion of results around the mean.

This can be achieved by reducing loss stops and taking winnings. In this way, we get the results concentrated as close as possible to the average.

3.3. Increase the number of operations.

By making N as big as possible, we can also improve the robustness of our trading system and the statistical data we get from our system becomes more reliable. In addition, the profit curve becomes smoother and more continuous. Increasing the number of operations also allows us to have a broader picture of the behavior of our strategy in different time frames. It’s basically what I usually comment on in videos about having greater statistical relevance. The SQN ratio, therefore, favours systems with a longer operating history.

Conclusion

This measure developed by Van Tharp allows us to objectively evaluate the performance of our trading systems. With the SQN ratio, you can also optimize the parameters of your system to make it more robust. Although I am not a fan of optimization as you already know, especially when we look for robustness. But this is another topic. In my case, I use it only in evaluating my systems and it is not among my favorites, but I find it very useful.

Categories
Forex Signals

EUR/JPY Continues to Trade Below Previously Violated Upward Channel – Signal Update! 

The EUR/JPY failed to stop its previous session bearish streak and drew further offers around the 124.17 regions. However, the basis for the bearish sentiment around the EURJPY pair could be associated with the fresh reports suggesting the re-imposition of stricter restrictions in Germany, Spain, and France to stop the coronavirus second-wave. This, in turn, weakened the forecast around the shared currency and dragged the currency pair lower. Apart from this, the intensification of the Sino-American tussle and the uncertainty over the American stimulus package, keep weighing on the market risk-tone, which eventually underpinned the Japanese yen’s safe-haven demand and contributed to the currency pair losses. Moreover, the risk-off market sentiment was further boosted by the fresh discouraging vaccine news, which put a further bid under the safe-haven Japanese yen. At this particular time, the EUR/JPY is trading at 124.29 and consolidating between 124.17 – 124.48.

The EUR/JPY failed to stop its previous session bearish streak and drew further offers around the 124.17 regions. However, the basis for the bearish sentiment around the EURJPY pair could be associated with the fresh reports suggesting the re-imposition of stricter restrictions in Germany, Spain, and France to stop the coronavirus second-wave. This, in turn, weakened the forecast around the shared currency and dragged the currency pair lower. Apart from this, the intensification of the Sino-American tussle and the uncertainty over the American stimulus package, keep weighing on the market risk-tone, which eventually underpinned the Japanese yen’s safe-haven demand and contributed to the currency pair losses. Moreover, the risk-off market sentiment was further boosted by the fresh discouraging vaccine news, which put a further bid under the safe-haven Japanese yen. At this particular time, the EUR/JPY is trading at 124.29 and consolidating between 124.17 – 124.48.

The EUR/JPY failed to stop its previous session bearish streak and drew further offers around the 124.17 regions. However, the basis for the bearish sentiment around the EURJPY pair could be associated with the fresh reports suggesting the re-imposition of stricter restrictions in Germany, Spain, and France to stop the coronavirus second-wave. This, in turn, weakened the forecast around the shared currency and dragged the currency pair lower. Apart from this, the intensification of the Sino-American tussle and the uncertainty over the American stimulus package, keep weighing on the market risk-tone, which eventually underpinned the Japanese yen’s safe-haven demand and contributed to the currency pair losses. Moreover, the risk-off market sentiment was further boosted by the fresh discouraging vaccine news, which put a further bid under the safe-haven Japanese yen. At this particular time, the EUR/JPY is trading at 124.29 and consolidating between 124.17 – 124.48.

The shared currency remained pressured by the vaccine news and re-imposed stricter restrictions in Spain and France, and Germany to stop the coronavirus second-wave. New infections in Germany once again top 4000 on Tuesday. According to the coronavirus (COVID-19) data from Germany’s Robert Koch Institute (RKI), the country’s cases rose around ~39,000 as of yesterday while the latest update today added 13 deaths more so that brings the total tally to 9,634 persons. This, in turn, undermined the shared currency and contributed to the currency pair.

Moreover, the sentiment around the shard currency was further bolstered by the reports suggesting that the UK pharma giant, Johnson, and Johnson, delayed its COVID-19 vaccine trial due to an unexplained illness.

Across the pond, the market trading sentiment has been flashing mixed signals since the day started. Be it the American lawmakers’ failure to offer any positive announcement on the coronavirus (COVID-19) relief package or the recent escalation in the Sino-American tussle, not to forget the Brexit worries, these all factors have been weighing on the market risk tone. At the US-China front, China recently showed his dislikes over the White House arms sale to Taiwan and the recent ban from China to use Aussie coal for power stations, which eventually offered additional pressure to the market sentiment and contributed to the currency pair losses.


Moving on, the ZEW will release its German Economic Sentiment Index and the Current Situation Index at 0900 GMT in the EU session later today, which is expected to drop to 73.0 in October as against a 77.4 reading booked in the previous month. Meanwhile, the Current Situation Sub-Index is expected to arrive at -60.0 against a -66.2-figure recorded last month. Apart from this, the market traders will keep their eyes on the US Consumer Price Index (CPI) data. Furthermore, the risk catalyst like geopolitics and the virus woes, not to forget the Brexit, will not lose their importance.

