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MadMarketScientist

Who Makes More Money?

Who Is More Profitable?  

46 members have voted

  1. 1. Who Is More Profitable?

    • Short term trading (shorter time frames, scalping)
      73
    • Long term trading (longer time frames, swinging)
      93
    • Investing (Warren Buffett style)
      36


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Not necessarily ,the more you trade the more are the chances that'll u'll make losing trades ..my personal psychology is to trade less but trade only when u are sure abt it....scalping is just a miss or hit game

 

It seems a clearer definition of scalping would be in order - why should it be called a hit or miss game and why isn't swing trading the same kind of game then? Imho, any kind of trading on any timeframe without a sound strategy, disciplined execution and evaluation is a hit or miss game. Price action is the same on all TFs. The choice of a trader's preferred time frame is a matter of personality and psychology - ability to tolerate risk over time, time needed to fully recover between periods of risk, intuitive ability, swiftness of decision making, etc.

 

As for the definition, I suppose we would agree that scalping, technically, is a breakout or pullback reversal strategy going for a high probability one directional move without major pullbacks (a single leg) - as opposed to swing trading where the holding time is longer and the trade endures through pullbacks in exchange for the probability of one to three extra legs within a swing. If we define it as such, then, technically, scalping is possible on any TF - from 70 ticks to daily to weekly charts - the setups for scalping look the same on all TFs, it only takes a different period of time to play out and reach the target or stop on different charts.

 

So, scalping, if we do not become attached to the superficial and erroeous notion that it is some reckless button pushing akin to playing the slot machine, is not limited to a particular timeframe - it is a type of strategy (or set of strategies), executed by the trader, vis a vis price behaviour. When people realize this, they are inevitably drawn to lower timeframes, because they understand that lower time frames give them the same kind of risk-reward play within minutes to hours compared to several days on higher TFs, so the potential for profit is considerably higher.

 

Hence, it is not correct to berate intraday "scalping" as such or look upon it as gambling, just because some people manage to apply the same breakout/pullback reversal strategy on lower timeframes better than others (i.e. push bottons more frequently, though still deliberately and for exactly the same reasons). Imho, in the presence of a sound strategy, your time rhythm is the key to success - how long you can bear the pain of uncertainty/loss before losing your head, and how long it takes to fully recover from a loss or climb down from the highs of a win. And I'd say trade the lowest TF that you your personality permits (the necessary condition being total focus and composure before every trade). And if you can trade a one-directional move strategy consistently profitably on 15 or 5 min TF, you can proudly call yourself an intraday "scalper". But the pride should come not from being a "scalper" (no-pullbacks trader), but from being able to play the same game faster than the "scalpers" on the 1H or daily charts do. Comparing it to sports, you will have advanced to a higher league of ability (hit a faster moving ball with the same amount of control and precision).

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Hence, it is not correct to berate intraday "scalping" as such or look upon it as gambling, just because some people manage to apply the same breakout/pullback reversal strategy on lower timeframes better than others (i.e. push bottons more frequently, though still deliberately and for exactly the same reasons).

 

Im am not berating Scalping. I know scalping exists and there are many day trading who do it successfully time after time .But saying that scalpers are more smart is not agreeable (as the other poster said) . There is not a single scalper who is there on the Forbes list .They were all long term traders/investors/fund owners and they used to invest only after getting reliable information about their desired assets.

My personal choice would be to do 10 trades a month and win 8 of them rather than having 120 trades a month and winning 70 of them........

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There is not a single scalper who is there on the Forbes list .They were all long term traders/investors/fund owners and they used to invest only after getting reliable information about their desired assets.

 

On Forbes, we see billionaire investors who do not do technical trading (either swing or scalping) themselves – they don’t need to. But I bet the traders at their hedge funds do a lot of both, and the question remains open which strategy generates more cash for them ;). I doubt the investors we see on Forbes could be called “swing traders”. Does Warren Buffet really do trading himself? From the article quoted:

 

"Berkshire Hathaway, in which Buffett owns 27 percent, according to a recent proxy filing, has more than $26 billion invested in eight financial companies that have received bailout money. The TARP at one point had nearly $100 billion invested in these companies and, according to new data released by Thomson Reuters, FDIC backs more than $130 billion of their debt. To put that in perspective, 75 percent of the debt these companies have issued since late November has come with a federal guarantee. [...] Without FDIC’s debt guarantee program, even impregnable Goldman would have collapsed."

 

I suppose that goes well beyond the scope of swing trading. That's big money feeding on monopoly money at the source of issue. No individual trader piggy-backing on the big money's moves, whether for a swing or scalp, will ever catch up with those guys on the Forbes list. Even scalpers like Paul Rotter, who allegedly makes USD 60million a year from scalping, are small fry compared to them.

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Another vote for Warren Buffet.

 

Rolfe Winkler | Analysis & Opinion | Reuters.com

 

This is surely the most profitable way.

 

To trade the Warren Buffet Way u need to have big money to invest which most of us dont have. But i will agree that Position trading is the least risky among others cause this is the only trading style which needs thorough research thus minimizing the risk.......

