Guide to Trading

1. Set a Stop Loss: Before entering any trade, decide beforehand the amount you are willing to lose and stick to it. Set a stop loss on the trade before you enter. Do not fluctuate your stop loss if you are in a losing trade. During times of extreme volatility it can be difficult or impossible to execute orders. Stop orders become market orders when executed, so the order may not be filled at the desired price. As a result, the initial risk can be estimated, but not guaranteed.

2. Let your profits run: Do not be emotional about a trade – you will lose some and win some. Know the reason why you entered a trade and stick to those reasons. The less emotional you are the more successful you will be. Stick to your game plan – move your stop loss as the market moves in your favor and let your profits run. During times of extreme volatility it can be difficult or impossible to execute orders.

3. Don't be influenced: You have your own game plan stick to it. If you are influenced by others you will constantly be changing your mind. Learn to insulate external sources once you have made up your mind. You will always find someone who will give you a logical reason to do the opposite.

4. Keep your position sizes within your limitations: Successful traders know that in order to profit you trade for the long term. Trading is a game of probabilities, and over the long run as long as you stick and implement sound strategies and stay consistent – success is much more likely to come. To be a successful trader you should never take a position that puts substantial capital in jeopardy. In actuality you will rarely find successful traders who risk more than 10% of their account in any trade. You might want to start small and increase your trade sizes as your confidence grows.

5. Know your risk vs. reward ratio: The minimum ratio you should be using is 2:1, so if you are successful on 50% of your trades you are doing well. For instance, if you are long GBP/USD and you want to earn 30 pips you should not risk more than 15 pips. You should never risk 30 pips in order to make 10 pips. If you do, you’ll make a lot more successful deals then unsuccessful ones, but the poor ones will ruin any of your chances for profit. Your risk vs. reward analysis is extremely important to trading successfully.

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Fundamental Analysis

Fundamental analysis involves examining the intrinsic value of a nation’s currency based on economic news releases that reflect the strength, or weakness, of a country’s economy. Fundamental traders follow these news announcements, known as “fundamental indicators,” because they paint a picture of a currency's strength in relation to other countries.

Fundamental indicators are reports that include statistical data on things such as employment, gross domestic product (GDP), international trade, retail sales, housing, manufacturing, and interest rates. The stability, growth, or decline in any of these sectors may have an effect – direct or indirect – on the value of a country’s currency.

Factors That Move The Forex Market
Central banks play a key role in the Forex market because they have the responsibility of changing the country’s “base” interest rate. A central bank has to find a fine balance when setting interest rates as it wants to maintain growth in the economy, but at the same time it has to be careful to curtail inflation. The bank’s decisions on whether to raise, cut, or hold the interest rate fuels speculation in the Forex market, where the value of a currency, or group of currencies, changes in real time.

In addition to information about a country’s economy, the value of a currency is connected to national and international political events, elections, and changes in government trade policies. The prices of sensitive commodities like oil and gasoline are an important fundamental indicator as high prices can hurt consumer spending and confidence, and curtail the activities of certain businesses and government services.

Natural disasters, terrorist attacks, and militarily actions in a sensitive region cause instability in the world and have a significant impact on the Forex market as they develop. These types of evens can be hard to predict in advance.

The ability to identify trends in macroeconomic indicators and reading central bank’s current and future actions is a valuable tool that comes from following financial news, watching the markets, and trading Forex.

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Top 10 Trading Tips for Beginner Traders.

1.Tread Softly into Unknown Territory!

Don’t make the mistake of most beginners. For example, they hear some rumors and invest all they have in the hopes of profiting quickly and effortlessly. As a beginning trader start small. Humbly learn all you can about a few instruments before you dive in.

2.Hold on to your Capital!

Quick profits are out there for the taking, but real success at trading comes with time and experience.  Remember: staying cool in this line of work is achieved by discipline and knowledge, by entering and exiting the market confidently.

3.Respect Your Stop Loss!

Do you know what the number one reason is that causes traders to quit trading? They incur heavy losses because they don’t incorporate Stop Loss into their strategies. It’s that simple. If you are not familiar with Stop Loss, make sure you understand it thoroughly before it’s too late.

4.Create a System of Trading

Just like each person has their own fingerprint, so each trader has their own style. You must nurture and develop your own style by reading widely and studying carefully. Study success and you may achieve it!

5.Watch your Profits Grow!

Among  the most important things to remember as a beginning trader is to not to close your winning trades too early.  Avoid making decisions based on fear and impatience.

6.Know when to Adjust!

When your trades prove profitable, watch them closely. If need be, more your stop loss forward to your entry point to guarantee profit. Then, watch the trend and adjust your stop loss. And most importantly, watch the trend to prevent your investment from slipping into a loss.


