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  1. The key element in trade executions done by ECN is that it brings market participants together without a dealing desk or market maker functioning as an intermediary. This allows traders to get the most transparent pricing possible. It requires the existence of plenty of liquidity; as a result, traders can only have access to ECN trading if they have account balances that start from $50,000 and above. In addition, spreads are not fixed as dealers jostle to offer competitive pricing, and the direct nature of trading operations in an ECN system also means that orders are executed speedily and without re-quotes.
  2. In the early days of online trading, traders were forced to manually adjust their stop loss levels in order to protect any profits made in the market, while following the market to maximize profits. With the advent of the trailing stop tool, a trader can wait for the market to become profitable, then activate the trailing stop tool, setting it to a pre-determined trailing distance. This protects the profits in the trade by staying still when the market moves against the trader, and continuing to trail the market when it moves in the trader’s favour. If the market moves against the trader to get to the trailing stop, the trailing stop now functions as a stop loss to close the trade but this time, in profit.
  3. Support is probably one of the most used terms that a trader MUST encounter every trading day. In reality, support levels are not just one fixed price level, but rather a zone. The more times a support level is tested without being broken, the stronger the support. If a support is tested repeatedly several times, at some point the price will either reverse totally or break through the support level if the downward trigger is strong).
  4. Market speculation is a risky venture. Speculators do not hold positions for the long term. They aim to enter and exit positions as fast as possible. Speculators aim to make the maximum gain from the smallest of price movements. They do this by leveraging positions so as to maximize the profits they can make from price fluctuations. To explain this better, rather than wait for 20 trading days to gain $1000 from 100 pips in the market, a speculator will aim to make the same amount of money, using a lower number of pips but with a high leverage in a shorter time frame.
  5. Slippage occurs in al financial markets when there is increased volatility or when there are so many orders that a broker/dealer can handle at a time. This is a phenomenon associated with dealing desks. Slippage is associated with a change in spread. For instance, a trader may want to BUY the EURUSD at 1.3209/1.3212, with an expected spread of 3 pips. Slippage may cause him to be filled at 11.3252, in which case, the trader’s position opens at a spread of – 40 pips. As seen in this example, slippage is associated with increased transaction costs. Slippage is an undesirable phenomenon and the only way to avoid it is by using brokers who offer direct market access.
  6. Short selling is a practice that is carried out in all financial markets, but carries a significant amount of risk when it is done outside the forex market. Indeed, short selling outside forex is a controversial practice. In forex, short selling simply means selling one currency against another in order to profit from the anticipated fall in value. Outside forex, short selling involves borrowing an asset from a broker and offering it for sale, and if the price falls, the trader can buy that security back and return to the broker, profiting from the price differential. The controversy in this practice was typified in 2008 as the collapse of Lehman Brothers hit stock markets. Unscrupulous traders circulated rumours of further collapses, triggering massive sell-offs. Many of these traders, who already had short-sale positions on these assets, profited from the steep price falls, forcing the Securities and Exchange Commission to place a ban on naked short-selling As such, short-selling is only allowed when the market is on an uptick or is in a neutral mode.
  7. Sometimes, a forex trader may see that his position in the forex market has the potential to make more money if allowed to run. This may warrant leaving the position overnight, or even for several days or weeks at a stretch. This is a forex rollover, as the position is allowed to remain open and be “rolled over” to the next trading day. Normally, a rollover incurs a charge. The interest rates of the countries whose currencies are represented in that trade are used to calculate the charge. So if a trader has a “Buy” position in a currency such as the AUDJPY (where the interest rate differential is 4.25 – 0.1 = 4.15%), the trader’s position will be credited with the corresponding interest calculation. If he held a “Sell” position, he would instead be debited based on the interest rate differential of 4.15%.
  8. Re-quotes usually occur when prices have moved away from the levels displayed on the trader’s platform screen. Re-quotes can occur for a number of reasons. Sometimes, there may be a delay in data transmission as a result of poor internet network. At other times, fast-paced market action can be so rapid that even when data transmission is ok, the price of the asset would have moved at the time of execution. The only way to avoid re-quotes is by using a broker with direct market access, such as ECN brokers. These offer prices from several liquidity providers with greater market depth so you can be sure your orders are always executed.
  9. Range trading is based on the fact that prices form channels independent of whether prices are trending upwards or downwards or sideways. It assumes that 80% of the time, the candlesticks will bounce up from lower channel trendlines and retreat from upper channel trend lines. By selling at resistance and buying at support levels, a trader may be able to profit from these moves in the market. Pivot points also form a basis of horizontal range trading, as opposed to use of ascending channels for uptrend range trading and descending channels for downtrend range trading.