Daily Support and Resistance

S1 121.85

S2 122.64

S3 123.04

Pivot Point 123.43

R1 123.83

R2 124.22

R3 125

The EUR/JPY pair is trading with a bearish bias at 125.35 level, having violated the support become a resistance level of 124.460 level. On the lower side, the EUR/JPY may gain support at 123.735 levels as worked as a support in the past. Checkout a trading plan below…

Entry Price – Buy 124.19

Stop Loss – 124.59

Take Profit – 123.79

Risk to Reward – 1:1

Profit & Loss Per Standard Lot = -$400/ +$400

Profit & Loss Per Micro Lot = -$40/ +$40

Fellas, now you can check out forex trading signals via Forex Academy mobile app. Follow the links below.

iPhone Users: https://apps.apple.com/es/app/fasignals/id1521281368

Andriod Users: https://play.google.com/store/apps/details?id=academy.forex.thesignal&hl=en_US

Categories
Forex Fundamental Analysis

The Impact Of ‘Money Supply’ Fundamental Indicator On the Forex Price Charts

Introduction

Introduction

Introduction

Inflation plays an undeniable role in influencing the fiscal and monetary policies implemented within an economy. These policies’ role is to either mop up money from the economy or inject more money into the economy. Primarily, the rate of inflation tends to fluctuate depending on the amount of money in circulation. When the money in circulation is high, so is the rate of inflation, and when it’s low, the rate of inflation lowers. For this reason, the money supply statistics are vital and can be used as a leading indicator of inflation.

Understanding Money Supply

The money supply is the totality of the cash in circulation within an economy, bank deposits, and other liquid assets that can quickly be converted to cash. Note that the money supply is measured over a specific period, and it excludes any form of a physical asset that must be sold to convert to cash, lines of credit, and credit cards.

There are three commonly used measures of the money supply in an economy. They are M1, M2, and M3.

M1 Money Supply

This measure of money involves the entirety of the cash in circulation, i.e., the amount of money held by the public. This measure includes travelers’ checks, checkable deposits, and demand deposits with commercial banks. The money held by central banks and depository vaults is excluded from this measure. The M1 money supply is also known as the narrow measure of the money supply and can be referred to as the M0 money supply in other countries.

Source: St. Louis FRED

M2 Money Supply

This measure of the money supply is the intermediate measure. It includes the M1 money supply as well as time deposits in commercial banks, savings deposits, and the balance in the retail money market funds.

Source: St. Louis FRED

M3 Money Supply

This measure of the money supply is broad. It includes the M2 money supply as well as larger time deposits depending on the country, shorter-term repurchase agreements, institutional money market funds’ balance, and larger liquid assets. Note that this measure of money mainly focuses on the money within an economy used as a store of value.

Source: St. Louis FRED

Monetary Base

As a measure of money supply, the monetary base measures the entirety of the money in circulation and those held by the central banks as deposits by the commercial banks.

How to use Money Supply in Analysis

As we noted earlier, both fiscal and monetary policies are influenced by the economy’s money supply. For companies and households, the analysis of money supply not only helps predict the interest rates but also to determine business cycles, expected changes in the price levels and inflation.

Money supply in an economy can be used to analyze and identify seasonal business cycles. When the economy is going through a period of recovery and expansion to the peak, the economy’s money supply will increase steadily. During recovery, there is an increase in aggregate demand, unemployment levels reduce, and households’ welfare improves. At this point, the money supply in the economy begins to increase. The supply rapidly increases during the expansion cycle than during recovery. At the peak, the money supply in the economy stagnates, and the increase is lower than the previous two stages.

Similarly, the money supply begins to drop when the economy is going through a recession to depression. These periods are characterized by a decrease in the GDP levels signaling a shrinking economy, accompanied by higher unemployment levels and diminished aggregate demand in the economy.

Furthermore, an increase in money supply in an economy leads to lower interest rates, which means that businesses and households can invest more in the economy. More so, increased money supply stimulates increased demand by consumers, which leads to increased production and demand for labor. The rise in aggregate demand is followed by increased aggregate supply, which leads to economic expansion and growth of consumer discretionary industries.

Impact on Currency

The most notable impact of the money supply is inflation. Inflation is the increase in the prices of goods and services over time.

When the money supply is increasing, it shows that households have more money to spend, which increases the aggregate demand. Since the supply doesn’t change at the same pace as demand, the resulting scenario is an increase in the prices of goods and services. In most countries, the central banks have a target rate of inflation.

Therefore, when inflation is increasing, the central banks will employ deflationary monetary policies, such as increasing interest rates. The deflationary policies are designed to increase the cost of money and discourage consumption. Therefore, in the forex market, an increase in money supply can be seen as a signal of a future hike in the interest rates, which makes the local currency appreciate relative to others.

Conversely, a decrease in the money supply signals an economic recession, loss of jobs, and a shrinking economy. For governments, preventing economic recessions is paramount. Thus, a constant decrease in the money supply will trigger the implementation of expansionary fiscal policies. The fiscal policies can be accompanied by expansionary monetary policies by the central banks. These policies aim to spur economic growth and are negative for the currency. Therefore, a decrease in the money supply implies a possible interest rate cut in the future, which makes the local currency depreciate relative to others.

Sources of Data

In the US, the Federal Reserve publishes the money supply data and releases it monthly in the Money Stock Measures – H.6 Release. An in-depth review of the US’s total money supply can be accessed at St. Louis FRED, along with the historical data on M1 money supply, M2 money supply, and M3 money supply. Trading Economics publishes data on global M1 money supply, global M2 money supply, and global M3 money supply. In the EU, the data on the money supply can be accessed from the European Central Bank.

How the Money Supply Data Release Affects Forex Price Charts

The most recent release of the EU’s money supply data was on September 25, 2020, at 8.00 AM GMT and can be accessed at Investing.com.

The screengrab below is of the monthly M3 money supply from Investing.com. To the right is a clear legend that indicates the impact level of the FI has on the EUR.

As can be seen, this low volatility is expected upon the release of the M3 money supply data.

