SELL NZD/USD @0.8240
T.P 50 PIPS , 70 PIPS
S.L - 0.8350
T.P 50 PIPS , 70 PIPS
S.L - 0.8350
Wednesday 28 November 2012
Monday 26 November 2012
What Is Hedging
Hedging denotes safety and security. Hedging is protection of client's funds from unfavorable currency rate fluctuations. Account funds are fixed at their current price through conducting trades on Forex. Thus, hedging helps to ease exposure to currency rate change risks, which helps to achieve result not influenced by fluctuations.
In fact, hedging presupposes using one instrument in order to lower the risk related to unfavorable market factors impact on the price of another one directly associated with it. More often, the notion ‘hedging’ means insurance from the currency price fluctuations, assets etc. Hedging can also be considered as a type of investment allowing to minimize the price movements risk in the market. The hedging cost should be valued with regard to possible losses in the event of refusal from it.
Hedging types on Forex
The first type is hedging the buyer’s money to lower the risk of possible increase of an instrument price. Another type is hedging the seller’s money in order to lower a price drop risk.
Hedging example
A trader, who imports foreign currency, opens buy trade with a currency on his trading account in advance, and when the real time of currency purchase comes in his bank, he closes the position. And a trader, who exports foreign currency, opens a sell trade with a currency on his trading account beforehand, and at a real moment of this currency purchase in his bank, he closes it.
There is a so-called hedging mechanism, which implies obligations balancing in the currency market (or securities market etc.) and the opposite futures market. To hedge capital losses from a particular instrument, the position is opened with another instrument, which can compensate financial losses.
In fact, hedging presupposes using one instrument in order to lower the risk related to unfavorable market factors impact on the price of another one directly associated with it. More often, the notion ‘hedging’ means insurance from the currency price fluctuations, assets etc. Hedging can also be considered as a type of investment allowing to minimize the price movements risk in the market. The hedging cost should be valued with regard to possible losses in the event of refusal from it.
Hedging types on Forex
The first type is hedging the buyer’s money to lower the risk of possible increase of an instrument price. Another type is hedging the seller’s money in order to lower a price drop risk.
Hedging example
A trader, who imports foreign currency, opens buy trade with a currency on his trading account in advance, and when the real time of currency purchase comes in his bank, he closes the position. And a trader, who exports foreign currency, opens a sell trade with a currency on his trading account beforehand, and at a real moment of this currency purchase in his bank, he closes it.
There is a so-called hedging mechanism, which implies obligations balancing in the currency market (or securities market etc.) and the opposite futures market. To hedge capital losses from a particular instrument, the position is opened with another instrument, which can compensate financial losses.
Saturday 24 November 2012
Capital Management Methods
When trading on Forex, it is necessary to know how to properly place your capital; how to calculate the amount of funds needed to make a trade in order to obtain sufficient earnings; and if it comes to loss, how not to loose your entire deposit.
To achieve these goals, there are special equity management methods (money management techniques):
No equity management methods. Most traders, when opening a position, do not calculate the amount of funds that are being used, estimate potential earnings or potential loss. This is considered to be a technique too, but if the capital is not very large to begin with, several unsuccessful trades will make it completely disappear.
Multiple contracts. Opening several positions on the foreign exchange market on different instruments, for instance, EURUSD and EURGBP, a trader can earn profit if the price moves in the right direction. Earnings can be considerable, losses too though.
Fixed amount. Depending on the amount of funds available, a trader decides how much can be put at risk when opening one or another position. The trader then makes deals not exceeding this amount.
Fixed equity interest rate. This technique is similar to the previous one but there is one small difference: the trader determines the equity interest rate, but not the equity amount.
Establishing correlation between profits and losses. It is necessary to track statistics on all operations (the amount of losses, profits and the correspondence between them). When you see the correlation between them, you can apply what you have learned to your trading.
Equity curve trading. Most people are acquainted with moving averages, which can act like signals for entering the market or leaving it. According to this method, moving averages (long- and short-term) are used to forecast trade results. If the short-term moving average of the equity curve is above the long one, a position can be opened and it will be profitable. If, however, the short-term moving average is below the long one, it is better to wait for a while.
Choosing a particular money management technique of trading on Forex can help you rationally use your money on the market and earn profit. Money management techniques are used for opening positions.
To achieve these goals, there are special equity management methods (money management techniques):
No equity management methods. Most traders, when opening a position, do not calculate the amount of funds that are being used, estimate potential earnings or potential loss. This is considered to be a technique too, but if the capital is not very large to begin with, several unsuccessful trades will make it completely disappear.
Multiple contracts. Opening several positions on the foreign exchange market on different instruments, for instance, EURUSD and EURGBP, a trader can earn profit if the price moves in the right direction. Earnings can be considerable, losses too though.
Fixed amount. Depending on the amount of funds available, a trader decides how much can be put at risk when opening one or another position. The trader then makes deals not exceeding this amount.
Fixed equity interest rate. This technique is similar to the previous one but there is one small difference: the trader determines the equity interest rate, but not the equity amount.
Establishing correlation between profits and losses. It is necessary to track statistics on all operations (the amount of losses, profits and the correspondence between them). When you see the correlation between them, you can apply what you have learned to your trading.
Equity curve trading. Most people are acquainted with moving averages, which can act like signals for entering the market or leaving it. According to this method, moving averages (long- and short-term) are used to forecast trade results. If the short-term moving average of the equity curve is above the long one, a position can be opened and it will be profitable. If, however, the short-term moving average is below the long one, it is better to wait for a while.
Choosing a particular money management technique of trading on Forex can help you rationally use your money on the market and earn profit. Money management techniques are used for opening positions.
What is Stop Loss
Stop loss is a widely used order aiming mainly at limiting the possible losses in case of negative market movements.
Stop loss is used only with open positions. When the market conditions are not favorable for a trader and the price has reached the level of Stop loss, the deal is closed automatically. Therefore, Stop loss helps the trader to control losses and in case of failures to keep safe at least the part of the deposit.
If a trader does not use Stop loss orders, the position is closed by the broker when the sum of losses is equal to the sum of the deposit.
There are 3 types of Stop loss orders: fixed Stop loss, sliding Stop loss and combined Stop loss.
Fixed Stop losses are set while opening positions. They cannot be replaced until the deal is closed. Sliding stop losses, on the contrary, can be replaced any time depending on the price movement. Another name for sliding Stop loss is Trailing stop that can be replaced either manually or automatically considering the traders settings.
Presently there are lots of discussions on whether it is necessary to use Stop losses or not. Some traders believe that Stop loss should be compulsory for trading, emphasizing the ability of Stop losses to prevent the loss of the whole deposit. If the price is rapidly moving in direction, which does not correspond to the forecast, the deal that has not been closed in due time can result in significant losses. The opponents of Stop loss believe that this order can limit not only losses, but profits as well. As the price movement is often unpredictable and unexpected, it can develop according to the trader’s expectations though with some periodic bounces crossing the Stop loss line. In this case the position is closed with losses though it was a possible to close it with profit.
As a rule, the decision on whether to use Stop loss or not depends on the individual strategy of a particular trader. Therefore, there is no single opinion on the necessity of using the limiting the losses.
Stop loss is used only with open positions. When the market conditions are not favorable for a trader and the price has reached the level of Stop loss, the deal is closed automatically. Therefore, Stop loss helps the trader to control losses and in case of failures to keep safe at least the part of the deposit.
If a trader does not use Stop loss orders, the position is closed by the broker when the sum of losses is equal to the sum of the deposit.
There are 3 types of Stop loss orders: fixed Stop loss, sliding Stop loss and combined Stop loss.
Fixed Stop losses are set while opening positions. They cannot be replaced until the deal is closed. Sliding stop losses, on the contrary, can be replaced any time depending on the price movement. Another name for sliding Stop loss is Trailing stop that can be replaced either manually or automatically considering the traders settings.
Presently there are lots of discussions on whether it is necessary to use Stop losses or not. Some traders believe that Stop loss should be compulsory for trading, emphasizing the ability of Stop losses to prevent the loss of the whole deposit. If the price is rapidly moving in direction, which does not correspond to the forecast, the deal that has not been closed in due time can result in significant losses. The opponents of Stop loss believe that this order can limit not only losses, but profits as well. As the price movement is often unpredictable and unexpected, it can develop according to the trader’s expectations though with some periodic bounces crossing the Stop loss line. In this case the position is closed with losses though it was a possible to close it with profit.
As a rule, the decision on whether to use Stop loss or not depends on the individual strategy of a particular trader. Therefore, there is no single opinion on the necessity of using the limiting the losses.
Thursday 15 November 2012
The stock market
The stock market (the USA) and Forex market have a lot of distinctions. In Russia the stock market is called share market. What is the difference between these two markets?
1. Work on the stock market starts at 9:30 and ends at 16:00 New York time. That is why traders carrying out most part of trades in the afternoon cannot trade actively on the stock market at this time. In contrast to it, Forex market works 24 hours (besides Saturday and Sunday, these days there is no trading) that allows the trader not to depend on market choosing the most suitable time to trade for himself.
2. As the stock market trading is run with thousands of shares of different companies, it is very hard to predict the shares of which companies would turn up or conversely, go down - it is almost impossible, as well as to get familiarized with all of them. For this reason, choosing some main companies to observe among a great many of others available comes as a rather complicated task.
However, in most cases trading on Forex is implemented with several certain currencies, the price is dollar-denominated. Also the cost of these currency pairs against the dollar and against each other is influenced much more by economic events and news, than the shares of companies on the stock exchange.
It is much easier to analyze objective economic factors impacting the state of things within the countries of interest. As the economic news are always in a free access due to their regular publication by the mass media.
3. During the economic conditions worsening in the country and constant market falling, the investors trading on the stock market face severe problems. In such periods their profits drop significantly and sometimes even reach 0, if the investor does not borrow money of a broker for bear speculation. Because of a cyclic economic development after its collapse there always comes an upsweep, its duration may vary from a few months to a few years.
On Forex market, in distinct from the stock exchange, the traders run trading buying the rising currencies and selling the falling ones. This is the main concept of trading and gaining profit on Forex currency market.
In spite of several advantages of Forex currency market over the share market (stock market) a 100% winning cannot be guaranteed as well as on the stock market, there is also a possibility of losing all your funds.
1. Work on the stock market starts at 9:30 and ends at 16:00 New York time. That is why traders carrying out most part of trades in the afternoon cannot trade actively on the stock market at this time. In contrast to it, Forex market works 24 hours (besides Saturday and Sunday, these days there is no trading) that allows the trader not to depend on market choosing the most suitable time to trade for himself.
2. As the stock market trading is run with thousands of shares of different companies, it is very hard to predict the shares of which companies would turn up or conversely, go down - it is almost impossible, as well as to get familiarized with all of them. For this reason, choosing some main companies to observe among a great many of others available comes as a rather complicated task.
However, in most cases trading on Forex is implemented with several certain currencies, the price is dollar-denominated. Also the cost of these currency pairs against the dollar and against each other is influenced much more by economic events and news, than the shares of companies on the stock exchange.