  10. The PIP is the smallest movement of a financial asset to the last decimal point of the price quote. For example, if the price of the EURUSD moves from 1.3290 to 1.3297, we say the currency pair has moved 0.0007 points or 7 pips (1.3297 – 1.3290 = 0.0007). The value of the pip depends on the lot size used to execute the trade. The value of a pip for a Standard Lot is $10, while the value for a mini-lot is $1.
  11. Pending orders are used when appropriate conditions for a favourable trade do not exist at present market levels, but are likely to do so at a future time. In these conditions, a trader can decide to set a pending order which will be automatically executed if the market gets to that level. For instance, a trader may be looking to sell a currency at a resistance level, but the price of the asset is still some distance away from his preferred point, and presently heading upwards. If he uses a market order, the trade may keep advancing against his position and leave his account in jeopardy of a large draw-down or being stopped out entirely. But by using a pending order such as a Sell Limit order set to the resistance level, his trade is executed at a point where the trade is more likely to succeed.
  12. The Non-Farm Payrolls (NFP) report is a part of the employment data released by the US Bureau of Labour Statistics on the first Friday of every month. It is a highly-watched economic indicator as it provides very strong information about the state of a nation’s economy. If more people are employed in the private sector, it shows that the economy of the nation is strong. Bad employment figures are a direct consequence of a weak economy. When the global financial crisis hit as a result of the collapse of the US sub-prime mortgage market in the US, the multiplier effect hit home and caused many businesses to lay off workers and reduce wages, resulting in poor NFP figures for many months at a stretch. The NFP represents about 80% of workers whose output brings about the total GDP of the US, and it helps policy makers evaluate the state of the nation’s economy and decide on economic policy.
  13. Traders can only trade when the markets are open for business. These times are referred to as market hours. Market hours differ from market to market. The stock market is only open for about 6 hours a day, 5 days a week. The forex market is a 24 hour market, with the market hours divided into 3 main zones; Tokyo, London and New York time zones.
  14. Hedging is used if the outcome of a trade is not assured, or if a transaction becomes too costly as a result of exchange rate differentials. In such an instance, a trader may decide to take a contrary position in another market or employ another kind of trade in reverse of the original one in order to cover up any losses incurred on the first trade. Hedge trades are done in such a way that if the original trade is a winner, the payout is higher than the second trade used as the hedge, and if the first trade is a loser, the hedge trade will cover the losses.
  15. Fundamental analysis is the primary driver of the forex markets. This is because the figures released for the economic indicators will affect the investment climate and appetite of traders for the affected country’s currency. Millions of individual and institutional traders watch these economic indicators and when the figures are released, they produce an immediate market bias for the affected nation’s currency. This bias can be positive, (sending the currency value upwards) or negative, crashing the value of the currency. Traders usually develop a bias because fundamental analysis answers the following questions: is the economy of the country in question expanding or contracting? What parts will the country’s policy makers be looking at, and what actions will they possibly take? What parts of the economy is doing well or in bad shape? These questions help traders determine if that country’s currency is worth holding, and they respond accordingly after conducting the fundamental analysis.
  16. Certain economic parameters are used by economics and politicians alike to determine the state of a nation’s economy. Some of these parameters include employment reports, retail sales, consumer and producer inflation figures, the Gross Domestic Product (GDP), interest rate decisions and manufacturing data. Economists look at the economic indicators and make prediction of what the figures will be every month. The extent of conformity or deviation of the actual figures from the consensus reached by economists in their predictions, affects the sentiment that traders have for the currency of the affected country, leading to either an increased demand for the currency or reduced demand. The extent of demand will ultimately affect the value of the currency vis-à-vis other currencies. A calendar of these indicators is released every month for the benefit of everyone concerned, including forex traders. Economic indicators are known colloquially as forex news.
  17. In the financial markets, traders can buy or sell securities in two ways: directly from the liquidity providers (banks) through the dealing desk of brokers When buying directly from the liquidity providers, traders get access to pricing and deals directly. When buying through the dealing desks, traders buy indirectly, as the brokers operating dealing desks buy from the liquidity providers and resell to the traders. In this instance, the dealing desk broker is not operating as a broker but as a dealer. Dealing desks have implications for traders as traders are offered pricing at slightly marked up rates. Dealing desks have also been implicated in some pricing abnormalities such as stop hunting, slippages and re-quotes.
