Trading signals for stock/options market
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By San Anderson
Underlying every trading decision is a slice of data. Charts are the graphic presentation of that data, providing a visual way of gauging and interpreting price action over time. Traders rely on charts, for with them, the prices' movements, trends, and further potential are more directly brought out based on past data.
It would be next to impossible to tell at one glance whether an asset is trending higher or lower, becoming volatile, or heading towards major support and resistance levels without charts. To the day trader and the long-term investor, the art of reading the charts can make a difference between profit and loss.
Types of Trading Charts
Before diving into specific strategies and techniques, it is important to understand the various chart types available. Since each chart type will offer you a different perspective on market data, choosing the right type will be critical to your trading strategy.
1. Line Charts
The line chart is one of the simplest and best-known chart types. It draws a single line based upon an asset's closing price over a specified time period. Line charts are great to identify overall or big picture trends, but they do not have enough information for detailed technical analysis.
Pros:
Simplicity. It is easy to read and understand.
Gives a good overview of the direction of a trend.
Cons:
Does not depict intraday price movements like highs, lows, and opening prices.
Lack of depth in regard to advanced technical analysis.
2. Bar Charts
The bar chart, also referred to as the Open, High, Low, Close chart, is similar to a line chart but reflects open, high, low, and close of an instrument for chosen periods.
Each bar comprises:
The top of the bar: the highest price;
Bottom of the bar: the lowest price.
The horizontal tick to the left represents the opening price, and the horizontal tick on the right represents the closing price.
Advantages
Line charts provide more detailed price information compared to charts.
Due to their nature, they are very helpful for the activity of identifying market trends and patterns.
Disadvantages
Difficult to read for beginners because of the amount of information presented. 3. Candlestick Charts Candlestick charts are the most popular among traders in that they provide a complete representation of price action. Like bar charts, candlesticks show the open, high, low, and close of an instrument for a selected period. The only difference is in its appearance: the candlesticks have a "body" which is colored and it visually represents the area between the open and close price. If the close is higher than the open, then the body is usually colored green or white. If the close is lower than the open, the body is red or black.
Pros:
Visually attractive and easy to read.
Critical information is given in a compact form.
It's practical for the reversal and the continuation patterns.
Cons:
Mostly too much information for a complete beginner to digest.
3. Heikin Ashi Charts
Heikin Ashi charts are a form of candlestick chart that smooths the price action to identify the trend. Heikin Ashi candles are calculated with an averaging method other than that in traditional candlesticks, which makes them noisier and more oriented toward the main market direction.
Advantages:
Excellent for trading according to trend-following strategies.
Reduces market noise by not responding to fake signals.
Disadvantages:
Not efficient in perfect timing of trade compared to the usual candlestick chart.
Lags from price action due to averaging.
Renko charts are built by placing a brick in the next column when the price goes over a pre-defined value called the box size. It is also said that Renko ignores time and only gives importance to price movement; hence, Renko charts serve as very efficient trend-determination tools for filtering out market noise.
Pros:
Excellent in the identification of key trends and price levels.
Gets rid of little noise or choppiness in price.
Cons:
It can become challenging to understand for complete beginners.
It does not suit short-term or intraday traders.
Key Charting Tools and Indicators
While charts themselves give lots of valuable information, many traders use technical indicators to further enlighten themselves regarding market behavior. The indicators are mathematical calculations based upon the price, volume, or open interest applied to chart data with the view to predict probable movements in price. Some of the popular indicators used by traders follow:
1. Moving Averages
Moving averages are used to smooth out price data in a curve that makes it easier to determine the trend of the market. There are, in short, two major types:
Simple Moving Average: The average of the prices over a selected number of periods.
Exponential Moving Average: Similar to SMA, but weights recent prices higher, thus it is more responsive to new information.
