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Wednesday, August 16, 2006
Thursday, August 10, 2006
The Currency Exchange Market
The currency exchange market is an inter-bank or inter-dealer market that was established in 1971 when floating exchange rates began to materialize. In addition, it is an Over-The-Counter market, meaning that transactions are conducted between any two counter parties that agree to trade via the telephone or electronic network. Trading is thus not centralized, as is the case with many stock markets (i.e., NYSE, ASE, CME) or as the case for currency futures and currency options, which trade on special exchanges. Dealers often "advertise" exchange rates using a distribution network, such as the one provided by Reuters or Bridge. Dealers then use the information obtained there (or directly) to "agree" to a rate and a trade.
The major dealing centers today are: London, with about 30% of the market, New York, with 20%, Tokyo, with 12%, Zurich, Frankfurt, Hong Kong and Singapore, with about 7% each, followed by Paris and Sydney with 3% each.
In terms of trading volume, the currency exchange market is the worlds largest market, with daily trading volumes in excess of $1.5 trillion US dollars. This is orders of magnitude larger than the bond or stock market. For example, the New York Stock Exchange has a daily trading volume of approximately $60 billion. Thus, the currency exchange market is by far the most liquid market in the world today. Because of the volume in trading, it is impossible for individuals or companies to affect the exchange rates. In fact, even central banks and governments find it increasingly difficult to affect the exchange rates of the most liquid currencies, such as the US dollar, Japanese Yen, Euro, Swiss Frank, Canadian Dollar or Australian Dollar.
The currency exchange market is a true 24-hour market, 5 days a week. There are dealers in every major time zone. Trading begins Monday morning in Sydney (which corresponds to 3pm EST, Sunday) and then daily moves around the globe through the various trading centers until closing Friday evening at 4:30pm EST in New York.
Today, over 85% of all currency exchange transactions involve a few major currencies: the US Dollar (USD), Japanese Yen (JPY), Euro (EUR), Swiss Frank (CHF), British Pound (GBP), Canadian Dollar (CAD), and Australian Dollar (AUD). In the currency exchange market, most of the currencies are traded only against the US Dollar. The term cross rate refers to an exchange rate between two non-dollar currencies. Trading between two non-dollar currencies usually occurs by first trading one against the US Dollar and then trading the US Dollar against the second non-dollar currency. Because of this, the spread in the exchange rate between two non-dollar currencies is often higher. (There are a few non-dollar currencies that are traded directly, such as GBP/EUR or EUR/CHF.) The following directly traded currency pairs make up the vast majority of the trading volume and are thus considered to be the most important ones: EUR/USD, USD/JPY, EUR/JPY, USD/CAD, EUR/GBP, GBP/USD, USD/CHF, AUD/USD, and AUD/JPY.
The currency exchange market is an inter-bank or inter-dealer market that was established in 1971 when floating exchange rates began to materialize. In addition, it is an Over-The-Counter market, meaning that transactions are conducted between any two counter parties that agree to trade via the telephone or electronic network. Trading is thus not centralized, as is the case with many stock markets (i.e., NYSE, ASE, CME) or as the case for currency futures and currency options, which trade on special exchanges. Dealers often "advertise" exchange rates using a distribution network, such as the one provided by Reuters or Bridge. Dealers then use the information obtained there (or directly) to "agree" to a rate and a trade.
The major dealing centers today are: London, with about 30% of the market, New York, with 20%, Tokyo, with 12%, Zurich, Frankfurt, Hong Kong and Singapore, with about 7% each, followed by Paris and Sydney with 3% each.
In terms of trading volume, the currency exchange market is the worlds largest market, with daily trading volumes in excess of $1.5 trillion US dollars. This is orders of magnitude larger than the bond or stock market. For example, the New York Stock Exchange has a daily trading volume of approximately $60 billion. Thus, the currency exchange market is by far the most liquid market in the world today. Because of the volume in trading, it is impossible for individuals or companies to affect the exchange rates. In fact, even central banks and governments find it increasingly difficult to affect the exchange rates of the most liquid currencies, such as the US dollar, Japanese Yen, Euro, Swiss Frank, Canadian Dollar or Australian Dollar.
The currency exchange market is a true 24-hour market, 5 days a week. There are dealers in every major time zone. Trading begins Monday morning in Sydney (which corresponds to 3pm EST, Sunday) and then daily moves around the globe through the various trading centers until closing Friday evening at 4:30pm EST in New York.
Today, over 85% of all currency exchange transactions involve a few major currencies: the US Dollar (USD), Japanese Yen (JPY), Euro (EUR), Swiss Frank (CHF), British Pound (GBP), Canadian Dollar (CAD), and Australian Dollar (AUD). In the currency exchange market, most of the currencies are traded only against the US Dollar. The term cross rate refers to an exchange rate between two non-dollar currencies. Trading between two non-dollar currencies usually occurs by first trading one against the US Dollar and then trading the US Dollar against the second non-dollar currency. Because of this, the spread in the exchange rate between two non-dollar currencies is often higher. (There are a few non-dollar currencies that are traded directly, such as GBP/EUR or EUR/CHF.) The following directly traded currency pairs make up the vast majority of the trading volume and are thus considered to be the most important ones: EUR/USD, USD/JPY, EUR/JPY, USD/CAD, EUR/GBP, GBP/USD, USD/CHF, AUD/USD, and AUD/JPY.
How currency trading is done traditionally
Currency trading is always done with currency pairs, such as EUR/USD, and so it is useful to consider the currency pair as an instrument, which can be bought or sold.
Buying the currency pair implies buying the first, base currency and selling (short) an equivalent amount of the second, quote currency (to pay for the base currency). (It is not necessary for the trader to own the quote currency prior to selling, as it is sold short.) A speculator buys a currency pair, if she believes the base currency will go up relative to the quote currency, or equivalently that the corresponding exchange rate will go up.
Selling the currency pair implies selling the first, base currency (short), and buying the second, quote currency. A speculator sells a currency pair, if she believes the base currency will go down relative to the quote currency, or equivalently, that the quote currency will go up relative to the base currency.
After buying a currency pair, the trader will have an open position in the currency pair. Right after such a transaction, the value of the position will be close to zero, because the value of the base currency is more or less equal to the value of the equivalent amount of the quote currency. In fact, the value will be slightly negative, because of the spread involved.
In todays currency market, a trade goes through a three-step process:
the trader communicates the currency pair and the amount he/she would like to trade with another dealer.
the dealer responds with a bid and an ask price
the trader responds to the bid and ask price with one of:
buy (by saying "Mine" or "I buy" or "I take")
sell (by saying "yours" or "I give you" or "I sell")
refuse.
The transaction occurs if the final response is either a buy or a sell. The dealer is required to quote a "good" market price, since he does not know whether the trader will buy or sell.
The currency exchange market described above is referred to as the spot market and the transaction described is referred to as a spot deal. A spot deal consists of a bilateral contract between a party delivering a specified amount of a given currency against receiving a specified amount of another currency from a second counter party, based on an agreed exchange rate, within two business days of the deal date, which is referred to as the settlement date. (The settlement date for USD/CAD is one business day after the deal date.) Speculators rarely deliver, however. Instead, they use what is referred to as a rollover swap. The rollover swap is designed to allow the changing of an old deal date to the current date by simultaneously closing an open position for todays date and opening the same position for the next day at a price reflecting the interest rate differential between the two currencies.
When a trader buys or sells a currency pair, the value of the currency pair, as an instrument, initially is close to zero. This is because (in the case of a buy) the quote currency is sold to buy an equivalent amount of the base currency. As the market rates fluctuate, however, the value of the currency pair position held will also fluctuate. Thus, if the rate for the currency pair goes down, the speculators long position will lose in value and become negative. To ensure that the speculator can carry the risk for the case where the position results in a loss, banks or dealers typically require sufficient collateral to cover those losses. This collateral is typically referred to as margin.
To limit down-side risk, traders often specify a Stop-Loss rate for each open trade. The Stop-Loss specifies that the trade should be closed automatically when the currency exchange rate for the currency pair in question reaches a certain threshold. For long positions, the Stop-Loss rate is always lower than the current exchange rate; for short positions, it is always higher. Traders, at times, also specify a Take-Profit rate for their trades in order to lock in a profit when the exchange rate reaches a certain threshold. For long positions, the Take-Profit rate must be above the current rate, while for short positions, it must be below the current rate.
