Review Category : Trading Tools

The Traits that Forex Live Traders Should Have

Forex Live Trader Traits

All forex live traders want to be successful when they are trading.  Unfortunately, this is a dream that not all traders will realise.  However, if you want to increase the chances of your successful then you should know about some of the traits that successful forex live traders have.

The Numeracy Traits

Something that many new traders do not consider is that you have to have some numeracy skills to trade.  While you are not going to be completing complex sums in your head you do have to know your way around figures.  This is mainly due to the fact that you have to calculate when your trades will be profitable and what the spreads you are being charged are.

Numeracy skills will also lend a hand when you are managing your risks.  To properly manage your risks you have to be able to calculate what you are risking and if the risk is worth the possible rewards.  This means that you also have to be able to calculate what the potential gains of a trade will be.

The Attitude for Trading on the Forex Live Market

Your trading attitude is a personality trait that you need to be successful.  Of course, there are ways that you can control certain aspects of your personality to ensure that you are only displaying the correct traits.  The personality traits that you need are discipline and patience.

You need to be disciplined in your trading to ensure that you do not complete emotional trades and divert from your trading plan.  When you do this you decrease the consistency of your trading and this often leads to losses.  The only way you can ensure that you are successful on the forex live market is to be consistent in your trades.

You also have to patient because you need to wait for the correct trading opportunity.  A forex trader has to wait for the market to move into the position that they need because they cannot force the market to do what they want.  If you are not patient then you will open positions at the wrong time and this will lead to losses more often than not.

Learning About the Market

Another trait that successful traders have is that they are open to continuous learning.  There is no-one that can honestly say that they know everything about the forex market.  You will always be learning either from your mistakes, through new information or from a new trading system.

Having Good Management

Trading is not only successful because of the way you are trading.  The plans you have and the records you keep can also affect how successful you are on the forex live market.  It is important that you hone your administrative skills to ensure they are helping you.  There are two areas that these skills will be employed and they are planning your trades and maintaining a trading journal.

Every trade that you place on the market should be planned out before hand.  This allows you to see whether or not they will be profitable and whether the risks are worth the rewards.  Keeping a trading journal also allows you to see what you have been doing and what could possibly be going wrong with your trading.

 

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Developing Forex Strategies – An Essential Tool

forex strategies

Developing Forex strategies is definitely an essential part of being a prosperous investor on the Foreign Exchange. There are a lot of currently established and effective strategies available on the market. The easiest method to ensure your prosperity is to create an ideal trading technique. Strategies all deal with the same types of information but they use that information differently.

If you want to be a truly successful trader, it is a requirement that you take the time to create your own trading techniques and Forex strategies. It can be overwhelming in the beginning because there is so much data to go through and all of the information needs to be analysed and then condensed into a usable form that can help you predict market trends.

Analysis – Technical and Fundamental

You will find two kinds of evaluation pertaining to the Foreign exchange. Complex technical analysis discusses the figures without looking at what generates them. In other words, technical analysis considers just the numbers and will focus on the exact influence that changed those numbers. Fundamental analysis does the exact opposite. It looks at the influences which causes the changes in the market as its focus instead of relying just on the numbers. It is for this reason that the majority of Forex strategies consist of data from each type of analysis.

In order to create a strategy that is going to be effective you need to understand the information that is being generated through both of these types of analysis. This is because you need to be able to anticipate market movement, for example if you take the opportunity to look at the data generated during previous market movement. There is plenty of data since the market can fluctuate as frequently as every five seconds.

Predicting Market Movement for Forex Strategies

Once you have gathered the data you track the events and the changes those events cause and you can predict how much the market is going to move in a particular direction and to some degree or extent when it is going to happen. The market does not respond instantaneously. There is a delay between the influencing event and the movement on the market.

For an experienced trader, one who has a good set of Forex strategies, it is not difficult to predict when the market is going to move and approximately how much of an influence the event is going to have on the market. They can set their orders up to be able to make the most of these moments. This is the entire purpose behind learning the trends and learning how to predict the market.

The more you know the more informed your decisions will be and the more accurate your predictions are going to be. This is essential for the prosperity and success of any trader. Forex strategies cover everything you need to make these predictions with an educated eye and increase your chances of being a successful trader on the foreign exchange.

