STAGE V – WHEN
When exactly should I trade, must be one of the many questions in a novice trader’s mind. And yes, it is an important question, especially when you know that Forex is a 24 hours market, open for 5.5 days a week.
What needs to be understood is the fact that although its true that the Forex market is open 24 hours a day, but it does not at all mean that the market action the same always. Majority of traders and investors do not stop to give this fact a thought for even a moment. They do not even consider the impact this fact can have on their trades.
Being in this volatile market, you as a trader should always give yourself a fair chance to play. Just because a market is open 24 hours does not mean that all those 24 hours, it is moving in your favor. There will be hours minutes or even moments when the market can move against you. Trading during those circumstances is never advisable. Trade only when you are sure that the market is most expected to go with you. For example, the markets are known to go in slumber during the days when London and New York are closed.
This is exactly where technical indicators are useful. But for checking their authenticity of these technical indicators, the best way is the trading volume. It is believed that these indicators turn out to be more accurate when the trading volume is high.
But since there are no trading volume records obtainable in the Forex markets, it is advisable to make use of trading ranges, which is the next good option. Trading range can be defined as the difference established between the high and low price limit for a specific currency pair over a specified time period like one trading day.
With this approximate data in hand, an investor can now more precisely and cautiously calculate when is the right time for him to trade.
If the trading range is high, entering the market would be a safe bet at that hour rather than the time, when the trading range is tight or low. Let’s take the example of a trade in EURUSD, which has an average trading range of 25 pips at 10 AM EST against the EURUSD which has an average trading range of 7 pips at 10 PM EST.
Now entering the market during the morning session of trade will give you a little more space for a safe trade in case it does tend to fluctuate a little high or low, as compared to the evening trading session, in which you would as it is be trading on margins only.
That is the reason why technical indicators are given so much importance as they are mostly useful in predicting accurately, the movements of the market. More often than not, the beginners in this trading business tend to ignore the importance of "when to trade" in the market. The professional, expert and refined trader always appropriately times his entry in the market in order to reap the maximum benefits and make the most profitable deals. Limiting losses by analytically monitoring the market gives a trader a more prospective outlook.
Tuesday, March 23, 2010
Forex Analysis - Stage 4
STAGE IV – WHAT
When we talk about what to trade for in Forex, the first thing that comes into our minds is the Currency. But there are a few other elements too which make up for a complete trading plan such as the currency pair also known as the trading medium, the market actions that generate the market entry and exit points, and the overall attitude towards trade management.
Forex is a trading market which gives its traders, returns in the form of the comparative value price of one currency exchanged by the other. Always dealt in currency a pair, Forex has its major currency pairs like namely Euro/US Dollar or (EUR/USD) and US Dollar/Japanese Yen or (USD/JPY).
With this simultaneous buying and selling of exchange an investor hopes to make winnings on positive exchange rate oscillations. There is a constant fluctuating going on, down as well as up, within seconds with the exchange rates. This is where the whole art of trading lies, in flawlessly predicting the movement of the variation between the two currencies.
Creating a comprehensive trading plan and correctly comprehending and including all its major elements into it are a must for an unbeaten trading approach.
All of these elements combine together to form a strong trading management approach.
A trading deal with a currency with tight spread alongside using mid or long intervals as entry signals as well as a low leverage always has an enhanced probability for being a hit.
On the other hand, a trading deal with a currency with loose spread alongside using short interval as entry signals as well as high leverage positions will almost certainly serve as a big fall down.
And finally, the currency pair, the entry and exit signals, and the trade management method should all merge well simultaneously and be present without disagreements and overlapping.
Beginners or new traders create grave errors at times, by trying hard to fuse collectively all the methods or strategies they have heard about or gained knowledge about from miscellaneous sources. What should be done instead is to put in your own effort and analytically construct, analyze, and set up a complete trading plan which perfectly matches your trading approach.
The refined, professional and experienced investor always goes in for this extra bit of hard work, just to function with a harmonizing trading plan which will help him produce steady winning opportunities.