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On Forbes, we see billionaire investors who do not do technical trading (either swing or scalping) themselves – they don’t need to. But I bet the traders at their hedge funds do a lot of both, and the question remains open which strategy generates more cash for them ;). I doubt the investors we see on Forbes could be called “swing traders”. Does Warren Buffet really do trading himself? From the article quoted:

 

"Berkshire Hathaway, in which Buffett owns 27 percent, according to a recent proxy filing, has more than $26 billion invested in eight financial companies that have received bailout money. The TARP at one point had nearly $100 billion invested in these companies and, according to new data released by Thomson Reuters, FDIC backs more than $130 billion of their debt. To put that in perspective, 75 percent of the debt these companies have issued since late November has come with a federal guarantee. [...] Without FDIC’s debt guarantee program, even impregnable Goldman would have collapsed."

 

I suppose that goes well beyond the scope of swing trading. That's big money feeding on monopoly money at the source of issue. No individual trader piggy-backing on the big money's moves, whether for a swing or scalp, will ever catch up with those guys on the Forbes list. Even scalpers like Paul Rotter, who allegedly makes USD 60million a year from scalping, are small fry compared to them.

 

You are saying the same point as im doing ..to get to the rich list one has to get out of the retail world. Retail traders are never going to be on the rich list just like a retail shopkeeper never becomes a super rich stores tycoon owner....one has to get out of this retail bubble to get to the next level.....

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Excellent post. The ramifications of it I am first feeling now....after 15 yrs of trading. TRADING FOR MOST OF US WILL NEVER BE WORTH IT BECAUSE.....We can never do both...1-pay our bills from our winnings, and compound our money until our acct is big enough to make us rich.

 

I am a winning trader. I win consistantly. But waht good is making 50% a year which is better than Warren does if all of that and more goes for living expenses. Its a guarantee to go broke.

 

The guy who gets into trading as a hobby,with the goal to slowly learn, and the ultimate goal to add extra income to his nest egg,will likely be the one to become the next Buffett!

 

Are we all blind when we start trading? Why do we not do the math and ask ourselves...How will we ever have the size trading account we need if we cant even make enough to pay all our bills?

 

Unless we have a wife who works that dont mind paying the bills..............this is a movie that will usually have a very sad ending. Look at all the guys selling systems on the Internet that claimed to be floor traders with yrs of experience.

 

What happened to all of their money?

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Excellent post. The ramifications of it I am first feeling now....after 15 yrs of trading. TRADING FOR MOST OF US WILL NEVER BE WORTH IT BECAUSE.....We can never do both...1-pay our bills from our winnings, and compound our money until our acct is big enough to make us rich.

 

I am a winning trader. I win consistantly. But waht good is making 50% a year which is better than Warren does if all of that and more goes for living expenses. Its a guarantee to go broke.

 

The guy who gets into trading as a hobby,with the goal to slowly learn, and the ultimate goal to add extra income to his nest egg,will likely be the one to become the next Buffett!

 

Are we all blind when we start trading? Why do we not do the math and ask ourselves...How will we ever have the size trading account we need if we cant even make enough to pay all our bills?

 

Unless we have a wife who works that dont mind paying the bills..............this is a movie that will usually have a very sad ending. Look at all the guys selling systems on the Internet that claimed to be floor traders with yrs of experience.

 

What happened to all of their money?

 

I'm hoping to have a nicely sized account before I move out of my parent's house. If I could get at least 250,000 dollars that would be enough because with margin it would be half a million, and I know I can at least make 20% which would be more than enough to live on.

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So what does everyone think? Do scalpers collect enough pennies throughout the day? Or do the swing traders make more compounding their position?

 

MMS

 

Very good scalper I heard make more money than very good swing traders but on the average the former group makes a lot less than the latter. Scalping was invented in the pits I think and now with HFT it is difficult to do it from home unless you collocate expensive hardware.

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I am a winning trader. I win consistantly. But waht good is making 50% a year which is better than Warren does if all of that and more goes for living expenses. Its a guarantee to go broke.

 

Are we all blind when we start trading? Why do we not do the math and ask ourselves...How will we ever have the size trading account we need if we cant even make enough to pay all our bills?

 

That's exactly the point and math behind this question - all in favour of scalping, if you want to grow your account, that is. Swing trading is for those with serious accounts, like 200,000 USD at the very least. Then you can trade longer timeframes at your leisure risking no more than 0.5 pct of account per trade and make a living. If you make 30 pct a year, that's 60K, not a fortune but good enough to start with as a swing trader.

 

But if you start small, you've got to be scalping intraday, unless you can afford to spend a century to get rich. And for competent intraday scalpers a daily profit goal is easily 5 pct of account risking 1-2 pct of account per trade. Do the maths of compounding and you'll see the allure of scalping - there's virtually no limit to how fast you can build your account: start with 10K, make 2 pct of account per day on average risking 1 pct per trade and you'll have doubled your account in less than two months, and on and on.

 

One more circumstance in favour of scalping is that, like it or not, the market is range-bound most of the time - exactly the ideal conditions for scalping.

