Thursday, April 1, 2010
FOREX TRADING TIPS ---PART 1
Forex Trading Tips - Part 1
Forex is always priced in pairs between two different types of currencies. When you make a trade, you have to buy one currency and sell another at the same time. If you want to exit the trade, you must buy/sell the opposite position. For example, when you think the price of the Euro is going to rise against the US Dollar. In order for you to enter a trade, you will have to buy Euros and sell US Dollars.
If you want to leave the trade, you will have to sell Euros and buy back US Dollars. You will be hoping that you were right in your guess and that the exchange rate for EU/USD has actually risen, which means that you will get more Euros back than when you bought them, which is how you will make a profit.
These days just about every forex broker is claiming to have the tightest spreads in the industry. But marketing does have the ability to be deceiving. The topic of spreads in the forex spot market is very complicated and often not easy to understand. However, nothing affects your trading profitability more.
First of all in order to understand the spread, you need to know what it is. A spread is the difference between the ask price (the price you buy at) and the bid price (the price you sell at) that is quoted in the pips. If the quote between EUR/USD at a given moment is 1.2222/4, then the spread equals 2 pips. If the quote is 1.22225/40, then the spread is going to equal 1.5 pips.
The spread is how brokers make their money. Wider spreads will result in a higher asking price and a lower bid price. The consequence to this is that you have to pay more when you buy and get less when you sell, which makes it more difficult to realize a profit
Brokers generally don’t earn the full spread, especially when they hedge client positions. The spread helps to compensate for the market maker for taking on risk from the time it starts a client trade to when the broker's net exposure is hedged (which could possibly be at a different price).
Spreads are important because they affect the return on your trading strategy in a big way. As a trader, your sole interest is buying low and selling high (like futures and commodities trading). Wider spreads means buying higher and having to sell lower. A half-pip lower spread doesn't necessarily sound like much, but it can easily mean the difference between a profitable trading strategy and one that isn’t profitable.
The tighter the spread is the better things are going to be for you. However tight spreads are only meaningful when they are paired up with good execution. Quality of execution will decide whether you actually receive tight spreads. A good example of this is when your screen shows a tight spread, but your trade is filled a few pips to your disadvantage or is mysteriously rejected.
When this occurs repeatedly, it means that your broker is showing tight spreads but is effectively delivering wider spreads. Rejected trades, delayed execution.
FOREX TRADING TIPS---PART 2
Forex Trading Tips - Part 2
Spreads should always be considered in conjunction with depth of book. Oddly enough, when it comes to economies of scale, forex doesn't even act like most other markets. On the inter-bank market, for example; the larger the ticket size, the larger the spread is. So when you see a 1-pip spread on an ECN platform, you have to wonder if that spread valid for a $2M, $5M or $10M trade, which it probably isn’t. In many cases, the tight spread that is offered applies only to a capped trade sizes that are very inadequate for most of the common trading strategies.
Spread policies change a great deal from broker to broker, and the policies are often difficult to see through. This certainly makes comparing brokers much more difficult. Some brokers actually offer fixed spreads that are guaranteed to remain the same regardless of market liquidity. But since fixed spreads are traditionally higher than average variable spreads, you are paying an insurance premium during most of the trading day so that you can get protection from short-term volatility.
Other brokers offer traders variable spreads depending on market liquidity. Spreads are tighter when there is good market liquidity but they will widen as liquidity dries up. When it comes to choosing between fixed and variable rates, the choice depends on your individual trading pattern. If you trade primarily on news announcements that you hear, you may be better off with fixed spreads. But only if quality of execution is good.
Some brokers have different spreads for different clients based on their accounts. For example; those clients that have larger accounts or those who make larger trades may receive tighter spreads, while the clients that are referred by an introducing broker might receive wider spreads in order to cover the costs of the referral. Some offer the same spreads to everyone.