It is much easier to analyze objective economic factors impacting the state of things within the countries of interest. As the economic news are always in a free access due to their regular publication by the mass media.
3. During the economic conditions worsening in the country and constant market falling, the investors trading on the stock market face severe problems. In such periods their profits drop significantly and sometimes even reach 0, if the investor does not borrow money of a broker for bear speculation. Because of a cyclic economic development after its collapse there always comes an upsweep, its duration may vary from a few months to a few years.
On Forex market, in distinct from the stock exchange, the traders run trading buying the rising currencies and selling the falling ones. This is the main concept of trading and gaining profit on Forex currency market.
In spite of several advantages of Forex currency market over the share market (stock market) a 100% winning cannot be guaranteed as well as on the stock market, there is also a possibility of losing all your funds.
What is PAMM account
PAMM account is a mode of investment, whereby the funds are transferred to a trader in trust, and with a successful trade execution the managing trader gets a certain interest from profit.
PAMM Account Work Principle
Investors put money into managing trader’s account. The managing trader makes trades using his own capital, so all operations are proportionally removed to the investors’ accounts. In case of raising profit, it is divided between investors and a managing trader depending on the size of deposits. In addition, the managing trader earns a profit interest.
Risk Degree
PAMM account investment is a high-yield work method in Forex market, especially if a trader has no possibility to devote all his time to trading. Moreover, PAMM accounts can bring a good extra income in case of combining the main job with currency market trading. However, what should be noticed is that investing in PAMM accounts undoubtedly has its risk degree. A trade executed by a managing trader with investor’s funds may bring either profit or loss. That is why it is appropriate to be severe with choosing a managing trader.
As a rule, before investing in PAMM accounts, professional features of candidates are examined first. Primarily, the attention should be focused on the number of completed trades and their results, on the market activity experience and PAMM account management skills. Professional trader is a recipe for deriving profit from investment.
Safety
There are certain rules directed to ensure PAMM accounts safety. Firstly, the managing trader may use investors’ capital for conducting trade operations only. Any other actions with investor accounts are not available for the trader.
As a PAMM account also includes the managing trader funds, a successful trade outcome is for his own benefit too. All managing trader actions are transparent and can be monitored at any moment, as well as own funds can be withdrawn from a PAMM account promptly. Furthermore, the investor determines the risk degree by himself, limiting possible losses.
In order not to lose funds and gain a stable high profit - future PAMM account investors should adhere to a basic safety rule: work with managing trader through a brokerage company only. Otherwise, the investor bears risk of losing all his injections.
PAMM Account Work Principle
Investors put money into managing trader’s account. The managing trader makes trades using his own capital, so all operations are proportionally removed to the investors’ accounts. In case of raising profit, it is divided between investors and a managing trader depending on the size of deposits. In addition, the managing trader earns a profit interest.
Risk Degree
PAMM account investment is a high-yield work method in Forex market, especially if a trader has no possibility to devote all his time to trading. Moreover, PAMM accounts can bring a good extra income in case of combining the main job with currency market trading. However, what should be noticed is that investing in PAMM accounts undoubtedly has its risk degree. A trade executed by a managing trader with investor’s funds may bring either profit or loss. That is why it is appropriate to be severe with choosing a managing trader.
As a rule, before investing in PAMM accounts, professional features of candidates are examined first. Primarily, the attention should be focused on the number of completed trades and their results, on the market activity experience and PAMM account management skills. Professional trader is a recipe for deriving profit from investment.
Safety
There are certain rules directed to ensure PAMM accounts safety. Firstly, the managing trader may use investors’ capital for conducting trade operations only. Any other actions with investor accounts are not available for the trader.
As a PAMM account also includes the managing trader funds, a successful trade outcome is for his own benefit too. All managing trader actions are transparent and can be monitored at any moment, as well as own funds can be withdrawn from a PAMM account promptly. Furthermore, the investor determines the risk degree by himself, limiting possible losses.
In order not to lose funds and gain a stable high profit - future PAMM account investors should adhere to a basic safety rule: work with managing trader through a brokerage company only. Otherwise, the investor bears risk of losing all his injections.
Tuesday 13 November 2012
Income as the main motive
It is not a secret that every person aims at making earnings to comply with the most of his needs. A good income is a guarantee of well-being and stability.
In the times of information technologies and all-round access to the global network millions of people have boundless opportunities of earning and increasing their capital by means of trading based on currency rates difference within the international Forex market. In 80-es and 90-es “distant” trades on the stock exchanges were carried out through telephone calls. Nowadays, traders can run trading through the Internet and gain more profit keeping seat.
Forex is a worldwide currency market in the form of a global stock exchange where not only banks, corporations and brokerage companies can buy/sell currency, but also anyone who wishes. For example, you can buy dollar and euro at low price and then sell it at higher one – such scheme allows making good earnings in the Internet.
What to Begin with
There may emerge a question: “How people can earn on Forex being far from the world of finance and who do not know the oats of currency speculations. On the whole, trading on Forex market is absolutely simple. Even if you just predict the rates movement, your trading activity will be successful and profitable.
If you feel that euro loses its cost, then you just buy dollar in EUR/USD currency pair, i.e. you put SELL order and finally get profit or lose if your intuition was wrong. However, we have described trading with intuition which can often bring profit, but it does not make you a professional trader, as you cannot draw up any exact forecasts. But you do have all chances to gain on Forex!
Professional traders use different tools set while trading: starting from mass media information (fundamental analysis) to a total indicators array and Expert Advisors.
Daily, every trader operates in the field of around 4 trillion dollars scale. And each one is able to have a piece of this huge pie!
There is no need to be a certificated financier or analyst, logical thinking and some patience will be enough to study the trading mechanism of stock markets. One of Forex market advantages is the provided leverage. A small amount on an account can advance by 100,200 or 600 times! In such a way, you get a substantial sum, make big trades and can wait for high dividends. However, while working on Forex market it is worth remembering about the ways of capital and risk management.
Trading Terminal
Presently, the most comfortable and popular trading terminal is MetaTrader. This program is quite comprehensible, reliable and handy, moreover, it is absolutely free.
A newcomer may consider that MetaTrader is uneasy for operating due to options plenty. Although, after getting wise to the program it is clear that this one is easier than Photoshop.
To play on Forex and get money you have to know only a few options of this terminal, it is so user-friendly that it can be compared to learning ICQ or antivirus program.
Modern technologies develop constantly, so the software moves with the time. MetaTrader terminal allows its users to trade automatically on Forex, in addition to manual operations.
A lot of high-skilled traders have their own trading market strategy. There is a signal – then sell. Another signal – buy.
Now such actions can be completely fulfilled by the automated program – bot. Let’s say, a trader has effective strategy which makes all actions of the trader following the strategy.
In other words, such program is called Expert Advisor or Automatic Trading System. Advisor can play on Forex doing the trader’s work without his participation - in autopilot mode!
Forex Advatanges
Everyone who is interested in doing this business can work in the international currency market Forex through Internet staying on-the-job. Only Forex works 24 hours except for weekends and holidays! For drawing stable profits and significant income you will have to allow only 2-3 hours of your free time.
High yield rate of Forex currency market: during the day the deposit can be extended ten-fold. Even if you don’t think you are lucky and you are not a professional currency trader, it is much better than putting your funds into bank and watch how they are decreased by inflation.
Analysis effectiveness and changes forecasting on Forex market: having analyzed various trends of the market and economic situation in the world, it is possible to forereach the rate fluctuations and direct your funds in the right way.
Total mobility of Forex market and perfect operational control of trading within it. You can earn in the Internet having just 1 dollar or 1000 dollars as well. Aside from this, the trades are executed momentarily. The operations can be stopped for a while and you can close your account any time, you also can manage your trading wherever you are through Internet from a personal computer, laptop or cell phone
In the times of information technologies and all-round access to the global network millions of people have boundless opportunities of earning and increasing their capital by means of trading based on currency rates difference within the international Forex market. In 80-es and 90-es “distant” trades on the stock exchanges were carried out through telephone calls. Nowadays, traders can run trading through the Internet and gain more profit keeping seat.
Forex is a worldwide currency market in the form of a global stock exchange where not only banks, corporations and brokerage companies can buy/sell currency, but also anyone who wishes. For example, you can buy dollar and euro at low price and then sell it at higher one – such scheme allows making good earnings in the Internet.
What to Begin with
There may emerge a question: “How people can earn on Forex being far from the world of finance and who do not know the oats of currency speculations. On the whole, trading on Forex market is absolutely simple. Even if you just predict the rates movement, your trading activity will be successful and profitable.
If you feel that euro loses its cost, then you just buy dollar in EUR/USD currency pair, i.e. you put SELL order and finally get profit or lose if your intuition was wrong. However, we have described trading with intuition which can often bring profit, but it does not make you a professional trader, as you cannot draw up any exact forecasts. But you do have all chances to gain on Forex!
Professional traders use different tools set while trading: starting from mass media information (fundamental analysis) to a total indicators array and Expert Advisors.
Daily, every trader operates in the field of around 4 trillion dollars scale. And each one is able to have a piece of this huge pie!
There is no need to be a certificated financier or analyst, logical thinking and some patience will be enough to study the trading mechanism of stock markets. One of Forex market advantages is the provided leverage. A small amount on an account can advance by 100,200 or 600 times! In such a way, you get a substantial sum, make big trades and can wait for high dividends. However, while working on Forex market it is worth remembering about the ways of capital and risk management.
Trading Terminal
Presently, the most comfortable and popular trading terminal is MetaTrader. This program is quite comprehensible, reliable and handy, moreover, it is absolutely free.
A newcomer may consider that MetaTrader is uneasy for operating due to options plenty. Although, after getting wise to the program it is clear that this one is easier than Photoshop.
To play on Forex and get money you have to know only a few options of this terminal, it is so user-friendly that it can be compared to learning ICQ or antivirus program.
Modern technologies develop constantly, so the software moves with the time. MetaTrader terminal allows its users to trade automatically on Forex, in addition to manual operations.
A lot of high-skilled traders have their own trading market strategy. There is a signal – then sell. Another signal – buy.
Now such actions can be completely fulfilled by the automated program – bot. Let’s say, a trader has effective strategy which makes all actions of the trader following the strategy.
In other words, such program is called Expert Advisor or Automatic Trading System. Advisor can play on Forex doing the trader’s work without his participation - in autopilot mode!
Forex Advatanges
Everyone who is interested in doing this business can work in the international currency market Forex through Internet staying on-the-job. Only Forex works 24 hours except for weekends and holidays! For drawing stable profits and significant income you will have to allow only 2-3 hours of your free time.
High yield rate of Forex currency market: during the day the deposit can be extended ten-fold. Even if you don’t think you are lucky and you are not a professional currency trader, it is much better than putting your funds into bank and watch how they are decreased by inflation.
Analysis effectiveness and changes forecasting on Forex market: having analyzed various trends of the market and economic situation in the world, it is possible to forereach the rate fluctuations and direct your funds in the right way.
