Forex Mentalist
Go Mental About Forex!
Forex Trading Strategies: Leveraged Trading
Sep 2nd
Most brokers these days advertise leverage as one of the selling points of opening an account with them. In simple terms, leverage in the Forex world refers to the ability to control large trading volumes with a small investment. It is commonplace to find brokers advertising leverage of 100:1. Simply put, this means that for every dollar you deposit you can trade $100.
In this example, the broker is saying that he will ‘lend’ you the money to make your trade, if you put forward 1% of that trade as a security against it. That 1% is called a margin: the percentage of the total trade required as collateral. This 1%, when expressed as leverage becomes 100:1 (a security of 1 is required for every 100 traded). Some brokers offer even greater leverage, such as 200:1 and 400:1 (which expressed as margins are 0.5% and 0.25% respectively).
So, by using leverage it is possible to fund an account with just $1000, and you could control trades valuing up to $100,000 (assuming the leverage is 100:1). This almost sounds too good to be true, especially for someone new to Forex who has a relatively small amount to begin trading with.
Everything you have read so far on leveraged trading is true, and traders are using leverage as a way of controlling large sums with small margins. There are also traders however, that have fallen foul of relying too heavily on leverage in their trading and lost more than they bargained for. And so we come across a case of ‘Caveat Emptor’!
What many new traders who fall for the allure of leverage advertised by brokers don’t realise, is that the quoted leverage available is the maximum leverage allowed on your account. You don’t actually have to use all of it. In fact, it is best to use as little as you can, because the more leverage you use, the more you are at risk from fluctuations in your trade value.
Going back to our example using a 1% margin to buy lots to the value of $100,000 (leveraging your $1000 by 100%). You now have open trades worth $100,000, but only a breathing space of $1000. If your lots fell in value by a mere 1%, your $1000 would be wiped out and your broker would make a ‘margin call’ (this means some or all of your trades would be closed automatically).
You may want to put in place a stop loss to prevent this happening, further narrowing your breathing space somewhat. Then we have the spread put in place by your broker, now you find youself with very little room to manouvre. Sure, your lots may increase in value, even by enough to make a profit after the spread. However, Forex markets can be volatile and your lots could easily dip below your stop loss before turning around and becoming profitable. Because you were too heavily leveraged, your trade closed at a loss because you had no room to breathe
Sensible traders will not leverage their accounts too heavily. Instead of taking the maximum 100:1 on offer, a much more level-headed option would be to take say 20:1 (which would be a 5% margin). Now I am not suggesting that taking an account you have funded with $1000 and putting it all at risk on the same trade is a good idea, but doing so with a 5% margin now gives you more breathing space.
With this example, you would now control lots to a value of $20,000, and they would have to fall by 5% in value for your broker to make a margin call. You can now place a stop loss that gives you room for a possible dip without your trades closing out before they turn into profit
Leveraged trading will always be a useful tool to allow traders to increase their capacity to trade, but for the inexperienced trader it can be a hard lesson in how a small movement in the market against you could be disastrous. Brokers tend to focus their attention on the maximum: the maximum leverage you can use on your account and the greater your risk if things move against you. As a trader you should focus on the minimum: the minimum amount you need to ‘borrow’ from the broker to trade.
Quick And Easy Forex Trading is an essential tool for anyone trying to learn to trade Forex profitably. It covers all the topics you need to know about, along with some very useful forex trading tips to help you kick-start your trading career.
To get a free chapter from Quick And Easy Forex Trading, simply fill out the form on the right of this page. Thank you.
Forex Trading Tips – Three Vital Rules To Successful Forex Trading
Aug 27th
Are you looking for some forex trading tips that will put you on the ladder to success?
The world of forex trading is a complex one, and for anyone new to the game the amount of information you are faced with can seem quite daunting. It is often tempting for the newcomer to try and ‘learn as you go’ rather than sit and study the boring theory. If that is you, then please take some time to read through these basic steps to trading forex:
Step 1 – Don’t jump in without learning at least the basics. Those that do will be in for a rude awakening, the forex market is too complex to just pick up the bat and run – you need to gain knowledge before you start to play!
Step 2 – Decide on a strategy and stick to it. Once you have decided on a strategy you believe can work for you, the worst thing you can do is to deviate from it. A successful trader is a disciplined one that trusts his or her system implicitly. Occasional losses are expected, as long as the strategy is delivering a good percentage of winning trades.
