The approach to trading in the forex markets is no dissimilar to that mandatory for surfing. By joining together good analysis with efficient execution, your success forex rates will get better considerably and, similar to several skill sets, good forex trading appears from a mixture of talent and hard work. Here are some suggestions that you can make into a strategy to hand out you fine in all markets.
* Approach Is Most Important In FOREX:
* Prior to you begin to do foreign trade, be familiar with the value of appropriate homework. The foremost step is to line up your personal aims and nature with the tools and markets that you can contentedly relate to. For instance, if you recognize something on day trading, then see to that trade.
* Time Structure
* The time structure points out the form of forex trading that is suitable for your nature. Trading forex off of a five-minute chart implies that you are more comfy being in a position devoid of the disclosure to overnight risk. On the other hand, selecting weekly forex charts points out a console with overnight risk and a readiness to observe some days go opposing to your position.
* A foreign currency converter is a calculator that converts the denomination or amount of one foreign currency into the comparative values or amounts of other currencies. For instance, if you had $10 that required to be exchanged into the euro, currency of a nation you are visiting, you would require recognizing the dollar to euro conversion!
Several forex traders are doubtful while applying the margin. But after that, they have small option and the majority of them have to employ the margin to do foreign trade.
One single lot includes 100,000 units of a currency in a normal account. One lot in Mini account may possibly include 10,000 units of a particular currency. This, as most of you would optimistically have the same opinion, is important cash to keep in an account. As well, the majority of people have been look to trade above one lot at a time.
And nearly all Forex trading firms need traders to have admission to margin funds. All in all there is just no options which will aid us turn clear of applying the margin in currency trading.
Significant aspect for a forex trader to bear in mind is that there are reasonable ways to employ the margin gainfully in addition to sensibly.
Margin is customizable: Margin is bendable and can be applied till the level at which the trader is comfy and thinks the requirement to exercise it. If the trader desires to play it protected, 5% to 10% of margin is measured comfy. For a trader who is start to taking a few risks, 40% to 50% percent of margin is measured standard or strong.
Therefore, the margin sum for every trade can be customized opening from zero to 100 percent. A person has to think every trade independently and has to create it a division of his long term forex currency trading strategy and create a well-versed verdict about how lot the margin is most appropriate for him.
Forex is the word that essentially describes the business of exchanging the currencies all over the world. Forex is also denoted by the term foreign exchange or FX. The world’s leading forex market carry out many trade activities, which are worthy of more than 1.5 trillion USD.
Forex trades are distinct from stock trading and there is not any kind of dealing with a central exchange that administers the world currency system. This is indeed a kind of accepted trading form between the central banks of every country.
Forex trade requires only telephones or any electronic device network which will hook up the corresponding person (buyers and sellers) all over the world for trading. Besides trading, forex market had also put forward a number of compensations in equities trading. Today, the internet is the major need for forex trading though the traditional methods are still on.
Basically the major ambition of any trade will be to be trading on the profitable side. Forex offers unlimited boundaries and at the extreme it beats the limitations of the other market such as share trading or equity.
Forex trading can be accomplished in 24 hours per day. Furthermore, regardless of forex being a risky trade, the main responsibilities for a trade to be constant and successful are the seller and buyer. The investors, companies and intuitions liquidity is also endowed by the bank.
Generally the traders who are willing to invest in the forex will scrutinize regarding the elemental and practical fact behind its trading. A lot of courses about forex trading are offered to the depositor which will help them in trading. These courses will impart the essential awareness on the basic dealings and it also provides with guidelines for the skilled trading policy.
One of the methods of forex trading is to recognize how to make best use of the forex automation facility. Trading is actually a trade of your time and your money; however, it will be better if you know how to save time while you still trade. Automating your trade provides you with the time to work on your other work rather than sitting before the computer all the day for the trade.
Forex trading automation is significant in that it tends to save time. You should be sure that you are working as gainfully as possible. Forex automation is not tough to exercise and it can be greatly organize, if you understand the forex software that will be most suitable for your needs. There are many different kinds of forex trading software accessible; try out the tools and go with the one that provides with the tools that are most accessible to you.
You can purchase a forex trading system software that you can install on to your personal computer or you can even make use of an internet dependent system which will work directly in the browser. Both of these systems hold various benefits therefore judge with your personal liking on which system will be workable for you to the most.
They will as well contain drawbacks for you to think and you should be conscious of these in addition to knowing what you are actually looking for and what you have found in the software, which is very significant in selecting a software to learn forex systems.
This is good because without automation you will use more time than needed for a beneficial forex trading.
Forex is simply similar to most other features of trading, you require being smart and do a few research. Here are a few plain rules that will defend forex broker/investor’s cash and give access to extra profits.