Total mobility of Forex market and perfect operational control of trading within it. You can earn in the Internet having just 1 dollar or 1000 dollars as well. Aside from this, the trades are executed momentarily. The operations can be stopped for a while and you can close your account any time, you also can manage your trading wherever you are through Internet from a personal computer, laptop or cell phone
Monday 12 November 2012
Sunday 11 November 2012
The Features of Weekday Trading on Forex Market
Movement of currency pairs on Forex market has a direction, so called trend, which can be seen well in the end, but for more efficient work traders should know its direction at the beginning of trading week.
There are several factors forming a trend on Forex market:
1. Movement of currency pairs on Friday on the American stock exchange.
2. Opening of Gap (price gap by the end of the previous day and at beginning of the next one) at midnight on Monday (Asian trading session). The result is that the hit resistance levels of pairs very often become the support levels, and the pairs, having made a start from these levels, move in the given direction during the week.
Between the American trading session on Monday and the Asian one on Friday the channel of peak resistance levels (on fractals and zigzags) determines the start point for currency pairs, which break the resistance upwards or downwards and, as a rule, move in the given direction of a trend.
The first and the basic feature of currency pairs' behavior on Forex market is their movement on the American stock exchange on Friday. This is an original testing of trend force and direction through the weekend news.
If a negative news release does not influence the bounces of currency pairs on Friday, this means that brokers and banks were not ready for such surges and the movement should start on Monday.
If a currency has made a sharp trend leap, there are two possible scenarios:
1. A new wave of trend, for example 400 points, which the currency pairs had passed for the last week, will become a first wave, and the third wave in the same direction, which is equal at least 640 points, is by 60% longer.
2. Being at the start of mid-term trend from 4-hour to daily and weekly charts, the rollbacks reach from 23% to 62%. Movement follows the trend, a new week - a new trend jump.
If at the Friday American session the currency did not start its movement on the market, this means that brokers cannot determine the trend or moving direction for the next week, and this direction will be known only on Monday.
From everything mentioned above we can make a conclusion: depending on behavior of the Elliot Waves, Friday session determines the currency behavior for the next week beginning.
1. If potential force of a trend is very strong and there was a trend jump on Friday, then on Monday or Tuesday a correction or reversal can be expected, or a new trend wave.
2. If on Friday the currency went against the trend, then Friday movement will turn into correction or into the first wave of an opposite trend.
3. If the currency did not start its movement on Friday, then a movement formation can be expected on Monday or Tuesday.
One more important feature of the currency market Forex is the analysis of Forex economic calendar for next week. For this purpose it is necessary to mark the events, which can forecast a trend direction and all updates to it.
Besides, there is one more peculiarity, it is necessary to pay attention to the Gap, which appears at midnight on Monday, whether currency pairs of the allies are opened upwards or downwards and which direction the currency pair is to move in after this at the Asian trading session, as a rule, the currency moves in this direction next week.
In order to earn on market, it is necessary to understand that intraday trend does not exist by itself.
Every trader should come to the main conclusion: currency makes the most part of its movement until the news release and only a minor movement is observed when the news was officially confirmed.
There are several factors forming a trend on Forex market:
1. Movement of currency pairs on Friday on the American stock exchange.
2. Opening of Gap (price gap by the end of the previous day and at beginning of the next one) at midnight on Monday (Asian trading session). The result is that the hit resistance levels of pairs very often become the support levels, and the pairs, having made a start from these levels, move in the given direction during the week.
Between the American trading session on Monday and the Asian one on Friday the channel of peak resistance levels (on fractals and zigzags) determines the start point for currency pairs, which break the resistance upwards or downwards and, as a rule, move in the given direction of a trend.
The first and the basic feature of currency pairs' behavior on Forex market is their movement on the American stock exchange on Friday. This is an original testing of trend force and direction through the weekend news.
If a negative news release does not influence the bounces of currency pairs on Friday, this means that brokers and banks were not ready for such surges and the movement should start on Monday.
If a currency has made a sharp trend leap, there are two possible scenarios:
1. A new wave of trend, for example 400 points, which the currency pairs had passed for the last week, will become a first wave, and the third wave in the same direction, which is equal at least 640 points, is by 60% longer.
2. Being at the start of mid-term trend from 4-hour to daily and weekly charts, the rollbacks reach from 23% to 62%. Movement follows the trend, a new week - a new trend jump.
If at the Friday American session the currency did not start its movement on the market, this means that brokers cannot determine the trend or moving direction for the next week, and this direction will be known only on Monday.
From everything mentioned above we can make a conclusion: depending on behavior of the Elliot Waves, Friday session determines the currency behavior for the next week beginning.
1. If potential force of a trend is very strong and there was a trend jump on Friday, then on Monday or Tuesday a correction or reversal can be expected, or a new trend wave.
2. If on Friday the currency went against the trend, then Friday movement will turn into correction or into the first wave of an opposite trend.
3. If the currency did not start its movement on Friday, then a movement formation can be expected on Monday or Tuesday.
One more important feature of the currency market Forex is the analysis of Forex economic calendar for next week. For this purpose it is necessary to mark the events, which can forecast a trend direction and all updates to it.
Besides, there is one more peculiarity, it is necessary to pay attention to the Gap, which appears at midnight on Monday, whether currency pairs of the allies are opened upwards or downwards and which direction the currency pair is to move in after this at the Asian trading session, as a rule, the currency moves in this direction next week.
In order to earn on market, it is necessary to understand that intraday trend does not exist by itself.
Every trader should come to the main conclusion: currency makes the most part of its movement until the news release and only a minor movement is observed when the news was officially confirmed.
Forex Trader
Forex is an international bank-to-bank currency market. Forex trade assumes purchasing or selling the currencies. Due to ever-changing currency rate, buying a currency at lower price and selling it at higher one you can gain profit catching its further movement correctly (for example: correctly determine the news).
Forex market partakers are: banks (central and commercial), pension funds, insurance companies, brokers, dealers and private investors. Because of a great participants number and similar trades volume a lot of transactions are executed in a few seconds.
A huge capital is not required for trading on Forex, as broker gives a loan - leverage. Its size is equal to hundredfold amount of deposit, it means that a trader (participant playing on Forex) enters the market with a sum exceeding the amount for trades execution hundredfold.
Trade execution on Forex consists of 2 parts. First: trader opens position with a certain currency pair. Second: he closes position with this pair. Trades on Forex are closed automatically during several seconds. However, even such a big trades quantity accomplished by traders cannot put a substantial effect on price.
Position opening in Forex trading is a process of requesting one currency from a broker for a certain quantity of another. The cost of a base currency in the first pair is called quote displayed in the quoted currency unit. It has 2 figures: Bid - the cost of base currency sold for quoted one and Ask - the price at which it is bought. A difference between them is called spread (it is the main income source for a broker), and point is the minimal price movement which can be accepted. Currency rate information is always available for those who operate on Forex market.
Forex trading is carried out in three ways. These methods involve several trading strategies. Traders with big trading experience on Forex develop their own strategies for several years, but there are some approved and really beneficial strategies:
- Day trading (intraday short term trading) is opening of short term trades by a trader for 1 or 2 minute period up to a couple of hours. Such trades are usually closed in the same trading day and almost never carried over night.
- News trading. Traders using this kind of trading can always have a stable profit, making the right analysis of published news. At the same time, wrong news analysis and position setup can result in serious losses.
- Midterm trading. With this kind of trading, trader opens long period trades (from 1-2 days up to 1-2 months). Getting a huge profit following this strategy is possible in case a trade remains opened for a few days at least. A good capital is needed for backing up such trades.
- Technical analysis in Forex trade implies an option to estimate and make right analysis of different chart types (bars, Japanese candlesticks, lines) with currency pairs and figures displayed on them that allows to forecast rate fluctuations of the currency pairs.
- Carry trade is gain acquisition from difference betweeen the interest rates of currency pairs.
Using this type of trade, trader's positions remain open for a long period of time (from 2-3 months to 1 year and more). Such trading requires a big capital. It is used for waiting when a trade becomes profitable not to bear losses until the price changes to the right direction.
Also one of the advantages of Forex trade is that the work does not stop 24 hours 7 days a week (from Monday to Friday), therefore, regardless of difference between the time zones and location you can continue taking part in trading. Such opportunity of trading on Forex is provided by the world financial centers managed by the national banks together with international banks where different countries capital is kept.
Major of them are located in: New York, London, Tokyo, Paris, Luxembourg, Singapore and Austria. They allow supporting the liquidity for trading on Forex during the whole day and night.
Forex market partakers are: banks (central and commercial), pension funds, insurance companies, brokers, dealers and private investors. Because of a great participants number and similar trades volume a lot of transactions are executed in a few seconds.
A huge capital is not required for trading on Forex, as broker gives a loan - leverage. Its size is equal to hundredfold amount of deposit, it means that a trader (participant playing on Forex) enters the market with a sum exceeding the amount for trades execution hundredfold.
Trade execution on Forex consists of 2 parts. First: trader opens position with a certain currency pair. Second: he closes position with this pair. Trades on Forex are closed automatically during several seconds. However, even such a big trades quantity accomplished by traders cannot put a substantial effect on price.
Position opening in Forex trading is a process of requesting one currency from a broker for a certain quantity of another. The cost of a base currency in the first pair is called quote displayed in the quoted currency unit. It has 2 figures: Bid - the cost of base currency sold for quoted one and Ask - the price at which it is bought. A difference between them is called spread (it is the main income source for a broker), and point is the minimal price movement which can be accepted. Currency rate information is always available for those who operate on Forex market.
Forex trading is carried out in three ways. These methods involve several trading strategies. Traders with big trading experience on Forex develop their own strategies for several years, but there are some approved and really beneficial strategies:
- Day trading (intraday short term trading) is opening of short term trades by a trader for 1 or 2 minute period up to a couple of hours. Such trades are usually closed in the same trading day and almost never carried over night.
- News trading. Traders using this kind of trading can always have a stable profit, making the right analysis of published news. At the same time, wrong news analysis and position setup can result in serious losses.
- Midterm trading. With this kind of trading, trader opens long period trades (from 1-2 days up to 1-2 months). Getting a huge profit following this strategy is possible in case a trade remains opened for a few days at least. A good capital is needed for backing up such trades.
- Technical analysis in Forex trade implies an option to estimate and make right analysis of different chart types (bars, Japanese candlesticks, lines) with currency pairs and figures displayed on them that allows to forecast rate fluctuations of the currency pairs.
- Carry trade is gain acquisition from difference betweeen the interest rates of currency pairs.
Using this type of trade, trader's positions remain open for a long period of time (from 2-3 months to 1 year and more). Such trading requires a big capital. It is used for waiting when a trade becomes profitable not to bear losses until the price changes to the right direction.
Also one of the advantages of Forex trade is that the work does not stop 24 hours 7 days a week (from Monday to Friday), therefore, regardless of difference between the time zones and location you can continue taking part in trading. Such opportunity of trading on Forex is provided by the world financial centers managed by the national banks together with international banks where different countries capital is kept.
Major of them are located in: New York, London, Tokyo, Paris, Luxembourg, Singapore and Austria. They allow supporting the liquidity for trading on Forex during the whole day and night.
The Features of Weekday Trading on Forex Market
Movement of currency pairs on Forex market has a
direction, so called trend, which can be seen well in the end, but for more
efficient work traders should know its direction at the beginning of trading
week.
