tag:blogger.com,1999:blog-61165875171605171512024-03-14T00:41:14.855-07:00forexwaseemhttp://www.blogger.com/profile/07639558378379576996noreply@blogger.comBlogger10125tag:blogger.com,1999:blog-6116587517160517151.post-12732523896853843782009-11-14T04:31:00.000-08:002009-11-14T04:31:49.785-08:0015 Major Day Trading HintsThe reports of the society making immeasurable gains in stocks markets have been delivered in newspapers around the world.So the first timer investors have been attracted to the stock market. Day trading is one of the organizations gaining in demand with investors. But this day trading has full of risks. However you can make immeasurable gains in day trading,you are also expected to expend huge money.On the other hand, if you want to do day trading the following tips and guidelines are here to make you succeed:<br />
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Who is day trader?<br />
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A person who actively associate within stock market and buys and sells frequently in a day to make quick income is called a day trader.<br />
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What are the following tips to succeed in day trading? Here are the 15 list of tips to guide you to succeed:<br />
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1. Study the fundamentals of the system like the functioning of the market, schedule to buy and sell, which way the stocks will be operate, and the long and short calls.You consider also learn to take care of the profits while cutting down the losses.<br />
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2. In view of excel in day trading is a time consuming process, apply the trading platform available on the trading websites before you actually start.<br />
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3. Avoid the thought of making losses let you to scare. Use strategies like stop orders to reduce your losses.<br />
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4. Do not worry, If you suffer some loss, as it is a portion of the process.<br />
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5. Stop trading, once you have earned your expected profit. Do not hunger after more money and throw away your profit.<br />
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6. Assuming that the market does not meet your expectations on each and every particular day, do not trade.<br />
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7. During the time that your experience in day trading increases, you gain the ability to foreknow the direction in which the stock price moves. But avoid to go for the lowermost or the topmost stocks.<br />
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8. If you find it crucial to decide in which way the market is going, do not trade but just paused and wait.<br />
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9. Keep up a record of the results of the day trading. It give permission you to learn the things which are effective, as well as ineffective.<br />
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10. Acquire some information about buying and selling tactics of successful day traders. These traders commonly sell when there is good news and buy when there is bad news.<br />
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11. Being aloof and professional is the main characteristics of being trader and don't be emotional.<br />
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12. Have confidence on your instincts as rely upon excessively on the analysis means skipping some good trading chances.<br />
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13. Be trained and use most important strategies to trade.<br />
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14. Concentrate and/or focus yourself only on a selected stocks. Sharpen your attention on various stocks will make it difficult for you to track the movement of each stock.<br />
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15. Educate yourself in a new trading strategies daily and use them to your benefit.waseemhttp://www.blogger.com/profile/07639558378379576996noreply@blogger.com0tag:blogger.com,1999:blog-6116587517160517151.post-26437928497672519132009-11-14T04:28:00.000-08:002009-11-14T04:28:54.622-08:00Forex Margin TradingComparing to other investment, the Foreign Exchange margin trading is one of the fairest and the most attractive investment method. <br />
The Foreign Exchange margin trading meaning the traders borrow loan from bank, finance organization or broker house to carry on the foreign currency trading. Generally, the financing proportion is above 20 times, which means the Forex traders’ fund may enlarge to 20 times to carry on the trading. The bigger the financing proportion, means the Forex traders just need to pay very less fund, for example, the financing proportion provided by the financial organization is 400 times, namely the lowest margin request is 0.25%, the traders just need to pay 25 US dollars, then he or she could trade as high as 10,000 US dollars, fully using the contra method to make big profit by only paying a very less price. <br />
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Besides the fund enlargement, another attraction of the Forex margin trading method is that it can be traded in both ways, you can make profit by buying the currency when the currency rise (makes many), or to sell a currency when the currency is dropping to make profit (short-selling), thus does not need to be restricted by the restriction so-called bear market is unable to make money.<br />
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Making Profit in the Foreign Exchange Market<br />