A trader may also leave an order with a bank, broker or dealer. These so called leave orders are orders that a trade should be executed (in the future) when certain market conditions occur. There are three types of leave orders:
entry orders: specifies that a currency pair should be traded when it reaches a certain exchange rate. Entry orders are used when the trade would not offset a current position.
take-profit orders: are used to clear a position by buying (or selling) the currency pair of the position when the exchange rate reaches a specified level.
stop-loss orders: are used to clear a position by buying (or selling) the currency pair of the position when the exchange rate reaches a specified level.
Currency trading is always done with currency pairs, such as EUR/USD, and so it is useful to consider the currency pair as an instrument, which can be bought or sold.
Buying the currency pair implies buying the first, base currency and selling (short) an equivalent amount of the second, quote currency (to pay for the base currency). (It is not necessary for the trader to own the quote currency prior to selling, as it is sold short.) A speculator buys a currency pair, if she believes the base currency will go up relative to the quote currency, or equivalently that the corresponding exchange rate will go up.
Selling the currency pair implies selling the first, base currency (short), and buying the second, quote currency. A speculator sells a currency pair, if she believes the base currency will go down relative to the quote currency, or equivalently, that the quote currency will go up relative to the base currency.
After buying a currency pair, the trader will have an open position in the currency pair. Right after such a transaction, the value of the position will be close to zero, because the value of the base currency is more or less equal to the value of the equivalent amount of the quote currency. In fact, the value will be slightly negative, because of the spread involved.
In todays currency market, a trade goes through a three-step process:
the trader communicates the currency pair and the amount he/she would like to trade with another dealer.
the dealer responds with a bid and an ask price
the trader responds to the bid and ask price with one of:
buy (by saying "Mine" or "I buy" or "I take")
sell (by saying "yours" or "I give you" or "I sell")
refuse.
The transaction occurs if the final response is either a buy or a sell. The dealer is required to quote a "good" market price, since he does not know whether the trader will buy or sell.
The currency exchange market described above is referred to as the spot market and the transaction described is referred to as a spot deal. A spot deal consists of a bilateral contract between a party delivering a specified amount of a given currency against receiving a specified amount of another currency from a second counter party, based on an agreed exchange rate, within two business days of the deal date, which is referred to as the settlement date. (The settlement date for USD/CAD is one business day after the deal date.) Speculators rarely deliver, however. Instead, they use what is referred to as a rollover swap. The rollover swap is designed to allow the changing of an old deal date to the current date by simultaneously closing an open position for todays date and opening the same position for the next day at a price reflecting the interest rate differential between the two currencies.
When a trader buys or sells a currency pair, the value of the currency pair, as an instrument, initially is close to zero. This is because (in the case of a buy) the quote currency is sold to buy an equivalent amount of the base currency. As the market rates fluctuate, however, the value of the currency pair position held will also fluctuate. Thus, if the rate for the currency pair goes down, the speculators long position will lose in value and become negative. To ensure that the speculator can carry the risk for the case where the position results in a loss, banks or dealers typically require sufficient collateral to cover those losses. This collateral is typically referred to as margin.
To limit down-side risk, traders often specify a Stop-Loss rate for each open trade. The Stop-Loss specifies that the trade should be closed automatically when the currency exchange rate for the currency pair in question reaches a certain threshold. For long positions, the Stop-Loss rate is always lower than the current exchange rate; for short positions, it is always higher. Traders, at times, also specify a Take-Profit rate for their trades in order to lock in a profit when the exchange rate reaches a certain threshold. For long positions, the Take-Profit rate must be above the current rate, while for short positions, it must be below the current rate.
A trader may also leave an order with a bank, broker or dealer. These so called leave orders are orders that a trade should be executed (in the future) when certain market conditions occur. There are three types of leave orders:
entry orders: specifies that a currency pair should be traded when it reaches a certain exchange rate. Entry orders are used when the trade would not offset a current position.
take-profit orders: are used to clear a position by buying (or selling) the currency pair of the position when the exchange rate reaches a specified level.
stop-loss orders: are used to clear a position by buying (or selling) the currency pair of the position when the exchange rate reaches a specified level.
The Need for Currency Exchange
Currency exchange is necessary in numerous circumstances.
Consumers typically come into contact with currency exchange when they travel. They go to a bank or currency exchange bureau to convert one currency (typically, their "home currency") into another (i.e., the currency of the country they intend to travel to) so they can pay for goods and services in the foreign country. Consumers may also purchase goods in a foreign country or via the Internet with their credit card, in which case they will find that the amount they paid in the foreign currency will have been converted to their home currency on their credit card statement. Although each such currency exchange is a relatively small transaction, the aggregate of all such transactions is significant.
Businesses typically have to convert currencies when they conduct business outside their home country. For example, if they export goods to another country and receive payment in the currency of that foreign country, then the payment must often be converted back to the home currency. Similarly, if they have to import goods or services, then businesses will often have to pay in a foreign currency, requiring them to first convert their home currency into the foreign currency. Large companies convert huge amounts of currency each year; for example, a company such as General Electric (GE) converts tens of billions of dollars each year. The timing of when they convert can have a large affect on their balance sheet and "bottom line.
Investors and speculators require currency exchange whenever they trade in any foreign investment, be that equities, bonds, bank deposits, or real estate. For example, when a Swedish investor buys shares in Sun Microsystems on the NASDAQ, she will have to pay for the shares in U.S. Dollars and likely have to convert Swedish Krona to U.S. Dollars. Similarly, a Japanese real estate investor who sells a New York property may well want to convert the proceeds of the sale in U.S. Dollars to Japanese Yen.
Investors and speculators also trade currencies directly in order to benefit from movements in the currency exchange markets. For example, if an American investor believes that the Japanese economy is strengthening and as a result expects the Japanese Yen to appreciate in value (i.e., go up relative to other currencies), then she may want to buy Japanese Yen and take what is referred to as a long position. Similarly, if an American investor believes that the Euro will go down over time, then she may want to sell Euro to take a short position. Interestingly, investors and speculators can profit equally from currencies becoming stronger (by taking a long position) or from currencies becoming weaker (by taking a short position). Speculators are often day traders, trying to take advantage of market movements in very short time periods; buying a currency and then selling it again may happen within hours or even minutes. They are attracted to currency trading for numerous reasons, including (i) the size and daily volatility of the market, which gives them unparalleled excitement, (ii) the almost perfect liquidity of the currency exchange market, (iii) the fact that the currency exchange market is "open" 24 hours a day market, and (vi) the fact that currencies can be traded with no brokerage charges.
Commercial and Investment Banks trade currencies as a service for their commercial banking, deposit and lending customers. These institutions also generally participate in the currency market for hedging and proprietary trading purposes.
Governments and central banks trade currencies to improve trading conditions or to intervene in an attempt to adjust economic or financial imbalances. Although they do not trade for speculative reasons --- they are a non-profit organization --- they often tend to be profitable, since they generally trade on a long-term basis.
Currency exchange is necessary in numerous circumstances.
Consumers typically come into contact with currency exchange when they travel. They go to a bank or currency exchange bureau to convert one currency (typically, their "home currency") into another (i.e., the currency of the country they intend to travel to) so they can pay for goods and services in the foreign country. Consumers may also purchase goods in a foreign country or via the Internet with their credit card, in which case they will find that the amount they paid in the foreign currency will have been converted to their home currency on their credit card statement. Although each such currency exchange is a relatively small transaction, the aggregate of all such transactions is significant.
Businesses typically have to convert currencies when they conduct business outside their home country. For example, if they export goods to another country and receive payment in the currency of that foreign country, then the payment must often be converted back to the home currency. Similarly, if they have to import goods or services, then businesses will often have to pay in a foreign currency, requiring them to first convert their home currency into the foreign currency. Large companies convert huge amounts of currency each year; for example, a company such as General Electric (GE) converts tens of billions of dollars each year. The timing of when they convert can have a large affect on their balance sheet and "bottom line.