  18. Day trading is often seen in the light of normal employment hours, where workers clock-in in the morning and clock-out at the end of the trading day. Day trading is the hallmark of speculators, who use leverage in order to maximize the relatively small market price fluctuations that occur during the trading day. The volatility of markets such as the forex markets allows traders to open and close positions in a matter of hours. Day trading is done by the majority of individual traders in the market, hence contributing to the great market liquidity that the forex market boasts of.
  19. Channels can be used in technical analysis to predict the range at which prices will peak before retreating, and the range at which prices will fall before bouncing up. Channels can form in an uptrend (ascending channels), in a downtrend (descending channels) or in a consolidation (horizontal channels). The pivot points of S1, S2, S3, central pivot, R1, R2, R3 all form horizontal channels which can be used to range trade at various price levels. A break of a channel on the upside is a buy signal, and a break of a channel to the downside is a sell signal. A channel tool exists as a technical indicator: the Donchian Channel.
  20. Candlesticks are simply a way of representing price data in a way that traders can easily interpret. Individual candlesticks only give an indication of what is happening in the market in the present time, but candlestick patterns (two or more candlesticks) can be used as determinants of future price action and are a great tool of technical analysis.
  21. Broker Support Live Chat Support. Since the forex marketplace is open nearly 24 hours a day, seven days a week, a broker’s customer service should be available during the hours that the trader might need help; i.e., when the trader is awake. The ease with which one can access live chat support or speak with a live person, rather than a time consuming and often frustrating auto attendant is an important consideration. A quick “test” chat or call can provide an idea of the type of customer service a broker provides, wait times, and the representative's ability to concisely answer questions regarding spreads, leverage, regulation, and company details, including how long they have been in business, and the size of their trade volume (larger brokers generally have access to better prices and execution). Most reputable brokers do offer round-the-clock support due to the nature of the forex markets. Languages. Many brokers’ websites specify the languages spoken by their customer support crew, or list separate telephone and/or email contacts by country. If the website does not provide this information, a call can be placed to clarify and determine if a trader will be able to comfortably and effectively communicate with the broker. In general, it makes sense to only do business with a company that can provide clear and helpful assistance in a language in which the trader is fluent. Funding Methods. Most forex brokers allow clients to make deposits using a credit card, such as a VISA or MasterCard, a bank wire transfer, or an electronic payment, such as PayPal. These methods are generally quick and allow traders to start using an account within a short period of time. Checks, either from an account in the individual’s or corporation’s account name, are often accepted as well; however, there will typically be a delay as the broker waits for the check to clear. Withdrawal of funds from a trading account can be made in several ways, depending on the broker. Ideally, the system in place should allow for hassle-free withdrawals, and the process should be clearly stated on the broker’s website or in its promotional material. Brokers may offer withdrawals via direct deposit to the bank account on record, by check, credit card, or wire transfer. If a withdrawal is made to a credit card, it will typically be processed only to a card that was used to fund the trading account, and cannot exceed the amount of the deposit. The broker’s website should state how long withdrawals take, and if any fees will be incurred. It pays to read the fine print: a broker’s website may state that they do not charge a fee for depositing or withdrawing funds, when in fact they may relay the costs of bank fees onto the client. For example, if the broker pays a bank fee of $20 for a wire transfer, the cost will be passed on to the client. Commissions & Fees Clients should be able to find detailed and up-to-date information regarding a broker’s commission and fee schedule. Brokers make money through commissions and spreads – the difference between the bid and ask price of the forex pair. Many brokers advertise that they charge no commissions, but instead make their money with wider spreads. The spread could be a fixed spread of, for example, three pips (the minimum unit of price change in forex), or it could be variable depending on market volatility. The wider the spread, the more difficult it can be to make a profit. Popular trading pairs, such as the EUR/USD and GBP/USD typically have tighter spreads than more thinly traded pairs. (There are three types of commissions used in this market. Any fees associated with deposits, withdrawals or other account actions, such as receiving a paper statement by mail or having an inactive