In August 2020, the M3 money supply in Europe grew by 9.5% compared to the 10.1% increase in July. The August increase was lower than analysts’ expectations of 10.2%.

Now, let’s see how this release made an impact on the Forex price charts.

EUR/USD: Before the M3 Money Supply Data Release on September 25, 2020, 
Just Before 8.00 AM GMT

Before the publication of the M3 money supply, the EUR/USD pair was trading in a subdued uptrend. Candles were forming just above a slightly rising 20-period MA.

EUR/USD: After the M3 Money Supply Data Release on September 25, 2020, 
at 8.00 AM GMT

The pair formed a 5-minute bearish candle after the release of the data. Subsequently, the pair adopted a strong downtrend as the 20-period MA fell steeply with candles forming further below it.

Bottom Line

The money supply data is generally expected to a mild impact on the forex price action. For this release, however, the worse than expected data was more pronounced in the markets. This effect could be attributed to the fact that the markets expected that the ECB’s pandemic stimulus program would have a visible impact on the money supply.

Categories
Forex Psychology

What is the Most Dangerous Trading Emotion?

Trading psychology is a broad topic that focuses on the ways that emotions like fear, anxiety, anger, etc. can cause us to make altered trading decisions that typically result in a loss of money. For example, a fearful trader might enter trades too late or not at all, while an angry trader might take revenge […]

Trading psychology is a broad topic that focuses on the ways that emotions like fear, anxiety, anger, etc. can cause us to make altered trading decisions that typically result in a loss of money. For example, a fearful trader might enter trades too late or not at all, while an angry trader might take revenge […]

Trading psychology is a broad topic that focuses on the ways that emotions like fear, anxiety, anger, etc. can cause us to make altered trading decisions that typically result in a loss of money. For example, a fearful trader might enter trades too late or not at all, while an angry trader might take revenge trades that aren’t well thought-out in an effort to make their money back quickly.

Often times, traders that aren’t aware of trading psychology don’t even realize that these emotions are affecting them so they never get to deal with it. While some people may disagree, most trading psychology experts will tell you that greed is actually the most dangerous trading emotion of them all. 

Greed is defined as a selfish desire for more of something than is needed, usually referencing money, although food or other materialistic items can also cause greed. Every trader wants to make more money, but the greedy trader becomes so obsessed with making money that they sabotage themselves. While an anxious trader might avoid entering trades altogether out of a fear of losing money, the greedy trader is prone to overtrading and might enter trades that they shouldn’t in an effort to get as much of it as possible. Unfortunately, entering more trades is not a surefire way to make money and it is more likely to work against you, especially if you are thinking irrationally.

With each trade you enter, you need to think of the risk to reward ratio and also ask yourself if there is evidence that supports the decision to enter the trade based on your trading plan. You also might want to take smaller position sizes on trades that you’re less sure about and vise versa. However, greedy traders aren’t as likely to consider all these details because their mind is only focusing on the money they want to make. 

On the bright side, traders that are suffering from greed can find ways to overcome this emotion in the same ways that anxiety, fear, and other negative psychological issues can be overcome. The first thing you’ll need to do is accept the fact that you can’t win every time – even the best traders are wrong sometimes. You also might need to adjust your expectations if you’ve set monetary goals that aren’t realistic. In fact, it isn’t a good idea to set goals with hard monetary limits at all because of how unpredictable trading can be.

Another way you can curb greed is by focusing on goals that improve your skills as a trader. Spending a certain amount of time each day reading trading articles or practicing on a demo account are a couple of examples of positive tasks that lead to self-improvement. If you take steps to improve yourself as a trader, rather than only focusing on how much money you’re making, you’ll actually make money in the long run.

Categories
Beginners Forex Education Forex Basics

Exploring Common Beginner Statements Regarding Forex

Before you ever began trading, you probably had opinions about what it would actually be like. Maybe you assumed it was an easy way to make some extra money, or you might have been doubtful that it would actually work. Either way, most traders figure out that their original expectations about trading were wrong once […]

Before you ever began trading, you probably had opinions about what it would actually be like. Maybe you assumed it was an easy way to make some extra money, or you might have been doubtful that it would actually work. Either way, most traders figure out that their original expectations about trading were wrong once […]

Before you ever began trading, you probably had opinions about what it would actually be like. Maybe you assumed it was an easy way to make some extra money, or you might have been doubtful that it would actually work. Either way, most traders figure out that their original expectations about trading were wrong once they actually open a trading account and start doing it.

Perhaps it turned out to be harder than you planned or you might have been surprised to learn that you actually can make money doing it. If you still haven’t tried trading yet, take a look at some of these beginner statements to see if you have the right or wrong first impressions about what trading is really like. 

You Can’t Make a Living from Trading

Yes, you actually can make a living from trading, but there are a few catches. First, you would need to make a sizable investment into your trading account. Think around $30,000 or so. You’d also need to invest enough time into trading while following a great trading plan with experience. If this doesn’t sound like it fits within your guidelines, you should know that you can still bring in extra income from trading, even if it isn’t enough to fully support you. Many traders actually work regular jobs and trade part-time and there are many different strategies that will allow you to do this, but you can’t expect to become rich in a few days. 

It’s too Hard

Everything you need to know about becoming a successful forex trader is available online and much of this information can be accessed for free. There are also professionals out there that want to share pro tips with you so that you can make money and avoid making mistakes they’ve made along the way. The idea that trading is hard actually comes from people that don’t invest the time into learning how to do it. If you don’t do research and learn to work a trading platform, you’re bound to feel confused and more likely to enter trades that will go against you. It isn’t hard to learn to trade – it just takes time and dedication. Those that are looking to make a quick buck are often thrown off by this fact. 

