21st February 2012
There are many pitfalls to be aware of when starting out as a forex trader. Not least of which is a refusal to change strategies and re-examine forex trading systems. Another important area for traders to be aware of is the necessity of keeping one’s emotions in check.
Most forex dealers join the business in order to make a lot of money and mistakenly believe that the field is easy to enter because it requires relatively little formal education. This is a flawed idea as the most successful traders and brokers are those who have undergone some type of forex training, either online or through a college or business school.
Some traders make costly mistakes either with their own or their client’s money by not placing a stop loss order after entering a position. This is sensible risk management and could help a trader minimise their losses should the position prove volatile. All traders take risks, that is the nature of forex trading, but the truly successful traders are those who take calculated risks by using management strategies and are constantly evaluating their own actions.
It is sometimes just as dangerous to invest money in a safe option and leave the funds there, as it is to take advantage of a volatile situation and act quickly. All the specialists in this field agree that trading without a strategy and investing without knowledge, is both precarious and foolhardy.
1st December 2011
Forex
Forex, or the foreign currency exchange market, is traditionally associated with large financial institutions, such as central banks, commercial banks, hedge funds and multinational corporations. It is an over the counter (OTC) market, which means it does not have a central exchange. Trades are instead executed directly between the two trading parties. Traditionally, this involved professionals or their brokers.
Nowadays, forex has become increasingly attractive to private individuals and access is enabled by the internet. In principle, all you need to start trading forex is a personal computer, an internet connection and the services of a personal forex broker.
Forex Day Trading
Forex day trading involves opening and closing positions on the same currency trading day. The main advantage of this form of trading is that it allows you to concentrate on one or more trades in a relatively short time span. Also, as forex is a 24-hour market, the trading day can start at any time; you are not confined to the 24-hour clock as it applies in your geographical location. This makes it an attractive option for traders who have other commitments during the day or night.
Risk Management
Although forex day trading may be limited in terms of time, it does not mean that potential profits or losses are similarly restricted. Forex trends can be sudden and sharp, even over a matter of minutes, especially when you consider the value of the trading position after leverage. Guarding against losses can be achieved by constantly monitoring open positions and by closing losing positions as soon as soon as they are recognised.
25th October 2011
Before you start investing in the forex market, you should take the time to find a suitable broker. An online forex trading broker helps put your trades into the system and can even provide advice on what is best for you. While brokers are less popular than in the past due to more advanced electronic online trading platforms, they are still useful, especially for beginners who know little about how to input and exit trades.
The best way to choose an online broker is by knowing which questions to ask. It also pays to know your needs. Not all brokers offer the same types or varieties of trades. One thing that is crucial to look at is the size of the broker. This means access to better prices and quality execution of trades. The sooner your trades are executed, the sooner you can take advantage of the possible profits. Bigger brokers have the benefit of size on their side, so you get better service.
Who Executes Orders
Two of the most common ways rates are quoted are dealing desk and no dealing desk. Orders are executed differently, depending on which your online FX trading broker uses. Dealing desk means your broker handles your orders, but there may be trade restrictions during economic or news events. No dealing desk means a bank handles your orders, but you do not have the same trade restrictions.
Questions to Ask
If you want to ensure orders are executed correctly, ask how long your broker has been in business. The more experience the better. Some brokers have trading restrictions. Ask about any restrictions and how they may affect you personally. Find out who exactly quotes rates. It could be the broker, a single bank or multiple banks. Also, ask about spreads. Find out how tight spreads are and if they are fixed or variable.
The more questions you ask before choosing a broker, the less surprises you have later on. Trading forex is much easier when you do not have to worry about mistakes from your broker. An excellent broker also provides customer service to answer all your questions, even before you choose them.
2nd October 2011
To be a successful forex trader, you need to adopt a reliable system. That system gives you a blueprint to follow, a series of steps to take that you know will result in successful trades in most cases. With this blueprint in place, you can focus on the trades as they happen, make decisions objectively and keep emotions out of play as you evaluate whether or not a particular trade is succeeding.
