Wednesday, August 7, 2013
Do You Really Need the Stock market trading course?
International Payments
Do you need to send money abroad?
Whether you are making an international payment for a property, a holiday, paying a mortgage or bills abroad you need to find the cheapest way to transfer your money and achieve the best exchange rate.
International payments can be made by your bank or via a foreign currency broker.
Banks V�s Foreign Currency Brokers
You will save more money using a foreign currency broker to make an international payment abroad. Banks can charge up to �30 per international payment and offer uncompetitive blanket exchange rates. Foreign currency brokers due to their huge buying power are able to offer you far better exchange rates. Most brokers will offer you free international payment transactions on larger amounts and will also waiver any transaction fees if you make regular international payments.
Use the Compare currency comparison table to find out what transaction fees the leading UK banks and foreign currency providers charge for international payments.
If you are making an international payment for the first time and are looking for advice and help monitoring the foreign exchange markets in order to achieve the best exchange rate, you will need an expert to help you. Unfortunately international payments made via the bank are carried out in call centres, where the staff has little/no knowledge of the exchange rate markets and the reasons behind the fluctuating exchange rates. Currency brokerages on the other hand employ market experts who are on hand to help guide you through your entire international payment. They can explain what is happening in the market, monitor the exchange rate for you and help you to achieve the best possible exchange rate.
We have listed the leading foreign currency broker�s specialist areas, transfer fees and minimum transaction sizes so that you can easily find the best one for your currency requirements. Once you have read through the table we would recommend contacting two different currency providers for a free no obligation quote so that you can find how if offering the most competitive exchange rate.
Making an international payment via a foreign currency broker is quick, simple and far easier than you may first imagine. Use the Compare currency international payment table now to save money and get the best exchange rate!
Bollinger Bands strategies in Forex trading
Bollinger Bands is one indicator which many traders tend to have on
their charts even if they are actually analyzing other technical
analysis indicators and not really Bollinger bands.
Let's see how to use this common indicator to get us more winning trades, mainly with a combination of other technical indicators like stochastic oscillator.
Bollinger bands indicate the volatility of market and hence we should always look for the change in volatility. The change always indicates some major move and we need to catch that up early. So what we need to look for is the following:
1) Bands are widening: Volatility is increasing and further move can be
anticipated in the current direction. So we need to ensure that we are
correct about the current direction.
2) Bands are tightening: Volatility is decreasing. It can be like silence before the storm and a major breakout may be on the way. But breakout in which direction?
1a) Widening Bollinger Bands (Bullish):
This pattern generally would take place after some band tightening with low volatility shorter candles with range movement)
- The bands are widening with the upper band moving sharply upside and the lower and moving sharply downwards.
- The price action is moving upwards.
- The recent candle sticks are longer than the previous candlesticks
Action:
- Check if RSI (Relative Strength Index) is in the range of 30 to 50 and rising.
- You may also check if ADX is rising towards 25/beyond 25 and +DI crossing -DI.
- Check if Slow Stochastic is crossing the signal line upwards (bullish).
- If all above are taking place then we can expect a further upward move of the price. It will be safer and hence better to wait for 2 or 3 more candles to confirm the trend and then take a buy position. It also happens that before a further upward move there may be some downward correction and the wait for 2/3 candles may help in increasing the gains.
If ADX does not move above 25 then the upward move may be limited and hence the profit taking will be limited
1a) Widening Bollinger Bands (Bearish):
This pattern generally would take place after some band tightening with low volatility shorter candles with range movement)
- The bands are widening with the upper band moving sharply upside and the lower and moving sharply downwards.
- The price action is moving downwards.
- The recent candle sticks are longer than the previous candlesticks.
Action:
- Check if RSI (Relative Strength Index) is in the range of 55 to 75 and falling.
- You may also check if ADX (Average directional Index)is rising towards 25/beyond 25 and -DI crossing +DI.
- Check if Slow Stochastic is crossing the signal line downwards.
- If all above are taking place then we can expect a further downward move of the price. It will be safer and hence better to wait for 2 or 3 more candles to confirm the trend and then take a sell position. It also happens that before a further downward move there may be some upward correction and the wait for 2/3 candles may help in increasing the gains.
