Interest Rates and the Forex Market

Although there are lots of factors that determine the value of a currency, the interest rate of a country is one of the most significant factors that determine the currency value. Forex traders, in reality need to concentrate on the interest rates of the currency they are trading more than anything else. This article discusses the meaning of interest rates and the impact it has on the currency value of a country. Continue reading “Interest Rates and the Forex Market”

Pros and Cons of Paper Trading

The main issue a Forex dealer should address first is opening of a demo account. This is because it can be used without spending money and also when testing a broker. Recent trading strategies can also be tested to make one familiar with the behaviors of the market. One should understand solely that the demo trading idea called sometimes “Paper Trading” is just slightly different from the main account. Success on demo trading doesn’t mean success too on live trading. It can show you a pattern but not surely assured.

Continue reading “Pros and Cons of Paper Trading”

Why Different Traders See the Same Forex Charts Differently

If you have spent any time trading Forex or reading different analysts online, you can see that different traders see the same Forex charts differently. How can this be? There are many reasons why different traders see things in different ways, and in this article I’ll take a look at some of the most common causes of this phenomenon.

Bias

One of the biggest problems that traders have is that they go into a market with a bias. For example, you may believe that the euro isn’t going to be around in 20 years. If you believe this, you will probably approach the EUR/USD pair with a negative bias under most circumstances. Unfortunately, the markets don’t care what you think about 20 years down the road, as they are focusing on what is happening right now. However, if you have but ultimately negative bias it will skew your trading decisions, unless you are willing to let it go. Most people aren’t, and this could be problematic. For example, even if the euro were to go down to zero, there would be several bounces along the way, perhaps even weeks at a time. I once had a friend who was very negative USD/JPY, ahead of the financial crisis a decade ago. While he was ultimately correct, he started trying to short the USD/JPY pair in late 2004. I have no idea how many Forex accounts he blew up, because he thought that the carry traders were wrong. They were trying to earn the interest daily, and that was a trade that lasted for several years. Although fundamentally he was correct, he had to endure a lot of pain for years because of his bias.

Time frames

Another thing that can greatly influence how different traders see the same Forex charts differently is that they may be working with different time frames. For example, a scalper isn’t worried about where the Australian dollar is trading against the US dollar for more than the next few moments. However, a swing trader would be much more interested in weekly support. A swing trader might understand that a 100 pips stop loss in the big scheme of things is nothing, but he also has a different focus and most certainly a different position size than somebody who is scalping the one minute chart. There stop loss might be 12 pips. Obviously, their position size is probably bigger as well. When I do my analysis, I will typically look at the daily charts. However, there are plenty of analysts out there that look at the hourly chart. It’s not that it’s wrong, it’s just that we are looking at two totally different markets from the standpoint of how long we would be in them.

Bad analysis

\Unfortunately, there is such thing as bad analysis. Some people simply do not grasp technical analysis easily, and therefore they don’t see the same things that someone with a bit more experience or skill would. Not everybody a naturally profitable trader, and some people are horrible when it comes to reading a chart. Somebody who doesn’t understand technical analysis will look at the trend, but perhaps not see support and resistance clearly. Unfortunately, it’s not surprising that different traders have different skill sets, and this can cause them to read charts incorrectly.

Methodology

One of my mentors used to say, “if you have five Elliott Wave traders in the same room, I guarantee you’ll get five different Elliott Wave counts.” To be honest, I barely use Elliott Wave because I believe that to be true. There is a bit of subjectivity in that type of method, as opposed to somebody like me who tends to focus more on horizontal support resistance. That’s not to say that there aren’t good Elliott Wave traders out there, just that I don’t see that methodology the same way that a truly skilled professional will. I have tried to trade Elliott Wave before and have found myself looking for support and resistance to define the next wave anyway. If I’m going to do that, then why would I bother with the wave count? On the other hand, some Elliott Wave traders are very successful, but they have also practiced that methodology for years. Remember, no matter what system or methodology you are using, it’s not going to be correct 100% of the time. That’s going to be true whether you are talking Elliott Wave, Fibonacci trading, or a simple Moving Average Crossover system. They can all make money, but they will fire off the different signalsat different times. Most of this comes down to knowing when your system is most likely to perform well and when it is not.