7.Plan Forward

Trading takes finesse and planning. If the price of a stock or currency suddenly rises or falls, don’t take that as an indication that it’s a good time to enter. Knowing your entry point well in advance takes study and planning.  You must know your Take Profit and Stop Loss rates before you trade, so then you only have to wait for the right opportunity to come up.

8.Trend Basics

One more thing that new traders should be aware about is that as a new trend starts to grow, it gains momentum. So, imagine that what you see as a great opportunity, so do thousands of others thereby strengthening the trend. This could push your trade into the right direction, increasing your profits sooner than you might forecast.

9.Taking a Loss? Get out!

Remember the old saying, “Don’t put all your eggs in one basket”? So it goes with trading. If one of your trades is taking a loss, pull out! You can always reassess it from the sidelines.

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Essential Forex Trading Tips to Help you Succeed Right From the Start

It is true that there are some people who make a lot of money in forex trading but there are also a lot of people who lose large amounts. To make at least a reasonable profit, you must know these five forex trading tricks.

Forex trading is all about risk management. Even though every venture is risky, forex trading is essentially so. Therefore you need to assess the amount of money that you want to put in the market so that you do not get devastated if you lose in the market. Even though forex trading is a great place to earn large sums of money in the shortest possible time, it is also a place where you can lose out on a lot of money equally quickly too. It is therefore important to be able to assess and manage risk appropriately.

Do not set the take profit order higher than the stop loss order. Do not fall prey to the greed factor hoping to maximize the profits from a sale everytime. Get the money coming in faster by opting for a lower take profit option.

It is a good strategy to stay away from high leverages if you can. This will help you in reducing the amount of risk and help you take advantage of the forex markets. This does not mean that leveages are not good but you need to be careful.

Many trading platforms allow the opportunity of social trading. Social trading involves the practice of seeing what the top rated traders are doing so that you can copy them and benefit from their knowledge. This is also a great place to actually check out whether the thought process that you had was right or not. It is definitely a great thing to adopt if you are too busy to analyze the charts and graphs. No doubt that social trading is the smartest way to enter the forex trading world.

Confidence is a great asset for all forex traders. It is confidence that keeps you afloat when you are anxious about what the markets will be like after a major fall. While absolute success with each trade is not possible, it is possible to win with confidence, perseverance and analysis skills. There is no reason why you should not be able to succeed in forex trading when others can.

Source : forexarticlecollection

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GBP/USD Currency pair

n 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.

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3 Things You Should Include In Your Daily Routine As A Forex Trader

 3 Things You Should Include In Your Daily Routine As A Forex Trader

If you trade the forex markets every single day, you will soon find yourself getting into some kind of routine. I know I did when I used to trade the markets all day long. Nowadays I make time for other things as well, but I still incorporate the same kind of things into my daily routine.

There are three things in particular that I will always try to do at the start of the day, and they are as follows:

1. Check the overnight price action and monitor any open trades
The good thing about trading the 4 hour charts, and using one of my favourite trading methods, is that you don't need to be screen-watching all day long. You can just set your stop loss and your target exit point and let the trade unwind, leaving it to run overnight if necessary.

For that reason it is always important to check the overnight price action when you first switch on your computer in the morning, and monitor any open positions. The overnight price action can often influence your trading plan for the coming day, and you may want to adjust your stop loss and exit point if necessary.

2. Check the long-term trends

Before you start trading, it is always a good idea to take a look at the long-term trends for the various currency pairs that you like to trade. This should give you an idea of which way you should be looking to trade on the shorter time frames.

For example if you are trading the 4 hour chart, then it is always a good idea to look at the price action on the daily chart, identify the current trend and possibly look at some key support and resistance levels.

3. Check which economic data releases are scheduled for the coming day

It is always vitally important that you are aware of any economic data releases that are scheduled for the forthcoming trading day because these can potentially ruin any of your trades in an instant.

The markets don't care about technical patterns, or even support and resistance levels, when a key piece of economic data is released. They simply react to the news, and subsequently there can be some wild swings as a result. In general you don't usually want to have any positions open around the time of one of the more important data announcements.

You can check the economic calendar, which includes the time (and importance) of each data release at Forexpros.com
ForexMarket4you.com

Once you have done these three things, you are good to go. Just make sure that you take a few breaks during the day, and try to get some exercise because sitting at your desk staring at a computer screen all day long is not good for your health.

Source : TheForexArticles

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Sell Eur/Jpy

Sell Eur/Jpy @110.45
T.p 70 pips
S.l 70 Pips

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A Volatile Market: A Blessing or A Curse?

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Volatility is the main feature of the Forex market where trading takes place non- stop throughout the week except for the weekend. It is by far the biggest market on earth and is bigger than all the other markets combined. The daily turnover of the market stands at a figure exceeding four trillion dollars and this will give you an idea as to its trading volume.