Problems can come up when you are trying to learn about a company's spread policy because this information, along with information on trade execution and order-book depth is rather difficult to get. Because of this, many traders get caught up in all of the promises they hear, and take a broker's words at face value. This can be dangerous. The only real way to find out is to try out various brokers
THE COST OF FOREX TRADING
The Costs Of Forex Trading
The costs of trading depend on several factors, including the instrument and market you are trading. Most of the costs you pay are to your brokerage firm. They need to make a living in exchange for the services they provide.
Commissions
Slippage
Spread
Platform Fees
Expenses
However, if you want to look at trading as a business, you may have to minimize them and make sure you are getting the most for every dollar you spend to ensure your long-term survival.
Happy Forex Trading!
The costs of trading depend on several factors, including the instrument and market you are trading. Most of the costs you pay are to your brokerage firm. They need to make a living in exchange for the services they provide.
Commissions
Slippage
Spread
Platform Fees
Expenses
However, if you want to look at trading as a business, you may have to minimize them and make sure you are getting the most for every dollar you spend to ensure your long-term survival.
Happy Forex Trading!
THE HIDDEN TECHNIQUES OF FOREX
The Hidden Techniques of Forex
Forex is a big market to participate in and surprisingly only the top 5% are making money. That means the remaining 95% of traders are either breaking even or losing money. The small minority at the top in this business have their own hidden techniques and strategies that they use to profit. I hope to give you a glimpse into what they do.
There is risk of losing your whole investment!
There is always risk of losing your money in investments. Any Amount of money can let you hold a Forex position many times bigger than the value of your account. This is called “gearing”.
I would say you don’t buy too much shares all at once, in that case you can lose a lot of money, and you don’t want that. I suggest you talk around with the forex dealers and other people or those who have knowledge about this and you will surely get profit in this business.
Forex Forecast Signal Strategy Services
You can use automatic orders such as restrictions and stops which allow you to leave your computer terminal for a while. This ensures that your losses will be kept to a minimum, but you may miss out on prospective profits.
Forex forecast signals are time-tested indicators of trends in the market. Breakouts, support levels and resistance levels, envelope patterns, currency pairs near moving averages, stochastic lines, oscillators, and Fibonacci levels are few of indicators.
Forex Brokers
Most FOREX traders use a broker to handle their transactions. What exactly is a broker? Strictly speaking, a broker is an individual or a company that buys and sells orders according the investor’s decisions. Brokers earn money by charging a commission or a fee for their services.
FOREX FUTURE INVESTMENT
There are many many advantages over the various other ways of investing. First of all it is a 24 hr market, except for weekends of course. You have the US market then the European and then the Asian. One of the great times to trade is during the over lapping periods. The USA and European overlap between 5am & 9am eastern and the Euro & Asian between 11pm & 1am eastern. Usually the busiest time and best to trade.
Forex is a big market to participate in and surprisingly only the top 5% are making money. That means the remaining 95% of traders are either breaking even or losing money. The small minority at the top in this business have their own hidden techniques and strategies that they use to profit. I hope to give you a glimpse into what they do.
There is risk of losing your whole investment!
There is always risk of losing your money in investments. Any Amount of money can let you hold a Forex position many times bigger than the value of your account. This is called “gearing”.
I would say you don’t buy too much shares all at once, in that case you can lose a lot of money, and you don’t want that. I suggest you talk around with the forex dealers and other people or those who have knowledge about this and you will surely get profit in this business.
Forex Forecast Signal Strategy Services
You can use automatic orders such as restrictions and stops which allow you to leave your computer terminal for a while. This ensures that your losses will be kept to a minimum, but you may miss out on prospective profits.
Forex forecast signals are time-tested indicators of trends in the market. Breakouts, support levels and resistance levels, envelope patterns, currency pairs near moving averages, stochastic lines, oscillators, and Fibonacci levels are few of indicators.
Forex Brokers
Most FOREX traders use a broker to handle their transactions. What exactly is a broker? Strictly speaking, a broker is an individual or a company that buys and sells orders according the investor’s decisions. Brokers earn money by charging a commission or a fee for their services.