There are several factors forming a trend on Forex market:
1. Movement of currency pairs on Friday on the American stock exchange.
2. Opening of Gap (price gap by the end of the previous day and at beginning of the next one) at midnight on Monday (Asian trading session). The result is that the hit resistance levels of pairs very often become the support levels, and the pairs, having made a start from these levels, move in the given direction during the week.
Between the American trading session on Monday and the Asian one on Friday the channel of peak resistance levels (on fractals and zigzags) determines the start point for currency pairs, which break the resistance upwards or downwards and, as a rule, move in the given direction of a trend.
The first and the basic feature of currency pairs' behavior on Forex market is their movement on the American stock exchange on Friday. This is an original testing of trend force and direction through the weekend news.
If a negative news release does not influence the bounces of currency pairs on Friday, this means that brokers and banks were not ready for such surges and the movement should start on Monday.
If a currency has made a sharp trend leap, there are two possible scenarios:
1. A new wave of trend, for example 400 points, which the currency pairs had passed for the last week, will become a first wave, and the third wave in the same direction, which is equal at least 640 points, is by 60% longer.
2. Being at the start of mid-term trend from 4-hour to daily and weekly charts, the rollbacks reach from 23% to 62%. Movement follows the trend, a new week - a new trend jump.
If at the Friday American session the currency did not start its movement on the market, this means that brokers cannot determine the trend or moving direction for the next week, and this direction will be known only on Monday.
From everything mentioned above we can make a conclusion: depending on behavior of the Elliot Waves, Friday session determines the currency behavior for the next week beginning.
1. If potential force of a trend is very strong and there was a trend jump on Friday, then on Monday or Tuesday a correction or reversal can be expected, or a new trend wave.
2. If on Friday the currency went against the trend, then Friday movement will turn into correction or into the first wave of an opposite trend.
3. If the currency did not start its movement on Friday, then a movement formation can be expected on Monday or Tuesday.
One more important feature of the currency market Forex is the analysis of Forex economic calendar for next week. For this purpose it is necessary to mark the events, which can forecast a trend direction and all updates to it.
Besides, there is one more peculiarity, it is necessary to pay attention to the Gap, which appears at midnight on Monday, whether currency pairs of the allies are opened upwards or downwards and which direction the currency pair is to move in after this at the Asian trading session, as a rule, the currency moves in this direction next week.
In order to earn on market, it is necessary to understand that intraday trend does not exist by itself.
Every trader should come to the main conclusion: currency makes the most part of its movement until the news release and only a minor movement is observed when the news was officially confirmed.
#free forex education
There are several factors forming a trend on Forex market:
1. Movement of currency pairs on Friday on the American stock exchange.
2. Opening of Gap (price gap by the end of the previous day and at beginning of the next one) at midnight on Monday (Asian trading session). The result is that the hit resistance levels of pairs very often become the support levels, and the pairs, having made a start from these levels, move in the given direction during the week.
Between the American trading session on Monday and the Asian one on Friday the channel of peak resistance levels (on fractals and zigzags) determines the start point for currency pairs, which break the resistance upwards or downwards and, as a rule, move in the given direction of a trend.
The first and the basic feature of currency pairs' behavior on Forex market is their movement on the American stock exchange on Friday. This is an original testing of trend force and direction through the weekend news.
If a negative news release does not influence the bounces of currency pairs on Friday, this means that brokers and banks were not ready for such surges and the movement should start on Monday.
If a currency has made a sharp trend leap, there are two possible scenarios:
1. A new wave of trend, for example 400 points, which the currency pairs had passed for the last week, will become a first wave, and the third wave in the same direction, which is equal at least 640 points, is by 60% longer.
2. Being at the start of mid-term trend from 4-hour to daily and weekly charts, the rollbacks reach from 23% to 62%. Movement follows the trend, a new week - a new trend jump.
If at the Friday American session the currency did not start its movement on the market, this means that brokers cannot determine the trend or moving direction for the next week, and this direction will be known only on Monday.
From everything mentioned above we can make a conclusion: depending on behavior of the Elliot Waves, Friday session determines the currency behavior for the next week beginning.
1. If potential force of a trend is very strong and there was a trend jump on Friday, then on Monday or Tuesday a correction or reversal can be expected, or a new trend wave.
2. If on Friday the currency went against the trend, then Friday movement will turn into correction or into the first wave of an opposite trend.
3. If the currency did not start its movement on Friday, then a movement formation can be expected on Monday or Tuesday.
One more important feature of the currency market Forex is the analysis of Forex economic calendar for next week. For this purpose it is necessary to mark the events, which can forecast a trend direction and all updates to it.
Besides, there is one more peculiarity, it is necessary to pay attention to the Gap, which appears at midnight on Monday, whether currency pairs of the allies are opened upwards or downwards and which direction the currency pair is to move in after this at the Asian trading session, as a rule, the currency moves in this direction next week.
In order to earn on market, it is necessary to understand that intraday trend does not exist by itself.
Every trader should come to the main conclusion: currency makes the most part of its movement until the news release and only a minor movement is observed when the news was officially confirmed.
#free forex education
Saturday 10 November 2012
Forex Trading Signals
Forex Trading Signals are signals to buy or sell trading instruments (currency, shares, CFD, precious metals, etc.), these are the signals for timely opening and closing positions. Trading Signals are very popular service on Forex market at the moment.
These signals suggest to a trader useful information - what currency and price is worth to make operation at, the moment for closing a position, better level to set stop loss, to avoid great losses in case you incorrectly predict the trend movements, or take profit for getting the maximal result etc.
Undoubtedly, signals play an important role for traders on Forex market, but the trader should not follow them fully and unconditionally. They are only assistants during the daily trading, once again, only assistants. Trader must make decisions according to the totality of factors, particularly, external environment (micro- and macroeconomic factors, i.e. fundamental analysis which is an analysis of economic indicators, social factors and government policy of a business cycle, can forecast price movement and trends of the market) and technical analysis and take into account non-market factors (political situation, different force-majour circumstances and etc.)
There are a lot of websites in the Internet, offering Forex signals, which guarantee a huge profit. (For example: If you use our Forex signals you will be able to get profit about 1000 - 1500 pips per month by 10 currencies, we also suggest fully automatic trading process.....) Don't believe it! Be attentive and extremely suspicious to such offers and trust reliable sources only, which have authority and reputation in the trading world.
You can check the quality of Forex signals by the following way: the comments of people you know (friends, colleagues, relatives who use the services of Forex signals provider) are the best indicator. Another way is to test the dynamics of executed transactions in a foreign exchange market. Such statistics is available for the clients, if it is not, you have to look for another Internet broker providing such information.
Forex Trading Signals may be considered as an alternative to trust management. In any case, carrying out transactions you rely on experience of other people or on the program algorithm, then analyze the market independently. In the first case, you pay a fixed sum for trading signal and independently execute transactions on a trading platform. In the second case, broker executes transactions on your behalf, but you share a part of your profit with it. In any case, if the situation in the currency market goes against you, only you take the loss risk.
These signals suggest to a trader useful information - what currency and price is worth to make operation at, the moment for closing a position, better level to set stop loss, to avoid great losses in case you incorrectly predict the trend movements, or take profit for getting the maximal result etc.
Undoubtedly, signals play an important role for traders on Forex market, but the trader should not follow them fully and unconditionally. They are only assistants during the daily trading, once again, only assistants. Trader must make decisions according to the totality of factors, particularly, external environment (micro- and macroeconomic factors, i.e. fundamental analysis which is an analysis of economic indicators, social factors and government policy of a business cycle, can forecast price movement and trends of the market) and technical analysis and take into account non-market factors (political situation, different force-majour circumstances and etc.)
There are a lot of websites in the Internet, offering Forex signals, which guarantee a huge profit. (For example: If you use our Forex signals you will be able to get profit about 1000 - 1500 pips per month by 10 currencies, we also suggest fully automatic trading process.....) Don't believe it! Be attentive and extremely suspicious to such offers and trust reliable sources only, which have authority and reputation in the trading world.
You can check the quality of Forex signals by the following way: the comments of people you know (friends, colleagues, relatives who use the services of Forex signals provider) are the best indicator. Another way is to test the dynamics of executed transactions in a foreign exchange market. Such statistics is available for the clients, if it is not, you have to look for another Internet broker providing such information.
Forex Trading Signals may be considered as an alternative to trust management. In any case, carrying out transactions you rely on experience of other people or on the program algorithm, then analyze the market independently. In the first case, you pay a fixed sum for trading signal and independently execute transactions on a trading platform. In the second case, broker executes transactions on your behalf, but you share a part of your profit with it. In any case, if the situation in the currency market goes against you, only you take the loss risk.
Forex and World Economic Crisis
World Economic Crisis is a burning issue not only for those dealing with finance but also for all social groups as everyone, one way or another, is influenced by economic cataclysms. Some are afraid of inflation rate and reduction of wages, the others are scared to lose their jobs.
So traders here are not the exception as their work is directly connected with finance and everything that is happening in the world of currency undoubtedly affects the exchange market. That is why, probably, at least once every trader wondered what would happen on Forex if another finance crisis takes place and how the members of the foreign exchange market should react to such major events.
Indeed, the World Economic Crisis leaves its mark on Forex with both positive and negative aftereffects.
Therefore it is very important for every trader to correctly react to financial cataclysms and try to elicit all the benefits out of such situation, still getting the profit.
First of all, there is no need to panic while monitoring a huge flow of world economic news. During the crisis period the amount of such news is getting much bigger than during peaceful periods. As soon as the financial situation loses stability, the currency rates undergo great changes: plummeting of exchange rates becomes a common thing for many national currencies which belong to the countries involved into crisis. While the newspapers headlines as well as on-line publications are full of information about the new world economic events, it becomes more complicated for a trader to deal with such a great amount of information, analyze the conditions in time as well as correctly predict the behavior of currency rates.
Nevertheless, together with the right approach and substitution of emotional breakouts for rational judgments it is possible to change things for the better. A trader can easily benefit from this event and multiply his/her capital while continue working confidently.
There is no need to be afraid of the raised market volatility - better to know how to get money out of it. As Forex trade is based first and foremost on buy and sell operations, the traders risk less to lose their job during the economic crisis.
The tools and methods that exist on the foreign exchange market will always allow to get the profit. If financial crisis involves some currency exchange rates falling, the quotes of other currencies raise automatically, which in case of competent analysis gives an opportunity for a trader to consummate a transaction with a benefit.
Undoubtedly the influence of World Economic Crisis on Forex is tangible. Yet, despite the traders’ disturbing expectations, financial turmoil cannot lead the exchange market to decay.
So traders here are not the exception as their work is directly connected with finance and everything that is happening in the world of currency undoubtedly affects the exchange market. That is why, probably, at least once every trader wondered what would happen on Forex if another finance crisis takes place and how the members of the foreign exchange market should react to such major events.
Indeed, the World Economic Crisis leaves its mark on Forex with both positive and negative aftereffects.
Therefore it is very important for every trader to correctly react to financial cataclysms and try to elicit all the benefits out of such situation, still getting the profit.
