- Never trade on wishful thinking. If you place a trade and it’s not working out for you, get out! Don’t compound your mistake by staying in and hoping for a reversal.
- Psychological Factor. Uncontrolled emotions are the number one cause of trading losses. Don’t let your emotions sway you, stick to your trading plan and remember to set (and stick to) your Stop Loss orders.
- “The Trend is Your Friend”. When trading in the direction of a trend you’re trading with the majority in the Forex market. As a result you’re trading results will generally improve.
- Accept that a part of successful trading is knowing when to cut your losses. Every trader sees the market go against them sometimes. Successful traders know that profits are achieved by owning up to your mistakes quickly in order to keep your losses in check. Dropping your failed trades will free you to focus your attention on looking for the next successful trade to let run.
- Focus on money management and a trading plan. Only enter a trade once you know how much of your margin you are willing to risk from the trade and how much you’re hoping to profit. Figuring out this calculation will help you develop your very own risk/reward ratio for your trade, the first step in a successful trading plan. Over time, the difference between successful traders and unsuccessful ones is that the former always enter the market with a trading plan and the latter never do.
- Take personal responsibility for your trades. Great traders accept personal responsibility for everything they do. Remember that you’re the one who is pulling the trigger. Great traders know that they are responsible for all the trades they make, either good or bad. Blaming the market or bad luck can cause a trader to lose focus on their ability to learn from their trading errors and apply their lessons to improve their trading in the future.
- Don’t become greedy. When traders have an open trade that is making them profit they often forget their pre-determined target for the trade, as they are sure that the trade will continue to make them profits. Remember that the markets are dynamic and that no trend lasts forever. If the price reaches your target, bank the profits or move your stop-loss forward to prevent a loss.
- Trade the News. Most of the really dramatic moves in the Forex market occur around important news events. Trading volume increases in advance of news releases and the resulting moves are normally significant: allowing traders to grab pips from rapid market movements. News-traders will often make only one trade a day due to the large potential profits involved by correctly trading important news releases
5/13/2013
forex
5/10/2013
What is Forex Trading?
Forex Trading is trading currencies from different countries against each other. Forex is acronym of Foreign Exchange.
For example, in Europe the currency in circulation is called the Euro (EUR) and in the United States the currency in circulation is called the US Dollar (USD). An example of a forex trade is to buy the Euro while simultaneously selling US Dollar.
Forex Trading
So what is is Forex trading
you may ask? Forex is the exchange you can buy and sell currencies. For example,
you might buy British pounds (by exchanging them to the dollars you had), then,
after pounds / dollar ratio goes up, you sell pounds and buy dollars again. At
the end of this operation you are going to have more dollars, then you had at
the beginning.
The Forex market has much higher liquidity, then the stock market, as much more money is being exchanged. Forex is spread between banks all over the planet and as a result it means 24 hour trading.
Unlike stocks, Forex trades are performed with high leverage, usually it is 100. It means that by investing $1000 you can control $100,000, and increase potential profits accordingly. Some brokers provide also so called mini-Forex, where the size of minimum deposit equals $100. It makes possible for individuals to enter this market easily.
The name convention. In Forex, the name of a "symbol" is composed of two parts — one for first currency, and another for the second currency. For example, the symbol usdjpy stands for US dollars (usd) to Japanese yen (jpy).
As with stocks, you can apply tools of the technical analysis to Forex charts. Trader's indexes can be optimized for Forex "symbols", allowing you to find winning strategy.
Example Forex transaction
Assume you have a trading account of $25,000 and you are trading with a 1% margin requirement. The current quote for EUR/USD is 1.3225/28 and you place a market order to buy 1 lot of 100,000 Euros at 1.3228, expecting the euro to rise against the dollar. At the same time you place a stop-loss order at 1.3178 representing a maximum loss of 2% of your account equity if the trade goes against you, 50 pips below your order price, and a limit order at 1.3378, 150 pips above your order price. For this trade, you are risking 50 pips to gain 150 pips, giving you a risk/reward ratio of 1 part risk to 3 parts reward. This means that you only need to be right one third of the time to remain profitable.
The notional value of this trade is $132,280 (100,000 * 1.3228). Your required margin deposit is 1% of the total, which is equal to $1322.80 ($132,280 * 0.01).
As you expected, the Euro strengthens against the dollar and your limit order is reached at 1.3378. The position is closed. Your total profit for this trade is $1500, each pip being worth $10
The Forex market has much higher liquidity, then the stock market, as much more money is being exchanged. Forex is spread between banks all over the planet and as a result it means 24 hour trading.