account, should also be clearly stated. Advanced Features Introducing Brokers. An Introducing Broker (IB) is an individual or organization that solicits and/or accepts orders to buy or sell futures contracts, forex, or commodity options, but that does not accept money or other assets from customers to support the orders. The Introducing Broker has a direct relationship with its clients, but partners with a merchant that handles the trading floor and trade execution operations. In the U.S. most brokers will not partner with an Introducing Broker unless it is registered as an IB with the CFTC and NFA. IBs provide specialized customer support and usually earn commissions on each of their clients’ trades. To stimulate business, IBs are often provided with perks that can be passed on to clients, including access to value added services, such as advanced charting software, and volume-based trade rebates. Some IBs, particularly those with a very large client base, offer their clients a rebate on every trade. Since many forex traders make many round-trip trades each month, the rebate savings can be substantial. CFDs, Oil & Metals. Not all forex brokers allow clients to trade the CFD, oil and metals markets. A CFD is a “contract for difference” where differences in settlement are made though cash payments instead of the delivery of physical goods. If a trader wishes to participate in these markets in addition to forex, he or she should confirm that the broker offers access to all of the markets. At times, the trader may need only open a different account with the same broker to provide the ability to trade in all of the markets. Due to the close relationship between oil, metal and currency prices, and because many currency traders actively follow the price of oil and commodities, many forex brokers have chosen to add these markets to their product offerings. Hedging. Traders can use hedging as a means of reducing risk. A forex hedge exists when a currency trader enters a trade with the intention of protecting an existing or anticipated position against an unwanted move in exchange rates. A trader who has bought a currency pair (entered a long position) can use a hedge to protect against downside risk, and vice versa. Direct hedging occurs when opposing trades are entered simultaneously; for example, a trade to buy a currency pair entered at the same time as a trade to sell the same currency pair. The net profit is zero while both trades are open, but the idea is that one of the trades eventually will make money and the other position can be closed. Brokers will state if they allow direct hedging. (For related reading, see Forum discussions about Hedging.) Scalping. A scalp is a very short-term trade that can be applied to the forex markets. These trades can last from a few seconds to a few minutes, and are intended to take small pieces out of the market on a frequent basis. Scalpers often trade using very small chart intervals. A challenge with scalping is that, since a typical winning trade is small, depending on the size, one or two losses can wipe out dozens of small wins. But with the right trading system, scalping can be a profitable means of participating in the forex market, especially for traders who like fast-paced action. A scalper should only trade the most liquid markets during times of high volume, using a broker that provides fast and reliable quotes, as well as an easy-to-use trade entry platform. (For related reading, see Forum discussions about Scalping.) Dealing Desk. In the foreign currency markets, a dealing desk is the location of a financial institution’s forex dealers. A dealing desk may, in reality, be a large facility staffed by dozens of traders who specialize in specific currencies and who offer support and assistance to traders. The dealing desk executes trades on behalf of the firm’s clients. A drawback to dealing desks is the chance that a trader will receive a re-quote – the rejecting of a client’s original order that is followed by a new, worse price that the client can either accept or reject. In fast markets, re-quotes could happen multiple times, resulting in losses. A more direct method of accessing the forex markets may be the no dealing desk broker (NDD). This is a preferred method for many professionals and one that allows traders to access the interbank market directly without the need to go through a dealing desk. NDDs work with market liquidity providers, such as global banks, financial institutions, and other market makers, to get the most competitive bid and ask prices. A computer typically selects the optimum buy and sell prices from amongst the NDD’s liquidity providers, and the prices are shown to clients via the trading platforms. NDDs provide an automated process that is generally considered to be fast, transparent and fair. Whether a trader uses a dealing desk or no dealing desk is a matter of preference, but either way, the method by which a broker handles trades should be investigated and understood. Conclusion If a trader has confidence in a forex broker, he or she will be able to devote more time and attention to analysis and developing forex strategies. A bit of research before committing to a broker goes a long way, and can increase a trader's odds of being successful and profitable in the competitive forex arena.