FOREX FUTURE INVESTMENT
There are many many advantages over the various other ways of investing. First of all it is a 24 hr market, except for weekends of course. You have the US market then the European and then the Asian. One of the great times to trade is during the over lapping periods. The USA and European overlap between 5am & 9am eastern and the Euro & Asian between 11pm & 1am eastern. Usually the busiest time and best to trade.
FOREX TRADING TIPS
Forex Trading Tips
There are thousands of successful Forex traders making money trading foreign currency, but did you know that 90% of new traders lose money doing this? In order to be successful, there are a few things you absolutely must know. The following are some of the more important forex trading tips to understand if you plan earn money trading currency.
Learn In Pairs – Know Both Sides Of The Currency
It is absolutely impairitive that you understand the relationship that both currencies you’re trading have with each other. Understand how swings on one currency affects the other, and their cyclinicals. Failure to have the basic understanding of learning what you’re trading will likely end up cost you alot of money.
Watch Global Influencers – News and Events
One of the largest contributers in currency fluctuation is events happening around the world. News good or bad, especially in the financial sector, will cause a swing in global currency values. Instability in one market will likely lead to upturns in another – make sure you know your pairs! Remember, instability and volatility is where you make your money.
Tiny Margins and Over-Cautious Trading
We’ve all heard the old addage “slow and steady wins the race.” Well, it’s this trader’s opinion that those types of investments will lose the race. This is a player’s game, if you don’t give your position a chance to demostrate it’s value you’ll end up undercutting yourself in trading fees. Making big trades is where the money is, then again you must know and be confident in your position.
Have A Strategy But Stay On Your Toes
Would you start a business without a business plan? If so, Forex trading isn’t right for you. You must have a plan that details the approach to take, the currencies to trade and how to manage the risk your taking. But with that said, always be aware of your market and don’t be afraid to call an audible if you see indicators suggesting a change of plans Remember the global influencers?
Emotional Trading and Confidence
This goes back to having a strategy. If you’re emotional then you’re not thinking with your head, much like a poker player who goes on tilt. Keep cool stay confident and stick to your plan. Learn to manage stress and understand that as long as you play a winning strategy, they’ll be ups and downs but in the end you’ll be successful as long as you keep your cool.
There are thousands of successful Forex traders making money trading foreign currency, but did you know that 90% of new traders lose money doing this? In order to be successful, there are a few things you absolutely must know. The following are some of the more important forex trading tips to understand if you plan earn money trading currency.
Learn In Pairs – Know Both Sides Of The Currency
It is absolutely impairitive that you understand the relationship that both currencies you’re trading have with each other. Understand how swings on one currency affects the other, and their cyclinicals. Failure to have the basic understanding of learning what you’re trading will likely end up cost you alot of money.
Watch Global Influencers – News and Events
One of the largest contributers in currency fluctuation is events happening around the world. News good or bad, especially in the financial sector, will cause a swing in global currency values. Instability in one market will likely lead to upturns in another – make sure you know your pairs! Remember, instability and volatility is where you make your money.
Tiny Margins and Over-Cautious Trading
We’ve all heard the old addage “slow and steady wins the race.” Well, it’s this trader’s opinion that those types of investments will lose the race. This is a player’s game, if you don’t give your position a chance to demostrate it’s value you’ll end up undercutting yourself in trading fees. Making big trades is where the money is, then again you must know and be confident in your position.
Have A Strategy But Stay On Your Toes
Would you start a business without a business plan? If so, Forex trading isn’t right for you. You must have a plan that details the approach to take, the currencies to trade and how to manage the risk your taking. But with that said, always be aware of your market and don’t be afraid to call an audible if you see indicators suggesting a change of plans Remember the global influencers?
Emotional Trading and Confidence
This goes back to having a strategy. If you’re emotional then you’re not thinking with your head, much like a poker player who goes on tilt. Keep cool stay confident and stick to your plan. Learn to manage stress and understand that as long as you play a winning strategy, they’ll be ups and downs but in the end you’ll be successful as long as you keep your cool.
TYPES OF FOREX TRADING
Trading
Congratulations! You’ve gotten through the Pre-School and are ready to begin your first day of class. You did go through the Pre-School right? By now you’ve learned some history about the Forex, how it works, what affects the prices, blah blah blah.