Most Brokers are Scammers

You might be wary about choosing a forex broker or view all of them as shady. It’s true that scammers are out there, but there are also many reliable options with terms & conditions that will protect you from fraud. All you have to do is spend some time researching any potential broker you’re considering. You’ll want to check their regulation status (you might want to lower your expectations if you’re located in the US) and thoroughly read through their terms & conditions for information related to hidden fees, withdrawal policies, and so on. You can also look for customer reviews online to see opinions that aren’t only one-sided.

Categories
Forex Psychology

Identifying and Harnessing Your Trading Strengths

The internet is filled with resources for traders, including articles, videos, and other mediums where experienced traders can share information and tips that will help you. However, a lot of this information seems to focus on what you’re doing wrong as a trader. For example, the entire field of trading psychology seems to focus on […]

The internet is filled with resources for traders, including articles, videos, and other mediums where experienced traders can share information and tips that will help you. However, a lot of this information seems to focus on what you’re doing wrong as a trader. For example, the entire field of trading psychology seems to focus on […]

The internet is filled with resources for traders, including articles, videos, and other mediums where experienced traders can share information and tips that will help you. However, a lot of this information seems to focus on what you’re doing wrong as a trader. For example, the entire field of trading psychology seems to focus on negative emotions and the ways that they play against you. You’ll also find articles that talk about bad trading habits, weaknesses, and other mistakes you might be making as a trader. All of this is important, but you might be left wondering what you’re actually doing right if you only look at resources that tell you what you’re doing wrong. 

If you’re trying to identify your trading strengths, you can start by taking a look at your trading journal. Hopefully, you’ve already been keeping detailed notes about each trade you’ve taken in your journal to help make this step easier. If you haven’t, you should start keeping a log right now. This won’t only help you with identifying your trading strengths, but it can also help point out weaknesses and help you identify other issues you might miss otherwise. From there, try identifying your 10 most profitable trades and look for common factors among them. Did you trade the same pairs, stick to your trading plan, or enter the trades based on a certain type of evidence? If you can identify things those trades have in common, you’ll have an idea of what you’re doing right. 

Another tip is to try to identify your strengths as a trader. This can seem hard at first, especially since you have to apply the adjectives to yourself, so we’ll provide a few examples:

  • Persistence
  • Self-control/discipline 
  • Creativity
  • Open-mindedness
  • Interested in learning
  • Wisdom
  • Curiosity 
  • Humor 

Basically, you need to think of the positive traits you have and then figure out a way to apply them to trading. For example, if you have an easy time laughing even when things are tough, you could use your humorous personality to help yourself get over any trading losses, rather than feeling depressed over them. You probably already apply some of your positive qualities to your trades, but it can help if you’re more aware of these qualities so that they can be used most effectively. 

Finally, you can try asking other people for their opinions on the way you trade. This could be a close friend, family member, or colleague with trading experience, or you could turn to the internet to get help from other traders online. Sometimes, others might be able to see things you can’t see about yourself and you’ll be able to get opinions that aren’t biased. Ask your friends what they see as your trading strengths and then compare the results to what you originally pinpointed to see if they match or differ. You might just learn something about yourself!

As a trader, it’s important to identify your weaknesses so that you can figure out healthy ways to address them. At the same time, you need to know what your strengths are so that they can be used to your advantage. Try keeping a trading journal, identifying your personal strengths and comparing those results with other’s opinions, and figuring out ways to use your identified strengths when you’re trading to get the best results possible.  

 

Categories
Beginners Forex Education Forex Basics

The Forex Trader’s Guide to Starting Over

Perhaps you took a long break from trading, lost your entire account balance, experienced several losing trades in a row, or had other bad luck somewhere along the line. Whatever the reason for previously quitting, you might be considering starting over again. Unfortunately, it’s harder to start over with trading than it is to try […]

Perhaps you took a long break from trading, lost your entire account balance, experienced several losing trades in a row, or had other bad luck somewhere along the line. Whatever the reason for previously quitting, you might be considering starting over again. Unfortunately, it’s harder to start over with trading than it is to try […]

Perhaps you took a long break from trading, lost your entire account balance, experienced several losing trades in a row, or had other bad luck somewhere along the line. Whatever the reason for previously quitting, you might be considering starting over again. Unfortunately, it’s harder to start over with trading than it is to try in the first place – and this sad fact is what keeps many traders from ever trying again. On the bright side, those that have been down on their luck before can actually benefit from starting over. 

Wondering how? Those that have already tried something out and failed have a better idea of what to expect. You might have believed in certain myths about trading when you first started, for example, that trading was easy, that you would become rich off a small deposit, or that you should risk a lot on each trade, like with gambling. Your losses would have shown you that these things aren’t true, but this gives you a place to start. Now you can begin with a better idea of what trading is, without believing in the same misconceptions and with more realistic goals. 

It’s important to ensure that you do learn from your past mistakes before starting over. If you didn’t spend enough time researching and learning how the forex market works the first time around, be sure to spend plenty of time looking into these facts the next time. You could even check your knowledge with quizzes and practice on a demo account for good measure. If your previous mistake was risking too much on a single trade, you’ll want to spend some time looking at the ways that you manage risk by placing stop losses, only risking 1-2% on each trade, and so on.

If you didn’t stick to your trading plan before, now is the time to do so. Or you might have opened an account with a brokerage that is less than trustworthy, but now you get to begin again and have the option to choose a better company to do business with. Whatever your previous mistake was, your main goals need to focus on overcoming them. 