The currency fluctuate continuously due to reasons such as political, economical reasons, sometimes the changes could be extremely great, therefore, the Forex traders also can have the opportunity in among which makes a profit. For example, the Japanese Yen daily fluctuation is probably between 0.7% to 1.5%, Forex traders may make profit through buying and selling. All trading could be completed in a short time, the trading strategy could be carry up according to the market conditions, it is extremely flexible, even if the direction looks wrong, the lost could be stop immediately, the lost could reduce but profit potential is still great. Therefore, the Foreign Exchange margin trading is the most flexible and the most reliable investment method.<br />
Foreign Exchange Margin Trading elementary knowledgewaseemhttp://www.blogger.com/profile/07639558378379576996noreply@blogger.com0tag:blogger.com,1999:blog-6116587517160517151.post-2724683807351407762009-11-14T04:26:00.000-08:002009-11-14T04:26:58.603-08:00Introduction to FOREXBeing the main force driving the global economic market, currency is no doubt an essential element for a country. However, in order for all the countries with different currencies to trade with one another, a system of exchange rate between their currencies is needed; this system, is formally known as foreign exchange or currency exchange.<br />
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In the early days, the system of currency exchange is supported solely by the gold amount held in the vault of a country. However, this system is no longer appropriate now due to inflation and hence, the value of one’s currency nowadays is determined through the market forces alone. In order to determine the value of a currency’s exchange rate, two main types of system is used which is floating currency and pegged currency.<br />
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For floating exchange rate, its value is determined by the supply and demand of the global market where the supply and demand is bound by all these factors such as foreign investment, inflation and ratios of import and export. Normally, this system is adopted by most of the advance countries like for example UK, US and Canada. All of these countries have a similarity where their market is well developed and stable in economic terms. These countries choose to practice this system due to the reason where floating exchange rate is proven to be much more efficient compared to the pegged exchange rate. The reason behind this is because for floating exchange rate, the market itself will re-adjust the exchange rate real-time in order to portray the actual inflation and other economic forces. However, every system has its own flaw and so does the floating exchange rate system. For instance, if a country suffers from economic instability due to various reasons such as political issues, a floating exchange rate system will certainly discourage investment due to the high risk of suffering from inflationary disaster or sudden slump in exchange rate.<br />
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Another form of exchange rate is known as pegged exchange rate. This is a system where the value of the exchange rate is fixed by the government of a country and not the supply and demand of the market. This system is called pegged exchange rate because the value of a country’s currency is fixed to another country’s currency. As a result, the value of the pegged currency will not fluctuate unlike the floating currency. The working principle behind this system is slightly complicated where the government of a country will fixed the exchange rate of their currency and when there is a demand for a certain currency resulting a rise in the exchange rate, the government will have to release enough of that currency into the market in order to meet that demand. However, there is a fatal flaw in this system where if the pegged exchange rate is not controlled properly, panics may arise within the country and as a result of that, people will be rushing to exchange their money into a more stable currency. When that happens, the sudden overflow of that country’s currency into the market will decrease the value of their exchange rate and in the end, their currency will be worthless. Due to this reason, only those under-developed or developing countries will practice this method as a form to control the inflation rate.<br />
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However, the truth is, most of the countries do not fully practice the floating exchange rate or the pegged exchange rate method in reality. Instead, they use a hybrid system known as floating peg. Floating peg is the combination of the two main systems where one country will normally fixed their exchange rate to the US Dollars and after that, they will constantly review their peg rate in order to stay in line with the actual market value.<br />
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The Foreign exchange market, or commonly known as FOREX, is the largest and most prolific financial market because each day, more than 1 trillion worth of currency exchange takes place between investors, speculators and countries. From this, we can deduce that the actual mechanism behind the world of foreign exchange is far more complicated than what we may already know, and that, the information mentioned earlier is just the tip of an icebergwaseemhttp://www.blogger.com/profile/07639558378379576996noreply@blogger.com0tag:blogger.com,1999:blog-6116587517160517151.post-66130387247807721322009-11-14T04:23:00.000-08:002009-11-14T04:23:47.502-08:00Short Term Options TradingThere are many traders who still consider options and warrants to be long term trading markets, but options can even be traded short term. It is important to understand that trading options short terms is not dramatically different from trading any other market but there are a couple of options specifics that need to be taken into account. In short term trading, the aptitude to steer the short term market is a key component for continued success. As an equity trader one has to learn to trade with the short trend of the markets to reduce market risk.<br />
