Forex trading

If I am day trading the stock and futures market, why would I want to move into day trading the forex as another additional trading avenue? Are there any special features of day trading the forex market that appear more appealing to stock traders to attract them to trade the forex as well?

In the pursuit of prosperity, we are always looking for ways to create personal wealth, and day trading forex offers much more opportunities to create wealth than say trading stocks and shares and commodities. Why is this so?

Forex Markets open 24/7

The stock markets and the commodity markets have set times that they are open for trading. In contrast, the forex markets are open 24hours a day, seven days in the week, giving much more trading opportunities to the day trader to trade. At the same time, convenience is a key factor, as anyone can trade at any convenient time with a web based trading platform provided free by his forex broker.

Higher Liquidity

The day trader is always conscious of liquidity. It is liquidity that allows a day trader to move smoothly into a day trade instantaneously at the best identified price without lag which will lead to a poor executed price. When he wants to buy, the day forex trader is able to get into that trade almost instantaneously due to the higher liquidity in the forex market and when a day trader wants to sell, he can get out of the currency at his price without delay. Where the difference in a fraction of a cent is important, this characteristic of very high liquidity makes forex trading very attractive. More so, it has been proven that there are trading systems that allow day traders to trade for only an hour or two, freeing them to do whatever they like for the rest of the day after pocketing profits. These are day traders who professionally trade for a living.

Lower Trading Costs

Forex trading seems like a dream to many day traders because there are no exchange fees, no commissions paid to brokers, and low transaction fees. In contrast, the day traders in stocks and shares and futures market all incur fees and commissions paid to licensed dealers and brokers, all of which will result in less profits.

Ability To Earn From Referrals

The active day trader can enter into arrangements with some forex brokers to earn a referral commission from the trades of people he introduces to the forex broker. Now while this is another separate activity, it cannot be denied that this is an added advantage for a day trader to earn something extra from his efforts in introducing or recommending friends to trade as well.

All these features make day trading the forex an attractive and possible replacement income source for those who work from home trading for a living.

Forex Market Offers Opportunity And Information

The forex market is what is called an international exchange currency market, where currencies are exchanged on a daily basis. There are five forex market centers around the world — New York, London, Tokyo, Frankfurt and Zurich. One does not need to be on the trading floor, so to speak to be involved in the forex market. Today, forex trading can be done from home on a computer.

The forex market itself is basically a worldwide connection of traders, who make investment moves based on the price of currencies, or their values relative to other currencies. These traders constantly negotiate prices with other traders resulting in the fluctuation or movement of a currency's value. The value of a currency on the forex market also corresponds with supply. If there is greater demand for the Euro, let's say, then there will be less supply of it on the forex market, which means, in time, it will make a Euro more valuable compared to let's say the dollar. In short, in this forex market situation, one Euro would yield more dollars, subsequently weakening the dollar as well. Analyzing the forex market's fluctuations allows investors to make predictions on how a currency will move in relation to another currency. They then can make predictions and buy and sell currency accordingly.

While some people view the forex market as a place to see what their exchange rate will be when they travel abroad, others view it as an opportunity to make great gains in their financial planning and future.

Stock Market 1

1: CFD Trading 95% Lose - How To Win

Everybody starts out in CFD Trading wanting to make money but a whopping 95% of Traders lose, which leaves 5% winners. So what is it that the 5% of CFD Traders are doing to make them win in CFD Trading. What are the mistakes that the 95% of people are making, and how can you avoid them!

2: Stock Market Trading - Winning Trading Plan

Successful stock market trading begins with a winning trading plan. It's as simple as that. If you develop a well-conceived trading plan to guide your actions in the stock market you will already have the advantage over most of your market competition. Put simply, it gives you the edge you need to win over the long haul when trading the stock market or forex market.

3: CFD TRADING- Indonesia

Contracts for Difference (are commonly known as a CFD) is a contract between the trader and a CFD provider, who will at the close of the contract, exchange the difference between the opening price and the closing price of the underlying index, share, commodity, per the number of specified CFD contracts.This is why CFDs are the flexible new way to trade.