 

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Developing an Essential Tool – Forex Strategies

Forex Strategies

An essential part of every successful Forex trader’s trading arsenal is a set of Forex strategies. These strategies can be previously developed and proven or they can be something created by the trader themselves. In fact, the majority of traders actually create their own so that they can custom fit their trading strategies to what they want to accomplish with their business. It does not have to be as difficult as it might sound because they all use the same information.

Creating Your Own Forex Strategies

In order to start creating your own strategies, you need to understand what goes into strategies and what makes them so vital. The first step is to understand that trends are an essential component to making it on the foreign exchange. A trend is where market movements become predictable. You can determine these trends using analysis.

There are two different types of analysis methods that are used on the currency market. The first step is to know the difference between fundamental and technical analysis. Fundamental analysis looks at what affects the market. Technical analysis looks at the numbers.

It is for this reason that most people create Forex strategies that incorporate both types of analysis. This gives a balanced perspective and allows traders to determine the effects of particular events and how much of an effect the various events will have, because this information is essential to predicting the market.

Predicting the Market

Predicting the market is where it is at when it comes to Forex strategies. You want a trading strategy that is going to help you gather the data you need and help you to predict exactly when the market is going to move and approximately how much movement there is going to be on the market as a result.

This information is extremely important because it allows you to be able to set your orders and make the most out of market movements. Unlike the stock market or futures market where you do not want wildly fluctuating prices, you want that kind of crazy movement on the foreign exchange. This type of movement indicates a healthy economy.

The Foreign exchange is primarily a speculative market. This means that everyone is making predictions on which currency is going to increase or decrease in value, which is where the money is on the market. One of the biggest things that people want to know is just how far a market movement is going to extend. This is why it is so important to have a good set of Forex strategies because these strategies are what help you to determine the trends of the market, which will tell you a number of vital pieces of information.

It will tell you how long it takes between an influencing event occurring and when the effects hit the market. It will tell you how long that effect will last and it will tell you how much the market will move along with which direction the market will take. A successful Forex trader takes this information and uses it with other data to create Forex strategies designed to increase the accuracy of their predictions.

 

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Currency Trading Hits NYC

Currency Trading

The Asian session is closed when New York wakes. Europeans are heading towards the afternoon, with London just heading off or coming back from lunch. Yet many financial eyes are on New York City where dreams are said to come true. For currency trading North Americans have a great opportunity to trade on news as it happens. For other traders around the world it might be time to get off work and take profits in a major financial market. In other places it is a chance to sleep and hope the NYC session doesn’t affect any open positions. During New York’s session pairs are trading anywhere from 50 to 80 pips.

Currency Trading Points to Remember

Liquidity is highest in the New York session from 8am to 12pm since the London/European session is open. This overlap actually has almost 50 per cent of the major trades for the day.
Between 8:30am and 11:30am most of the economic data reports will be launched on news websites and live. Since 85 per cent of all currency trading is with USD pairs it stands to reason these economic reports are huge to the world forex markets. It is certainly why trends can switch the moment a new economic report is out in the USA.

Liquidity, volume and volatility do not stay around in the afternoon since the European markets close down. It does not mean the market stands still; however, things tend to drop off in terms of interest more so in the afternoon than the flurry of the morning currency trading session.

Fridays are usually the biggest time for reversals to happen on currency pairs. USA traders are worried about weekend moves since New Zealand and other Asia-Pacific markets open late Sunday afternoon to USA traders. To avoid any position problems traders close out and trends change. Weekend news can also create changes for the market trends. On a Monday open suddenly pairs in Asia can be trading much differently due to weekend news.

What Currency Trading Pairs are most Attractive?

During the 4 hour overlap assume any pair is tradable. These pairs may lack some attractive qualities, but given the liquidity of both sessions combining there is often more interest even in exotic pairings for currency trading.

Despite more currency pairs being available and more attractive it is not always best to trade some of the more exotic pairs. It is typically easier to make money on a USD pair especially during this session. The USD is usually in the transaction to convert the currency you own into another, thus you can tend to make more by sticking with the USD pairs. Also, most traders are going to pay attention to USA news reports factoring in how the other pairs react in currency trading markets.

At this moment you may still want to know what session is really the best to trade in. You may have it in mind that being awake for the New York session is the best, but do not jump ahead. Consider the overlaps that happen besides the London-NY one.

