segunda-feira, 31 de março de 2008

Forex Trend Trading: The Early Bird Gets the Cash

Trend trading is where the big money is in the Forex market. While there is money to be made in counter-trending markets, there is only so much that can be made when the market is essentially moving sideways.

Trading when the market trends is where there is the opportunity to make (and if you're on the wrong side without a stop-loss, possibly lose) major money.

A market goes into a trend anytime there are more buyers than sellers or more sellers than buyers over a prolonged period of time. This trend can be with prices going up (more buyers than sellers) or down (more sellers than buyers). There is money to be made regardless of which way the trend goes, since all trading is done with pairs.

Figuring out the best way to trade trends involves knowing extensive technical analysis, so having a proven and profitable trading system helps immensely. Without a prove and profitable trading system, it's very unlikely that over the long run, you will profit from Forex trend trading.

While there are all sorts of technical tools for analyzing trades, the simplest way to spot a trend, or what might be the beginning of a trend, is to watch and see if each time period's high keeps getting higher, indicating the market is steadily trending up in price, or if each period's low continues to get lower, indicating a downward trend in price.

If you decide to use bands to help your trend trading, remember that a basic rule when using bands is to wait and see when the high price penetrates the upper band. This is your signal that an upward trend is about to start. You want to buy when that price penetrates the upper band and go long, with a trailing stop loss. There's a good chance the market will make an upward trend that a long position can profit from.

When the price penetrates the lowest band of your corridor, you want to sell and go short, watching the market for any confirmations on any further trends, counter-trends, or pivot points that indicate a trend reversal.

The basic goal of trend trading strategies is always the same. While you don't want to be the first to test the market, once a market trend reveals itself: join the move early!

Then hold your position, making as much money as possible, until the trend reverses and then get out. This is where using a trailing stop loss can help maximize the profits you earn from any market movement.

Trend trading is where the big money is at, and recognizing and getting in on trends early will make you a very happy (and wealthy) trader in the Forex market.

domingo, 30 de março de 2008

Is Forex Trading Essentially Just Gambling?

Forex trading is considered by many to be nothing more than gambling. After all whenever you take a position in a particular currency pair, you are essentially betting on the price to either go up or down by taking a long or short position. So is forex trading really just another form of gambling?

Well to the uneducated person or the inexperienced forex trader, it would appear to be very easy to arrive at this conclusion, particularly if you start watching the chart of any currency pair and observe how it moves in a seemingly random fashion.

However many large financial institutions around the world, and indeed individual traders, make consistent profits from trading forex markets, so you can be pretty sure that they're not gambling away huge amounts of money every day at random.

There are of course many different ways you can give yourself an edge trading forex. The main way is of course through technical analysis. This is basically the study of charts and technical indicators to identify trading patterns and help you find potentially high probability trading positions.

They work so well because traders all over the world watch the same charts and the same technical indicators and see the same patterns repeating themselves over and over again. This allows them to take positions knowing that the price will most probably behave the same in this instance as before.

For example if the GBP/USD has found support at say 1.9600 three times before, and does so once more on this occasion, then many traders will have also noticed this and will be encouraged to take a long position, and in many ways it becomes a self-fulfilling prophecy.

Furthermore with the advancement of technology these days so many people can quickly and easily track any technical indicators they want thanks to the internet so technical analysis has become an even more valid way of trading forex.

So while it is true that on a very short-term basis, there is an element of randomness in the markets, if you look at the longer-term charts and use technical analysis to analyse the markets and make trading decisions, you can place the odds of winning firmly in your favour.

Therefore to answer the original question I would say that forex trading is definitely not another form of gambling because with a bit of education you can become an accomplished technical analyst and determine high probability trading positions where you win far more than you lose.

sábado, 29 de março de 2008

Charts for the technical analysis

Kinds of prices and time units. Charts for the technical analysis are being constructed in coordinates price (the vertical axis) time (the horizontal axis). The following kinds of currency prices represented on charts are being distinguished on Forex:
* open - a price at the beginning of a trade period (year, month, day, week, hour, minute or a certain amount of one from these units);
* close - a price at the end of a trade period;
* high - the highest from prices observed during a trade period;
* low - the lowest from prices observed during a trade period.

Providing the technical analysis one uses charts for different time units  from 1 year or more till 1 minute. The bigger is a time unit applied for the chart plotting the bigger is a time span to analyze price movements and to determine the major trend by means of the chart. For the short trading charts for less time units are more suitable.

Line chart. The line chart is plotted connecting single prices for a selected time period. The most popular line chart is the daily chart. Although any point in the day can be plotted, most traders focus on the closing price, which they perceive as the most important. But an immediate problem with the daily line chart is the fact that it is impossible to see the price activity for the balance of the period as well as gaps  breakups in prices at joints of trade periods. Nevertheless, line charts are easier to visualize. Also, technical analysis goes well beyond chart formation; in order to execute certain models and techniques, line charts are better suited than any of the other charts.

Bar chart. The bar chart consists from separate histograms. To plot a histogram in coordinates price  time the points responding to high, low, open and close prices for a time period analyzed should be marked on the one vertical bar. The opening price usually is marked with a little horizontal line to the left of the bar; and the closing price is marked with a little horizontal line to the right of the bar. Bar charts have the obvious advantage of displaying the currency range for the period selected. An advantage of this chart is that, unlike line charts, the bar chart is able to plot price gaps. Hence, it is impossible to see on a bar chart absolutely all price movements during the period.

Candlestick chart. The candlestick chart is closely related to the bar chart. It also consists of four major prices: high, low, open, and close. In addition to the common readings, the candlestick chart has a set of particular interpretations. The latter is possible thanks to the convenient visual observation of that chart.

The opening and closing prices form the body (jittai) of the candlestick. To indicate that the opening was lower than the closing, the body of the bar is left blank. Current standard electronic displays allow you to keep it blank or select a color of your choice. If the currency closes below its opening, the body is filled. In its original form, the body was colored black, but the electronic displays allow you to keep it filled or to select a color of your choice. The intraday (or weekly) direction on a candlestick chart can be traced by means of two "shadows": the upper shadow (uwakage) and the lower shadow (shitakage). Just as with a bar chart, the candlestick chart is unable to trace every price movement during a period's activity.

sexta-feira, 28 de março de 2008

Forex Trading Tools: Timeless Forex Trading Wisdom And Strategie

The foreign exchange market, or Forex market, is an around-the-clock cash market where the currencies of nations are bought and sold. Forex trading is always done in currency pairs. For example, you buy Euros, paying with U.S. Dollars, or you sell Canadian Dollars for Japanese Yen. The value of your Forex investment increases or decreases because of changes in the currency exchange rate or Forex rate. These changes can occur at any time, and often result from economic and political events. The purpose of this article is to present trading wisdom and strategies from some of the world's trading greats.

Trading System - According to Howard Abell: The trading system gives the trader the ability to control his or her emotional states rather than allowing them to control him. A system is a disciplined method for organizing dynamic, ever-changing market phenomena.

Risk Control - According to Paul Tudor Jones: If I have positions going against me, I get right out; if they are going for me, I keep them... Risk control is the most important thing in trading. If you have a losing position that is making you uncomfortable, the solution is very simple: Get out, because you can always get back in.

Psychological Makeup - According to Leo Melamed: You learn to distinguish the good traders from the bad, the successful techniques from the unsuccessful, and the good habits from the faulty. You also learn to distinguish the lover from the fighter, the winners from the losers, the serious from the frivolous, the cerebral from the superficial, and the friend from the foe. But above all, you learn that the psychological makeup of the trader is the single most critical element of success.