This highly volatile market is the arena where millions of traders and investors risk their money in the hope of making a profit. If there was no volatility there would be no trading. In this sense it is truly a blessing that many traders capitalize on. Volatility is brought about by markets that trade erratically swinging between highs and lows. Where there is no market movement in currency prices you will see no volatility and thus no trading will take place in such an environment.

It is fact that the volatility in currency trading moves by pips and a closer look will tell you that this movement is indeed extremely small. This is why leverage is considered as necessary by currency traders, as well as signals. In a highly volatile market losses can be augmented by leverage and at times like this it is best to trade lesser amounts so that losses are also kept to a minimum.

Although a volatile market can be a blessing you should control your trading in such a market. This is easily by using tighter stops so that losses are cut off at the outset. The exact placing of the stop will depend upon the currency pair being traded. Volatile market conditions often tempt traders to invest more than normal in the hope of collecting profits. However, this can be dangerous as the risk faced in a volatile market is higher than at other times. A trader should stick to his planned trading at all times and during times of extreme volatility this is even more essential.

Keeping up with fundamental indicators and news in general will ensure that you know the cause for the high volatility in the Forex market. This knowledge will help you to make better trade decisions in the longer run as you face volatility in the market. When you trade carefully adjusting leverage so as to reduce any potential losses you can still win in a volatile market.

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Why It's Important to Accurately Time Your Trade

Timing is everything in forex. Time it right, you win. Get your timing wrong, your money goes up in smoke.

In a fast paced market with periods of intense volatility like the forex market, timing is essential. There is a saying that “the trend is your friend till it ends”. I will say that the “trend is your enemy if you get in too late”.

Traders are advised to “trade fundamentally, enter technically.” This implies that traders are expected to follow the direction of a high impact news item. But in doing so, traders must use their technical analysis to enter at the right time.

What happens if entries are not timed properly? These are the scenarios that could occur.

1)      Some high impact news hits the news wires and it favors a long trade. You go long, but you discover that the market has spiked by almost 80 pips about a second after news release. Your entry is still pending, waiting for the broker to fulfill it. Too late. Prices are too far gone and you are asked to “REQUOTE”. Not wanting to miss out, you re-enter the market not minding the prices, and your order is instantly fulfilled. Suddenly, the price starts to retrace wildly, and you are stopped out, just in time for the price to resume its move northwards. It’s almost like the market maker was watching you to do you in.



2)      The second scenario is a bit like the first, but instead of a requote, your order is filled at a price so far away from market price, it will take a miracle move in the trade direction to break even, let alone make a profit. Slippage sucks.

Let’s explain the two scenarios. In a high impact news trade, the news feeds are received by the institutional investors before anyone else via premium news services like Bloomberg and Reuters, who charge thousands of dollars a month for this. A team of veteran traders will be waiting to analyze the news and hit the trade buttons fast. The sheer volume of such trades sends the currency price candlesticks spiking. Sometimes the spikes happen even before the retail traders get the same news. As such, any trade entered by a retail trader at this point will most likely not be fulfilled; requotes follow. If a trader enters the trade at this time, he will meet the institutional guys offloading their positions to take profits, and he will get hit by the unavoidable retracement that follows.

The two scenarios are a case of wrong timing at work.

How Can You Accurately Time Your Trades to Avoid Losses?

For news trades, it is pretty obvious here that you should not try mixing it with the big dogs. You will get blown out by the two scenarios I painted again and again. Only enter news trades when the initial madness has died down. Soon, the market will respond in a slower and more purposeful direction to the news trade, as we see here from the Non-Farm Payroll report of June 3, 2011.

Secondly, use pivot points in addition to your other technical indicators to determine if you are still within touching distance of a profit. If a long trade is closer to a resistance than a support level, the chances of that trading making a profit is lower than if the entry was closer to the support level.

There are many tips, but hang on to these two for now.

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The Future of Long Term Investing

The future of long term investing is dependent on the long term investor changing their investments beliefs to suit the post economic crisis climate.

Introduction:

The current financial crisis has caused concern that investment objectives have a short horizon and there is more weight on these short term objectives rather than on growth and the creation of value in the long term. Corporations need to know what the long term investment outlook is to enable them to plan for the future. Investors in the long term play a part in having a economically stable environment. While the markets seem to have all the short term capital they need there is doubt about capital in the future.

The Future of Long Term Investing:

An investment is considered long term if it runs for more than ten years. This is more or less in line with a whole business cycle. This means that the asset classes which are perfect for investing in the long term are obviously riskier and are much more liquid than other assets. The class of asset which meets these criteria is venture capital, private equity and strategic stake holdings in private equity. It used to be that the traditional long term capital came from the pension funds and life insurances, however recent imposed constraints have meant that managed funds amounting to $67 trillion can only allocate 25% of the total as long term investments.