You’ll also want to avoid making the mistake of thinking that you’re immediately ready to start trading again, thanks to the idea that now you know exactly what to change. It’s important to invest time into improving on prior mistakes and to work on your trading plan so that you don’t fail. Even if you previously wiped out your account by risking too much, you still need to brush up on your overall trading knowledge, while paying extra attention to risk management. Try reading articles or watching tutorials that deal with your specific issues, but don’t forget to look at the big picture. You don’t want to start off with improvements in certain areas where you failed before, while using a trading plan that doesn’t work and making mistakes in other areas, otherwise you’ve defeated the purpose. 

Starting over can be difficult and you might question whether it’s worth it in the first place. After all, it was hard enough to lose money the first time around and nobody wants to lose money on the same mistake twice. The good news is that traders that have failed before have a better idea of what to expect and know more about their own personal weaknesses, so they know where to focus their efforts for improvement. The first step is to identify your previous mistakes. Then, you should brush up on your trading knowledge, especially if some time has passed since you last traded.

When developing your trading plan, be sure to devote more time to your previous problem areas. From there, you’ll be ready to start over with a newfound confidence in your abilities. As long as you truly devote yourself to starting over, one day you’ll be able to share how your previous defeat was the precursor to your successful trading career. 

Categories
Forex Assets

Trading The CAD/ZAR Forex Cross Currency Pair & Analyzing The Costs Involved

Introduction

Introduction

Introduction

The CAD/ZAR is an Exotic forex currency cross. CAD represents the Canadian Dollar, and the ZAR corresponds to the South African Rand. CAD is the base currency in this pair, while the ZAR is the quote currency. This pair’s exchange rate shows the value of the ZAR, which is equivalent to 1 CAD. If the pair’s exchange rate is 12.7969, it means that 12.7969 ZAR is equivalent to 1 CAD.

CAD/ZAR Specification

Spread

The spread in forex is calculated by subtracting the bid price from the asking price. Brokers determine the spread since it’s their primary source of revenue. Below is the spread charges for ECN and STP brokers for CAD/ZAR pair.

ECN: 39 pips | STP: 44 pips

Fees

Forex traders with the ECN type accounts have to pay a commission to their brokers for every position they open. Brokers do not charge any trading fees on STP accounts.

Slippage

The difference between the trade price preferred by a trader and the broker’s execution price is the slippage. In forex, slippage depends on market volatility and the speed at which the broker executes the trade.

Trading Range in the CAD/ZAR Pair

The trading range is best described as the analysis of how the exchange rate of a currency fluctuates across different timeframes. This analysis will help to estimate the expected returns from trading a particular currency pair. If, for example, on the 1-hour timeframe, the volatility of the CAD/ZAR is ten pips, a trader can expect to gain or lose $78. The trading range for the CAD/ZAR pair is shown below.

The Procedure to assess Pip Ranges

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

CAD/ZAR Cost as a Percentage of the Trading Range

To make an informed risk management decision when trading the CAD/ZAR pair, we can analyze how the trading costs vary across different timeframes with different volatilities. Here are the cost analyses for the CAD/ZAR pair for both ECN and STP accounts.

ECN Model Account

Spread = 39 | Slippage = 2 | Trading fee = 1

Total cost = 42

STP Model Account

Spread = 44 | Slippage = 2 | Trading fee = 0

Total cost = 46

The Ideal Timeframe to Trade CAD/ZAR

We can notice that shorter timeframes have higher trading costs than the longer timeframes for both the ECN and the STP accounts. Also, across all timeframes, the trading costs reduce as the trading range of the CADZAR pair increases from minimum to maximum.

Although longer-term traders enjoy lesser trading costs, intraday traders can reduce their trading costs by trading when the volatility ranges between medium to the maximum. We can also further reduce the trading costs by implementing forex limit orders, which ensures that slippage does not affect your prices. Here is how trading costs can be reduced using forex limit orders.

ECN Account Using Limit Model Account

Total cost = Slippage + Spread + Trading fee

= 0 + 39 + 1 = 40

Using limit orders has significantly reduced trading costs. For the CAD/ZAR pair, the highest cost has been reduced from 711.86% of the trading range to 677.97%.

Categories
Forex Course Forex Daily Topic

149. Trading The Fakeouts In The Most Conservative Way

Introduction

Introduction

Introduction

Breakout trading is prevalent among all types of traders. Professional traders make a lot of cash by trading these breakouts, while some novice traders fail to effectively trade them. While trading these breakouts, the pretty basic strategy is to pull the trigger when the price breaks above or below any significant level. But many times, the price tends to reverse its direction and cause immediate losses. This is one of the most frustrating experiences breakout traders go through.

Did this ever happen to you, and did you wonder why this happens? The reason is that you have no pre-planned entries. You are just reacting to the price action and chasing the markets purely based on your feelings, but you must accept that the market has no feelings.

How to Trade the fakeouts?

❶ Primarily, find the confluence level on the price chart. This is a place where most of the indicators point towards one direction.

❷ Avoid trading range breakouts as both the parties hold equal power when the market is ranging. In this state of the market, the chance of spikes is very high. So it is always advisable to trade breakouts only in a trending market.

❸ Wait for the price to break above any significant level in an uptrend and break below any major level in a downtrend.

❹ Right after the breakout, wait for the price to test above or below any major level to confirm the breakout’s authenticity.

Trading Strategies

Buy Example

The image below represents a breakout in the EUR/CHF Forex pair.

As you can see in the below chart, we waited for the price action to holds above the breakout line. We have only entered the market after we confirmed the breakout. If the price action fails to hold, it simply means that it was a fakeout, and we can ignore it completely.