How to Use Moving Averages:
Crossover strategy: When a short-term moving average crosses above a long-term moving average, this situation can be interpreted as a potential buying opportunity, or what is more commonly referred to as a bullish crossover. Conversely, when a short-term moving average crosses below a long-term moving average, this can be looked upon as a potential selling opportunity otherwise known as a bearish crossover. Support and resistance: Moving averages may also serve as dynamic levels of support or resistance. 2. Relative Strength Index (RSI)
One of the indicators belonging to the oscillator family of momentum is called the Relative Strength Index. It maps out the velocity and magnitude of change in prices. The velocities range from 0 to 100, with overbought readings occurring over 70 and oversold readings occurring below 30.
Using RSI:
Overbought/Oversold Conditions: When the RSI enters the overbought zone-that is, above 70-it could indicate that the asset is overvalued and due for a pullback. From another perspective, when the RSI slips below 30 and enters the oversold territory, this could indicate that the asset has become undervalued and may be presenting a buying opportunity.
Divergence: When the price creates a new high or low but does not get confirmed by the RSI, such a scenario creates RSI divergence and usually signals a potential reversal.
Bollinger Bands
Bollinger Bands consist of three lines: a simple moving average-the middle band-and two outer bands plotted two standard deviations away from the moving average. The bands expand and contract based on volatility. This characteristic makes them useful for determining either a time of low or high volatility.
How to Use Bollinger Bands:
Squeeze: When the bands come closer together, that means that volatility is low and may be ready to break out.
Mean reversion: The price often touches or violates the outer bands and then returns back to the middle band, providing potential entry or exit signals. 4. Fibonacci Retracement
Fibonacci Retracement: A study used to determine levels of support and resistance by drawing horizontal lines based on the Fibonacci series. Traders find these levels helpful because they serve as an indication of where to expect the market to pull back or rally.
How to Use Fibonacci Retracement:
Support and Resistance-Fibonacci levels can be used for support and resistance in trending markets during retracements.
Entry points: Traders regularly use Fibonacci retracements to measure likely entry points to trade in the direction of the whole trend.
Chart Patterns and Price Action
In addition to indicators, traders also use chart patterns as methods of determining what might occur with prices in the future. These are visual patterns that form on a chart because of price action and usually occur with potential breakouts or reversals in a trend or the continuations of trends themselves. A few common patterns include:
1. Head and Shoulders
It is a trend reversal pattern that signals a possible trend shift. It has three peaks-it consists of a middle peak known as the head, which is higher than the two other side peaks, referred to as shoulders. A break below the neckline (support level) confirms the pattern and suggests a trend reversal.
2. Double Top and Double Bottom
The double top is a bearish reversal pattern that occurs after an uptrend and is, for the most part, constituted of two peaks occurring around the same level. A penetration of the support line confirms the pattern. The double bottom is a bullish reversal pattern that forms after a downtrend and has two troughs formed at approximately the same level.
3. Flags and Pennants
Flags and pennants are a continuation pattern that reflects the consolidation of a brief nature before resuming into the previous trend. A flag comes out as a little rectangle against the slope of the trend while a pennant is a tiny symmetrical triangle.
Conclusion
Trading charts are a fabulous gadget for both amateur and accomplished traders. By first understanding chart types, indicators, and patterns, the trader can go on to make informed decisions and hopefully increase their chances of success in the markets. Charting is not an exact science; neither should it be used in isolation, but the art of reading a chart certainly forms a major ingredient of any trader's development. Whether this involves trading in stocks, forex, cryptocurrencies, or commodities, a full understanding of charting techniques will go a long way toward endowing a trader with a real edge in the intricacies of financial markets.
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By James William
Overview of MT4
MetaQuotes Software developed MetaTrader 4, commonly referred to as MT4. It was released in 2005, but it quickly became popular because of its simple interface combined with customizable trading tools and a powerful back-end that allowed the smooth execution of trades. Whereas the original design for MT4 supported forex trading, brokers have since expanded their offerings to include other asset classes: CFDs, indices, commodities, and even cryptocurrencies.
Probably the most striking feature of MT4 is the scripting language it offers, called MQL4, or MetaQuotes Language 4, through which it provides access to automated trading. It offers traders an opportunity to develop, backtest, and execute their own trading programs or use already set ones-"Expert Advisors" (EAs). These EAs can automatically open and close positions for them, based on predefined conditions and rules, in this way excluding emotional trading decisions and allowing these strategies to be executed successfully.