When we talk about what to trade for in Forex, the first thing that comes into our minds is the Currency. But there are a few other elements too which make up for a complete trading plan such as the currency pair also known as the trading medium, the market actions that generate the market entry and exit points, and the overall attitude towards trade management.
Forex is a trading market which gives its traders, returns in the form of the comparative value price of one currency exchanged by the other. Always dealt in currency a pair, Forex has its major currency pairs like namely Euro/US Dollar or (EUR/USD) and US Dollar/Japanese Yen or (USD/JPY).
With this simultaneous buying and selling of exchange an investor hopes to make winnings on positive exchange rate oscillations. There is a constant fluctuating going on, down as well as up, within seconds with the exchange rates. This is where the whole art of trading lies, in flawlessly predicting the movement of the variation between the two currencies.
Creating a comprehensive trading plan and correctly comprehending and including all its major elements into it are a must for an unbeaten trading approach.
All of these elements combine together to form a strong trading management approach.
A trading deal with a currency with tight spread alongside using mid or long intervals as entry signals as well as a low leverage always has an enhanced probability for being a hit.
On the other hand, a trading deal with a currency with loose spread alongside using short interval as entry signals as well as high leverage positions will almost certainly serve as a big fall down.
And finally, the currency pair, the entry and exit signals, and the trade management method should all merge well simultaneously and be present without disagreements and overlapping.
Beginners or new traders create grave errors at times, by trying hard to fuse collectively all the methods or strategies they have heard about or gained knowledge about from miscellaneous sources. What should be done instead is to put in your own effort and analytically construct, analyze, and set up a complete trading plan which perfectly matches your trading approach.
The refined, professional and experienced investor always goes in for this extra bit of hard work, just to function with a harmonizing trading plan which will help him produce steady winning opportunities.
Forex Analysis - Stage 3
STAGE III – WHERE
Where to trade Forex from, or with whose help, is an extremely important question serving as the basis of a successful or an unsuccessful trading deal in the future. Choosing the right dealer or broker or brokerage firm makes all the difference.
When you are planning to choose a broker for yourself, always keep in mind the services he can provide you with and more importantly, under which terms and conditions? They can make you fill up many forms and a lot of paperwork also goes into it all. Every broker will have some exclusive features and services to offer you too. Always take a closer look at what you are agreeing to and understand and grade all their offered services.
Every dealer has his strength and weakness. What needs to be learnt is how to compare these strengths and weakness and see what suits our needs the best. Always choose a broker who is ready to move along with you and the Forex trading plans, methods and strategies that you have planned on. Also, comparing and taking knowledge about various brokers will arm you as a trader with all the information that you need before selecting a dealer who best matches your trading approach.
With the question remaining which dealer to choose, there can be various answers as traders will have varied answers to this one. The new and beginner traders are most likely to trust and select the brokers who approach them with the finest marketing techniques, high promises and greater benefits schemes.
Trick to get information about the dealer or broker is not by asking or believing him only, but by learning as much as you can about him and his past records by visiting his site, registering for a demo, and inquiring about him through some references or past clientele.
It is not always true that a dealer spending so much money making attractive advertisements is the best to trade with too. Also, when trading with a broker or a brokerage firm for the first time, always go in for a short term or a mid term trading duration. Keep the long term trading planning with them only when you have tried and tested any of them successfully.
In Forex market, every trader will find for themselves an optimal broker. Therefore, do not lose patience and go in for a dealer which approaches you first. Rather go in for a dealer who will work in your interest to provide you with optimized returns on your investment by harmonizing his trading technique with yours or vice versa.
Where to trade Forex from, or with whose help, is an extremely important question serving as the basis of a successful or an unsuccessful trading deal in the future. Choosing the right dealer or broker or brokerage firm makes all the difference.
When you are planning to choose a broker for yourself, always keep in mind the services he can provide you with and more importantly, under which terms and conditions? They can make you fill up many forms and a lot of paperwork also goes into it all. Every broker will have some exclusive features and services to offer you too. Always take a closer look at what you are agreeing to and understand and grade all their offered services.