Technical versus Fundamental

Another way that traders will see the same chart differently is by focusing on fundamentals when other traders are focused on technical analysis. For example, I tend to focus about 95% of my effort on the price action on the chart, while some of my friends in the Forex world will pay attention to fundamentals. Fundamentals do influence price action eventually, but that doesn’t mean they will have an impact today. I have found over the years that most fundamental traders are longer-term investors while technical traders tend to function as short-term or swing traders.

A Million Other Reasons

To be honest, there have been days where I walked in and looked at the chart only to see it in a completely different interpretation just a few hours later. Sometimes it’s just a simple lack of focus, sometimes you just don’t feel well. Maybe there is a distraction in the room, or perhaps you are emotional due to the last trade that you took and the losses you incurred, or even the gains you earned. At the end of the day, it’s not a bad thing that different traders interpret Forex charts in different ways. After all, that is what makes the market – you need somebody to sell while you are buying and vice versa.  

Tips on How to Keep a Trading Journal

In order to become a profitable trader, you need to act like a professional. Most trading desks around the world demand that their traders keep some type of journal, or at the very least notes on each trade. These notes must explain what they are doing, the set up, and the results of each trade.

The act of keeping a journal is probably one of the main things that I have seen separate amateur from professional traders. Granted, the journal itself doesn’t contribute to your profit and loss statement directly, but over the longer-term it does make a difference. This allows you to see what your thought process was and start to see if you can pick up a pattern. This is especially important if you start to see a pattern with trades that ended profitably. This shows you where you should be focusing your attention, and the type of trades that you should be looking for to increase the value of your account.

Things you should be paying attention to

There’s a whole list of things that you should be writing down in your journal, some of which include the basics: things such as the entry price, exit price, time of day, and of course the financial instrument that you are trading. I recommend paying attention to the size of your position as well. However, there are some less obvious things that you should record as well.

One of the points to keep in your trade journal is the reason you got involved, not only from a technical perspective, but the overall attitude of the markets. For example, if you are buying the EUR/USD pair, you should keep and I and record write down in your journal how the US dollar is doing overall. Is it strong? Is it weak? Is it mixed against most other major currencies?

It was that simple step that led me to understand correlation through currencies when I was a new trader. I found that I was trading against the overall attitude of the dollar and losing money as a result. Even if the technical setup looked good in the pair I was trading, quite often if I looked around at the other major currency pairs, I would see that the dollar was moving in the opposite direction. Sometimes it’s just important to take a step back and look at the bigger picture to see things in a new (and important) way.

Another thing to record in your trade journal is how you feel psychologically during the trade. If you start to notice that many of your trades make you uncomfortable, then it should be apparent to you that you either didn’t take the right set up, don’t trust your system, or most likely have far too much leverage on. Your position size might be a bit too large for your comfort, and therefore by writing this down you start to get a feel for what your position size comfort is. With this self-knowledge, you can plan your trades better and stick to the plan better as well

Write it down

Studies show that if you write down something you are much more likely to remember it than you are if you type it. Today, writing things by hand may seem a bit outdated or even irrelevant, I have found that I do, in fact, remember things better when I write them down by hand. I believe that the act of writing down your trades and all of the factors involve also slows you down, something that I have found to be extraordinarily positive to the trading results that I have seen. Not only does it get you thinking about the reasons you take the trade, but it also gets you to slow down your trades, which can lead to more positive results in the end. Remember, one good trade during the day can be worth more than five poor ones.

Each journal will look different

Your journal will not be identical to those of other traders, and that’s ok. Over time you’ll find out what details are most important in your trade journal, and you’ll keep those exclusively. If you’re trading someone else’s money you may also be required to record information that you find less important, but that’s ok – it’s better to have more details than less, as you never know when this information will come in handy to provide a new perspective.