Long term investors have more to think about that the short term investor in terms of what their liability profile might be, what are their long term investment values, what is their appetite for risk, the diversification of the portfolio in terms of liquid and illiquid assets and of course how long does it take to make an investment decision.

However there are benefits to long term investing which the short term investor does not have. There are opportunities for higher returns in the long term for the investor or individual corporations. It is also a way of stabilizing the financial markets, kick starting economic growth and bring social benefits to many more people.

For the investor also there are other benefits such as no decision is needed as to whether to buy high or sell low. Costs can be drastically reduced particularly transaction costs and a long term investment does not disturb or cause volatility in the forex markets.

The economic crisis has highlighted the need for long term investors to change their strategy and look at ways in which they can diversify their portfolios efficiently without incurring increased risk. The crisis caused traditional correlations to decline and others to increase which in turn made portfolio management more difficult.

Investment beliefs have been challenged as has risk exposure regarding liquidity and new regulations which are constraining.

However there are signs that long term investors are returning to the long term markets and are seeking investments that have the return they desire but also the risk and volatility profile that suits their new investment beliefs.

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Six Tips for Long Term Investment

The long term investor needs to follow a strategy that is compatible with long term investment success.

A long term investor requires that the investment is safe, that his capital is secure and that there is a reasonable risk free return on the investment. Banks offer a reasonably risk free investment however the interest rate is very low. The Stock market has much higher returns but there is an aspect of risk which deters some investors. For all this the stock market can proffer the long term investor the opportunity to invest with manageable risk and a good return.

Six Tips for Long Term Investment:

A key long term strategy for a long term investor is to diversify their investments into various instruments such as stocks, bonds, and mutual funds. Most investment advisors recommend that not more than 10% of an investment portfolio should have more than one stock or other similar investment. Investments should be spread over geographical areas of the world such as Asia, America, Europe and also emerging markets. In addition several market or industrial sectors should be used so as to avoid the risk of a sector collapsing and a huge lose of capital.

Investors tend to be lone wolves and don’t take advice easily however even though you might not take the advice at least listen to it some of it might make sense. Try and invest in the companies whose products you like. Try to analyze the companies you are interested in and see if you like their business strategies. There are many resources on the internet that can help you understand investments. Also although an investments past performance is no guarantee that in the future it will perform well it can be prudent to choose investments that have been strong performers over the last couple of years.

Another tip is to keep an eye on your investments. Don’t invest and then forget about them. Even if you are investing for the long term you need to make sure that you have investments that are performing as you had expected against the market indices. Don’t be tempted to sell investments that are doing well to take your profit; you are in it for the long term so investments that are doing well should continue to grow. On the other hand investments that are not doing well should be sold and replaced. Remember that it is better to lose a little rather than wait in the hope that the investment will do better when in fact it continues to do badly and you lose more money.

Don’t be tempted to cash in your dividends as the return on an investment is a combination of reinvested dividends and stock appreciation. The yields might seem small but over a period of years they can make a big difference. Part of the analysis of your potential investments is looking at stocks that have a history of regular dividends.

One of the golden rules of investing is that when the market is down then that is the best time to buy stocks and when the stock index market is high its time to sell the stocks that are not performing so well and reinvest the proceeds in other instruments such as bonds or real estate.

Finally as you are investing for the long term it is important that you don’t reduce your funds through unnecessary fees and commissions. Keep your trading down to a minimum so as not to incur fees that reduce your funds. When the markets turn down don’t make the mistake of panic selling. The economy goes in cycles so a market that is down will soon move up again. Always bear in mind that a market that is low presents a buying opportunity.

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The best hours to trade Forex

The highly volatile and dynamic market of currency trading is built on the price changes of currency pairs that are being traded. There can be any number of price changes oscillating from high to low and back within any given minute. The Forex market is volatile and busy due to the number of traders buying and selling currencies. Demand and supply is the same and rules regarding these apply in the same way as in any other market. An investor who wants profitable trades can start at the time the market is at its busiest. This means that the investor will be able to find either buyers or sellers for his currency trading.

One salient point about the Forex market is that you are always able to find a buyer or a seller for your currency trading needs. This is an aspect of currency trading that is a distinct advantage to traders. For one thing, you can trade at any time during the day or night as the market is open at one of the sessions around the world. This access to the market is one factor for its popularity among retail traders. Trading starts off in New Zealand and is followed closely by Australia, Asia, Middle East, Europe and finally America. Each of these market sessions has their own characteristics. Out of these sessions more than 50% of the trading is done during the European session and the American session. Therefore, a trader who wants to trade more profitably should concentrate on these two sessions.