Investors and speculators require currency exchange whenever they trade in any foreign investment, be that equities, bonds, bank deposits, or real estate. For example, when a Swedish investor buys shares in Sun Microsystems on the NASDAQ, she will have to pay for the shares in U.S. Dollars and likely have to convert Swedish Krona to U.S. Dollars. Similarly, a Japanese real estate investor who sells a New York property may well want to convert the proceeds of the sale in U.S. Dollars to Japanese Yen.
Investors and speculators also trade currencies directly in order to benefit from movements in the currency exchange markets. For example, if an American investor believes that the Japanese economy is strengthening and as a result expects the Japanese Yen to appreciate in value (i.e., go up relative to other currencies), then she may want to buy Japanese Yen and take what is referred to as a long position. Similarly, if an American investor believes that the Euro will go down over time, then she may want to sell Euro to take a short position. Interestingly, investors and speculators can profit equally from currencies becoming stronger (by taking a long position) or from currencies becoming weaker (by taking a short position). Speculators are often day traders, trying to take advantage of market movements in very short time periods; buying a currency and then selling it again may happen within hours or even minutes. They are attracted to currency trading for numerous reasons, including (i) the size and daily volatility of the market, which gives them unparalleled excitement, (ii) the almost perfect liquidity of the currency exchange market, (iii) the fact that the currency exchange market is "open" 24 hours a day market, and (vi) the fact that currencies can be traded with no brokerage charges.
Commercial and Investment Banks trade currencies as a service for their commercial banking, deposit and lending customers. These institutions also generally participate in the currency market for hedging and proprietary trading purposes.
Governments and central banks trade currencies to improve trading conditions or to intervene in an attempt to adjust economic or financial imbalances. Although they do not trade for speculative reasons --- they are a non-profit organization --- they often tend to be profitable, since they generally trade on a long-term basis.
45 Hints to Avoid Losing Money In FOREX
1) Knowledge Deficiency ?Most new FOREX traders don take the time to learn what drives currency rates (primarily fundamentals). When news or a statement is due out they must close out their positions and sit out the best trading opportunities. They are taught to only trade after the market calms down. So essentially they miss the whole move and then trade the random noise that follows a fundamental price move. Just think for a moment about technically trading the aftermath of a price move; there is no potential.
2) Overtrading - Trading often with tight stops and tiny profit targets will only make the broker rich. The desire to ust?make a few hundred dollars a day by locking in tiny profits whenever possible is a losing strategy.
3) Over leveraged - Leverage is a two way street. The brokers want you to use high leverage because that means more spread income because your position size determines the amount of spread income; the bigger the position the more spread income the broker earns.
4) Relying on Others ?/SPAN> Real traders play a lone hand; they make their own decisions and don rely on others to make their trading decisions for them; there is no halfway; either trade for yourself or have someone else trade for you.
5) Stop Losses ?/SPAN> Putting tight stop losses with retail brokers is a recipe for disaster. When you put on a trade commit to a reasonable stop loss limit that allows your trade a fair chance to develop.
6) Demo Accounts ?/SPAN> Broker demo accounts are a shill game of sorts; theye not as time sensitive as real accounts and therefore give the impression that time sensitive trading systems, such as short-term moving average crossovers can be consistently profitably traded; once you start dealing with real money reality is quick to set in.
7) Trading During Off Hours ?/SPAN> Bank FX traders, option traders, and hedge funds have a huge advantage during off hours; they can push the currencies around when no volume is going through and the end game is new traders get fleeced trying to trade signals. There is only one signal during off hours ?stay out.
8) Trading a Currency, Not a Pair ?/SPAN> Being right about a currency is half a trade; success or failure depends upon being right about the second currency that makes up the pair.
9) No Trading Plan - Make money is not a trading plan. A trading plan is a blueprint for trading success; it spells out what you see your edge as being; if you don have an edge, you don have a plan, and likely youl wind up a statistic (part of the 95% of new traders that lose and quit).
10) Trading Against Prevailing Trend ?/SPAN> There is a huge difference between buying cheaply on the way down and buying cheaply. What was a low price quickly becomes a high price when youe trading against the trend.
11) Exiting Trades Poorly ?/SPAN> If you put on a trade and it not working make sure you exit properly; don compound the damage. If youe in a winning trade don talk yourself out of the position because youe bored or want to relieve stress; stress is a natural part of trading; get use to it.
12) Trading Too Short-term ?If youe profit target is less than 20 points don do the trade; the spread you pay to enter the trade makes the odds way against you when you go for these tiny profits.
13) Picking Tops and Bottoms - Looking for bargains works well at the supermarket but not trading foreign exchange; try to trade in the direction the price is going and youe results will improve.
14) Being Too Smart ?/SPAN> The most successful traders I know are high school graduates. They keep it simple and don look beyond the obvious; their results are excellent.
15) Not Trading Around News Time ?/SPAN> Most of the big moves occur around news time. The volume is high and the moves are real; there is no better time to trade fundamentally or technically than when news is released; this is when the real money adjusts their positions and as a result the prices changes reflect serious currency flow (compared to quiet times when Bank traders rule the market with their customer order flow.
16) Ignore Technical Condition ?/SPAN> Determining whether the market is over-extended long or over-extended short is a key determinant of near time price action. Spike moves often occur when the market is all one way.
17) Emotional Trading ?/SPAN> When you don pre-plan youe trades essentially it a thought and not an idea; thoughts are emotions and a very poor basis for doing trades. Do people generally say intelligent things when they are upset and emotional; I don think so.
18) Lack of Confidence ?Confidence only comes from successful trading. If you lose money early in your trading career it very difficult to gain true confidence; the trick is don go off half-cocked; learn the business before you trade.
19) Lack of Courage to Take a Loss ?/SPAN> There is nothing macho or gutsy about riding a loss, just stupidity and cowardice. It takes guts to accept your loss and wait for tomorrow to try again. Getting married to a bad position ruins lots of traders. The thing to remember is the market does crazy things often so don get married to any one trade; it just a trade. One good trade will not make you a trading success; rather it monthly and annual performance that defines a good trader.
20) Not Focusing on the Trade at Hand ?/SPAN> There is no room for fantasizing in successful trading. Counting up and mentally spending profits you haven made yet is mental masturbation and does you no good. Same with worrying about a loss that hasn happened yet. Focus on your position and have a reasonable stop loss in place at the time you do the trade. Then be like an astronaut ?sit back and enjoy the ride; no sense worrying because you have no real control; the market will do what it wants to do.
21) Interpreting FOREX News Incorrectly ?/SPAN> Fact is the press only has a very superficial understanding of the news they are reporting and tend to focus on one element and miss the point. Learn to read the source documents and understand it for real.
22) Lucky or Good ?Your account balance changes don tell you the whole story about your trading; fact is if your taking a lot of risk and making money you will eventually crash and burn. Look at the individual trade details; focus on your big loses and losing streaks. Ask yourself this; if I had a couple of consecutive losing streaks or a couple of consecutive big loses, how would my account balance look. Generally, traders making money without big daily loses have the best chance of sustaining positive performance. The others are accidents waiting to happen.
23) Too Many Charity Trades ?/SPAN> When you make money on a well thought out trade don give back half on a whim; invest your profits from good trades on the next good trade.
24) Courage Under Fire ?/SPAN> When a policeman breaks down the door to a drug dealers apartment he is scared but he does it anyway. When a fireman climbs onto the roof of a burning building he is scared but does it anyway; and gets the job done. Same with trading; it ok to be scared but you have to pull the trigger; no trigger ?no trades ?no profits ?no trader.
25) Quality Trading Time ?/SPAN> I suggest 3 hours a day of quality, focused trading time; that about all your brain allows. When your trading being 100% focused; half way is bullshit?it doesn work. Don even think that time spent in front of the computer watching the rates has any correlation to profitability; it doesn. Spend less time but when your trading be 100% focused on trading.
26) Rationalizing ?/SPAN> Killer. Absolute Killer. Put your trade on and let it run. If it hits your reasonable pre-determined stop your out. Think of yourself as a prizefighter; you just got knocked out. Moving your stop is like getting up after being crushed with a knockout blow; it pointless; things will only get worse. Don ignore the obvious; your wrong ?get out. Come back the next day and try again. A small loss will not hurt you; a catastrophic loss will.
27) Mixing Apples and Oranges ?Have you ever done this; you see the EURUSD trading higher so you buy GBPUSD because it asn moved yet? That a mistake. Most of the time the reason the GBPUSD hasn moved yet is because its already overbought or some 4:30am UK news was bearish. Don mix apples and oranges; if EURUSD looks bid buy EURUSD.