The Easy Middle - According to Randy McKay: The beginning of a price move is usually hard to trade because you are not sure whether you are right about the direction of the trend. The end is hard because people start taking profits and the market gets very choppy. The middle of the move is what I call the easy part.

Cut Back Trading Size When Losing - According to Bill Lipschutz: When you are in a losing streak, your ability to properly assimilate and analyze information starts to become distorted because of the impairment of the confidence factor, which is a by-product of a losing streak. You have to work very hard to restore that confidence, and cutting back trading helps achieve that goal.

Have A Predetermined Stop - According to Bruce Kovner: Whenever I enter a position, I have a predetermined stop. That is the only way I can sleep. I know where I am getting out before I get in. The position size on a trade is determined by the stop, and the stop is determined on a technical basis.

Accept the Risk - According to Mark Douglas: To whatever degree you haven't accepted the risk, is the same degree to which you will avoid the risk. Trying to avoid something that is unavoidable will have disastrous effects on your ability to trade successfully.

Making Mistakes Is Part of Business - According to Bruce Kovner: Michael Marcus [another top trader] taught me one other thing that is absolutely critical: You have to be willing to make mistakes regularly; there is nothing wrong with it. Michael taught me about making your best judgement, being wrong, making your next best judgement, being wrong, making your third best judgement, and then doubling your money.

Trading Forex on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite.

quinta-feira, 27 de março de 2008

Investing In The Forex Market Using A Hedge Strategy

The FreedomRocks System is a long-term Forex investment strategy. As you understand the profit components explained below, the reasons for this long-term viewpoint will become apparent. As you read the descriptions of each component below, recognize that the first 2 components will virtually always be profitable. This fact alone puts FreedomRocks in a class by itself.

The FreedomRocks Investment Strategy represents the state-of-the-art in technology and financial portfolio modeling. It requires no charts or graphs, it calculates what you need to do and when you need to do it, it structures your trading so you will buy low and sell high, and it allows you to select the amount of daily interest you will earn dependent upon your tolerance for risk. Most importantly, you'll place all the trades in your own brokerage account, so you will always have 100% control over your own money and accounts.

Investors using the FreedomRocks strategy realize profits in 3 very distinct ways as illustrated by the following formula:

Trading (Buying Low / Selling High) - Always profitable

FreedomRocks investors will make (on average) 2-5 trades per week (depending on overall market volatility). Since we always sell at a higher rate than we buy, those trades will always be profitable.

Interest - Virtually always profitable

Barring any significant shifts in world interest rates, FreedomRocks investors will net a positive rate of interest each day on their portfolios. You can determine, in advance, the approximate amount of daily interest you will receive by using our Portfolio Allocator (based upon today's approximate interest rates). This money is deposited into your account by your broker each day. You are normally paid triple the daily interest amount on Wednesdays to compensate for the weekends.

Market Fluctuation - Can be positive or negative

This component is completely subject to the normal (and sometimes extreme) movements in the Forex market. It cannot be predicted with any degree of accuracy. In the long run, statisticians would tell us this should average out to zero. In the short run, however, market fluctuations can and will cause extreme movements (in both directions) in your account equity. We provide guidelines to help minimize these movements, but there are no guarantees. Over time, Trading profits and Interest profits will continue to build. The Market Fluctuation will either be positive or negative.

Features of FreedomRocks

*Structures your trading so you buy low / sell high
*Has no charts or graphs to read
*Tells you exactly what to do and when to do it
*Allows you to practice making live trades in the market, without risking a penny
*Depending upon your tolerance for risk, it allows you to select virtually any interest rate you desire on your portfolio
*You place all the trades in your account so you have 100% control over your money

quarta-feira, 26 de março de 2008

Earn money with your Blog

BloggerWave is a site where blogs and companies if find. Its possible if to announce products and services through the act of contract services of summaries.
For owners of blogs it is a good tool where is possible to gain money. It is good for not forgetting, that when writing summaries for the Bloggerwave, its blog will be able to have a increment in visits.

I recommend Bloggerwave. Sure there are more established sites, but Bloggerwave is a valid solution to make money blogging, even if it is just to keep options open.

Learn Forex Trading The Right Way!

Forex is nothing but the foreign exchange market where money itself is being bought and sold. Learning Forex trading means understanding what forex is and how to make use of the forex market to earn good profits by investing proper amounts. In order to learn forex the following are the things that are to be understood:

First off, in the Forex market there are three levels. We have the brokerage accountants, the real accountants and the students. The brokerage accountants are the brokers who let the buyers and the sellers to trade there currencies. They mediate between two firms or individuals. They are the Market Makers who will set the currency values and will help the traders to trade. The real accountants are the clients who are investing in the market in order to try to get some profits from the same. The students are beginners who are trying to understand the market with the help of training courses, simulators and the like.

Forex Market should not be confused with the stock market. Stock market is one where users deal with stocks and try to make profits with the increase in the stock values, forex deals with making profits with the increase in the currencies. It is more of an objective market. In the forex market if the participants want to change or manipulate the values of the currencies for certain purposes, they can do so by operating with billions of dollars or any other currency. Since it operates on such high values the manipulation of a single participant in the market is not a possibility. But the liquidity of this market allows both sides of traders to open and close the situations. The time that a trader will occupy a position is highly arbitrary and is dependent upon the strategies that he follows through out the trading.
It is also important to note the fluctuations in the currency values.

Another important term which we'll come across when we are learning about forex trading is Margin Trading. Margin Trading is where traders trade with borrowed amounts. It allows traders to start trading with lesser capitals than what is normally allowed. It reduces the overhead expenses of having to transfer money and enables the traders to open there positions with lesser amounts of U.S dollars thus buying and selling other currencies. In forex it is not necessary to actually buy some currencies to sell it later. It is enough for the traders to actually open the positions for buying and selling without having any. But even to open positions it is necessary to invest a certain amount in dollars. The major currencies that are traded in the forex are euro, yen, pound, franc all of which are traded against dollars.

These are the basics that need to be understood to learn forex.

terça-feira, 25 de março de 2008

Forex Money Management

Money management is a critical point that shows difference between winners and losers. It was proved that if 100 traders start trading using a system with 60% winning odds, only 5 traders will be in profit at the end of the year. In spite of the 60% winning odds 95% of traders will lose because of their poor money management. Money management is the most significant part of any trading system. Most of traders don't understand how important it is.

It's important to understand the concept of money management and understand the difference between it and trading decisions. Money management represents the amount of money you are going to put on one trade and the risk your going to accept for this trade.

There are different money management strategies. They all aim at preserving your balance from high risk exposure.

First of all, you should understand the following term Core equity
Core equity = Starting balance - Amount in open positions.

If you have a balance of 10,000$ and you enter a trade with 1,000$ then your core equity is 9,000$. If you enter another 1,000$ trade,your core equity will be 8,000$

It's important to understand what's meant by core equity since your money management will depend on this equity.

We will explain here one model of money management that has proved high anual return and limited risk. The standard account that we will be discussing is 100,000$ account with 20:1 leverage . Anyway,you can adapt this strategy to fit smaller or bigger trading accounts.

Money management strategy

Your risk per a trade should never exceed 3% per trade. It's better to adjust your risk to 1% or 2%
We prefer a risk of 1% but if you are confident in your trading system then you can lever your risk up to 3%

1% risk of a 100,000$ account = 1,000$

You should adjust your stop loss so that you never lose more than 1,000$ per a single trade.

If you are a short term trader and you place your stop loss 50 pips below/above your entry point .
50 pips = 1,000$
1 pips = 20$

The size of your trade should be adjusted so that you risk 20$/pip. With 20:1 leverage,your trade size will be 200,000$

If the trade is stopped, you will lose 1,000$ which is 1% of your balance.