First of all, there is no need to panic while monitoring a huge flow of world economic news. During the crisis period the amount of such news is getting much bigger than during peaceful periods. As soon as the financial situation loses stability, the currency rates undergo great changes: plummeting of exchange rates becomes a common thing for many national currencies which belong to the countries involved into crisis. While the newspapers headlines as well as on-line publications are full of information about the new world economic events, it becomes more complicated for a trader to deal with such a great amount of information, analyze the conditions in time as well as correctly predict the behavior of currency rates.
Nevertheless, together with the right approach and substitution of emotional breakouts for rational judgments it is possible to change things for the better. A trader can easily benefit from this event and multiply his/her capital while continue working confidently.
There is no need to be afraid of the raised market volatility - better to know how to get money out of it. As Forex trade is based first and foremost on buy and sell operations, the traders risk less to lose their job during the economic crisis.
The tools and methods that exist on the foreign exchange market will always allow to get the profit. If financial crisis involves some currency exchange rates falling, the quotes of other currencies raise automatically, which in case of competent analysis gives an opportunity for a trader to consummate a transaction with a benefit.
Undoubtedly the influence of World Economic Crisis on Forex is tangible. Yet, despite the traders’ disturbing expectations, financial turmoil cannot lead the exchange market to decay.
Non-News Trading on Forex
Due to permanent improvement of the Internet and communication facilities for traders operating on Forex, the information becomes more accessible. That is why a lot of traders and investors consider that following the fresh news release, reading the analytical reviews and another similar information their chances of profit earning advance essentially. But it is not exactly so:
Staking on news may result in huge financial losses. Why does it happen? Without a detailed consideration of this issue the true cause of this will be hardly understandable. So let us make a close analysis:
Almost every beginning trader supposes that applying to news in trading will certainly turn out to be beneficial, but it is wrong.
The first thing said about news is that they reflect changes taking place in the market in full measure. But as a rule, such assertions are not approved and the currency`s reaction to them mostly differs from the expected one.
Certainly, the leading positions of supply and demand are not passed by in the market, at the same time there is no logics in their movements.
The main reason depreciating the news is the markets. That is why the news trading becomes almost unreal. Thus, knowing in advance when some news will be published and what influence it can put on the market the investors start acting. So when this news is given to public the market reaction can be hardly visible or there will be no any reaction at all, as everything is taken into account by the price. It is also worth paying attention to people`s character and the real picture showing the news "importance" will become clear.
One more reason impacting the trading during the news is human emotions violating a significant nuance in trading - discipline. Similarly, the analytics can be incorrect sometimes. In situations when an opened trade should better be closed the trader does not make it, as an active motion is predicted by analysts to start at that very moment.
At the same time, the news should not be ignored. It is widely known that the market peaks often emerge after the news with positive forecasts, and the lows to the contrary after unpromising news.
It can be concluded that for traders with big capital who operate with major pairs the right decision would be not to run a news trading and to apply to an order trading system instead. Because these news are already recorded by the system. They are also a part of technical analysis which is an irreplaceable component of any well-set trading system
E-Currency [[ electronic currency ]]
Undoubtedly, a distinctive feature of electronic currency is its virtuality, as it cannot be touched, put in pocket or paid with in a store. Speaking about material component, it does not exist. However, we should not doubt of its materiality. You can buy anything in the Internet with it: apartment, car or home appliances. Electronic currency can also be converted into any currency you need. Virtual purses are usually funded through prepaid cards such as WebMoney, Yandex.Money or bank wire. You can withdraw money from electronic payments system by using ATM or bank withdrawal. Moreover, you can get a credit in electronic currency. All this is available in the global network Internet. As a rule, all operations with electronic currency take no longer than several minutes.
Electronic currency has many peculiarities which paper money does not have:
1. It cannot be faked.
2. With electronic purse on your computer and a special anti-spy protection, third parties will have no chance to hack it. Confidentiality is guaranteed. And you do not need to obtain any permission documents. You may open as many electronic purses as you want.
3. You are absolutely independent. Only you can determine the deposit amount.
4. You will be always aware of who and where you transfer money to and where it comes from.
5. Absolute safety of all operations. Using electronic money you are able to make a riskless transaction, i.e. pay for goods only after you receive them.
6. All transactions take a few seconds.
7. You can buy a lot of goods and services which are available for sale for electronic money only.
8. You can take out a loan using electronic money. Besides, you can both obtain and grant loans.
9. Opportunity of using numerous banks, multicurrency.
We can state that electronic currency is the same money, but expressed in digital format.
Due to dynamic development of the Internet and technologies, people take another view of payment opportunities. All aforesaid advantages of electronic currency prove its great use.
Electronic currency is a new phenomenon widening opportunities. The only problem you can face is a fear of something new.
Electronic currency has many peculiarities which paper money does not have:
1. It cannot be faked.
2. With electronic purse on your computer and a special anti-spy protection, third parties will have no chance to hack it. Confidentiality is guaranteed. And you do not need to obtain any permission documents. You may open as many electronic purses as you want.
3. You are absolutely independent. Only you can determine the deposit amount.
4. You will be always aware of who and where you transfer money to and where it comes from.
5. Absolute safety of all operations. Using electronic money you are able to make a riskless transaction, i.e. pay for goods only after you receive them.
6. All transactions take a few seconds.
7. You can buy a lot of goods and services which are available for sale for electronic money only.
8. You can take out a loan using electronic money. Besides, you can both obtain and grant loans.
9. Opportunity of using numerous banks, multicurrency.
We can state that electronic currency is the same money, but expressed in digital format.
Due to dynamic development of the Internet and technologies, people take another view of payment opportunities. All aforesaid advantages of electronic currency prove its great use.
Electronic currency is a new phenomenon widening opportunities. The only problem you can face is a fear of something new.
Friday 9 November 2012
GBP/USD Currency pair
In this article we consider the peculiarities of GBP/USD currency pair. GBP/USD is an abbreviation of British pound and US dollar currency pair. The currency pair quote indicates how much money it is necessary to pay in order to buy 1 British pound.
It is very popular trading instrument in Europe and, especially, in Great Britain. It stands third on the list of the most traded currency pairs worldwide, daily trading turnover reaches 12% of the total Forex market turnover. This currency pair is really unpredictable and has strong volatility. Its fluctuations are short-term and unstable. Due to such behavior in the market it was called Cable.
Daily fluctuations of the currency pair reach 130 points on average. Low liquidity of this pair is observed only in the Asian region (average movement is about 30 points). That is why novice traders are not recommended to start with this pair.
Many traders prefer EUR/USD to the Cable. As a rule, British pound moves in the same direction as EUR/USD, but not always.
Pound-dollar movement can be absolutely different from the same euro-dollar in the period when certain “cable” news is released. For example, the British Government changes interest rate through the Central bank. Pound movements are similar to the movements of euro and Swiss franc. One should always be careful trading with pound because nobody knows what surprise it will bring this time. Pound often moves against the news; even when everything seems favorable for the currency, its rate can fall down. Many traders choose this pair for swap trading because of a substantial difference in interest rates of pound and dollar.
It is very popular trading instrument in Europe and, especially, in Great Britain. It stands third on the list of the most traded currency pairs worldwide, daily trading turnover reaches 12% of the total Forex market turnover. This currency pair is really unpredictable and has strong volatility. Its fluctuations are short-term and unstable. Due to such behavior in the market it was called Cable.
Daily fluctuations of the currency pair reach 130 points on average. Low liquidity of this pair is observed only in the Asian region (average movement is about 30 points). That is why novice traders are not recommended to start with this pair.
Many traders prefer EUR/USD to the Cable. As a rule, British pound moves in the same direction as EUR/USD, but not always.
Pound-dollar movement can be absolutely different from the same euro-dollar in the period when certain “cable” news is released. For example, the British Government changes interest rate through the Central bank. Pound movements are similar to the movements of euro and Swiss franc. One should always be careful trading with pound because nobody knows what surprise it will bring this time. Pound often moves against the news; even when everything seems favorable for the currency, its rate can fall down. Many traders choose this pair for swap trading because of a substantial difference in interest rates of pound and dollar.
Technical analysis Principles
Technical analysis is a method of forecasting price movement by data comparison in different time frames and by eliciting regularities of market behavior. Application of a technical analysis in Forex activities is irreplaceable for the most of traders.
Technical analysis is based on three general principles:
1. Market movement is taken into account by everybody
The price is always impacted by external factors, however technical analysis implies that investigation of political, economic and psychological factors influencing the price movement is not obligatory, as the main motion indicator is the price as it is. Any slight influence of factors is considered and reflected by a price, that is why it will be the object of study.
2. Price movement moves in a certain direction
For applying a technical analysis it is necessary to comprehend the trend meaning. The main goal of a technical approach is determination of price move tendency in order to trade in compliance with this trend.
There are three trend types:
• Bullish when price moves up
• Bearish when price moves down
• Flat - has no certain price move direction
As a rule, during the price movement you can elicit each of trend types, but only one of them can be major. Worth keeping in mind that tendency change takes place only after it gives certain signals.
3. History repeats itself
This principle implicates that in the course of human history the rules and analysis types do not change, that preconditions a multiple repeating of price movement on different time intervals.
The market dynamics is primarily studied by means of charts during a technical analysis. The main tools are as follows:
• Oscillators
• Japanese candlesticks
• Bar chart (intervals)
• Line chart
• Trend indicators
• Wave analysis
Technical analysis can be a foundational forecasting instrument in the currency market. This technique is successfully used by professional traders and analysts of Forex. Their long experience points to practicability of using technical analysis in trading.
Technical analysis is based on three general principles:
1. Market movement is taken into account by everybody
The price is always impacted by external factors, however technical analysis implies that investigation of political, economic and psychological factors influencing the price movement is not obligatory, as the main motion indicator is the price as it is. Any slight influence of factors is considered and reflected by a price, that is why it will be the object of study.
2. Price movement moves in a certain direction
For applying a technical analysis it is necessary to comprehend the trend meaning. The main goal of a technical approach is determination of price move tendency in order to trade in compliance with this trend.
There are three trend types:
• Bullish when price moves up
• Bearish when price moves down
• Flat - has no certain price move direction
As a rule, during the price movement you can elicit each of trend types, but only one of them can be major. Worth keeping in mind that tendency change takes place only after it gives certain signals.
3. History repeats itself
This principle implicates that in the course of human history the rules and analysis types do not change, that preconditions a multiple repeating of price movement on different time intervals.
The market dynamics is primarily studied by means of charts during a technical analysis. The main tools are as follows:
• Oscillators
• Japanese candlesticks
• Bar chart (intervals)
• Line chart
• Trend indicators
• Wave analysis
Technical analysis can be a foundational forecasting instrument in the currency market. This technique is successfully used by professional traders and analysts of Forex. Their long experience points to practicability of using technical analysis in trading.
Market Makers
The participants of Forex currency market are divided into two groups by their activity and influence on currency rates: market makers and market users.