If ADX does not move above 25 then the downward move may be limited and hence the profit taking will be limited.
2a) Tightening Bollinger bands (bullish move):
The pattern happens with a prolonged sideways move with less volatility (short candlesticks)
- Check if there are minimum 2 continuous bullish candlesticks (green) which are longer than previous 2 to 3 candlesticks.
- Check if RSI (Relative Strength Index) is in the range of 30 to 50 and rising.
- You may also check if ADX is rising towards 25/beyond 25 and +DI crossing -DI.
- Check if Slow Stochastic is crossing the signal line upwards.
- If all above are taking place then we can expect an upward breakout. It will be safer and hence better to wait for 2 or 3 more candles for confirmation before taking a buy position with a red candle.
If ADX does not move above 25 then the upward move may be limited and hence the profit taking will be limited
2b) Tightening Bollinger bands (bearish move):
The pattern happens with a prolonged sideways move with less volatility (short candlesticks)
- Check if there are minimum 2 continuous bearish candlesticks (red) which are longer than previous 2 to 3 candlesticks.
- Check if RSI (Relative Strength Index) is in the range of 40 to 60 and falling.
- You may also check if ADX is rising towards 25/beyond 25 and -DI crossing +DI.
- Check if Slow Stochastic is crossing the signal line downwards.
- If all above are taking place then we can expect a downward breakout. It will be safer and hence better to wait for 2 or 3 more candles for confirmation before taking a sell position with a red candle.
If ADX does not move above 25 then the upward move may be limited and hence the profit taking will be limited.
3a) Continuation of uptrend after correction
During an ongoing uptrend the price may reverse to the middle band or even the lower band.
- Check if RSI (Relative Strength Index) is in the range of 30 to 50 and rising.
- You may also check if ADX is above 25 and +DI over -DI.
- Check if Slow Stochastic is over the signal (bullish configuration).
- With all above we can expect a continuation of the uptrend. It will be safer and hence better to wait for 2 or 3 more candles to confirm that the recent move was just a correction and then take a buy position
3b) Continuation of downtrend after correction
During an ongoing downtrend the price may reverse to the middle band or even the upper band.
- Check if RSI (Relative Strength Index) is in the range of 55 to 75 and falling.
- You may also check if ADX is above 25 and -DI above +DI.
- Check if Slow Stochastic is below the signal (bearish configuration).
- With all above we can expect a continuation of the downtrend. It will be safer and hence better to wait for 2 or 3 more candles to confirm that the recent move was just a correction and then take a sell position.
Let's see how to use this common indicator to get us more winning trades, mainly with a combination of other technical indicators like stochastic oscillator.
Bollinger bands indicate the volatility of market and hence we should always look for the change in volatility. The change always indicates some major move and we need to catch that up early. So what we need to look for is the following:
2) Bands are tightening: Volatility is decreasing. It can be like silence before the storm and a major breakout may be on the way. But breakout in which direction?
1a) Widening Bollinger Bands (Bullish):
This pattern generally would take place after some band tightening with low volatility shorter candles with range movement)
- The bands are widening with the upper band moving sharply upside and the lower and moving sharply downwards.
- The price action is moving upwards.
- The recent candle sticks are longer than the previous candlesticks
Action:
- Check if RSI (Relative Strength Index) is in the range of 30 to 50 and rising.
- You may also check if ADX is rising towards 25/beyond 25 and +DI crossing -DI.
- Check if Slow Stochastic is crossing the signal line upwards (bullish).
- If all above are taking place then we can expect a further upward move of the price. It will be safer and hence better to wait for 2 or 3 more candles to confirm the trend and then take a buy position. It also happens that before a further upward move there may be some downward correction and the wait for 2/3 candles may help in increasing the gains.
If ADX does not move above 25 then the upward move may be limited and hence the profit taking will be limited
1a) Widening Bollinger Bands (Bearish):
This pattern generally would take place after some band tightening with low volatility shorter candles with range movement)
- The bands are widening with the upper band moving sharply upside and the lower and moving sharply downwards.
- The price action is moving downwards.