This trade will require 10,000$ = 10% of your balance.

If you are a long term trader and you place your stop loss 200 pips below/above your entry point.
200 pips = 1,000$
1 pip = 5$

The size of your trade should be adjusted so that you risk 5$/pip. With 20:1 leverage, your trade size will be 50,000$

If the trade is stopped, you will lose 1,000$ which is 1% of your balance.

This trade will require 2,500$ = 2.5% of your balance.

This's just an example. Your trading balance and leverage provided by your broker may differ from this formula. The most important is to stick to the 1% risk rule. Never risk too much in one trade. It's a fatal mistake when a trader lose 2 or 3 trades in a row, then he will be confident that his next trade will be winning and he may add more money to this trade. This's how you can blow up your account in a short time! A disciplined trader should never let his emotions and greed control his decisions.


Trading one currnecy pair will generate few entry signals. It would be better to diversify your trades between several currencies. If you have 100,000$ balance and you have open position with 10,000$ then your core equity is 90,000$. If you want to enter a second position then you should calculate 1% risk of your core equity not of your starting balance!. Itmeans that the second trade risk should never be more than 900$. If you want to enter a 3rd position and your core equity is 80,000$ then the risk per 3rd trade should not exceed 800$

It's important that you diversify your prders between currencies that have low correlation.

For example, If you have long EUR/USD then you shouldn't long GBP/USD since they have high correlation. If you have long EUR/USD and GBP/USD positions and risking 3% per trade then your risk is 6% since the trades will tend to end in same direction.

If you want to trade both EUR/USD and GBP/USD and your standard position size from your money management is 10,000$ (1% risk rule) then you can trade 5,000$ EUR/USD and 5,000$ GBP/USD. In this way,you will be risking 0.5% on each position.

The Martingale and anti-martingale strategy

It's very important to understand these 2 strategies.

-Martingale rule = increasing your risk when losing !

This's a startegy adopted by gamblers which claims that you should increase the size of you trades when losing. It's applied in gambling in the following way Bet 10$,if you lose bet 20$,if you lose bet 40$,if you lose bet 80$,if you lose bet 160$..etc

This strategy assumes that after 4 or 5 losing trades,your chance to win is bigger so you should add more money to recover your loss! The truth is that the odds are same in spite of your previous loss! If you have 5 losses in a row ,still your odds for 6th bet 50:50! The same fatal mistake can be made by some novice traders. For example,if a trader started with a abalance of 10,000$ and after 4 losing trades (each is 1,000$) his balance is 6000$. The trader will think that he has higher chances of winning the 5th trade then he will increase ths size of his position 4 times to recover his loss. If he lose,his balance will be 2,000$!! He will never recover from 2,000$ to his startiing balance 10,000$. A disciplined trader should never use such gambling method unless he wants to lose his money in a short time.

-Anti-martingale rule = increase your risk when winning& decrease your risk when losing

It means that the trader should adjust the size of his positions according to his new gains or losses.
Example: Trader A starts with a balance of 10,000$. His standard trade size is 1,000$
After 6 months,his balance is 15,000$. He should adjust his trade size to 1,500$

Trader B starts with 10,000$.His standard trade size is 1,000$
After 6 months his balance is 8,000$. He should adjust his trade size to 800$

High return strategy

This strategy is for traders looking for higher return and still preserving their starting balance.

According to your money management rules,you should be risking 1% of you balance. If you start with 10,000$ and your trade size is 1,000$ (Risk 1%) After 1 year,your balance is 15,000$. Now you have your initial balance + 5,000$ profit. You can increase your potential profit by risking more from this profit while restricting your initial balance risk to 1%. For example,you can calcualte your trade in the following pattern:

1% risk 10,000$ (initial balance)+ 5% of 5,000$ (profit)

In this way,you will have more potential for higher returns and on the same time you are still risking 1% of your initial deposit.

segunda-feira, 24 de março de 2008

Discover Forex Trading Secrets With These Resources

If you are serious about pursuing investments in the realm of the foreign exchange market, then you want to learn as many tricks of the trade as possible. Fortunately, uncovering Forex trading secrets is not as difficult as you may think. Here are some suggestions for resources that will help you learn some helpful tips and tricks in very little time.

One of the key things about building your arsenal of Forex trading tools is to understand that some of them will be online resources while others will involve more conventional avenues. Don't tend to think that one is a good substitute for the other. Plan on developing a working list of diverse resources to help you in learning how to trade Forex.

A good place to begin learning a few tips and secrets is by purchasing a few books on the subject of foreign exchange. Forex trading books are loaded with background and ideas that may be just what you need in order to get very enthusiastic about the whole idea of trading. Books also have the advantage of being accessible even if an electronic device is unavailable.

Along with printed matter, don't forget to ask your dealer about some basic Forex trading secrets. Often, this will yield at least some good ideas to keep in the back of your mind when deciding whether to initiate a given deal or not. Remember that a broker dealer has a wealth of experience to call upon, and there is no reason why you should not pick up on some of that experience. Most dealers are happy to share a few tips with a new investor, since it helps to build rapport and increase the chances of doing business together.

Networking with other Forex investors is also a good way to learn about resources and pick up some tips that could allow you to make quite a profit. You can find other investors at business-related events in the community, as well as participating in online forums that cater to Forex trading tips and strategies. As you come across some good ideas from one source, don't forget to share them with others on the forums. This will help you cultivate the reputation of being up front, which in turn will make it easier for others to respond with helpful suggestions when you ask a question.

Searching the Internet for helpful articles about Forex trading may also provide some useful ideas as well. There are a number of web sites today that are devoted to the subject of Forex trading, so finding plenty of content on the web will not be difficult at all. Look for sources that offer links to other resources, or include a bibliography at the end of the article. These tools will help you continue to find more resources that will yield even more useful trading secrets.

domingo, 23 de março de 2008

Consider Day Trading Training To Gain Market Advantage

There are several markets for day trading like currency, stocks, futures and commodities. Many people have heard the buzz about day trading. They have all heard the stories of fortunes being made and lost. With day trading accessible to anyone with a phone or Internet connection, along with the lure of tax free trading it is becoming more popular then ever. With its ever increasing popularity, many more people are asking themselves, what is day trading? Day trading is a style wherein traders either sell all long positions are sold or cover short positions at the end of the trading day.

Some Facts You Should Know In Day Trading:

1. Day traders typically suffer extreme financial losses in their first months of trading.
2. A disciplined day trader can make more money faster day trading, and with less risk, than the average stock trader.
3. In day trading, you usually finish the day with cash in hand, to avoid holding any risks.
4. Most of the day trading systems have about one to three trades each day.
5. One of the biggest enemies of a trading system is transaction costs.

Some Benefits Of Day Trading:

1. One of the benefits of day trading is that since the positions are closed at the end of the trading day, any sudden news of events doesn't affect the opening prices of trading.
2. The main advantage of day trading is that one's stock positions are not held beyond the current trading day.
3. Secondly, day trading allows for lesser speculation as the trader may not see a lot of variation in the values during a span of a day.
4. Awareness regarding day trading stock picks allows a day trader to gain maximum returns from the market.

Some Tips For Day Trading:

1. Like all broker-dealers, day trading firms must register with the SEC and the states in which they do business.
2. One point to remember in stock market day trading is that there is a limit on the gains from a single share.
3. If you plan to invest your money in day trading, make sure you do not put in all your hard earned savings in one go, as this might prove to be quite dangerous for you.
4. In order to use several markets simultaneously, good trading software should be able to open several windows by dividing the screen.
5. Follow the day trading system rule by remembering the number of open positions.

