Trading education » Leverage

FX Trading Strategy – To Win it Must Contain These 3 Vital Elements

admin — Tue, 13 Apr 2010 15:27:56 +0000

If you want to win with your FX trading strategy make sure it contains these key elements otherwise you will be doomed and join the 95% of losing traders.

1. It must be Your Strategy!

Don’t fall for the hype that some junk robot will give you success or a guru or mentor there are plenty sold online with huge profits in simulation but they don’t work – no one gives you something for nothing and forex trading is no different.

Even if you have got the forex education from someone else, you must understand it and have confidence in it so you can follow it with discipline – discipline is the key, you must be able to ride out losing periods and wait until you hit a home run.

If you don’t have confidence you will never be able to do this make sure you have it.

2. You Must Understand Your Edge

Your trading edge is the reason you will win when 95% of other traders lose and you must have confidence and understand what it is and it must be based on sound logic.

Many people think they have an FX strategy based on sound logic and do the following and lose.

- They try and predict market prices

- They follow bogus scientific theories

- They trade news stories

- They day trade and try and scalp

- They follow experts

All the above will see you lose if you don’t know why, continue your forex trading education until you do.

Your trading edge is something that is personal to you and can be based on a simple forex trading strategy you can execute with discipline – that’s enough, remember simple systems executed with rigorous discipline work!

3. Play Defence First

When you are trading on leverage you need to trade great defence first and always protect what you have this means rigorous money management rules and money management is much more than placing a stop!

If you don’t keep your losses small you will get wiped out – sounds obvious?

Well most traders don’t heed it and use leverage of 200 or 300:1 on a few hundred bucks, 10 or 20 is enough.

Forex trading can make you a lot of money but if you expect not to have to work your in for a rude awakening.

Do your homework, get confident and make sure you have the discipline to stick with your FX trading strategy and follow it through drawdown periods, to long term success and the rewards if you can do this are huge.

By: Kelly Price

International Currency Trading – An Opportunity For Wealth For Wealth For All

admin — Tue, 16 Mar 2010 17:29:48 +0000

Could you make money at international currency trading? The answer is yes – but you need to understand a few key points as, it’s a well known fact that 95% of traders fail. So let’s look at the advantages and how to avoid the pitfalls and enjoy currency trading success…

Anyone can trade – but most fail and first you need to learn currency trading the right way and get yourself a solid forex trading education.

First avoid the myths and there are plenty of them, so here are some common ones to avoid.

- Day trading and forex scalping makes money

- Following a forex trading robot with simulated track record will see you win

- You can trade news stories

- You can predict forex prices

- You can earn a regular monthly income with little or no drawdown

All of the above assumptions are wrong so avoid the myths. Forex trading is NOT easy and as the potential for profit is so high, you wouldn’t expect it to be easy. The good news is anyone can build a forex trading strategy for success.

Here are some points to put you in the right direction with your forex trading system

- Keep it simple as simple systems work best and have fewer elements to break.

- Learn the system don’t try and follow anyone else. You need to know what your doing to have confidence

- Base your strategy on forex charts and use the reality of changes in price to execute your trading signals

- Do NOT trade news events, these are discounted immediately and your playing catch up

- De leverage sure you can get 200:1 but 10:1 is plenty for most traders – Over leverage destroys equity quickly as your stop has to be to close

- Base your trading strategy on breakouts to start. We have written on this frequently and it’s a high odds way of trading

- Be patient! Only trade sparingly, the big high odds trades don’t come around often so wait for them.

The big key to winning at international currency trading is having the discipline to execute your plan and this is built on confidence in what you are doing. You can’t follow anyone else – you’re on your own.

With the rise of electronic online trading we have seen a huge rush of naïve and greedy traders enter the market, who think trading is easy and the facts point to the opposite.

For the forex trader, prepared to get the right forex education and work smart with a disciplined mindset the potential is huge.

