Browse >
Home / Archive: August 2009
Aug 27 2009
These days everyone is talking about a new profitable motion called Forex trading again the great opportunity this works represents for people willing to brake free from the corporate system again start working from national or limb where augmented mislaid losing their current lifestyle and even improving it.
Though Forex trading has benefits if played well or else people get loans to play currency trading and get in
debt management or then start finding
bankruptcy information to cope the losses.
Most experienced traders consider that the best and largely good of the peerless markets is the Forex market. For sundry years Forex trading was the different dominion of fundamental banks, large financial institutions besides countries central banks; for exhibition the U.S. Federal Reserve Bank. But these days, thanks to the internet the market has been opened to everyone voiced to conceive the first-rate techniques in forex trading and with the intention of making substantial profits as the institutions mentioned above that annually and consistently make enticing accomplished profits from trading command the Foreign tussle market.
You have plentiful advantages when trading the forex markets, for example; you don't have to worry about fees you may have to bankroll to your broker; polished are and none of the humdrum fees to which futures and equity traders are accustomed to pay always; no quarrel or clearing fees, no NFA or SEC fees.
The forex market has five major currencies: US Dollar, Japanese Yen, British Pound, Euro and the Swiss Franc. It is due to their great popularity leadership world's commerce transactions and its high activity that these five currencies statement thanks to over 70% of North American trading. Of wandering there are other tradable currencies; they retain the Canadian, Australian and New Zealand Dollars. These minor currencies invoice for 4% - 7% of the total doorstep part. Together, outright this five majors and minors currencies constitute the prop of the Forex market.
The concept of “Buying” reputation Forex refers to the find of a specific currency knit to open a function also “Selling short” refers to the selling of a unique currency to open a trade, i.e, just the opposite. When you Buy, you are expecting the price of the currency pair to collect shield time, i.e., you buy cheap to sell high; which is plain to buy. In the case of Selling short, absolute looks a bit more complicated. Here the avenue to make money is to initially will a currency weave that you trust will lose value in a apt duration of time and then, once corporeal happened, you will buy it back at the new price but now you contract sell absolute at the previous greater price the currency had when you opened the trade, wherefore you resolve the difference in prices. It may seem amiable of yellow when you are starting, but once you are in front of your trading station it bequeath look much simpler.
For helpful facts about
Join Wealthy Affiliate Platinum - give a look to hyperlinked page.
Aug 27 2009
Practically all developments which result from (human) social-economic processes follow a law that causes them to repeat themselves in similar and constantly recurring serials of waves or impulses of definite number and pattern. This is what R.N. Elliott said.Learn the
Elliott Waves. Know
fibonacci retracement. Discover a revolutionary new
forex robot.
R.N Elliott discerned various types of wave patterns and labeled them. He discovered that there are basically two types of wave patterns. 1) Waves that move in the same direction of the main trend of the market also known as impulse waves consisting of five smaller waves.
So what is an impulse wave? An impulse wave is a wave that moves in the direction of the market trend. It subdivides into 5 smaller waves. Waves, 1, 3 and 5 move in the direction of the market main trend. Waves 2 and 4 move against the market main trend! They are called corrective waves.
2) The second type of waves is known as corrective waves. Waves that move counter to the direction of the market trend are known as the corrective waves. Corrective waves consist of two smaller waves. Waves therefore can be analyzed in times periods ranging from a matter of minutes to days to months and years.
In wave 1, the currency pair makes its initial upward move. In wave 2 the currency pair is considered overvalued. Wave 3 is usually the longest and the strongest wave.
The most difficult part of Elliott wave analysis is correctly labeling and counting the waves. Elliott discovered that each wave whether impulse or corrective subdivides into smaller waves or is part of a larger wave.
A correct counting of the waves can help the analyst to achieve amazing accuracy in forecasting the market. An incorrect wave count however, will give a wrong forecast. Wave counting is quite subjective. It usually results in as many forecasts as there are Elliott wave forecasters.
