Why To Trade Currencies? (and How…)

Posted on June 19, 2008
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There are many advantages to trading Forex. Here are just a few reasons why, so many investors are choosing this market:

No Fees. No clearing fees, no exchange fees, no government fees, no brokerage fees, no redemption fees. Forex brokers are reimbursed for their services through something called the bid-ask spread, essentially a commission. This commission is several times less than stock exchange market fees and commissions (read below)!

No middle man. Spot currency trading eliminates the middlemen, and allows you to deal directly with the market makers responsible for the pricing on a given currency .

No fixed lot size. In the futures markets, for instance the contracts are set by the exchanges. A standard-size contract for silver futures is 5000 ounces. In spot Forex, you determine your own lot size.

This allows investors to participate with accounts as small as $250.

Low transaction costs. The retail transaction sacrifice (the bid/ask spread) is typically less than 0.1% in normal market conditions. At superior dealers, the spread could be as low as .07% (percent). This depends on your account settings and all will be explained later.

A 24-hour market. There is no waiting for the starting bell - from Sunday nightfall to Friday daylight EST, the Forex market never sleeps. This is awesome for those who want to trade on a part-time basis, because you can choose when you want to trade–morning, noon or night.

No insider trading. It is impossible to corner the market. The global foreign exchange market (Forex) is so vast and has so many participants that no specific entity (not even the Federal Reserve) can command the market charge for a significant period of time.

Leverage. In Forex trading, a small margin account can command a much bigger interbank position. Leverage gives the seller the ability to make those high profits, and at the same time keep exposed wealth to the minimum. For example, Forex brokers recommend 200 to 1 weight, which means that a $50 cash margin deposit would allow a trader to buy or sell a $10,000 contract. Similarly, with $500 dollars, one could trade with $100,000 dollars and so on. However, margin is a double-edged sword. Without proper risk management, this high gradation of leverage can lead not only to large gains but to large losses as well.

High Liquidity. Because the Forex Market is so vast, it is also awfully liquid. This means that under regular market conditions, with a click of a mouse you can immediately buy and sell at will. You are never left in a situation when you are unable to close a position.

Free Demo Accounts. Most online Forex brokers pffer demo accounts for beginner traders to practice trading, along with streaming Forex news and charting and trading software. All free! These are very valuable resources for SMART traders who would like to polish their trading skills with ‘play’ funds before opening a live trading account and risking actual money.

Free Trading Software. As mentioned earlier all brokers provide you with trading and charting software, usually free of charge. The software allows you to open and close trades in real time, with a click of a mouse! You can even configure your online trading platform automatically to close your position at your prefered Take Profit level and/or close your position if it is going against you (a stop loss order).

Mini and Micro Accounts. You would think that starting out as a currency trader would require a lot of investment. The reality is, compared to trading stocks, options or futures, it does not. Online Forex offer “mini” and “micro” trading accounts, some with a minimum account deposit of $300 or less. This is not to say that you should open an account with the bare minimum but it does make Forex much more affordable to the average individual who does not have a lot of initial investment.

Despite all these advantages trading the Forex is not an easy undertaking and shold never be taken light-mindedly especially by novice forex traders. The promise of great returns can quickly turn into a reality of frustration and losses if you start trading unprepared.

What is the best way to prepare?

Invest in Forex education if you want to make this your full-time source of income. One excellent Forex education resource is Peter Bain’s “Forex Mentor” course. Peter, a long term professional Forex trader has compiled his course as a series of printed materials, exercises, videos and ongoing personal live video sessions where he explains the current market situation and advises participants what to do.

The next best thing, (for those who don’t want to go through weeks of training and want to get a taste of Forex trading right away) is to get the right automated tools for the job. A proven, no-guesswork system designed and tested by professional traders. Two of the industry leaders in Forex software tools for new traders are the Forex AutoPilot Software (FAPS) and the Forex Killer System.

The Forex Autopilot Software is a completely automated “set it and forget it” type of system. By dragging and dropping an icon onto your chart you are activating the trading robot which will then go on to monitor the market, open and close trades non-stop, 24/7!

The Forex-Killer on the other hand does not actually trade for you. Given the current market conditions, the Forex Killer coputes the next move of the market and gives you Buy, Sell or No Trade signals, with probabilities and projected entry and exit levels, effectively telling you how to setup your entry, stop-loss and take-profit orders.

With either system at your dosposal you can start trading with 1000 usd or even less. Just keep in mind that more capital will minimize the risk and give you greater profits.

Which system is best suited for you? Check out the web-sites, read the result reports on those pages, watch some of the recent testimonial videos and decide for yourself!

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Managed Forex Account Yielded 137 Percent Last Year

Posted on May 25, 2008
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Trading in currency can be incredibly rewarding. It can also be very risky. In fact, most Forex traders lose their trading capital in the first few months. There are of course many reasons for so many traders losing their money. Among the numerous causes for these losses the number one reason is a lack of money- and risk management principles. That’s right, incorrect position sizing has led more traders to consistently lose their funding. The good news is that there is an answer: Developing winning Forex strategies.
Before you can develop a winning Forex strategy, you must understand the basic principles. Forex is an acronym for the foreign exchange market; an investment market that handles the legal exchange of one currency for another. Accredited brokers track all legal currency transactions that occur on the exchange. This happens whether you are a consumer using traveler’s checks, a forex trader, an investor involved in international business, or a financial institution exchanging currency. International currency exchange happens every day. Many unregulated exchanges that occur exist outside the forex, usually the result of individual investor trades. Although an unadvisable method, it does occur for many reasons.
Forex, or the Foreign Exchange Market, is market competition at its finest, as it includes traders from all over the globe, operates twenty-four hours a day, and has massive trading volume and liquidity. Anyone with access to the World Wide Web can try his or her hand at making a profit by buying and selling currency. The trick, of course, is to figure out what to buy and what to sell and at what time. That is when forex trading indicators become valuable; indicators help investors figure out the best times to buy and sell their particular currency. Moving averages indicators are commonly used and are one of the best ways to determine the optimal buying and selling times in the Forex market. Because any event from a natural disaster to a change in government policy and anything in between can affect a country’s currency exchange rate, the successful Forex trader will understand the importance of reading trends over the long term, rather than looking for a get-rich-quick plan.
If you don’t have the time to trade yourself then you might want to have a managed forex account, where a professional trades your account and you share some of the profits. In most cases, you as the investor get about 65-75percent of all profits while the asset manager gets anything between 25 percent up to 35 percent. Not bad, thinking that a qualified trader grows your account while you sleep!