Unlike stocks, Forex trades are performed with high leverage, usually it is 100. It means that by investing $1000 you can control $100,000, and increase potential profits accordingly. Some brokers provide also so called mini-Forex, where the size of minimum deposit equals $100. It makes possible for individuals to enter this market easily.
The name convention. In Forex, the name of a "symbol" is composed of two parts — one for first currency, and another for the second currency. For example, the symbol usdjpy stands for US dollars (usd) to Japanese yen (jpy).
As with stocks, you can apply tools of the technical analysis to Forex charts. Trader's indexes can be optimized for Forex "symbols", allowing you to find winning strategy.
Example Forex transaction
Assume you have a trading account of $25,000 and you are trading with a 1% margin requirement. The current quote for EUR/USD is 1.3225/28 and you place a market order to buy 1 lot of 100,000 Euros at 1.3228, expecting the euro to rise against the dollar. At the same time you place a stop-loss order at 1.3178 representing a maximum loss of 2% of your account equity if the trade goes against you, 50 pips below your order price, and a limit order at 1.3378, 150 pips above your order price. For this trade, you are risking 50 pips to gain 150 pips, giving you a risk/reward ratio of 1 part risk to 3 parts reward. This means that you only need to be right one third of the time to remain profitable.
The notional value of this trade is $132,280 (100,000 * 1.3228). Your required margin deposit is 1% of the total, which is equal to $1322.80 ($132,280 * 0.01).
As you expected, the Euro strengthens against the dollar and your limit order is reached at 1.3378. The position is closed. Your total profit for this trade is $1500, each pip being worth $10
Money Management Tips For Trading On The Forex
What is Money Management:
describes strategies or methods a player uses to avoid losing their bankroll.
Money management in the foreign exchange currency market requires educating yourself in a variety of financial areas. First, a definition of the foreign exchange currency or forex market is called for. The forex market is simply the exchange of the currency of one country for the currency of another. The relative values of various currencies in the world change on a regular basis. Factors such as the stability of the economy of a country, the gross national product, the gross domestic product, inflation, interest rates, and such obvious factors as domestic security and foreign relations come into play. For instance, if a country has an unstable government, is expecting a military takeover, or is about to become involved in a war, then the country's currency may go down in relative value compared to the currency of other countries.
The Forex, or foreign currency exchange, is all about money. Money from all over the world is bought, sold and traded. On the Forex, anyone can buy and sell currency and with possibly come out ahead in the end. When dealing with the foreign currency exchange, it is possible to buy the currency of one country, sell it and make a profit. For example, a broker might buy a Japanese yen when the yen to dollar ratio increases, then sell the yens and buy back American dollars for a profit.
There are five major forex exchange markets in the world, New York, London, Frankfurt, Paris, Tokyo and Zurich. Forex trading occurs around the clock in various markets, Asian, European, and American. With different time zones, when Asian trading stops, European trading opens, and conversely when European trading stops, American trading opens, and when American trading stops, then it is time for Asian trading to begin again.
Most of the trading in the world occurs in the forex markets; smaller markets for trade in individual countries. Simply put forex trading is the simultaneous buying of one currency and selling of another. Over $1.4 trillion dollars, US of forex trading occurs daily and sometimes fortunes are made or lost in this market. The billionaire George Soros has made most of his money in forex trading. Successfully managing your money in forex trading requires an understanding of the bid/ask spread.
Simply put the bid ask spread is the difference between the price at which something is offered for sale and the price that it is actually purchased for. For instance, if the ask price is 100 dollars, and the bid is 102 dollars then the difference is two dollars, the spread. Many forex traders trade on margin. Trading on margin is buying and selling assets that are worth more than the money in your account. Since currency exchange rates on any given day are usually less than two percent, forex trading is done with a small margin. To use an example, with a one percent margin a trader can trade up to $250,000 even if he only has $5,000 in his account. This means the trade has leverage of 50 to one. This amount of leverage allows a trader to make good profits very quickly. Of course, with the chance of high profits also comes high risk.
