INTERESTING FOREX & CURRENCY TRADING ARTICLES
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THIS ARTICLE WAS VERY RECENTLY ADDED
WHY CURRENCY TRADING BEATS
STOCK TRADING (HANDS DOWN)
By Nathan Pennington
As I write this the US stock market has just taken its biggest hit since September
9, 2001. Other stock markets around the world have also been hit hard (China probably
the hardest).
It was a brutal day to be long in the stock market (and strangely most investors/traders
trade only long). This is exactly why I love the currency market.
Sure, there was some volatility in the currencies due to what was happening in the
world of equities, but it wasn't anything like the beating stock traders took.
That's why you should be spread out over several trading instruments. You gain the
real advantage of diversifying. (Buying a basket of stocks is NOT real diversification.
Ask any stock trader after a huge hit like today.) However, being in several different
markets give real security (well, at least as real as you can give in the world of
finance).
The other thing is that, properly traded, currencies can give you a lower beta in
your account balance. That means that you'll have less violent swings in your account
(give you less stress :-).
But, there is a problem.
The world of forex is full of snakes. The problem is they are all sitting behind
pretty websites. You can't tell who they are with just a casual glance if you're
new to this game.
Forex brokers who are really market makers present themselves as ECNs (Electronic
Communication Networks). This is one of the biggest problems. You have to execute
trades if you want to be involved in forex.
So when you go looking for a broker, tons of market makers present themselves as
ECNs. You bite, and they take your money. (ECNs just execute your order. Nothing
else. Market makers actually trade against you, including stop hunting).
Do you want to learn more about how I trade? I have just completed my brand new guide,
"Forex Trading - What Finally Worked For Me".
Download it free here: Forex Trading
Nathan Pennington is a forex trader and the author
of Winning Forex Trading -THE
Definitive Guide
Article Source: http://EzineArticles.com/?expert=Nathan_Pennington
ANOTHER RECENTLY ADDED ARTICLE
This two-part report clearly and simply details essential tips on how to avoid typical
pitfalls and start making more money in your forex trading. It is a very long article,
so here’s a cup of tea to relax by (leave the paper aside for now).
FOREX TRADING TIPS
By John Gaines
Why do hundreds of thousands online traders and investors trade the forex market
every day, and how do they make money doing it?
This two-part report clearly and simply details essential tips on how to avoid typical
pitfalls and start making more money in your forex trading.
Trade pairs, not currencies - Like any relationship, you have to know both sides.
Success or failure in forex trading depends upon being right about both currencies
and how they impact one another, not just one.
Knowledge is Power - When starting out trading forex online, it is essential that
you understand the basics of this market if you want to make the most of your investments.
The main forex influencer is global news and events. For example, say an ECB statement
is released on European interest rates which typically will cause a flurry of activity.
Most newcomers react violently to news like this and close their positions and subsequently
miss out on some of the best trading opportunities by waiting until the market calms
down. The potential in the forex market is in the volatility, not in its tranquility.
Unambitious trading - Many new traders will place very tight orders in order to take
very small profits. This is not a sustainable approach because although you may be
profitable in the short run (if you are lucky), you risk losing in the longer term
as you have to recover the difference between the bid and the ask price before you
can make any profit and this is much more difficult when you make small trades than
when you make larger ones.
Over-cautious trading - Like the trader who tries to take small incremental profits
all the time, the trader who places tight stop losses with a retail forex broker
is doomed. As we stated above, you have to give your position a fair chance to demonstrate
its ability to produce. If you don't place reasonable stop losses that allow your
trade to do so, you will always end up undercutting yourself and losing a small piece
of your deposit with every trade.
Independence - If you are new to forex, you will either decide to trade your own
money or to have a broker trade it for you. So far, so good. But your risk of losing
increases exponentially if you either of these two things:
Interfere with what your broker is doing on your behalf (as his strategy might require
a long gestation period);
Seek advice from too many sources - multiple input will only result in multiple losses.