- The recent candle sticks are longer than the previous candlesticks.
Action:
- Check if RSI (Relative Strength Index) is in the range of 55 to 75 and falling.
- You may also check if ADX (Average directional Index)is rising towards 25/beyond 25 and -DI crossing +DI.
- Check if Slow Stochastic is crossing the signal line downwards.
- If all above are taking place then we can expect a further downward move of the price. It will be safer and hence better to wait for 2 or 3 more candles to confirm the trend and then take a sell position. It also happens that before a further downward move there may be some upward correction and the wait for 2/3 candles may help in increasing the gains.
If ADX does not move above 25 then the downward move may be limited and hence the profit taking will be limited.
2a) Tightening Bollinger bands (bullish move):
- Check if there are minimum 2 continuous bullish candlesticks (green) which are longer than previous 2 to 3 candlesticks.
- Check if RSI (Relative Strength Index) is in the range of 30 to 50 and rising.
- You may also check if ADX is rising towards 25/beyond 25 and +DI crossing -DI.
- Check if Slow Stochastic is crossing the signal line upwards.
- If all above are taking place then we can expect an upward breakout. It will be safer and hence better to wait for 2 or 3 more candles for confirmation before taking a buy position with a red candle.
If ADX does not move above 25 then the upward move may be limited and hence the profit taking will be limited
2b) Tightening Bollinger bands (bearish move):
The pattern happens with a prolonged sideways move with less volatility (short candlesticks)
- Check if there are minimum 2 continuous bearish candlesticks (red) which are longer than previous 2 to 3 candlesticks.
- Check if RSI (Relative Strength Index) is in the range of 40 to 60 and falling.
- You may also check if ADX is rising towards 25/beyond 25 and -DI crossing +DI.
- Check if Slow Stochastic is crossing the signal line downwards.
- If all above are taking place then we can expect a downward breakout. It will be safer and hence better to wait for 2 or 3 more candles for confirmation before taking a sell position with a red candle.
If ADX does not move above 25 then the upward move may be limited and hence the profit taking will be limited.
3a) Continuation of uptrend after correction
During an ongoing uptrend the price may reverse to the middle band or even the lower band.
- Check if RSI (Relative Strength Index) is in the range of 30 to 50 and rising.
- You may also check if ADX is above 25 and +DI over -DI.
- Check if Slow Stochastic is over the signal (bullish configuration).
- With all above we can expect a continuation of the uptrend. It will be safer and hence better to wait for 2 or 3 more candles to confirm that the recent move was just a correction and then take a buy position
3b) Continuation of downtrend after correction
During an ongoing downtrend the price may reverse to the middle band or even the upper band.
- Check if RSI (Relative Strength Index) is in the range of 55 to 75 and falling.
- You may also check if ADX is above 25 and -DI above +DI.
- Check if Slow Stochastic is below the signal (bearish configuration).
- With all above we can expect a continuation of the downtrend. It will be safer and hence better to wait for 2 or 3 more candles to confirm that the recent move was just a correction and then take a sell position.
Thursday, August 1, 2013
What is easy-forex?
What is easy-forex?
easy-forex® is a pioneer online-currency-trading group that was founded in 2003, and has revolutionised currency trading in over 160 countries ever since.
Forex trading was previously restricted to professional traders and institutions, but we made trading foreign exchange (forex) possible for the private individual trader by lowering the cost of entry from USD 10,000 to just USD 25 and developing an easy and user-friendly web-based trading platform.
More than ever, individuals are trading forex, gold and oil online with easy-forex. With one easy-forex account, traders can trade currencies and commodities using their web, desktop or mobile platforms, from any location. We have over 40 currency pairs available for trading, as well as commodities such as gold, silver and oil.
You can trade via our web trading platform, download our own desktop trading platform or easy-forex® MT4, or even trade from your smartphone mobile!
Some reasons why our traders choose easy-forex:
We operate under strict regulatory conditions and are licensed in the United States under NFA, in Europe by CySec and in Australia by ASIC. These are regulatory bodies which monitor forex brokers’ activities and their objective is to ensure that retail clients are protected.