Like many other speculative investments, a key part of money management for the forex trader is only using money that can be put at risk. It is wise to set aside a portion of your net worth and make that the only money you use in forex trading. While the chances of good profits are there, if you should have a problem and get wiped out, you'll only have a limited amount of money placed at risk. Also remember that the market is n constant motion. There are always trading opportunities. If a currency is becoming stronger or weaker in relation to other currencies there is always a chance for profit. For instance, if you believe that the Euro is gong to become weak compared to the US dollar then selling Euros is a good bet. If you believe that the dollar is going to become weaker than the yen, or the pound sterling, then selling dollars is wise. Staying current on the news and current events in the countries whose currency you hold is a smart move. Many people reach points where they can predict currency changes based on political or economic news in a given country. Remember though that forex trading is speculation, so be careful when managing your funds and only invest what you can afford to risk.
Please always make sure you check with the pros when dealing in this market unless you are doing this as a hobby and don't have a lot at stake in it. There are a lot of big boys playing here and they won't lose much sleep if you and thousands others lose their shirts...
Money management in the foreign exchange currency market requires educating yourself in a variety of financial areas. First, a definition of the foreign exchange currency or forex market is called for. The forex market is simply the exchange of the currency of one country for the currency of another. The relative values of various currencies in the world change on a regular basis. Factors such as the stability of the economy of a country, the gross national product, the gross domestic product, inflation, interest rates, and such obvious factors as domestic security and foreign relations come into play. For instance, if a country has an unstable government, is expecting a military takeover, or is about to become involved in a war, then the country's currency may go down in relative value compared to the currency of other countries.
The Forex, or foreign currency exchange, is all about money. Money from all over the world is bought, sold and traded. On the Forex, anyone can buy and sell currency and with possibly come out ahead in the end. When dealing with the foreign currency exchange, it is possible to buy the currency of one country, sell it and make a profit. For example, a broker might buy a Japanese yen when the yen to dollar ratio increases, then sell the yens and buy back American dollars for a profit.
There are five major forex exchange markets in the world, New York, London, Frankfurt, Paris, Tokyo and Zurich. Forex trading occurs around the clock in various markets, Asian, European, and American. With different time zones, when Asian trading stops, European trading opens, and conversely when European trading stops, American trading opens, and when American trading stops, then it is time for Asian trading to begin again.
Most of the trading in the world occurs in the forex markets; smaller markets for trade in individual countries. Simply put forex trading is the simultaneous buying of one currency and selling of another. Over $1.4 trillion dollars, US of forex trading occurs daily and sometimes fortunes are made or lost in this market. The billionaire George Soros has made most of his money in forex trading. Successfully managing your money in forex trading requires an understanding of the bid/ask spread.
Simply put the bid ask spread is the difference between the price at which something is offered for sale and the price that it is actually purchased for. For instance, if the ask price is 100 dollars, and the bid is 102 dollars then the difference is two dollars, the spread. Many forex traders trade on margin. Trading on margin is buying and selling assets that are worth more than the money in your account. Since currency exchange rates on any given day are usually less than two percent, forex trading is done with a small margin. To use an example, with a one percent margin a trader can trade up to $250,000 even if he only has $5,000 in his account. This means the trade has leverage of 50 to one. This amount of leverage allows a trader to make good profits very quickly. Of course, with the chance of high profits also comes high risk.
Like many other speculative investments, a key part of money management for the forex trader is only using money that can be put at risk. It is wise to set aside a portion of your net worth and make that the only money you use in forex trading. While the chances of good profits are there, if you should have a problem and get wiped out, you'll only have a limited amount of money placed at risk. Also remember that the market is n constant motion. There are always trading opportunities. If a currency is becoming stronger or weaker in relation to other currencies there is always a chance for profit. For instance, if you believe that the Euro is gong to become weak compared to the US dollar then selling Euros is a good bet. If you believe that the dollar is going to become weaker than the yen, or the pound sterling, then selling dollars is wise. Staying current on the news and current events in the countries whose currency you hold is a smart move. Many people reach points where they can predict currency changes based on political or economic news in a given country. Remember though that forex trading is speculation, so be careful when managing your funds and only invest what you can afford to risk.
Please always make sure you check with the pros when dealing in this market unless you are doing this as a hobby and don't have a lot at stake in it. There are a lot of big boys playing here and they won't lose much sleep if you and thousands others lose their shirts...
What You Need To Know About Forex Straddle Trading
Forex trading is becoming more and more popular these days. It has encouraged
many people to start making money in the foreign exchange world due to the
benefits that it provides. With this, the number of new participants keeps on
increasing each and every day. There is no question about it as the existence of
trading books, courses and tools has influenced numerous individuals to get into
the forex industry. Problem is, beginners in the forex exchange world suffer
from information overload and even lose their confidence in making their way to
the top. The good news is there are forex trading strategies that can help you
become a successful trader and one of them is by simply using Forex straddle
trading.