Every dealer has his strength and weakness. What needs to be learnt is how to compare these strengths and weakness and see what suits our needs the best. Always choose a broker who is ready to move along with you and the Forex trading plans, methods and strategies that you have planned on. Also, comparing and taking knowledge about various brokers will arm you as a trader with all the information that you need before selecting a dealer who best matches your trading approach.
With the question remaining which dealer to choose, there can be various answers as traders will have varied answers to this one. The new and beginner traders are most likely to trust and select the brokers who approach them with the finest marketing techniques, high promises and greater benefits schemes.
Trick to get information about the dealer or broker is not by asking or believing him only, but by learning as much as you can about him and his past records by visiting his site, registering for a demo, and inquiring about him through some references or past clientele.
It is not always true that a dealer spending so much money making attractive advertisements is the best to trade with too. Also, when trading with a broker or a brokerage firm for the first time, always go in for a short term or a mid term trading duration. Keep the long term trading planning with them only when you have tried and tested any of them successfully.
In Forex market, every trader will find for themselves an optimal broker. Therefore, do not lose patience and go in for a dealer which approaches you first. Rather go in for a dealer who will work in your interest to provide you with optimized returns on your investment by harmonizing his trading technique with yours or vice versa.
Forex Analysis - Stage 2
STAGE II – WHY
Before taking up any job, course or even a habit, what is important is to understand why exactly do you want to take it up? There always has to a reason for things to be done by you. When it comes to Forex market, investors have recently started rushing in, as more and more traders have now started earning their living through trading foreign exchange. All these investors trade Forex for many reasons, the main one being the superior returns which they are likely to get back. Apart from this, there are also many other factors which create an exclusive investment atmosphere for the traders in Forex, such as:
Accessibility
Liquidity
Commission free
Leverage
Accessibility
Being a 24 hour market, there is always some investor, someplace in the world whom you can trade with as so many such traders are dynamically trading foreign currencies somewhere in the world or another. This also enables these traders to respond to any latest news of the market, without delay.
Providing a 24 hour trading opportunity, you can trade anytime from Sunday 5:00 pm (ET) to Friday 4:30 pm. This gives traders a chance to trade according to their convenience, like going to bed or spending time with their family, or going by their own schedule.
Liquidity
Forex as a market contains high levels of liquidity, leading to an even higher degree of transparency in the big sized transactions and lots of money changing hands. Being the largest financial market in the world, Forex changes more than $2 trillion hands every day.
Being such a large and liquid market helps Forex attract enormous players, some retail and some large scale.
Commission free
With “free of commission” trading, many dealers believe is a perceived benefit of Forex. Forex trading lets its investors keep 100% of their trading profits. Although this does not change the high degree of business deal costs being paid to the dealers via the bid-ask spread, this free of cost trading makes Forex an even more lucrative business opportunity for the traders as well as the dealers.
Leverage
Forex market offers higher leverage and with its lower margin requirements it enables the Forex traders to trade with much bigger sum of currency as compared to their initial deposit. Leverage mostly also depends on the type of Forex broker an investor has chosen for trading.
Think about it this way, where would you find a trading market so partial to an investor, at least apparently. But to make the most of these factors, it is equally important for you to be aware of their shortcomings as well.
Surely all these factors like liquidity, leverage, convenience, and transaction costs can be used as money making tools, but so can they be used for losing all your funds. Yes, of course anything if misused or over used can result in harmful ways. Everything benefits to a limit, with a skill and method to use it with balance.
And this is what makes a difference between a beginner trader who might use these tools in all the wrong ways to destroy his wealth, and the refined investor who will have the experience and expertise to use them all to create wealth.
Before taking up any job, course or even a habit, what is important is to understand why exactly do you want to take it up? There always has to a reason for things to be done by you. When it comes to Forex market, investors have recently started rushing in, as more and more traders have now started earning their living through trading foreign exchange. All these investors trade Forex for many reasons, the main one being the superior returns which they are likely to get back. Apart from this, there are also many other factors which create an exclusive investment atmosphere for the traders in Forex, such as:
Accessibility
Liquidity
Commission free
Leverage
Accessibility
Being a 24 hour market, there is always some investor, someplace in the world whom you can trade with as so many such traders are dynamically trading foreign currencies somewhere in the world or another. This also enables these traders to respond to any latest news of the market, without delay.