We know what you’re thinking…BORING! SHOW ME HOW TO MAKE MONEY ALREADY!
Well, say no more my friend; because here is where your journey as a Forex trader begins… This is your last chance to turn back… Take the red pill, and we take you back to where you were and you will forget all about this. You can go back to living your average life in your 9-5 job and work for someone else for the rest of your life. OR
You can take the green pill (green for money! Yeah!) And learn how you can make money for yourself in the most active market in the world, simply by using a little brain power. Just remember, your will never stop. Even after you graduate from BabyPips.com, you must constantly pursue as much knowledge as you can, so that you can become a true FOREX MASTER! Now pop that green pill in, wash it down with some chocolate milk, and grab your lunchbox…School of Pipsology is now in session!
Note: the green pill was made with a brainwashing serum. You will now obey everything that we tell you to do! Mwuahahaha! <--evil laugh
Two Types of Trading
There are 2 basic types of analysis you can take when approaching the forex:
Fundamental analysis
Technical analysis.
There has always been a constant debate as to which analysis is better, but to tell you the truth, you need to know a little bit of both. So let’s break each one down and then come back and put them together.
Fundamental Analysis
Fundamental analysis is a way of looking at the market through economic, social and political forces that affect supply and demand. (Yada yada yada.) In other words, you look at whose economy is doing well, and whose economy sucks. The idea behind this type of analysis is that if a country’s economy is doing well, their currency will also be doing well. This is because the better a country’s economy, the more trust other countries have in that currency.
For example, the U.S. dollar has been gaining strength because the U.S. economy is gaining strength. As the economy gets better, interest rates get higher to control inflation and as a result, the value of the dollar continues to increase. In a nutshell, that is basically what fundamental analysis is.
Later on in the course you will learn which specific news events drive currency prices the most. For now, just know that the fundamental analysis of the Forex is a way of analyzing a currency through the strength of that country’s economy.
Technical Analysis
Technical analysis is the study of price movement. In one word, technical analysis The idea is that a person can look at historical price movements, and, based on the price action, can determine at some level where the price will go. By looking at charts, you can identify trends and patterns which can help you find good trading opportunities
The most IMPORTANT thing you will ever learn in technical analysis is the trend! Many, many, many, many, many, many people have a saying that goes, “The trend is your friend”. The reason for this is that you are much more likely to make money when you can find a trend and trade in the same direction. Technical analysis can help you identify these trends in its earliest stages and therefore provide you with very profitable trading opportunities.
Now I know you’re thinking to yourself, “Geez, these guys are smart. They use crazy words like "technical" and "fundamental" analysis. I can never learn this stuff!” Don't worry yourself too much. After you're done with the School of Pipsology, you too will be just as....uhmmm..."smart?" as us.
So which type of analysis is better?
Ahh, the million dollar question. Throughout your journey as an aspiring Forex trader you will find strong advocates for both fundamental and technical trading. You will have those who argue that it is the fundamentals alone that drive the market and that any patterns found on a chart are simply coincidence. On the other hand, there will be those who argue that it is the technicals that traders pay attention to and because traders pay attention to it, common market patterns can be found to help predict future price movements.
Do not be fooled by these one sided extremists! One is not better than the other...
In order to become a true Forex master you will need to know how to effectively use both types of analysis. Don't believe me? Let me give you an example of how focusing on only one type of analysis can turn into a disaster.
Let’s say that you’re looking at your charts and you find a good trading opportunity. You get all excited thinking about the money that’s going to be raining down from the sky. You say to yourself, “Man, I’ve never seen a more perfect trading opportunity. I love my charts.”
You then proceed to enter your trade with a big fat smile on your face (the kind where all your teeth are showing).
But wait! All of a sudden the trade makes a 30 pip move in the OTHER DIRECTION! Little did you know that there was an interest rate decrease for your currency and now everyone is trading in the opposite direction.