 

 

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Info On Trading Habits For Forex Australia

Forex Australia Trading habits

The forex market is a dangerous and highly competitive environment filled with “inconsiderate” traders. The instability and inconsistency makes it very stressful and anxiety-inducing. Many new traders will often find themselves in situations of emotional stress and vulnerability leading to non-profitable trades. In order to prevent these difficulties, one needs to gain knowledge about yourself and the foreign exchange market. This article will examine some trading habits one should develop in order to keep yourself safe on the market and to become a successful trader.

Overtrading on the forex Australia market

The act of overtrading occurs when a trader places or takes too many trades in a single day. Generally, overtrading can be seen when a trader experiences a damaging loss and is attempting to regain the lost amount. The traders who participate in this type of behaviour will often forget that there will be later opportunities to regain the money. Instead, they wish to replace the funds immediately which will most likely cause a further loss. A highly recommended method to avoid this pattern of behaviour is by learning to acknowledge the result of bad trades and accept that overtrading will worsen the situation.

Low risk trading and use of leverage

It is a general consensus among forex traders that the simplest way of protecting a trading account from a detrimental loss is to use low risk. This risk should not exceed 3-5% of the account size; neither should it use a leverage of more than 1:100. This is due to the fact that forex accounts recover more easily from a 5% loss than 20% loss. This is a strong risk preventative method which should be employed from the beginning of your forex Australia career. If you have a high risk account, it would be advised to follow this trading tip and move to a lower risk account with adequate leverage.

Dealing with greed

When trading the forex Australia market, it is inevitable that profits will be experienced. Dependent on your trading strategy and personality these profits may be large or small. Irrespective, individuals have been known to earn generous amounts on the forex market making it a highly lucrative industry. It has been noted that this aspect of the market lends itself to the human emotion of greed.

Greed is a dangerous emotion which can affect a trader in a detrimental fashion. It is a desire to trade regardless of a potential lack of trading capital because you want more than you have. Greedy traders have been known to gamble on trades or push the profit targets beyond their psychological and technical abilities. This greedy trader does not know when to cut their losses and may even try to post immaterial trades. A good way to avoid all this is by controlling the emotion. Evidence has shown that benevolent traders save large amounts of pips making greater profits than the greedy trader.

 

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Effect of Interest Rates: Forex Australia Trading

Forex Australia and Interest Rates

The interest rates in a country affect a lot of people.  They will also affect the way that you trade on the forex Australia market.  It is important that you know about the effects that the interest rates can have on your forex Australia trading.

The Interest Rates and the Impact of Forex Australia Trading

There are several factors that affect the interest rate.

The Supply and Demand

Interest rates, like forex currencies, are based on supply and demand.  When the demand for credit increases, the interest rates will be raised.  When this demand drops, the interest rate will be lowered to attract the demand again.  On the other hand, an increased credit supply will normally cause a reduction in the interest rates, while a decreased credit supply will increase the interest rates.

Credit that is available to the wider economy is lowered when borrowers do not pay their loans.  A daily example to illustrate this is if you decide to postpone the settlement of your credit card bill for a month.  To do this, you will have to pay more interest on the outstanding amount.  This decreases the credit availability in the market which will cause an increase in the interest rate.

The Rate of Inflation

The higher the inflation rate, the more likely it is that the interest rate will increase.  This is because lenders will ask for higher rates on their money to make up for the drop in purchasing power the repayments they receive will have in future.

The Role of Governments

The government plays a huge role in the determination of suitable interest rate levels.  Central banks often release announcements about the effect of monetary policy on the country’s interest rates.  The central bank rate is the rate at which financial institutions offer funds to each other.  This is the rate that is set on short-term loans between these financial institutions.  This rate will eventually seep through the system and affect the rates that your bank will charge you on short-term loans.

The central bank influence on this rate is determined by open market transactions that they undertake.  The central bank often undertakes buying and selling of securities.  In the event that the government purchases more securities, this money becomes available to banks and since they have more funds to lend to clients, the interest rates tend to decrease.  When the government decides to sell securities, funds from the banks are depleted and since they no longer have the funds for loans, they are forced to increase interest rates charged on money available to borrowers.

Interest rates affect many daily transactions in the financial market.  If you are in the foreign exchange trading market, you will be affected by the supply and demand of funds.  This law of economics has a direct effect on the supply and demand of foreign currencies.  It affects investments and if there is a high interest rate in a country, foreign investors turn their attention to that currency as an investment with potential.