Even before you enter into a trade, decide when you are going to get out. Stop/loss orders let you set when that happens, so that you do not have to think about it. If you are succeeding, by all means stay in a trade; however, once you begin to see a plateau, decide when you are going to get out and then set your stop/loss order so that it executes when performance drops below a predetermined point.
Though all forex traders hope to succeed, the best know that no fx trading will succeed if they let their emotions rule. If you are winning with a particular trade you should still try to remain cool and objective. If you are losing, stay objective and simply deal with whatever is happening; it may be time to cut your losses and get out for now.
A good forex trading system is going to help you plan your trades objectively and achieve the best results. Remember, as well, that you are not going to win on every trade. The successful forex trader knows that wins have to outweigh losses, but he or she does not take any single loss personally; neither should you.
28th September 2011
As the world’s largest economy, the US has had significantly rocky times recently, with Moody’s decision to review the US’ credit rating; a possible decision to downgrade may be the result unless the debt ceiling resolution can be reached by 2nd August. This has caused the US dollar to struggle against other currencies, most notably the Japanese yen and the Swiss franc, although it has also had significant fluctuations against the euro and the pound.
The US’ possible downgrade from its current AAA credit rating, would greatly affect not just its domestic economy and therefore negatively impact the US dollar’s trading value in Forex; it would also affect economies around the world as well. A possible downgrade also adds to the shaky situation that has come about as a result of the ongoing debt crisis in the eurozone. Therefore, the US economy would be affected by a downgrade in US credit rating or a US default on credit, but so would many others.
Other news
Greece’s credit rating was also downgraded from a B+ to a CCC rating on Thursday 14 July. At the same time, Italy sold €4.96 billion of its multiyear Treasury bonds. Italy’s government also called for a confidence vote in the Senate on a budget bill that has €40 billion in austerity measures, mostly to take effect in 2013 and 2014.
Specifically related to Forex trading, the euro gained some ground against the US dollar in spite of the debt problems ongoing in Europe. It was up to $1.4191 against the US dollar, from $1.4158 late on Wednesday.
24th September 2011
The US jobs report found that nonfarm payrolls were just 18,000 in June, as opposed to the 125,000 forecast. This had a significant impact on the Forex market globally. In addition, ongoing debt crises, especially with regard to Italy, shook Forex traders’ confidence. The US dollar has also struggled against the yen; with its debt ceiling limit another factor in a cautionary outlook.
However, ECB President Jean-Claude Trichet made the decision on Thursday to continue to give Portugal liquidity, at least temporarily alleviating Europe’s debt crisis. This caused a gain of the euro against the dollar after two days of decline. Some have said this shows the ECB’s flexibility and willingness to adjust to current circumstances, especially important considering the current debt crisis in Greece.
Next week, finance ministers in the eurozone will discuss Greece’s bailout package and will also discuss the results of the European banks’ stress test.
Upcoming Trends to Watch in Relation to Forex Trading
Potential softening of the US dollar as a result of the US’ weaker than expected jobs report and debt ceiling quandary may brighten the outlook for sterling and for the euro, since both have been struggling against the US dollar. In particular, the euro is expected to make improvements. Trichet has promised continuing vigilance in regard to inflation for the eurozone, further strengthening the euro’s footing. The outlook for sterling is more cautious.
19th September 2011
The Swiss franc reached record highs today versus the euro, the pound, and the US dollar after a downgrade of Greece’s credit rating by Fitch Ratings. Previously, there had been gains with news that the US Federal Reserve would not charge quantitative easing for the time being, but these gains disappeared with Greece’s credit downgrade from B+ to CCC. US Fed chairman Ben Bernanke stated that inflation is growing, such that stimulus would not be increased for the US economy at least at present.