Do not apply complete margin: Regardless of how risk lenient you are, widening your margins to its outer limit is foolish that limits one’s capability to get benefit of other forex trading chances. A normal rule to pursue should be to keep away from applying more than two-thirds of one’s margin ability. This allows you have the room for instability in your currency trading account without risking the feared margin call.
Check the risk prize ratio of every foreign trade: A rule to pursue here is that the risk prize ratio should be a 1:2 ratio or yet more. A few traders as well apply 1:5, but this high ratio will once again restrict your trading skill. Make certain you carry out the estimations to choose whether your possible reward is value the possible risk. If not, maintain your eyes open for one more trade chance.
Margin trading is dangerous and losses here are a lot larger.
Thus currency traders who have simply gotten into foreign exchange trading should apply more than the lowest sum of margin just when the forex market is presenting a great trending currency pair.
If the above stated steps are recognized and pursued appropriately one is able to lessen risk of big losses and boosts the odds against making high profits.
Foreign Exchange or FOREX for several years defended weaker countries from abusing, and essentially, defended them all from worsening economic trends, uncontrolled capitalism, and defaulting state debts.
In 1971 Foreign Exchange or FOREX experienced a drastic change permitting National Banks, Large Corporations, and private entrepreneurs to occupy a share in profit making use of Foreign Exchange or FOREX.
It relates to the acceptability of various currencies, buying and selling of paired currencies between various states, expecting to profit off from the foreign exchange rate.
All of this is carried out below the umbrella of the Foreign Exchange or FOREX. It a bit different from Wall Street or any of the other chief trading places of the globe, Foreign Exchange or FOREX has no universal main office. It is an internationally based trading area that operates five days a week twenty four hours a day.
To function and earn within the environment of Foreign Exchange or FOREX you have to be a professional trader with the self-assurance of realizing that risk, and you got to he able, sharp and supportive.
Euro to dollar conversion is one of the major processes in the forex market; however, it pays, if you will be recognizing the related risks so that you will know what you are trading for in the globe of Foreign Exchange or FOREX. If you would like to be on the profitable site, not being too greedy is the way to go.
In day trading, one and a half trillion dollars is exchanged utilizing the Foreign Exchange or FOREX, for a few it can denote massive profits, for others it can lead to overwhelming losses? The special character of Foreign Exchange or FOREX needs one to be skilled to work with advantage of information to deal successfully within the Foreign Exchange or FOREX.
How Do Traders Trade Forex?
The requisites for Forex trading or currency trading are the market analysis such as forecasting the future. To better analyze forex trading or currency trading, need to focus on two prominent schools of thought.
1. Fundamental Analysis:
Fundamental analysis mainly emphasize on economic, social and geopolitical, these are the forces that are responsible for supply and demand. Fundamental analysis examines the indicators regarding macroeconomic, like economic growth rates, interest rates, inflation and unemployment. Forex market have an impact on all those countries
2. Technical Analysis:
Technical analysis is the emphasis on study of price movements. Historically currency statistics is used to forecast the future prices. Technical analysis states that all the present market information is shown through price of that currency therefore, price analysis is all that is needed to do well informed trading The tools regarding technical analysis are charts. To find profit opportunities charts are the most suitable form of analysis. Technical analysis concept is that the markets have a tendency to trend. Technical analysis identifies those trends in the early part of development. Forex or currency trading moves in three directions that are upward, downward or sideways When currency pair of a specific market is upward or downward, it is a trending market and money can be made both ways. On the other hand in case of side ways market it is called range bound market. Technically speaking in order to penetrate into trending market, an average based technical indicators can be used with the help of charts to pin point trending market. Market oscillators, indicators are used for sideways. Lines or symbols on the chart drawn mathematically that indicate perfect timings to enter a trade are called indicators. Historical data is used for that purpose.
Technical Analysis or Fundamental Analysis?
Technical analysis does not require hours of hard work and study and most of the traders abide. by technical analysis. Technical analysts follows many currencies at the same time. Fundamental analysts, on the other hand inclined towards specialization due to huge amount of date in the market. Currency market develop strong trends and technical analysis works very well there. Mastered technical analysis once makes it easy for future application of currency trading. However it is wise to use both.