4: Stock Market Trading- 3 Strategies to Make you a Millionaire

Stock Market Trading- Are you ready to become a millionaire. Here are 3 proven strategies to make you become a more successful trader and increase your wealth. They can be used if you are forex trader, stock market trader.

5: Little Known Ways Regarding FOREX Market Online : Discover Helpful Suggestions Next

FOREX is the Foreign Exchange market also known as FX. All three of these means the same thing, which is the trade of trading between different banks,

6: Stock Market Meltdown - Watching Rome Burn

Both presidential candidates want to crucify SEC Chairman Cox for failing to control our creative financial institutions. But rumor has it that Congress specifically excluded the devilish derivatives from SEC purview. Let's fire the right bunch of "poips" for a change!

7: Preventing Investment Mistakes: Ten Risk Minimizers

Losing money on an investment may not be the result of a mistake, and not all mistakes result in monetary losses. Your own misconceptions about how securities react to varying economic, political, and hysterical circumstances are your most vicious enemy. Step away from calendar year, market value thinking. Avoid these ten common errors to improve your performance:

8: Good News For Income Investors

Admittedly, even if your asset allocation has been fine tuned for years, lower portfolio market values in this area make stock market valuation shrinkage feel even worse. But the value of stable cash flow becomes painfully clear for investors who misguidedly depend on capital gains for their spending money.

9: When All Stocks Are Value Stocks - Think QDI

How do we create a confidence building Stock Selection Universe? Simply operating on blind faith with one of the common definitions may be too simplistic, particularly since many of the numbers originate from the subject companies. Here are five filters you can use to come up with a listing of higher quality companies:

10: Quarterly Window Dressing - A Recurrent Wall Street Scam

Why aren't the wizards of Wall Street assuaging our nerves by explaining the cyclical nature of the markets and pointing out that similar crises have always preceded the attainment of new all time highs? Right, because the unhappy investor is Wall Street's best friend. Why can't politicians address economic problems with capitalist-economic solutions?

Stock Market 2

11: Volatility Rocks The Investment Markets

Investor perceptions of volatility need to be rearranged. When you allow more than an up-only smiley face into your understanding of the markets, you will be able to position yourself to actually take advantage of the volatility while it is happening.

12: Go Stock Trade . com Primer: What is the stock market all about?

Thousands of people who have money in any type of account for their retirement can consider ourselves participating in the Stock market. But have you pondered about the functionality of how this interesting market works? Imagine being at a regular auction, where instead of nice bits such as cars and antiques are being bidded away, think of bits of public companies being auctioned away.

13: Compound Stock Earnings Programs - Caveat Investor

Options are bets about the future price movement of exchange-traded securities--- it's just that simple. The prospect of unusually high returns always signals unusually high risk. Caveat emptor, in spades. Here are some things to consider before you think about attending that free seminar---

14: Your 401(k) Investments and the IGVSI

Risk minimization begins with quality, is enhanced through diversification, and is compounded with realized income. The first two steps require research, greed control, and discipline. The income part just requires discipline, so it should be much easier to manage.

15: Predicting Stock Market Movements

Wall Street spins reality in whatever manner it can to make most investors unhappy, thus increasing new product sales. Your confusion, fear, greed, impatience, and need for a quick panacea fuels their profit engines, not yours. Learn how to deal unemotionally with Wall Street events and shun the herd mentality.

16: A Few Tips For Day Trading the Stock Market

Day trading the stock market involves the rapid buying and selling of stocks on a day-to-day basis. This technique is used to secure quick profits from the constant changes in stock values, minute to minute, second to second. It is rare that a day trader will remain in a trade over the course of a night into the next day. These trades are entered and exited in a matter of minutes.