The Forex Trading;

Forex Trading generates a volatility of 500 versus 60 to 100 in liquid stocks, and there are no transaction fees or commissions in the trading of currencies. Day trading, despite differences in times zones throughout the world, is also popular because the forex market remains open 24 hours a day. There are many forex-trading companies that can train you for day trading so that your transactions are not reduced to gambling.

Trading Software:

Good trading software could cost as much as $1,000, but it ensures high-quality service by helping the user to develop and check indicators under different scenarios. Trading software is not only important but necessary to survive in today's competitive market.

Some Trading Media:

1. While there are many day traders who do their trading using only the computer, there are others who trade using telephone and mobile phones.
2. The computer age and the Internet revolution are the foundation for electronic day trading.

Day Traders Should Be:

1. A person is considered a day trader when they can accomplish four or more day trades in a five business day period and has two unmet day trade calls in 90 days.
2. In day trading, the trader does not hold stocks until the next day; instead dispose it off by the end of the day.
3. Day traders are more particular with buying and selling not the bottom line.

sábado, 22 de março de 2008

A Few Forex Basics

The term Forex is short for foreign currency exchange market, and it refers to the direct trading of foreign currencies. Forex is actually a virtual network of currency dealers who are connected by means of telecommunications. This interbank market was originally created in 1971 when international trade changed from fixed to floating exchange rates. The Forex market is open 24 hours a day and the currency exchange operations are continued through working days of the week.

Forex is a worldwide market, so when you are sleeping in the United States, dealers in Europe can be trading currencies with their Japanese counterparts. It is the largest financial market in the world, with the equivalent of over $3-4 trillion changing hands every day whereas traded volume on the stock markets is only 500 billion US dollars. Forex is part of the bank-to-bank currency market which is known as the 24-hour interbank market.

Forex trading is becoming more popular every day and it is an exciting and fast-growing marketplace. Transactions are conducted within seconds online and the markets move quickly and take new directions all the time. Forex markets are not based in one place meaning there isn't some large building on Wall Street where a load of people shout and waive dollar bills in an effort to get other people to buy them. Trading System Software to help investors in the foreign exchange market has been around for a long time, but just recently it has become extremely popular.

Trading Forex has become really accessible for the private investor because of the World Wide Web, and can be a recession proof business, but it must be noted that Forex is not a means of getting rich quick and executing foreign exchange orders with this aim in mind could well end in financial hardship. Trading in online Forex means that when you are investing in foreign exchange, you are buying one currency and at the same time selling another currency. Trading occurs over the telephone and through computer terminals at thousands of established locations, as well as within home-based trading businesses worldwide.

This article contains fairly basic information, but then I am sure there are many people in the world who don't even know what Forex is, so I haven't gone into any complex strategies here. In the foreign exchange trading markets there is always a risk that a trade will turn against you, and I must stress that the best way to learn the Forex market is to get some experience with live hands on trading. The single best way to learn how to trade in the Forex markets is to have a go.

sexta-feira, 21 de março de 2008

Forex Trading System - A Key To Successful

Losing money in forex?

Every one has his days when no matter how well he has planned out his trades, he may find some of his trades not performing to what is planned. It is only natural for one to feel upset, but for the follower of a forex trading system, making money or losing money from that trade is not the paramount objective.

Why is this so?

For the trader who employs a forex trading system, he can still face the losing trade with a smile, because he has had followed through the trading signals in a disciplined way, and it is only when a trader follows a system, he can be sure of keeping his losses small and to live to trade again another day.

By using a forex trading system, the trader can have a cool head, and can face his trades rather unemotionally. He can execute his trades following pre-determined price levels of initial stop loss, trailing loss and computed and projected price profit.

He knows his tolerable level of loss, his threshold of pain - and of course, his risk to reward ratio even before he trades.

Now when a trader has a trading system and follows through the trading plan, making profits is a natural result when he makes a correct trade. But when his trade is wrong, his forex trading system will very quickly show him that the direction of his trade is wrong, so that he is out of the game fairly quickly.

I am often flabbergasted at some very broad claims of some traders who condemn day trading systems and relegate them to the garbage bin. When you look at forex trading systems, review them quickly by peer recommendation whenever possible. By peer recommendation, I mean you can ask existing traders their experience on the trading system, and how they are doing with it. Posting to the numerous reliable trading forums will allow you to receive some independent reviews fairly quickly. At the same time, my personal experience, and that of many other professional traders is that day trading can be profitable, though it is never easy to day trade. Otherwise, how is it that so many day traders are able to earn their income day trading the short swings of the market daily for a living? So it is important for you to have a broad view of forex trading systems if you are contemplating of learning or purchasing any trading system that relates to day trading.

If you ever wish to trade successfully, whether you day trade or swing trade, it is important that you have a trading system that will allow you to approach trading in a disciplined manner. It is only when you are a disciplined trader that you can see consistent large gains and small losses.

quinta-feira, 20 de março de 2008

Good and Bad of Online Trading

You can do just about anything online these days as you may already know. You can can do your shopping, banking, and even dating online if you so choose to do. Trading stocks online has really exploded in recent years. Investors love having the freedom to check on their stocks anytime they choose. Its more flexible than trying to use a broker in person or over the phone, though they still have their place in the investing world.

In fact, what youll find is that almost all brokers these days will have online trading options for their clients as well. Prices for online trading are typically lower as there is fierce competition among internet trading companies to grab the masses.There are certainly some benefits to online trading but there is a downside as well. Penny stocks are great for online trading.

One of the drawbacks is the learning curve if you are a new investor. The advantage of talking directly to a broker is he or she can explain things very quickly and share valuable wisdom and experience. Jumping into the stock market ocean can be very risky if you dont have an experienced life guard nearby. Your best defense in this situation is becoming as educated as possible before investing any large sums of money. Also, use practice trading accounts until you feel comfortable.

A broker usually has live feeds and constant internet connectivity to stay on top of the market constantly. You may not have this kind of connectivity all day every day, which is very necessary for some types of investments. You need to be ready to make a trade on a moments notice sometimes. You need to be sure that you can call and speak with a broker if this is the case, using the online broker. This is true whether you are an advanced trader or a beginner.

It would probably be wise to choose an online broker thats been around for awhile and would be able to offer sound advice in the event that you did need to talk to a real person.

Dont mean to scare you here. Of course online trading can be a wonderful tool if you know what youre doing. It also depends on the level of risk of the investment. In some cases you may be watching stocks day to day and would find online trading accounts very useful. Perhaps for a long term retirement investment that is pretty safe you wouldnt need to check up on it that much. Learn and practice as much as possible before starting online trading.

quarta-feira, 19 de março de 2008

Forex News Trading Tip: How To Trade The FOMC

The Federal Open Market Committee (FOMC) decision on interest rates is one of the most powerful market movers in the forex market and when the markets move traders trading the news have the opportunity to make money.

The FOMC sets the discount rate or federal funds rate and because interest rates are set higher to induce foreign investment and therefore fight inflation during times of prosperity and lower to increase spending during recessions they are one of the main factors influencing the strength of the dollar.

Economic indicators play a huge role in the forex trading especially for traders who approach the market through fundamental analysis and trade the news. The Federal Open Market Committee (FOMC) interest rate decision is one of the most influential indicators for the US dollar and you can be sure after the news is released there is going to be volatility in the markets and volatility is what traders thrive on.

I have heard many 'traders' say never to trade the news and especially the FOMC. Although the FOMC interest decision is a news event and can fall under the category of through fundamental analysis I am a technician and I believe that charts always price everything in. However I guarantee the market does not know what exactly the Feds comments and decision will be, therefore it is not priced in yet and this will cause the markets to react when they do find out. This is confirmed by the change in price after the decision and the continuation in the days following.