28) Avoiding the Hard Trades ?/SPAN> Bank FX traders have an axiom; the harder the trade is to do the better the trade. This I learned from experience; when I needed to buy EURUSD and it was hard to get them that when it necessary to pay up and get the business done. When it easy to get them then sit back and wait for better levels. So if your trying to get into a trade or more importantly get out of a trade don putz around for a few points; get your business done.
29) Too Much Detail ?/SPAN> If your trading more than 2 indicators then you need to clean house. Having many indicators stifles trading and finds reasons not to trade. A setup and a trigger is all you need.
30) Giving Up Too Easy ?/SPAN> Your first trade of the day may not be your best but certainly it no reason to quit. I have a preset daily trading limit and I use it; you can make money by making excuses; getting trades wrong is natural and should be expected.
31) Jumping the Gun ?/SPAN> Don be penny wise and dollar foolish; wait for your trade signal to be clear; put on your trade and give it a decent size stop loss so that you don get knocked out by random noise. Do trades don?buy lottery tickets (extremely tight stops).
32) Afraid to Take a Loss - trading is not personal; it business. Don think that a poor trade is a reflection on you. It could be your just ahead of your time or a commercial order hits the market and temporarily creates a small unexpected move. Again, place your stop beforehand and NEVER increase your pre-determined risk; if it going bad it will probably get worse; I think that Einstein n motion stays in motion?
33) Over-Relying on Risk Reward ?There is zero advantage in risk reward; if you put a 20 point stop and a 60 point profit your chances are probably 3-1 that you will lose; actually with the spread its more like 4 to 1 (from entry point if it goes down 17 points you lose or up 63 you win; 17/63 is close to 4-1).
34) Trading for Wrong Reasons ?Because the EURUSD is going up is not in itself a reason to buy. Buying EURUSD because its not moving so little risk is even worse; youe paying the toll (spread) without even a hint that you will get a directional move. If your bored don trade; the reason your bored is there is no trade to do in the first place.
35) Rumors ?Rumors are rumors almost 100% of the time; think about where in the motion you heard the rumor; if EURUSD is up 50 points in last 15 minutes and the rumor is dollar negative, well then you missed it. Whenever you trades determine where in the motion you are entering.
36) Trading Short-term Moving Average Crossovers ?This is the money sucker of the century. When the shorter term moving average cross the longer term moving average it only means that the average price in the short run is equal to the average price in the longer run. For the life of me I cannot understand why this is bullish or bearish. Easy to set up on software, complete with lights, bells and whistles, and good for the seller getting thousands for the software but in terms of creating profit it a zero.
37) Stochastic ?Another money sucker. Personally I think this indicator is used backwards; when it first signals an overdone condition that when I think the big spike in the verdone?currency pair occurs. To be overbought means strong and oversold means weak. Try buying on the first sign of overbought and selling on the first sign of oversold; youl be with the trend and likely have identified a move with plenty of juice left. So if %k and %d are both crossing 80; buy! (Same on sell side; sell at 20)
38) Wrong Broker ?A lot of FOREX brokers are horrible; get a good one. Read forums and chats in several different places to get an unbiased opinion.
39) Simulated Results ?Watch out for lack box?systems; these are trading systems that don divulge how the trade signals are generated. Great majority of them are absolute garbage. They show you a track record of extraordinary results but think about it; if you could build a trading system with half a dozen filters using the benefit of hindsight, couldn you too come up with a great system. Of course going forward is an entirely different story. High-speed number crunching capabilities allows for building great hindsight trading systems; BEWARE.
40) Inconsistency ?Every business (FOREX trading included) requires a business plan (trading plan). Unless you have taken the time to write down a set of rules that you can and will follow, it likely your trading will remain unfocused and directionless. Make a plan, have rules, follow them set goals that are realistic and you will achieve them.
41) Master of None ?Focus on one currency for technical trading; each currency has a unique way of trading and unless you get intimate with it you will never truly understand its underlying idiosyncrasies. Don spread yourself too thin ?focus ?master one currency at a time.
42) Thinking Long Term ?Don do it. Stay in the moment. Especially if youe a day trader. It doesn matter what happens next week or next month, if your trading with 30 to 50 point stops restrict your thought process to what happening right now. That is not to stay the long-term trend is not important; it is to say the long-term trend will not always help you when your trading a significantly shorter time frame.
43) Overconfidence ?Trading is not easy; statistics show 95% failure rate. If your doing well don take your success for granted; always be on the lookout for ways to improve what youe doing.
44) Getting Pumped Up ?/SPAN> The trick is to maintain an even keel; when you are in a trade you want to think exactly as you would if you didn have a trade on. To do this requires a relaxed disposition; this is not a football game; don get psyched up; relax and try to enjoy it.
45) Staying in the Game ?I don recommend demo trading because traders learn bad habits when trading with play money. I also don think etting it all hang out?right away is wise either. Start off doing trades and taking risk that is relatively small but still makes a difference to you if you win or lose; about a quarter to a third of what you expect to reach as your trading matures is reasonable.
Source from http://www.eurusdtrader.com
1) Knowledge Deficiency ?Most new FOREX traders don take the time to learn what drives currency rates (primarily fundamentals). When news or a statement is due out they must close out their positions and sit out the best trading opportunities. They are taught to only trade after the market calms down. So essentially they miss the whole move and then trade the random noise that follows a fundamental price move. Just think for a moment about technically trading the aftermath of a price move; there is no potential.
2) Overtrading - Trading often with tight stops and tiny profit targets will only make the broker rich. The desire to ust?make a few hundred dollars a day by locking in tiny profits whenever possible is a losing strategy.
3) Over leveraged - Leverage is a two way street. The brokers want you to use high leverage because that means more spread income because your position size determines the amount of spread income; the bigger the position the more spread income the broker earns.
4) Relying on Others ?/SPAN> Real traders play a lone hand; they make their own decisions and don rely on others to make their trading decisions for them; there is no halfway; either trade for yourself or have someone else trade for you.
5) Stop Losses ?/SPAN> Putting tight stop losses with retail brokers is a recipe for disaster. When you put on a trade commit to a reasonable stop loss limit that allows your trade a fair chance to develop.
6) Demo Accounts ?/SPAN> Broker demo accounts are a shill game of sorts; theye not as time sensitive as real accounts and therefore give the impression that time sensitive trading systems, such as short-term moving average crossovers can be consistently profitably traded; once you start dealing with real money reality is quick to set in.
7) Trading During Off Hours ?/SPAN> Bank FX traders, option traders, and hedge funds have a huge advantage during off hours; they can push the currencies around when no volume is going through and the end game is new traders get fleeced trying to trade signals. There is only one signal during off hours ?stay out.
8) Trading a Currency, Not a Pair ?/SPAN> Being right about a currency is half a trade; success or failure depends upon being right about the second currency that makes up the pair.
9) No Trading Plan - Make money is not a trading plan. A trading plan is a blueprint for trading success; it spells out what you see your edge as being; if you don have an edge, you don have a plan, and likely youl wind up a statistic (part of the 95% of new traders that lose and quit).
10) Trading Against Prevailing Trend ?/SPAN> There is a huge difference between buying cheaply on the way down and buying cheaply. What was a low price quickly becomes a high price when youe trading against the trend.
11) Exiting Trades Poorly ?/SPAN> If you put on a trade and it not working make sure you exit properly; don compound the damage. If youe in a winning trade don talk yourself out of the position because youe bored or want to relieve stress; stress is a natural part of trading; get use to it.
12) Trading Too Short-term ?If youe profit target is less than 20 points don do the trade; the spread you pay to enter the trade makes the odds way against you when you go for these tiny profits.
13) Picking Tops and Bottoms - Looking for bargains works well at the supermarket but not trading foreign exchange; try to trade in the direction the price is going and youe results will improve.
14) Being Too Smart ?/SPAN> The most successful traders I know are high school graduates. They keep it simple and don look beyond the obvious; their results are excellent.
15) Not Trading Around News Time ?/SPAN> Most of the big moves occur around news time. The volume is high and the moves are real; there is no better time to trade fundamentally or technically than when news is released; this is when the real money adjusts their positions and as a result the prices changes reflect serious currency flow (compared to quiet times when Bank traders rule the market with their customer order flow.