Brokers or Market Makers:
First open a bank account with Broker/market maker as informed earlier that a broker provides the basic structure to trade. Even if brokerage firms are everywhere across the world. One has to select according to the size of its spread (difference between buy. Sell price) Implementing quality trade, anti-slippage assurance, efficient handling during unpredictable periods, commission and other charges, profits returns home due to wire transfer and least requirements for account size
Account Types:
There are two types of accounts offered by the forex brokers, that are mini and regular account. Mini account varies from US $300 to US$ 500 to a maximum of US $ 2,000 and the minimum size of regular account typically is US$ 2,000 without any upper limit. The size of account is not as important as the minimum lot size, in mini account typically a lot size can not be lower than US $10,000 and US$ 100,000 per lot for a regular account. The trader can take full advantage of the leverage of 1,100 by committing only US$ 100 for mini account and US$ 10,000 for a regular account.
Currency Pairs:
In forex trading or currency trading, EUR/USD, GBP/USD, USD/JPY, are most profoundly traded pair. Each coupled with base currency and quoted currency. First pair indicates a base currency (or transaction currency) and the second one a quoted currency. (or payment currency, counter currency) For example USD/EUR means number of Euros that can be purchased in 1. Dollar, the pair will increase in its value if USD tends to strengthen or EURO starts to weaken.
Forex trading turnover is almost 3.2 $ trillion everyday, offering greater advantages to conventional trading markets. Its outlined as following:
FOREX VS EQUITIES
Around the Clock Trading
Forex trading is around the clock, providing benefits over equities trading. Buyers are always actively involved in trading foreign currencies. Traders quickly respond whenever news breaks. Earning reports and analyst conference calls are not affected by after hours
Equities trading has several restrictions for after hour US equities trading such as ECN’s ( Electronic Communication Networks), also know as matching systems; if possible brings together buyers and seller. Chances of carrying out every trade is not assured, or at fair market price. Often traders have to wait for next market with a tighter spread.
Quality Liquidity
Forex trading volume is 50x everyday, that is larger than New York Stock Exchange, broker/dealers are always buying and selling currencies. It helps to ensure price stability of major currencies in the liquidity market. Traders have a choice to open or close at a reasonable market price. Stock market stocks are vulnerable to liquidity risk due to lower trade volume resulting wider dealing spread or larger price movements, responding to somewhat large transaction.
100:1 (&200:1) Leverage
Leverage of 100:1 is usually available from online forex dealers that is far more than usual 2:1 margin offered by equity brokers. Traders post $1000 margin for a $100,000 or 1% at 100:1
Significant leverage available from online currency trading firms is not for everyone but it’s an effective tool to boost finance. In forex market leverage its not just about risk but in fact its necessary because the regular percentage change chief currency is below 1% in contrast to stock with 10% price change on any given day.
Margined trading is strictly followed by a disciplined trading method that constantly apply stop and restrict orders. Planning strict controls that emotions might not take over
Efficient Transaction Costs
In terms of transaction fees and commission Forex is more cost effective to trade. Offering traders access to all the related market knowledge and trading tools for self-direct accounts without any charges. Commission for stock trades range from $795-29.95 per trade including online discount brokers up to $100 or more per trade with complete brokers service.
One more point require consideration is regarding the width of the bid/ask spread irrespective of deal size, normally forex dealing spreads are 5 pips or less ( a pip is 0005 US cents). Generally width of the spread in a forex transaction is less than 1/10 of a stock including a .125(1/8) wide spread
Profit Potential In Both Rising And Falling Markets
The potential for profit always exists in rising as well in falling market. An investor in an open forex position, shorten one currency and lengthen the other. Trader sells in short position in anticipation of decline while in long position the trader buy a currency in anticipation of rise.
Another distinct advantage over equity trading is the ability to sell currencies without any limitations Equity markets in the US is very difficult to set up a brief position because of Zero Uptick rule that discourages investors from shorting a stock unless it directly equals or lowers the price of short sale that follows.
FOREX VS FUTURES
Forex trading or currency trading markets operates 24 hours with over $2 trillion daily turn over. It is the most dynamic market in the world. It’s a major even.
There are significant benefits of forex over currency futures trading. There are philosophical facts like the history of each, their main spectators, and their importance in the contemporary forex markets, to more visible issues like trade fees, surplus, cash flow, convenience of technical and information proposed by each service.
These differences are as following
Big volume is better for Liquidity. Futures currency volume is 1% CME of the daily volume in the forex markets as compared to liquidity has many advantages that forex markets hold over currency futures. It is an established fact that currency professionals are well aware that cash has been dominating since the dawn of contemporary currency markets in the early 1970’s. From every individual traders risk profile currently have full access to the available opening in the forex markets.
Compared to futures markets forex markets presents much tighter bid for spreads. It can be readily seen that in the USD/CHF in the above example that by inverting futures dealing price of 5894 – 5897 brings about a cash price of 1.6959 – 1.6966,8 pips vs the 5 pip spread on hand in the cash markets.