The world of international currency trading offers you the potential for currency trading success either via a good second income or a life changing income. Sure it’s a challenge – but if you are prepared to work smart, get the right education and adopt the right mindset, you can win.

Are you up for the challenge?

By: Sonia Kristina

Important Forex Trading Terminology

admin — Sat, 13 Mar 2010 02:54:49 +0000

For somebody who is new in the forex business, it is a must that he or she should be knowledgeable in the differing terminologies that are used in this kind of trading business. Forex trading terminology is a must learn for those who plans to involve themselves in this undertaking. Otherwise, they would subject themselves to greater risk of losing their investments if they do not fully well know the meaning of basic forex terms. Hereunder are the different basic terminology and their meanings that you will be well advised to take note of if you have plans to invest in forex trading.

Base Currency: The value of a particular currency in relation to another currency as denoted by a currency quotation represented in this expression as USD/CAD whereby the first currency is always the base currency. This example shows USD as the first currency, which makes it as the base currency.

Quote Currency: This will be the second currency in a currency quotation expression. The above currency quotation indicates CAD as the second currency in the expression thus, it is the quote currency.

Long Buy: In forex trading, you are considered in a long position if you buy base currency and sell quote currency.

Short Buy: The opposite of long buy. Your position is considered short if you sell base currency and buy quote currency.

Ask: This is a forex trading terminology whereby the dealer has come to a decision to call on a currency quotation whereby he will be selling on an ask price a base currency in exchange of quote currency.

Bid: When the dealer has decided to call a currency quotation whereby he will be buying on a bid price a base currency in exchange of a given quote currency.

Pips: Pip is a shortcut for price interest points which would be indicative of profits for forex traders. One pip is equivalent to one hundredth of one percent of a currency contract price.

Leverage: This is one attraction given to forex investors by forex brokers. You deposit 100 dollars with your forex broker and he will lend you 1,000 dollars from his own account for you to trade in the forex market. This will give you a good leverage in your trading but the moment your broker is not satisfied with your trading, he can cut you off depending on their policy on leverage.

Slippage: This situation would usually result to the disadvantage of traders due to lost opportunity in gaining pips because of the broker’s inability in correctly handling and fulfilling the order at the requested price. This situation does not happen often, however.

Spike: These are sudden fluctuations in currency rates brought about by global breaking news that can impact heavily on a currency traded pairs. These fluctuations can either swing wildly for or against a pair of traded currency depending on the nature of the global breaking news.

Retracement: The peaking out of a sudden and wild swing of a rise or fall of a particular currency in a currency pair caused by an international breaking news that would impact on subject currency. Once this sudden rise or fall of a currency reaches its peak or bottom and starts to normalize, we call this process as retracement.

Stop Loss: A forex trading terminology that denotes a mechanism used by traders to limit losses. A particular amount estimated by the trader will be set up by him as his stop loss mechanism whereby once this amount of trading losses will be reached; trading for this trader will automatically be cut off.

By: Peter Flemming

An Easy Way To Learn eCurrency Trading

admin — Wed, 24 Feb 2010 19:39:46 +0000

Currency trading is the buying and selling of the different world currencies in the currency market, it is also known as the foreign exchange (Forex), the Forex market is known as the biggest market in the world and it allows the participation of individuals from around the world of every race and color. It has a good leverage since an individual can control an investment of $200 with just $2 in his/her account. The e-currency trading is the buying and selling of currencies on the online market, in this case traders sell and buy the currencies of their choice via the internet.
It should be noted that the Forex market is a virtual market with all its transactions carried out online, so to get started you will need a computer and an internet connection. And the first lesson to learn is to avoid the fake propaganda on line that the e-currency trading is easy, it is not as easy as they claim, because it takes a high level of skill and diligence to make it. Just think of it, if forex trading was so easy, then every trader would have become millionaires, even a moron would have made huge profits in the market.