All of our clients have dedicated personal account managers who guide and educate them on a one-on-one basis dependent on their needs and level of experience. We have an extensive Learn section on our website, which includes over 40 videos-on-demand which explain everything from the basics of forex trading to improving your trading strategies.
Those clients who open a gold, platinum or VIP account also get access to our dealing room services, including personal support and exclusive tools for traders that are looking to take their trading to the next level.
To start trading click here.
easy-forex® is a pioneer online-currency-trading group that was founded in 2003, and has revolutionised currency trading in over 160 countries ever since.
Forex trading was previously restricted to professional traders and institutions, but we made trading foreign exchange (forex) possible for the private individual trader by lowering the cost of entry from USD 10,000 to just USD 25 and developing an easy and user-friendly web-based trading platform.
More than ever, individuals are trading forex, gold and oil online with easy-forex. With one easy-forex account, traders can trade currencies and commodities using their web, desktop or mobile platforms, from any location. We have over 40 currency pairs available for trading, as well as commodities such as gold, silver and oil.
You can trade via our web trading platform, download our own desktop trading platform or easy-forex® MT4, or even trade from your smartphone mobile!
Some reasons why our traders choose easy-forex:
- Unique simple margin calculation method that allows traders to leverage all available balance in their account
- Guaranteed stop-loss on our easy-forex platform, which means you can never lose more than you are prepared to risk
- Tight fixed spreads so that you can be sure that the rate you set is the rate you get
- No commissions or deposit and withdrawal fees
- Fast and secure deposit and withdrawals service
We operate under strict regulatory conditions and are licensed in the United States under NFA, in Europe by CySec and in Australia by ASIC. These are regulatory bodies which monitor forex brokers’ activities and their objective is to ensure that retail clients are protected.
All of our clients have dedicated personal account managers who guide and educate them on a one-on-one basis dependent on their needs and level of experience. We have an extensive Learn section on our website, which includes over 40 videos-on-demand which explain everything from the basics of forex trading to improving your trading strategies.
Those clients who open a gold, platinum or VIP account also get access to our dealing room services, including personal support and exclusive tools for traders that are looking to take their trading to the next level.
To start trading click here.
Risk warning: Forex Commodities and CFDs (OTC Trading) are leveraged products that carry a substantial risk of loss up to your invested capital and may not be suitable for everyone. Please ensure that you understand fully the risks involved and do not invest money you cannot afford to lose. The information provided can under no circumstances be considered as a recommendation to engage in any trade.
How to start trading forex online
How to start trading forex online
Markos Solomou, Risk Manager at www.easy-forex.com, explains how easy it is to trade forex online.
The forex or currency trading market is the largest financial market in the world with an estimated $4 trillion traded daily, dwarfing the daily volume of any global stock market. In the past, forex markets were available only to large corporations, governments, central banks and hedge funds but the spread of the internet in the mid 1990s made it possible to trade currencies electronically, anywhere in the world, 24 hours a day, with no physical exchange needed. The easily accessible internet spawned the birth of online trading which now offers even the smallest trader access to the financial market place.
The first step in trading forex is to learn as much as you can and familiarise yourself with basic trading concepts. This is easy because there is a wealth of free information about the forex market on the internet that can be accessed with a simple web search. An easier and more convenient way to learn about the forex market is to go to the website of a reputable forex broker. Many well-regarded forex brokers like easy-forex provide an array of free online trading tools. easy-forex offers educational videos, as well as one-on-one training sessions, webinars and seminars and an eBook guide to trading. Tools to help you trade can be found on the www.easy-forex.com website - including technical analysis, market commentary, a financial calendar, Reuters news and more.
The next step is to choose a professional broker and an easy-to-use trading platform. The easy-forex web trading platform allows you to trade from anywhere in the world with just a click of the mouse. This is a major benefit because the forex market trades 24 hours a day; from 7am Monday Sydney time until 5pm Friday New York time. The easy-forex trading platforms are highly regarded and you can choose to trade online via our web platform, download our desktop platform, TradeDesk™, onto your computer or access the platforms on your smartphone or tablet. You also get support from an account service manager via phone, email and Live Chat, who can inform you about the markets.