Take a position, ride with it and then analyse the outcome - by yourself, for yourself.
Tiny margins - Margin trading is one of the biggest advantages in trading forex as
it allows you to trade amounts far larger than the total of your deposits. However,
it can also be dangerous to novice traders as it can appeal to the greed factor that
destroys many forex traders. The best guideline is to increase your leverage in line
with your experience and success.
No strategy - The aim of making money is not a trading strategy. A strategy is your
map for how you plan to make money. Your strategy details the approach you are going
to take, which currencies you are going to trade and how you will manage your risk.
Without a strategy, you may become one of the 90% of new traders that lose their
money.
Trading Off-Peak Hours - Professional FX traders, option traders, and hedge funds
posses a huge advantage over small retail traders during off-peak hours (between
2200 CET and 1000 CET) as they can hedge their positions and move them around when
there is far small trade volume is going through (meaning their risk is smaller).
The best advice for trading during off peak hours is simple - don't.
The only way is up/down - When the market is on its way up, the market is on its
way up. When the market is going down, the market is going down. That's it. There
are many systems which analyse past trends, but none that can accurately predict
the future. But if you acknowledge to yourself that all that is happening at any
time is that the market is simply moving, you'll be amazed at how hard it is to blame
anyone else.
Trade on the news - Most of the really big market moves occur around news time. Trading
volume is high and the moves are significant; this means there is no better time
to trade than when news is released. This is when the big players adjust their positions
and prices change resulting in a serious currency flow.
Exiting Trades - If you place a trade and it's not working out for you, get out.
Don't compound your mistake by staying in and hoping for a reversal. If you're in
a winning trade, don't talk yourself out of the position because you're bored or
want to relieve stress; stress is a natural part of trading; get used to it.
Don't trade too short-term - If you are aiming to make less than 20 points profit,
don't undertake the trade. The spread you are trading on will make the odds against
you far too high.
Don't be smart - The most successful traders I know keep their trading simple. They
don't analyse all day or research historical trends and track web logs and their
results are excellent.
Tops and Bottoms - There are no real "bargains" in trading foreign exchange. Trade
in the direction the price is going in and you're results will be almost guaranteed
to improve.
Ignoring the technicals- Understanding whether the market is over-extended long or
short is a key indicator of price action. Spikes occur in the market when it is moving
all one way.
Emotional Trading - Without that all-important strategy, you're trades essentially
are thoughts only and thoughts are emotions and a very poor foundation for trading.
When most of us are upset and emotional, we don't tend to make the wisest decisions.
Don't let your emotions sway you.
Confidence - Confidence comes from successful trading. If you lose money early in
your trading career it's very difficult to regain it; the trick is not to go off
half-cocked; learn the business before you trade. Remember, knowledge is power.
The second and final part of this report clearly and simply details more essential
tips on how to avoid the pitfalls and start making more money in your forex trading.
I told you it was a long article, here’s another cup of tea!
Take it like a man - If you decide to ride a loss, you are simply displaying stupidity
and cowardice. It takes guts to accept your loss and wait for tomorrow to try again.
Sticking to a bad position ruins lots of traders - permanently. Try to remember that
the market often behaves illogically, so don't get commit to any one trade; it's
just a trade. One good trade will not make you a trading success; it's ongoing regular
performance over months and years that makes a good trader.
Focus - Fantasising about possible profits and then "spending" them before you have
realised them is no good. Focus on your current position(s) and place reasonable
stop losses at the time you do the trade. Then sit back and enjoy the ride - you
have no real control from now on, the market will do what it wants to do.
Don't trust demos - Demo trading often causes new traders to learn bad habits. These
bad habits, which can be very dangerous in the long run, come about because you are
playing with virtual money. Once you know how your broker's system works, start trading
small amounts and only take the risk you can afford to win or lose.
Stick to the strategy - When you make money on a well thought-out strategic trade,
don't go and lose half of it next time on a fancy; stick to your strategy and invest
profits on the next trade that matches your long-term goals.