Compared to currency futures trading, forex market offer higher leverage rate and lower margin rates. Currency trading have same rate for all day and all night traders, but futures traders have different rates for day and night traders, its dependent on transaction size.
Forex markets make use of easy and understandable terms and price quotes where as currency futures quotes are inversions of the cash price. Such as a cash price for USD/CHF is 1.71001.7105, the futures equivalent is 58941/.5897; a policy that is only limited to futures trading.
The forex market have no other difficulty of including a forward forex element, to consider any time factor, interest rates, and the difference of interest from currency to currency, where as currency futures prices have many complications such as adjustments, and mathematical manipulation
Currency futures can easily swallow trader’s profits due to trading commission, exchange fees and clearing fees. Currency futures have experienced historical fluctuations since the last ten years. Currency futures are a tiny part of extremely larger market. Currency futures contracts were established at the Chicago (called IMM contracts or international monetary markets futures ) Mercantile Exchange in 1972. These contracts were established for the market specialists, at that time they have accounted for 99% of the quantity generated in the currency markets. Contracts proposals were designed as 99% of the quantity will be generated by markets. Few courageous individuals speculate in currency futures, extremely skilled veterans take over the pits. These contracts were created. Currency futures become a minor event, rather than a hub for world-wide currency connections for hedgers and arbitragers roaming around for small, brief, and inconsistent cash and futures currency prices.
They appear permanent but in reality very few arbitrage windows are open and whenever they do, they are instantly slammed shut by a horde of professional dealers. These changes have reduced the importance of number of currency futures professionals, shut the window further on forex vs. futures arbitrage openings and increased the openings for systematic markets. While equal opportunity is dangerous to the P&L of a currency futures trader, its been the trail out of the labyrinth for individuals trading in the forex markets.
Courage under Stressful Conditions When the Outcome is Uncertain
Confronting with courage under tense conditions
Armed with all foreign exchange trading information will not help unless you have the courage to take risk in buying and selling currencies and risking your money. When you put your money at risk you have to be confident that you are going to make profit our of it. Its not easy at all to press enter key when your real money is at risk.
Anxiety and fear will always accompany you. You will only make money if you have enough courage and will to act. When a fireman enters a burning building to save life, his own life is endanger but he does it anyway and accomplish his mission. If you can put yourself to the role of that fireman you can be successful forex trader or currency trader
On the other hand, when you acquire enough courage, soon it will be convenient for you to take risk and start making money in forex trading or currency trading. Sometime you grow over confidence and start losing your focus on all risk involved
Begin by knowing yourself first. Ask yourself that are you the person who can control his personality, like overcoming emotions and shortcomings carryout trades in currency market, most of the times under tense conditions? Ask yourself that are you the type of person who is overoptimistic and vulnerable to take more chances then desired? By looking inside yourself you can overcome the defects in advance, otherwise they may result in failure or huge loss. An immense loss can end your career in forex trading or currency trading or delay your attainment until you can raise extra capital.
The incapacity to begin a trade or close a losing trade can establish severe psychological problems for a trader moving forward. Being aware of these obstacles, you can acquire excellent trading habits.
In trading foreign exchange the problem does not end just by “pulling the trigger” In fact what comes next is far more problematic. The next challenge is staying in the trade. Once you enter the trade of trading foreign exchange or forex you can leave the trade early once you find it not working. Many people who find success in non trading projects find this notion hard to carry out.
For example, real estate tycoon make money by selling property during the boom periods and buying during bad times. The strategy is to hold on the capital during bad times and invest that capital during boom period. In foreign exchange trading, the currencies are in long term persistent, directional trends and when you really want to invest and make good use of it, your equity will be worn out before currency comes back
The other strategy is to stay in a trade that is flourishing. The danger is closing out while gaining, without any appropriate motive. “Fear is your worst enemy”. Fear will work as a hindrance in your subconscious mind. You will not be able to work unhindered. Some fearful thoughts come into your mind, like “what if news comes out and you wind up with a loss”. In reality, if the news comes out in a currency that is showing upward trend, than there are higher chances of news being positive than negative.
Mostly your fear is untrue. Don’t fight your fear, accept it like a fun and move towards your task at hand that is shaping your way out plan based on real price measure. As Gath says in Wayresworld ”Live in the now man”. Don’t worry about what could be, work on what is in hand by studying your chart and shaping your way out point as genuine and realistic.
Some times you close in a winning position, because you find it boring, its not moving according to your expectations. For example in a hockey match, some time a key player is out of the ground temporarily for a breather, when he comes back in the game, he is a serious threat to the opponent, because now he can gain more yards. Your situation is like that hockey player. Once you take a breather after gains, the next move should be more gains.