 

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Understanding Forex Brokers Rollover Credits & Debits

Forex Brokers Rollovers

When you look into trading on the forex market you will come across the carry trade.  Carry trading is a passive type of trading where you make a profit from the rollover credits and debits offered by forex brokers.  It is important that you understand the rollover credits and debits that are offered by the forex brokers.  If you do not understand this you will not be able to make a profit from this correctly.

What is Rollover Interest?

When you look at making a profit from the forex market with the carry trade you have to know what rollover interest is.  Rollover interest is paid to a trader by forex brokers for certain open positions.  These open positions will need to be held overnight for the rollover interest to be paid.

The interest that you are paid will vary depending on the currency you are buying and the currency that you are selling.  The rollover interest will also be paid on the total value of the trade and not on the margin used for the trade.  This means that you will receive interest based on the value of the lot that you are using and not the amount you have put into the trade.  The rollover interest that you are getting will be based on the difference in the interest rates of the currencies.

Rollover Interest and Forex Brokers

The rollover interest that the forex brokers offer will be paid on the currency that you are holding.  If you are holding the high interest rate currency then you are going to be paid the rollover interest amount.  However, if you are holding the low interest rate currency then you are going to be paying the broker the rollover interest.  It is very important that you consider the currency that you are holding when you look to profit from the rollover interest.

Forex brokers will automatically add or deduct the rollover interest from your account.  However, you need to consider when your broker has there end of day cut off.  This will vary depending on the broker you are using and where they are located.  Some brokers will use the end of day in the country they are located in while others will simply use 5pm EST as their cut off time.

Profiting from Rollover Interest

There are a lot of traders who look at profiting from rollover interest.  There are two ways that you can do this and they are passively and actively.  When you actively profit from rollover interest you will be completing carry trades with the sole purpose of making money from the rollover interest.  The most commonly used currency pair for the carry trade is the Australian dollar and Japanese Yen currency pair.  This is due to the large difference in the interest rates of the two countries.

When you look at passively profiting from the rollover credit you will be looking to actively make money from price action.  This means that the profits you make from the rollover interest are an added bonus to the profits you are making from the movements on the market.

 

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Choosing Currency Pairs For Your Forex Strategies

Forex Strategies for Currency Pairs

When you enter the forex trading world, you should learn all you can about currency pairs.  You should not only know which currency pairs are available, but also which work best with your trading strategy.  There are forex strategies that work best with particular currency pairs because of the price movements related to those particular currencies.  To determine the currency pairs you should be using you need to look at how volatile the pairs are and when they are most liquid.

Choosing Currency Pairs

There are many forex strategies out there and you need to choose one that suits your trading style and personality.  A lot of traders look to day trading as their best option because of the short-term nature of the trades and the number of primary and supplementary strategies available.  Of course, there are certain currency pairs that work best with day trading and you should be aware of these.

Creating a Base Line

When you look at the different currency pairs you should create a base line.  The base line is a percentage of the daily range of the pair’s price movement.  When you form the base line you should take note of what the spread for the pair is.  If you are working with a broker that offers variable spreads you should take an average for the week.  Brokers with fixed spreads are easier to work with in this regard because you are sure of the spread.

Once you have the average daily movement for the pair and the spread, you can calculate your base line.  The base line calculation is the spread as a percentage of the movement and this is calculated by taking the spread divided by the average movement.

Which Pairs to Trade with Your Forex Strategies

Once you have calculated the base line, you should be able to see what the spread is as a percentage of the price movement.  This is actually very important when you are looking at short-term trading.  Long-term traders do not have to worry about this as much as the spread is engulfed in the long-term movements.  With short-term trading the impact of the spread can drastically affect the profits you make from a trade.

It is recommended that you use currency pairs with the lowest base line percentage.  This means that the spread makes up less of the movement per day.  When you use these low percentage pairs the profit you make is greater.  The spread does not eat into your profits as it would with the larger percentage pairs.  You should create the base line for all the major currency pairs because these are the ones that you are likely to be trading.

Be Realistic

While creating the base line percentage is a good indicator of the spread percentage, it is not actually a realistic representation.  With the base line you are assuming that you could get the maximum pip movement as a profit and this is something you generally cannot do.  To get a more realistic figure you should calculate 80% of the price movement.  This removes 10% from both the top and the bottom range prices.  You can then calculate the base line with the 80% of price movement to get a more realistic percentage.  These realistic percentages will be higher than the previous calculation and may change the currency pairs you should be trading.