Core Features of MetaTrader 4
Ease of Use:
One of the most distinctive features that make MT4 so special is the user-friendly interface it has. It is very simple and thus easy to use, even for those beginners with minimal experience in online trading. Real-time quotes, charts customizable by different settings, and detailed account information can be obtained in one main window for easy management, making it easier to handle multiple trades at once.
Charting Tools:
MT4 boasts impressive charting capabilities. It allows users to monitor several charts simultaneously, with the ability to switch between any desired time frames-from one minute to one month-and to apply from a huge variety of indicators and technical analysis tools to those charts. Over 30 built-in technical indicators are supported within the platform, such as Moving Averages, MACD, RSI, and Bollinger Bands. Of course, proprietary indicators can also be developed using MQL4.
Automated Trading (Expert Advisors):
Probably the most attractive aspect of MT4 is its ability to develop and execute automated trading strategies, better known as EAs. These programs can be set to monitor the markets for certain conditions to occur and execute trades when those conditions are met. This can be done by writing personalized EAs using MQL4 or downloading ready-made EAs from the MetaTrader Market.
Backtesting:
MT4 allows backtesting, which means one can check his strategy against historical data before using it in live markets. This feature would help a trader in changing trading strategies and checking their effectiveness under numerous market conditions.
Customizable Alerts:
MT4 allows you to set up price alerts and notifications so that you never miss an important market move. Their alert might be delivered through on-platform pop-up notifications or via email.
Multiple Order Types:
MT4 has various order types, including market, pending orders, stop orders, and trailing stops. This large array enables traders to carry out different strategies and manage their risks effectively.
Mobile Trading:
The MetaTrader 4 mobile application is available on both Android and iOS devices. This simply means that traders can manage their accounts, monitor markets, and execute trades on the go.
Security:
MT4 places great emphasis on security. All data interchanged by the client terminal and servers is encrypted with 128-bit keys, while the platform allows the use of public-key cryptography for secure account management.
MetaTrader Market and Signals:
MT4 has access to the MetaTrader Market, where trading robots and indicators can be bought or even downloaded for free. There is also a signal service that allows the user to follow more experienced traders' trades and even copy them entirely.
Advantages of MetaTrader 4
Accessibility and Compatibility:
MT4 is highly accessible because it supports a wide range of operating systems such as Windows, macOS, Android, and iOS. Due to the web terminal in its place, users can log into the platform from any device that has a browser, which means flexibility in access.
Customization:
Customization is one of the favorite reasons why traders love this platform. The users can orient the platform to suit their specific trading style and needs, such as modifying charts, templates, or even creating custom tools using the MQL4 language.
Strong Community Support:
MetaTrader 4 has a huge and active community. There exist lots of online forums, communities, and marketplaces where traders share strategies of trading, EAs, indicators, and even tips. Due to this great support network, it is easy to find resources and learn how to optimize the platform.
Automated Trading
MT4 boasts of an unrivaled automatic trading capability. One can create or download Expert Advisors, which allow traders to execute complex strategies with significantly better trade management, even when closely monitored.
Stability and Performance:
MT4 is known for stability and performance. The platform stays put, even when heavy trading is done, moving multiple charts, several indicators, and a number of EAs.
Broker Support:
Because MT4 is so widely adopted by brokers around the world, traders can easily find a brokerage that supports the platform. This broad compatibility with brokers is actually one of the reasons MT4 continues to dominate the retail trading industry.
Limitations of MetaTrader 4
Outdated Interface:
Although user-friendly, the interface of MT4 is somewhat obsolete when it comes to comparing it with more modern platforms. The simplicity is an asset in this respect, but it may not be that catching to the eye for those traders who need something more up to date with the times.
Limited Asset Coverage:
It does not offer the same amount of assets as some of its competitors because it only supports MT4 for forex and a few other CFDs. For instance, stock or options traders would find this platform very restrictive in trading, except probably when their brokers offer such instruments through MT4.