Once you've chosen a forex broker, the next step is to start the registration process, which at easy-forex is simple. Just register online for our trading platform and complete the process by depositing your first funds into your personal trading account. You can make a deposit with your credit card, or via a bank transfer or e-wallet. For the true beginner, easy-forex offers a free demo account which requires no deposit of funds. The demo account will help you learn and get the feel for what it’s like to trade forex under live market conditions before you invest real money. At easy-forex we also offer a monthly demo challenge whereby we award generous trading credit to the top three traders practicing with an easy-forex demo account. You can find out more about the demo challenge and other great offers by joining our popular Facebook page.
So it really is easy to start trading forex online. Follow the above steps and join the exciting world of forex.
Markos Solomou, Risk Manager at www.easy-forex.com, explains how easy it is to trade forex online.
The forex or currency trading market is the largest financial market in the world with an estimated $4 trillion traded daily, dwarfing the daily volume of any global stock market. In the past, forex markets were available only to large corporations, governments, central banks and hedge funds but the spread of the internet in the mid 1990s made it possible to trade currencies electronically, anywhere in the world, 24 hours a day, with no physical exchange needed. The easily accessible internet spawned the birth of online trading which now offers even the smallest trader access to the financial market place.
The first step in trading forex is to learn as much as you can and familiarise yourself with basic trading concepts. This is easy because there is a wealth of free information about the forex market on the internet that can be accessed with a simple web search. An easier and more convenient way to learn about the forex market is to go to the website of a reputable forex broker. Many well-regarded forex brokers like easy-forex provide an array of free online trading tools. easy-forex offers educational videos, as well as one-on-one training sessions, webinars and seminars and an eBook guide to trading. Tools to help you trade can be found on the www.easy-forex.com website - including technical analysis, market commentary, a financial calendar, Reuters news and more.
The next step is to choose a professional broker and an easy-to-use trading platform. The easy-forex web trading platform allows you to trade from anywhere in the world with just a click of the mouse. This is a major benefit because the forex market trades 24 hours a day; from 7am Monday Sydney time until 5pm Friday New York time. The easy-forex trading platforms are highly regarded and you can choose to trade online via our web platform, download our desktop platform, TradeDesk™, onto your computer or access the platforms on your smartphone or tablet. You also get support from an account service manager via phone, email and Live Chat, who can inform you about the markets.
Once you've chosen a forex broker, the next step is to start the registration process, which at easy-forex is simple. Just register online for our trading platform and complete the process by depositing your first funds into your personal trading account. You can make a deposit with your credit card, or via a bank transfer or e-wallet. For the true beginner, easy-forex offers a free demo account which requires no deposit of funds. The demo account will help you learn and get the feel for what it’s like to trade forex under live market conditions before you invest real money. At easy-forex we also offer a monthly demo challenge whereby we award generous trading credit to the top three traders practicing with an easy-forex demo account. You can find out more about the demo challenge and other great offers by joining our popular Facebook page.
So it really is easy to start trading forex online. Follow the above steps and join the exciting world of forex.
Please note that Forex trading (OTC Trading) involves substantial risk of loss, and may not be suitable for everyone. Do not invest money you cannot afford to lose. The information provided is for informative purposes only, and can under no circumstances be considered as a recommendation to engage in any trade.
How to spot trading opportunities in forex
How to spot trading opportunities in forex
By Zoe Fiddes, easy-forex
When buying stocks and bonds, the goal is to profit from dividend and interest income and appreciation in value. In the forex market you buy or sell currencies which are traded in pairs, with the goal of trying to profit from appreciation or depreciation of one currency versus the other. Knowing when to buy or sell a currency may appear daunting for those unfamiliar with the forex market but there are some basic guidelines forex traders use to spot trading opportunities.
To spot trading opportunities, most traders rely on fundamental or technical analysis or a combination of the two. Fundamental analysis includes economic data, political developments, central bank monetary policy decisions and global events. Technical analysis focuses on forecasting based on market price action using a number of methods to interpret chart patterns and identify market direction.