  22. As of January 2012, foreign exchange market accounts for more than $4 trillion in average traded daily value, making it the largest financial market in the world. No central marketplace exists for the forex market; rather, traders must conduct their trading activities through forex brokers. An increasing number of forex brokers are available, and traders should take the time to research, evaluate and compare options to find the broker that best fits their needs. This guide will explore the various important considerations when choosing a broker in today’s competitive forex marketplace. (In this article we’ll look at five considerations when choosing a forex broker. Broker Basics Regulation. A reputable forex broker should have rules, programs or services to protect the integrity of the market. They should protect the public from fraud, manipulation and abusive practices related to the sale of futures and options and to encourage open, competitive and stable futures and options markets. In the U.S. brokers would be registered with the U.S. Commodity Futures Trading Commission (CFTC) as a Futures Commission Merchant and Retail Foreign Exchange Dealer, and will be a member of the National Futures Association (NFA.) A professionally looking website does not imply or guarantee that a broker is reputable; reputable brokers will state these affiliations on their websites, typically in the “About Us” section and on each web page. Each country outside of the U.S. has its own regulatory body which traders can research. Location. In the Internet age, there may not be any reason to visit a brick and mortar office, but the location of a forex broker remains a consideration primarily because of regulation and potential educational opportunities. A broker that is located in a country that provides little regulation may be a riskier place to open an account than one located where regulatory compliance and enforcement have a strong presence. A trader who deals with a broker that is regulated has some recourse in the event that there is a problem with the broker: the trader can contact the appropriate authorities to file a complaint and seek a resolution. In addition, the location of some brokers (such as those with regional or local offices) may allow traders to attend in-person training seminars or workshops that can assist with learning trading concepts. Year Founded. When a broker became established may help confirm the professionalism and durability of the broker. There have been instances where fly-by-night brokers have either acted in a fraudulent manner or simply had poor business practices, and ended up closing shop after a short stint. While all brokers have to start out as new companies, those who have been around for a few years or longer gain credibility since a fraudulent or badly managed firm is unlikely to remain in business. For U.S. Clients, they should accept U.S. Clients. In response to increased regulation brought on by the Dodd-Frank Act, many International Forex brokers have stopped offering services to U.S. clients. Foreign affiliates of U.S. based brokers can service U.S. retail customers only if they are registered with the CFTC and comply with the new CFTC leverage rules. Currently, the maximum leverage for U.S. retail clients is 50:1 for major currencies, and 20:1 for minors. Restricted leverage ratios are intended to protect both firms and clients from unnecessarily large losses resulting from over-leveraged positions. Due to concerns over possible legal issues, many brokers have opted to simply drop out of the U.S. retail market. Platforms & Account Details Trading Platform. The trading platform is the trader's portal to the markets. With this in mind, traders should ensure that the platform and any software is easy to use, visually pleasing, and has a variety of technical and/or fundamental analysis tools. Perhaps most importantly, trades should be able to be entered and exited with ease: a well-designed trading platform will have clear buy and sell buttons, and some may even have a "panic" button that immediately closes all open positions. Figure 1 shows an example of an order entry window that has clear, easy-to-use order entry buttons. A poorly designed interface, on the other hand, could lead to costly order entry mistakes, such as accidentally adding to a position rather than closing it, or going short when a long trade was intended. Other considerations include customization options, order entry types, automated trading options, strategy builders, backtesting and trading alerts. (Learn how to set each type of stop and limit when trading currencies. Typical EUR/USD Spread on Standard. Brokers typically make their money on the spread; that is, the difference between the bid and the ask price. A EUR/USD quote of 1.3943 - 1.3946 has a 3 pip spread. That means that as soon as a market participant buys at 1.3946, the position has already lost 3 pips of value since it could only be sold for 1.3943. Typically, the majors, which include the US Dollar/Japanese Yen (USD/JPY), the Euro/US Dollar (EUR/USD), the US Dollar/Swiss franc (USD/CHF), and the British Pound/US Dollar (GBP/USD), trade with greater liquidity and tighter spreads, but the various brokers can determine the spread for each currency pair. A typical spread for the EUR/USD currency pair traded on a standard account might range from 1-2 pips. Many brokers, however, reward their standard account clients with tighter spreads, and some offer premium accounts with even more favorable spreads. Typical EUR/USD on Micro. Since micro accounts are the smallest accounts, brokers may utilize a wider spread to try to make money. While the spread varies from broker to broker, forex traders could expect to see spreads of 2-3 pips, though some brokers do offer the same spreads on both standard and micro accounts. In addition, some brokers state in their fine print that during times of increased market volatility, such as during the release of important economic or political news, the spread on micro accounts for certain pairs can be raised. Number of Pairs Offered. While there are numerous currencies available for trading, only a few get the majority of attention, and therefore, trade with the greatest degree of liquidity. The majors (USD/JPY, EUR/USD, USD/CHF, and