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There is also no limit to how fast you can ........ blow your account.

 

Having winning trades is easy.

 

Holding and building an account, which can't be rushed, is the hard part.

 

Do you mean holding a trade or holding a growing account? I think most of us have trouble with the latter by becoming careless, not executing the strategy, feeling like we're now rich enough to experiment and risk more to get even richer, not following risk and money management rules etc., etc. But that's a matter of psychology and discipline, not of one strategy being better over the other.

 

Meanwhile, as far as strategy goes, I'd like to share this article: To scalp or swing trade? That is the question . My takeway from this article, coupled with the realization about the laws that govern price movement in the markets, is that part-scalping/part-swinging is the best strategy:

- first off, provided a strategy with an edge and disciplined execution is place, intraday trading will build the account much faster

- that's because in the lower timeframes you'll get many nice and quite broad channels and ranges with high probability setups and even good trends whereas all you see on the higher TF is unreliable congestion,

- the best strategy is mainly scalp and leave a smaller swing position on (set to break even) for a possible major breakout; if the breakout doesn't happen, you've gotten something out of the trade, no worries, take a rest, do new analysis and take it from there.

- as emphasized in the article, this approach is very motivating psychologically, because you get a scalp out of most of your trades, and if the major breakout does happen, you're already positioned for a good swing (and enter with new scalps along the way).

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The trader who have proper market analytical skill and who knows to manage money and risk properly makes more money. If you do not possess this skills than you have to select appropriate broker to do that work for you. I have been trading since 3 years and I have earned a lot through my Broker.

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According to me I think , You can earn money from various sources , but In Forex you have to pass a long time with great patience if you want to earn mney from here, and you have to ensure a reliable support from a credible trading broker , because the broker can affects the result of our trading with certainly.
 

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A person who is aware of the recent trends and the one who knows where and when to invest makes more money.

We should know before investing that what's the score scope of investing in a long or short term investment, we should know the difference. Once, things are clear we can generate more profit.

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A slightly repetitive answer (as is usually the case)

On 1/3/2020 at 2:26 AM, CrazyCzarina said:

Trader who is having strategy that really works in this market, also having mind which can survive the risk and management both with market movement.

 

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On 12/12/2019 at 6:52 AM, Debby_Tompkins said:

A person who is aware of the recent trends and the one who knows where and when to invest makes more money.

We should know before investing that what's the score scope of investing in a long or short term investment, we should know the difference. Once, things are clear we can generate more profit.

And not only that. Knowing your own psychological problems is fundamental. Not everyone is ready for this kind of market's trading.

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On 12/12/2019 at 5:52 AM, Debby_Tompkins said:

A person who is aware of the recent trends and the one who knows where and when to invest makes more money.

We should know before investing that what's the score scope of investing in a long or short term investment, we should know the difference. Once, things are clear we can generate more profit.

nah.. all you need to be able to 'generate more profit' is the ability to type words. Looks like you got that part perfect

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due to the unprecendented response to the stuff ive been posting recently ive decided to post mere frequently and more often .Thanks for your continued support. And dont forget to make good profits on forex.

It's possible to trade profitably on the Forex, the nearly $2 trillion worldwide currency exchange market. But the odds are against you, even more so if you don't prepare and plan your trades. According to a 2014 Bloomberg report, several analyses of retail Forex trading, including one by the National Futures Association (NFA), the industry's regulatory body, concluded that more than two out of three Forex traders lose money. This suggests that self-education and caution are recommended. Here are some approaches that may improve your odds of taking a profit.

 

Prepare Before You Begin Trading

Because the Forex market is highly leveraged -- as much as 50 to 1 -- it can have the same appeal as buying a lottery ticket: some small chance of making a killing. This, however, isn't trading; it's gambling, with the odds long against you. 

 

A better way of entering the Forex market is to carefully prepare. Beginning with a practice account is helpful and risk-free. While you're trading in your practice account, read the most frequently recommended Forex trading books, among them:

 
 

All three are available on Amazon. Rosenberg's book, unfortunately, is pricey, but it's widely available in public libraries. "Trading in the Zone: Master the Market with Confidence, Discipline and a Winning Attitude," by Mark Douglas is another good book that's available on Amazon, and, again, somewhat pricey, although the Kindle edition is not. 

 

Use the information gained from your reading to plan your trades before plunging in. The more you change your plan, the more you end up in trouble and the less likely that elusive forex profit will end up in your pocket.

 

Diversify and Limit Your Risks

Two strategies that belong in every trader's arsenal:

 
 
  • Diversification: Traders who execute many small trades, particularly in different markets where the correlation between markets is low, have a better chance of making a profit. Putting all your money in one big trade is always a bad idea.
  • Familiarize yourself with ways of guaranteeing a profit on an already profitable order, such as a trailing stop, and of limiting losses using stop and limit orders. These strategies and more are covered in the recommended books. Novice traders often make the mistake of concentrating on how to win; it's even more important to understand how to limit your losses. 
 