Fundamental analysis usually begins with an economic calendar. Currency markets tend to make price moves in reaction to economic reports as they are the main barometer of a country’s economic health. Forex trading platforms like easy-forex provide economic calendars which include regularly scheduled economic releases from all the major developed economies and help to determine the importance of these economic reports and potential impact on the currency markets. Fundamental analysis will also look at issues of political stability and changes in central bank monetary policies which can significantly impact currency price moves.
For the past four years, price movement in most financial markets including stocks, bonds and currencies, have been greatly influenced by risk sentiment. When risk aversion rises, traders may liquidate positions in riskier assets and shift funds to less risky assets, seeking safe haven in currencies like the US dollar (USD), Swiss franc (CHF), Japanese yen (JPY) and gold. The downgrade of the US debt rating and the EU crisis helped propel gold to a record high last year.
Conversely, when risk aversion subsides, there is greater demand for riskier assets and higher yielding currencies like the Canadian, Australian and Kiwi dollars. One of the best starting points to determine whether to buy or sell a currency is to monitor economic and global news that contribute to risk sentiment.
A recent example of this type of dynamic is the euro currency selling at a 16 month low versus the USD in reaction to concern about the EU debt crisis. Economic and regional news that shows escalation in the EU debt crisis may spark additional selling pressure of the euro. Positive news that dampens fears about the crisis may encourage buying of the currency.
Technical analysis usually starts with identification of chart patterns. There are a multitude of tools that are used to interpret chart patterns. Currency trading platforms like easy-forex provide free chart packages that can help spot technical buy and sell opportunities based on market price action.
Forex markets often move in identifiable long-term trends. Despite what many would consider negative economic fundamentals in Japan that include weak growth, low interest rates and a rising budget deficit, the JPY has been in a strong uptrend against the USD rising to an 11 year high in 2011. JPY is supported by safe haven demand and risk aversion. Technical analysis can be used to spot a trading opportunity and help gauge if the trend for the USD/JPY will continue.
Zoe Fiddes
UK Branch Manager
easy-forex
www.easy-forex.com
By Zoe Fiddes, easy-forex
When buying stocks and bonds, the goal is to profit from dividend and interest income and appreciation in value. In the forex market you buy or sell currencies which are traded in pairs, with the goal of trying to profit from appreciation or depreciation of one currency versus the other. Knowing when to buy or sell a currency may appear daunting for those unfamiliar with the forex market but there are some basic guidelines forex traders use to spot trading opportunities.
To spot trading opportunities, most traders rely on fundamental or technical analysis or a combination of the two. Fundamental analysis includes economic data, political developments, central bank monetary policy decisions and global events. Technical analysis focuses on forecasting based on market price action using a number of methods to interpret chart patterns and identify market direction.
Fundamental analysis usually begins with an economic calendar. Currency markets tend to make price moves in reaction to economic reports as they are the main barometer of a country’s economic health. Forex trading platforms like easy-forex provide economic calendars which include regularly scheduled economic releases from all the major developed economies and help to determine the importance of these economic reports and potential impact on the currency markets. Fundamental analysis will also look at issues of political stability and changes in central bank monetary policies which can significantly impact currency price moves.
For the past four years, price movement in most financial markets including stocks, bonds and currencies, have been greatly influenced by risk sentiment. When risk aversion rises, traders may liquidate positions in riskier assets and shift funds to less risky assets, seeking safe haven in currencies like the US dollar (USD), Swiss franc (CHF), Japanese yen (JPY) and gold. The downgrade of the US debt rating and the EU crisis helped propel gold to a record high last year.
Conversely, when risk aversion subsides, there is greater demand for riskier assets and higher yielding currencies like the Canadian, Australian and Kiwi dollars. One of the best starting points to determine whether to buy or sell a currency is to monitor economic and global news that contribute to risk sentiment.
A recent example of this type of dynamic is the euro currency selling at a 16 month low versus the USD in reaction to concern about the EU debt crisis. Economic and regional news that shows escalation in the EU debt crisis may spark additional selling pressure of the euro. Positive news that dampens fears about the crisis may encourage buying of the currency.
Technical analysis usually starts with identification of chart patterns. There are a multitude of tools that are used to interpret chart patterns. Currency trading platforms like easy-forex provide free chart packages that can help spot technical buy and sell opportunities based on market price action.