In this example, prices held above the breakout, which confirms the validity of the breakout. We took entry at the breakout line and chose to go for a brand new higher high. The exit was purely based on the higher timeframe’s significant resistance area, and the stop loss was just below our entry.

Sell Example

The image below represents a sell breakout in the GBP/NZD forex pair.

In the below image, we can see the price holding below the significant resistance level, which confirms the breakout. Our entry was at the red candle at the significant resistance level. The price sharply rejects to go any higher. Now we can see a brand new lower low forming after our entry.

The stop-loss is placed just above the entry as the seller response was quite aggressive. When the price started to struggle and failed to go down further, we chose to close our trade.

This is one of the best ways to trade the fakeouts in the most conservative way. We hope you got a clear understanding of this concept. Please let us know if you have any questions in the comments below. Cheers!

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Categories
Forex Basics

When NOT to Trade Forex

In the fast-paced world of forex trading, many of us are kept on our toes just waiting for the next trading opportunity. However, patience is considered to be one of the key factors necessary for successful results. There are hundreds of articles online that are dedicated to telling you when you should enter a trade, […]

In the fast-paced world of forex trading, many of us are kept on our toes just waiting for the next trading opportunity. However, patience is considered to be one of the key factors necessary for successful results. There are hundreds of articles online that are dedicated to telling you when you should enter a trade, […]

In the fast-paced world of forex trading, many of us are kept on our toes just waiting for the next trading opportunity. However, patience is considered to be one of the key factors necessary for successful results. There are hundreds of articles online that are dedicated to telling you when you should enter a trade, but it’s equally as important to know when you shouldn’t. Take a look at our list below to ensure that you aren’t making the mistake of overtrading and losing money.

#1: During A Losing Streak

While we never want to lose money, losing streaks can affect us all from time to time. The most successful forex traders talk about brushing off losses and moving on, but the truth is that this is easier said than done. If you’ve lost a lot of money and you can’t afford to deposit much more, a losing streak can leave you feeling really down in the dumps. This can also bruise your ego and it can give loss-fearing traders a run for their money. If you continue trading while feeling this way, your results can suffer.

The first thing you need to do is to take a step back from trading and review what’s been going wrong. Hopefully, you’ll have a detailed trading journal handy to help with this step. Look for things like poor risk management, bad trading decisions, or other mistakes that could be adding to your losing streak. After pinpointing those mistakes, you can develop a better plan to avoid them and start again with a renewed sense of confidence. 

#2: When You’re Feeling Uncertain

If you trade news events, your economic calendar might be telling you to enter a trade that you just aren’t certain about. The truth is that you don’t have to enter these trades if there isn’t enough evidence to do so. In some cases, it is better to sit out when you’re expecting the market to experience volatile conditions, so ask yourself how the event may play out and consider how much money you could lose if things don’t go your way. If you aren’t comfortable with those answers, try sitting out and taking notes about what would have happened if you had entered the trade. Checking to see if you would have been right or wrong can help influence your future decisions when you can’t decide whether to enter a trade or sit out. 

#3: When the Odds Aren’t in Your Favor

You need to think of the risk-to-reward ratio for every trade setup you consider. Is the risk worth it? Some traders choose to enter trades even though the potential risk is high or there’s a low probability that they will make money. In reality, there isn’t much of a reason to risk money on a setup that is unlikely to win any money, so this is a good time to sit out. If you’re not sure whether or not to enter a trade, try looking for fundamental or technical signs that it has a high probability to win. If you can’t find the evidence, it’s probably better to do nothing. 

Categories
Forex Psychology

Regret: Is it Negatively Impacting your Trades?

Regret is a negative emotion that we’ve all experienced at some point in our lives. Something we wish we had said, a sinking feeling in our stomach after making a big purchase, a person that we wish we had asked out, and other mistakes that we feel we’ve made along the way. Sadly, many of us feel those first stings of regret as early as childhood and we continue to find things to regret about our life choices as time moves forward. This negative emotion comes in a lot of different shapes and sizes – and it can affect forex traders rather harshly. 

Regret is a negative emotion that we’ve all experienced at some point in our lives. Something we wish we had said, a sinking feeling in our stomach after making a big purchase, a person that we wish we had asked out, and other mistakes that we feel we’ve made along the way. Sadly, many of us feel those first stings of regret as early as childhood and we continue to find things to regret about our life choices as time moves forward. This negative emotion comes in a lot of different shapes and sizes – and it can affect forex traders rather harshly. 

Regret is a negative emotion that we’ve all experienced at some point in our lives. Something we wish we had said, a sinking feeling in our stomach after making a big purchase, a person that we wish we had asked out, and other mistakes that we feel we’ve made along the way. Sadly, many of us feel those first stings of regret as early as childhood and we continue to find things to regret about our life choices as time moves forward. This negative emotion comes in a lot of different shapes and sizes – and it can affect forex traders rather harshly. 

When you’re trading, you obviously have the goal of making money and being successful. Sometimes, emotions come into the picture that makes you fear losing money and being left behind. To deal with that fear of losing money, you might back out of a trade sooner than you should have or convince yourself not to enter trades at all. However, it affects you; you wind up losing money because you’ll miss the shots you don’t take every time. Regret is like anxiety and fear in the ways that it controls traders and forces them to rethink everything they planned on doing. Even with a solid trading strategy and good past results, one bad move can introduce regret that will put the crippling fear of failure into your brain. 

Let’s say that you just made a trading decision and you wound up losing some money. You based your decision to enter the trade off of solid evidence that was outlined by your trading plan, but things just didn’t go your way this time. Now, you start thinking of what you could have done differently. You think to yourself “Maybe I could have tightened my stop-loss” or “I knew that I shouldn’t have entered that trade in the first place”. You daydream about what could have happened if you had made a different decision.