Providing a 24 hour trading opportunity, you can trade anytime from Sunday 5:00 pm (ET) to Friday 4:30 pm. This gives traders a chance to trade according to their convenience, like going to bed or spending time with their family, or going by their own schedule.
Liquidity
Forex as a market contains high levels of liquidity, leading to an even higher degree of transparency in the big sized transactions and lots of money changing hands. Being the largest financial market in the world, Forex changes more than $2 trillion hands every day.
Being such a large and liquid market helps Forex attract enormous players, some retail and some large scale.
Commission free
With “free of commission” trading, many dealers believe is a perceived benefit of Forex. Forex trading lets its investors keep 100% of their trading profits. Although this does not change the high degree of business deal costs being paid to the dealers via the bid-ask spread, this free of cost trading makes Forex an even more lucrative business opportunity for the traders as well as the dealers.
Leverage
Forex market offers higher leverage and with its lower margin requirements it enables the Forex traders to trade with much bigger sum of currency as compared to their initial deposit. Leverage mostly also depends on the type of Forex broker an investor has chosen for trading.
Think about it this way, where would you find a trading market so partial to an investor, at least apparently. But to make the most of these factors, it is equally important for you to be aware of their shortcomings as well.
Surely all these factors like liquidity, leverage, convenience, and transaction costs can be used as money making tools, but so can they be used for losing all your funds. Yes, of course anything if misused or over used can result in harmful ways. Everything benefits to a limit, with a skill and method to use it with balance.
And this is what makes a difference between a beginner trader who might use these tools in all the wrong ways to destroy his wealth, and the refined investor who will have the experience and expertise to use them all to create wealth.
Forex Analysis - Stage 1
STAGE I – WHO
Although Forex as a market offers its successful traders with some of the big bonuses as rewards, it is also an equally tough market to crack, and doing well here takes more than just a knack for betting. Therefore, with the will of trading, the skill is also required, and who would help you get acquire this skill better than the previously successful traders. Their proven techniques and methods can be of great help to all the new traders who are yet to develop their own strategies for trading.
Every player in the Forex markets works his trading in his own way, with his own study, intuitions, and outlook. Any player on entering the market creates a force which is always relative to the outlook another trader. This force between the trader buyer and trader seller always plays a role in creating price changes, sometimes drastic and sometimes light, and also significant movements.
Every trader carries a different perspective, with a dissimilar mind-set, singular target, varied investment possibility, and market force. And even more, what mainly marks a distinction among these market traders are the various other elements of the Forex trading market, such as:
*Appropriate level of discipline
*Wise money management techniques
*Profound research abilities
*Achievable profit objectives
*Sharp quantitative abilities
All these elements combine together to give a trader a certain level of sophistication.
In the market, there always are extremely superior and superior banks, financing firms and companies and traders. Here, all the banks, financial firms and companies, and investment corporations have an external governance of sticking to the rules, regulations and restrictions. Whereas an individual trader can only be restricted by his pocket as he has the smallest amount of external control or restriction that might keep him from taking wrong decisions.
When we talk about restrictions, one is the external control while the other is the internal restrictions. Internal restrictions can be imposed on themselves by only those traders which believe in maintaining self-discipline. While the others who cannot control their gut feelings or intuitions and want to “trade till they win it all” even after losing the entire sum of money which they had initially planned to trade with, can never reach that level of sophistication required to stay in position in the market.
Sophisticated traders are those which can successfully impose this discipline on themselves and are aware of the right time to start trading and stop it to quit too. A sophisticated trader always makes use of the tools and strategies to follow those highly skilled and professional previous market participants to extract profits and constructive returns from the market.
Although Forex as a market offers its successful traders with some of the big bonuses as rewards, it is also an equally tough market to crack, and doing well here takes more than just a knack for betting. Therefore, with the will of trading, the skill is also required, and who would help you get acquire this skill better than the previously successful traders. Their proven techniques and methods can be of great help to all the new traders who are yet to develop their own strategies for trading.
