SELL NZD/USD

SELL NZD/USD @0.8240

T.P 50 PIPS , 70 PIPS

S.L - 0.8350

 

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What Is Hedging

Hedging denotes safety and security. Hedging is protection of client's funds from unfavorable currency rate fluctuations. Account funds are fixed at their current price through conducting trades on Forex. Thus, hedging helps to ease exposure to currency rate change risks, which helps to achieve result not influenced by fluctuations.

In fact, hedging presupposes using one instrument in order to lower the risk related to unfavorable market factors impact on the price of another one directly associated with it. More often, the notion ‘hedging’ means insurance from the currency price fluctuations, assets etc. Hedging can also be considered as a type of investment allowing to minimize the price movements risk in the market. The hedging cost should be valued with regard to possible losses in the event of refusal from it.

Hedging types on Forex

The first type is hedging the buyer’s money to lower the risk of possible increase of an instrument price. Another type is hedging the seller’s money in order to lower a price drop risk.

Hedging example

A trader, who imports foreign currency, opens buy trade with a currency on his trading account in advance, and when the real time of currency purchase comes in his bank, he closes the position. And a trader, who exports foreign currency, opens a sell trade with a currency on his trading account beforehand, and at a real moment of this currency purchase in his bank, he closes it.

There is a so-called hedging mechanism, which implies obligations balancing in the currency market (or securities market etc.) and the opposite futures market. To hedge capital losses from a particular instrument, the position is opened with another instrument, which can compensate financial losses.

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Capital Management Methods

When trading on Forex, it is necessary to know how to properly place your capital; how to calculate the amount of funds needed to make a trade in order to obtain sufficient earnings; and if it comes to loss, how not to loose your entire deposit.

To achieve these goals, there are special equity management methods (money management techniques):

No equity management methods. Most traders, when opening a position, do not calculate the amount of funds that are being used, estimate potential earnings or potential loss. This is considered to be a technique too, but if the capital is not very large to begin with, several unsuccessful trades will make it completely disappear.

Multiple contracts. Opening several positions on the foreign exchange market on different instruments, for instance, EURUSD and EURGBP, a trader can earn profit if the price moves in the right direction. Earnings can be considerable, losses too though.

Fixed amount. Depending on the amount of funds available, a trader decides how much can be put at risk when opening one or another position. The trader then makes deals not exceeding this amount.

Fixed equity interest rate. This technique is similar to the previous one but there is one small difference: the trader determines the equity interest rate, but not the equity amount.

Establishing correlation between profits and losses. It is necessary to track statistics on all operations (the amount of losses, profits and the correspondence between them). When you see the correlation between them, you can apply what you have learned to your trading.

Equity curve trading. Most people are acquainted with moving averages, which can act like signals for entering the market or leaving it. According to this method, moving averages (long- and short-term) are used to forecast trade results. If the short-term moving average of the equity curve is above the long one, a position can be opened and it will be profitable. If, however, the short-term moving average is below the long one, it is better to wait for a while.

Choosing a particular money management technique of trading on Forex can help you rationally use your money on the market and earn profit. Money management techniques are used for opening positions.

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Sell Usd/Cad

Sell Usd/Cad @ 0.9962
T.p -0.9890
S.L -1.0070

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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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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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