I have been trading the Fed for eight years now and yes I have been burnt in the past and that is exactly how I have come to learn how to trade it properly. The most common pattern to trade the Fed is the whip-saw. But do not be fearful of it, embrace it. Here is how it happens, first there is a large spike one direction (traders come in and follow that direction)followed by a large spike in the opposite direction (those same traders now sell their first position at a loss and reverse their position - this is when I take a position in the direction of the original move)followed by an extended move back in the direction of the original spike (all the emotional trades are left sick to their stomachs) and I am left holding a very nice position setting myself up to capture a larger than average market move.

If this pattern does not play out exactly as outlined I stand on the sidelines and do not trade at all. Because the markets are moving fast in the period following the FOMC interest rate decision I am watching a very short time frame, mainly the one and five minute charts.

terça-feira, 18 de março de 2008

How to Find Top Forex Trading Software

One of the great things about trading today is that there is software that works for just about every imaginable type of investment strategy. When it comes to Forex trading, there are plenty of different types of Forex trading software to choose from. Here are some tips to help you pick the software that will work best for your situation.

When looking for quality Forex trading software, a good place to begin is by talking with your broker or dealer. Chances are the firm has some specific recommendations about software packages that would be of interest to you. Because some types of trading software are more ideally suited to specific investments, the dealer may have some ideas that will not only help you manage your Forex assets, but also provide some assistance with other types of investments as well. After getting a few recommendations from your dealer, check each one out and see what you think.

Another possibility is to get some ideas for Forex software from some of your fellow investors. Often, you can visit online message boards, post your query, and receive several excellent recommendations. One of the advantages of this approach is that you will often also get some ideas on software packages to avoid, which can also be very helpful.

Of course, you can always to your own online search for Forex trading software packages. If you decide to go this route, look for products that offer a free downloadable version that you can test drive. Several producers offer free editions with limited features that will work for a period of seven to ten calendar days before becoming inoperable. This will give you the chance to test drive the product before you make a purchase.

When choosing a type of Forex trading software, make sure you know what features will be of most interest to you. It is sometimes helpful to compile a short list of features you must have, along with a listing of features that you would like to have included as well. Using these two lists as your guide, you can search for the right Forex trading software options through these several avenues, and find exactly what you want.

Most of all, you really need to make sure that the software solution will work for you. If you go to Google or a good review site, you will find many different reviews about the software in question, what its benefits are, and who will benefit most from it (a good site is at the bottom of this article). If you have any doubts, make sure to do some research!

segunda-feira, 17 de março de 2008

How to Choose the Right Strategy to Invest in the Forex Market

The currency trading (FOREX) market is the biggest and fastest growing financial market on earth. More than 2.5 trillion dollars is traded daily. The participants in this market are banks, organizations, investors and private individuals. The market consist of the currencies of various countries. For example you buy Euro, paying with US dollars, or you sell Japanese Yens for Canadian dollars.

How does one profit in Forex?

Obviously, buy low and sell high. The profit potential comes from the fluctuations (changes) in the currency exchange market. The nice thing about the FOREX market, is that regular daily fluctuations, say - around 1%, are multiplied by 100.

How risky is Forex trading?

You cannot lose more than your "margin" (your initial investment) You may profit unlimited amounts, but you never lose more than what you initially risked. However your should only trade with risk capital in the Forex market.

What is FreedomRocks?

FreedomRocks is a long-term Forex investment strategy. As you understand the profit components explained below, the reasons for this long-term viewpoint will become apparent. As you read the descriptions of each component below, recognize that the first 2 components will virtually always be profitable.

Investors will realize profits in 3 very distinct ways as illustrated by the following formula:

Trading (Buying Low / Selling High) - Always profitable

Investors will make (on average) 2 - 5 trades per week (depending on overall market volatility). Since we always sell at a higher rate than we buy, those trades will always be profitable.

Interest - Virtually always profitable

Barring any significant shifts in world interest rates, investors will net a positive rate of interest each day on their portfolios. You can determine, in advance, the approximate amount of daily interest you will receive by using our Portfolio Allocator (based upon today's approximate interest rates). This money is deposited into your account by your broker each day. You are normally paid triple the daily interest amount on Wednesdays to compensate for the weekends.

Market Fluctuation - Can be positive or negative

This component is completely subject to the normal (and sometimes extreme) movements in the Forex market. It cannot be predicted with any degree of accuracy. In the long run, statisticians would tell us this should average out to zero. In the short run, however, market fluctuations can and will cause extreme movements (in both directions) in your account equity. We provide guidelines to help minimize these movements, but there are no guarantees. Over time, Trading profits and Interest profits will continue to build. The Market Fluctuation will either be positive or negative.

domingo, 16 de março de 2008

Timing is Everything With Forex Trading

The most challenging part of getting started with Forex trading is to learn this innovative way of trading. Many potential investors that try to navigate the Forex system unaided end up being frustrated and financially intimidated. There are very simple strategies to becoming successful using the foreign exchange trading system but the first step is gathering all of the necessary information surrounding this type of trading specialty. Securing a reliable Forex trading broker is likely the first and most pivotal step after learning the initial principles.

Unlike many types of trading and futures, foreign exchange trading is not designed to make the client rich quickly. Many people are frightened off by the word that Forex trading is a get rich quick scheme that in large part, doesn't work. This is a financial myth despite all the hype surrounding the foreign exchange trading system. There are steps and gains to be taken in order to secure a future in successful trading. Expect to dedicate a large portion of time to researching and understanding the market in general before setting out with your pocket book ready to invest. Learn all you can about the Forex market in the beginning in order to make the Forex trading path a smooth and triumphant one.

There is no doubt that there are numerous types of orders that can be utilized in order to open and close trades and becoming familiar with them is a must. In the foreign exchange trading business there are charts, graphs and other visuals to help you effectively analyze trends in currency trading. These charts and graphs will assist in making well-informed decisions on what currency to sell. Timing is everything and it goes without saying that when experiencing with the Forex trading system, knowing when to trade can be the pivotal difference between success and failure. Understanding the analysis tools and how to use them efficiently will put any investor on the right track.

As well as proficient trading tools, it is an absolute necessity when using the foreign exchange trading system to understand how to use the software to perform actual trades. The only way to become comfortable with using Forex trading software is to use it and learn how to plot a course through the process. Selecting a good trader is the most imperative tip at this stage because an established trader can help you with the services required as well as giving you in depth tutorials using the foreign exchange trading system.

The most critical tool that will be utilized in the Forex trading system is patience and discipline. As mentioned earlier, foreign exchange trading is not a get rich quick proposal so learning patience and discipline can help you to become profitable in a timely fashion without losing money. Most brokers offer a demo account that can be used to practice and learn the foreign exchange trading system that mimics the real account with the exception of real money being traded. This gives a client insight into the market and its behaviors before actual money is invested. Learn how to make a profit using paper trading on a regular basis before risking your capital with Forex trading.

Forex Trading Strategies That Withstand The Test Of Time

Forex is an abbreviated name for foreign exchange. The Forex trading market is an around-the-clock cash market where the currencies of nations are bought and sold, typically via brokers. For many years, the Forex market was dominated by large institutions such as banks and brokerage firms. However, the Forex market has experienced a major change over the past several years, as a growing number of private investors and traders just like you have started to actively participate and trade. The purpose of this article is to reveal Forex trading strategies that withstand the test of time.

Have An Open Mind: According to Mark Twain, It's not what we don't know that hurts us; it's what we know for sure that just ain't so.