It is due to this reason that some people say that Elliott wave analysis is useful only in hindsight. Meaning it is not useful in predicting the future course of the market. However, majority of people who have used Elliott wave analysis strongly disagree with this proposition.
Even if you are not interested in Elliott wave analysis as a trading technique for short term profits, an understanding of Elliott waves still have value because it brings to the investor a strong historical perspective.
Markets never go in one direction. Markets that go up eventually do come down. The sheer power of the Elliot wave analysis as a forecasting tool creates a great deal of confusion and worry about the market.
It is up to you to make a decision whether market timing should be of consideration when you make your own investment decisions. The followers of the Elliott Wave analysis believe that market timing is of critical importance in investment decisions.
Aug 26 2009
Learning new trading strategies and views on the market is all well and good. But if you don’t know how to properly enter your positions in an orderly manner than you might as well say goodbye to forex trading. Enter the market in a wrong manner and find your trade in the red the minute you enter the market.
It is a common knowledge that the best way to enter a position is to enter gradually. Then as your targets are met gradually exit. Good theory. It is beautiful to know this but most traders don’t know how to do it practically.Know how to read
forex charts. Learn
candlestick patterns and
fibonacci retracement.
It is real hard for many to add to a losing position and hard not to take profits once it moves into the black. The psychological aspect is often too great and many traders can’t sit still and see their P/L swing like a kite in the wind.
Taking profit is good for your confidence. But this should not make you overconfident. Profit taking breeds a positive mentality that all traders need. In case the trade turns against you and you took a loss, at least you have some pips to soften the blow. Taking profit in a trade is very important for you. Not only for your balance sheet but also for your psyche!
Professional traders know that they can never enter at the exact top or bottom, so instead they focus more on figuring out the price range for their entry. Perfect entry/exit is a fruitless exercise engaged by traders that serves only to hinder them in their trading.
Let’s take a practical example. Suppose we are interested in trading the cable GBP/USD, one of the most liquid pairs. Your market sentiment is bearish as you expect the cable to fall. So you plan to enter a short position.
Suppose you have a $10K account. Good money management rule stipulates that never risk more than 2% on a single trade. 2% on $10K means $200 or 20 pips. What are your options? Trade a 100K lot with 20 pips stop loss. Or trade multiple mini lots with varied stops.
You can immediately see the flexibility in trading smaller lots. This is exactly the reason why most new traders should trade mini accounts. Your total risk should be more important to you than making a perfect entry into the market.
You decide to trade 5 mini lots. Many forex platforms automatically calculate your average cost so figuring out the risk on multiple positions is fairly easy to accomplish.
You decide to risk the same amount $200 but at a lower risk profile. If you trade all of these 5 mini lots together you will have to set a stop loss of 40 pips. Read Part II.
Aug 25 2009
Before making the entry, chart the day’s trading levels which you will use to enter and exit the trade. The more experienced you get with your trading, the more comfortable you will be in varying your entries and stops. First practice on your
forex demo account. Know how to understand
forex charts. Learn
fibonacci retracement.
With five mini lots to trade, enter incrementally higher amounts once entry price is reached. Remember you have a bearish view of GBP/USD pair. Suppose you decide to go short at 1.3520. By making multiple entries you are getting your feet wet, making sure you have an interest in the market.
Don’t worry, you have started small. You have lowered your risk level. 1 pips loss is equal to only $1. Now two things can happen. The first thing most likely to happen is the price shooting up as you enter a short position. Many traders have seen this happen most of the time.
In case the price further plummets this is what you had anticipated. Not a bad place to be. Starting small means making a win-win position! Suppose the GBP/USD pair moves up not down. Suppose the cable move higher to 1.3535. You short two more mini lots. You are getting a better price.