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An option trading is a strategy that does not depend on the market direction; in fact it does well in volatile markets. With options trading there are two methods through which you can enter a long trade and short terms trade. While a long fundamental trade can be entered either by buying a call or by selling a put, a short underlying trade can be entered either by buying a put or by selling a call.<br />
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In short term options trading calculating risk reward is yet another important point that trader need to well aware of. Calculating the risk reward can be defined as the amount trader would risk if he or she were wrong and the amount trader would make if he or she were right. If we don't figure out this number, the chances are more where we may find the stock that may go in favor but the option goes against.<br />
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If we compare long term and short term options trading, then both have their own advantages. However, buying short term options can be very beneficial as it gives more control. It very general that no one can exactly make prediction very clearly when it comes to stock trading. It's really hard to predict what will happen to a stock 3 months down the road. Though sometimes it is easier to predict which way the stock will be heading in just a few weeks as opposed to a few months. Thus, selling short term options allow capture more premiums over a longer time frame.<br />
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Apart from this, it even works well and provides an excellent way for novice traders to trade. This is because as the price movement is so fast and dynamic that when things happen, beginners may not know what to do and be able to do it quickly. Moreover, it is an enormously lively options trading method where options are bought and sold very quickly in order to gain profit from the least intraday price swing or change in volatility.<br />
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Today certainly short term option trading has gained its world-wide popularity. It has become extremely money-making method in the hands of options trading veterans and new comers in current extremely volatile market conditions.waseemhttp://www.blogger.com/profile/07639558378379576996noreply@blogger.com0tag:blogger.com,1999:blog-6116587517160517151.post-89783248175956884272009-11-14T04:22:00.000-08:002009-11-14T04:22:05.108-08:00Forex Options Market OverviewThe forex options market started as an over-the-counter (OTC) financial vehicle for large banks, financial institutions and large international corporations to hedge against foreign currency exposure. Like the forex spot market, the forex options market is considered an "interbank" market. However, with the plethora of real-time financial data and forex option trading software available to most investors through the internet, today's forex option market now includes an increasingly large number of individuals and corporations who are speculating and/or hedging foreign currency exposure via telephone or online forex trading platforms.<br />
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Forex option trading has emerged as an alternative investment vehicle for many traders and investors. As an investment tool, forex option trading provides both large and small investors with greater flexibility when determining the appropriate forex trading and hedging strategies to implement.<br />
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Most forex options trading is conducted via telephone as there are only a few forex brokers offering online forex option trading platforms.<br />
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Forex Option Defined - A forex option is a financial currency contract giving the forex option buyer the right, but not the obligation, to purchase or sell a specific forex spot contract (the underlying) at a specific price (the strike price) on or before a specific date (the expiration date). The amount the forex option buyer pays to the forex option seller for the forex option contract rights is called the forex option "premium."<br />
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The Forex Option Buyer - The buyer, or holder, of a foreign currency option has the choice to either sell the foreign currency option contract prior to expiration, or he or she can choose to hold the foreign currency options contract until expiration and exercise his or her right to take a position in the underlying spot foreign currency. The act of exercising the foreign currency option and taking the subsequent underlying position in the foreign currency spot market is known as "assignment" or being "assigned" a spot position.<br />
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The only initial financial obligation of the foreign currency option buyer is to pay the premium to the seller up front when the foreign currency option is initially purchased. Once the premium is paid, the foreign currency option holder has no other financial obligation (no margin is required) until the foreign currency option is either offset or expires.<br />