Be Patient

Forex traders, particularly beginners, are prone to getting nervous if a trade does not go their way immediately, or if the trade goes into a little profit they get itchy to pull the plug and walk away with a small profit that could have been a significant profit with little downside risk using appropriate risk reduction strategies.

 

In "On Any Given Sunday," Al Pacino reminds us that "football is a game of inches." That's a winning attitude in the Forex market as well. Remember that you are going to win some trades and lose others. Take satisfaction in the accumulation of a few more wins than losses. Over time, that could make you rich!

 
 
 
 
And now take a look at our really great pictures (theyre really great) they will help you make good profits on forex
 
 
   
 

 

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How Much Money Can I Make Forecks trading

money sucked into laptop from forex day trading
•••
 
Updated July 25, 2019

Many people like trading foreign currencies on the foreign exchange (forex) market because it requires the least amount of capital to start day trading. Forex trades 24 hours a day during the week and offers a lot of profit potential due to the leverage provided by forex brokers. Forex trading can be extremely volatile and an inexperienced trader can lose substantial sums.

 

The following scenario shows the potential, using a risk-controlled forex day trading strategy.

 

Forex Day Trading Risk Management

Every successful forex day trader manages their risk; it is one of, if not the, most crucial elements of ongoing profitability.

 

To start, you must keep your risk on each trade very small, and 1% or less is typical. This means if you have a $3,000 account, you shouldn't lose more than $30 on a single trade. That may seem small, but losses do add up, and even a good day-trading strategy will see strings of losses. Risk is managed using a stop-loss order, which will be discussed in the Scenario sections below.

 

Forex Day Trading Strategy

While a strategy can potentially have many components and can be analyzed for profitability in various ways, a strategy is often ranked based on its win-rate and risk/reward ratio.

 

Win Rate

 

Your win rate represents the number of trades you win out a given total number of trades. Say you win 55 out of 100 trades, your win rate is 55 percent. While it isn't required, having a win rate above 50 percent is ideal for most day traders, and 55 percent is acceptable and attainable.

 

Risk/Reward

 

Risk/reward signifies how much capital is being risked to attain a certain profit. If a trader loses 10 pips on losing trades but makes 15 on winning trades, she is making more on the winners than she's losing on losers. This means that even if the trader only wins 50% of her trades, she will be profitable. Therefore, making more on winning trades is also a strategic component for which many forex day traders strive.

 

A higher win rate for trades means more flexibility with your risk/reward, and a high risk/reward means your win rate can be lower and you'd still be profitable.

 

Hypothetical Scenario

Assume a trader has $5,000 in capital funds, and they have a decent win rate of 55% on their trades. They risk only 1% of their capital or $50 per trade. This is accomplished by using a stop-loss order. For this scenario, a stop-loss order is placed 5 pips away from the trade entry price, and a target is placed 8 pips away.

 

This means that the potential reward for each trade is 1.6 times greater than the risk (8/5). Remember, you want winners to be bigger than losers.

 

While trading a forex pair for two hours during an active time of day it's usually possible to make about five round turn trades (round turn includes entry and exit) using the above parameters. If there are 20 trading days in a month, the trader is making 100 trades, on average, in a month.

 

Trading Leverage

Forex brokers provide leverage up to 50:1 (more in some countries). For this example, assume the trader is using 30:1 leverage, as usually that is more than enough leverage for forex day traders. Since the trader has $5,000, and leverage is 30:1, the trader is able to take positions worth up to $150,000. Risk is still based on the original $5,000; this keeps the risk limited to a small portion of the deposited capital.

 

Forex brokers often don't charge a commission, but rather increase the spread between the bid and ask, thus making it more difficult to day trade profitably. ECN brokers offer a very small spread, making it easier to trade profitably, but they typically charge about $2.50 for every $100,000 traded ($5 round turn).

 

Trading Currency Pairs

If you're day trading a currency pair like the GBP/USD, you can risk $50 on each trade, and each pip of movement is worth $10 with a standard lot (100,000 units worth of currency). Therefore you can take a position of one standard lot with a 5-pip stop-loss order, which will keep the risk of loss to $50 on the trade. That also means a winning trade is worth $80 (8 pips x $10).

 

This estimate can show how much a forex day trader could make in a month by executing 100 trades:

 
  • 55 trades were profitable: 55 x $80 = $4,400
  • 45 trades were losers: 45 x ($50) = ($2,250)
 

Gross profit is $4,400 - $2,250 = $2,150 if no commissions (win rate would likely be lower though)

 

Net profit is $2,150 - $500 = $1, 650 if using a commission broker (win rate would be like be higher though)

 

Assuming a net profit of $1,650, the return on the account for the month is 33 percent ($1,650/$5,000). This may seem very high, and it is a very good return. See Refinements below to see how this return may be affected.

 

Slippage Larger Than Expected Loss

It won't always be possible to find five good day trades each day, especially when the market is moving very slowly for extended periods.

 

Slippage is an inevitable part of trading. It results in a larger loss than expected, even when using a stop-loss order. It's common in very fast-moving markets.