Step 3 – Test your strategy before you risk anything. You can back-test any trading system to see how it has performed in the past, but it is also possible to carry out ‘live’ testing. This is done by trading with a ‘demo’ account. Practically all online brokers will let you have one with an imaginary balance that you can trade with. The added bonus is that it also allows you to get to know the trading software and experience working in a live and real-time trading environment.
If nothing else, I hope these simple forex trading tips will be enough to convince you not to try and learn this business on the job. The theory may seem boring at first, but it is essential knowledge if you are ever going to become a successful forex trader.
Quick And Easy Forex Trading is an essential tool for anyone trying to learn to trade Forex profitably. It covers all the topics you need to know about, along with some very useful forex trading tips to help you kick-start your trading career.
To get a free chapter from Quick And Easy Forex Trading, simply fill out the form on the right of this page. Thank you.
Forex Trading Indicators – Why The Trend Is Not Always Your Friend
Aug 26th
Are you trying to get to grips with forex trading, indicators and trends?
The Foreign Exchange market can be a very profitable one for those who learn how to trade it correctly. The problem for most people is they underestimate just how much information there is to absorb in order to consistently make profit, and unfortunately they inevitably end up losing their money.
One way in which new traders underestimate the complexity of trading is when it comes to indicators. The most commonly used indicator is the candlestick chart. The candlestick chart is a very good tool for identifying a trend in the market, and nearly all traders use them.
Forex trading can be exciting, especially for the newcomer, and so when a candlestick chart indicates the start of a trend it is very tempting to jump in on that evidence alone. This is the mistake people so often make, and why a trend may not always be your friend:
You should seek confirmation of a trend from several different forex trading indicators before jumping in!
There are just too many factors involved in the movement of a market to risk your money on the strength of one indicator. Remember, you are trying to accurately predict the future price of a currency pairing to make money and shouldn’t leave things to chance.
So, what other indicators should you be looking at?
Apart from candlestick charts, there are three other main indicators in common use. These are Bollinger Bands, Stochastic Indicators and MACD (Moving Average Convergence Divergence), and while too complex to cover here, they are good tools to use to confirm whether a trend should be acted on.
The complexity of forex trading means there is often little room for error when predicting a profitable trend. By seeking confirmation form several forex trading indicators before you risk your money, you will start to find that the trend can indeed be your friend.
Quick And Easy Forex Trading is an essential tool for anyone trying to learn to trade Forex profitably. It covers all the topics you need to know about, including detailed explanations of how all the forex trading indicators mentioned in this article work.
To get a free chapter from Quick And Easy Forex Trading, simply fill out the form on the right of this page. Thank you.
Week 7 Results
Aug 20th
Week 7 (16 August – 20 August): +83
Back into profitable trading after a couple of smallish losses, back on track then!
Just a quick note that if anyone is interested in joining this trading signals service then I will be proudly announcing the release date here when the time comes. To get prior knowledge of that announcement and avoid the disappointment of all places being full (yes, it is going to be limited to a certain number of subscribers) you can put yourself on my mailing list by filling out the form on the right. You will get a free chapter of Quick And Easy Forex Trading for free when you do so (very useful if you are just starting out), and the option to join this service before it goes on general release.
Week 5 Results
Aug 6th
Week 5 (02 August – 06 August): -59
A small loss, but one had to come round eventually.
Three Step Strategy For Forex Trading
Aug 5th
If you’re a potential investor who I looking for the best place to turn your investment into profit, then forex trading is something you should look at. The foreign exchange market is one of the largest financial markets in the world, with an estimated turnover upwards of $2 trillion every day. Here are a few strategies on how to be successful in the forex market.
Step One: Know your market.
The best way to gain an advantage, earn profit and minimize losses is to familiarize yourself with the market and how the whole system works. In the forex market, the players are usually commercial banks, central banks and firms involved in foreign trade, investment funds, broker companies and other private individuals with large capital. With the speed and high liquidity present in the market, more companies engage in this business than in any other trading venture. Transactions are done in an instant, and there is always the allure and promise of serious profit.
Trading is operated in pairs. The most commonly traded currencies are the US Dollar, Japanese Yen, Euro, British Pound, Canadian Dollar, Australian Dollar and the Swiss Franc. In Forex trading, everything is speculative, and the activity consists of traders placing a risk made on the value of one currency against another. Say for example, you can buy Euros with US Dollar, hoping that the Euro will increase it value. Once its value rises, you can sell the Euro again, thus earning you profit.
Step Two: Learn the language.
There are three concepts you need to know in the currency market. Pips refer to the increase of one hundredth of a percent of the value of the currency pair you are trading. Usually each pip has a value of $10 or $1. Volume is the quantity or amount of money being traded at one particular time in the market. Buying and selling is the acquisition of a particular currency in the hope that the price of the currency will increase, and offloading a currency when there is a likelihood of a decrease in its value.