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On the expiration date, the call buyer can exercise his or her right to buy the underlying foreign currency spot position at the foreign currency option's strike price, and a put holder can exercise his or her right to sell the underlying foreign currency spot position at the foreign currency option's strike price. Most foreign currency options are not exercised by the buyer, but instead are offset in the market before expiration.<br />
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Foreign currency options expires worthless if, at the time the foreign currency option expires, the strike price is "out-of-the-money." In simplest terms, a foreign currency option is "out-of-the-money" if the underlying foreign currency spot price is lower than a foreign currency call option's strike price, or the underlying foreign currency spot price is higher than a put option's strike price. Once a foreign currency option has expired worthless, the foreign currency option contract itself expires and neither the buyer nor the seller have any further obligation to the other party.<br />
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The Forex Option Seller - The foreign currency option seller may also be called the "writer" or "grantor" of a foreign currency option contract. The seller of a foreign currency option is contractually obligated to take the opposite underlying foreign currency spot position if the buyer exercises his right. In return for the premium paid by the buyer, the seller assumes the risk of taking a possible adverse position at a later point in time in the foreign currency spot market.<br />
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Initially, the foreign currency option seller collects the premium paid by the foreign currency option buyer (the buyer's funds will immediately be transferred into the seller's foreign currency trading account). The foreign currency option seller must have the funds in his or her account to cover the initial margin requirement. If the markets move in a favorable direction for the seller, the seller will not have to post any more funds for his foreign currency options other than the initial margin requirement. However, if the markets move in an unfavorable direction for the foreign currency options seller, the seller may have to post additional funds to his or her foreign currency trading account to keep the balance in the foreign currency trading account above the maintenance margin requirement.<br />
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Just like the buyer, the foreign currency option seller has the choice to either offset (buy back) the foreign currency option contract in the options market prior to expiration, or the seller can choose to hold the foreign currency option contract until expiration. If the foreign currency options seller holds the contract until expiration, one of two scenarios will occur: (1) the seller will take the opposite underlying foreign currency spot position if the buyer exercises the option or (2) the seller will simply let the foreign currency option expire worthless (keeping the entire premium) if the strike price is out-of-the-money.<br />
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Please note that "puts" and "calls" are separate foreign currency options contracts and are NOT the opposite side of the same transaction. For every put buyer there is a put seller, and for every call buyer there is a call seller. The foreign currency options buyer pays a premium to the foreign currency options seller in every option transaction.<br />
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Forex Call Option - A foreign exchange call option gives the foreign exchange options buyer the right, but not the obligation, to purchase a specific foreign exchange spot contract (the underlying) at a specific price (the strike price) on or before a specific date (the expiration date). The amount the foreign exchange option buyer pays to the foreign exchange option seller for the foreign exchange option contract rights is called the option "premium."<br />
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Please note that "puts" and "calls" are separate foreign exchange options contracts and are NOT the opposite side of the same transaction. For every foreign exchange put buyer there is a foreign exchange put seller, and for every foreign exchange call buyer there is a foreign exchange call seller. The foreign exchange options buyer pays a premium to the foreign exchange options seller in every option transaction.<br />
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The Forex Put Option - A foreign exchange put option gives the foreign exchange options buyer the right, but not the obligation, to sell a specific foreign exchange spot contract (the underlying) at a specific price (the strike price) on or before a specific date (the expiration date). The amount the foreign exchange option buyer pays to the foreign exchange option seller for the foreign exchange option contract rights is called the option "premium."<br />
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Please note that "puts" and "calls" are separate foreign exchange options contracts and are NOT the opposite side of the same transaction. For every foreign exchange put buyer there is a foreign exchange put seller, and for every foreign exchange call buyer there is a foreign exchange call seller. The foreign exchange options buyer pays a premium to the foreign exchange options seller in every option transaction.<br />