Every player in the Forex markets works his trading in his own way, with his own study, intuitions, and outlook. Any player on entering the market creates a force which is always relative to the outlook another trader. This force between the trader buyer and trader seller always plays a role in creating price changes, sometimes drastic and sometimes light, and also significant movements.
Every trader carries a different perspective, with a dissimilar mind-set, singular target, varied investment possibility, and market force. And even more, what mainly marks a distinction among these market traders are the various other elements of the Forex trading market, such as:
*Appropriate level of discipline
*Wise money management techniques
*Profound research abilities
*Achievable profit objectives
*Sharp quantitative abilities
All these elements combine together to give a trader a certain level of sophistication.
In the market, there always are extremely superior and superior banks, financing firms and companies and traders. Here, all the banks, financial firms and companies, and investment corporations have an external governance of sticking to the rules, regulations and restrictions. Whereas an individual trader can only be restricted by his pocket as he has the smallest amount of external control or restriction that might keep him from taking wrong decisions.
When we talk about restrictions, one is the external control while the other is the internal restrictions. Internal restrictions can be imposed on themselves by only those traders which believe in maintaining self-discipline. While the others who cannot control their gut feelings or intuitions and want to “trade till they win it all” even after losing the entire sum of money which they had initially planned to trade with, can never reach that level of sophistication required to stay in position in the market.
Sophisticated traders are those which can successfully impose this discipline on themselves and are aware of the right time to start trading and stop it to quit too. A sophisticated trader always makes use of the tools and strategies to follow those highly skilled and professional previous market participants to extract profits and constructive returns from the market.
Analysis Stages In Forex
It will not be wrong if we say that Forex traders lead their lives, living on the edge. You never know what’s going to happen the next moment. In this currency world of speculations, instincts, calculations and uncertainties, the market experiences one moment of total harmony, and the next one of absolute commotion.
Amidst such high degrees of speculation and large amount of money at stake, can we precisely foretell the trend this market is going to follow each time? And furthermore, can we bet high capital on it?
For all this, we first need to be clear with the basics. The basics which tell us exactly what causes the market to move in the direction it does? What makes it follow the trend it does? Why are different traders trading with same currency using different strategies? Answers to all these questions can be a little tricky especially knowing that every trader senses different set of indications and warnings each time the market moves.
Every trader has his personal instinct behind his decision of buying or selling a currency, keeping in mind the atmosphere in the market. But there is still something that every sensible Forex trader does, Analysis! Before investing a sum of money in the market, any sensible trader would want to analyze the market, get full knowledge of the situation and be equipped to forecast what movement the market might take in the future. And to do this analysis, a trader must keep in mind the six important stages of analysis in Forex trading, which are:
Who tells us about the people involved with Forex who form the market and bring about action in it.
Why is about comprehending the outlook of the Forex market and the openings or prospects which it provides to its traders.
Where tell us to match our goals with the goals a genuine and professional dealer.
When tells us about the right time when our trades can bring us maximum efficiency.
What is all about choosing a trading medium or currency pair on the basis of your budget and investment principle.
How is about choose a trading toolkit which will help us advance our trading skills and techniques.
Every trader requires building up a fanatical sense of the Forex market and what’s happening in it and around them. Not every move of the currency market can be predicted though, but we can definitely try developing an understanding of the situation and the environment of the market.
What all the above mentioned six stages do is help us in creating more advantageous trading options. With the systematic and balanced use of these stages, we can easily create and execute a complete trading plan, the one that covers all the major trading aspects and angles.
It is important to understand who actually trades Forex? Also needed to be known are the participants, and the reasons for their success and failure. This will help us make use of the points which lead to successful results and avoid the ones which led to a loss.
To know why to trade Forex at the first place is the very reason why we should be interested in trading with it. Only if we know the advantages and disadvantages of this market will we be able to make up our minds for or against trading Forex.
It is also important to know from where we should trade. Always choose the right trading platform or broker who can professionally allow your trading style to mingle with its approach.
For deciding upon what to trade for, we should always choose a currency pair and money management method which will boost your returns.