Forex markets often move in identifiable long-term trends. Despite what many would consider negative economic fundamentals in Japan that include weak growth, low interest rates and a rising budget deficit, the JPY has been in a strong uptrend against the USD rising to an 11 year high in 2011. JPY is supported by safe haven demand and risk aversion. Technical analysis can be used to spot a trading opportunity and help gauge if the trend for the USD/JPY will continue.
Zoe Fiddes
UK Branch Manager
easy-forex
www.easy-forex.com
Disclaimer: Please note that forex trading (OTC trading) involves substantial risk of loss, and may not be suitable for everyone. The information provided is based on data generated by third party investment research providers. easy-forex® does not assume any liability as to the accuracy of such information. This information shall be used for reference only and it is not binding on easy-forex. This is not an advertisement or a recommendation by easy-forex in engaging / binding you in any forex transactions.
How novice traders can maximise profits and minimise risks
How novice traders can maximise profits and minimise risks
Markos Solomou, Risk Manager at www.easy-forex.com, highlights key skills that can help you become a successful forex trader.
“Let your profits run and cut your losses short”. This is an axiom traders hear a lot, but it is much easier said than done. The best way to maximise profit and limit losses is to employ a systematic approach to trading that requires discipline and eliminates emotional decisions.
Most novice traders fail because they often rely on emotions when making trading decisions. Psychology plays a crucial role in trading and, left unchecked, fear and greed make it nearly impossible to make rational trading decisions, increasing the likelihood of failure. Fear may stop a trader from taking a loss, yet learning to take a loss is key to becoming a successful trader and the only safeguard against major losses. Greed may lead to overconfidence, encouraging too much risk taking and a breakdown in discipline.
To succeed, you must treat trading like a business and, to make money, learn how to manage risk.
The first step to maximising profit and limiting loss is to create a trading plan that includes a money management strategy. Money management is risk management and is used to deploy and preserve risk capital and keep you in the game.
At a minimum, a trading plan should include a set of goals, a money management strategy that seeks capital preservation, and guidelines for disciplined trading decisions. The plan should also set risk/reward ratios, have tools for determining where to place stop losses and profit targets, and make provision for continuing education and learning about the markets.
When setting the goals in your trading plan you should include questions as to why you are trading and what you want from trading. If you don't know what you want, the markets can be an expensive place to learn. Some people may trade for the excitement or the competition, others may trade as a hobby, but most often the goal is to make money while avoiding major loss of capital.
Money management is a defensive concept which is key to the difference between success and failure in trading. An effective money management strategy helps to set rules for how much to risk per trade and has two basic controls - discipline and capital preservation.
The amount of risk per trade is usually determined by a risk/reward ratio. The risk/reward ratio is defined as expected risk on a trade compared to expected return. The ratio is calculated by dividing the amount of profit the trader expects, i.e. the reward, by the amount they stand to lose if the trade moves against them, i.e. the risk. A good risk/reward ratio should generally not exceed 3% of capital and have a profit target of 3 to 1. Risk/reward ratios are not permanently fixed and should be adjusted regularly by your level of risk tolerance, the current market environment and your trade entry and exit points.
Placing a stop loss order is an important part of risk management and should be done at the time of entering a trade. A stop loss order is a type of order which will help both to limit trading losses and to lock in trading profits. You can decide where to place the stop by calculating how much you plan to risk on a trade, a breakeven point, or by using tools like technical analysis. A trailing stop is used to protect profit or exit a market once a profit target has been reached. Most often, profit targets are determined by the risk/reward ratio. As a general rule, the longer you stay in a trade, the greater the risk.
For the novice trader, reducing position size, lowering the risk/reward ratio and shortening the duration of a trade are good ways to preserve capital. This is important because trading often involves drawdowns of capital. The goal is to use risk management to withstand these periods of drawdowns and thereby limit the risk of large losses.
Please note that Forex trading (OTC Trading) involves substantial risk of loss, and may not be suitable for everyone. Do not invest money you cannot afford to lose. The information provided is for informative purposes only, and can under no circumstances be considered as a recommendation to engage in any trade.
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