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Plain Vanilla Forex Options - Plain vanilla options generally refer to standard put and call option contracts traded through an exchange (however, in the case of forex option trading, plain vanilla options would refer to the standard, generic forex option contracts that are traded through an over-the-counter (OTC) forex options dealer or clearinghouse). In simplest terms, vanilla forex options would be defined as the buying or selling of a standard forex call option contract or a forex put option contract.<br />
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Exotic Forex Options - To understand what makes an exotic forex option "exotic," you must first understand what makes a forex option "non-vanilla." Plain vanilla forex options have a definitive expiration structure, payout structure and payout amount. Exotic forex option contracts may have a change in one or all of the above features of a vanilla forex option. It is important to note that exotic options, since they are often tailored to a specific's investor's needs by an exotic forex options broker, are generally not very liquid, if at all.<br />
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Intrinsic & Extrinsic Value - The price of an FX option is calculated into two separate parts, the intrinsic value and the extrinsic (time) value.<br />
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The intrinsic value of an FX option is defined as the difference between the strike price and the underlying FX spot contract rate (American Style Options) or the FX forward rate (European Style Options). The intrinsic value represents the actual value of the FX option if exercised. Please note that the intrinsic value must be zero (0) or above - if an FX option has no intrinsic value, then the FX option is simply referred to as having no (or zero) intrinsic value (the intrinsic value is never represented as a negative number). An FX option with no intrinsic value is considered "out-of-the-money," an FX option having intrinsic value is considered "in-the-money," and an FX option with a strike price at, or very close to, the underlying FX spot rate is considered "at-the-money."<br />
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The extrinsic value of an FX option is commonly referred to as the "time" value and is defined as the value of an FX option beyond the intrinsic value. A number of factors contribute to the calculation of the extrinsic value including, but not limited to, the volatility of the two spot currencies involved, the time left until expiration, the riskless interest rate of both currencies, the spot price of both currencies and the strike price of the FX option. It is important to note that the extrinsic value of FX options erodes as its expiration nears. An FX option with 60 days left to expiration will be worth more than the same FX option that has only 30 days left to expiration. Because there is more time for the underlying FX spot price to possibly move in a favorable direction, FX options sellers demand (and FX options buyers are willing to pay) a larger premium for the extra amount of time.<br />
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Volatility - Volatility is considered the most important factor when pricing forex options and it measures movements in the price of the underlying. High volatility increases the probability that the forex option could expire in-the-money and increases the risk to the forex option seller who, in turn, can demand a larger premium. An increase in volatility causes an increase in the price of both call and put options.<br />
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Delta - The delta of a forex option is defined as the change in price of a forex option relative to a change in the underlying forex spot rate. A change in a forex option's delta can be influenced by a change in the underlying forex spot rate, a change in volatility, a change in the riskless interest rate of the underlying spot currencies or simply by the passage of time (nearing of the expiration date).<br />
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The delta must always be calculated in a range of zero to one (0-1.0). Generally, the delta of a deep out-of-the-money forex option will be closer to zero, the delta of an at-the-money forex option will be near .5 (the probability of exercise is near 50%) and the delta of deep in-the-money forex options will be closer to 1.0. In simplest terms, the closer a forex option's strike price is relative to the underlying spot forex rate, the higher the delta because it is more sensitive to a change in the underlying rate.waseemhttp://www.blogger.com/profile/07639558378379576996noreply@blogger.com0tag:blogger.com,1999:blog-6116587517160517151.post-41188176168020952202009-11-14T04:18:00.000-08:002009-11-14T04:18:05.174-08:00Trend Following System - Building a System For Triple Digit Annual GainsForex markets trend long term, they always have and they always will as long as we have a free market and the big trends which reflect the underlying economic cycle can last for many weeks, months or even years. If you learn to trend follow correctly you can make huge long term profits in around 30 minutes a day...<br />
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Many traders like to trade the market noise and trade short term but this is doomed to failure, as all short term volatility is random. If you trade the big trends you get better odds, more profits and spend less time on your trading. Lets look at trend following in more detail.<br />
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If you want to succeed at Forex trend following, you should keep the key points in mind below when formulating your Forex trading strategy.<br />