The different sessions around the world at time overlap each other in trading hours. These overlapping time periods offer the most dynamic and profitable trades for the investor. Out of the overlapping time periods the best are when London and New York sessions overlap. This gives the investor the most dynamic and busiest time in the entire Forex market offering the best potential for profits.

As a trader or an investor in the foreign exchange market it is best to study the overlapping time periods and trade within them. A close study will reveal that the New York session overlaps the London session during 8:00 am and 12 Noon EST. Most big market moves originate during the London session and the time that overlaps the New York session.

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Forex Trading - Should You Invest?

Forex trading was not available to the average person up until recently when technological advancements made trading currencies possible even with small amounts of capital. In the past, this was the monopoly of large financial houses, governments, central banks and multinational corporations that were in trading Forex to facilitate international trade. Now the market has changed allowing retail traders to take part even with a few hundred dollars and this has made this market the largest on earth with more than four trillion dollars in daily turnover.

The Forex market can be highly profitable if handled carefully with proper money management as well as risk management. Regular currency trading can be nerve racking and trading with a true picture of the potential of trading is the best. This can be achieved by studying the market (using the charts and the useful information they can provide) from as many angles as possible.

Another advantage with Forex trading that novices have is the ability to do a test run with a virtual currency account. Here, you can practice all that you have learned about Forex trading systems without having to risk any real money although all other aspects from trading signals to placing of orders can be real. After starting off with a demo account you can graduate onto a micro and then to a mini account which gives you the best opportunity to handling your money and optimizing investing even with a few hundred dollars. This is the training ground for many traders and by this time you will find out whether currency trading is actually your cup of tea.

After a mini account it is a matter of risk analysis, market analysis combined with the best investment opportunities to be found. The psychological aspect of trading is also important for traders as it determines how risk is handled by a trader and how much trading pressure he is able to handle. Patience is certainly a trait that will pay handsomely in the long run

A trader who is able to enjoy trading will definitely be more successful at it. The secret of being successful also depends on how much work goes into studying the market, trends and entry and exit points. Trading currencies has to be treated as a business where you are in it for the profits rather than a lottery or a get-rich-quick scheme.

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Handling a Liquidating Market

A liquidating market is defined as a market that is experiencing a pattern of broad selling in the face of declining prices. It can take place in all kinds of market and is not just limited to the financial markets. Nevertheless, the issue of liquidating market is important for an online trader as it will affect his trading strategy. Lately, it is even more critically important as the recent financial meltdown that happened in the sub-prime mortgage market in the U.S. has caused the liquidating market to dominate the scene longer than usual.

Thus, in the face of this kind of volatile market that you might be facing, you need to be on your toes and be aware of exactly what kind of markets that you are trading in and adjust your trading strategy accordingly. A market which is consolidating, Ranging or trending all requires different types of trading strategies to deal with them. Liquidating markets are especially difficult to deal with for day traders because the fluctuation of prices tends to move in ‘bursts’. One will see a sharp drop in prices when a large liquidating order comes into the market with limited follow through after that. Because a sharp drop in prices can trigger stops or break through an important technical level, these can and is likely to spark off another round of liquidation. When the above vicious cycle occurs, we often find false bottoms or tops.

Usually, the span of a liquidating market position is relatively short and stops will also get exhausted. The next phase of the market reaction after a liquidating run has flatten out is either to continue the trend as the next cycle or reverse the trend. On the other hand, the current market situation is far from ordinary. Since the beginning of 2008 and driven by a heighten level of risk aversion, the global financial market has been facing extreme volatility.

Just as when we thought the market is due for a correction and trend reversal, the liquidating market continues its vicious cycle. The unending waves of selling orders will put a strain for those traders who are used to trading in a typical market by looking for paltering bottoms or tops. The end result will cause everybody to be running for cover. Nevertheless, avoiding the temptation to go bottom fishing for profitable situations is not easy in a liquidating market. The illusion of the market bottoming out can really pull one into loss making spiral. This is where iron clad discipline in trading will pay off.

he herd like mentality that we all possess needs to be restrained. Financial experts have suggested the liquidating markets are driven by factors other than fundamental economic theories or technical analysis. Hence, relying on technical analysis for reliable forex signals can be extremely difficult for a liquidating market. Regardless, the best way to avoid getting sucked into a liquidating market is to have proper money management and discipline in controlling oneself from running after false bottoms or tops.

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Multiple Time Frame Analysis

Multiple time frame analysis is a form of technical analysis which requires the traders to look at the different price changes of the same currency pair. Typically the charts are in different time frames and will allow the trader to better understand how the currency options moves with changing market conditions. Through multiple time frame analysis, traders can effectively enter positions.