Lack of In-Built News:
Some traders believe that MT4 lacks sufficient in-built news and data feeds, while it permits integration with third-party news services. Still, this feature of real-time news remains lacking and is a major drawback for traders whose strategies are dependent on fundamental analysis in a big way.
MQL4 Language Complexity:
While powerful and highly customizable, MQL4 is very steep to learn. The traders who have never dealt with programming will hardly be able to create an indicator or EA of their own and have to use only ready solutions.
How to Maximize Your MetaTrader 4 Experience
Learn MQL4:
For serious users of MT4, learning MQL4 will be extremely important. The scripting language will allow traders to design and then execute their own rules for automation without relying on third-party solutions.
Expert Advisors:
With EAs, you save time and take away the emotional factor of trading, as this automates your strategy. Be you a novice or an advanced trader, the advantage of using EAs means it allows you to apply strategies without you having to constantly monitor them.
Backtest Your Strategies:
Always backtest your new EA or any other trading strategy on historical data before using it in a live environment. In this way, you will have an idea about how the strategy is performing in various market conditions and can refine it for optimized performance.
Use of Multiple Timeframes and Indicators:
Enhance your trade accuracy by using multi-timeframes and technical indicators. You will be able to combine shorter and longer time frames to get a broader picture of market trends and price movements.
Leverage the MetaTrader Market and Community:
Take advantage of the vast amount of resources on offer between the MetaTrader Market and online forums. Whether it be for new trading tools or input into how to best optimize the terminal, the MT4 community is a great partner to have on board.
Conclusion: The Longevity of MetaTrader 4
It's old but still holds the biggest share in the retail trading industry with the solidity, flexibility, and great support it has received from the community. This, combined with an intuitive interface, makes it possible for traders of all skill levels to use automated trades.
However, the constant coming up with newer and flashier platforms with more functionalities is gradually pitting MT4 against tough competition. In fact, the system MetaTrader 5, MT5, can boast extra features like more time frames, indicators, and asset classes; however, many traders would prefer MT4 because of its simplicity and the wide, already-existing resources it boasts of.
It would keep on catering to traders in search of a stable, customizable, and adequately supported platform. Both novice and professional traders would find the necessary tools and functionality in MT4 to achieve success in present turbulent markets.
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By Kim
Cut Your Losses
All traders experience losses from time to time, so try not to panic if you make a bad trade. However, think carefully before trying to make back what you’ve lost. It’s easy to fall into the trap of trying to breakeven when you’ve made a loss but, more often than not, this mindset results in your compounding your losses. Instead, accept the odd loss and part and parcel of trading and focus on your long-term profitability, rather than an isolated loss.
Backtest Potential Strategies
Traders use a variety of different strategies when playing the markets but finding the right ones for your needs isn’t always as straightforward as you might think. Before you use a new plan on active markets, be sure to test them against historical data. Using backtesting software like Optionnet Explorer is an easy and accurate way to do this. Once you know how the strategy would have worked, you’ll be able to determine its efficacy and decide whether or not to use it going forward.
Pexels - CCO Licence
Diversify Your Portfolio
Diversification can be an effective way to protect your capital. When you invest in stocks and shares or commodities that react differently to market events, you can offset potential losses and, to an extent, secure your capital. Similarly, investing in different companies or making various types of investments prevents you from ‘putting all of your eggs in one basket’ and can reduce the risk of major losses.
Reduce Commissions
Now that you can make trades yourself, without having to use a broker, trading can be much more cost-effective. However, even relatively low brokerage fees can eat away at your profits over time. By shopping around for reputable brokers or platforms, you can ensure that you’re not paying over the odds to make trades. After all, you’ll want to keep every cent of what you earn as a trader.
Show Commercial Awareness
You may not need to react to every piece of news, but it’s vital to be aware of what’s going on in the world if you want to be a successful trader. An environmental disaster, political unrest, or even new legislation can have a major impact on the markets, which means you need to be ready to react when necessary.