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How To Make The Most Of A Automated Trade Idea

Posted on May 20, 2008
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Most people who are in the market spend about 80% of their time trying to find an idea, rather than actually figuring out how to implement a automated trade idea. While selection is key, going in at the wrong time, or before an expected news event that may trigger additional volatility is asking for trouble.

Even if you are not a super active trader, the timing aspect is often overlooked and can be a real drag on net returns over the years if not considered. Now if you are a long term investor, it becomes less of an issue - however I know very few people, even if they plan on holding the investment for years, that would like to see it sell 3-5%% down right after purchase. After all, in hindsight, had you waited a bit you could have gotten it on sale - but some of this part is unavoidable. One must balance the risk of missing the trade vs. going in with bad timing which can exacerbate any losses taken should the trade not work out. We will concentrate on what is avoidable to help with timing, whether its an investment or a robot trading idea.

Anytime you are looking to invest or trade, whether long term or a automated trade idea, the timing of WHEN to go in is important. Some stocks on an average day can have a 5 or 7% range between the highest price and the lowest price, if they are volatile. Even non volatile names can be so sporadically. So some attention needs to be paid about when to actually go in and purchase the shares you want.

Where you think a stock might eventually go should not really affect you here. Too many people say ‘Well the stock is 40 here today, but in 2 days I think it will be 45 dollars so I don’t care how I enter my automated trade idea.’ or ‘I think it will be 25 points higher in a year or 2, so who cares?’ Well if you think about it, if you regularly give the market even 1% per trade, figure about how much that adds up to over the years. After all, would you pay a broker 1% or 2% commission per trade? Years ago maybe, these days that is almost unheard of anywhere.

So what is needed is a basic frame of reference to try to time the entry. Usually the best method is splitting the order so as to not entirely miss it (it does happen occasionally if one is perfect :) ). To do a decent job of entry, you need to look at where the stock has been in the last 1 or 2 hours, and where it is versus the last 2 hours of the prior day. If it is at the high range, the only justification for entering would be a high expectation that it would continue and you would miss it. Often this is hard to judge, so this is where splitting the order can come in handy. Enter half now, and then put more in 1 or 2% lower (this is assuming you are not in a robot trading idea, which is entirely different). This way if you are right, and the stock does sell off, you now own the stock at a net better price. If the price takes off, you have not entirely missed it. One thing with this method is you will sometimes miss adding as many shares as you wanted. Usually chasing it and adding higher is NOT a good idea.

Now if the stock is in the lower 1/3 of the range for the last 1-2 hours and its near the low of the prior day its probably ok to add the full position if its a somewhat longer term trade. The only exception to this would be the last 45 minutes. Usually its not advisable to add stocks breaking or near the lows in the last 45 minutes as they have a tendency to go lower the next am. Of course this depends on the issue looked at and market conditions, but in general this holds.

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A Good Entry With A Day Trading Robot Idea

Posted on May 8, 2008
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No matter where the idea comes from, the entry point matters. You can do all the technical analysis in the world, but the consistent gyrations of the stock market do not care. Put your stop too close, and you may very well get stopped out only to watch the trade go in the exact direction you were betting.

When day trading, or even getting ideas from a newsletter, you have a stock daytrading idea that you need to monitor for entry. While robot trading systems will give you the exact entry point, there are some obvious times where paying attention to a few details can improve results. If you come up with the idea on your own, the same rules apply.

1. Even if you have a great stock daytrading idea, watch for a pattern of behavior in many similar stocks. Often times if the market has a definite bias up or down, a lot of stocks will push through resistance some (enough to stop shorts out and suck some longs in) then reverse, or vice versa. Pay attention to stocks you are not intending to trade, but are a major component of an index the stocks you follow are in.

2) Note key areas intraday, 5 minute, 15 minute and hourly (including prior 2 or 3 days) where the price had trouble pushing through. There will be no “IRON CURTAIN” with an exact price. Look for areas where the high pushed through but it pulled back the same bar, or the very next bar without pushing further, then that pattern is repeated again. This will be a good resistance or support area. You will want to make not of this before entering any stock daytrading idea. Also the area is relative, there is no “exact” resistance, only an area. One should also realize that the first push through sometimes will fade back to shake out weak hands, then go for the bigger move.

3. Have reasonable expectations based on todays market action. If the market is really headed lower, you cannot expect to press and add long on a stronger (relative) stock and hold it very long. Sellers control the market, and buyers, unless compelled by a very good reason, will not chase. So if a stock normally (that you have noticed) can move about 1 point before a potential reversal may happen, on days where you are bucking the trend, take 60% of that on most of the position then trail the rest until completion.

All this will help with any sort of stock daytrading idea, and make you a better trader overall. Adhering to an overall trading plan is a very important part of making consistent money in the stock market.

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