In most cases, only 3 time frames are used , weekly, daily and 4-hour charts but traders may also decide to utilize shorter time frames (4-hour, 1-hour and 15 minutes). Generally, the longer time framed charts are used to get an overview of how the market is behaving while the shorter time frames are utilized to fine tune the entry and exit points. It is important for the traders to capture the big movements in the market in order to make a huge sum of profit. In this case, the traders will need to know which direction they should take and what kinds of shorter term movement can they take advantage of. Multiple time frame analysis is more than just picking out the tops and bottoms; instead, it is about looking for buying opportunities in an uptrend and selling opportunities in a downtrend which enables the trader to profit more.

Traders in the spot market typically use daily charts to identify the general trend while hourly charts determine the exact entry points. In the AUD/USD currency pair which has been trending up since the early 2002, range traders will find it difficult to trade, and will probably experience losses if they stick to the same strategies they use in normal situations. Even when certain dips in the market, the pair remained strong for the last couple of years, hence presenting very little opportunities even for medium term range traders.

In this case, it is best to adopt a position which follows the trends and to look for buying opportunities when the prices are lowest. In this case, the trader can use a level of the Fibonacci retracement as the main support level then use the daily charts to get a general idea of the direction of the trade and then hourly charts to pinpoint entry points.
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Why Investors Fail [ Must Read ]

According to research more than 92% of traders close their accounts within 9 months and never come back trading again. This essentially means one thing – trading is not a get rich quick scheme. Yet, this should not be misinterpreted to mean that it is not a profession for newbies. Even the best traders lose money in their first months in the investment industry, and they made it big because they strived to overcome the challenges and went on to learn from their mistakes. Why then do so many investors fail? Here are a number of reasons:

1.    They trade for a quick buck. While traders can easily make money in the forex market, it can easily disappear. Many traders earn quick money but very few make it big because they do not fully understand how the market works. On the other hand, there are many others who end up broke because they failed to realize that forex trading is all about an properly timed trading strategy.

2.    They don’t have a plan. In any financial market, a trading plan (or strategy) is essential. Before an investor decides to trade real money, they must set specific amounts on capital they want to invest, and how much they are prepared to lose. Unfortunately, so many new traders do not realize the importance of this or they simply couldn’t be bothered.

3.    They don’t use stop losses. Not all trades will go well, and in this case, a trader must know when they can call it quits. By setting up stop losses, traders can prevent additional risk to their account and can limit their losses to a few hundred dollars.

4.    They do not test for entry and exit points. Trading works a lot like firing a missile – you have to test it so you can minimize the casualty. Random buying and selling just wont work.

5.    They get emotional. Most traders who profit in an uptrend will tend to keep their bets on that same position hoping to get a few more dollars. Unfortunately, at a time when information can be transmitted so fast, prices can change in just a few minutes and will cause a $1,000 portfolio to drop in value without notice.

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The Benefits of Liquid Investment Trading

The main benefit of investment trading in a liquid market is the flexibility of buying and selling assets.

Investment liquidity is the ability of an asset to be bought or sold without causing price movements of any significance. The most liquid asset is cash as it can be used immediately to carry out economic activities but for trading purposes the really liquid markets are forex, stocks and commodities in that order.

The Benefits of Liquid Investment Trading:

An asset is classed as liquid when it can be sold quickly without any loss in value, at any time during market hours. The crucial characteristic of a market classed as deeply liquid is that there are eager sellers and buyers available at all times and that the price of the next trade is equivalent to the preceding one.

A major benefit of trading in a liquid market is that the most liquid market, foreign exchange, is open 24 hours a day except for weekends. You can decide to trade in your own time frame, after work, before you go to work or even at work.

Liquid markets are so much more efficient in that when there is many sellers and many buyers, the price at which the trade is done is very close if not the same as the last market price. Again the most efficient market is the foreign exchange market as it has a trading volume that is over 50 times larger than the New York Stock Exchange.

Another benefit from trading in liquid markets is volatility. When a price fluctuates as it does in a liquid market more trading opportunities are available. If you buy an asset and its price doesn’t move there is little or no opportunity to make a profit. Volatility is the magnitude of the level of a price’s fluctuation and its frequency of fluctuation. Volatility is measured as the maximum return that can be generated with perfect prescience. For example the average volatility for stock is 70 but the average volatility for a currency is 500. Day traders in particular can exploit this greater volatility in the currency markets.

A further benefit of investing in a liquid market like the currency markets is that there are no commission fees and no transaction fees. The fees are all in the spread and there is hardly any ‘slippage’ cost. Slippage is a cost that a trader incurs when entering the market at a worse price than the price level they wanted. For low volume trades slippage is not such a problem but for high volume trades it could be.

Leverage can be a big benefit for investors who are investing in liquid markets, particularly the currency markets. Using leverage an investor can trade the equivalent of $10,000 and depending on the broker the investor is trading through, the investor only needs between $50 and $200. This makes it possible for an investor in a liquid market to profit from a small trading account.