16) Ignore Technical Condition ?/SPAN> Determining whether the market is over-extended long or over-extended short is a key determinant of near time price action. Spike moves often occur when the market is all one way.
17) Emotional Trading ?/SPAN> When you don pre-plan youe trades essentially it a thought and not an idea; thoughts are emotions and a very poor basis for doing trades. Do people generally say intelligent things when they are upset and emotional; I don think so.
18) Lack of Confidence ?Confidence only comes from successful trading. If you lose money early in your trading career it very difficult to gain true confidence; the trick is don go off half-cocked; learn the business before you trade.
19) Lack of Courage to Take a Loss ?/SPAN> There is nothing macho or gutsy about riding a loss, just stupidity and cowardice. It takes guts to accept your loss and wait for tomorrow to try again. Getting married to a bad position ruins lots of traders. The thing to remember is the market does crazy things often so don get married to any one trade; it just a trade. One good trade will not make you a trading success; rather it monthly and annual performance that defines a good trader.
20) Not Focusing on the Trade at Hand ?/SPAN> There is no room for fantasizing in successful trading. Counting up and mentally spending profits you haven made yet is mental masturbation and does you no good. Same with worrying about a loss that hasn happened yet. Focus on your position and have a reasonable stop loss in place at the time you do the trade. Then be like an astronaut ?sit back and enjoy the ride; no sense worrying because you have no real control; the market will do what it wants to do.
21) Interpreting FOREX News Incorrectly ?/SPAN> Fact is the press only has a very superficial understanding of the news they are reporting and tend to focus on one element and miss the point. Learn to read the source documents and understand it for real.
22) Lucky or Good ?Your account balance changes don tell you the whole story about your trading; fact is if your taking a lot of risk and making money you will eventually crash and burn. Look at the individual trade details; focus on your big loses and losing streaks. Ask yourself this; if I had a couple of consecutive losing streaks or a couple of consecutive big loses, how would my account balance look. Generally, traders making money without big daily loses have the best chance of sustaining positive performance. The others are accidents waiting to happen.
23) Too Many Charity Trades ?/SPAN> When you make money on a well thought out trade don give back half on a whim; invest your profits from good trades on the next good trade.
24) Courage Under Fire ?/SPAN> When a policeman breaks down the door to a drug dealers apartment he is scared but he does it anyway. When a fireman climbs onto the roof of a burning building he is scared but does it anyway; and gets the job done. Same with trading; it ok to be scared but you have to pull the trigger; no trigger ?no trades ?no profits ?no trader.
25) Quality Trading Time ?/SPAN> I suggest 3 hours a day of quality, focused trading time; that about all your brain allows. When your trading being 100% focused; half way is bullshit?it doesn work. Don even think that time spent in front of the computer watching the rates has any correlation to profitability; it doesn. Spend less time but when your trading be 100% focused on trading.
26) Rationalizing ?/SPAN> Killer. Absolute Killer. Put your trade on and let it run. If it hits your reasonable pre-determined stop your out. Think of yourself as a prizefighter; you just got knocked out. Moving your stop is like getting up after being crushed with a knockout blow; it pointless; things will only get worse. Don ignore the obvious; your wrong ?get out. Come back the next day and try again. A small loss will not hurt you; a catastrophic loss will.
27) Mixing Apples and Oranges ?Have you ever done this; you see the EURUSD trading higher so you buy GBPUSD because it asn moved yet? That a mistake. Most of the time the reason the GBPUSD hasn moved yet is because its already overbought or some 4:30am UK news was bearish. Don mix apples and oranges; if EURUSD looks bid buy EURUSD.
28) Avoiding the Hard Trades ?/SPAN> Bank FX traders have an axiom; the harder the trade is to do the better the trade. This I learned from experience; when I needed to buy EURUSD and it was hard to get them that when it necessary to pay up and get the business done. When it easy to get them then sit back and wait for better levels. So if your trying to get into a trade or more importantly get out of a trade don putz around for a few points; get your business done.
29) Too Much Detail ?/SPAN> If your trading more than 2 indicators then you need to clean house. Having many indicators stifles trading and finds reasons not to trade. A setup and a trigger is all you need.
30) Giving Up Too Easy ?/SPAN> Your first trade of the day may not be your best but certainly it no reason to quit. I have a preset daily trading limit and I use it; you can make money by making excuses; getting trades wrong is natural and should be expected.
31) Jumping the Gun ?/SPAN> Don be penny wise and dollar foolish; wait for your trade signal to be clear; put on your trade and give it a decent size stop loss so that you don get knocked out by random noise. Do trades don?buy lottery tickets (extremely tight stops).
32) Afraid to Take a Loss - trading is not personal; it business. Don think that a poor trade is a reflection on you. It could be your just ahead of your time or a commercial order hits the market and temporarily creates a small unexpected move. Again, place your stop beforehand and NEVER increase your pre-determined risk; if it going bad it will probably get worse; I think that Einstein n motion stays in motion?
33) Over-Relying on Risk Reward ?There is zero advantage in risk reward; if you put a 20 point stop and a 60 point profit your chances are probably 3-1 that you will lose; actually with the spread its more like 4 to 1 (from entry point if it goes down 17 points you lose or up 63 you win; 17/63 is close to 4-1).
34) Trading for Wrong Reasons ?Because the EURUSD is going up is not in itself a reason to buy. Buying EURUSD because its not moving so little risk is even worse; youe paying the toll (spread) without even a hint that you will get a directional move. If your bored don trade; the reason your bored is there is no trade to do in the first place.
35) Rumors ?Rumors are rumors almost 100% of the time; think about where in the motion you heard the rumor; if EURUSD is up 50 points in last 15 minutes and the rumor is dollar negative, well then you missed it. Whenever you trades determine where in the motion you are entering.
36) Trading Short-term Moving Average Crossovers ?This is the money sucker of the century. When the shorter term moving average cross the longer term moving average it only means that the average price in the short run is equal to the average price in the longer run. For the life of me I cannot understand why this is bullish or bearish. Easy to set up on software, complete with lights, bells and whistles, and good for the seller getting thousands for the software but in terms of creating profit it a zero.
37) Stochastic ?Another money sucker. Personally I think this indicator is used backwards; when it first signals an overdone condition that when I think the big spike in the verdone?currency pair occurs. To be overbought means strong and oversold means weak. Try buying on the first sign of overbought and selling on the first sign of oversold; youl be with the trend and likely have identified a move with plenty of juice left. So if %k and %d are both crossing 80; buy! (Same on sell side; sell at 20)
38) Wrong Broker ?A lot of FOREX brokers are horrible; get a good one. Read forums and chats in several different places to get an unbiased opinion.
39) Simulated Results ?Watch out for lack box?systems; these are trading systems that don divulge how the trade signals are generated. Great majority of them are absolute garbage. They show you a track record of extraordinary results but think about it; if you could build a trading system with half a dozen filters using the benefit of hindsight, couldn you too come up with a great system. Of course going forward is an entirely different story. High-speed number crunching capabilities allows for building great hindsight trading systems; BEWARE.
40) Inconsistency ?Every business (FOREX trading included) requires a business plan (trading plan). Unless you have taken the time to write down a set of rules that you can and will follow, it likely your trading will remain unfocused and directionless. Make a plan, have rules, follow them set goals that are realistic and you will achieve them.
41) Master of None ?Focus on one currency for technical trading; each currency has a unique way of trading and unless you get intimate with it you will never truly understand its underlying idiosyncrasies. Don spread yourself too thin ?focus ?master one currency at a time.
42) Thinking Long Term ?Don do it. Stay in the moment. Especially if youe a day trader. It doesn matter what happens next week or next month, if your trading with 30 to 50 point stops restrict your thought process to what happening right now. That is not to stay the long-term trend is not important; it is to say the long-term trend will not always help you when your trading a significantly shorter time frame.
43) Overconfidence ?Trading is not easy; statistics show 95% failure rate. If your doing well don take your success for granted; always be on the lookout for ways to improve what youe doing.
44) Getting Pumped Up ?/SPAN> The trick is to maintain an even keel; when you are in a trade you want to think exactly as you would if you didn have a trade on. To do this requires a relaxed disposition; this is not a football game; don get psyched up; relax and try to enjoy it.