Trade today - Most successful day traders are highly focused on what's happening
in the short-term, not what may happen over the next month. If you're trading with
40 to 60-point stops focus on what's happening today as the market will probably
move too quickly to consider the long-term future. However, the long-term trends
are not unimportant; they will not always help you though if you're trading intraday.
The clues are in the details - The bottom line on your account balance doesn't tell
the whole story. Consider individual trade details; analyse your losses and the telling
losing streaks. Generally, traders that make money without suffering significant
daily losses have the best chance of sustaining positive performance in the long
term.
Simulated Results - Be very careful and wary about infamous "black box" systems.
These so-called trading signal systems do not often explain exactly how the trade
signals they generate are produced. Typically, these systems only show their track
record of extraordinary results - historical results. Successfully predicting future
trade scenarios is altogether more complex. The high-speed algorithmic capabilities
of these systems provide significant retrospective trading systems, not ones which
will help you trade effectively in the future.
Get to know one cross at a time - Each currency pair is unique, and has a unique
way of moving in the marketplace. The forces which cause the pair to move up and
down are individual to each cross, so study them and learn from your experience and
apply your learning to one cross at a time.
Risk Reward - If you put a 20 point stop and a 50 point profit your chances of winning
are probably about 1-3 against you. In fact, given the spread you're trading on,
it's more likely to be 1-4. Play the odds the market gives you.
Trading for Wrong Reasons - Don't trade if you are bored, unsure or reacting on a
whim. The reason that you are bored in the first place is probably because there
is no trade to make in the first place. If you are unsure, it's probably because
you can't see the trade to make, so don't make one.
Zen Trading- Even when you have taken a position in the markets, you should try and
think as you would if you hadn't taken one. This level of detachment is essential
if you want to retain your clarity of mind and avoid succumbing to emotional impulses
and therefore increasing the likelihood of incurring losses. To achieve this, you
need to cultivate a calm and relaxed outlook. Trade in brief periods of no more than
a few hours at a time and accept that once the trade has been made, it's out of your
hands.
Determination - Once you have decided to place a trade, stick to it and let it run
its course. This means that if your stop loss is close to being triggered, let it
trigger. If you move your stop midway through a trade's life, you are more than likely
to suffer worse moves against you. Your determination must be show itself when you
acknowledge that you got it wrong, so get out.
Short-term Moving Average Crossovers - This is one of the most dangerous trade scenarios
for non professional traders. When the short-term moving average crosses the longer-term
moving average it only means that the average price in the short run is equal to
the average price in the longer run. This is neither a bullish nor bearish indication,
so don't fall into the trap of believing it is one.
Stochastic - Another dangerous scenario. When it first signals an exhausted condition
that's when the big spike in the "exhausted" currency cross tends to occur. My advice
is to buy on the first sign of an overbought cross and then sell on the first sign
of an oversold one. This approach means that you'll be with the trend and have successfully
identified a positive move that still has some way to go. So if percentage K and
percentage D are both crossing 80, then buy! (This is the same on sell side, where
you sell at 20).
One cross is all that counts - EURUSD seems to be trading higher, so you buy GBPUSD
because it appears not to have moved yet. This is dangerous. Focus on one cross at
a time - if EURUSD looks good to you, then just buy EURUSD.
Wrong Broker - A lot of FOREX brokers are in business only to make money from yours.
Read forums, blogs and chats around the net to get an unbiased opinion before you
choose your broker.
Too bullish - Trading statistics show that 90% of most traders will fail at some
point. Being too bullish about your trading aptitude can be fatal to your long-term
success. You can always learn more about trading the markets, even if you are currently
successful in your trades. Stay modest, and keep your eyes open for new ideas and
bad habits you might be falling in to.
Interpret forex news yourself - Learn to read the source documents of forex news
and events - don't rely on the interpretations of news media or others.
John Gaines
online trading, currency trading, financial service
A veteran of online trading, John Gaines offers the financial services industry his
perspectives and expertise on a variety of trading systems and financial instruments.