If you have ever practiced the trade on the e currency trading market, you will realize that one has to be tactical, logical and analytical to succeed in this trade – that certainly is not easy. It means that you will need the proper education to make it, without this training, every effort will be ended in futility. The good thing about this discussion is that it is an easy learning process that is very easy to understand, it does not require much from you.

Learn to avoid the day system of the e currency trading; this will go a long way to determine your profit margin, most people online promoting the day system trading say it is very easy to win with it, the fact is that it is not true, don’t fall for that. If you search through past records you will discover that traders hardly make it using the day system of trading, so, the most important lesson to learn is to choose the best system that is simple and suitable for you and you will always smile to the bank.

Also avoid all myths about e currency trading, made sure a strategy is tested and proved before applying it. All your decisions should be informed decision to determine your success in the online Forex market, be wise, be bold and don’t be afraid to dare new grounds. Educate yourself to win by getting informative materials from http://www.forex-books.com. A good education is the best way to make it easy.

By: Arturo Ronzon

Best Forex Trading Education – Learning The Right Stuff

admin — Fri, 22 Jan 2010 08:33:59 +0000

It is the aim of all retail Forex traders to make money from the market. We read books, take courses and search the web for all kinds of Forex-related information to
best educate us on how to trade profitably.

Unfortunately, most of the time retail traders are looking to learn about the wrong kinds of things. We spend our time looking for the “best and latest” techniques and systems with the hope of making money once we adopt them.

The truth, however, is that there are other more important aspects of Forex trading that we should all be paying attention to… and these are the aspects that separate a consistently winning trader from a consistently losing one.

Forex Education Topic #1 – Understanding Leverage

One of the biggest attractions of Forex trading is leverage. We are all aware that in the Forex market, we can trade with a large amount of currency using only a fraction of our own money. What most retail traders don’t realize, however, is that leverage actually plays a major role in how they should manage their money (and risk).

Simply put: the more leverage one trades with, the smaller the stop-loss allowance would be available to them. If you don’t know why this is so, I highly recommend that you study the impact of trading with leverage more carefully and how it affects your money management system… too many beginner traders have wiped out their accounts because they didn’t truly understand the risks involved here.

Forex Education Topic #2 – Understanding Yourself

Among all the aspects of profitable Forex trading, this is arguably the most difficult to master. You can have the “best” trading system in the world; but if you find it hard to trade according to its rules, then it’s still useless.

Understanding your own risk appetite is a crucial component of deciding which trading system you should adopt. If you’re an aggressive trader, find a trading system that reflects your style. And vice versa if you’re a conservative trader.

An old trader once told me, “The market is the perfect place to discover your true flaws”. And now, I finally realize what he meant. My flaws of greed, fear and discipline have all been exposed to the market… and it’s through the conquering of these flaws that you can emerge as a profitable trader.

Don’t trade if you’re not prepared to have your vulnerabilities exposed by the market.

By: Harold Hsu

Forex Trading Education

admin — Thu, 07 Jan 2010 15:45:21 +0000

For years now people have turned their attention to Forex. Almost everyone these days know the turnover that takes place on Forex market. With 3.2 trillion daily turnover Forex is the best. Even well known stock markets world wide even if combined together cannot overtake the turnover. But Forex has certain limitations too. You need to learn thoroughly before investing on forex. On field training is not possible because a wrong decision could ruin your investment completely. It is in this regard Forex Trading education gains Importance.

Forex has lot of advantages. Because of its high leverage margin we could trade 100 times or even more the amount we have invested. That makes it possible to increase the rate of returns which great considering other options. Forex market allows us to intervene and take corrective actions 24 hours a day because, it never closes. As we know lot of factors like social, economic and political affect the market. Because it is open 24 hours a day we could take corrective actions to make our investments safe and earn more for us.

Another main advantage of this trading is that we could control and track the performance of our investments 24 hours a day at the comfort of our home. It is one business we love to do. There are many more advantages to forex trading than what I have listed.