45) Staying in the Game ?I don recommend demo trading because traders learn bad habits when trading with play money. I also don think etting it all hang out?right away is wise either. Start off doing trades and taking risk that is relatively small but still makes a difference to you if you win or lose; about a quarter to a third of what you expect to reach as your trading matures is reasonable.
Source from http://www.eurusdtrader.com
Wednesday, August 09, 2006
Monday, August 07, 2006
Investment Forum You Can't Miss Out!
I alwasy surfing around to learn what people tought, Because I beleive the way they tought will influence their daily life, investment strategy, method or way to make decision and more.
European Social Investment ForumPan-European stakeholder network encourages and develops sustainable and responsible investment and...
www.eurosif.org/
Talkgold HYIP Investment ForumForum for discussion of high yield investment programs, foreign exchange, and general investing.
www.talkgold.com/forum/
UK Social Investment ForumMember association of the United Kingdom social, ethical, and green investment industry and community....
www.uksif.org/
US Social Investment ForumSIF online covers socially responsible investment, and green, environmental, ecological, ethical investing, by institutions, banks, organizations, ...
www.socialinvest.org/
1. The Motely Fool
2. Silicon Investor
3. Raging Bull
4. Yahoo Finance
5. StockChat
6. Stockhouse.com
7. Virtual Stock Exchange
8. Marketforum.com
9. BullandBear Financial Center
10. talkstock.com
I alwasy surfing around to learn what people tought, Because I beleive the way they tought will influence their daily life, investment strategy, method or way to make decision and more.
European Social Investment ForumPan-European stakeholder network encourages and develops sustainable and responsible investment and...
www.eurosif.org/
Talkgold HYIP Investment ForumForum for discussion of high yield investment programs, foreign exchange, and general investing.
www.talkgold.com/forum/
UK Social Investment ForumMember association of the United Kingdom social, ethical, and green investment industry and community....
www.uksif.org/
US Social Investment ForumSIF online covers socially responsible investment, and green, environmental, ecological, ethical investing, by institutions, banks, organizations, ...
www.socialinvest.org/
1. The Motely Fool
2. Silicon Investor
3. Raging Bull
4. Yahoo Finance
5. StockChat
6. Stockhouse.com
7. Virtual Stock Exchange
8. Marketforum.com
9. BullandBear Financial Center
10. talkstock.com
'Financial Intelligence & Financial Independence'- How to Achieve it?
Overview
A 2 hour candid talk on what it takes to achieve financial Intelligence and financial independence. The talk also enlightens the audience on ways to appreciate, save, make, grow and manage money. The talk creates an awareness in the audience on the need to have the Right Mental Attitude and Positive Financial Habits to achieve financial freedom.
Outline of Talk
At the end of the talk, the audience will be able to understand:-
v Myths and Truths about wealth
v The value of Money and the effects of inflation
v Financial Fitness Checkup - how healthy are you financially ?
v 10 mistakes people make in money management
v What is Financial Intelligence?
v 8 steps to achieve Financial Independence
v 20 Positive Financial Habits
v How to achieve the Wealth Ratio?
v The difference between Passive Income and Active Income
v Multiple streams of cashflow! ?how do you create it?
v The Right Mental attitude needed in achieving financial freedom
"TOO MANY PEOPLE SPEND MONEY THEY HAVE NOT EARNED, TO BUY THINGS THEY DON'T WANT, TO IMPRESS PEOPLE THEY DON'T LIKE.' Will Rogers
WHAT ABOUT YOU?
Date : 8th August, 2006 (Tuesday)
Time : 8.00pm sharp
Venue : Dewan Seroja, Kelab Golf Perkhidmatan Awam
Entry Fee : RM 20 Per person
PLEASE CONFIRM ATTENDANCE A.S.A.P AS SEATS ?????.ARE LIMITED!!!!!!
SPEAKER's PROFILE
Mr Karthigesu Sivalingam is the Principal Consultant of Global Dynamics, a training and consultancy firm. He obtained his Bachelor of Accountancy (Hons.) from University Malaya and his Masters in Business Administration (HR Management) from University of Warwick, UK.
Mr Karthigesu has more than 15 years experience in the field of training and consultancy. He has worked with Bank Negara Malaysia as an auditor and fulltime Trainer. He has also been a Resource person for Bankers Institute of Malaysia in the areas of Accounting , Financial Management , Credit Management , Cash Flow Analysis and Financial Analysis to train the employees of Commercial Banks , Finance Companies , Merchant Banks , Insurance Companies and Discounts Houses.
Mr Karthigesu has also researched, designed and facilitated training programs in the areas of Personal Development , Customer Service , Personality Profiles , Motivation, Communication, Change Management , Supervisory Skills , Leadership Skills , Management Skills, Team Building, Optimal Health and Financial Intelligence.
Some of his in-house clients are the Arab Malaysian Group, Akademi Percukaian Malaysia, Alstom Power, the Amanah Group, Bank Negara Malaysia, Bumiputra Commerce Bank Group, Caltex, Castrol, Celcom, the DRB Hicom Group, the Maybank Group, Malaysian Institute for Nuclear Technology, Malayan Rubber Board, MSE, Modenas, OCBC Bank, Star Publication, Sirim ,the Sunway Group, the Southern Bank Group etc.
He is currently on a quest to educate others on Financial Intelligence and Financial Independence. He has been conducting related talks for various corporate and non-profitable organizations in the past year. He is a much sought after speaker due to his frank, candid and humorous way of presenting his talks. The talks are very informative yet non-technical and easily understood by people of all levels.
Overview
A 2 hour candid talk on what it takes to achieve financial Intelligence and financial independence. The talk also enlightens the audience on ways to appreciate, save, make, grow and manage money. The talk creates an awareness in the audience on the need to have the Right Mental Attitude and Positive Financial Habits to achieve financial freedom.
Outline of Talk
At the end of the talk, the audience will be able to understand:-
v Myths and Truths about wealth
v The value of Money and the effects of inflation
v Financial Fitness Checkup - how healthy are you financially ?
v 10 mistakes people make in money management
v What is Financial Intelligence?
v 8 steps to achieve Financial Independence
v 20 Positive Financial Habits
v How to achieve the Wealth Ratio?
v The difference between Passive Income and Active Income
v Multiple streams of cashflow! ?how do you create it?
v The Right Mental attitude needed in achieving financial freedom
"TOO MANY PEOPLE SPEND MONEY THEY HAVE NOT EARNED, TO BUY THINGS THEY DON'T WANT, TO IMPRESS PEOPLE THEY DON'T LIKE.' Will Rogers
WHAT ABOUT YOU?
Date : 8th August, 2006 (Tuesday)
Time : 8.00pm sharp
Venue : Dewan Seroja, Kelab Golf Perkhidmatan Awam
Entry Fee : RM 20 Per person
PLEASE CONFIRM ATTENDANCE A.S.A.P AS SEATS ?????.ARE LIMITED!!!!!!
SPEAKER's PROFILE
Mr Karthigesu Sivalingam is the Principal Consultant of Global Dynamics, a training and consultancy firm. He obtained his Bachelor of Accountancy (Hons.) from University Malaya and his Masters in Business Administration (HR Management) from University of Warwick, UK.
Mr Karthigesu has more than 15 years experience in the field of training and consultancy. He has worked with Bank Negara Malaysia as an auditor and fulltime Trainer. He has also been a Resource person for Bankers Institute of Malaysia in the areas of Accounting , Financial Management , Credit Management , Cash Flow Analysis and Financial Analysis to train the employees of Commercial Banks , Finance Companies , Merchant Banks , Insurance Companies and Discounts Houses.
Mr Karthigesu has also researched, designed and facilitated training programs in the areas of Personal Development , Customer Service , Personality Profiles , Motivation, Communication, Change Management , Supervisory Skills , Leadership Skills , Management Skills, Team Building, Optimal Health and Financial Intelligence.
Some of his in-house clients are the Arab Malaysian Group, Akademi Percukaian Malaysia, Alstom Power, the Amanah Group, Bank Negara Malaysia, Bumiputra Commerce Bank Group, Caltex, Castrol, Celcom, the DRB Hicom Group, the Maybank Group, Malaysian Institute for Nuclear Technology, Malayan Rubber Board, MSE, Modenas, OCBC Bank, Star Publication, Sirim ,the Sunway Group, the Southern Bank Group etc.