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Simple and Robust<br />
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The best trend following systems are simple and it's a fact that in Forex simple systems work better than complex ones, as they have fewer elements to break than complex ones. A graphic example of this is the free one we have on this site which has only one rule yet, test it and you will see how much money it makes. A Successful trend following system can be based on just looking at support and resistance and have a few indictors to confirm your view and that will work just fine.<br />
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Use Breakouts<br />
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All big trends start and continue from breakouts to new market highs or lows so if you are considering trend following, breakout methodology should be used in your Trading strategy. Breakouts are simple to understand and simply trade the reality of price change and trading breakouts is a highs odds way of trading Forex.<br />
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Trade Infrequently<br />
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I know traders that trade maybe once or twice a month and make triple digit gains and that's because they focus on the best high odds trades. You get nothing for effort in Forex trading, you're judged purely on results and if you are patient and wait for the best set ups you will increase your odds of success and reduce your work rate<br />
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Acceptance of Short Term Volatility<br />
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If you are tend following in Forex you are after trends that last for weeks, months or even years and you have to accept that you cannot predict tops or bottoms, you always have to give a bit back at the end of a trend and you also have to accept short term drawdown in equity against you as you follow the trend.<br />
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Long term trend following, requires patience and discipline but if you caught just 60% of every major trend, you would make a lot of money.waseemhttp://www.blogger.com/profile/07639558378379576996noreply@blogger.com0tag:blogger.com,1999:blog-6116587517160517151.post-36455982085797291912009-11-14T04:16:00.000-08:002009-11-14T04:16:25.559-08:00Forex Trading Signal - A Free Simple to Understand Equation Which Makes Big ProfitsHere we are going to look at a free Forex trading signal that makes big gains and has done for over 25 years and is used by some of the world's top traders in their Forex trading strategies. Let's take a look at it. <br />
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The signal doesn't even need trading software to generate it, you can actually do it in your head. The signal is credited to famous trader Richard Donchain who is considered the grandfather of modern trend following and he called it the four week Rule and this is the rule<br />
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1. When prices move to a new 4 month high buy a currency and hold it.<br />
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2. Wait for a new 4 week low to occur, liquidate the long and take a short position.<br />
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3. Always maintain a position long or short in the market and simply reverse on each new 4 week high or low.<br />
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The above rule could not be simpler but it works and if you test it, you will see how much money it makes and the reason it works is because it works on two pieces of logic which will never go out of date and there the following:<br />
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1. Markets trend up or down for sustained periods of time.<br />
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2. All major trends start and continue from major breakouts<br />
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This system over the long term, will catch a good chunk of profit from every major trend but despite the fact it works most traders won't use it for the following reasons:<br />
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1. They prefer the get rich quick route and buy a cheap automated software package with no independent verification of gains instead, the above Forex trading signal is proven and has a real track record over a quarter of a century.<br />
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2. It takes discipline to follow as its long term and traders have a problem with holding long term trends, they think trading frequently means more profits and its clear this is not true.<br />
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3. Most traders simply pass it buy because they think a signal so simple cant work but of course all the best systems are simple because they are so robust.<br />
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The 4 Week Rule, as stood the test of time and any trader can use it to seek Forex trading success. In the next article in this series we will look at how to add filters to the above trading signal to make it even more effective and also look at some of Richard Donchian's other Forex trading tools.waseemhttp://www.blogger.com/profile/07639558378379576996noreply@blogger.com0tag:blogger.com,1999:blog-6116587517160517151.post-65354217651017806492009-11-14T04:13:00.000-08:002009-11-14T04:13:00.403-08:00Forex signal provider? which one?So you decided to make full time leaving from foreign exchange market? Or you are going to supplement your income from here? You have set up yourself with proper broker available. I believe you spent hundred of hours in front of PC trying to put together all maths and physics involving currency market. Now you watching business news in the morning paper and following CNBC channel to be on the top with latest information from exchange market. You trading your demo account trying to figure out how to make it all work? So? Does it? No?<br />