Planning Your Investments
As new opportunities come about and existing investments mature, you’ll want to be proactive about managing your trades. By thinking strategically about the level of risk you’re willing to take, you can identify the trading vehicles that are most likely to generate a return over the short, medium, and long-term, and, in doing so, you can maximize your returns in 2021.
This is a contributed post.
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By Kim
So when the going gets tough, you’ll need an answer for the above question - and you’ll need to meditate on it when you’re wondering whether to keep going.
The truth of the matter is that for traders who take their efforts seriously, it’s always going to be a process with high rewards and potentially high risks, too. Below, we’ll look into some ways that trading offers you a different experience from a 9 to 5 - and why that can be a very attractive prospect for anyone looking to make a better future for themselves.
You can work for yourself
Being your own boss isn’t essential when you’re getting into trading - there are plenty of trading firms who offer the chance to benefit from institutional knowledge and greater capital. With that being said, flying solo is the preferred end state for any trader who wants an element of control over what decisions they make, what trends they follow and which instincts they listen to. When you get into trading, a major part of the attraction has to be the opportunity for financial independence - and you’ll feel that independence earlier on if you’re working for yourself.
If you’re a solo trader and you quite simply don’t want to turn up one day, then you have that option. As long as you’ve got the appropriate instructions in place, or have no open trades at a given time, you can take some well-earned rest and enjoy the independence you have signed up for.
You can trade from anywhere (within reason)
Independence is all well and good, as long as you are actually putting it to use. Trading from home is a more attractive prospect than riding a packed train to sit in an office, and that sense of freedom can be expanded as far as you want to expand it. You don’t need to stick to the Dow Jones if you’re a trader in the US, or trade specifically on the FTSE if you’re in London. As the bulk of trading happens electronically, all you need is to be set up for remote trading, and you can do it from anywhere in the world.
It takes the correct software, of course: you’ll need the right trading platform and a suitable payment gateway for when you want to cash out. As long as you have established these necessities, you can spend part or all of a year in a beachside paradise while you trade the markets of one of the world’s financial hubs like London, New York or Tokyo.
Trading itself is a varied field
The world of stock trading can look absolutely impenetrable for anyone who isn’t used to it, and there is no doubt that it can be intimidating to the point where some people simply turn away from the idea. But if your belief is that trading is too pressurized, confusing and hostile to newcomers, then you may need to simply find your niche. Once you’re comfortable in one area you’ll find that a lot of concepts are transferable between types of trading.
It’s not such a long time ago that Forex trading became a household topic because of its popularity among people who would never have ordinarily even considered playing the markets. If you’re minded to follow international news anyway as a personal interest, then you can get a feel for how different stories such as election results can move the line, and can apply your knowledge to increase the chance of success. If, on the other hand, you’re trading the stock markets, you’ll get a feel for which ones have greater volatility at which times, and know how to react to that.
Trading is a varied life that offers little in the way of guarantees, but so much in the form of opportunities. Working at it will open up new worlds to you, and there aren’t many jobs out there that regularly offer the same level of variety - in the form of working days, challenges, and rewards. As long as you’re not expecting every day to be the same, it’s pretty obvious why so many people come to see trading as their passport to the financially secure future they want.
This is a contributed post.
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By Kim
That level is opening your own space where you can conduct business your way with the clients who will make you the most money and you make them the most money. Here are a few things to keep in mind as you start the journey of opening your own trading office.
Partner Up
As much as you want to run the entire show on your own, you can’t do it all by yourself. Having someone to share some of the responsibilities with will be ideal for your mental health and will allow you to stay on top of the more important priorities as you get started. The ideal partner is someone who is already successful in the realm of financial trading and has an impressive Rolodex that will help bring you the network and connections you need to succeed. When you partner with someone who is as seasoned as yourself means that you can double your chances of making the most money you can.
It Takes a Village
Build a team that will get the job done. You and your partner are going to need help, and that help will come in the form of a support team that you trust. The best way to get everyone on the same page is to train them yourself. Take the time out of your setup process for a training session. Even though you are going to hire people who already know what they are doing, they are not going to know your way of doing things. Make sure you and your partner are pleased with the people you are bringin on board and mold them to your image so that everyone knows the exact way to conduct business without any mistakes or confusion.
