07 Dec 2011
Forex Trade business is a remarkably substantial investment. That is why, it is most vital to know all about the trade and how to work with it before getting into business. The foreign exchange market or better known as the currency market is a global, decentralized economic market for currency exchange.
The fast rising online business has also penetrated the Forex Trade. Online Forex Trade business also allows Internet user to partake directly into the trading of the currencies to any part of the world.
The Forex trade is known as the largest monetary market in the world. This means that this market represent a highly attractive, but risky, ground. The trade is complete with a lot of profit, due to the advantages you can get. Forex trade gives a lot of opportunities to those who engage in this, because they can easily make money in a short period of time, yet it can also break you with scams that are around in this business.
Nevertheless, many people still want to be a part of Forex trade business. Since, they are beginners, they would need help, and that makes experts earn more. They create and sell assistance packages, and through this, another scam outbreak as been prevented. Creating a Forex trade business online is also a terrific option. Through this way, you will have a significant advantage of the market. Before you do that, there are five basic things that you should do.
First, select the broker who is reliable. Someone who will surely give you the best service is indeed crucial as to increase your experience in the market. Second, choose the type of the account that suits you best. There are many account types, which also depends on your chosen broker. Many accounts are created as to meet the standard of the clients. So, it is essential to examine carefully the features that each account type has. Third thing you need to do is to register with documents that are relevant. Common documents that are being required are national identity card, international passport, and utility bills. Fourth is to place funds in your account. The amount you are required to place depends on the account you choose. There are some accounts that you can open with only $10 on it, while others require $1000. There are many ways that you can fund your account like through using popular credit cards, Paypal, etc. Last, is activating your account. After the completion of that entire are required, your broker will have your online Forex trade business account activated. Then, you can install a trading platform on your computer or simply trade online. The transaction will be faster because the request for Forex trade will be processed without any delay.
Forex trade business is indeed a risky business to invest, but with the proper management, things for sure will go smoothly.
07 Dec 2011
1. Dependable
This works on multiple levels. You need a broker that you can rely upon to be trustworthy and who will not all of a sudden vanish like a puff of smoke from the internet taking with them all of your hard earned money. The FX market is surprisingly devoid of regulations so there are a vast number of Forex brokers to choose from and as is like with many things in life some Forex trading brokers are more honest than others.
The first step is to check up on the reliability of the currency trading broker and to confirm your online Forex broker is regulated. In the USA this means that you want a Forex trading broker that carries a current registration with the Commodity Futures Trading Commission (CFTC) and also the National Futures Association (NFA).
Check for a Forex currency trading broker with an unblemished record regarding any complaints logged against them on the National Futures Association website. Other countries have their own regulatory bodies for example the Financial Services Authority in the UK performs the same function.
Another consideration is whether the online Forex broker’s trading platform is reliable. The Forex trading platform is the financial software that will connect you to the FX markets whenever you want to trade. If the online Forex trading platform is often offline then this will cause you some major problems. For example you could miss out on either opening or closing a trade at the optimum time.
It would be best to check a number of online Forex trading forums for feedback from individual users regarding the amount of downtime that they have experienced. Remember it is like with all online forums do not listen to the loudest voice as they may have a vested interest either way in recommending or not recommending who in their opinion are the best Forex brokers
2. Services Provided by the Best Forex Brokers
The Forex markets trade for a full 24 hours each day that’s from Sunday evening through to Friday afternoon Eastern Standard Time. Check that your Forex broker’s trading platform is reachable available during all of these times, The best Forex brokers trading platforms will be available and they will also offer around the clock customer support on Forex trading days.
Check that they cover at the seven main currencies that are USD, JPY, CAD, AUD, CHF, EUR and GBP certainly the best Forex brokers will.
The best Forex brokers will offer you a minimum of the following essential tools, which are instant execution of your Forex trade at the price displayed, technical analysis charts and financial trading charts. Most will also offer a training program to teach the basics of using the tools.
3. Forex Broker Costs
Online Forex brokers do not make commission charges to their customers so the way they make their income is from the difference in the Forex trading spread. The Forex spread is the differences between the buying and selling prices on any of the currency pairs. The Forex trading spread is usually any spread between 1 pip and even sometimes less to around 3 pips; this will depend upon the online Forex brokers terms of service and the currency pair being traded.
The piece of the pie taken by the spread can make all the difference between achieving a profit or making a loss in your Forex trading account. This will affect both the immediate term and also the longer term so you will need to scrutinize closely at what level the spread will be computed. If you can decide which pairs you are likely to trade most frequently the spread on those pairs will be more important to you than on others. For example I prefer the USD/GBP trading pair, which is known as cable.