He is currently on a quest to educate others on Financial Intelligence and Financial Independence. He has been conducting related talks for various corporate and non-profitable organizations in the past year. He is a much sought after speaker due to his frank, candid and humorous way of presenting his talks. The talks are very informative yet non-technical and easily understood by people of all levels.
Are You Winning? Calculating FOREX Profits and Losses
When trading currency you deal with much smaller divisions than when dealing with actual cash. For example the smallest denomination of US is currency is the penny ($0.01) but on the FOREX market it can be traded down to $0.0001. The smallest division that a currency can be traded at is known as a pip. A pip is short for Price Interest Point; this is sometimes also referred to as points. Currencies are traded in very large lots so even a small change in the value can create a significant profit or loss. If you are trading $100,000 in US dollars a single pip is worth $10 so a change of 60 pips or 6/10 of one cent will generate a profit or loss of $600 depending on the direction of the move.
When trading currencies various lot sizes are not unusual but 100,000 units are considered a standard lot. A single unit is what ever the name of that particular currency is for example when trading Japanese currency a single unit is the Yen. Some trades are done in lots of 10,000 these are commonly referred to as mini lots. Even though lots of various sizes are possible the majority of trades involve standard lots of 100,000 units.
The size of the pip is based on the currency type; different types of currencies have different pip sizes. For example the Yen pip is 0.01 where as the US dollar has a pip of 0.0001. Both the type of currency as well as the size of the lot determines the actual value of the pip. Using the US dollar as the quote currency (second currency) such as CAD/USD then the pip always equals $10 for a standard lot and $1 for a mini lot. For other currencies it is easiest to use a pip value calculator to determine the pip value.
In the FOREX market there are a variety of order types available for making trades. You need to have a solid working knowledge of the different order types to be a successful FOREX trader.
Market Orders - This is simply an order to buy or sell at the current market price. Market orders can be used to enter or exit a position. Market orders can be dangerous during times of high market volatility. The price can change significantly between the time that you enter your order and the time when it is actually recorded or executed. The amount that the market changes between the time that an order is placed and when it is executed is known as slippage. Depending on market conditions slippage can result in the gain or loss over several pips.
Limit Order - This is an order to buy or sell at a specific price. These are used to help you control your trades without having to constantly monitor the market. If you have a sell limit in place for a price higher than the current rate your order will be executed as soon as the market rate rises to match your limit. If you have a buy order in place to purchase a currency at below the current market price your order will not execute until the current rate drops to match your limit.
Stop Order - These are used to limit your losses if the market moves in the opposite direction of what you are expecting. This will cause your currency to be sold at below the market price or purchased above the current price. A stop loss is executed when the market crosses the threshold set by the trader when placing the order.
To be successful on the FOREX market it is essential that you learn to figure profit and losses and to use the various order types to their fullest potential.
About the Author
Ready to learn forex trading? Want to learn about FOREX Trading Signal.
Learn our FOREX day trading system completely free.
When trading currency you deal with much smaller divisions than when dealing with actual cash. For example the smallest denomination of US is currency is the penny ($0.01) but on the FOREX market it can be traded down to $0.0001. The smallest division that a currency can be traded at is known as a pip. A pip is short for Price Interest Point; this is sometimes also referred to as points. Currencies are traded in very large lots so even a small change in the value can create a significant profit or loss. If you are trading $100,000 in US dollars a single pip is worth $10 so a change of 60 pips or 6/10 of one cent will generate a profit or loss of $600 depending on the direction of the move.
When trading currencies various lot sizes are not unusual but 100,000 units are considered a standard lot. A single unit is what ever the name of that particular currency is for example when trading Japanese currency a single unit is the Yen. Some trades are done in lots of 10,000 these are commonly referred to as mini lots. Even though lots of various sizes are possible the majority of trades involve standard lots of 100,000 units.
The size of the pip is based on the currency type; different types of currencies have different pip sizes. For example the Yen pip is 0.01 where as the US dollar has a pip of 0.0001. Both the type of currency as well as the size of the lot determines the actual value of the pip. Using the US dollar as the quote currency (second currency) such as CAD/USD then the pip always equals $10 for a standard lot and $1 for a mini lot. For other currencies it is easiest to use a pip value calculator to determine the pip value.
In the FOREX market there are a variety of order types available for making trades. You need to have a solid working knowledge of the different order types to be a successful FOREX trader.
Market Orders - This is simply an order to buy or sell at the current market price. Market orders can be used to enter or exit a position. Market orders can be dangerous during times of high market volatility. The price can change significantly between the time that you enter your order and the time when it is actually recorded or executed. The amount that the market changes between the time that an order is placed and when it is executed is known as slippage. Depending on market conditions slippage can result in the gain or loss over several pips.
Limit Order - This is an order to buy or sell at a specific price. These are used to help you control your trades without having to constantly monitor the market. If you have a sell limit in place for a price higher than the current rate your order will be executed as soon as the market rate rises to match your limit. If you have a buy order in place to purchase a currency at below the current market price your order will not execute until the current rate drops to match your limit.
Stop Order - These are used to limit your losses if the market moves in the opposite direction of what you are expecting. This will cause your currency to be sold at below the market price or purchased above the current price. A stop loss is executed when the market crosses the threshold set by the trader when placing the order.
To be successful on the FOREX market it is essential that you learn to figure profit and losses and to use the various order types to their fullest potential.
About the Author
Ready to learn forex trading? Want to learn about FOREX Trading Signal.
Learn our FOREX day trading system completely free.
8 Penny Stock Strategies Separating the Gated Community Dweller from a Cardboard
Those who want to become successful traders need to know how to invest in penny stocks without losing their shirt. The list below contains 8 penny stock strategies that separate the successful (and rich) traders from the ones who jump in without a clue. If you have a desire for upper body warmth, ask yourself if you are using all of these strategies in your trading:
1. Don't trade on unregulated exchanges: The SEC regulates stocks sold on the NYSE and NASDAQ exchanges. These companies are required to fill out quarterly and annual reports. The reports give investors a detailed view of a company's overall financial health and future outlook. You can also read free reports such as ones from Reuters, giving gain access to all the latest inside information about a particular company. Don't buy a stock if you have no idea of its financial viability.
2. Diversify your Stock Investment: One very valuable tip to remember when trading penny stocks is to figure out a maximum percentage that you will invest in each stock. Also, purchase a variety of stocks so all of your money is not all in one place. This will of course minimize your risk of a devastating loss. Successful traders will tell you the secret to making money really lies in minimizing losses.
3. Beware of Stock Investment Scams: Don't invest in a company that you know very little about. If you aren't careful, you could end up with stock that has no real monetary value. Make sure you do your research and learn as much about the company in which you will invest before you make a decision to purchase stock the stock.
4. Prepare yourself for the Ups and Downs of Trading: Sometimes you will profit from of a trade and other times you will lose money. This will happen no matter how careful you are. If you lose, make sure you do not let your emotions get the best of you. Take a short break and analyze the previous moves you made while thinking of how you could improve in the future. If you have several losing trades in a row, don't purchase any real stock for a short time. Revert back to a stock simulation until your trades become profitable again.
5. Evaluate the risk of Stock Investment: Making money from penny stocks is not a sure thing. If you don't want to end up homeless and begging on the street, you will learn as much as you can about what works on the penny stock market and do your due diligence. If you are willing and prepared to accept the risk of investing in penny stocks, it could turn out to be a profitable investment avenue for you.
6. Educate yourself: Visit reputable websites that can teach you about all aspects of trading. Don't miss the ones offering stock trading simulation software, often known as paper trading. You can find investment information in various magazine and newspaper publications, as well as in other periodicals. Other ways of learning include purchasing ebooks, stock trading courses, or systems developed by successful traders. Make sure if you buy one of these that it has a money back guarantee. Also, if any of the information in this article is new to you, just type in the term in a search engine and make sure you know it inside and out. The more you know, the more you'll make.
7. Hire a Broker You Trust: Another aspect of trading is to make sure you hire a stockbroker that you can trust to complete honest and fair trading transactions. You will want to carefully consider all your options before choosing your broker.