Today the Swiss franc retained a stronghold, and has advanced against nine currencies in developed markets; that is more than 16% in a year. The safety of the Swiss franc has become ever more popular in Forex trading, because of European nations that are struggling with debt and other economic crises; in addition, the US dollar has been tenuous in recent times because of concerns about US employment and its own looming debt crisis.
As of last week, the Swiss franc had a bit of a downturn, given that it had looked as though European debt problems had at least lessened for the present. Nonetheless, it regained its strength this week as three major rating agencies may consider indebted nations in Europe to be in default; it is perhaps these rating agencies’ attitudes (Standard & Poor’s, Moody’s, and Fitch) that allowed the Swiss franc to regain its footing.
13th September 2011
Although the health of the eurozone has been in question recently because of the debt crisis there (particularly in regard to Greece), the Swiss franc has provided safe haven to traders. With money flowing out of Greece and Greece’s financial future to be decided next week, the franc has risen strong against it.
Italy’s debt situation appears to be one reason for this upset, although it could be a major test for the stability of the euro. Although the US dollar has risen recently, it could fall next week as a result of the nonfarm jobs report and on reports of a weak retail sector and consumer activity. If that happens, the Swiss franc would gain in strength, providing a new rival for the euro. The Swiss National Bank could intervene and slow down the Swiss franc’s strength, but there’s also a benefit to strong Swiss currency. That is, high-yield euros could be bought at lower cost.
What Does This Mean for Forex Trading?
Both the euro and sterling have struggled against competitors like the US dollar, but the euro especially has promise as a “good catch” in relation to Forex. Lower values now certainly soften it, but ECB President Jean-Claude Trichet’s willingness to raise interest rates and support Portugal, among other things, means that the euro is likely to gain significantly in value once impending crises are averted.
7th September 2011
The dollar has retained modest gains against the Swiss franc and euro in Asia, after the Federal Reserve in the US discounted reports that easing would happen for at least the time being. The market at large is bracing for stress tests across Europe on 90 banks, which could hurt the euro and impact it’s weight in forex trading, especially if some of those banks look for state aid.
Although the European Banking Authority has worked to provide serious measures by which the state of European banking system’s health can be judged, these tests nonetheless can hurt the euro, no matter what the actual results are. While most banks have passed these tests historically, they have not always been foolproof. For example, in July 2010, all Irish banks passed the tests, even though the Irish banking system collapsed just four months later.
To that end, the EBA has worked to create much more serious tests, even though these may in fact hurt the euro in the present climate. It is currently down to $1.416 in Asia from a high of $1.4225, upon US Federal Chairman Ben Bernanke’s assurances that easing would not happen for at least the time being. Analysts state that among the better trades for forex trading at the moment, is a short US dollar/Swiss franc pair, given that the Swiss franc seems to be a stopgap for both the turmoil in the US and possible longer turmoil in Europe.
4th September 2011
In forex currency trading you have two options, the first being manual trading. Traders, who use a manual forex system to make their trades, take all the decisions themselves, personally. The second option is auto trading. This is achieved by way of a forex robot, which makes trades automatically, based on criteria set by the trader. While both have their benefits, deciding which is best boils down to personal preference.
Manual Trading
Manual trading is the tried and tested method. The biggest downside to manual trading is emotional involvement. When traders are winning, they tend to become over confident and do not cash out until they actually start losing. The same can be true for losing positions. In order to regain losses, traders make hasty decisions, resulting in bigger losses. However, with careful trading and disciplined strategies, this is not a problem. The benefit of manually trading is the fact that you always have full control over when to enter and exit a position.
Using a Forex Robot
If you prefer to automate at least part of your trading, you can choose to use a forex robot. You set your parameters, including limits and number of trades based on technical analysis from currency trends and the robot makes trades for you throughout the day. The key benefit is that you are able to trade whether you are at a computer or not. The downside is that robots do not have the same decision making skills as a human. The most effective strategy is to use a combination of both and then decide which works best for your trading needs.