Your big fat smile turns into mush and you start getting angry at your charts. You throw your computer on the ground and begin to pulverize it. You just lost a bunch of money, and now your computer is broken. And it’s all because you completely ignored fundamental analysis.
(Note: This was not based on a real story. This did not happen to me. I was never this naive. I was always a smart trader.... From the overused sarcasm, I think you get the picture)
Ok, ok, so the story was a little over-dramatized, but you get the point.
The Forex is like a big flowing ball of energy, and within that ball is a balance between fundamental and technical factors that play a part in determining where the market will go.
OPENING A FOREX TRADING ACCOUNT
Opening a Forex Trading Account
Opening a new online trading account with BROKER can be done in three simple steps:
Selecting an account type
Registration
Activating your account
Before trading a dime of your hard earned money, you may want to think about opening demo account. Actually, open up two or three demos - why not? It’s all FREE! Try out several different brokers to get a feel for the right one for you.
Account Types
When you're ready to open a live account, you have the choice of opening a Forex trading account under your personal name or a business name. Also, you will have to decide whether or not you want to open a "standard" account or a "mini" account (or "micro" account if available). Inexperienced traders or traders with a small amount of capital to trade should always open a mini account. Only experienced traders with lots of money should open a standard account.
Always read the fine print.
Some brokers have a “managed account” option in their applications. If you want the broker to trade your account for you, pick this, but obviously you’re here to learn how to trade the Forex for yourself. Besides, opening a managed account typically requires a pretty big minimum deposit - $25,000 or higher - and the broker also takes a portion of the profits.
Also, make sure you open a Forex spot account and not a “forwards” or “futures” account.
Registration
You will have to submit paperwork in order to open an account and the forms will vary from broker to broker. They are usually provided in PDF format and can be viewed and printed program.
Account Activation
Once the broker has received all the necessary paperwork, you should receive an email with instructions on completing your account activation. After these steps have been completed, you will receive a final email with your username, password, and instructions on how to fund your account.
So all that’s left is for you to login and start trading. Pretty easy huh?
But wait a darn minute!
STOP!
We strongly advise you spend some time at our entire School of Pipsology before you start risking real money.
Why?
Because if you don’t, you will lose all of your money and freak out!
You’re probably thinking, “So if I read through your School of Pipsology first, I will not lose any money?”
No, we’re not saying that. You will still probably lose money...
Opening a new online trading account with BROKER can be done in three simple steps:
Selecting an account type
Registration
Activating your account
Before trading a dime of your hard earned money, you may want to think about opening demo account. Actually, open up two or three demos - why not? It’s all FREE! Try out several different brokers to get a feel for the right one for you.
Account Types
When you're ready to open a live account, you have the choice of opening a Forex trading account under your personal name or a business name. Also, you will have to decide whether or not you want to open a "standard" account or a "mini" account (or "micro" account if available). Inexperienced traders or traders with a small amount of capital to trade should always open a mini account. Only experienced traders with lots of money should open a standard account.
Always read the fine print.
Some brokers have a “managed account” option in their applications. If you want the broker to trade your account for you, pick this, but obviously you’re here to learn how to trade the Forex for yourself. Besides, opening a managed account typically requires a pretty big minimum deposit - $25,000 or higher - and the broker also takes a portion of the profits.
Also, make sure you open a Forex spot account and not a “forwards” or “futures” account.
Registration
You will have to submit paperwork in order to open an account and the forms will vary from broker to broker. They are usually provided in PDF format and can be viewed and printed program.
Account Activation
Once the broker has received all the necessary paperwork, you should receive an email with instructions on completing your account activation. After these steps have been completed, you will receive a final email with your username, password, and instructions on how to fund your account.
So all that’s left is for you to login and start trading. Pretty easy huh?
But wait a darn minute!
STOP!
We strongly advise you spend some time at our entire School of Pipsology before you start risking real money.
Why?
Because if you don’t, you will lose all of your money and freak out!
You’re probably thinking, “So if I read through your School of Pipsology first, I will not lose any money?”
No, we’re not saying that. You will still probably lose money...
Subscribe to:
Posts (Atom)