17: Stocks vs. Bonds: Differences and Risks

In the world of investments, you'll often hear about stocks and bonds. They are both feasible forms of investment. They allow you the opportunity to invest your money with a specific company or corporation with the possibility of future profits. But how exactly do they work? And what are the differences between the two?

18: Know About Stock Market Trading

Many stock market traders lose simply out of ignorance in stock market trading. They base their trades on news and tips from friends, and do not define specific risk and profit objectives before placing trades. Others have the merit of educating themselves but fall victims of their emotions. They hold on to losing positions hoping they will turn into winners and sell winners by fear of losing a small gain.

19: Playing Both Directions for Better Trades

When I first began trading back in the '90's, I was very fortunate. I had begun trading at time when the market was headed almost straight up. My first strategy was writing covered calls which blended with a rising market in such a way that I almost never lost.

20: The Perfect timing to sell your stocks

I will guide you through the best way and timing for selling your stocks at maximum cost with minimum risk.

21: Cut Your Losses and Let Your Profits

Did you know that many successful traders win less than 50% of their trades? Yes, top traders know that they can be VERY successful winning only 40% of the time. "How can that be?" you ask. Simple, really. They are truly following the old adage of "Cut Your Losses and Let Your Profits Run." Let's see how this might actually work.

Forex trading examples

Many beginning traders don’t fully understand the concept of leverage. Basically, if you have a start up capital of $5,000 and if you trade on a 1:50 margin you can effectively control a capital of $250,000. However, a two percent move against you and your capital is completely wiped out. If you are a beginning trader you should not use more than 1:20 margin until you get comfortable and profitable and then and only then you can attempt to use higher margins.

What does 1:20 margin mean? It means that with your $5,000 you will control a capital of $100,000. Let’s say you are trading EUR/USD and by using our entry strategy you have decided to enter the trade on a long side. That means that you are betting that USD will depreciate against Euro.

Let’s say current EUR/USD rate is 1.305. Again, if your trading capital is $5,000 and you are using 1:20 leverage you will effectively be exchanging $100,000 to Euros. If the current rate is 1.305 you will receive 100,000/1.305 = 76,628 Euros.

If the trade goes in your direction margin will work in your favour and 1% decline in USD will mean 20% increase in your start up capital. So if EUR/USD rate moves from 1.305 to 1.318 you will be able to exchange your 76, 628 Euros back to $101,000 for a profit of $1,000. Since your start up capital was $5,000 it is effectively a 20% increase in your account. However, if the trade went against you and USD appreciated 1% vs. Euro your account would be reduced to $4,000. That would not have happened as our strategy has built in hard stops to prevent such outcome.

Example 2

The most frequently asked question of aspiring traders is "How much money can I make?" Unfortunately there's no easy answer, because it depends how much you are willing to risk.

Trading is a function of risk and reward: The more you risk, the more you can make. Here's an easy example: Let's say you start with a $5,000 account and you're willing to risk $1,000. Now you could place a trade to go long at the opening, set a profit goal of $1,000 and a stop loss of $1,000. Let's say you investigated the market behavior in the past couple of months and realized that your chances of achieving your profit goal are 60%.

Unfortunately the trade you just placed is a loser, and you lose the whole $1,000. Since this was the amount you were wiling to risk, you close your account, transfer the remaining $4,000 back in to your checking account and that's it for you.

Now let's assume you wanted to risk only $100 per trade and you adjusted your profit goal to $100, too. Now you can make at least 10 trades, because only if all 10 trades are losers you'll lose the $1,000 you are willing to risk. I don't want to become too mathematical, but statistics says that the probability of having 10 losing trades in a row is less than 1%. Therefore it's highly likely that you will have a couple of winners within the 10 trades. If your trading system shows the same performance as it did in the past (60% winning percentage), you should make $200: 4 losing trades * $100 = -$400 + 6 winning trades * $100 = $600. Make sense?

Compare these two options:

The risk of losing your money in scenario 1 is 40%. But if you won, you would have made $1,000.