Good Money Management Alone Is Not Enough: According to Monroe Trout, Good Money Management alone isn't going to increase your edge at all. If your system isn't any good, you're still going to lose money, no matter how effective your money management rules are. But if you have an approach that makes money, then money management can make the difference between success and failure.

Do Not Play Catch Up: According to Richard Dennis, I learned to avoid trying to catch up or double up to recoup losses. I also learned that a certain amount of loss will affect your judgment, so you have to put some time between that loss and the next trade.

Trading System: According to Howard Abell, The trading system gives the trader the ability to control his or her emotional states rather than allowing them to control him. A system is a disciplined method for organizing dynamic, ever-changing market phenomena.

Trade Small: According to Mark Ritchie, I think it's generally a good idea that when you put on a trade, it should be so small that it seems almost a waste of your time. Always trade at a level that seems too small.

Be Greedy When Others Are Fearful: According to Warren Buffet, Be greedy when others are fearful.

Courage: According to Bill Lipschutz, It is not enough to simply have the insight to see something apart from the rest of the crowd, you also need to have the courage to act on it and to stay with it. It's very difficult to be different from the rest of the crowd the majority of the time, which by definition is what you are doing if you are a successful trader.

Limit Your Losses: According to Linda Bradford Raschke, The market will decide how much profit to give you. Only you can decide how much to limit your loss.

Good Trades: According to Van K. Tharp, Good Trades Seldom go too far against us.

Always Changing: According to Jack D. Schwager, The markets are always changing, and they are always the same.

The Strategy: According to Sun-Tzu, All men can see those tactics whereby I conquer, but what none can see is the strategy out of which victory is evolved.

Sit On Your Hands: According to Bill Lipschutz, If most traders would learn to sit on their hands 50 per cent of the time, they would make a lot more money.

Psychological Makeup: According to Leo Melamed, You learn to distinguish the good traders from the bad, the successful techniques from the unsuccessful, and the good habits from the faulty. You also learn to distinguish the lover from the fighter, the winners from the losers, the serious from the frivolous, the cerebral from the superficial, and the friend from the foe. But above all, you learn that the psychological makeup of the trader is the single most critical element of success.

Trading Forex on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite.

quinta-feira, 6 de março de 2008

Are you selling your stocks at the right time?

Limiting your losses and protecting your gains is the most important rule for every investor. Unfortunately, with the high volatility of today's stock markets, making an efficient decision on selling your investment is riskier and consumes more time than ever. Statistics show that most intuitive, individual investors lose this game sooner or later.

When it comes to the stock market, there is no place for emotions or intuition. Believing otherwise has led many amateur investors straight to bankruptcy. If you want to become a successful investor, you must exclude emotions from your trading, and spend some time on choosing a trading strategy that is right for you.

How would you limit the losses? It is all about selling at the right moment. A successful investor never puts emotions into trading, and sells as his sell strategy suggests. Ask yourself: what is my exit strategy? If you don't have a sell strategy, you don't have any trading strategy at all!

There are many trading strategies available, all having their pros and cons. Most require you to monitor your stocks very closely. If you don't have much time to spare to watch your investment, a strategy based on the Trailing Stop method may be right for you.

The Trailing Stop method has strong benefits over alternative trading strategies. A Trailing Stop limits your losses but not your gains, while not requiring you to constantly monitor the market to achieve best results.

It does not perform miracles, but uses proven, published mathematical methods to maximize your gains and minimize losses. Speaking broadly, the Trailing Stop method has to deal with just two things: the current stock price, and the stop selling price that represents the moment at which to sell your shares.

Without going much further into the complex mathematics, the Trailing Stop method raises your stop selling price when the stock goes up, but holds it when the stock goes down. If the stock falls enough to reach the stop selling price, a strategy based on the Trailing Stop method produces a recommendation to sell immediately. This strategy effectively limits your loss to a pre-defined percentage of your investment, while at the same time not limiting your potential profit.

A modified version of this strategy based on the Adaptive Trailing Stop takes an additional parameter into account. The Adaptive Trailing Stop method ties its selling recommendations to stock volatility, which represents how fast the particular stock can rise or fall. Volatility is arguably the most important factor when it comes to the decision to sell, as it is closely tied with the stock's risk factor. This method works best for modern stock markets, as today's stocks can start moving very fast.

Developing and following the right strategy can be a difficult and time-consuming process that does require certain skills in higher mathematics. If you don't have that much time to spare, try using a service that does all the monitoring and calculations for you, and gives you selling recommendations in plain English.

Sell@Market is a brand new service that uses the Adaptive Trailing Stop method as the sell strategy. It tracks and analyzes stock quotes daily on all major exchanges, including AMEX, NASDAQ, and NYSE, and re-evaluates the profit to risk ratio according to the chosen risk strategy. If a stock being monitored matches certain criteria, Sell@Market emails you a recommendation to sell.

There is nothing that even the best strategy can do to protect investments if an investor is not following its recommendations. Sell@Market helps you protect your investments by excluding emotions from trading. Just check your email daily and follow the system's recommendations to maximize your gains and minimize losses.

quarta-feira, 5 de março de 2008

What You Should Know About Forex Trading

How difficult is it to make money trading the Forex market? How much time does it take to actually be able to make a living trading the Forex market? These and other important aspects of trading are to be discussed in this article.

Trading the Forex market has many benefits over other financial markets, among the most important are: superior liquidity, 24hrs market, better execution, and others. Traders and investor see the Forex market as a new speculation or diversifying opportunity because of these benefits. Does this mean that it is easy to make money trading the Forex Market? Not at all.

Forex brokers agree that 90% of traders end up losing money, 5% of traders end up at break even and only 5% of them achieve consistent profitable results. With these statistics shown, I don't consider trading to be an easy task. But, is it harder to master any other endeavor? I don't think so, consider musicians, writers, or even other businesses, the success rates are about the same, there are a whole bunch of them who never got to the top.

Now that we know it is not easy to achieve consistent profitable results, a must question would be, Why is it that some traders succeed while others fail to trade successfully in the Forex market?

There is no hard answer to this question, or a recipe to follow to achieve consistent profitable results. What we do know is that traders that reach the top think different. That's right, they don't follow the crowd, they are an independent part of the crowd.

A few things that separate the top traders from the rest are:

Education: They are very well educated in the matter; they have chosen to learn every single and important aspect of trading. The best traders know that every trade is a learning experience. They approach the Forex market with humility, otherwise the market will prove them wrong.

Forex trading system - Top traders have a Forex trading system. They have the discipline to follow it rigorously, because they know that only the trades that are signaled by their system have a greater rate of success.

Price behavior - They have incorporated price behavior into their trading systems. They know price action has the last word.

Money management - Avoiding the risk of ruin is a primary subject to the best traders. After all, you cannot succeed without funds in your trading account.

Trading psychology - They are aware of every psychological issue that affects the decisions made by traders. They have accepted the fact that every individual trade has two probable outcomes, not just the winning side.

These are, among others, the most important factors that influence the success rate of Forex traders.

We know now that it is not easy to make money trading the Forex market, but it is possible. We also discussed the most important factors that influence the rate of success of Forex traders. But, how much time does it take to have consistent profitable results?

It is different from trader to trader. For some, it could take a life time, and still don't get the desired results, for some others, a few years are enough to get consistent profitable results. The answer to this question may vary, but what I want to make clear here is that trading successfully is a process, it's not something you can do in a short period of time.

Trading successfully is no easy task; it is a process and could take years to achieve the desired results. There are a few things though every trader should take in consideration that could accelerate the process: having a trading system, using money management, education, being aware of psychological issues, discipline to follow your trading system and your trading plan, and others.

terça-feira, 4 de março de 2008

Building a Forex Trading System

About two weeks ago I got an email from a trader explaining his trading method and asking me for some advice on how to improve on it. On the surface of it, there wasn't much to his approach but he had been trading profitably for a few years and that got me interested.