8. Don't Believe Message Board Opinions: Where do you think all of the scam artists and stock manipulators go to try to get people to buy the stock they have already purchased? Yep, message boards or chat rooms. This should be obvious, but many people still believe that hot tip they are reading about, or insider info they become aware of can make them money.
Hopefully this article has given you some good ideas to use to improve your penny stock trading profits. You can view other similar articles at the links below.
Related articles:
How to find the best penny stocks: Best Penny Stocks
Those who want to become successful traders need to know how to invest in penny stocks without losing their shirt. The list below contains 8 penny stock strategies that separate the successful (and rich) traders from the ones who jump in without a clue. If you have a desire for upper body warmth, ask yourself if you are using all of these strategies in your trading:
1. Don't trade on unregulated exchanges: The SEC regulates stocks sold on the NYSE and NASDAQ exchanges. These companies are required to fill out quarterly and annual reports. The reports give investors a detailed view of a company's overall financial health and future outlook. You can also read free reports such as ones from Reuters, giving gain access to all the latest inside information about a particular company. Don't buy a stock if you have no idea of its financial viability.
2. Diversify your Stock Investment: One very valuable tip to remember when trading penny stocks is to figure out a maximum percentage that you will invest in each stock. Also, purchase a variety of stocks so all of your money is not all in one place. This will of course minimize your risk of a devastating loss. Successful traders will tell you the secret to making money really lies in minimizing losses.
3. Beware of Stock Investment Scams: Don't invest in a company that you know very little about. If you aren't careful, you could end up with stock that has no real monetary value. Make sure you do your research and learn as much about the company in which you will invest before you make a decision to purchase stock the stock.
4. Prepare yourself for the Ups and Downs of Trading: Sometimes you will profit from of a trade and other times you will lose money. This will happen no matter how careful you are. If you lose, make sure you do not let your emotions get the best of you. Take a short break and analyze the previous moves you made while thinking of how you could improve in the future. If you have several losing trades in a row, don't purchase any real stock for a short time. Revert back to a stock simulation until your trades become profitable again.
5. Evaluate the risk of Stock Investment: Making money from penny stocks is not a sure thing. If you don't want to end up homeless and begging on the street, you will learn as much as you can about what works on the penny stock market and do your due diligence. If you are willing and prepared to accept the risk of investing in penny stocks, it could turn out to be a profitable investment avenue for you.
6. Educate yourself: Visit reputable websites that can teach you about all aspects of trading. Don't miss the ones offering stock trading simulation software, often known as paper trading. You can find investment information in various magazine and newspaper publications, as well as in other periodicals. Other ways of learning include purchasing ebooks, stock trading courses, or systems developed by successful traders. Make sure if you buy one of these that it has a money back guarantee. Also, if any of the information in this article is new to you, just type in the term in a search engine and make sure you know it inside and out. The more you know, the more you'll make.
7. Hire a Broker You Trust: Another aspect of trading is to make sure you hire a stockbroker that you can trust to complete honest and fair trading transactions. You will want to carefully consider all your options before choosing your broker.
8. Don't Believe Message Board Opinions: Where do you think all of the scam artists and stock manipulators go to try to get people to buy the stock they have already purchased? Yep, message boards or chat rooms. This should be obvious, but many people still believe that hot tip they are reading about, or insider info they become aware of can make them money.
Hopefully this article has given you some good ideas to use to improve your penny stock trading profits. You can view other similar articles at the links below.
Related articles:
How to find the best penny stocks: Best Penny Stocks
Friday, August 04, 2006
Choosing Your Investment Training Curriculum
The information and free online investment portfolio management resources available to us today via the internet have completely altered the process and amount of online portfolio management control that we as individuals have with our personal financial investment structure and goals. An online portfolio management structure in which you have almost full control that is sound and consists of a platform that is based around your personal financial characteristics is very feasible and much simpler than ever before.
The problem many individual investors have when first starting to construct a portfolio based on their personal financial goals and characteristics is where to begin and how to develop a management process that they are confident in and comfortable with. Although it may seem like a very daunting task and one that is extremely complicated the opposite is really the case.
To begin developing a sound financial portfolio there are two very important education criteria that an individual must acquire to form a solid foundation to build upon. First an education and basic knowledge of the fundamentals, terminology, analysis strategies, theories and tools must be acquired. Second an understanding of the process involved in research, where to find the research data and how to interpret it is of the highest necessity. A quality understanding and knowledge of these two factors are without question a must if one is to be successful. Now by an education this in no way implies that we must obtain a formal education such as a degree in finance or an MBA. If we want to manage a business or pursue a banking career then this type of formal education would most likely be appropriate. But we are only looking to control our financial future with confidence and success and this does not require the formal education previously mentioned. This education can be very easily gained through a quality home study course or a series of seminars. There are several quality individual investment related curriculum available in both seminar or home e-learning format.
The key is to ensure that you choose the right curriculum in which your investment education needs are based. It should be structured upon sound - realistic content not claims of overnight success and huge fortunes with small print disclaimers of "these are not typical results". Now I would recommend "Successful Online Portfolio Management", as it does deliver a very quality and full content scope curriculum, however it is important to remember I am not you therefore an investment curriculum that meets your specific characteristics providing a learning environment that you feel confident and comfortable with may not resemble my characteristics. Nobody knows what your personal financial situation and goals are better then you. Therefore while you should most definitely research any recommendations that you have by all means it still should be you who makes the final decision and that decision should be based on your financial overall characteristics.
Next, the content of the educational investment curriculum must not only contain quality but also the full spectrum. By this I mean that the curriculum should cover stocks, bonds, mutual funds, as well as cash investments (i.e. savings - CD's - money market accounts, etc.). Ensure that it covers both Fundamental and Technical analysis. An educational curriculum must also contain a variety of financial analysis tools, resources and the purpose for them. If the educational curriculum does not instruct you about principles of proper investment research it is not worth a single penny. If you do not know what to look for, where to find it and what to do with it once you have it there is no possible way that you can develop a portfolio that produces a return on your investment. You should just pay someone else to do it for you. I can not stress this enough, quality research is not very difficult given the screening software and other free online investment portfolio management resources on the internet. Therefore your curriculum must provide the locations of where, their purpose and when to use these tools. Sound research is probably the most important key to structuring your portfolio and there are so many free resources available. There is no excuse for any curriculum that does not provide this information. An effective and good curriculum will also provide other educational resources available that may offer greater detail or maybe tools that can be very useful. Such as it may cover the topic of risk management and the importance of its use, but it would also provide the URL location of a web site that is free, deals with this subject only and provides several analysis tools to properly evaluate your personal risk factors.
Any quality curriculum will offer an unconditional guarantee therefore you can actually experience it hands-on to ensure that it meets your learning needs. Take advantage of this as it places all risk on the publisher so if it is not of sound content you can simply return it and get your money back with nothing lost. One thing to remember though when doing this, make sure that the company you are purchasing your curriculum from is of high caliber as this will be a reflection of the caliber of their product. Look at their marketing tools for professionalism and clean presentation. Be careful not to get caught up in real fancy and flashy techniques. Web sites that have fancy animation and video can be easily constructed but really have nothing to do with quality of the products offered. Look at the structure and the content of the site for a feel of their professionalism; this will be a reflection of their product. If they have taken the time to develop a professional and quality web site then they most likely have developed a professional and quality product as well.
In summary let's go over what you will want to be looking for with your educational curriculum:1 - Check out the publishers marketing content for quality, sound content and professionalism.2 - Verify that the content covers the full spectrum including all the entities and available analysis strategies.3 - Demand that the where's and how's of research resources are included in the documentation.4 - Ensure that the curriculum provides information of other resources in which to further you education and knowledge.5 - Utilize the return policy to ensure that the product is specifically what you need.
When shopping for the educational curriculum you are going to use to build your understanding of the content, knowledge of principles and guidance in the analytical processes remember that your understanding will only be as good as the information you are provided. So, if you will follow these five things listed above you will know that what you have purchased will be well worth the money you have invested.
About the Author
Scott G. Henderson, BSE/MBA, has written many articles about the subject of financial portfolio management. After years of personal experience, education and research he spent over 18 months writing and developing the educational curriculum "Successful Online Portfolio Management". If you would like to know more please click on this link: http://www.onlineinvestmentguide.com/
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