The benefits of trading and investing in a liquid market are numerous and give the investor greater flexibility to buy or sell investment assets.

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Profiting from short term investments

Profiting from short term investments is a question of how involved the investor wants to be in the decision making process.

There are a number of advantages to investing short term with the most important being that profits or losses can be observed almost immediately. Also short term investments don’t lock up your money for very long and if you see that an investment is not doing well you don’t need to wait too long before you can reinvest elsewhere.

Profiting from Short Term Investments:

Short-term investments typically are about investments with more prospects for big profits, but also potential for additional risk. The assets that can be invested in short term investments are options, forex, futures, commodities and stocks. Sometimes realized profits for these investments reach double digit proportions per day! Alas, if you are not careful losses can be that high also. However, there are ‘safe’ or less risky short term investments such as money market funds or treasury bonds which do not offer a big return and are for the conservative investor.

To profit from a short term investment you must decide which time frame you are comfortable with. For example investments in the currency markets might be for a length of several hours or even one day especially if you intend to day trade.

Other types of short term investments such as options, futures, or stocks may last a few days or a few weeks. Investments such as bonds or treasury notes may have a short term horizon of several months. In general the shorter the time period the more involved in the investment you need to be to profit more successfully from it.

You should decide the risk level you feel comfortable with before you decide to invest your money. If you are investing money that you can’t afford to lose don’t invest in the high risk investments such as currencies, stocks or commodities, options and futures. You might have a chance to make a killing but you are just as likely to make a big loss. You should be looking at investing in low risk assets such as CD’s, treasury notes and short term bonds.

If your investment money is spare cash and not earmarked for anything in the future then you are free to choose a higher risk investment and an asset class that can give you a higher return on your investment.

Short term investments require a lot of on-going decisions and also need more knowledge of markets as well as more than passing knowledge of fundamental and technical analysis, especially assets such as currencies, stocks and commodities. Either you learn and acquire the right knowledge or you get advice from a qualified investment advisor.

However, short term low risk investments such as money market instruments or bonds which are held until they mature don’t require a lot of study and skill as your profits can be estimated in advance and you can choose the return on investment you desire from the options you have.

To profit from short term investments you need to decide whether high risk, high return, short term investments suit you or whether you are more comfortable with short term low risk, low return safe investments.

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Day Trading Strategies for Beginners

Introduction:

A day trader is a trader that buys and sells currencies many times a day and does not leave an overnight position. This means that a day trader usually trades within one time zone and does not cross into other time zones except maybe a trader in Europe where the afternoon session coincides with the American morning session. The concept of a day trader is to generate income on a daily basis using technical and fundamental analysis to facilitate this money making process.

Day trading Strategies for Beginners:

When starting out as a day trader a beginner needs to develop a simple trading strategy that enables the trader to have the opportunity to generate profits with a viable risk/reward ratio. To develop a strategy which meets these requirements the trader needs to learn about self-discipline, price charts, volume and price movements, technical analysis and fundamental analysis. In addition the day trader needs to learn about different candlestick chart patterns, volume movements and trend lines, all of which provide tools which enable the trader successfully day trade.

So the first pillar of a day trading strategy for a new forex trader is knowledge. The second pillar of a day trading strategy is an understanding of how the markets function. Elements such as when the highest volumes are traded, what type of economic data has the strongest impact on the market, what time frames are good for certain currency pairs, and the best time of day to trade?

The third pillar of a day trading strategy is to do with deciding how much loss you are comfortable with taking on individual trades. To do this you must establish the maximum loss you are willing to bear. This is something that must be done in advance and not on the fly as you trade. Before you actually make the trade you should decide on the risk/reward ratio for the trade and your loss limit. As soon as you reach your loss limit you should exit the trade. Never fall into the trap of not keeping to your strategy and stay in the trade hoping the market will turn. It invariably does not.

The next important pillar of a day trader’s strategy is the maintenance of documentation which record the day’s trades and the results of those trades. In this way you can gauge how effective your day trading strategy is and amend it accordingly. Documenting your daily trading will also enable you to repeat your successes.

The final pillar of your day trading strategy is hedging. Hedging is the act of selling and buying the same currency pair or the act of buying one currency pair and buying another currency pair which is historically inversely correlated to the original currency pair. Hedging in this way does not produce high profits but it does produce profits and reduces the likelihood of losses.

The above simple day trading strategy will enable day trading beginners to start a successful day trading career.

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A Profitable Strategy for Trading the News

 Trading the news can only be done profitably if the news release in question triggers enough volatility in the currency pair affected by the news release.