As it turned out, he was using the same charting package I use and had used the back test facility to go over years of data to come up with the method he now used. The method itself was a simple, sound little technique but his money management control was brilliant and that was the genius of his method.

So far there was nothing unusual about this other than he was using the back testing facility. If you have only started trading in the last few years this might not seem unusual to build a little code and go back and test lots of ideas. For me it is different. I started when most charting packages never had this facility and I did everything the hard way. I would sit with a notepad, come up with an idea and literally go over every bar on a chart for the last 10 years. This could take weeks.

Because that's how I started I never really got out of the habit of doing it any other way. I have lost count of how many of these notepads I have dotted around my office. I have always continued doing it this way until a few weeks ago.

Anyway, He agreed to help me learn a little code in exchange for some help with his approach to the market. Even then I wasn't particularly enthusiastic about the idea as I have become pretty set in my ways and comfortable with my trading style.

This was all done via email, but luckily he was very good at explaining things and after a few more emails I was beginning to get the hang of it.

Welcome to the 21st century -- following his instructions to the letter, I opened up the box he told me to on the charting software and entered the code then pressed the button -- BANG. In about 30 seconds flat this thing had worked out the profit and loss of 10 years of data. I sat looking at this for over 10 minutes thinking of the possibilities.

In the past, every time I had a new idea or combination I wanted to test I would write it down for testing later when I got time. With this new power I could do all this in minutes.

After that I idly started messing around with the code and couldn't get it to work. When I put in my own formula and hit enter nothing happened or I got an error message. I knew immediately this would take some studying.

Luckily I am a fast learner and within an hour or two I had mastered a few basic formulas. I got so involved in this that I missed lunch, dinner and before I realized it, I had been at it for 20 solid hours.

The following days where no better. I stopped watching the markets and even phone calls and emails where beginning to bug me. All I wanted to do was test. This thing was becoming addictive.

The thing that got me hooked was actually a mistake. The first working formula I used gave a result of a 93% accuracy making astronomical amounts of money. It wasn't until later in the day that I realized that I had made a mistake in the formal and I was calculating the wrong thing.

If you think back to when you started trading, you probably used one of the standard indicators in the standard way. After all, it was your only reference point.

My experience has taught me that most of the indicators don't work well in the way that they where designed. Now, this is where I can be of some help.

I don't claim to be a guru or a genius at anything but I do often have an unusual approach to things and here is an example.

Let's take a fairly typical simple moving average of 50 periods and test it. If there is a close of the daily bar above 50 MA then we will go long and if there is a close below the 50 MA then we will go short. This is a SAR trade (stop and reverse), which means the long position will stay open until we get a short signal at which time we will reverse and go short. This is what you will come up with if you test this idea on the daily bars of the spot Pound/Dollar currency pair (GBP/USD).

Now as soon as you see these numbers it will make most trades walk away. There were a total of 196 trades and only 19.4% of them where profitable and to cap it all it was a loss overall. But wait, there is more here then meets they eye and this is the point I want to make. Be different. If you do the same as everyone else you will get the same results. You only need one little thing that works regardless of how weird it is to make serious money.

What would happen if we had done exactly the opposite of what everyone else would have done. What would happen if we went short when the close was above the average and long when it was below the average?

Again you would have made 196 trades but you would have been correct an incredible 80.6% of the time. The largest loss of -2208 wouldn't have fazed me, as I know that once I start adding stops and limits it would take care of it. I also know that if something is profitable in its basic form it will generally become more profitable once good money management has been added.

Sounds impressive. However I wouldn't trade something like this because for every trade you would pay a 5 pip spread, which means it would bring your profit down to 2770 over 10 years to give you an average of 277 pips per year or 14 pips per trade. That's just not enough juice for the effort. Don't try and trade this, I am just making a point with the example.

Over the two-week period I tested hundreds of combinations and came up with at least three viable methods. If an old fart like me can do it, you can do it to.

The point is that all the best results of my testing where when I tried weird stuff. Doing the opposite of what an indictor said I should do or using them in an entirely different way.

If your charting package doesn't have the ability to do back testing or you are on a limited budget don't worry. Just get out your notepad and start writing.

Start with an idea. Go back through as much data as you can get your hands on. A hundred trades are not enough. You really want to test thousands of trades if you can. You also want it to work on more than the market you normally trade. If you are trading stocks, test it on all the stocks you trade not just one. If it is a good system, it should work on anything.

Just because your method might be discretionary (you decided when to enter or exit a trade) doesn't mean you shouldn't back test it. Go through all the charts you can get your hands on and go through each scenario and make a note of whether you would have made a profit or a loss on each trade.

Some methods can't be back tested because there are too many variables. Especially if each trade set up is different form the next. But test the parts you can.

New traders are obsessed with the entry point - don't be. The object of trading is to get an advantage. There is nothing wrong with having a system that only has a 30% win rate if overall you have a profit.

There are two main approaches to building a system. You either have to have an advantage of more winners than losers or your winners have to greatly outweigh your losers. If you can invent something that has the advantage and your winners greatly out number your losers then you win first prize.

The common thread that ran through all the methods and systems I have tested is this -- money management is easily the most important part of any approach. How you control your loses is probably the most important thing you can do in trading. Even a badly designed method or system can look good if it has good money management. On the other hand, there is no system that will survive bad money management.

Last thing -- try and keep things simple. I know there are bright sparks out there that test banks of information with various types of sampling but your approach must be robust and robust approaches tend to be simple.

segunda-feira, 3 de março de 2008

Understanding Forex Trends

Trend is the easiest and the most difficult thing to understand. The difficulty arises because of the time factor. Whenever we talk of trend it has to be related to the context of time.

An intraday (relates to action on that particular day only) price chart may show a significant trend, which is contrary to a trend recognizable on a daily price chart, which may be contrary to a trend on a weekly chart.

Success depends on recognizing and trading the appropriate trend. Successful investing depends on recognizing the short, medium or long-term trend and their correction (Rallies and Dips) inside the larger trend.

We will usually be trading when at least the short term and intermediate term trends are in the same direction. The ideal will be when all three trends are in unison, but this is not a prerequisite, as intermediate trends can be substantial in both time and price.

It would be too exclusive a trading strategy to ignore these opportunities and only trade when all three trends are in harmony.

A simple definition of trend is basically the general direction of price movements. An up trend is present when prices make a series of higher highs and higher lows.

A downtrend is present when prices make a series of lower highs and lower lows. When prices move without such a discernible series, prices are said to be trading side ways in a range or trendless.

Once a trend is discernible then trend lines can be drawn to define the lower limits of an up trend or the upper limits of a downtrend. It is essential that trend lines be drawn correctly. It is the recognition of the trend line and the violation of this trend line that is your key to successful trading and fortune building.

As you can see from the diagram below, the trend is moving up. To draw a trend line, draw a straight line from the lowest low of the period to the next lowest low. Make sure the line does not pass through any bars.

To draw a trend line, draw a straight line from the highest high of the period to the next highest high. Make sure the line does not pass through any bars

During development of a trend the growth of the trend proceeds at different rates at different times.

A frequent sequence is the following - a short initial explosive breakout and advance from a previous prolonged period of range trading, a much longer period of steady progression at a lower rate of change and, finally, a shorter period of noticeably slower rate of progression.

Each phase of trend advancement is followed by a period of retracement and consolidation. The initial growth phase is too rapid to be sustained and the ensuing correction is often quite deep.