Journals will also look different because of the differing psychology that you see between people. Understand that it’s okay to be upset about a result or a life event but write down how you are feeling and be brutally honest so that you can address any deficiencies, be it psychologically or technically. This is a market that is very difficult to get through with positive expectation, so every little bit of insight can be extremely valuable. Quite frankly, if you can’t be bothered to write down why and how you took the trade, is most likely that you don’t have the wherewithal or the true passion it takes to be successful at trading.

 

 

How to use Pivot Points in Forex Trading

Introduction

In Forex Trades, “Pivot Points” can be described as an assembly of opposition and support which has been premeditated before time in order to provide you with a clue of someplace you can sell and purchase a currency duo. Pivot points are not specially made use of in Forex trades and truthfully, own an account in the prospect America pits. Dissimilar to lots of other various indicators you would encounter, pivot points can easily be predicted, by their precise nature. Basically, that which is done by you are just looking at the general pivot’s position in the marketplace and thereafter, the ensuing three resistances and support levels. The strength of the indicator is relatively great, but similar to several other indicators, it ought to be ratified by either the price action otherwise, some other features for example; a preceding support level. Studies for pivot are focused on the connections amongst the closing, low and high values amid every trading time. Thus explained, the prices of the preceding trading day are implemented in calculating the present day’s pivot point. Do not forget that when a price is rising then begins to drop, that is known as running into a resistance and when a price which is dropping reverses and begins rising, that is known as meeting a support. The market’s “Fair Value” would be strategized by the indicator and also three probable areas in the two ways known as the Support 1, 2 and 3 and interchangeably resistance 1, 2 and 3 to stand as instructions.

 

The calculation

The day’s pivot point calculation is equivalent to the sum of the preceding session’s close, low and high. Hence the point is gotten when the three digits are divided by three. When you identify the pivot point, you can then deduce the R1, S1, R2, S2, R3 and S3. Pivot Point for present session = Close (previous) + Low (previous) + High (previous session) You can calculate the other the pivot points as stated below: Support 1 = (2 x Pivot Point) – High (previous period) Resistance 1 = (2 x Pivot Point) – Low (previous period) Support 2 = Pivot Point – (Resistance 1 – Support) Resistance 2 = (Pivot Point – Support 1) + Resistance 1  Support 3 = Pivot Point – (Resistance 2 – Support 2) Resistance 3 = (Pivot Point – Support 2) + Resistance 2 

Statistical probabilities

A major reason why traders make use of pivot points is because they have statistically functioned properly. An example is when a certain currency pair has fixed a low to suit the day below S1. The day’s high was greater than R1 while the low was below S2.Hence, you would begin to feel that you can know how the price would be at a given time under probability. Fortunately, many trading sites now embrace pivot points, in order for you to certainly not require knowing how to perform its calculations.

An example in action

Below is an attached AUD/USD duo chart with the indicator of the pivot point visible. Now, it is not every platform for Meta Trader that comes having it. Moreover, you can download some available free ones on the net. In this actual setting, the yellow path is the pivot point from the preceding day, the blue one is the support levels and then, the red path symbolizes the resistance. The chart if well-read would show you the necessities of the various levels due to the fact that even at their breaking, the subsequent level begins displaying its impact. Also, at the level 0.73 lies the central pivot which is a region which has both been resistance and support several times. Hence, it is not surprising how the market had rammed into the level without charging through it instantaneously. As it isn’t a trading scheme itself, pivot points function on statistical probability which is the basis of many measurable trading. Remember that numerous equipment do trade currencies nowadays therefore, these formulas and ratios could surely be applied. Hence by making use of the Forex trades, the strategy you apply in your trades expands and grows computable.