Deciding on when you should trade is also an important aspect to be kept in mind before you start to trade. Always advisable is to trade when the situation you are in, is most liable to generate the best circumstances for you to execute your trading methods and techniques.
Choosing on how to trade should always be done keeping in mind the usage of those methods that make best use of your skills and also help you follow the previously well-known successful traders of the market.
Hints for Trading Forex
Why is it important to keep a track of the economic developments of a country whose currency you are planning to buy?
Every currency represents a country in the Forex market. And therefore, the economic status of each country or nation is valued into its exchange. But with so many currencies in the market to trade for, it can get a little challenging to keep a track of every countries economic growth and development.
This is the reason why Economic Indicators are used by the traders to assess the strength of an economy they are interested in. A trader should always remain vigilant and informed about when these indicators are due for release in the market. It is also equally important to be updated on all the news releases which are to be released and can make an impact on the market.
What makes some economic indicators more important than the others?
Every economic indicator has the power to influence the Forex market, it’s just the degree of influence that ranges from low to medium to high. Which ever indicator is carrying the news capturing most of market's attention gets more significance than the other ones.
News carrying high GDP data of a certain country or information about high employment rate in another is bound to make greater news than others, as these factors are directly effecting, rather boosting the economy of those countries.
Does difference between the consensus and actual results cause price movement?
It is not correct to just keep yourself updated as a trader with the latest of economic, political and geographical news. What is even more important is to know what effect has the current news caused in the market and why?
One of the ways to find this out is by also keeping a tab of the expectations of the fellow traders in the market, from the different economic indicators and the news they were supposed to carry according to the.
A study of whether or not a news flash is matching the market expectations is a highly significant aspect, as each market forecaster is expecting different news from each indicator, news in their favour.
Therefore, apart from knowing the current news update, what needs to be kept in mind is the consensus number which is met successfully. A huge variation between the consensus and actual results can be a valid source for price movement.
Should technical investors also focus on news releases?
Keeping in mind a case of any monetary market, whenever a market is being dominated by the fundamental factors such as economic data, Technical analysis are generally not in use. This is because of the reason that most of market traders become sensitive to these economic and political developments.
Also, with so many speculations arising in the market, more and more importance is given to such developments as well as the essential news releases like increase in a certain country’s export figures, which have the power to spike up volume as well as volatility in the market.
Every currency represents a country in the Forex market. And therefore, the economic status of each country or nation is valued into its exchange. But with so many currencies in the market to trade for, it can get a little challenging to keep a track of every countries economic growth and development.
This is the reason why Economic Indicators are used by the traders to assess the strength of an economy they are interested in. A trader should always remain vigilant and informed about when these indicators are due for release in the market. It is also equally important to be updated on all the news releases which are to be released and can make an impact on the market.
What makes some economic indicators more important than the others?
Every economic indicator has the power to influence the Forex market, it’s just the degree of influence that ranges from low to medium to high. Which ever indicator is carrying the news capturing most of market's attention gets more significance than the other ones.
News carrying high GDP data of a certain country or information about high employment rate in another is bound to make greater news than others, as these factors are directly effecting, rather boosting the economy of those countries.
Does difference between the consensus and actual results cause price movement?
It is not correct to just keep yourself updated as a trader with the latest of economic, political and geographical news. What is even more important is to know what effect has the current news caused in the market and why?
One of the ways to find this out is by also keeping a tab of the expectations of the fellow traders in the market, from the different economic indicators and the news they were supposed to carry according to the.
A study of whether or not a news flash is matching the market expectations is a highly significant aspect, as each market forecaster is expecting different news from each indicator, news in their favour.
Therefore, apart from knowing the current news update, what needs to be kept in mind is the consensus number which is met successfully. A huge variation between the consensus and actual results can be a valid source for price movement.
Should technical investors also focus on news releases?
Keeping in mind a case of any monetary market, whenever a market is being dominated by the fundamental factors such as economic data, Technical analysis are generally not in use. This is because of the reason that most of market traders become sensitive to these economic and political developments.
Also, with so many speculations arising in the market, more and more importance is given to such developments as well as the essential news releases like increase in a certain country’s export figures, which have the power to spike up volume as well as volatility in the market.
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