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Face the fact that in currency market all is possible and there is no golden rule to follow. There are so many aspects to consider that you will need at least another head to set this puzzle together.<br />
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But do not worry there is a hope that can make it work.<br />
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Signal solutions for forex trading. People who traded forex for a long time and developed their own systems to enter and exit with profit strategies. They will share this knowledge with you for varieties of prices from usd49 to usd499 a month for those precious information. Problem is which one will suit you best. Are they scams? How do I know?<br />
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For medium advanced forex trader is almost impossible to choose proper forex signal system, which is not a scam, or at least not profitable. There is bulk of forex signals providers out there. They all offer their signal solution to trade currency with success.<br />
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Advice is that you will have to establish what type of trader are you? Do you want to trade quickly or maybe over the days or weeks? What losses can you manage and how much money you want to invest.<br />
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As long as you know al that it is a time to pick up signal trade provider.<br />
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Few things worth researching are: performance, service offered and rewievs of the signal. Search on forum for another users of the product you are interested in and ask for comment. Every profitable system should be up on collective2 with real track performance. Look for service offered. You will quickly find out that only few offer free trail-option to try signals before you pay. Demand performance evidence.<br />
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But while doing all that hard work choosing your automat forex signal system remember that you will have to totally follow it without exceptions to make most out of it. Any even small innovation may have dramatic results in your own gains.<br />
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Remember that your future profits will depend on your signal provider so calculate carefully and make smart decisions.for more go to http://www.rorexmoneysignal.comwaseemhttp://www.blogger.com/profile/07639558378379576996noreply@blogger.com0tag:blogger.com,1999:blog-6116587517160517151.post-35381117839358948462009-11-14T04:10:00.000-08:002009-11-14T04:10:06.350-08:00The Opportunities of trading the forex hedged grid systemI have seen the hedged grid system been used successfully (and highly unsuccessfully) over the last few years. Unfortunately the failures tend to discourage traders from taking advantage of this great system. I have found that the failures are mainly due to ignorance, impatience and greed (common reasons..<br />
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I have seen the hedged grid system been used successfully (and highly unsuccessfully) over the last few years. Unfortunately the failures tend to discourage traders from taking advantage of this great system. I have found that the failures are mainly due to ignorance, impatience and greed (common reasons for trading failure).<br />
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In a nutshell the grid system uses the following methodology. You start by buying and selling a currency. When the price moves a predetermined distance (grid leg) you cash in the positive leg, leave the negative leg and buy and sell again. Sooner or later the system goes positive and you would then cash in when it is positive.<br />
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This is a brief summary of the content of our free hedged grid trading course available on expert-4x.com. Please refer to this course for more details of how money is made. The attraction is that the system is reasonably mechanical, can be programmed and does not take much supervision as exclusively entry orders are used.<br />
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Money is made when the price retraces 100%, 50%, 33% at various levels. This starts looking like a strategy that supports the Fibonacci concept. The grid system is also based on the nature of the market to trade sideways 80% of the time and to trend 20% of the time.<br />
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The dangers are that what if the price does not retrace and continues to trend. The Grid system can not make money in a trending market – full stop. One has to realize that. You therefore need Strategies to minimize damage during these periods:-<br />
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Firstly I have found that the biggest mistake made by traders is that they select a very small grid leg sizes e.g. 20 to 30 pips. This is a recipe for disaster. The trick is to use big leg sizes between 150 and 300 pips. What this does is that it sometimes turns a trending phase into movement in a sideways market. I would typically use 300 pips for the GBPJPY and 150 pips for the EURUSD for instance.<br />