To be successful in foreign exchange trading or forex trading or currency trading you have to be brave and patient. If you are impatient and hasty you will have to adjust yourself according to the requirements of the trade. You will have to be confident to risk your money. You need to acquire knowledge base to be confident in decision making.
Gain knowledge through patience, study and focus.
Many enter the trade but mostly fail because of the fact that they don’t have the proper money management skills. They believe that all they need is know how of few charts, technical indicators and finance. Most of them come up losers with few weeks or months, in the beginning few of them are successful, but it take not more than a year before they are flatten. Only few with good money making skills, patience, study and very well focused are successful traders.
Chances of success is only insured if you can acquire knowledge that requires hard work, study, dedication, and focus. Also learning all aspects of the trade like fundamental and technical. Forex trading or currency trading does not come up without hard work.
In currency trading you do the hard work and surely you will succeed.
1) What is your approach to trading in periods between news releases?
2) Do you trade in these times of more gradual market activity, and if so, what are your rules for entry and exit?
3) Which charts (1 min through monthly) do you refer to for entry and exit in these periods and the relevance of each?
• At the time of government officials talking, closely observe and monitor the market. When any sudden price move than assume that the reason behind is government officials statement. This is an effective technique for new forex trader for forex trading.
• Acquire real economic releases and any relevant articles published. This is an effective technique for new forex trader for forex trading.
• Find out the up to date misforecast and its impact on economic release’s instant price shock. This is an effective technique for new forex trader for forex trading.
• Precisely I look for forex trading routes inside forex trading channel, preferably 5 minute forex trading channel within 30 minute forextrading channel. When both are concurrently close to top or bottom of channel I begin a trade with a tight stop that reinforce my analysis. I frequently study trad EURUSd. This is an effective technique for new forex trader for forex trading.
• I study for 30 min visual plus 60 period moving regular and I also study 5 min visual plus 60 period moving regular. I am looking inside for a trend. For instance, when EURUSD price is less than 60ma on 30 minute visual than I search for openings to sell EURUSD if price bore into 60ma on 5 minute visual to the lower side than I ponder that 30 minute is suggestive of today’s trend and 5 minute a timing pointer. This is an effective technique for new forex trader for forex trading.
• When within a short period of time prices rise quickly I look for short term adjustments and recovery. I find a limit on 1 minute visual plus 60 period moving regular is remarkable for profit taking or beginning for a brief period of time “bounce” trade. This is an effective technique for new forex trader for forex trading.
• My main focus is on high and low end that is within reach of forex trading range that earlier responds to real accomplishment of main points and forex trading plan that I possibly can employ. This is an effective technique for new forex trader for forex trading.
• To understand the indicators of patterns of higher high and higher lows and vise versa I look at bar charts. While discovering the patterns of early change I will join at a level that permits me to connect the patterns at a price that consider for tight stop loss and validate that the pattern is broken. For instance if EURUSD seem to place in a short term bottom as pointed by two successive bars with higher highs and higher lows. Than I will enter a trade when the third bar that is rather close to low of second bar (consider tight stop as if price goes under low of second bar pattern is broken and no reason for trade, and pattern continuation exists) and expectations of getting in at the beginning of a new brief period inclination. This is an effective technique for new forex trader for forex trading.
• Finally the series of bars with higher highs and lower highs will run in a sequence of trends and proceed downward. I look for patterns when they no longer able to approach important tops, forex trading channels tops, vital and effective regular lines. Many times I change to candle charts for more validation when these patterns arrive at their logical stopping place. There are many ways to trade this 1) sell immediate top of earlier bar with stop higher than earlier bar ( tight stop, potential to catch full turnaround) 2) sell vital top with tight stop 3) sell top of forex trading channel with tight stop 4) sell lower but with regular line and stop higher than regular. This is an effective technique for new forex trader for forex trading.
• Taking any position you need close analysis of crucial moment, so that you can monitor your stop loss level and your ability to risk taking. This is an effective technique for new forex trader for forex trading.
• The large number of trades you do than the chances are that you will end up self defeating because of paying spreads (difference between bid and offer late) on each transaction you carry out. Once you start a trade the odds are 50-50, the spread (for example 3 to 5 points in EURUSD ) the success chances are inclined towards brokers favor. For instance, suppose you are forex trading on four point EURUSD spread, by committing two trades a day your additional payment (spread cost) is 8 points, if you do 40 trades than your additional payment (spread cost) is 160 points in commission’s daily and thrive. Do some effort in learning this. This is an effective technique for new forex trader for forex trading.