In another scenario, you see a trade that you want to enter but negative thoughts start to creep into your head. You think to yourself “What if I lose money?” Even though there is evidence that supports entering the trade, you decide not to. Later, you see that you could have made money if you’d followed your instincts and you regret sitting out on the winning trade. 

If either of these scenarios sounds familiar, you’re dealing with regret. But you need to know that there’s no point beating yourself up over what could have been and what you did wrong. Instead, you need to use regret to your advantage and allow it to give you that extra kick of motivation you need. Think of things this way: if you’re the trader that is avoiding trades because you don’t want to lose money, you’re likely losing more money on the trades you don’t take than you would if you took them. If you enter a trade that goes against you, you should evaluate what happened and figure out what went wrong. Don’t daydream about what could have happened, figure out if you made a mistake and learn from it instead.

If you learn to take control of emotions like regret, you’ll come out with a better trader for it. There’s no point sitting around thinking of what you’ve done wrong when you could learn from it and move on. Likewise, daydreaming about a trading move you wish you had made won’t put more money in your pocket. You’re probably going to feel regretful when you lose money, but you simply need to learn to let the emotion evoke a healthy response instead of letting it turn into fear and anxiety. In the end, you have to learn to keep regret from controlling your life. Rather than regretting things you can’t change, you can make better decisions in the future.

Categories
Beginners Forex Education Forex Basics

Trading-Related Resolutions that Will Improve your Results

While we usually introduce resolutions around New Years, why wait? You can start practicing these healthy trading resolutions right now (for free) if you’re looking to put more money in your pocket. Resolution #1: Review your Past Performance Whether you’ve only been trading for a short time or you have more experience under your belt, […]

While we usually introduce resolutions around New Years, why wait? You can start practicing these healthy trading resolutions right now (for free) if you’re looking to put more money in your pocket. Resolution #1: Review your Past Performance Whether you’ve only been trading for a short time or you have more experience under your belt, […]

While we usually introduce resolutions around New Years, why wait? You can start practicing these healthy trading resolutions right now (for free) if you’re looking to put more money in your pocket.

Resolution #1: Review your Past Performance

Whether you’ve only been trading for a short time or you have more experience under your belt, it’s a good idea to look back at your past performance over the last year or so, or however long you’ve been trading if it hasn’t been that long. Are you making more or less money than you were in the beginning? You can try asking yourself these questions with your results in front of you:

  • Did I follow my trading plan or drift from its guidelines?
  • What are my trading strengths and weaknesses?
  • Have I met the goals I had set? 
  • What goals do I want to achieve in the next 6 months or longer?

After answering these questions, you should have a place to start with your plan for improvement. Try addressing your weaknesses to start. When reviewing your past goals, you’ll want to think about whether they were realistic or not. To be clear, an unrealistic goal would be to make a million dollars from a small deposit, while a realistic goal could be to improve your results over a period of time. If your previous goals were unrealistic, try to model more reachable goals for the next period of time without setting harsh financial objectives. If your goals were realistic, ask yourself why you weren’t able to meet them and work on a plan to try again. Perhaps you need to devote more time to trading, revise your trading plan, spend more time researching, etc. 

Resolution #2: Embrace Positive Thinking

That little voice in your head can be negative from time to time, and some traders can be especially hard on themselves after making mistakes that cause them to lose money while trading. We hear a lot about the ways that negative emotions like anger and greed can negatively impact our trading results, but did you know that there’s a whole movement dedicated to the ways that positive thinking can improve them? If you beat yourself up over mistakes, this negative mindset is going to spill over into your results, and you might even wind up feeling more depressed and less motivated. Instead, try to be kinder to yourself by thinking positively and learning from past mistakes. Remember that even trading robots make mistakes and we’re all only human.

Resolution #3: Learn!

Once you figured out everything you felt was important about trading and devised a strategy, you might have slacked off on the extra research or even avoided it altogether. Sure, you might know the ropes and feel confident about your trading knowledge, but why not learn something new? You just might find some helpful tips, come across a new strategy that you like better, learn more about trading psychology, and so on. Putting in the time to expand on your trading knowledge will only benefit you in the long run. If you’re unsure where to start, try the following:

  • Look for a trading-related book about strategies, tips, psychology, etc. 
  • Find a blogger that has a different trading style from you.
  • Research trading tips.
  • Check out trading forums.
  • Google search beginner, intermediate, or advanced trading articles (depending on your skill level).

The more you know, the better. Never stop learning new things when it comes to trading, otherwise, you’ll be left in the dust as new advancements are made and you might miss out on some really helpful trading-related information.

Categories
Forex Education

Important Forex Lessons for Newbies

Oftentimes, new traders start out with their own preconceived idea of what trading is. Ideas can vary widely – some might assume that trading is easy and a quick way to earn a buck, while others might think of it in a more intimidating light. No matter what theory one has in the beginning, each […]

Oftentimes, new traders start out with their own preconceived idea of what trading is. Ideas can vary widely – some might assume that trading is easy and a quick way to earn a buck, while others might think of it in a more intimidating light. No matter what theory one has in the beginning, each […]

Oftentimes, new traders start out with their own preconceived idea of what trading is. Ideas can vary widely – some might assume that trading is easy and a quick way to earn a buck, while others might think of it in a more intimidating light. No matter what theory one has in the beginning, each beginner is likely to learn the lessons we’ve outlined below with time. Of course, you could always learn the hard way, risking real money as you go, or you could take a few minutes to take a look at our list below to avoid learning these lessons through trial and error.