You may already be asking yourself what straddle trading means so before we move further, let us define what a straddle is. A straddle is an investment strategy that involves the purchase or sale of certain option derivatives. It allows the trader to make money based on how much the price moves. This trading principle is proven to be effective in gaining profits. Underlying asset prices as well as price movements are considered to be the determining factors of the straddle option strategy.
The purchase of an option derivative is known as the long straddle while the sale of the option derivatives is considered as the short straddle. The former strategy has been recommended by experienced traders due to the benefits that it provides. In the long straddle, the owner generates income whenever the underlying price moves away, whether it is above or below the strike price.
Basically, when you straddle, you place both purchase and sale orders above and below the current price. This simply means that you do not have a directional bias. You will just expect movements both ways. You do not have to think about which way the foreign exchange markets go. All you will care about is that they get to move.
If you are looking for a mechanical trading strategy, the straddle trading strategy would definitely be the answer to your needs. You do not have to do some in depth analysis because the same exact thing is done all the time. It just entails canceling or closing old trades at the same exact time every day and then placing new orders right after
You may already be asking yourself what straddle trading means so before we move further, let us define what a straddle is. A straddle is an investment strategy that involves the purchase or sale of certain option derivatives. It allows the trader to make money based on how much the price moves. This trading principle is proven to be effective in gaining profits. Underlying asset prices as well as price movements are considered to be the determining factors of the straddle option strategy.
The purchase of an option derivative is known as the long straddle while the sale of the option derivatives is considered as the short straddle. The former strategy has been recommended by experienced traders due to the benefits that it provides. In the long straddle, the owner generates income whenever the underlying price moves away, whether it is above or below the strike price.
Basically, when you straddle, you place both purchase and sale orders above and below the current price. This simply means that you do not have a directional bias. You will just expect movements both ways. You do not have to think about which way the foreign exchange markets go. All you will care about is that they get to move.
If you are looking for a mechanical trading strategy, the straddle trading strategy would definitely be the answer to your needs. You do not have to do some in depth analysis because the same exact thing is done all the time. It just entails canceling or closing old trades at the same exact time every day and then placing new orders right after
Fundamental Forex Trading
When I first started trading,
I was overwhelmed with all the discussions on technical analysis. In fact, my
first introduction to forex trading was a book I read on correlations and how
certain currencies move in rhythm with other currencies. It seemed like there
were so many theories based on technical analysis that there was no point in
studying anything else.
After reading up and watching the markets for awhile, I came to the conclusion that technical analysis did matter, but only on a short scale. When trading for the long term, based on months rather than days, it was better to rely on fundamental analysis. Technical analysis is great and it's fun to learn and experiment with, but to truly trade something you have to understand what it is. Fundamental analysis is all about that.
After reading up and watching the markets for awhile, I came to the conclusion that technical analysis did matter, but only on a short scale. When trading for the long term, based on months rather than days, it was better to rely on fundamental analysis. Technical analysis is great and it's fun to learn and experiment with, but to truly trade something you have to understand what it is. Fundamental analysis is all about that.
How to Get Started with Forex Trading
Getting started with forex
trading requires educating yourself on the basics. Forex trading is serious
business and there is much to learn before you can begin. Taking the time to
educate yourself can help you avoid costly mistakes.
- Forex Basics
- Currency Profiles
- Getting Started
Forex Basics
Before you can get started, you need to know the basics. Here you can learn forex basics, the benefits of forex, and forex terminology.- What is Forex Trading?
- The Benefits of Forex Trading
- Forex Order Types
- Forex Chart Basics
- Trading on Margin
- Best Times to Trade
- Forex Scam
Currency Profiles
The world has many currencies. In order to trade them efficiently, you need to understand a little bit about them.- MXN
- NOK
- NZD
- PLN
- SAR
- SEK
- TRY
- TWD
- USD
- ZAR
Getting Started
Once you understand some of the basics of forex trading, it's time to get started. When getting started you will need to understand how to choose a broker, demo accounts, and how to make your first trade.- How to Choose a Forex Broker
- Trading With a Demo Account
- Going Live - Making Your First Trade
- Finding a Forex Strategy
- How to Manage Risk
Subscribe to:
Posts (Atom)