In scenario 2 the risk of losing your money after 10 trades is less than 1%, but you have a fair chance of making $200. Therefore you need to define first how much you are willing to risk, since the amount you can make is a function of that risk. Make sense? I'll give you more specific examples later in this chapter.

Keep in mind that there's a difference between the amount you need to trade and the amount you're willing to risk. Your broker is always asking your for a "margin", and you need to fund your account with that margin requirement + your risk. In our previous example you funded your account with $5,000, but you only risked $1,000. More on that later.

Example 3

50:1 Leverage: what does it mean?

With a minimum account of USD 10,000, for example, you can trade up to USD 500,000. The USD 10,000 is posted on margin as a guarantee for the future performance of your position.

What’s The Market Bias: Buy, Sell or Flat?

Online Trading and Forex

Exiting The Trade: Profit Targets

February 8th, 2009 by admin

Profit targets are similar to stoploss orders, but in the opposite direction. They’re pending

orders that automate the exiting process when we hit out profit goal.

Why would you want to exit a profitable trade? Because as we already established, the Pound

is volatile. We can judge with a fair degree of success when it will go in our direction, but we

have to be aware it will always go the other direction sooner or later. Setting profit targets

allows us to close a profitable trade at the point where we’re satisfied with the profits we’ve

already made – and exit before volatility takes us the wrong direction.

Remember, the London Forex Rush system aims to capitalize on two things: 1) The

correlation between the Tokyo range breakout and the likely trend for the London session,

and 2) the high volume in the first two hours of trading. So we aim to make most of our profits

fast and early, then get out. History shows this is the most sensible plan to give us the best

chance to build long term profits.

Just as we saw with our stoploss placements, our exits also allow both aggressive and

conservative approaches.

So, how do we set them? Let’s elaborate on this topic in detail:

Different currency crosses pour in different average daily moves. That means that while some

might move 150 pips per day as an average (such as GBPUSD), others might move over 300

pips per day (such as GBPNZD). By averaging how many pips any particular currency pair

has moved per day over the last X number of days (14 days is a commonly used number), we

can arrive at the “average daily range”.

We use the average daily range to determine our target profits. Here are the two ways of

setting our targets:

1. Aggressive target placement: the aggressive approach seeks to exploit the full

amount of the average daily range. Imagine we were seeking to enter a long (BUY)

trade: we would calculate the average daily range (in pips) for a particular currency

cross for the last 14 days; then we add that number to the Tokyo low for that day (or

Tokyo high is it was a SELL trade). The resulting figure gives a potential point where,

as a statistical average, that currency pair might be expected to run out of steam. So,

by setting our target aggressively, we’ll want to place our exit point just a little before

that point, to be on the safe side.

2. Conservative target placement: the conservative approach is also based on the

average daily range, but considers a psychological factor as well. It takes into

consideration the “round number phenomenon”. Round numbers are those price levels

ending in “00” or “50” (for example: round numbers for GBP/USD would be 1.9700,

1.9750, 1.9800, 1.9850, etc). The “round number phenomenon” suggests that once the

price has broken a round number, it tends to gravitate towards the next one. Moreover,

if price can not break through a round number, chances are that it will fall back to the

round number immediately below. Well, the conservative approach of placing our

targets takes them into consideration so we exit the trade few pips before hitting a

nearby round number in case price does bounce off that level.

Let’s look at an example.

Let’s say we take a long entry on GBPUSD at 1.9715 - that’s our starting point. Now, let’s say

we calculated the average daily range, and by adding it to our Tokyo low, it takes us, in theory,

all the way up to 1.9815 – which would be a gain of 100 pips.

The aggressive way of placing your profit target would be to set it just shy of 1.9815, at a

number like 1.9810.

The conservative approach would suggest we exit the trade few pips before 1.9800 just in

case the price does indeed finds resistance there and falls back.

I am a firm believer in the round number phenomenon. The markets are run by humans and

are susceptible to group psychology. Therefore, I recommend using the conservative

approach to setting your exit levels. I feel that in the long run, they will grow your account

further than an overly aggressive approach will.