GBP/USD) tend to trade in more predictable movements and ranges; however, many more currency pairs are traded. A broker may offer a huge selection of forex pairs, but what is most important is that they offer the pair(s) in which the trader is interested. Demo Account. Most brokers offer free demo accounts so traders can test drive the trading platform prior to opening and funding an account. This is important for several reasons. First, it gives traders the opportunity to use the platform to determine if it is intuitive, robust and user-friendly, or complicated. Secondly, using a demo account allows traders to practice making trades before money is on the line. This is particularly important in regards to entering and exiting trades, as well as placing profit target and protective stop loss orders. Order entry mistakes – pilot error – can be extremely costly, and the best way to avoid these types of losses is to practice with a demo account, with no money on the line. Lastly, a demo account affords the trader the opportunity to learn the subtle tricks of a platform, which can increase efficiency in real trading. Knowing that a simple right-click of the mouse can close all open positions instead of having to go into a menu and sub-menu can save time and money. Maximum Leverage. Forex traders have access to a variety of leverage depending on the broker and the country where the broker is located. Leverage is represented as a ratio; for example, leverage could be 50:1 or 200:1. Leverage is a loan extended to margin account holders by their brokers. Using 50:1 leverage, for example, a trader with an account size of $1000 can hold a position that is valued at $50,000. Leverage works in a trader's favor with winning positions since the potential for profits is greatly enhanced. Leverage can, however, quickly destroy a trader's account since the potential for losses is magnified as well. Because leverage can cause catastrophic losses, it should always be used judiciously. Minimum Standard Account Deposit. Standard accounts are appropriate for experienced and/or professional traders, and trade with a standard lot, or contract, size of 100,000 units. A one-pip change in a currency pair is equal to $10 for EUR/USD. While many brokers require a minimum deposit of $10,000, others do offer lower deposits of $3,000 or even $1,000. With leverage, of course, the buying power is much greater than the minimum deposit, which is one reason forex trading is so attractive to traders and investors. Minimum Micro Account Deposit. A micro account allows forex participants to trade in much smaller increments than a standard account. A micro lot is equal to 1,000 units of the base currency, compared with a standard lot’s 100,000 units. A one-pip change in a currency pair traded in a micro account equates to a $0.10 change for EUR/USD. Mini-accounts are also available that have a size of 10,000 units of the base currency, and where a one-pip fluctuation is equivalent to $1 for EUR/USD. Designed for new traders, micro accounts are appropriate for traders who want to trade with less of an investment, or who are ready to put real money on the line – just not a lot of it. As traders gain confidence, more lots can be added to increase exposure. Many brokers allow traders to open micro accounts with as little as $5. It should be noted that some brokers offer micro accounts as “self-service” accounts, and no telephone or chat support is provided. All support is conducted through e-mail, FAQs and an online trading community. Mobile Trading. Mobile forex trading is increasingly important to traders on the go, and provides a convenient means of staying on top of the markets. Many of the larger and reputable brokers offer the ability to access charts and trade entry windows via applications designed for the iPhone/iPad or Android operating systems. Typically, these applications are included free of charge with a funded trading account. NEXT: [THREAD=11755]How To Choose a Forex Broker - Part 2[/THREAD]
  23. Why Use Price Action Analysis to Trade Forex? Below Nial Fuller Talks About Why Traders Should Use Price Action Analysis to Trade Forex. Trading Forex successfully is both art and skill. You need to learn to read the natural ebb and flow of the market if you want to truly understand the price dynamics that occur within it. Trading based off rigid rule-based systems, or black-box systems is a thing of the past that is quickly losing popularity amongst savvy Forex traders. You have probably already experienced the mess and frustration that comes with using numerous indicators on your charts or with trying to trade solely off software trading programs. The core problem with such approaches to trading is that they are not natural. If I may, I would like to make an analogy with food here; when you eat unhealthy food that is not natural, your body suffers, and everyone knows this. Similarly, in Forex trading, when you try to use unnatural trading strategies that are not based off the ‘pure’ price data of a market, you end up polluting your mind and as a result your trading results will be poor. You see, to trade successfully you need a clean and calm mind, just like you need a clean body if you want to live healthily. You get a clean body from eating natural foods, and you get a clean and calm trading mindset from trading natural price action based trading strategies. Price action trading allows you to ‘resonate’ with the market by being as in-sync with it as possible, just like eating natural foods will work to keep you healthy because they are what your body needs and they ‘resonate’ better with your body’s cells than do unnatural or highly-processed foods. Why price action trading is effective in the Forex market I have used about every trading strategy available, because when I first started out in the markets I was stuck in the cycle of analysis-paralysis that so many traders get stuck in, jumping from one strategy or system to the next and trying to analyze as many economic news reports as I could get my hands on. Eventually, I realized that the most efficient and effective way to trade is to simply learn to analyze a ‘naked’ price-only chart. My unique way of trading with price action strategies is the result of many hours of time spent analyzing price