The second phase of advancement is one of steady sustainable growth and often persists for some time. Inevitably this too ends and a period of retracement follows but usually not as deep as the initial correction.

This second correction often takes more time than the first to complete the corrective process. When the correction is complete the final phase of trend advancement occurs usually at the slowest rate of change for the whole progression of the trend and then this too corrects.

The three trend lines that can be drawn from the initial point of the trend through each of the retracement extremes are known as Fan Lines.

They illustrate the decaying rate of progress of the trend. When finally prices violate the third fan line it invariably means the trend so monitored has finished and a reversal of the trend is underway.

Channels are a good visual representation of the struggle between buyers and sellers. It is important to realize that you must know the time frame you intend to trade.

The channel on a 4-hour chart may be different from that on another time period. Once you are committed to a particular time frame we can then define trend and emphasize the importance of drawing correct trend lines within the context of the time frame. Now we will combine these insights to maximize the efficiency of trading. This we will do by establishing channels in the particular trend we are working with.

We learned that the trend line acts as underlying support to up trend lines and overhead resistance to down trends. We also can observe that prices once finding support or resistance will move ahead and away from the trend line then return to the trend line. Over time we can recognize that this movement of price to and from the trend line forms a channel, which once identified can be traded.

In an up trend, as prices come back to the trend line, new increased buying comes into the market and overwhelms the sellers. These buyers are made up of previous buyers in the market adding to their positions, intending buyers who missed earlier opportunities and are now buying the dip.

The buying that stops the selling at the trend line impresses some of the previously uncommitted. Now convinced that the buyers have the upper hand, buy. This new buying takes prices up and away from the trend line and the further it moves up the more impressed the uncommitted become and more buyers come into the market.

The previous short sellers become frustrated and buy to cover their short positions and prices move up further. After a while, buying becomes exhausted and is overwhelmed by selling and profit taking.

As buying is overwhelmed more profit taking occurs and nervous recent buyers will have their close trailing stops (To be discussed later) triggered as market orders and so price retreats to the trend line again.

This starts the whole cycle off again if the up trend is to continue. This to and fro, buying and selling in the direction of the trend plots out a recognizable channel of dynamic flux of the trend.

Recognizing the trend line and the opposing parallel channel line - channel return line - and understanding the human dynamics that account for its structure, increase the efficiency of profit making by initiating or adding to one's position at trend lines and profit taking at the channel return line.

One can, but I do not usually, trade the retracement. For those who do not wish to trade the trend so aggressively one can use the trend line for placing and moving stops and to initiate new trades. Also when a channel is in force we can respond to trend violation by having a recognizable entry level to trade the new trend.

Also, as the trend progresses one can recognize support and resistance levels, which can also be used for further trading on the placement of stops.

As you can clearly see from the diagram, the trend line can change slope as the trend may move at different rates and it is mandatory to adjust the trend as necessary.

So it is with channels, as these too must be adjusted as the trend accelerates or decelerates.

Also it can often be recognized that channels can exist within channels. These channels within channels are plotting the short, medium and long-term trend.

domingo, 2 de março de 2008

How to Choose a Forex Broker?

When it comes to getting started in forex trading, there are quite a few things that you have to consider. The first thing to do is to find and choose the right broker to help you in making your trades. Here are some things that you need to look for in making your choice:

Low Spreads

The spread, which is calculated in pips, is the difference between the price at which a currency can be bought and the price at which it can be sold at any specific point in time. forex brokers don't charge a commission, so this difference is how they are going to make money.

When you're comparing brokers, you'll find that the difference in spreads in forex is as large as the difference in commissions in the stock arena. What this means is that lower spreads will save you money and therefore, look for a broker that offers low spreads.

Quality of the Institution

Unlike equity brokers, forex brokers are usually attached to large banks or lending institutions because of the large amounts of capital that are required. Also, forex brokers should be registered with the Futures Commission Merchant (FCM) as well as regulated by the Commodity Futures Trading Commission (CFTC).

You can find this and other financial information and statistics about a forex brokerage on the company's website or the website of its parent company. You'll want to make sure that your broker is backed by a reliable institution.

Extensive Tools and Research

Forex brokers offer many different trading platforms for their clients just like brokers in other markets do. These different trading platforms often show realtime charts, technical analysis tools, real-time news and data, and even support for the various trading systems. Before you commit to any one broker, you'll need to be sure to request free trials so that you can test their different trading platforms.

Brokers usually provide technical as well as fundamental commentaries, economic calendars, and other research as a means of assisting you. Basically, you'll want to find a broker who will give you everything that you need to succeed.

A Variety of Leverage Options

Leverage is a key necessity in forex trading because the price deviations (the sources of profit) are just set at mere fractions of a cent. Leverage, which is expressed as a ratio between total capitals that is available to actual capital, which is the amount of money a broker will lend you for trading.

For example, when you have a ratio of 100:1, this means that your broker would lend you $100 for every $1 of actual capital. Many brokerage firms will offer you as much as 250:1.

Of course, you need to remember that lower leverage also means lower risk of a margin call, but it also means that you will get a lower bang for your buck (and vice-versa). Basically if you have limited capital, you need to make sure that your broker offers high leverage.

If capital is not a problem, you can rest assured that any broker that has a wide variety of leverage options should suffice. A variety of options lets you vary the amount of risk you are willing to take. For example, less leverage (and therefore less risk) may be preferable if you are dealing with highly volatile (exotic) currency pairs.

sábado, 1 de março de 2008

A 24 Hour Market: Forex Trading

The Forex trading market cannot actually be found physically. Instead, the market is a large network of central banks and individual investors all caught up in the process of currency exchange. Because the Forex market deals with countries all over the world, the market must remain open 24 hours a day. The market follows the three markets, the United States of America, Europe, and Asia.

This presents a problem to even the more successful investors. It is simply not possible for any human being to stay up 24 hours a day so that they have up to date information of the market. Often the market changes will the investor sleeps or goes about their daily routines. If statistics are not checked often, opportunities to gain profits may be lost.

An alternative is hiring a professional broker. This takes the pressure off of the investor, but presents a whole new range of problems itself. Profits are cut due to the fact that the professional broker must be paid, and again, professional brokers are human as well, and must sleep. This still presents the possibility of missing out on profit gains.

A key to becoming a successful Forex trader is finding tools and services that aide you in making informed decisions. The internet allows investors to access an almost unlimited amount of information.Whether it is a program, chart, or article, successful Forex traders rely on any reliable tools they can get their hands on.

Training Tutorials- Several types of online training tutorials are available for little or no cost.
Typical training tutorials take you from the very basics to the more advanced portions of Forex trading.

By reading, studying, and following the training programs as instruction, you gain knowledge and experience in the Forex market, which will help you make informed decisions later.

Simulated Trading- Simulated trading programs allow you to work within the actual Forex market without the risk of loosing your hard earned money in the process. Most simulated programs work in real time, allowing you to learn about the real market. Simulated programs often use paper money and work exactly the same as a real trade service. By gaining and losing as you would in the real market, you gain real world experience.

Statistic Analyzers- Programs are available that actually analyze information for you. When you are new to investing, the statistics and information may seem to be in gibberish. Statistic analyzers take the information and make it readable by even the newest investor.

Real Online Trading Programs- If you prefer to trade without the pressure of learning the trade, you may consider an online trading program. Online trading programs allow you to determine your settings, then the program controls your portfolio for you. Since programs do not rely on human emotion, profits are easily obtainable.

Finally, the best alternative is allowing a program to do the work for you. Seems strange, but a program can run 24 hours a day, constantly checking statistics and charts which will allow the program to make a decision and complete the transaction before the time in which profits can be gained runs out.

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