Lesson #1: Stay True to your Plan

Before you start trading, you’ll need to create a trading plan that really considers the important aspects of the why’s and how’s of the way that you will trade. Many beginners read advice online that details the importance of actually making this plan, and they do start out with a trading plan. However, it’s common for beginners to deviate from their plan over time or simply forget they even made one. You might even decide that you don’t need a plan anymore once you start getting better results. Unfortunately, this can lead down the wrong path and you could actually lose money by forgetting about your tried and tested trading method. It’s a good idea to review your results once you implement your plan – if the statistics show that the plan is working, that’s reassurance that you should stick with it. 

Lesson #2: Manage your Risk

With gambling, you might be tempted to take bigger risks in lieu of larger rewards. Some beginners have this mindset when they start trading, but this is a quick way to drain your account. Trading decisions should be based on hard evidence that is outlined in your trading plan, but you also need to limit the risk you take on each trade because the market is never predictable. Be sure to read up on margin, leverage, and drawdowns if you haven’t, and ensure that you are also using stop losses and the correct position sizes as well. Many beginners don’t realize how important these factors are when it comes to limiting losses and wind up taking one or more large losses that leave them with a zeroed-out account balance. 

Lesson #3: Be Patient

There will be times when the best thing to do is nothing at all. If there isn’t evidence that supports making a trade based on the facts you’re looking for, you should sit back and be patient. Some beginners become addicted to the rush of trading or might even feel unproductive if they don’t do something, making them more likely to enter a trade that will go south. After all, it’s often said that the best traders do nothing 99% of the time. 

Lesson #4: Don’t Compare Results

Everyone trades at their own pace, so it isn’t fair to compare your results with others. Remember that the factors affecting your results are different, as that person likely invested a different amount of money, risks a different percentage on their trades, uses a different strategy, and so on. It’s also important to remember that you shouldn’t throw your trading plan out the window to randomly adopt a plan that seems to be making someone else more money. Otherwise, you might run into problems you didn’t expect and could wind up losing more money in the long run. 

The Bottom Line

Many of these lessons revolve around the importance of creating a solid trading plan and sticking with it over time, rather than abandoning one’s proven plan in favor of a sudden urge to try something else. You also need to avoid entering trades just to do so and only enter a trade if the evidence supports that it is a good move. Know when to do nothing if your trading plan doesn’t support entering a trade. Beginners also have a common problem that revolves around managing risk effectively, as some like to jump into things taking bigger risks when the reality is that a new forex trader should risk less money than someone that has been trading for a long time. If you keep these lessons in mind, they should help you to avoid losing money because of mistakes that could have easily been avoided.

Categories
Beginners Forex Education Forex Basics

The Four Stages of Loss in Forex Trading

When people hear about the four stages of loss, they tend to think of death, dealing with a break-up, and other life-changing events that can leave you feeling down and out. But did you know that the four stages of loss can be applied to losing money in forex trading as well?  Stage 1: Denial […]

When people hear about the four stages of loss, they tend to think of death, dealing with a break-up, and other life-changing events that can leave you feeling down and out. But did you know that the four stages of loss can be applied to losing money in forex trading as well?  Stage 1: Denial […]

When people hear about the four stages of loss, they tend to think of death, dealing with a break-up, and other life-changing events that can leave you feeling down and out. But did you know that the four stages of loss can be applied to losing money in forex trading as well? 

Stage 1: Denial

In this stage, you first realize that you have made a losing trade. In the first phase, it’s common to try to deny that the loss was your own fault by throwing out excuses that take away the blame from themselves. Perhaps you could blame your broker, or claim that you were distracted because your spouse was speaking to you. Maybe you could say that you just didn’t care that much about the trade in question anyways. Whatever excuse you come up with, the real reason for doing so is that this helps to soften the blow on your ego so that you can move on without doubting yourself. 

On another note – if you ever do truly believe that something else interfered with your trade, like a problem on your broker’s side, you can reach out to their customer support team to get some insight on the issue. If it’s their fault, they will fix it, but you should be prepared to hear that slippage or some other issue is to blame. 

Stage 2: Rationalization

In an attempt to further convince yourself that you did everything right with your losing trade, you will slip into the second stage of loss: rationalization. In this phase, you point out everything you did right. Perhaps you give credit to your solid trading plan, claim that you used the perfect entry point and stop loss, and so on. In the end, the trade still lost money, which points to a mistake being made somewhere along the way. You might have made correct decisions in several key areas, but you’ll need to analyze your plan to find the problem. 

Stage 3: Depression

After trying your best to come up with reasons as to why the loss wasn’t your fault and then trying to rationalize your decisions, you will probably slip into depression. In this stage, traders finally begin to consider that their loss might have been caused by their own actions. It’s good to take some responsibility for the loss, however, you don’t want to make the mistake of being too hard on yourself. Don’t start thinking self-deprecating thoughts that make you gravitate towards quitting. Don’t doubt yourself altogether over one loss. Many experts have explained that they don’t take losses personally – you need to understand the reasons why you lost so that those mistakes can be avoided next time, but don’t sit around beating yourself up over it. You don’t need to give up over something that can be fixed.

Stage 4: Acceptance 

By the time that you reach this stage, you will be able to accept that your mistakes might have contributed to the losing trade while understanding that it isn’t healthy to sit around blaming yourself for everything or to think self-deprecating thoughts. Remember that the market is unpredictable and losses are inevitable, even the best of traders lose sometimes. At this point, you can start looking to move on. It’s possible that you’ll make a winning trade that makes up for the loss, improve your strategy, lower your risk tolerance, or develop a plan to handle losses in a better way. As long as you can walk away with a positive attitude, you will finally be able to accept your loss in a healthy way.