• The main point access plan favor close points were I will wither be stopped out quickly or take part in short term movement turnaround. Correcting my exit level is firm by the subsequent price action. Preferably I get quick price spike turning in my favor. I happily exit. In EURUSD when the trade goes 30 points my favor I move my stop to neither profit nor loss scenario and most of the times not fortunate enough to become my exit strategy. My forex trading strategy is never to let a profit into loss. End result with exit points is to have an exit plan before you enter the trade and stick to it unless you have real cause to change it. What looks sometimes like a 50 point trade might be 150 point trade with endurance and order.
• Trades turnaround tendency is an effective exit plan that is 38%. Sometimes price move in opposite direction and many forex traders jump in there when they anticipate the tendency to go on afterwards that may turn out to be only an adjustment, creating 35% initial tendency change turnaround have to be fine, as well as the Fib level does not grip you can always enter again.
• If you are sharp and patient your results will improve considerably, no matter where you enter or exit the market.
• More than 30 minutes visuals are good for big picture. More than 30 minutes for 300 periods is not good. As they say in Waynes World, “Stay in the now man”
1) What is the relationship between fundamentals and technical in these periods?
If there is no imminent risk of news associated spikes, prices are inclined to slower movement in a well defined direction (technical forex trading). When prices touch a crucial levels instability starts to surge and the possibility of a huge earning trade emerges. Without any news alarm, fault lines can be broken, on the other hand huge position shift cause news shocks. In the absence of fundamental news, technical take over takes place.
2) What is a minimum acceptable ratio of profitable trades (to develop a forex trading system)
• Right or wrong is not the standard for a successful forex trading, in fact its all about return on equity, if the money in your forex trading account is growing you are successful. The great Chicago commodity traders in 1980’s applied breakout system that lost 90% of their trades but they made profit by positive three digit percent returns for years. All they did was when they got it right they rode it for all that was worth and when they were not right they exit without any further delay.
• On the other hand the broker, he invests his money by buying at his buy price (bid) and selling at his sell price (offer) and usually seize the price difference between them. That’s how your broker makes money and you lose money in forex trading
• The importance of profitability forex trades ratio is irrelevant in shaping forex trading success; on the other hand psychological effect can be important. It becomes much more difficult to pull the trigger on the trade, once you have lost money on successive trades. This is an effective technique for new forex trader for forex trading.
Focus on risk/reward.
3) What is the average frequency that you trade (5 times a day? once every two days?)?
Once every two days?
4) What is the average number of points per profitable trade a new trader should expect over a period of 6 months?
New comers in forex trade should consider a no profit no loss result to be good during the first 6 months of forex trading period.
5) While results will inevitably vary from person to person, what is a reasonable benchmark profit expectation for a new trader in the first 6 months of forex trading one contract?
• In forex trading if you choose a results that is neither profit nor loss than you are doing good. If you participate in an active forex trade then the chances are that you will loose your stake. Exceptions are rare.
Fiction – Commission-free forex trading
Fact – In fact brokers charge heavy mark–ups in forex trading
Fiction – Execution is instant
Fact – In forex trading the market in fact is predictable by proving instant fills. Unpredictable market can shift from 50 points or greater before you get a fill.
Fact – In forex trading profitable traders in fact are put on guide performance; a dealer have to agree on every trade done.
Fiction – Fills are assured on stop loss orders.
Fact – In forex trading, when its officially stated regarding important economic indicators, in fact only few market makers admit the stop loss entry orders.
Fact – As a matter of fact stop loss orders are regularly filled before they mature
Fiction – Hedging skills let the customer to choose in case to close a trade or offset to make up for trade risk reduction.
Fact – In fact many brokers promote hedge as a trade benefit, in case you close a trade or for make up, the P&L will remain the same.
Fiction – Replicated effects can be displayed as in real time.
Fact – An amazing profit making forex trading system can easily be established within few minutes by using available back testing computer programs.
Fact – As a matter of fact these forex trading have almost zero probability of improving the results that are produced with the advantage of hindsight.
Fiction – FOREX markets are the best for forex trading because trends persist and are sustained.
Fiction – FOREX markets are excellent for forex trading as trends endure and continue.
Fact – Those who rely on technical analysis in fact can’t continue for more than 3 months
Fiction – Using demo account to learn trade
Fact – putting real money at risk completely changes the perception of most of the traders market, the outcome attained by using play money has no importance compared to what is attained with real money.
Fiction – Take advantage of the power of leverage
Fact – As a matter of fact leverage is all about winning or losing quickly
Fiction – Narrow spreads and fair prices
Fact – Manipulation is the order of the day, the rates obtained from the Banks are applied to their own benefit.
Fiction – Superior liquidity in the currency market
Fact – In forex trading when markets are volatile liquidity dries up, resulting in price spikes.
Fact – In fact when markets are unstable liquidity dries up, resulting in price spikes.