Conclusion Pivot points are usually used in trades that are for a shorter period but still, there exist pivot points which are used for those periodic spells also. When you want to calculate those, just interchange the close, low and high values of the earlier session using the preceding month. This is because it just functions same pattern for whichever periodic spell.  

How to Set Stop & Limit Orders When Trading Forex

Introduction

It is very critical to halt stop losses during Forex trading due to the fact that the similar causes which boost profits in the Forex market could also cause it to be catastrophic. Precisely, when carrying out Forex trades, you are habitually dealing with risky instability and leverage and, if you lose cautiousness, it can result in a severe financial discomfort.

An example is illustrated thus: The National Bank at Switzerland chose to drop its €1.20 peg which for some years now, has been imposing. Numerous wholesale dealers got rubbed off due to the fact that they hadn’t employed the correct orders, or rather, yet merely over prized their spot. The 1.20 stage was as amazingly dependable in the CHF/EUR market as its backing that at the time the National Bank at Switzerland chose to halt lifting the duo there, individuals all-round the earth were rubbed off. Past that, there also existed Forex dealers that also fell into trouble too.

Apart from the above example, there still exist lots more occasions which are not quite severe but occur more often. You could just get up from your PC for some minutes and when you return, you see that a number of headlines had intersected the wires hence moving your exchange duo 300 bleeps. At that moment, you can only wish it had moved for your gain. Still, the Law of Murphy states that it won’t ever.

Following the below tips would help you in setting the stop and limiting orders for your Forex Trades.

Tip One: Stop Orders

A “Stop Order” can be simply said to be an order which becomes implementable immediately a fixed price is achieved and thereafter, it is occupied at the present price in the market. The stockbroker is ordered to secure your spot, irrespective of the speed the market is going at. However, this can end up in a slippage (It is a condition where you did not obtain the precise charge you had requested for), and at more number of times, your request would be accurately filled. Else, if the market speed is very fast counter to you, it will keep leaving the spot till you are totally flat. At most times, a stop order can be called a Stop Loss order. This means: It safeguards your own account when the spot moves counter to you.

 

Tip two: Limit orders

This is a dissimilar animal. The limit orders are those orders fixed at a certain value. It is simply implementable at periods when one can carry out the trade at that exact value. An example is when you place a limit order for a currency’s purchase at 1.1753,it is just at that exact value the currency will be bought or sometimes, at a lesser value if the chance to do that rises. This guarantees that the value you would pay wouldn’t be higher than your preferred value. This is an approach of entering the market thru accuracy, though at same period, acting as a prodigious manner of saving cash on trades. It is a condition that keeps developing into further intricate trades, like the stop-limit order.

 

Tip Three: Always trade using them

There are lots of risks in the Forex markets if you don’t have appropriate security. Making use of the above stated “Limit Orders and Stop Loss” can aid safeguard your resources. Regrettably, several individuals can’t take losses; hence they decide to waive these stated orders. Several expert dealers would execute decisions as a stop loss system; however, it is a far more intricate scheme. At the moment, you ought to be only thinking of the moment the deal has confirmed your theory wrong. An example is when you want to purchase the USD/GBP currency duo and you feel that, provided you remain higher than the 1.2750 stage, things would remain good. At that time, your stop loss is required to remain at that stage. If you leave the market or even your PC screen, you would be protected by your Stop Loss.

Outside this scenario, these orders could send you away from the market with a yield too. Safety is not everything because at times the market would change as you are taking a nap and smash your yield aim. Immediately this happens, the monetary yield would be credited to your account as you are in you sleep.

Conclusion

Lastly, ensure you never re-position your orders except if you are re-positioning them due to a yield. Thus explaining, an argument could arise for the movement of the stop loss nearer to the value action, however certainly not further away. This is due to the fact that immediately a trade exists as incorrect, it stays incorrect. Though, if you desire to seal in several profits, it becomes a totally different situation.