 

To account for slippage in the calculation of your potential profit, reduce the net profit by 10% (this is a high estimate for slippage, assuming you avoid holding through major economic data releases). This would reduce the net profit potential generated by your $5,000 trading capital to $1,485 per month.

 

You can adjust the scenario above based on your typical stop loss and target, capital, slippage, win rate, position size, and commission parameters.

 

The Final Word

This simple risk-controlled strategy indicates that with a 55% win rate, and making more on winners than you lose on losing trades, it's possible to attain returns north of 20% per month with forex day trading. Most traders shouldn't expect to make this much; while it sounds simple, in reality, it's more difficult.

 

Even so, with a decent win rate and risk/reward ratio, a dedicated forex day trader with a decent strategy can make between 5% and 15% a month thanks to leverage. Also remember, you don't need much capital to get started; $500 to $1,000 is usually enough.

 

The Balance does not provide tax, investment, or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal.

 
 
 
 
 
 

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or how about...

1. MakingMoneyin ForexTradingTheForexmarkethasadailyvolumeofover $4trillionper day,dwarfingthevolumeof theequityandfuturesmarketscombined.Thousands ofpeople,allover theworld,are tradingForexandmakingtonsofmoney.Whynotyou?All youneedtostarttradingForexis acomputer andanInternetconnection.Youcan doitfrom thecomfortofyour home,inyour sparetimewithoutleavingyour dayjob. Andyoudon'tneedalargesum ofmoneytostart,youcantradeinitially withaminimal sum,or betteroff,youcanstartpracticingwithademoaccountwithouttheneedto depositanymoney.OnceyouconsiderstartingForextrading,oneofthefirstthings youneedtodois chooseabroker,choosingareliablebroker is thesinglemostcriticalfactor toForex success.We currently trade at eToro platform. After testing several Forex platforms we find this one to be the best. What made the difference is a unique feature that allow us to watch and copy the strategies and trades of the best performing traders on the platform. You can actually see each move the "Guru" traders make. This method works nicely for us. Since we started trading at this broker we noticed an increase of our successful trades and profits when compared to our former brokers. You may want to check them out.Please note that all trading involves risk. Only risk capital you're prepared to lose. Past performance does not guarantee future results. This post is for educational purposes and should not be considered as investment advice.NowIwouldstronglyencourageyoutogoandvisittheabovebroker's siterightnow evenifyouarenotyetdecidedwhether youwanttogointoForextrading.Why? Becauseitprovides tons offreeeducationmaterials,videosandbestofall ademo accountthatallows youtopracticeForextradingforfreewithouttheneedtodeposit anymoney.Simplygotothesite,registerforafreeaccountandstart"trading"-by actuallypracticingandexperiencingitfirsthandyou'll beabletodecidewhether Forex tradingisfor you.Inanycase,beforestartingtotradefor real,itis advisablethatyoupracticewithademo account.Onceyoubuildsomeskill andfeelmorecomfortablewiththesystemyou can starttradinggraduallyfor real money.GotoTop

       
 

2.WhatisForexTradingForeignexchange,popularlyknownas 'Forex'or 'FX',is thetradeofasinglecurrency for another atadecidedtradepriceontheover-the-counter (OTC)marketplace.Forex is definitelytheworld's mosttradedmarket,havinganaverageturnover ofmorethan US$4trillioneachday.ComparethistotheNewYork Stock Exchange,thathasadailyturnover ofabout US$70billionanditisveryobvious howtheForexmarketisdefinitelythelargest financialmarketontheglobe.Inessence,Forexcurrencytradingis theactofsimultaneouslypurchasingoneforeign currencywhilstsellinganother,mainlyfor thepurposeofspeculation.Foreigncurrency values increase(appreciate) anddrop(depreciate) towards oneanother asaresultof varietyoffactors suchas economics andgeopolitics.ThenormalobjectiveofFXtraders is tomakemoneyfrom thesetypes ofchanges inthevalueofoneforeigncurrency againstanother byactivelyspeculatingonwhichwayforeignexchangerates arelikelytoturninthefuture.Incontrasttothemajorityoffinancialmarkets,theOTC (over-the-counter) currency marketsdoes nothaveanyphysical placeormainexchangeandtrades 24-hours every dayviaaworldwidesystem ofcompanies,financial institutionsandindividuals.Because ofthis,currencyratesarecontinuouslyrisingandfallinginvaluetowards oneanother, providingnumerous tradingchoices.Oneoftheimportantelements regardingForex's popularityis thefactthatcurrency tradingmarkets usuallyareavailable24-hours adayfromSundayeveningrightthrough toFridaynight.Buyingandsellingfollows theclock,beginningonMondaymorningin Wellington,NewZealand,movingontoAsiantradespearheadedfrom Tokyoand Singapore,aheadofgoingtoLondonandconcludingonFridayeveninginNewYork.Thefactthatprices areavailabletodeal 24-hours dailymakes certainthatprice gapping(whenever apriceleapsfrom onelevel toanother withnotradingbetween) is less andmakes surethattraders couldtakeapositioneachtimetheydesire, irrespectiveoftime,eventhoughinrealitythereareparticular 'lull' occasions when volumes tendtobebelowtheir dailyaveragewhichcouldwidenmarketspreads.Forexis aleveraged(or margined) item,whichmeansthatyouaresimplyrequiredto putinasmall percentageofthefull valueofyour positiontosetaforeignexchange trade.Becauseofthis,thechanceofprofit,orloss,fromyour primarymoneyoutlayis considerablygreater thaninconventional trading.Currencies aredesignatedbythreeletter symbols.Thestandardsymbolsfor someof themostcommonlytradedcurrencies are: EUR Euros