Market makers are large banks and financial organizations which determine the current level of a currency rate, owing to a significant share of their operations in a total volume of the world market. Market makers exercise a constant control of different trading instruments, and they also conduct trades with them. Market makers are market members providing liquidity of particular instruments, making buy or sell orders. These are big international banks and financial institutions, which run daily currency operations of buying or selling trading instruments for more than billions of US dollars. Every market has its own market makers. Similarly, every Forex broker has its personal market makers, the quoting rates of which are exploited by it and offered to its clients further on. Among the greatest market makers such as Deutsche Bank, Mizuho Bank, Barclays Bank, PBS, Citi Bank, Chase Manhattan Bank, Union Bank of Switzerland can be named. In order to define whether the organization is a market maker it is important to consider not only the size of a bank, but also its share in market operations and its capability to influence the market by setting a price policy.
As mentioned before, for a particular market there can be own market maker. Worth pointing out that for the USD/CHF trading instrument the main market makers are Credit Suisse Bank and Union Bank of Switzerland. For trading instruments comprising the Asian currencies the major market maker is the Standard Chartered Bank. As to the rouble instruments, here the top market makers are the International Moscow Bank and the Onexim Bank. The Central Bank of Russia can also play this role being one of the most active participants in setting up the quote rates of currencies vs. the rouble, making different currency interventions, if the rouble rate exceeds the regulated currency rate limits.
Market makers determine the current currency exchange rate by conducting trades with each other as well as with smaller banks, which are also market participants. That is the market makers who introduce quote rates to small banks, organizations and individuals. Thus, another notion emerges characterizing these participants - market users.
Market users are financial organizations, broker companies, small banks and individuals, who use the quoting rate set by market makers for their operations. Market users are not aggressive market players, though a total volume of their operations in the market can be significant, but the share of each one is minor. The role of small market users consists in either acceptance or not of the rates provided by market makers. Consequently, market makers make price and market users take it.
Thursday 8 November 2012
Trade Arrangment - Every Trader Must Know
Any trader either a newbie or a professional should develop the most convenient and profitable trading system for himself. Trading strategy is one of the basic elements of the trading system. Undoubtedly, there are many trading strategies on the international currency exchange Forex market, but it does not mean that each of them can be applied by all traders. Before developing a trading system the trader should define which strategy will be the most appropriate. It should save trader’s time searching for the most applicable trading system. In order to decide on the trading strategy you have to take into account two factors:
- personality and internal constitution;
- financial capacities.
Most traders make a great mistake by following an unnatural trading strategy for them. The problem is that the major part of traders, regardless of their trade experience, does not think about that. The second reason is lack of financial resources in order to choose the most relevant trading strategy. Consequently, a trader does not have any other way except for choosing a strategy which meets the requirements of small capital, not taking account of the first component.
We consider all trading strategies as follows:
Adherents of this type of trade are mostly beginners, it is connected with currency market dynamics which attracts novices. Intraday trade has the following peculiarities:
• Positions can be opened during one trading day and by the end of the day they should be closed or, in case of urgency, carried over the next trading day with setting protecting orders;
• All trades are short-term and meant for taking just a part of profit;
• Within a day the number of trades can be more than one;
• Intraday trading does not require huge financial investments;
• The work time interval is minute charts.
- personality and internal constitution;
- financial capacities.
Most traders make a great mistake by following an unnatural trading strategy for them. The problem is that the major part of traders, regardless of their trade experience, does not think about that. The second reason is lack of financial resources in order to choose the most relevant trading strategy. Consequently, a trader does not have any other way except for choosing a strategy which meets the requirements of small capital, not taking account of the first component.
We consider all trading strategies as follows:
Intraday trade
Adherents of this type of trade are mostly beginners, it is connected with currency market dynamics which attracts novices. Intraday trade has the following peculiarities:
• Positions can be opened during one trading day and by the end of the day they should be closed or, in case of urgency, carried over the next trading day with setting protecting orders;
• All trades are short-term and meant for taking just a part of profit;
• Within a day the number of trades can be more than one;
• Intraday trading does not require huge financial investments;
• The work time interval is minute charts.
Intraweek trade
As a rule, traders, disappointed in intraday trade, try this strategy. Intraweek trade has no such furious market movement as in intraday trade. It may seem that market is motionless. But it is just at first sight. Intraweek trade has some peculiarities as follows:
• A trade can remain opened for ten days;
• All trades are counted on taking the most part of profit on market movement;
• As a rule, not more than 2 positions are opened during a week;
• Requirements for invested funds are much higher than for intraday trading;
• The work time time is multi-hour charts.
Positional trade in the direction of positive swaps
As a rule, positional trade is used only by patient traders. Positional trade is distinguished from the previous two by a pressure put on trader, and moreover, a trader has more free time. Positional trade has the following characteristics:
• The work time interval is daily and weekly charts;
• A trade can remain open during months;
• Requirements for invested capital are the highest, compared to the intraday and intraweek trades;
• An option of being outside the market during correction periods is available.
Probably, every trader can find additional definitions of the strategies, but the basis is one of these strategies to become ideal for you. In order every trader to be able to choose the most appropriate strategy for him/her, let us consider which strategies are applicable to different characteristics of a trader. However, strategy choosing is a responsibility of traders.
First, let us look through advantages and disadvantages of the intraday trade:
Advantages:
• Huge capital is not necessary;
• Trader may stop trading any time;
• Minimal risk;
Disadvantages:
• High emotional pressure;
• It is required much time for refreshment;
• Lack of time during a trading session.
This strategy is suitable for traders with a great endurance and virile character, quick reaction and strong nerves.
Intraweek strategy:
Pros:
• Insignificant pressure;
• High profitability;
• Less time is required for refreshment;
• There is free time during a trading session.
Cons:
• Significant volume of funds is required;
• Trader can be outside the market during the trend correction;
• Impossibility to stop trading at any moment;
• Necessity to hold opened position for 24 hours.
This strategy suits traders who combine such qualities as working capacity, deliberation and thoughtfulness, because first time trader will need to monitor positions 24 hours a day, analyzing all market changes. It is really timely at the moment of market trend formation. Meanwhile, usage of multi-hours charts will be uncomfortable for you due to signals which are shaped on the night bars.
Positional trade:
Pros:
• A lot of free time;
• No emotional pressure;
• No necessity in refreshment.
Cons:
• Periods of absolute inactivity;
• Impossibility to stop trade at any moment;
• Limited number of currency pairs for trading;
• Necessity in huge capital for trade.
This strategy suitrs traders who have a great patience, purposefulness and big funds.
In case you have achieved absolute coincidence of a trading strategy, your character and financial capacities, it would be a perfect variant for you.
Wednesday 7 November 2012
Automated Trading
Today the high popularity of Forex is mainly caused by the fact that you can trade having a computer and Internet access, you do not need to invest large sums in order to start trading on the market, and also trader can use the advisors for automated trading.
People, who have just started their work at Forex, very often do not have the required experience and knowledge in order to begin trading themselves. That is why about 70% of traders use the automated trading – advisors. The usage of the automatic trading system helps to avoid the influence of the human emotions, panic, excitement, etc. on the trade process. The advisors are developed on the basis of long experience of the successful traders and professional analysts. However, even the programs of automated trading can not guarantee 100% profit; nevertheless, due to them you start trading at Forex market, having minimum of knowledge and experience in this area.
What is the Automated Trading, as known as the trading with the help of expert advisors?
Advisors are the special programs, including different modules, which are used when the charts, indices, received from the broker to trader, are processed and analyzed.
The programs of the Automated Trading were developed and are used by traders in trading for a long time, and every year the number of such programs grows, a lot of them are updated and become more perfect in the work. The trading with modern expert advisors allows to receive profit as well as to get familiar with Forex market and acquire skills and knowledge, which are needed in order to trade successfully.
The major part of advisors, provided by different companies for the automated trading, as a rule, does not require special skills to start work with them. You just need to download them and install, that is all, you can start trading, which very often gives a result immediately.
Most often the automated trading systems are provided for free, with the detailed description of program’s functions, but sometimes this description does not correspond to its real possibilities. That is why despite all advantages of advisors, you should not rely on them completely. Traders, who have enough experience and know much about trading strategies, start trading independently, guessing the movements of exchange rates on short time intervals.
People, who have just started their work at Forex, very often do not have the required experience and knowledge in order to begin trading themselves. That is why about 70% of traders use the automated trading – advisors. The usage of the automatic trading system helps to avoid the influence of the human emotions, panic, excitement, etc. on the trade process. The advisors are developed on the basis of long experience of the successful traders and professional analysts. However, even the programs of automated trading can not guarantee 100% profit; nevertheless, due to them you start trading at Forex market, having minimum of knowledge and experience in this area.
What is the Automated Trading, as known as the trading with the help of expert advisors?
Advisors are the special programs, including different modules, which are used when the charts, indices, received from the broker to trader, are processed and analyzed.
The programs of the Automated Trading were developed and are used by traders in trading for a long time, and every year the number of such programs grows, a lot of them are updated and become more perfect in the work. The trading with modern expert advisors allows to receive profit as well as to get familiar with Forex market and acquire skills and knowledge, which are needed in order to trade successfully.
The major part of advisors, provided by different companies for the automated trading, as a rule, does not require special skills to start work with them. You just need to download them and install, that is all, you can start trading, which very often gives a result immediately.
Most often the automated trading systems are provided for free, with the detailed description of program’s functions, but sometimes this description does not correspond to its real possibilities. That is why despite all advantages of advisors, you should not rely on them completely. Traders, who have enough experience and know much about trading strategies, start trading independently, guessing the movements of exchange rates on short time intervals.
EUR/USD Currency Pair
The international currency market is built on principles of buying one currency and selling another. The daily market turnover is about 3 million US dollars. With the help of brokers and dealing centers one can trade almost any world currency.
In this article we consider one of the most popular currency pairs – EUR/USD. The euro-dollar currency pair appeared on April 7, 1989. The initial EUR/USD rate was 1.0445.
Statistics for 2007 confirms that 27% of all operations are executed with euro-dollar currency pair. To the present time EUR/USD pair has been the most traded and popular in the international currency market Forex. The pair is interesting both for professionals of currency speculations and absolute novices of trading. It is one of the most active pairs in the market and notable for insignificant volatility, attracting traders with different experience on Forex. EUR/USD pair movements are smooth, but during the day high activity can be noticed and used by the intraday and short-term traders for getting great profit.
Traders who actively work with the euro-dollar currency pair should be always aware of economic events in the USA and Eurozone. The pair adheres to the trend trading. Entering the market trader should estimate the current prices, draw a trend and find the historical levels of short trading prospect.
Every currency pair in the market has its own peculiarities and suffers from impact of different factors. Traders should realize these peculiarities and trade paying great attention to them.
In this article we consider one of the most popular currency pairs – EUR/USD. The euro-dollar currency pair appeared on April 7, 1989. The initial EUR/USD rate was 1.0445.
Statistics for 2007 confirms that 27% of all operations are executed with euro-dollar currency pair. To the present time EUR/USD pair has been the most traded and popular in the international currency market Forex. The pair is interesting both for professionals of currency speculations and absolute novices of trading. It is one of the most active pairs in the market and notable for insignificant volatility, attracting traders with different experience on Forex. EUR/USD pair movements are smooth, but during the day high activity can be noticed and used by the intraday and short-term traders for getting great profit.