Beware of special short term marketing maneuvers like special offers of lower Forex trading spreads that may not last long once you have committed your funds.
Consideration need to be given on how much is the minimum amount of capital you can invest in order to open a Forex trading account. Good advice given to new traders is to start out small, which means looking for a Forex broker who will let you open an account with a minimum of $250 or hopefully less.
4. Margins, which are also known as Deposits
Margins are a variable that change from Forex broker to Forex broker. A lower margin requirement means giving you a higher leverage, and higher leverage can give you the ability to create greater profits, or losses from a fund of the same size. Margins allow you to magnify the opportunity to make more money
5. Size of the Trade also known as Lot Size
Trade size varies from one broker to another. Generally 100,000 trading units of currency is considered a standard lot, 10,000 of trading units is a mini lot, and 1,000 trading units is a micro lot. Some brokers do offer fractions of a lot too, which give you more power to set your own lot size. This could be perceived as a bonus or just an added complication depending on your point of view.
There are other matters to be considered which include the interest paid on the Forex margin account, the rollover charges when trades continue over to the next trading day and any other FX trading policies that the broker may have which could affect your Forex trading account commerciality. These are the main points that you should be looking out for when choosing the best Forex trading broker.
6. Customer Service
This is very important especially when you have just started out using a Forex trading platform. Like with all new things there will inevitably be teething troubles and you will want to be able to speak or email someone and get an instant response. The best Forex brokers will provide this service.
7. Forex Exit Strategy
There will be a time when you want to realize some of the profits that you have made and be able to withdraw your money quickly and easily. Make sure that you are able to get your money within a couple of days as some online Forex brokers insist on a 14 day delay which is totally unnecessary
07 Dec 2011
In recent years, mechanical currency trading systems, using technical analysis to predict trend movements have become increasingly popular as a way of locking into, and profiting from the longer term currency trends.
Making Money from the Longer Term Trends
Currency trading systems are ideal for making profits from longer-term currency trends, and they occur in all currencies.
The longer-term trends in FOREX markets reflect the health of the economy.
As economic cycles are relatively long and take years, so do the currency trends that reflect these cycles.
A good currency trading system can enable traders to lock into, and make profits from these longer-term trends.
When choosing currencies to trade, it is important to have good long-term trends, but just as important is liquidity, which enables traders to lock in profits and exit losing trades quickly.
Currencies that offer good trends and liquidity include:
· The US Dollar
· Swiss Franc
· Euro
· Japanese Yen
· British Pound.
Currency trading systems remove emotions from trading, which is the major reason the majority of traders end up losing.
Removing the Emotion from Trading with Systems
There has been plenty of material written about using currency trading systems, and the works below provides informative reading for anyone thinking of using a currency trading system.
Traders should try to read the following authors:
Edwin Lefeurve, Jake Bernstein, Larry Williams, Ken Roberts, Van Tharpe and Jack Shwager whose books “Market Wizards” and “The New Market Wizards” interview some of the most successful traders of all time, including the “turtles”. The Turtles are group of traders who had no prior trading experience, but went on to earn hundreds of millions of dollars, using very simple mechanical trading systems.
Currency Trading Systems that Make Money
The developments in recent years in computer software, the growth of the Internet, and online trading, has seen currency trading systems become more popular than ever.
Software Packages such as Tradestation, Supercharts, Omni trader, and many more, allow traders to back test systems, using a variety of technical indicators that include:
· Stochastics
· Bollinger bands
· RSI
· moving averages
· ADX
And many more.
The currency trading system picked can then be analyised, to see how it would have performed in the markets with commissions and slippage deducted.
Traders, who don’t want to develop a currency trading system, can buy systems off the shelf from vendors.
How do you Choose a Successful Currency Trading System?
If you are buying a currency trading system, there are several things to consider before parting with your hard earned cash:
1. Are you interested in being a day trader, or a trader looking for longer-term trends? You need to pick a system that you’re comfortable with and this is mostly down to personal preference. Some traders like the excitement of day trading others prefer a longer-term approach.
2. Do you want to have any input into the system, or do you want it to be totally mechanical?
3. Do you want to trade just one currency, or a basket of currencies? Using a currency trading system that trades just one currency can be more profitable but keep in mind, the converse is true, i.e losses and drawdowns can be larger.