To see the round number phenomenon in effect, have a look at the GBPNZD chart below:

As you can see, the entry was taken as the price broke out of the Tokyo range in the direction

of the down-trend. Now, the average daily move for this currency pair indicated that price

might drop all the way down to a level a bit below 2.5000.

By setting the profit target conservatively – in this case, 5 pips before hitting the 2.5000 round

number at 2.5005 – we can see how a potential loss was turned into a gain. Notice that the

price did in fact find support and bounce back up from the 2.5000 level. Psychology can be a

stronger market force than momentum so it’s best to take that into consideration.

One last point of clarification: even though we’re only looking for entries when a breakout

occurs in the first two hours of the London market, don’t expect your profit target or stoploss

to be hit within that time span. Usually, the trade will remain open for few hours after the two

hour entry window closes. This is normal and furthermore acceptable. Remember, we were

using that window of high volume only as a predictor of the overall daily trend, not as a profit

target time frame.

Controlling The Risk: Stop Losses

February 8th, 2009 by admin

As you may know, a stoploss is a pending order in the direction opposite your trade. For

example, if you buy GBPUSD at 1.9800, you might place a sell stop order at 1.9750. That

way, if price heads south, your maximum loss will be limited to 50 pips. Basically, once the

price hits your stoploss, you’re automatically exited out of the trade. Stoplosses are crucial in

order to avoid unnecessary large losses. That’s why every successful trader uses them

religiously.

There are two ways you can set your stoploss in the London Forex Rush system, depending

on your personal aversion to risk: an aggressive way and a conservative way.

1. Aggressive stop loss placement: the stoploss is placed 5 pips behind the Tokyo

range mid-band. That is, you take the Tokyo range’s high, subtract its low, divide the

result by two, and set your stoploss 5 pips behind that figure.

2. Conservative stop loss placement: to take a more conservative approach, you can

place your stoploss 5 pips behind the opposite Tokyo band from the breakout band. For

example: if you buy the breakout of the Tokyo high, place your stoploss 5 pips below

the Tokyo low.

So which is better? There’s no right or wrong answer to that question. It depends entirely on

how much risk you’re willing to take as a trader.

We personally use the aggressive stoploss positioning. My reasoning goes like this: the London

Forex Rush is a momentum-based technique. When the breakout we’re looking for comes,

we want the price to be moving away from the Tokyo trading range rather quickly.

If, once it breaks out and we have entered a trade, price comes back within the Tokyo range

again, it may well mean that we were lacking the momentum we thought we had in the first

place. Without that momentum, I don’t feel the need to wait for the price to reach the opposite

band of the Tokyo range in order to exit the trade.

In essence, I feel momentum is important enough an ingredient for our success that in its

absence, seeing price returning to a level midway through the Tokyo band (plus 5 pips) is

more than enough to get me to drop the position.

The Trading Instrument: GBP-CROSSES

February 8th, 2009 by admin

The London Forex Rush system trades exclusively GBP-crosses. Once again, this is due to

both their high volatility, and the typical massive early-session volume influx. These are the

two factors this system is designed to exploit.

We’ll be following six of the major GBP-crosses: GBPUSD (Pound against the US Dollar),

GBPJPY (Pound against the Japanese Yen), GBPCHF (Pound against the Swiss Franc),

GBPCAD (Pound against the Canadian Dollar), GBPAUD (Pound against the Australian

Dollar) and GBPNZD (Pound against the New Zealand Dollar). These six pairs are all a

skilled London Forex Rush trader needs to build up his trading account.

You’ll note we’re excluding EURGBP (Pound against the Euro) as it simply lacks the volatility

we require.

Now, be aware that many brokers don’t offer certain of these trades. In particular: GBPCAD,

GBPAUD and especially GBPNZD. But it’s worth it to search for a broker who offers as many

of these pairs as possible. The more pairs you can find, the more daily trading opportunities

you will have. I personally recommend MIG FX: they offer all the currency pairs we need, their

spreads are among the lowest for MT4-brokers and they are a secure and honest broker.