Fiction – In Forex Trading free training is offered to Brokers
Fact – In Forex trading, many results are not facts because of fundamental weakness of paying the spread on each forex trading, after having your limit order is outlawed on NASDAQ, and carrying out your stops hastily.
Usually leverage is quoted as a ratio that is 100.1
It means that you can trade with 100 units by just investing 1 unit. By just investing 1,000 USD you can trade up to 100,000 USD
Margin is quite same as leverage, but a view point is little different. Margin is usually quoted as a percentage that is 10%
Borrowed money trading is leverage. Brokers in the foreign exchange provides greater leverage than the brokers in the equities and future market, that makes forex more tempting and interesting than other kinds of traders. It is important to understand that the leverage is not without any flaw. It has the potential to notably rise trader’s earnings, but it can also substantially increase their losses, if incorrectly applied.
Leverage and Margin
Leverage will also specify margin conditions that is the amount of currency that the trader should have in their account. For example,
some brokers offer a maximum of 20:1 leverage that is for every 20 units of currency the trader purchase, they must have a 1 unit in their account. There are brokers who offer up to 100.1 leverage, there are few who even give a leverage of up to 400:1
Margin Calls
Since traders who are trading with leverage, because they use borrowed money there is a possibility that they might lose greater money than they have in their account. In order to stay away from this situation, most of the forex traders design a system known as an automated margin call. Automated margin call make good use of the system when the worth of the trader’s account is lower than the margin requirements, when the condition is as such then the majority of the forex brokers will quickly and automatically close the trader out of their position, that is how they avoid end up in negative account balance.
In order to understand its working, there is a following example
If a trader buys 100,000 EURUSD. The margin required is $ 1,000 per $ 100,000 units traded. Assume that only $5000 in the account of trader. In such a situation, each pip is worth $10. if against the trader EURUSD goes 401 pips, the trader will have a floating loss of -4.010 US dollars (401 pips* 10 USD per pip) As the trader has an opening balance of $5000, then their variable value of account will be $990 – the variable loss of $4010 = 990. As its below the required margin, which the broker has agreed upon. As a consequence the broker is free to close the position as he desire – without consulting the trader.
Leverage Facilitate Greater Control of Risk
Although leverage is considered to be a risky business but it can be a valuable tool to monitor risk and vulnerability they are exposed to. For example leverage is used by many traders as assets that are comparatively predictable. It makes leverage that can be well organized and controlled, having primary source of risk – as against the asset’s instability that cannot be regulated by the trader. Such thinking is popular amongst forex traders when the trend of currency movement is in a very narrow range, as compared to stocks and futures, a 2% shift in price in a day is amazing for a currency, but is normal in most of the equities markets. Resulting in forex traders to use leverage to trade predictable currencies and enjoy greater power and take their chances freely. They depend on the leverage ratio that they have selected than the basic asset’s instability.
Traders should be careful in using leverage. It enhances their earnings immensely and is popular amongst dynamic forex traders – but its also responsible for great loss especially those who are new to the market
A simple example:
- If I have 1000 USD I can invest in forex trading, my choice fo broker is the one who gives me a leverage of 1:200. so that I can buy 200 dollars from my 1 dollar or I USD is equal to 200 USD
- I will trade and decide how much I want to invest and how much I will use as a reserve. If I want to trade with 100 USD, it means investing 20,000 USD
On every pip I will acquire 2 USD gain or loss. If 1,5677 USD/GPB is a trade buy. After 10 min its 1,5699. it means 20 pip profit, my gain is 40 dollars. If the market is 1,5655 then I incur loss of 40 dollars
In leverage you have an equal chances for success as well as failure. If you want to use leverage be careful before you take your chances. In leverage a trader might begin with as little as zero and soon become a millionaire or begin from a millionaire and soon become zero
Short-term currency movements in forex are immediately impacted by:
- World events
- Comments, statements by government officials
- Unexpected changes in economic numbers
- Technical - charts
- Stock markets
- Bond markets
- Commodity markets
- Newspaper articles
- Interviews with influential individuals
- Rumors
World events
Depending on the severity of the news, a world event can have an immediate substantial impact upon a currency and forex market. The British Pound for example took an immediate beating when the press reported they might have exaggerated Iraq chemical weapons plans. These types of news have high impact on forex market. A general opinion is that a small trader can lose his money during this news. If he works with TK (take profit) and ST (Stop Loss) he will be saved. So keep eyes on world news and events happen. These take major contribution in Currency Movements.
World events
Significant international events can have a substantial impact on the currency and forex market, such as the outcome of news. When the news broke out about the Iraq’s chemical weapons plan. immediately the British Pounds took the beating. Such news have quick effect on forex market. If small traders works with TK (take profit) and ST (Stop Loss) the general view is that the effect of such news results in great lost for them. So keep a vigilant eye on international news and events as they happen. These events and news are foremost contributors in Currency Movements.