movement on price charts. Forex trading is a process of trying different methods and tweaking them and eventually ending up with your own unique trading method. Price action analysis is the art and skill of identifying specific price action patterns in the market you are trading. Forex is an excellent market to use price action analysis in because it is open 24 hours a day 5 and half days a week and this means there are more opportunities for you to take advantage of. All you need to know is how to identify and trade specific price action strategies and you can learn this most effectively from a professional price action trader and by studying the charts. Price action analysis works very well in the Forex market because it is such a dynamic and liquid market. The beauty of price action trading is that it is a naturally flexible method of trading that gives you a perspective on the market that allows you to make sense out of what is happening at any given time. I have been profitable by concentrating on just 2-3 good price action setups that have proved consistently effective for me. If you learn how to read what the chart is telling you and focus on just 1 to 3 setups that you like, eventually you will master these setups / patterns, allowing you to have a better chance of making make money from your trading. Where people go wrong is with using indicators and other overly complicated methods and then constantly jumping from one trading system or strategy to the next. You have to find a truly consistent edge in the market and just concentrate on that until you truly master it, remain in one frame of mind, focus and master those setups first, and then you can add more tools to your arsenal later on. Forex trading is difficult enough without having an overly complicated trading system that tells you to look at numerous indicators when you could just be looking at a simple Forex price chart. Perhaps the best reason to trade Forex using price action is that any indicator you use on your chart to analyze market movement is derived from price and is just showing you in a less vivid format the same thing price is showing you. Some people like indicators because they give you rigid buy and sell signals without you having to think for yourself. The truth is, rigid trading systems and strategies will never stand up over time because the market is not rigid, and you have to trade a strategy that allows you to resonate with the market, not fight it. Just because your charts come with a hundred different indicators doesn’t mean they are going to help your trading or make you money in the markets. Trading success depends mostly on your mindset and your ability to remain disciplined in a realm of constant temptation to over-trade and over-leverage. We are trading currency markets, and the ‘core’ of what we are doing is trying to profit off of price movements. So, why so many traders do not want to make their trading decisions off of pure price action is beyond me. I promise you that if you simplify your trading method and concentrate on using price action strategies you will wonder how you ever traded any other way
  24. The situation in the Eurozone remains the main driver for the market. The European peripheral countries and their debt problems keep influencing the stock market, causing risk aversion. Tuesday’s trading results turned out to be almost the same as on the previous sessions with the exception that the yen was the only currency to win against the dollar, and the reason for that were probably fears that China would raise its interest rated. As a result, the yen became attractive as a reserve currency, so the greenback managed to win only against the pound and the euro. The US economic data, released on Tuesday, turned out to be rather positive for the dollar too. As for today, the investors are looking forward to the news on employment – Fed’s labor report is being released this Friday. Of importance to the market will also be ADP . ? ?????? ???????? ????? ????? ADP private sector employment data. Growth by 69 thousand is anticipated in November, after the previous +43 thousand in October, which can be considered as a positive factor for the American dollar. News from ISM is also about to come out and manufacturing PMI for November is also there – a decrease from 56.9 to 56.3 is anticipated here. Fed’s Beige Book, which is likely to bring the information on the situation in the regions, is being released right at the end of the weekly trading session. It’s worth noting, that the dollar’s trading slowed down a bit on Tuesday’s session and the investors didn’t eager so much to buy the dollar any more, and this fact suggests to expect a possible large-scale correction. EUR After the situation with Ireland and its problems cleared up a little bit, the market switched its attention to the problems of some other European countries, like Portugal, Spain and Italy, which brought more negative moods to the euro. One leads to another and, like it usually happens, S&P rating agency threatened to put France on the list of countries “at risk”, to crown it all. Messages from the Portuguese central bank, which warned of a possible financial instability fueled the market even more. Today’s economic statistics will bring Germany’s and the Eurozone’s final manufacturing PMI which are likely to remain the same in November 58.9 (for Germany) and 55.5 (for the Euro zone). Germany’s retail sales increased month over month by 2.3% m/m in October after the previous -1.8% m/m and this can be considered positive for the European currency. Nevertheless, the market moods towards the euro are not likely to change significantly in the nearest future. Standard & Poor's is currently considering a possibility to downgrade Portuguese investment credit ratings, and these news will most likely keep negative to the euro. GBP Talks that financial situation in the Euro zone was getting worse put the pound under pressure, so the currency closed the session with a decline against the dollar, but the losses weren’t that big – probably as a result of the news, coming from Ireland – the country has close economic ties with Britain and the fact that the situation with Ireland financial issues had cleared up, supported the sterling. There weren’t any significant