 

USD UnitedStatesdollar CAD Canadiandollar GBPBritishpoundJPYJapaneseYen AUD Australiandollar CHF Swiss francForextransactionsarequotedinpairsbecauseyouarebuyingonecurrencywhile sellinganother.Thefirstcurrencyis thebasecurrencyandthesecondcurrencyis the quotecurrency.Theprice,or rate,thatis quotedistheamountofthesecondcurrencyrequiredto purchaseoneunitofthefirstcurrency.For example,ifEUR/USD has anask priceof1.2327,youcanbuyoneEurofor 1.2327USdollars.Thereareso-calledmajors,for whicharound75%ofallmarketoperations onForexare held:theEUR/USD,GBP/USD,USD/CHF,andUSD/JPY.Aswesee,theUSdollar is representedinall currencypairs,thus,ifacurrencypair contains theUSdollar,this pair is consideredamajorcurrencypair.Pairs whichdonotincludetheUSdollar arecalled cross currencypairs,or cross rates.Thefollowingcross rates arethemostactively traded:EUR/CHF = euro-franc EUR/GBP= euro-sterling EUR/JPY= euro-Yen GBP/JPY= sterling-Yen AUD/JPY= aussie-Yen NZD/JPY= kiwi-YenTogiveyouatasteofwhatis happeningintheForexarenaherearesomehistoricalForexevents.Oneofthemostinterestingmovements intheForexmarketinvolvingtheBritishpound tookplaceintheSeptember16,1992.Thatdayis knownas BlackWednesdaywiththe BritishPoundpostingits biggestfall.Itwas mostlyseenintheGBP/DEM (BritishPound vs.theDeutschemark)andtheGBP/USD (BritishPoundvs.theUSdollar) currency pairs.ThefalloftheBritishpoundagainsttheUSdollar intheperiodfrom November toDecember 1992constituted25%(from2.01to1.51GBP/USD).

 
 

Thegeneral reasonsfor this "sterlingcrisis"aresaidtobetheparticipationofGreat BritainintheEuropeancurrencysystemwithfixedexchangeratecorridors;recently passedparliamentaryelections;areductionintheBritishindustrialoutput;theBank of Englandeffortstoholdtheparityratefor theDeutschemark,as well as adramatic outflowofinvestors.Atthesametime,duetoaprofitabilityslant,theGermancurrency marketbecamemoreattractivethantheBritishone.All inall,thespeculators were rushingtosellpoundsfor Deutschemarks andfor USdollars.Theconsequencesofthis currencycrisiswereas follows:asharpincreaseintheBritishinterestratefrom 10%to15%,theBritishGovernmenthadtoacceptpounddevaluationandtosecedefrom the EuropeanMonetarySystem.Asaresult,thepoundreturnedtoafloatingexchange rate.Another intriguingcurrencypair is theUSdollar vs.theJapaneseYen(USD/JPY).The USdollar andJapaneseYenis thethirdonthelistofmosttradedcurrencypairs after theEUR/USDandGBP/USD.Itistradedmostactivelyduringsessions inAsia. Movementsofthis pairareusuallysmooth;theUSD/JPYpair quicklyreacts totherisk peakingoffinancialmarkets.From themid80's theYenratings startedrisingactively versus theUSDollar.Intheearly90's aprosperouseconomic developmentturnedinto astandstill inJapan,theunemploymentincreased;earnings andwages slidas well as thelivingstandardsoftheJapanesepopulation.Andfrom thebeginningoftheyear1991,this causedbankruptcies ofnumerousfinancialorganizationsinJapan.As a consequence,thequotes ontheTokyoStockExchangecollapsed,aYendevaluation tookplace,thereafter,anewwaveofbankruptcies amongmanufacturingcompanies began.In1995ahistorical lowoftheUSD/JPYpair was recordedat-79.80.TheabovestartedanAsiancrisis intheyears1997-1998thatledaYencrash.It resultedinatumbleoftheYen-USdollar pair from 115YensforoneUSdollar to150.Theglobaleconomic crisis touchedalmostall fields ofhumanactivities.Forexcurrency marketwas noexception.Though,Forexparticipants (central banks,commercialbanks, investmentbanks,brokers anddealers,pensionfunds,insurancecompaniesand transnational companies) wereinadifficultposition,theForexmarketcontinues to functionsuccessfully,itis astableandprofitableasnever before.Thefinancial crisis of2007has ledtodrasticchanges intheworld's currencies values. Duringthecrisis,theYenstrengthenedmostofall againstall other currencies.Neither theUSdollar,nor theeuro,buttheYenprovedtobethemostreliablecurrency instrumentfor traders.Oneofthereasonsforsuchstrengtheningcanbeattributedto thefactthattraders neededtofindasanctuaryamidamonetarychaos.Askand BidWhentraders wanttoplaceanorder ontheForexmarkettheyshouldbeawareofthe currencypair as well as thepriceofthispair.AForexmarketpriceofacurrencypair is denotedbytwosymbols,Ask andBid,whichhavespecific digital notations.

