Are You Cut Out To Be A Forex Trader?
Trading forex can be one of the most profitable professions, even if you’re just trading your own account, providing you’re successful. However, if you are trading on your computer at home it can be a very lonely profession.
The common opinion amongst non-traders is that forex trading is hugely exciting with vast sums of money to be won and lost every day, with the potential to really strike it rich, but in reality this isn’t really the case.
Sure it can be exciting at times when, for example, a currency pair moves 50 or 100 points in your favour in a matter of minutes and you’re sitting on a huge profit, but this type of occurrence doesn’t happen all the time. Far from it in fact.
There are times when you can be sitting at your computer for hours on end trying to find a trading position to take, and can sometimes spend the whole day without entering a single trade. In fact sometimes during particularly volatile times and conversely in very quiet times when the markets are moving sideways, it’s often best to sit on your hands and not take a position.
This certainly isn’t exciting and is a good example of why forex trading is not always that exhilarating. In addition there are times when you can have a losing trade, or worst still a losing streak where several trades go against you, and therefore not only have you not made any money, but you’ve actually lost money. Trust me, it’s not a great feeling going into the weekend knowing you’ve actually lost money during the last week.
There’s also the fact that forex trading is an extremely lonely profession if you’re working from home. The lack of social interaction during the day is really noticeable, particularly if you are a naturally sociable person, and I would suggest that this aspect alone means that forex trading is not for everyone.
However on the opposite side of the coin, forex trading provides an obtainable means to become very wealthy thanks to leverage and compounding, so if you can become a successful trader the rewards can more than compensate for the loneliness and occasional periods of boredom and inactivity.
Forex trading has provided me with a very good income since 2001, but like anything it takes real dedication and hard work, and you need to learn how to consistently generate profits from your trading and develop your own strategy, but it’s definitely possible, as thousands of other successful traders have discovered.
James Woolley has been trading the forex markets for around five years and also runs a blog dedicated to offering free forex tips and strategies. Click on the following link for more information:
http://theforexarticles.com
4 Types Of Technical Indicator You Need When Trading Forex
If you have any experience in using any kind of charting packages to assist you with your forex trading, you will know that there are endless different technical indicators you can use. In this article I’m going to be asking what are all these indicators and which ones do you really need?
As you can guess from the title of this article, there are essentially four different types of technical indicator and they are as follows:
1.Trend indicators.
MACD, Parabolic SAR and the various moving averages are a few examples of trend indicators and they can all be used to identify a trend. It’s widely argued that you should only trade with the trend so all of these indicators will help you to take the decision out of your hands, and therefore dictate which way you should be trading. Your only decision now is at what level to enter the trade.
2.Momentum indicators.
These types of indicators are essentially oscillating indicators and are most useful for determining overbought and oversold positions and can be very useful in signalling the start of a new trend. Examples include RSI, Stochastics and CCI.
3.Volume indicators.
As the name suggests, these types of indicators show the volume of trades behind a particualr price movement which can be extremely beneficial because a price movement backed up by high volume is a much stronger signal than a price movement based on low volume. Examples here include Chaikin Money Flow, Force Index, Money Flow Index and Ease Of Movement.
4.Volatility indicators.
Volatility indicators generally use ranges to show the behaviour of the price and the volume behind any movements. This is useful because any dramatic change in behaviour can provide a good entry signal. Common examples include Bollinger Bands, Average True Range and Envelopes.
So there you have the four different types of technical indicators available to you. Which ones you use is entirely up to you, but it’s generally advised that you have at least one type of each in order to provide additional confirmation for entering a trade.
Trading forex using technical analysis is all about probabilities in that when you enter a long position, for example, you want all of your chosen signals to be signalling an upwards movement, therefore indicating a high probability of an upwards movement taking place.
If you use a strict stop loss policy and use these different types of indicators to confirm positions, then over time this high probability trading method should provide you with more winners than losers in the long run.
James Woolley has been trading currencies for around five years and also runs a blog dedicated to offering free forex tips and strategies. Click on the following link for more information:
http://theforexarticles.com
Understanding The Two Different Types of Forex Brokers
If you are trading the forex market on a retail or individual level, there is a very slim chance that you will be able to participate in the interbank market.
Typically, the smallest trade that can be placed on the interbank market is USD $1,000,0000, so really only high-net worth individuals could possibly have the trading capital to participate in this segment of forex trading.
The smaller part of forex trading is called the retail or individual forex market, and anybody can trade this market with as little as $500 due to the existence of retail forex brokers.
It is, however, important to understand the two different types of forex brokers that you will encounter when you are navigating the slightly murky waters of forex so that you can grow your money and not lose it.