 

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Finding The Most Suitable Forex Brokers

Forex Brokers Trial Accounts

There are so many choices available as regards forex brokers.  This is why newcomers to this financial market are so confused.  Not only do they need to understand the market and all its terminology, but now they have to find a suitable forex broker as well.

The first step is to determine the most important questions that need to be answered when you review the different brokers.  You then have to see exactly what you are being offered by the different forex brokers.  It is a good idea to make a list of these questions and offerings as it will give you the opportunity to easily compare the different brokers.

Researching Different Forex Brokers

There are a few main questions that you need to have answered before you make a decision on a forex broker.

  • How much do you need for your initial investment?  If you do not have more than $2000 to commence your trading with, you should consider opening a micro account.  Not all brokers offer this type of account.
  • How much leverage is the broker offering you?  You should be careful when you choose your leverage level.  For newcomers, the ‘less is more’ attitude is probably more helpful.
  • Is the broker registered with any of the regulating authorities?  You should check to see if the broker you wish to choose is registered with the Australian Securities and Investments Commission (ASIC).  If the broker is based in the US, they should be registered with the National Futures Association or the Commodity Futures Trading Commission.  If the broker is based in the UK, you should check on the Financial Service Authority website.  If your broker of choice is not registered with any of these authorities, you should reconsider you choice.
  • Are you being offered fixed or unfixed spreads and how wide are they?  You also need to know if the broker operates under a dealing or non-dealing desk.  These types of questions are more important to traders who intend making quick profits on small pips.  If you wish to use this strategy, the larger or variable spreads may eat into your profits.
  • Is rollover interest accounted for daily?  This is an important factor if you intend holding overnight positions.
  • What type of reports will you get?  You need to know what type of general reports you will be offered.  Does the broker offer other services, such as charts, market commentary and news feeds?

Once you have all this information, you should list it on a comparison chart to allow you to easily see the differences between the brokers’ services offered.

Trial Account

Once you have completed the comparison, you should choose at least two brokers that meet with your criteria and open demo accounts with them.  This will give you the opportunity to play with their trading platform and find the one that suits you best.  Make sure that you go through all the features of the programme.  If you have any questions, do not be afraid to ask as this will be a test of the customer service of the broker.  As soon as you feel comfortable and wish to trade live, you should commence with small trades to test if the broker operates in the way you would like and if they are keeping to their promises.

 

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A Guide To Understanding Forex Brokers

Understanding Forex Brokers

One of the first things you need to do when entering the foreign exchange market is to locate a forex broker.  There are numerous forex brokers available to utilise, but it is important to register with one that suits your specific trading needs.  To find this ideal broker there are various considerations to take into account.  It is important to examine what services they offer, where they are located and whether or not you feel comfortable dealing with them.

The different accounts available

Brokers offer different types of accounts.  The smallest one is the mini account and this requires that you invest a minimum of about $250.  These accounts generally offer high levels of leverage.  It is possible to find a micro account, but not all brokers offer this type of account.  A standard account requires a minimum capital investment of around $2,000.  These accounts normally come with several levels of leverage.  Premium accounts require much higher initial investment capital, but it allows you to work with different levels of leverage and you will more than likely be offered a more superior account with more tools and services.

Looking at spreads

A spread is the variance between the price at which you can buy a currency and the price at which you can sell a currency at some point in the future.  Forex brokers generally do not charge commissions and but earn their income off this spread.  The spread differs greatly from one broker to the next.  Forex brokers are generally linked to large lending institutions or banks.  This is due to the amount of capital required to allow them to provide the required leverage to their clients.  It is a good idea to find a broker who is registered with a regulatory body.

Considering margin rules

Your broker plays a large role in the amount of risk you can take when trading with borrowed money.  This gives your broker the right to sell or buy your positions at its discretion.  This can be extremely bad risky and should be examined with caution.  You may have a position that declines just before it climbs back up to a high.  Some brokers may liquidate that position when it is at a low, even if you have sufficient in your account to cover that amount.  This type of broker could cost you a lot of money.

All about bad forex brokers

You should avoid shady brokers who do things such as hunting or sniping.  This is when the broker buys or sells prematurely near the preset points.  You will not find this out until you have an account with a broker who does this, as no-one is going to openly admit to being guilty.  You need to look for a broker who has a good reputation and you should speak to other traders about potential brokers.  Unfortunately, you will not be able to find blacklisted brokers as this does not exist.  A good place to go is an online trading forum where you could ask other traders for recommendations on brokers.

 

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