 
 

Ask priceis thehighestpriceinthepair’s quotationatwhichatrader buys thecurrency, standingfirstintheabbreviationofthecurrencypair.Consequently,atrader sells the currencystandingsecond.Bidpriceis thelowestpriceinthequotationofthecurrencypair,atwhichatrader sells thecurrencystandingfirstintheabbreviationofthecurrencypair.Respectively,atrader buys thecurrencystandingsecond.Seemcomplicated?here'sanexample:Let's assumethatwehavethecurrencypair ofEUR/USD withthequotationof1.3652/1.3655.Thismeansthatyoucanbuy1eurofor1.3655dollars or tosell1euro for 1.3652dollars.ThedifferencebetweentheBidpriceandtheAsk priceis called spread.Thespreadisactually thecommissionofthebroker.TheSpreadsinForextradingare actuallyverysmall comparedtocurrencyspreads atbanks.Aterm thatyou'll seealotwhiletradingForexis "pip"and"pips"-apip” standsfor PercentageinPoint.Apipis thesmallestpricemovementofatradedcurrency.Itis alsoreferredtoasa“point.Itis veryimportantthatyouunderstandwhatapipis inthe Forextradingbecauseyouwill beusingpips incalculatingyour profits andlosses..For mostcurrenciesapipis 0.0001or 1/100ofacent.Whenacurrencymovesfromavalueof1.2911to1.2914,itmoved3pips.Whenapip has avalueof$10,youhavegained$30.Thereis anexceptionfor quotationsfor JapaneseYenagainstothercurrencies.For currencies inrelationtoJapaneseYenapipis 0.01or 1cent.Another termthatyou'll needtounderstandinrelationtoForextradingis Lots.Alotis theminimal tradedamountfor eachcurrencytransaction.For regular accounts onelot equals 100,000unitsofthebasecurrency.Howeveryoucanalsoopenminiandmicro accounts thatallowtradinginsmaller lots.Understanding thePip Spread -Thespreadis closelyassociatedwiththepipandhas amajor importanceforyouas atrader.Asmentionedabove,Itis thedifferencebetweenthesellingandthebuyingpriceofacurrencypair.Itis thedifferenceinthebid andask price.Theaskis thepriceatwhichyoubuyandthebidis thepriceatwhichyousell.SupposetheEUR/USDis quotedat1.4502bidand1.4505ask.Inthis casethespread is 3pips.Thepipspreadis your costofdoingbusiness here.Inthecaseaboveitmeans yousustainapaper lossequal to3pips atthemomentyouenter thetrade.Your contracthastoappreciateby3pipsbeforeyoubreakeven.Thelower thepipspreadtheeasier is itfor youtoprofit.Generallythemoreactiveandbigger themarket,thelower thepipspread.Smaller and moreexotic markets tendtohaveahigher spread.Mostbrokers willbeofferingdifferent

 

