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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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.

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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.

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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.

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Forex Cross Currency Pairs

On Forex there are cross currency pairs, which do not include the US dollar, unlike major 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.

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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.

 Click here to zoom

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.
 

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Risk Management Methods

When trading, a Forex investor can multiply capital, and the risks to loose not only potential earnings, but the invested money as well. The deviation from an average expected yield determines the investor’s risk in the financial market.

This kind of deviation can bring high profit as well as great loss.

Financial risk management does not guarantee a successful trading, but assembles important parts of it. Every currency operation is a risk. That is why usage of general management methods decreases potential losses.

1. Stop order setting;
2. Capital share investment;
3. Trend trading;
4. Emotion control.

Risk management methods are used after positions are opened. The main risk management method is an order setting that restrains losses.

Stop loss (literally means to stop losses) – is a point where trader goes off the market to avoid a disastrous situation. You have to set a stop loss when opening positions for preventing losses.
There are several types of stop signals:   

Initial stop signal – determines the deposit amount or interest rate that the trader is ready to lose. When the price moves toward this position and reaches it, the trader’s fixed level position closes, not exceeding the loss preset by the trader.

Trailing stop signal – is when price moves towards a position and stop signal is set right after it, according to trader preferences. In case the direction changes, the price reaches that signal and the trader goes off the market, potentially having earned profit (depending on when the price started moving).

Profit raising – is when a net profit has been earned and position is closed.
Stop signals at times – is when the market is not able to provide the necessary yield rate in the course of time and the position closes.

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Difference between Winners and Losers

A trader going deeply into Forex should realize that currency trades imply a certain risk: you can open profitable positions one by one, but any wrong step may bring you a total loss in the blink of an eye.
Your success does not entirely depend on your trading experience and professionalism. Every novice and professional should understand that the risk is always there, so it is better to keep an eye out. In order to trade on Forex and gain profit, you have to follow a constructive approach, be attentive and analyze every factor which may affect trends.
Below we are going to deal with 9 factors underpinning a successful trading strategy:
1. Traders who decided to work in a short-term period are initially in a risk group, which brings them closer to failure. The main reason for failure of short-term traders is a lack of training and a strict trading plan to follow, not the time limits they set. Lack of experience and knowledge does not allow even a tiny mistake, which can result in a loss of deposit. At the same time, such traders often do not have a lot of money on their accounts. More successful traders work in medium- and long-term periods. Statistically, medium- and long-term trading is more successful. The same can be referred to the funds invested, a capability to stay on the market depends much on the starting capital.
2. Losing traders often spend a lot of time on analysis of where the market will be tomorrow, while more successful ones decide how to behave in the current situation and apply their strategy in accordance with their conclusions. If a trader can foresee the reaction of crowd, he/she will definitely achieve success. The probability of deriving profit would be much higher if a trader can respond to irrational buying and selling of the crowd by a rational action plan. Therefore, it is much more difficult to be a successful analyst than such trader. An analyst has to perform more complicated work, as they have to predict the market movement and recommend how to earn a maximum profit while a successful trader just follows the market.
3. Successful traders pay attention to losing trades and to correlation of profit and loss, while losers only concentrate on their successful trades. It is much more important to track your risks than your profit or loss. Professional traders always estimate how much they can earn and how much they can lose.
4. As a rule, those traders who cannot control their emotions are never successful. Professional and experienced traders analyze the market putting their emotions aside. In case a trader opens and closes positions based on emotions only, this approach cannot be considerate or logical. However, complete ignorance to one's emotions is wrong too. Sometimes excessive stress may lead to mental disease and loss of all trading skills. The best way is to track each emotion and consider if the reasons for one or another decision still remain.
5. All unexperienced traders are concerned about their rightness, while professionals admit their emotions being able to master temper. Successful traders only acknowledge those factors that may help or prevent from obtaining profit. It is very important to stay aware of processes on the market; however, it is necessary to separate private life from trading. Considerable exertion may result in mental disorders and physical exhaustion. Professional traders promptly react to market processes, as it is the only way to earn money for them.
6. After losing money while trading a loser starts buying new books or trading systems and following their concepts. In the meantime, a professional analyses the incident and edits his methods with a regard to the analysis results. More successful trader does not switch to another trading system at once; he/she rather does it after realizing that the old one does not work properly. Successful traders always stick to their developed system using only a few trading strategies usually.
7. Traders without a considerable trading experience often try to repeat trading techniques of famous traders. At the same time, professionals consider all possible strategies, including ones of famous traders, but use them only in case they suit their trading style. Trader's individuality, a knowledge about the market and own trading system are much more relevant than the achievements of famous market players.
8. Often inexperienced traders do not notice numerous factors that could help them to derive profit. Profit of each trader determines the amount of funds in circulation, that is clearly realized by all experienced traders. The amount of money flowing into Forex must exceed the one flowing out, and this is what every trader has to take into account.
9. As a rule, all beginning traders losing any opportunity to get profit really take it too hard, while more successful traders take it easy. Trading is a pleasure for them; however, they take it absolutely seriously. Psychiatrists argue that an excessive seriousness makes person more vulnerable to diseases.
Both successful and losing traders take Forex trading as some sort of a game.
If we compare trading with a game, for example, bowling, newbies realized that strikes thrown by experienced professionals without any visible effort are results of much time spent outside the "big game". As in sports, trading implies numerous internal and external factors. You should be extremely serious about each of your trades. The difference between a professional and a beginner is that the former follows an accurate trading strategy and the latter takes trading as a game.

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