4. When choosing a currency trading system you need to have confidence to trade with it, and follow the system through losing periods. To do this you should know the logic the system is based upon. If you understand the system and its logic, you will derive confidence and be more likely to follow it – in contrast to one where the logic is not revealed.
5. What are the average profits you can expect in relation to drawdowns? All currency trading systems will have periods of drawdown and losses. Generally the larger the profits the bigger the drawdowns tend to be over time – so pick a system that reflects your investment aims and risk tolerance.
6. When you are buying a currency trading system, check out the system seller’s experience, track record, customer support, – and whether they have a real-time track record, or a hypothetical one.
A real time track records means the system has performed in the market and made money, i.e it’s proven. Trading systems that simply rely on hypothetical track records mean they have been back tested, – and with the benefit of hindsight we can all make money!
While hypothetical track records should be treated with a degree of caution, you can find out a lot about whether the system is likely to make money, by knowing the logic the system is based on.
When considering a hypothetical track record, look for one where the logic is revealed and not a “black box” system where you have no idea how to system works.
In conclusion, you can make your own currency trading system, or you can buy one from a vendor – when choosing one from a vendor make sure you do your homework, and remember – if it looks too good to be true, it probably is!
Currency trading systems can, and do make money, and the effort you put into finding the system that suits your personality, risk tolerance, and profit objectives, will be time well spent.
07 Dec 2011
So what are market cycles?
Not knowing what market cycle you are in will affect your forex trading. Knowing the correct major market cycles is important for you and which forex trading system you should be using. As each cycle requires a different approach from your forex trading system.
There are three major market cycles and the ability to adapt to each cycles is an important part of your forex strategy and will improve your profitability.
So you need to understand how to determine the market cycles if you want to become a successful trader.
The three major cycles are:
1) Trending
2) Consolidation
3) Breakout
The Three Market Cycles
It does not matter what financial market you are trading, the market can only move in these three cycles.
A common saying amongst forex trade is “The Trend is your friend.”
Trending Cycle
Trending is when the market price moves in the same direction consistently in one direction either up or down.
How a forex market trend is inherently defined? A trend can be defined as progressively higher lows and higher highs.
Of course if the price movement consisted of a straight line either up or down, then identifying a trend would obviously be very easy.
In real life, currency prices move do not move in one direction consistently, so denying forex traders and easy trend read.
Consolidation Cycle
A Consolidation cycle also known as Non Trending or Ranging market, which looks like a sideways / horizontal line of bars on a chart. Consolidating is when the market is struck between two horizontal support and resistance levels and cannot break these support / resistance levels for at least seven bars.
You can use moving averages or other technical indicators to determine whether the market is consolidation or trending. In case of a consolidating market, the moving average line will almost be horizontal.
Breakout Cycle
Now what is breaking out of a Consolidation? After the market has been consolidation for at least 7 bars and then the price sharply breaks out of this ranging market sharply to make a new high or low.
That is basically it for the cycles
How does this affect your forex strategies…?
The majority of forex traders only have a forex strategy for one or two market states. The most popular forex strategies being Trends and Breakouts.
But recent research has shown that on average the forex market is in a trending cycle about 30% of the time, breakout cycle about 10% of the time and Consolidation for 60% of the time.
So if your only forex strategy is for a trending cycle then you will only be trading for 30% of the time and if you are one of the few that have more than one forex strategy with the most common being the trending and breakout strategies, then you will still be trading only 40% of the time.
This means that you will be sitting on the sidelines for about 60% of the time. Whilst it is always important to have the patience to wait and pick high probability trades, waiting for the market to change cycles because you do not have a forex strategy for this cycle does not make sense.
Some forex traders will then get sucked into making trades with the wrong strategy into market cycles that the strategy just will not work in.
This year in the July and August the market spent the majority of its time in consolidation and breakouts with very few trends happening. A lot of traders I know only did not have a strategy for this type of cycle so they either lost money over these months or stopped trading altogether until the marker started trending again.
I was myself was in the same position. About mid way through July, I realised that my strategies where just not cutting it in this cycle and I set about on developing my forex strategies so they included one strategy for each cycle. Now I am comfortable trading and making pips in all market cycles.
So it is important to have a set of forex strategies that cover each of the market cycles.
You need to learn what the different market cycles are in addition to having correct trading systems. That means you should develop the skill of correctly identifying the different market cycles at the right time.
Once you have the skill to identify the market cycles then it is important to have set of forex strategies that will cover each market cycle. As effectively identifying the market cycles is a skill that all successful traders have mastered. You need to learn how to adopt your approach to those cycles to remain profitable.