Better still, MIG Forex features the very powerful (and free!) MetaTrader 4 charting platform

which is the trading platform my custom indicators are coded for (more on my custom

indicators in the following chapter).

I recommend you download their free demo here to test the waters. This will allow you to

download their full charting platform immediately, with no risk involved.

This is what my charting screen looks like with MIG Forex:

What’s The Market Bias: Buy, Sell or Flat?

January 26th, 2009 by admin

The market bias, or “the trend,” will help us determine whether we want to search for long

entries (meaning we’re looking to buy), short entries (looking to sell), or even if we simply

don’t want to search for entries at all.

It’s an established fact that trading in the direction of the trend increases a trader’s win-to-loss

ratio. This helps our overall scoring performance since we have the market inertia pushing our

trade forward. That’s why we will only be interested in trading breakouts that take place in the

direction of the market bias.

For example, if the market has been uptrending throughout the last few days, we will only be

interested in breakouts of the upper band of the Tokyo range. In this case, should price drive

through the lower band of the Tokyo range, we will simply pass on taking any trade on that

currency pair for the time being.

Moreover, if the chart shows no clear bias through the last few days, it means the market has

been fluctuating sideways, which makes it is too difficult to position ourselves to best take

advantage of market momentum. Our best bet in a fluctuating market is to not search for any

entry at all.

Get Started with Forex Trading

Get Started with Forex Trading

Before you can get started with forex trading, there are so many questions to answer. How do I choose a broker? Should I use a demo account? What do I need to know before making my first trade?

Let’s answer these questions one at a time, in order of importance.

1. Choose a broker
Making a decision on which broker to use is personal for each trader. Some brokers offer certain options that some traders will thrive on, while other traders will hate the broker for those same options. It is important to review and compare the options of each broker closely and choose the one that makes you feel most comfortable.

• Review Forex Brokers

2. Open a Demo Account
Once you have made your decision on which broker you like the best, it is time to open a demo account. Most brokers will offer at least a 30 day trial of their trading platform giving you a chance to trade on the platform using play money. Using a demo account is a good opportunity to make sure that you feel comfortable using the broker’s trading tools. You would not want to trade real money without being fully comfortable with the trading platform. A demo account will not only help you get a grip on how to use the broker’s trading platform, but also trading the market in real time.

• Learn to take risk seriously
• Practice sound money management

3. Learn About Leverage
Forex trading is typically carried out using leverage, or trading on margin. Margin is a useful tool, but it can be very dangerous if it isn’t used correctly. Forex brokers typically offer anywhere from 50:1 leverage up to 400:1 leverage. The higher the number, the less money required to put on a large trade. The use of leverage is something that needs to be taken with a lot of care.

4. Practice Reading Charts
Before you start making trades you should get familiar with charts and how they work. It is a good idea to get familiar with the different time frames and the different types of charts. The shorter time frames will give you an idea of how the market is moving minute to minute. The longer time frames can show you how the market moves over longer periods and will show the larger trends. Most charting software will offer charts as lines, candlesticks, or bars. Take plenty of time to try out different looks and time frames to find the style that you are comfortable with.

• Learn about candlesticks
• Learn to understand support and resistance

5. Making the first live trade
The first trade is a nervous and exciting experience. The demo account prepares you for the technical aspects of trading, but when real money is on the line, emotions will come into play. It is important that you keep a level head and do your best to trade with the same methods that you practiced on the demo account. It may prove to be difficult, but if you master your emotions and use sound money management, anything is possible after this step. If your first trade loses money, do not give up, just piece together where you think you went wrong, and try again.

Forex trading is a constant learning experience. Trading mistakes can be expensive. If you learn from those mistakes and do your best to avoid them in the future, you can become a very successful forex trader.

For More Details Visit www.forextrading.about.com