Find a Great Office Space
You may not have the overhead necessary to rent or lease an entire floor of an office building or even a small office in a commercial space. There are other alternatives to finding real estate and shared office spaces are one of them. Places like Bond Collective offer memberships where you can use a luxurious office space at a fraction of the cost. Bond Collective membership options offer a range of deals that will best suit your needs. You can use these office spaces at will and whenever you choose, and you don’t have to worry about all the other headaches that come with having an office like bills and upkeep. Your membership will go towards that and you can spend your time worrying about important things like your clients and the work you are so passionate about doing.
Expand Your Knowledge
Make sure that you are up-to-date on all the happenings in the financial world. Working for major corporations sometimes gives you an inside scoop on all the things that are happening in the industry because you are surrounded by so many people. That pool of people is going to shrink once you strike out on your own. This means that you are going to have to make a concerted effort to know what is happening with trading and finance on a daily basis. This extra work will go a long way because you will appear more knowledgeable and better equipped to provide the service you need to provide for your clients. That kind of appearance will make you more trustworthy, helping you grow your client base.
Tell Everyone What You Are Doing
Once you are all set up and feeling good about what you know and who you know, it’s time to start telling everyone you are open for business. A lot of companies may not allow you to take your clients with you so that means you have to start from scratch. This is where your partner’s Rolodex comes in handy. Start getting the word out there that you are starting your own office and that you are ready to help make money with others. Use social media, friends, and word of mouth to get the news out there that you are open for business. Before long, you will be building one of the most successful trading offices in finance.
This is a contributed post.
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By capitalstreet_fx
WHAT IS A FOREX?
Forex is the marketplace where various world currencies are traded. The forex market is the largest and is the easiest to liquidate within the world, with trillions of dollars changing hands a day. there’s no centralized location, rather the Forex market is a network of banks, brokers, institutions, and individual traders Many entities, from financial institutions to individual investors, have currency needs, and should also speculate on the direction of a specific pair of currencies movement. They post their orders to shop for and sell currencies on the network in order that they can interact with other currency orders from other parties. The forex market is open 24 hours each day, five days every week, apart from holidays. Currencies should trade on a vacation if a minimum of the country/global market is open for business.
3 SIMPLE STEPS TO MAKE YOUR FIRST TRADE IN FOREX
Select a currency pair
When trading forex you are exchanging the value of one currency for another. In other words, you will always buy one currency while selling another at the same time. Because of this, you will always trade currencies in a pair.
Most new traders will start out by trading the most commonly offered pairs of major currencies, but you can trade any currency pair that we have available as long as you have enough money in your account. For this walkthrough, we’ll look at EUR/USD (Euro/ U.S. Dollar). Analyze the market
Research and analysis should be the foundation of your trading endeavors. Without these, you’re operating on emotion. This doesn’t typically end well.
When you first start researching, you’ll find a whole wealth of forex resources – which may seem overwhelming at first. But as you research a particular currency pair, you’ll find valuable resources that stand out from the rest. You should regularly look at current and historical charts, monitor the news for economic announcements, check indicators and perform other technical and fundamental analyses. We’ll talk more about specific types of research later on. Pick your position
If you’ve traded stocks, bonds, or other financial products, you know that you can usually only speculate on the one direction of the market: up.
Forex trading is a little different. Because you are buying one currency, while selling another at the same time you can speculate on up and down movements in the market.
WITH A BUY POSITION you believe that the value of the base currency will rise compared to the quote currency. If you’re buying EUR/USD, you believe the price of the euro will strengthen against the dollar. In other words, you believe the euro is bullish (and the US dollar is bearish).
