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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SELL NZD/USD

SELL NZD/USD @0.8240

T.P 50 PIPS , 70 PIPS

S.L - 0.8350

 

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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.

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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.

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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!

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