Introduction:

Currency traders not only have to educate themselves on technical analysis but also they need to learn the fundamentals of fundamental analysis. This means that they should study over a period of several months the economic calendar and note the important economic events that occur on a monthly basis. They then need to observe the strength of the impact these events have on the currency trading pairs  and whether the impact has a positive or negative affect on their traded currency.

A Profitable Trading Strategy for Trading the News:

One of the news items that can have a major affect on the EUR/USD currency pair is the publication of the Retail Sales Report. In order to trade the report there needs to be enough deviation between the numbers expected and the numbers published. Historically the deviation that has the most effect on the EUR/USD currency pair is 20%.

If the retail sales number published is 20% worse than the consensus number then the dollar is impacted negatively so the strategy is to buy the Euro.

If the retail sales number published is 20% better than the consensus number then the dollar is impacted positively, so the strategy is to sell the Euro.

The strategy set up is as follows:

Check the economic calendar to see what the consensus number is for the retail sales. Decide on the percentage deviation that will activate a trade. Say the consensus number is 0.3% then a 0.1% change either up or down is sufficient to generate the volatility you require to trade.

Just before the retail sales number is published place a buy stop 15 pips above the current price of the EUR/USD currency pair. At the same time place a sell stop 15 pips below the current price of the EUR/USD currency pair. The 15 pip margin should take care of any slippage due to choppiness or extreme market noise. Also make sure you place your stop loss correctly. The best strategy is to place the stop loss on the buy side at the price of the sell order and the stop loss for the sell order should be the price of the buy order.

When the news is released you need to watch what the market does. If the market moves in the direction of your buy order then cancel your sell order and if it moves in the direction of your sell order than cancel your buy order. Exit the trade when the initial volatility has calmed down as it’s possible that the market could slip back to where it was before that news release.

This strategy is an excellent strategy for all news releases that have a strong effect on a currency pair. The only difference between the various news items is that you need to historically study the effect that the news items have on different currency pairs and what size of percentage deviation from the consensus number triggers a volatile market response either negatively or positively. The set up will be the same for any currency pair effected by the news item.

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3 Power Strategies in Forex Trading

3 Rules to Make serious earnings

If you want to catch the serious profit in forex dealing you need to trend watch forex trends which are worse term. here we are going to give you a 3 step simple method which if you use it correctly, will help you catch every superior forex trend and lead you to long-term term currency dealing success.

Most beginner traders don't bother trying to trend following forex lengthier term - instead they try forex scalping or day trading. These methods focus the trader on small moves and they hope to catch small profit however as most short term moves are random, this leads to equity eliminate.

The other alternatives are swing trading and long term forex trend following and this article is all about the latter method. If you look at any forex chart, you will see long-term term trends that last for months or years. These moves can and do yield serious profit - present we will outline a simple method to get them.

Breakouts

By far the best way of catching the serious moves is to use a forex dealing strategy based around breakouts. A breakout is simply a move on a forex chart where a new high or low is made and resistance or support is broken.

It's a fact that most leading moves start from new highs or lows.

While it might appear that you are not buying or selling at the greatest level, you are in terms of the odds of the trend continuing. Most forex traders make the mistake of waiting for the breakout to come back and get in at a better price but these traders never get on board. The grounds for this is if a breakout occurs, then you have a new strong trend and a pullback is not very likely to occur.

Most traders don't buy or sell breakouts and that's exactly why it's such a powerful method.

The only point to keep in mind is a support or resistance which is ruined, should be valid and that means at least 3 points in at least 2 different times frames. The more tests and the greater the spacing between the tests the more valid the level is.

Confirmation

Of course not every breakout keeps and some reverse, these are false and can cause losses. You therefore need to confirm each move. All you need to do to achieve this is to put a few momentum indicators in your forex trading system to confirm your dealing signal.

These indicators give you an estimation of the strength and velocity of price and there are many to choose from. We don't have time to discuss them here (simply look up our other articles) but two of the greatest are - the stochastic and Relative Strength Index RSI

Stops and Targets

Stop points are easy with breakouts - Simply behind the breakout point.

If you have a serious trend then you need to be careful you can milk it, so don't move your stop to soon and keep it outside of normal volatility. If it is a huge move, trailing stops should be held a long-term way back and the 40 day moving average is a good level to use.

You have to keep in mind that when the trend does eventually turn you are going to give some profit back. You don't know when the trend is going to end, so don't predict.

It's ok to give a serious back, as that's the nature of trading forex. Keep in mind if you got 50% of all leading trend you would be very rich. When you are long-term term trend following you have accept giving a bit back and taking dips in open equity as the trend develops - this is noise and does not affect the long term trend.

The above is a simple way to trend watch forex and catch the high odds moves that yield the serious profit. If you are learning forex dealing and want a simple method that is robust and will help you get every major move, then you should base your dealing on the above method.

Source : Forex Article Collection

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