WITH A SELL POSITION, you believe that the value of the base currency will fall compared to the quote currency. If you’re selling EUR/USD, you believe the price of the euro will weaken against the dollar. In other words, you believe the euro is bearish (and the US dollar is bullish). ADVANTAGES OF FOREX TRADING
A. Ability to go long or go short
While you’ll go short on other markets by using derivative products, like CFDs, short sale is an inherent part of trading forex. This is because you’re always selling one currency (the quote currency) to shop for another (the base currency). The price of a forex pair is what proportion one unit of the bottom currency is worth within the quote currency.
● For Instance:– within the forex pair GBP/EUR, GBP is that the base currency and EUR is the quote currency. If GBP/EUR is trading at 1.12156, then one pound is worth 1.12156 euros. If you think that the pound goes to extend against the euro, you’d buy the pair (going long). If you think that the pound will decrease in value against the euro, you’d sell the pair (going short). Your profit or loss will depend upon the extent to which you get your prediction right, meaning it’s possible to profit whichever way the market moves.
B. Forex market hours
The foreign exchange market is open 24 hours a day, five days a week – forex can be traded from 9pm Sunday to 10pm Friday (GMT). These long hours are because forex transactions are completed between parties directly, over the counter (OTC), instead of through a central exchange. And because forex may be a truly global market, you’ll always cash in of various active session’s forex trading hours.
It is important to recollect that the forex market’s opening hours will vary in March, April, October and November, as countries shift to sunlight savings on different days.
C. High liquidity in forex
The FX market is the most liquid market within the world, meaning there is an outsized number of buyers and sellers looking to form a trade at any given time. Each day, over $5 trillion dollars of currency is converted by individuals, companies, and banks – and therefore the overwhelming majority of this activity is meant to get a profit.
The high liquidity in forex means transactions are often completed quickly and simply, therefore the transaction costs – or spreads – are often very low. This creates opportunities for traders to speculate on price movements of just a few pips.
D. Forex volatility
The high volume of currency trades each day translates to billions of dollars every minute, which makes the price movements of some currencies extremely volatile. You can potentially reap large profits by speculating on price movements in either direction. However, volatility may be a double-edged sword – the market can quickly turn against you, so it’s important to limit your exposure with risk-management tools.
E. Leverage can make your money go further
CFDs are leveraged, which can make your money go further. Leverage in forex enables you to open an edge on the currency market by paying just a little proportion of the complete value of the position upfront.
The profit or loss you create will reflect the complete value of the position at the purpose it’s closed, so trading on margin offers a chance to form large profits from a relatively small investment. However, it also can amplify any losses, meaning losses could exceed your initial deposit. For this reason, it’s important to think about the entire value of the leveraged forex position before trading CFDs.
F. Trade a good range of currency pairs
Forex trading gives you the chance to trade a good sort of currency pairs, speculating on global events and therefore the relative strength of major and minor economies.
With IG, for instance , you’ll choose between over 90 currency pairs, including:
Major currency pairs, eg GBP/USD, EUR/USD, and USD/JPY
Minor pairs, eg USD/ZAR, SGB/JPY, CAD/CHF
Emerging currency pairs, eg USD/CNH, EUR/RUB and AUD/CNH
Exotic pairs, eg EUR/CZK, TRY/JPY, USD/MXN
G.Hedge with forex
Hedging may be a technique that will be wont to reduce the danger of unwanted moves within the forex market, by opening multiple strategic positions. Although volatility is a component of what makes forex so exciting, hedging is often an honest way of mitigating loss or limiting it to a known amount.
There is a spread of strategies you’ll use to hedge forex, but one among the foremost common is hedging with multiple currency pairs. By choosing forex pairs that are positively correlated, like GBP/USD and EUR/USD, but taking positions in opposite directions, you’ll limit your downside risk.
●For instance, a loss on a brief EUR/USD position might be mitigated by an extended position on GBP/USD.
Alternatively, you’ll use forex to hedge against loss in other markets, like commodities.
●For instance, because the USD/CAD generally has an inverse relationship with petroleum, it’s commonly used as a hedge against falling oil prices.
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By Lazlo
Hi everybody,
I searched for a similar thread but couldn't find anything close to my question.
I want to ask a rather personal question and therefore hesitated to do so. If this is not adequate just let me now.