How to Set Stop & Limit Orders When Trading Forex

 

Introduction

It is very critical to halt stop losses during Forex trading due to the fact that the similar causes which boost profits in the Forex market could also cause it to be catastrophic. Precisely, when carrying out Forex trades, you are habitually dealing with risky instability and leverage and, if you lose cautiousness, it can result in a severe financial discomfort.

An example is illustrated thus: The National Bank at Switzerland chose to drop its €1.20 peg which for some years now, has been imposing. Numerous wholesale dealers got rubbed off due to the fact that they hadn’t employed the correct orders, or rather, yet merely over prized their spot. The 1.20 stage was as amazingly dependable in the CHF/EUR market as its backing that at the time the National Bank at Switzerland chose to halt lifting the duo there, individuals all-round the earth were rubbed off. Past that, there also existed Forex dealers that also fell into trouble too.

Apart from the above example, there still exist lots more occasions which are not quite severe but occur more often. You could just get up from your PC for some minutes and when you return, you see that a number of headlines had intersected the wires hence moving your exchange duo 300 bleeps. At that moment, you can only wish it had moved for your gain. Still, the Law of Murphy states that it won’t ever.

Following the below tips would help you in setting the stop and limiting orders for your Forex Trades.

Tip One: Stop Orders

A “Stop Order” can be simply said to be an order which becomes implementable immediately a fixed price is achieved and thereafter, it is occupied at the present price in the market. The stockbroker is ordered to secure your spot, irrespective of the speed the market is going at. However, this can end up in a slippage (It is a condition where you did not obtain the precise charge you had requested for), and at more number of times, your request would be accurately filled. Else, if the market speed is very fast counter to you, it will keep leaving the spot till you are totally flat. At most times, a stop order can be called a “Stop Loss” order. This means: It safeguards your own account when the spot moves counter to you.

Tip two: Limit orders

This is a dissimilar animal. The limit orders are those orders fixed at a certain value. It is simply implementable at periods when one can carry out the trade at that exact value. An example is when you place a limit order for a currency’s purchase at 1.1753,it is just at that exact value the currency will be bought or sometimes, at a lesser value if the chance to do that rises. This guarantees that the value you would pay wouldn’t be higher than your preferred value. This is an approach of entering the market thru accuracy, though at same period, acting as a prodigious manner of saving cash on trades. It is a condition that keeps developing into further intricate trades, like the stop-limit order.

Tip Three: Always trade using them

There are lots of risks in the Forex markets if you don’t have appropriate security. Making use of the above stated “Limit Orders and Stop Loss” can aid safeguard your resources. Regrettably, several individuals can’t take losses; hence they decide to waive these stated orders. Several expert dealers would execute decisions as a stop loss system; however, it is a far more intricate scheme. At the moment, you ought to be only thinking of the moment the deal has confirmed your theory wrong. An example is when you want to purchase the USD/GBP currency duo and you feel that, provided you remain higher than the 1.2750 stage, things would remain good. At that time, your stop loss is required to remain at that stage. If you leave the market or even your PC screen, you would be protected by your Stop Loss.

Outside this scenario, these orders could send you away from the market with a yield too. Safety is not everything because at times the market would change as you are taking a nap and smash your yield aim. Immediately this happens, the monetary yield would be credited to your account as you are in you sleep.

Conclusion

Lastly, ensure you never re-position your orders except if you are re-positioning them due to a yield. Thus explaining, an argument could arise for the movement of the stop loss nearer to the value action, however certainly not further away. This is due to the fact that immediately a trade exists as incorrect, it stays incorrect. Though, if you desire to seal in several profits, it becomes a totally different situation.