Traders who actively work with the euro-dollar currency pair should be always aware of economic events in the USA and Eurozone. The pair adheres to the trend trading. Entering the market trader should estimate the current prices, draw a trend and find the historical levels of short trading prospect.
Every currency pair in the market has its own peculiarities and suffers from impact of different factors. Traders should realize these peculiarities and trade paying great attention to them.
What is Swap-free or Islamic Accounts
Swap-free accounts are also called Islamic because owners of such accounts exercise Islamic religion. According to the rules of the Mohammedan religion, any business transactions, where one of the parties must pay or get an interest from another party, are prohibited.
Islamic or Swap-free accounts allow trading any currency pair and if a position is carried over midnight, a trader does not earn and there is nothing to withdraw from trader's account, regardless of the open position volume. Islamic accounts were created special for Muslims, because crediting swaps and interests is against their religion.
Accounts which are not influenced by swap allow their owners to hold positions as long as it is necessary. In this case the result of trading depends only on the currency rates change during a certain period of time.
Due to this peculiarity Swap-free accounts became popular in both Islamic countries and worldwide. Many Forex brokers provide swap-free service for free
Islamic or Swap-free accounts allow trading any currency pair and if a position is carried over midnight, a trader does not earn and there is nothing to withdraw from trader's account, regardless of the open position volume. Islamic accounts were created special for Muslims, because crediting swaps and interests is against their religion.
Accounts which are not influenced by swap allow their owners to hold positions as long as it is necessary. In this case the result of trading depends only on the currency rates change during a certain period of time.
Due to this peculiarity Swap-free accounts became popular in both Islamic countries and worldwide. Many Forex brokers provide swap-free service for free
Tuesday 6 November 2012
what is futures and options
Futures is a contract concluded for delivery of a certain commodity in future at a fixed price. A futures contract buyer assumes responsibility to buy a commodity within a particular timeframe. A futures contract seller takes obligation to sell the commodity within the specified time limits. Both obligations are related to a standard quantity of a certain commodity, they will be implemented at a certain time in future at a price fixed during the trade execution. That is to say, this operation must be implemented till the date set in advance - it is specified in the futures contract specification. The most wide spread commodities are those often used in everyday life.
Here they are:
• Gas
• Oil
• Gasoline
• Gold
• Corn
• Currency
• Steel
• Cotton
• Wood
The futures market is more liquid than the commodity one where futures are traded. Futures for these commodities are traded by thousands of traders daily. All them are trying to earn profit speculating on futures - buying commodities cheaper and selling at a higher price. The futures trading takes place on the futures stock exchange, the most famous commodity and futures stock markets are:
• NYMEX (New York Merchantile Exchange)
• CBOT (Chicago Board of Trade)
• CME (Chicago Mercantile Exchange)
• IPE (International Petroleum Exchange)
• LIFFE (London International Financial Futures Exchange)
• LME (London Metals Exchange)
The process of futures trading is similar to the process of trading on Forex. On the futures markets there are similar principles of technical and fundamental analysis, the same indicators and charts and also the way of setting orders. Moreover, firstly, all this system was worked out special for the futures trading, as it emerged much earlier than Forex market. But worth noticing that futures trading has several significant distinctions:
- A currency pair on Forex can be opened forever, i.e. once having bought pounds for dollars you can hold this position for a very long time - for months or even years. But it is different with futures. A futures contract has an expiration date. If you do not close position by yourself it will be closed involuntary at a closing price of the day and hour of futures contract maturity. You have to follow the validity period of a futures contract and switch to a later contract on time.
- The futures code consists of several parts. The first symbols in the designation point to a commodity type (gold, oil, cotton etc.), the next symbols show the month and year of futures delivery. For example, NGQ0 means gas futures (NG - Natural Gas), Q - August, 0 - 2010 year.
Here are the designations of months when futures are traded:
• January - F
• February - G
• March - H
• April - J
• May - K
• June - M
• July - N
• August - Q
• September - U
• October - V
• November - X
• December - Z
- The nearest expiration date of a futures contract is the most liquid. That means that the price for this asset is maximally close to the real one and there is a small possibility of sharp price surge.
- As it is known, Forex is a non-exchange market, the quotes are provided by a big number of banks and dealers. So you can trade at prices substantially different from prices of other brokers/dealers. It is impossible with futures.
- The futures trading is run only in the stock markets and only a certain buyer or seller determines the rates. Each quote has its price and volume - it has a certain buyer and seller. The stock exchanges submit quotes on their websites for the previous trading session (trading day) accurately to each tick.
- The size of futures contracts is strictly standardized by the stock exchange which sets the quantity and quality of a commodity specified in it. For example, 1 futures contract for pig bulks (PB) stipulates a delivery of 40000 pounds of certain sized pig bulks; Gold future (GC) stipulates a 100 ounce delivery of gold not less than 995 countermark; a crude oil futures contract stipulates a 1000 barrel delivery of crude oil meeting a specific quality requirement. Price quotes of futures contracts are globally universal.
Trading Psychology - Control your emotions
Trading is less a work, than a psychology, on which your success or failure on Forex market depends on. If you decided to switch to systematical trading, it does not unload emotional pressure at taking a trading decision entirely.
Frequently, Forex traders incline to the opinion that only complete absence of emotions can help while trading. Though, fear, suspense, greed, hope, belief, regret and happiness accompany the trading process inevitably. Suppressing emotions at the moment of feelings overwhelming you means disregarding the sixth sense, intuition, and finally, insight.
It is known that emotions are also transmitting a flow of information to us. We are guided by this information, act under impressions from it. But this is given to us in order to control our emotions and to change one sentiment for another.
There are a number of ways to control emotions:
Firstly, it is possible to change your emotions by switching to another object of your concentration. As a rule, this method is very effective. The thing which draws our careful attention becomes real for us. You can consider suffering losses, or vice versa render an opportunity of gaining profit.
Secondly, having changed your convictions and believes you can alter your emotions. Every belief that we attain during our life time is a sort of a filter for us, influencing all the information perceived. All views accumulated during our life affect the interpretations which we are admitting into our consciousness.
And finally, the third way to change our emotions is by modifying physiology. A change of breathing, mimics, body position, the tone and tempo of our voice, all this has a direct influence on the emotive part of not only a Forex trader, but of any person.
Attention concentration
A concentration of attention is one of the most significant constituents of our emotional condition. Because the thing you are focused on in the process of Forex trading becomes not only an object of happening reality, but also a perception of factual reality. All actions influence your interpretation of events and consequently, affect your emotions. All this manipulates your behaviour, and decisions get emotional connotation. In this case it is needed to define priorities: what are you waiting for? Are you entertaining a possibility of losses? Or are you expecting gains only?
Those who see only losses are likely to hesitate for too long entering the market or can even skip a trade. But once having decided to enter the market, they are gaining profit quickly.
Trading is an attempt to balance the opposites. A trader should focus on profit and loss and try to balance them. A trader should concentrate on probability of his methods, and on information provided by the market, as it is the only accurate and reliable one.
Physiology
It is proved that our body manages our emotions, and emotions affect the thoughts. The easiest and the most correct way to change emotional condition is to change your physiology - tempo and depth of your breath, voice or even your pose.
Pay attention to your position, the way you sit, breathe, whether the muscles of your face, shoulders and of all body are tense. If you feel discomfort, you should only sit cosily.
Absolutely simple physiological manipulation can serve an effective instrument to control your feelings.
Control your emotions, and this will definitely make a more successful trader out of you!
Pipsing and scalping
What do these two terms mean? This type of trading allows gaining profit from intraday currency fluctuations on the market. Such deals are not held opened but for a couple of minutes. A single pipsing or scalping deal would not provide you with much profit, that is why the main principle of these two trading styles is having as many positions closed as possible.
The number of deals carried out by pipsers and scalpers runs 200 per day. It is however imprudent to expect that all the deals will prove to be profitable. The result to strive for is a positive balance by the end of a trading day. To accomplish this aim one needs to set a stop-loss level close to an opening price rate. This will help to minimize a loss in case the price takes the opposite direction.
It is a well-known fact that Forex is the most liquid market in the world. Prices on Forex mix, falling and rising again, following the cycle. If a price passes approximately 60 points within a day, the gap between its high and low is rather substantial. Trading based on hourly price fluctuations (highs and lows) ensures even more profit. This is why pipsing and scalping are so popular with traders. The novices on Forex may think that through such trading incredible profit is possible to make, the sum fancied may even go beyond any real limits, taking into account an opportunity to reinvest. Such conviction is hardly truth, despite the Internet abounding in the stories of lucky traders who managed to boost their deposits manifold. In fact this strategy will not guarantee you any success. Let us investigate the reason for this.
First, a stop-loss level approaching a price rate increases a possibility to suffer losses at the slightest fluctuation if the strength of bulls and bears has been misestimated, even though further trend has been foreseen. It is far too easier to make a mistake in defining a direction for a short period of time (1-2 hours), than to define a price direction for the whole day.
The simplest way to escape the execution of the order with a risk of loss is not to have such an order, but then, there appears a risk of losing many sources after the strong movement is against you. This happens when the price moves far and is not probable to return to its preliminary positions in the nearest future. If a trader keeps the greater part of his deposit as a margin and does not set any stop-loss levels, he/she may well get a margin call and later to the loss of all the funds on the account.
Second, most traders grow nervous and anxious when dealing with real money. As a rule, such type of trading is tested on a demo account first, since there is no real money involved, consequently there is no risk to waste it. Thus, the emotional state of a trader handling a real account worsens with each pip in case the price moves in the wrong direction.
Pipsing and scalping imply that a trader is to be on the market constantly, which is a stress of course, leading to hasty and ill-considered actions.
The number of deals carried out by pipsers and scalpers runs 200 per day. It is however imprudent to expect that all the deals will prove to be profitable. The result to strive for is a positive balance by the end of a trading day. To accomplish this aim one needs to set a stop-loss level close to an opening price rate. This will help to minimize a loss in case the price takes the opposite direction.
It is a well-known fact that Forex is the most liquid market in the world. Prices on Forex mix, falling and rising again, following the cycle. If a price passes approximately 60 points within a day, the gap between its high and low is rather substantial. Trading based on hourly price fluctuations (highs and lows) ensures even more profit. This is why pipsing and scalping are so popular with traders. The novices on Forex may think that through such trading incredible profit is possible to make, the sum fancied may even go beyond any real limits, taking into account an opportunity to reinvest. Such conviction is hardly truth, despite the Internet abounding in the stories of lucky traders who managed to boost their deposits manifold. In fact this strategy will not guarantee you any success. Let us investigate the reason for this.
First, a stop-loss level approaching a price rate increases a possibility to suffer losses at the slightest fluctuation if the strength of bulls and bears has been misestimated, even though further trend has been foreseen. It is far too easier to make a mistake in defining a direction for a short period of time (1-2 hours), than to define a price direction for the whole day.