statistics from the Islands yesterday, but today the market will surely get some piece of news. Manufacturing PMI for November, coming out today, is likely to decrease from 54.9 to 54.8. Besides that, according to the data, received from Nationwide, Britain’s housing market results leave much to be desired – November index registered -0.3% m/m, 0.4% y/y after the later -0.7% m/m, 1.4% y/y. Still, taking into account technical factors, that suggest a correction in the GBP/USD pair, there is a chance of profit fixation in this instrument. JPY The Japanese currency grew against the dollar on Tuesday’s session as a result of decreased risk appetites because of the US poor employment data which turned out to be 5.1% in October after the previous 5.0% in September. Besides that, the US government bonds are not that high-yielding any more, which made the investors go back to the yen as a funding currency for the carry trade. Fears that China would make some changes to its monetary policy keep influencing the Japanese currency too – recent rumors that Beijing will have to raise its interest rates by 200 basis points through a bomb into the market. Today’s statistics brought data on vehicle sales, which turned out to be rather disturbing – the index dropped to -31.0% y/y in November after the later -26.7% y/y. As for the yen’s positions, taking into account high-yielding currencies highly possible corrections, the yen has all chances to become more attractive as a funding currency and, as a result, decline even further. For More Details visits(Promotional URL removed)
  25. 5 common discipline mistakes traders make: Trading with money they can’t afford to lose Most active traders know that they should not be using money they might possibly need for other life purposes to fund their trading account. However, I know many of them commit this cardinal trading sin because they think they can get rich quick or they don’t really think they will lose any money. You really need to have the discipline to consciously remind yourself that if you are using money to trade that you really shouldn’t lose than you are essentially gambling and are setting yourself up for a whole host of emotionally fueled trading mistakes. Not having a defined trading plan or method If I were to ask you “what is your trading plan”, what would you say? If you cannot decisively answer this question than you have a serious lack of discipline which is going to drain your trading account very quickly. Developing a defined trading plan is not only a benefit to your emotional sanity but it also gets you in the habit of doing things objectively and helps develop your self-discipline. Success in trading is all about self-control and managing your emotions. You need to write out your trading plan when you are away from the markets and then follow this plan as you interact with markets in order to keep your brain in check. Having a trading plan and not following it Having a valid and defined trading plan is essential to trading success but if you are not following the plan you spent so long developing than you might as well throw it out the window. It is extremely easy to think you see something happening in the market that warrants you doing something not consistent with your trading plan. These are the exact behaviors that end up killing traders’ accounts. After the fact you realize that had you just stuck to your objective trading plan you would have been much better off. The emotional anguish and frustration that results from this is often quite intense. Often this cycle is the catalyst for a snow-ball effect of emotional mistakes that can literally lead to you blowing out your trading account very quickly. It requires more discipline to stick to your trading plan than to actually develop one. Read that last sentence again. Letting winners turn into losers Allowing a previously positive trade to turn negative is probably one of the most common mistakes that are a direct result of a lack of discipline in the market. Predicting near-term market direction is not the most difficult skill to become good at. What is difficult though, is taking profits off the table and proper stop-loss placement. Many times traders have un-realistic profit targets that are too far away from their entries. When these targets get missed and the market starts turning back towards the entry point many traders at this point are not thinking logically if they don’t stick to their plan. Often traders will not have moved their stop loss to break even after being up a substantial amount of money. Then when the market gets back to their entry and turns negative they start to hope. Once the hoping starts you might as well start burning your trading account money, because you are about to lose it. Many traders even move their stop losses further away from their entries because they think the market will turn back around in their favor. Sometimes it indeed will, but the point is, if you develop the habit of hoping and moving your stops away from your entry point eventually you are going to get burned really bad and it’s going to essentially nullify all of your previous trading success. Overtrading Over trading is a direct result of a discipline deficiency. Generally, over trading is a symptom of numerous other trading mistakes that were a result of a lack of discipline. Not having a trading plan or not following the one you do have leads to overtrading, as does letting winners turn into losers. People usually over-trade as they try to make back money they unexpectedly lost on a previous trade. Even if you are following your trading plan to a T you are going to endure losing trades or even strings of losing trades. In the face of such adversity you must realize that you cannot make irrational trades that deviate from your plan just to try and make back what you just lost. It won’t work, it never works. Your trading plan needs to be played out over a large series of trades for you to see its profitability. If you deviate from this plan by over trading than you are nullifying your edge in the market and might as well go hit the slots in Vegas. Nial Fuller is an expert on price action forex trading strategies, you can visit his website at Learn To Trade The Market
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