Forex trading also has certain disadvantages. It is the market full of crocodiles and little careless could mean we lose all our investments immediately. A lot of factors affect the market and we must be update to the happenings around us if not, we will see our investments lost.

It is in this respect, we now know the importance of Forex trading education. We all know it has tremendous potential to make money. Its rate of returns is unmatched and bigger than many other successful businesses. But a careless attitude from our part means we would lose all our investment. So, we must learn the basics of the trade first to avoid unpleasant surprises. It is easy with basic education now provided by brokers and other for free. It is also easy to learn now the fluctuations in the currencies and their reasons. Learning the basics would leave us in better position to handle the challenges that may come our way later.

One good piece of advice shall do not enter this market if you are not interested in taking risks. It is business where you can make money and you may even make loss. If you are a person who loves challenges and love to make money taking risks please go further. Learn more.

By: Noor Mohamed

Here’s Why You Should Trade the S&P 500 E-Mini Future

admin — Wed, 09 Dec 2009 09:57:07 +0000

Whether you’re new to the markets or a seasoned trader, you should be trading S&P 500 E-Mini Future.

Large Institutions and Hedge Funds trade S&P 500 Futures contracts. This way they leverage their money, not having to
invest in any one company but actually able to trade all 500 at once. The S&P 500 E-mini Future is a smaller version of the
exact same futures contracts traded by these large institutions. It is designed primarily for individual traders to trade.

But it follows along exactly with the larger S&P 500 the institutions trade. That way, when the large S&P 500 contract goes
up, the E-Mini S&P 500 goes up along with it.

The E-mini S&P 500 Future offers great potential for traders. The margins for trading the E-mini S&P 500 Future contract can
be as low as $400-$500 per contract, depending on the brokerage firm you use. But low margins are not the only reason
traders are turning away from trading the Stock Market. So if you are tired of being in stocks “for the long haul”, if you
are tired of seeing your mutual fund portfolio value cut in half by the sub-prime credit crunch, find out why you should be
trading S&P 500 E-mini Futures.

One of the best things about trading the S&P 500 E-mini Future is leverage. The S&P 500 E-mini Future is based upon the S&P
500 index, or the value of the top 500 stocks traded publically. Wouldn’t it be great to be able to trade 500 stocks all at
once, not having to research any one in particular? Unfortunately you cannot trade an index. So the Chicago Mercantile
Exchange created a futures contract based upon this index. Instead of having to buy shares in 500 companies that would cost
a fortune, you can pay $500 per contract. This way it is as if you are trading all 500 stocks at once. Now that is
leverage. Leverage is probably the main attraction of professional traders to the futures market.

Another reason professional traders are attracted to trading the S&P 500 E-Mini Future is the ability to daytrade. For $500
per contract, you can daytrade. What could you buy for $500 if you were trading stocks? And many futures brokers will
allow you to open an account with $2500. Daytrading stocks makes you a “pattern day trader.” The regulations required that
you have a margin account of at least $25,000 in order to daytrade stocks.

Not convinced yet? Look, here’s another good reason to daytrade the S&P 500 E-mini Future…no research.
You don’t need to do hours and hours and hours of research just to find the stock to trade. No more investing hundreds of
dollars monthly in a Real Time stock screener. And most important, no need to have 5 or 6 charts open at the same time.

You can use just one chart. This means you can concentrate on your technical set-ups on just one instrument. You won’t
need to open one chart, then minimize it, and then open another chart, etc. Trading just one instrument can often mean that
you minimize risk because your attention is narrowed to just what you are trading.

As we know, each instrument trades differently, requiring its own profit targets and stop losses. Trading the S&P 500 E-
mini future, you’ll be able to identify profit targets and stop losses easier because you only need to set them for 1
instrument.

Much of trading is watching highs and lows, hard to do if you are watching a portfolio of 5 or 10 stocks. But if you only
need to remember one closing price, one high or one low, might that not be easier to trade?