The simplest way to escape the execution of the order with a risk of loss is not to have such an order, but then, there appears a risk of losing many sources after the strong movement is against you. This happens when the price moves far and is not probable to return to its preliminary positions in the nearest future. If a trader keeps the greater part of his deposit as a margin and does not set any stop-loss levels, he/she may well get a margin call and later to the loss of all the funds on the account.
Second, most traders grow nervous and anxious when dealing with real money. As a rule, such type of trading is tested on a demo account first, since there is no real money involved, consequently there is no risk to waste it. Thus, the emotional state of a trader handling a real account worsens with each pip in case the price moves in the wrong direction.
Pipsing and scalping imply that a trader is to be on the market constantly, which is a stress of course, leading to hasty and ill-considered actions.
Forex Cross Currency Pairs
The analysis of the US dollar movement is of crucial importance in trading major currency pairs. The analysis of the second currency quoted in a pair (EUR - the euro, JPY - the Japanese yen, CHF - the Swiss franc, GBP - the British pound) is not that essential. Trading major currency pairs is quite a profitable strategy. Still, dealing with such pairs is worth trying, once you have gained some experience on Forex.
Cross currency pairs. The value of a currency in such pair is denominated in other currency units - not in USD. The rates of these pairs are called cross rates.
The most-traded pairs are those with euro, for instance, EUR/CHF, EUR/GBP, EUR/JPY. These pairs are distinctive due to their high liquidity. A currency pair can sometimes be more liquid than USD/CHF because of institutional players, willing to work with the Swiss franc.
The yen is an integral part of another cluster of cross currency pairs: CAD/JPY - the Canadian dollar and yen, NZD/JPY - the New Zealand dollar and yen, as well as GBP/JPY - the British pound and yen. This cross currency cluster is quite popular with investors and traders, as they can engage in carry trade with its pairs. Carry Trade is selling a certain currency at a relatively low interest rate (for example, the yen) and then buying a currency at a higher one. This scheme enables a trader to gain profit from the difference between two rates.
The highest interest rates are those of the following developed countries: Canada, New Zealand and Great Britain. The currencies of these countries are thus the most widely used in carry trade against the Japanese yen.
A trader dealing with major currency pairs can face a situation, when the US dollar is just as strong as the second currency quoted in pair. The situation is tricky as USD is rather unpredictable.
If both the USA and Eurozone show persistent economic growth, it is unclear what decision to make - either to open or close a trade. Trading in EUR/JPY is optimal when the yen is under pressure of geopolitical factor, for example.
The most popular cross currency pairs are as follows:
EUR/CHF - Eurozone is Switzerland`s major trade partner. The Swiss franc has rather low interest rate, which makes this currency preferred for carry trade operations. The pair has been showing a positive trend since 2006.
EUR/JPY - A much-used cross currency pair owing to its interrelation with USD/JPY and EUR/USD. Traders often speculate on its movement, relying upon interest rates and differences between the growth rates of Japan and Eurozone.
NZD/JPY - This pair is in great demand among cross currency pairs at carry trade dealing, as it has the widest difference between the interest rates. The pair is good for long positions, particularly if general fundamental and technical indicators are favourable for its growth.
EUR/GBP - Eurozone is the second important trade partner for Great Britain. So, if a trader takes into account fundamental factors related to England and the British pound, he is sure to work with this particular pair since GBP/USD is most affected by USD movement in the market.
CAD/JPY - One can use the ability to foresee the upcoming oil prices trend trading with this cross currency pair. Canada is the second on the list of largest oil reserves in the world. This country is a net oil exporter, so that it gains profit from rising oil prices, whereas the major oil importer, Japan, suffers losses. Thus, opening long positions with this pair is the most profitable ahead of oil price spike.
Working with cross currency pairs, a trader can open carry trade deals. Difference between two countries is a good advantage in trade. Each cross currency pair has its characteristics, interest rates differences; it is dependent on certain political and economic events determining its trend.
Money Management Techniques
When trading on Forex, it is necessary to know how to properly place your capital; how to calculate the amount of funds needed to make a trade in order to obtain sufficient earnings; and if it comes to loss, how not to loose your entire deposit.
To achieve these goals, there are special equity management methods (money management techniques):
No equity management methods. Most traders, when opening a position, do not calculate the amount of funds that are being used, estimate potential earnings or potential loss. This is considered to be a technique too, but if the capital is not very large to begin with, several unsuccessful trades will make it completely disappear.
Multiple contracts. Opening several positions on the foreign exchange market on different instruments, for instance, EURUSD and EURGBP, a trader can earn profit if the price moves in the right direction. Earnings can be considerable, losses too though.
Fixed amount. Depending on the amount of funds available, a trader decides how much can be put at risk when opening one or another position. The trader then makes deals not exceeding this amount.
Fixed equity interest rate. This technique is similar to the previous one but there is one small difference: the trader determines the equity interest rate, but not the equity amount.
Establishing correlation between profits and losses. It is necessary to track statistics on all operations (the amount of losses, profits and the correspondence between them). When you see the correlation between them, you can apply what you have learned to your trading.
Equity curve trading. Most people are acquainted with moving averages, which can act like signals for entering the market or leaving it. According to this method, moving averages (long- and short-term) are used to forecast trade results. If the short-term moving average of the equity curve is above the long one, a position can be opened and it will be profitable. If, however, the short-term moving average is below the long one, it is better to wait for a while.
Choosing a particular money management technique of trading on Forex can help you rationally use your money on the market and earn profit. Money management techniques are used for opening positions.
To achieve these goals, there are special equity management methods (money management techniques):
No equity management methods. Most traders, when opening a position, do not calculate the amount of funds that are being used, estimate potential earnings or potential loss. This is considered to be a technique too, but if the capital is not very large to begin with, several unsuccessful trades will make it completely disappear.
Multiple contracts. Opening several positions on the foreign exchange market on different instruments, for instance, EURUSD and EURGBP, a trader can earn profit if the price moves in the right direction. Earnings can be considerable, losses too though.
Fixed amount. Depending on the amount of funds available, a trader decides how much can be put at risk when opening one or another position. The trader then makes deals not exceeding this amount.
Fixed equity interest rate. This technique is similar to the previous one but there is one small difference: the trader determines the equity interest rate, but not the equity amount.
Establishing correlation between profits and losses. It is necessary to track statistics on all operations (the amount of losses, profits and the correspondence between them). When you see the correlation between them, you can apply what you have learned to your trading.
Equity curve trading. Most people are acquainted with moving averages, which can act like signals for entering the market or leaving it. According to this method, moving averages (long- and short-term) are used to forecast trade results. If the short-term moving average of the equity curve is above the long one, a position can be opened and it will be profitable. If, however, the short-term moving average is below the long one, it is better to wait for a while.
Choosing a particular money management technique of trading on Forex can help you rationally use your money on the market and earn profit. Money management techniques are used for opening positions.
Strategy 20 pips a day - Make Atleast 400 pips per week
Forex scalping strategy “20 pips a day” enables a trader to gain 20 pips daily, i.e. at least 400 pips a weak.
According to this strategy the given currency pair must move actively during the day and also be as volatile as possible. The GBP/USD and USD/CAD pairs are considered as the best. Trading should begin no earlier than 12.30 GMT due to the volatile movements of American session, provided that this day no breaking news on economy is expected. But in case there is, it is necessary to enter the market after the news release.
A trader is recommended to choose a 30 minute interval setting a standard average Momentum 5 indicator in the trading terminal and 20 SMA moving average.
According to this strategy the given currency pair must move actively during the day and also be as volatile as possible. The GBP/USD and USD/CAD pairs are considered as the best. Trading should begin no earlier than 12.30 GMT due to the volatile movements of American session, provided that this day no breaking news on economy is expected. But in case there is, it is necessary to enter the market after the news release.
A trader is recommended to choose a 30 minute interval setting a standard average Momentum 5 indicator in the trading terminal and 20 SMA moving average.
A close candle located above the 20 SMA and Momentum indicator fixed above the average level indicate the point of the market entry for further purchase. When the price drops below the moving average and Momentum Indicator is located lower than the average level, it is necessary to open a sell deal. When a deal is open and the price is ready to cross the 20 SMA line, the position should be closed.
Stop loss and Take profit are set on the level of 20 pips. As the interval is quite small, it is possible to use Trailing stop (from 1 pip). As another option, the order can be placed to the zero are when the price has passed 10 pips.
The creators of the strategy believe that the strategy 20 pips a day can be profitable only if each recommendation listed above is observed.
Stop loss and Take profit are set on the level of 20 pips. As the interval is quite small, it is possible to use Trailing stop (from 1 pip). As another option, the order can be placed to the zero are when the price has passed 10 pips.
The creators of the strategy believe that the strategy 20 pips a day can be profitable only if each recommendation listed above is observed.
Monday 5 November 2012
Main Secret of Short-term Trading
The secret is the less you trade, the less you earn.
Sad but true. Think of any investment that you have ever made. Were you able to finish a job in one day? And if you were so lucky, how many times did you do it again? Undoubtedly, very few. That’s because the universal rule of speculation is the same as for growth.
We need time to increase profits.
Successful Forex traders know that a one-minute market can move forward a little, in 5 minutes it will move a bit further, and in 60 minutes still more, and who knows how far it will go in one day or in one week. Losing traders feel like trading only within short periods of time, which automatically narrows their potential profit.
By definition they intentionally limit their profits and go along with unlimited losses. No wonder that so many come up with poor results in short-term trading. They have locked themselves into a hopeless situation, thinking that it is possible to make money during the day just by catching market ups and downs. And this theory seems to be rational, because when you trade within one day and don’t ever leave positions open for a night, you simply don’t rely on news events and major changes, and therefore narrow your risks. And this is incorrect for two reasons.
First of all, your risk is under your control. The only control you have in that business is the control over stop loss points – the point where positions close. Yes, there is a probability that next morning the market will open with a gap exceeding your stop (slip over your stop) even though it is a very rare case, but even then you can limit your losses, having stop loss points and willing to close loss-making trades. Losers stick to losses but not winners.
As soon as you set positions with stop-loss points, you can lose a fixed amount of money. Without any reference to the time your position opens, since your stop-loss point limits your risk. Your risk is the same whether you buy at the all time high point of market or at the all time low point.
Refusing to set positions overnight limits the amount of time that brings investment growth. Sometimes, although the market may open against us, we are still in the right direction, as the market is to open in favor of us in most cases.
And what is more important, when you finish trading at the end of the day, or worse at some made-up moment, let’s say, 5 – or 10-minute intervals, you radically narrow your profit potential. Remember, a big difference between winners and losers was mentioned, and that losers stuck to their losses? Well another distinction is that winners hold their winning positions, while losers go off the market way too soon. As for losers, they don’t wait for winning positions: they are so happy to make any profit that they leave the market too soon (mostly during the day).
You’ll never make big money, until you learn how to stick to winning positions. And the longer you stick to them, the bigger your potential profit can be. When farmers sow fields, they don’t dig the plants up every few minutes to see how they are growing. They let those plants grow and sprout. Traders can learn from this natural process. Trader success is not any different from successful farming. To cultivate successful trading, traders need time as well.
Subscribe to:
Posts (Atom)
Posts