The two different types of forex brokers are called ‘market makers’ and ‘ECN brokers’ (ECN stands for electronic communications network). The most typical question that many traders ask initially is ‘Which one is better?’ and it would probably be best to say that ECN brokers are better for the simple reason that market makers have a vested interest in seeing you lose money trading (as you will see below).
First, let’s break down how each of these two different types of brokers are set up.
Let’s begin by making sure you understand the reason that these brokers exist in the first place: they exist to provide forex market access to people who have a willingness to trade but do not have access to vast reserves of capital necessary to participate in the interbank market.
Simply put, the only role an ECN broker is to match buyers and sellers by putting orders through their communications network. ECN brokers play no role in actually providing liquidity, all they do is provide a medium where buyers and sellers can find each other, so they also play no role in manipulating market prices in any way.
The goal of the forex market maker is to provide liquidity to potential traders, and the way that they do this is to take the opposite position on every trade that you make. For example, if you want to buy 1 lot of EUR/USD, some other party will need to place a sell of this same size in order for the trade to go through.
This is what the market maker does, and they will be on the opposite side of every trade that you make.
Also realize that forex trading in this manner is what we call a ‘zero-sum’ transaction, which simply means that for every time that you make money, some other trader has to lose money, and vice versa.
So what does this mean for you if you choose a market maker as your foex broker? It means that every time you have a profitable trade, you take money away from your broker, and your broker will make money every time you have a losing trade.
Now your market maker will probably never admit it to you, but because they stand to profit every time you lose on a trade, it is actually in their best interest to see you lose.
It is, however, still very possible to make money for yourself if your broker is a market maker, though if you become highly profitable then they may come up with some BS excuses for why they cannot give you your money. So if this ever happens, and your broker starts giving you fake excuses like ‘We cannot guarantee this fill on your trade because you entered the market at a volatile time, blah blah,’ it is time to find a new broker!
If you are a forex trader and are looking for good free information on how to become a profitable trader, there is a large collection of free forex-related ebooks and guides available at http://TheForexSurfer.com/reports
How Does Forex Currency Trading Work?
Foreign exchange trading, or often referred to as Forex (FX) currency trading, is simply the trading of foreign currencies in a forex market. This form of trading was initiated by the event of the Breton Woods Agreement in 1944. This agreement was an effort to keep cash from draining out of the war-ravaged Europe. The U.S. Dollar served as the basis for currency values, which was pegged to the price of gold.
When this agreement had collapsed, the modern era of foreign exchange then emerged in 1971. By then the U.S Dollar was no longer convertible to gold, signaling an increase in currency market volatility and trading opportunities, however, during the collapse of the Smithsonian and European Joint Float agreements in 1973, the true free-floating currency exchange began to transpire. With the aid of the computer technology, the reach of the exchange marketplace was extended. Values of major word currencies today have become independent of each other.
There are four known currency pairs that dominate the percentage of trades. This are identified when buying and selling in the forex currency trading system market. These four currency pairs are the Euro vs. U.S. Dollar, the U.S. Dollar vs. the Japanese Yen, the U.S. Dollar vs. Swiss Franc, and the U.S. Dollar vs. the British Pound.
When investing in currency, the primary goal is to hold a currency that appreciates in value relevant to the other currencies. Here is a simplistic example. If 50 British Pounds were bought for 100 U.S. Dollars, then held the Pounds for one week, considering that in that period the value of Pounds increased in relation to U.S. Dollars, those Pounds could then be converted back into $120 for example.
The forex currency trading is open for trades the whole 24 hours in a day. Compared to the domestic stock markets, the foreign currency trading is always in business since every country from different regions of the globe trade on the FX market. In addition, the other important distinction of the forex currency trading from the domestic stock exchange is that it does not rely on a central body or organization such as the NYSE or NASDAQ to act as middleman. Usually, the trading flows between major banking centers around the world.
Previously, currency trading had very high barriers to entry, giving only large banking and institutional firms the access to the tools and systems required to participate in the forex trading. With the advent of the internet, there came the FX brokers. These forex brokers may be thought of as something similar to an online stock trading account such as etrade. This enables anybody to play the forex trading game by opening an account and buy and sell in quantity. The large minimum transaction size can be met by brokers as these are composed of thousands of investors placing orders through tem.
It may seem easy to start trading forex, however, it is undeniably a complicated and complex market. As it offers a tremendous opportunity for wealth, it is also very easy to lose a whole lot. It is best to first to do research, understand and analyze as much on this matter before investing your hard earned money.
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