How much of your entire capital do you invest in different strategies? And with different strategies I mean preserving your capital, steadily increasing it or increasing it dramatically, like Anchor-Strategy, Steady Condors, and Steady Options. I would also count investing in businesses and real estate as a valid approach. Personally, I would not only say it is a valid approach to invest in multiple assets but almost a necessity. But what about you?
For example, do you allocate 10% for Steady Options and 25% for Steady Condors and 50% for Anchor Strategy? Do you own real estate? Do you plan on doing so?
I know, I already can hear "you have to answer this question for yourself" and "depends on your risk tolerance". But I want to know your opinion and experience on how you would approach investing, now that you know what it takes. What would YOU do if you started from 0 again?
I'm not interested in answers like I could imagine doing this and that. I would expect something along the lines. First I would start saving x amount of money while I learn the Y-Strategy with paper trading. After z time I would then use x amount of money in A-Strategy until I reach point S (some amount of money). At this point, I would still do Y-Strategy but also get my hands on Strategy Z, which promises higher returns. And so on.
I'm aware that this is a question not particularly related to SO but I value your opinions and at least to me a plan for investing is the absolute most important aspect. It's like having an exit strategy for your trades before you open them, just the other way around.
Why do I want to know your experiences? Because I seek a rough guidance on approaching investing. I would like to compare each other approaches.
I think this topic is a significant aspect of investing and therefore for trading. It's equally important for beginners as it is for experienced investors and traders.
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By Kim
10 Reasons Why Trading is Difficult
It is hard not to trade too big when you really believe in a trade entry. It is even harder to take a big loss if it goes against you. It is hard to keep taking your entry signals during a losing streak. It is also hard to miss a signal and watch it go on to be a big winner. It is hard not to add to a losing trade when the price keeps looking better as it falls lower and lower. It is hard to be on the wrong side of a trend. It is hard to buy a breakout in trend because it looks too high. It is hard to miss out on the beginning of a big uptrend. It is hard to cut a loss early with the ego wanting to be right about the trade. It is hard to let a winning trade run when you would prefer a quick gain than a bigger long-term gain. It is hard to buy when everyone is fearful and hard to sell short when everyone is greedy. It is hard to trade through different types of markets, bull markets, bear markets, volatile, trending, and range bound because the rules keep changing. It is hard to convince your friends and family that there is a process to your trading and that you are not a degenerate gambler. It is hard to ever quit trading after you have tasted how sweet a big winning streak is and how life changing it can be. 10 Ways Traders Lose Money In This Market
Making money in trading is a function of the market matching our methodology and approach to the market. But at the same time, traders need to be focused and consistent, as there are several ways traders lose money.
We trade with a philosophy and we profit when it syncs up with the current market environment. We make money when our winning percentage is strong and our losses are minimal, or when or wins are big and are losses are small.
If we have the discipline to follow a system consistently and manage our risk by it, then the profits will come when the market aligns with our method. Until then it is our job to keep our losses and drawdowns under control.
In short, there will be periods where everything is working great. And periods where trades are getting stopped out and lost quickly. It is our job during the latter periods to make sure that the losses are minimal (and that we understand the ways traders lose money). This is a tough task, considering all the different types of traders and approaches. Let’s review some examples.
Day traders have trouble making money in markets that lack intra-day volatility. Trend followers can’t make money when markets don’t trend in one direction for any length of time. Momentum traders lose money when stocks fail to breakout over resistance and trend. Traders that use chart patterns don’t make money when trend line breaks don’t lead to sustained trends. Swing traders don’t make money when support levels fail and stop losses are hit before a reversal. Dip buyers don’t make money when downtrends begin and lows get lower. Option trades lose money when markets fail to trend before the option expires. Option sellers lose money when parabolic moves put the sold options in the money. Investors lose money in bear markets. Perma-bears lose money in bull markets. There are several ways traders lose money in the market. Successful traders ensure that those losses are small.
Thanks for reading.
Read this and more from Steve on his blog NewTraderU.
Twitter: @SJosephBurns
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