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1. MakingMoneyin ForexTradingTheForexmarkethasadailyvolumeofover $4trillionper day,dwarfingthevolumeof theequityandfuturesmarketscombined.Thousands ofpeople,allover theworld,are tradingForexandmakingtonsofmoney.Whynotyou?All youneedtostarttradingForexis acomputer andanInternetconnection.Youcan doitfrom thecomfortofyour home,inyour sparetimewithoutleavingyour dayjob. Andyoudon'tneedalargesum ofmoneytostart,youcantradeinitially withaminimal sum,or betteroff,youcanstartpracticingwithademoaccountwithouttheneedto depositanymoney.OnceyouconsiderstartingForextrading,oneofthefirstthings youneedtodois chooseabroker,choosingareliablebroker is thesinglemostcriticalfactor toForex success.We currently trade at eToro platform. After testing several Forex platforms we find this one to be the best. What made the difference is a unique feature that allow us to watch and copy the strategies and trades of the best performing traders on the platform. You can actually see each move the "Guru" traders make. This method works nicely for us. Since we started trading at this broker we noticed an increase of our successful trades and profits when compared to our former brokers. You may want to check them out.Please note that all trading involves risk. Only risk capital you're prepared to lose. Past performance does not guarantee future results. This post is for educational purposes and should not be considered as investment advice.NowIwouldstronglyencourageyoutogoandvisittheabovebroker's siterightnow evenifyouarenotyetdecidedwhether youwanttogointoForextrading.Why? Becauseitprovides tons offreeeducationmaterials,videosandbestofall ademo accountthatallows youtopracticeForextradingforfreewithouttheneedtodeposit anymoney.Simplygotothesite,registerforafreeaccountandstart"trading"-by actuallypracticingandexperiencingitfirsthandyou'll beabletodecidewhether Forex tradingisfor you.Inanycase,beforestartingtotradefor real,itis advisablethatyoupracticewithademo account.Onceyoubuildsomeskill andfeelmorecomfortablewiththesystemyou can starttradinggraduallyfor real money.GotoTo2.WhatisForexTradingForeignexchange,popularlyknownas 'Forex'or 'FX',is thetradeofasinglecurrency for another atadecidedtradepriceontheover-the-counter (OTC)marketplace.Forex is definitelytheworld's mosttradedmarket,havinganaverageturnover ofmorethan US$4trillioneachday.ComparethistotheNewYork Stock Exchange,thathasadailyturnover ofabout US$70billionanditisveryobvious howtheForexmarketisdefinitelythelargest financialmarketontheglobe.Inessence,Forexcurrencytradingis theactofsimultaneouslypurchasingoneforeign currencywhilstsellinganother,mainlyfor thepurposeofspeculation.Foreigncurrency values increase(appreciate) anddrop(depreciate) towards oneanother asaresultof varietyoffactors suchas economics andgeopolitics.ThenormalobjectiveofFXtraders is tomakemoneyfrom thesetypes ofchanges inthevalueofoneforeigncurrency againstanother byactivelyspeculatingonwhichwayforeignexchangerates arelikelytoturninthefuture.Incontrasttothemajorityoffinancialmarkets,theOTC (over-the-counter) currency marketsdoes nothaveanyphysical placeormainexchangeandtrades 24-hours every dayviaaworldwidesystem ofcompanies,financial institutionsandindividuals.Because ofthis,currencyratesarecontinuouslyrisingandfallinginvaluetowards oneanother, providingnumerous tradingchoices.Oneoftheimportantelements regardingForex's popularityis thefactthatcurrency tradingmarkets usuallyareavailable24-hours adayfromSundayeveningrightthrough toFridaynight.Buyingandsellingfollows theclock,beginningonMondaymorningin Wellington,NewZealand,movingontoAsiantradespearheadedfrom Tokyoand Singapore,aheadofgoingtoLondonandconcludingonFridayeveninginNewYork.Thefactthatprices areavailabletodeal 24-hours dailymakes certainthatprice gapping(whenever apriceleapsfrom onelevel toanother withnotradingbetween) is less andmakes surethattraders couldtakeapositioneachtimetheydesire, irrespectiveoftime,eventhoughinrealitythereareparticular 'lull' occasions when volumes tendtobebelowtheir dailyaveragewhichcouldwidenmarketspreads.Forexis aleveraged(or margined) item,whichmeansthatyouaresimplyrequiredto putinasmall percentageofthefull valueofyour positiontosetaforeignexchange trade.Becauseofthis,thechanceofprofit,orloss,fromyour primarymoneyoutlayis considerablygreater thaninconventional trading.Currencies aredesignatedbythreeletter symbols.Thestandardsymbolsfor someof themostcommonlytradedcurrencies are: EUR EuUSD UnitedStatesdollar CAD Canadiandollar GBPBritishpoundJPYJapaneseYen AUD Australiandollar CHF Swiss francForextransactionsarequotedinpairsbecauseyouarebuyingonecurrencywhile sellinganother.Thefirstcurrencyis thebasecurrencyandthesecondcurrencyis the quotecurrency.Theprice,or rate,thatis quotedistheamountofthesecondcurrencyrequiredto purchaseoneunitofthefirstcurrency.For example,ifEUR/USD has anask priceof1.2327,youcanbuyoneEurofor 1.2327USdollars.Thereareso-calledmajors,for whicharound75%ofallmarketoperations onForexare held:theEUR/USD,GBP/USD,USD/CHF,andUSD/JPY.Aswesee,theUSdollar is representedinall currencypairs,thus,ifacurrencypair contains theUSdollar,this pair is consideredamajorcurrencypair.Pairs whichdonotincludetheUSdollar arecalled cross currencypairs,or cross rates.Thefollowingcross rates arethemostactively traded:EUR/CHF = euro-franc EUR/GBP= euro-sterling EUR/JPY= euro-Yen GBP/JPY= sterling-Yen AUD/JPY= aussie-Yen NZD/JPY= kiwi-YenTogiveyouatasteofwhatis happeningintheForexarenaherearesomehistoricalForexevents.Oneofthemostinterestingmovements intheForexmarketinvolvingtheBritishpound tookplaceintheSeptember16,1992.Thatdayis knownas BlackWednesdaywiththe BritishPoundpostingits biggestfall.Itwas mostlyseenintheGBP/DEM (BritishPound vs.theDeutschemark)andtheGBP/USD (BritishPoundvs.theUSdollar) currency pairs.ThefalloftheBritishpoundagainsttheUSdollar intheperiodfrom November toDecember 1992constituted25%(from2.01to1.51GBThegeneral reasonsfor this "sterlingcrisis"aresaidtobetheparti