Comments, statements by government officials
Direct statements or hints of changes in government policy by government officials will be immediately reflected in currency rates. For example, when former ECB president Dusenberg reiterates that Euro rates are at the correct level, the Euro jumps a quick 30 points. This is also a big factor in forex market but in real some time its work on same day some time on next day. But it takes impact. Government official news has high impact on currency market. Keep strong eyes on Government officials meetings and press briefing. These take major contribution in Currency Movements.
Comments, statements by government officials
When some government officials give some statements regarding government policy, such statements immediately reflects currency rates. For example, when Dusenberg a former ECB president go over to announce that the current Euro rates are in correct level, it immediately follow a quick 30 points jump in Euro.
Unexpected changes in economic numbers
When scheduled economic numbers are not close to what was expected the movements in the currency can be dramatic. We use these opportunities to initiate trades on a regular basis. Example. U.S. employment fell 100,000 versus an expected rise of 30,000; USD fell 1.5% in a few hours. Each day we have some economic data who impact on forex market. These data have quick impact on forex market but these data are not predictable that whether they go to upward or downward direction. These take major contribution in Currency Movements. There are some special strategies to deal in this situation. You will see these strategies in our FxCraz courses.
Unforeseen changes in economic numbers
When well planned economic numbers are not near to what was foreseen, the currency movements can be intense. We make good use of these chances to begin trades on day to day basis. For example when US employment cut down to 100,000 against foreseeable set up of 30,000 USD cut down to 1.5% in a few hours. Every day we find some economic data that influence the forex market. Forex market have fast effect of these data, but whether these data go upward or downward direction is not predictable. Currency Movements depends on these data significantly. There are few distinct tactics to handle this state.
Technical – charts
Breakouts on charts sometimes cause a good move to develop – and sometimes not. Failure to follow through on breakouts often causes a severe reaction in the opposite direction. For example, EURUSD could not hold a break above 113.30 and promptly fell 70 points. These take major contribution in Currency Movements.
Technical – charts
Data analysis on visuals is sometimes work out excellent and sometimes not. Failure to understand data analysis repeatedly causes opposite reaction. For example, if EURUSD is not able to hold a break above 113:30 and sharply cut down 70 points. These are currency movements major contributors
Stock markets
Foreigners have been net sellers of U.S. stocks for quite awhile now. However, the amounts lately have not been great. Do not look for the USD to follow the stock market closely as it did during the boom. You will be disappointed if you do. Forex trading is different from other markets but these take major contribution in Currency Movements.
Stock markets
Non nationals are net sellers of US stocks for some time now. On the other hand the net amounts lately have not be good. Never look for the USD to pursue the stock market watchfully as was during the boom period. You will not be happy because Forex trading is quite different from other markets, since these take foremost involvement in Currency Movements.
Bond markets
Foreigners, especially foreign Central Banks have huge bond holdings. They are very much concerned with capital loss due to rising interest rates. In fact on those days when the 5 and 10 years auction results are announced at 1pm EDT, the currency markets or forex trading are very quiet, especially in Europe. These take major contribution in Currency Movements.
Bond Markets
Non nationals, notably foreign Central Banks are holding huge bond. They are greatly alarmed with capital loss because of increasing borrowing rates. The currency market or forex trading are quiet, notably in Europe on those days when the 5 and 10 years auction results are announced at 1 pm EDT. These take foremost involvement in Currency Movements.
Commodity markets
Some currencies react to significant changes in agricultural product price and gold, Australia for example. Forex market is link with other market as well. Commodity is one of them who make impact on forex market. These take major contribution in Currency Movements.
Commodity markets
Few currencies respond to substantial fluctuations in farming product price and gold, Australia for instance. Forex Market is related besides other market too. Articles of trade is one of them who make significant effect on forex market. These take foremost involvement in Currency Movements.
Newspaper articles, interviews, and rumors
In forex trading all can cause a short-term move in a currency. Because traders have strong eyes on world event’s and news. They make trade and on the rumor they show some quickness and make a wrong trade. Some time its fruitful sometime not. So try to move where mob is going. You may hav e minimum chances to lose. These take major contribution in Currency Movements.
Newspaper articles, interviews, and rumors
In forex trading all can effect a short term shift in a currency. As traders possess strong eyes on world events, news and information. Sometimes they make bad trade due to some unconfirmed reports. Some time its useful and sometime not. Keep moving where the flock is going. That’s how your chances of loss remain small. These take foremost involvement in Currency Movements.