Whether you are a fundamental analyst or a technical analyst, the S&P 500 E-mini Future will work for you. With the
institutional traders trading the larger S&P 500, you get the benefit of their research without the cost because you are
trading the same basic instrument they are trading. Are you concerned with overbought or oversold conditions, news
announcements, Federal Reserve interest rate cuts? The S&P 500 E-mini is a perfect tool for taking advantage of those
specific movements. Why? Because the S&P 500 E-mini trades 24 hours a day.

Or are you a master chart technician? If so, the S&P 500 E-mini Future is for you. It works well with moving averages,
macd’s, stochastics, pivots, and many other technical tools. If you prefer to look at the markets through a fundamental or
sentiment-based approach, then rest assured that the same techniques for determining oversold markets or markets where
emotions have run to extremes, will apply to e-mini index futures trading.

Like any other trading, whether it is stocks or bonds or options, or currencies, trading the S&P 500 E-mini Future offers
great potential for gain and loss. Before you start trading the Futures market, it is advisable that you learn to trade
it. Take an online course, do a seminar, read a book. You might take a look at Shadowtraders.com. They offer both an
online study course as well as a seminar.

By: Barbara Cohen

Penny Stock Trading – The Great Advantages of Trading Penny Stocks

admin — Tue, 01 Dec 2009 23:50:50 +0000

I know that penny stock trading isn’t a real big focus on Wall Street. But to that I say, who cares? Sometimes the best things in life aren’t necessarily what is popular. That being said here are some advantages to trading penny stocks:

Leverage: There is nothing else in the stock market that can compare to the leverage you get from trading penny stocks. The closest possible competitor are stock options. But with penny stocks you can invest so little, yet get such a potential great return in advance.

More shares: Let’s face it, many traders don’t have hundreds of thousands of dollars to invest in stocks. The problem with many “safe” large cap stocks is that most people are lucky if they can afford to buy 100 shares of the company. With penny stocks, you get more bang for your buck.

The ability to build a portfolio: If you want a diversified portfolio you can invest modest amounts across varying sectors of the penny stock market. Unless you’ve got a lot of money, that’s going to be tough to accomplish with the blue-chip stocks.

This is how the rich became rich: The rich didn’t necessarily get rich by investing in penny stocks per say, but the concept is the same. Most rich investors got that way because they took chances on up and coming companies. They didn’t buy into fortune 500 stocks after they made the list. They bought them way before that. Penny stock trading really exemplifies the concept of buying low and selling high.

By: Chris Braff

Day Trading And Market Internals

admin — Sun, 29 Nov 2009 09:38:54 +0000

As an online stock trader, part of your responsibilities is understanding when to trade more actively and when to use more leverage. To have a long and rewarding carer as an equity trader you need to understand how to run your business on a daily basis. When my family owned a pizza parlor in NY it would have been great to be making pie after pie all day however that wasn’t reality. You only made a pizza when there was a request, you made many of them when the store was busy.

When you are sitting at your screen you need to understand when it is busy. To define this even deeper, you want to know when institutions are involved. Since we are seeking to jump on their backs we want to know when they are involved. The tool we use to determine this larger involvement is the NYSE TICK. There is also one for NASDAQ, but we feel the info from the NYSE TICK is sufficient.

The TICK represents the number of upticking stocks versus downticking stocks at any one particular moment in time. Reading the absolute number all day is not necessary but there are specific readings to pay attention to in order to make an informed decision regarding your activity level, trade expectation and leverage.

If the TICK has readings of +500 or -500 but no more than that, there is very little institutional order flow or activity. When I see this, I slow down my activity level, lighten up on my leverage and DECREASE my expectation for each trade (meaning I expect to make less per trade).

When I get consistent pushes of +1,000 or higher or -1,000 or lower I know the big boys are around and I will increase my leverage, activity level and my leverage. I am expecting FOLLOW THROUGH now.

This simple but effective tool will be a great gauge for your trading. Monitor it for a few days, I am sure you will be very happy to add this to your arsenal.

By: Pete Renzulli