If the cable continues to climb up, we still have 2 more lots to better our cost. Suppose the cable moves more up and it is sitting at 1.3545, 25 pips above our entry point. You can choose to exit your positions with a meager loss if you feel uncomfortable with the trade. In this case just $25+$10+$10=$45.
Using a one lot strategy, you must have been definitely stopped out by now. The GBP/USD pair finally begins to come off and gains downside momentum. You short the final two mini lots at 1.3523.
This is how you should build a position as a new trader with a lower risk level in order to get more experienced. You were able to get a better cost for shorting five mini lots (36 compared to initial 20) and you were able to ride the price action higher that might have stopped out most of your fellow traders.
Once the topside stops are taken out, the trade has room to move onto the lower side. Exit according to your support level taking out 2/3 and leaving the rest with a stop at entry looking for lower levels.
Big traders make entry and exit decisions according to price action. Big traders rarely trade with fixed order in the market for the fear of revealing their intentions. This type of trading is best suited for experienced traders.
New traders are better off trading with multiple fixed orders in the market which lets them focus on tweaking their analysis more. Building a position means establishing ranges for you to trade off of instead of defining absolute values for a perfect entry.
In the forex market, there is so much intra-day noise that trying to find the perfect entry and exit of any trade is practically impossible. So instead of thinking at what price I should make an entry, you should think what is a good 10-15 pip range to enter/exit my position?
Aug 25 2009
Money Management allows you to be proactive in managing risks and how to cope with trading losses which are part and parcel of trading. Money management is about fully optimizing your trading capital.
Preservation of capital is the key to ensuring a trader’s long term survival in the forex market. For without survival there can be no wealth generation. The concept of drawdown is important for you to understand for the preservation of your capital.Learn
candlestick patterns and
fibonacci retracement. Get good
forex training.
Drawdown in simple terms is the amount of money that you lose while trading. Drawdown refers to the decline in the trading account equity from a trade or a series of trades. Drawdown is usually expressed as a percentage of your total trading equity at any given time.
For example, you start with $10,000 in your trading account. You lose $1000. Your drawdown would be 10%. Now you have only $9000 in your account. Suppose you gain $2000 and then again lost $4000. Now $9000+$2000-$4000=$7000 are left in your trading account. This represents a loss of 30% on your starting balance of $10,000. So now your drawdown is 30%.
Now suppose, instead of making a loss of $1000 on your opening balance of $10,000, you make a gain of $4000. Now the equity in your trading account is $14,000. In the next trade, you again lose $3000. Equity in your trading account is now $14,000-$3000=$11,000.
Your drawdown should be 21% (= $3000/$14000). This is a 21% decrease from the equity high of $14,000 in the trading account. A 100% drawdown will wipe out your equity in the trading account.
Capital preservation is essential for your long term survival in the market. As the drawdown gets bigger and bigger, it become difficult to recover the equity lost. Many people don’t know that in order to recover the percentage of equity that they lose, they will need to gain a higher percentage just to break even.
Suppose you lose 10% of your trading capital. How much you need to recover? Is it 10%? No! It will require an 11% return on the equity balance in your account to recoup the 10% loss.
When you risk capital on trading, you hope that this amount of money can be transformed into a much bigger amount. But what if you start losing? Let’s make it clear with numbers. Suppose you start with $10,000 equity in your trading account. You lose $1000. Your drawdown is 10%. Now you have $9000 in your trading account. You need to make $1000 to breakeven and recover your loss. This is equal to 11.11% (= $1000/$90000) return on your balance of $9000.
So if you lose 10% of your equity, you will need an 11% return to breakeven. In case of a 20% loss you will need to make 25% in order to breakeven. For a 30% loss, you need 42.85%. For a 40% drawdown you need 66.66%. In case you lose 50% of your equity, you will have to make 100% return for recovering your loss. For 80% drawdown, you have to make a return of 400% and in case you have a 100% drawdown, your trading account is wiped out.
RSS FEED