Top Forex technical indicators all traders should know

When carrying out surveys on the Foreign Exchange market, it could present a difficulty for fresh traders in the market and as well, those with little trading skills. Lots of novices begin by using excessive technical indicators in the charts they run, thus leading to exorbitant trading blunders. At last, those types of traders let go of technical indicators by seeing them as a feasible tool for analyzing the market place, however, it remains true is that one could produce positive trading indications by knowing the steps in using and interpreting them appropriately.Thus, the aim of this article is to show the best pattern of reading important Forex Indicators. Continue reading “Top Forex technical indicators all traders should know”

How to implement the Set and Forget Forex Trading Strategies

Introduction

There exists a strategy used in trading known as the “Set and Forget” strategy. This type of strategy is one that is carried out using the correct cautiousness besides a slight knowledge of at least, the marketplace. When talking about these strategy types, the major thing to note is the fact that they should all be implemented using the lesser leverage. Moreover, you wouldn’t like to be pulled up 200 stretches, set a deal and march walk off expecting that there doesn’t exist any retracement counter to you because it might be precisely costly.

In the world of investing, the “Set and Forget” How to implement the Set and Forget Forex Trading Strategiesstrategy stands for the impression that you could just purchase or vend anything and then march off. This is similar to that act done by stock-traders by buying stocks in a big establishment like Walmart then they relax because they feel that bonuses will arise and they will keep on existing. No one has concerns to request a margin. They just purchase the shares and retain them. In Forex, it isn’t same thing because due to the pull and instability, it would be very risky notion to hold them for a long duration. Lots of retail dealers are opportunists; hence they incline to concentrate on strategies which last not long. The below tips would assist you on making use of this strategy in your forex tradings.

Tip One: Investing and the lack of leverage

Something you must understand about many “set and forget trading strategies”, is the fact that they would be of more suitability for shareholders and then less suitable for opportunists. This does not mean that an opportunist cannot implement them but you require the right trading principal sum.

When investing, you should adopt that the principal asset’s value would rise after a long while. The normal shareholder is not worried on a 1% descent in his asset. An example is for Microsoft Shareholders, a 1% drop in the stock would not bother them because they believe it would still rise after a while and you would definitely get your dividends.

Tip Two: Dial down the leverage for these strategies

Just like the way you would not make use of leverage in a longstanding stock deal, you are not required to make use of it in other lengthy-term trading strategies. Approved, leverage could cause you to be tremendously wealthy, nevertheless, what would likely occur is the scene that you might encounter a pullback that would either cause a margin request or cause a thereafter, a pullback which would make you so nervous that you would want to leave the trading, thus making it to be quite difficult to endure for the lengthy exchange.

In the world of Forex, the means of getting past the possible risk is taking off a lesser leveraged spot. An example is having a margin of $1000, your spot magnitude can be roughly close to 5000 units. It represents a leverage of 5 to 1. It may not look plentiful to you but it similarly makes you able to dangle on that deal for some weeks, maybe months and in some cases, may even be years depending on the system dictation. Outside that, if losses occur as they eventually would, it won’t be much.

.set & forget trading strategy

The below pictorial illustration, is a Fibonacci retracement where those traders who deal on lengthy term deals ensure the buying signal is taken from a swing as high as the retracement and after that, make use of the subsequent level of the Fibonacci Retracement beneath the 61.8% level as the stop loss

moving average cross over system

Most dealers are scared of the stop loss of 230 pips but finally it returns to spot magnitude. Hence, it is your spot that really means a lot. You won’t become wealthy through this pattern of trading but you could as well develop your account relatively in an easier way.

Tip Three: If you need leverage there is an alternative

There exist some other choices for you if you want to make use of leverage. A popular one is by running the opportunities market. An example is you going inside the marketplace and selling deposits in contrast to SPY. This shows your belief in the market hope of rising, and habitually instills leverage.

Nevertheless, if you engage in spot FX trades, the solitary approach would be using leverage and also, the “set and forget trading strategy”, to only lay your stop loss and thereafter, place your yield aim onto the directive and switch the PC off. It stands as probable, a though it is not easy as spoken.

 

Conclusion

In a way, every trading strategy ought to be the “set and forget.” This is that which the stop loss is standing for. When nervous because of a spot, the reason is because you have applied too many a pull. You can also see it in this form also of the rhetorical question. “Will you be scared of misplacing a $10 or $1000 bill?”