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Secondly there is no rule that says that the legs have to be the same size. So I change my leg sizes in trending markets to be even bigger. If I started with 150 for the 1st leg I would go to 200 for the 2nd leg and 250 for the 3rd leg etc. This makes sure that I am carrying less loss making transactions in a trend.<br />
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Thirdly – sometimes it is wise to increase the number of lots with the trend compared to the numbers against the trend in a good trend. However be aware of having the same number of sell and buy transactions. All you will have done was lock in your current status in a 100% hedge.<br />
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Fourthly – This is the biggest change and most important one that I personally have made in my grid trading strategy. Always cash in all your transactions when your system is positive and when the price reaches the end of one of your grid legs. By cashing in you are reducing the risk of carrying negative lots in a trending market. This also gives you an opportunity to re-assess the market conditions.<br />
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Fifthly:- Cash in a start again is always an option. One of my strategies is to cash in all my open positions when the 3rd leg of my grid is reached and start again. Experience has taught me that this is a short term pain that goes away very quickly and is soon forgotten.<br />
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People that have traded the grid system will immediately see how the above approaches will reduce the risks of exponential losses building up in a strongly trending market. Please feel free to contact Mary McArthur at marymcarthur@expert4x.com for clarification on any items discussed above. She has numerous examples of successful applications of grid trading<br />
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This article is part of a series and many more will follow on Grid trading, money management and Forex Trading Strategies.waseemhttp://www.blogger.com/profile/07639558378379576996noreply@blogger.com0tag:blogger.com,1999:blog-6116587517160517151.post-63819414762037981952009-11-14T04:00:00.000-08:002009-11-14T04:00:15.099-08:00Forex Trading System - A Key To Successful Forex Trading And Trading For A LivingLosing money in forex?Every one has his days when no matter how well he has planned out his trades, he may find some of his trades not performing to what is planned. It is only natural for one to feel upset, but for the follower of a forex trading system, making money or losing money from that trade...<br />
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Losing money in forex?<br />
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Every one has his days when no matter how well he has planned out his trades, he may find some of his trades not performing to what is planned. It is only natural for one to feel upset, but for the follower of a forex trading system, making money or losing money from that trade is not the paramount objective.<br />
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Why is this so?<br />
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For the trader who employs a forex trading system, he can still face the losing trade with a smile, because he has had followed through the trading signals in a disciplined way, and it is only when a trader follows a system, he can be sure of keeping his losses small and to live to trade again another day.<br />
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By using a forex trading system, the trader can have a cool head, and can face his trades rather unemotionally. He can execute his trades following pre-determined price levels of initial stop loss, trailing loss and computed and projected price profit.<br />
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He knows his tolerable level of loss, his threshold of pain - and of course, his risk to reward ratio even before he trades.<br />
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Now when a trader has a trading system and follows through the trading plan, making profits is a natural result when he makes a correct trade. But when his trade is wrong, his forex trading system will very quickly show him that the direction of his trade is wrong, so that he is out of the game fairly quickly.<br />
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I am often flabbergasted at some very broad claims of some traders who condemn day trading systems and relegate them to the garbage bin. When you look at forex trading systems, review them quickly by peer recommendation whenever possible. By peer recommendation, I mean you can ask existing traders their experience on the trading system, and how they are doing with it. Posting to the numerous reliable trading forums will allow you to receive some independent reviews fairly quickly. At the same time, my personal experience, and that of many other professional traders is that day trading can be profitable, though it is never easy to day trade. Otherwise, how is it that so many day traders are able to earn their income day trading the short swings of the market daily for a living? So it is important for you to have a broad view of forex trading systems if you are contemplating of learning or purchasing any trading system that relates to day trading.<br />
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If you ever wish to trade successfully, whether you day trade or swing trade, it is important that you have a trading system that will allow you to approach trading in a disciplined manner. It is only when you are a disciplined trader that you can see consistent large gains and small losses.waseemhttp://www.blogger.com/profile/07639558378379576996noreply@blogger.com0