There are also two techniques of analysis usually used in this business – fundamental and technical analysis. Technical analysis is usually used by small and medium players. Here, the primary point of analysis revolves on the price. Fundamental analysis, on the other hand, is used by bigger companies and players with higher capital as it involves looking at other factors affecting the value of a particular currency. In this type of analysis, the player also looks at the situation of the country, particularly issues like political stability, inflation rate, unemployment rate, and tax policies as these are seen to have an effect on the currency’s value.
Step Three: Develop a sound trading strategy.
Your trading strategy will depend on what kind of trader you are, and so identifying your trading style is important. Plan the size of your transactions, it is often better to conduct many different trades than one huge transaction. Not only does it develop discipline, but it also lessens any possible loss as only a fraction of the capital is affected. Part of a trading strategy is developing the values of discipline and proper money management.
A good way of developing your trading strategy is to try demo trading. It is a great way to practice your skills, see how the market works and get acquainted with the software and tools being used without risking any money. Most online brokers provide free demo accounts nowadays. Make sure that the broker you choose are regulated by the law, search through some forex forums to find out if anyone has had bad experiences with them, or if they have a generally good reputation.
Forex trading is not something you jump into without a plan. The emotional stress and the demands & challenges of being a forex trader requires more than just knowledge of the market. It requires more than just a keen and sensible head for business. It’s all about a game-plan and a strategy.
Week 4 Results
Jul 31st
Week 4 (26 July – 30 July): +168
Even better than last weeks results, looks promising so far.
Choosing A Forex Trading Broker
Jul 23rd
An account with a forex trading broker is something that you must have when you are beginning currency trading. You always have to have a way into the market and your brokerage company will provide software so that you can control your trades online. They will also give you leverage so that you can trade on margins and control much larger sums that you have yourself. Depending on the brokers’ software, you may be able to use a trading robot, like the Forex Megadroid robot on your account.
There are several things to take into account when choosing a forex broker. Here are some of the most important points to consider.
1. Reliability
Finding a broker that you can trust is not as straightforward as you might think. The forex market operates worldwide and there is no global regulatory body, so some brokers are unregulated. Check where their business is based and what registrations and memberships they have. American brokers should be registered with the Commodity Futures Trading Commission (CTFC) and/or the National Futures Association (NFA). Other countries have other associations.
You can usually see if a broker has a big problem by checking forex forums for user feedback. However, be sure to get several views. Do not accept one person’s point of view as fact. That person may have personal or financial reasons for praising or criticizing a broker.
2. Services provided
The forex is a 24 hour market, five days a week. You will want your broker’s trading software to be live online all of this time (most are). You may also want to check if they have 24 hour customer support Monday through Friday.
Check that they cover all of the major currency pairs, that is USD against EUR, JPY, GBP, CHF, CAD, AUD. They should also offer at least some cross pairs of the major currencies, that is two of the other currencies not including the US dollar.
All brokers will offer charts and technical analysis. Check that these meet your needs. You will also want to check whether they offer instant execution of orders at the displayed price without slippage.
3. Charges
Forex trading brokers generally do not charge a fee or commission. Instead they make money from the spread, which is the difference between the bid and ask prices of a currency pair. Spread is usually in the range of 1-3 pips, depending on the broker and the currency pair, but it can vary at times of volatility.
The size of the spread can make a big difference to whether you make profits in the long term. If you know which pairs you are likely to trade most often, the spread on those pairs will be more important to you than others.
4. Minimum account and lot size
The minimum investment will be an important factor. Some brokers only offer standard accounts where the minimum investment could be $10,000 or more. Mini forex trading accounts have a much lower minimum account balance, often$250-$1,000. These are better for almost all beginners.
5. Leverage
Leverage is the factor that determines how much you can control with the money that is in your account. You can often control a lot that is up to 100 times the money that you actually put in, with your broker covering the rest. Some brokers offer even higher leverage but be aware that the higher the leverage, the more you are risking on each trade.
You can also look at a prospective broker’s rollover percentages and other policies. However, the above 5 points are the main factors to take into account when selecting a forex trading broker.
Quick And Easy Forex Trading is a fully comprehensive e-book tutorial on the world of Forex. You can get access to a free chapter of the book here, simply by filling out the form above. The chapter you will get absolutely free is "Making Sense Of Quotes and Pairs", which covers the best pair for beginners, understanding a Forex quote, spreads and pips. This e-book has an RRP of $19.99. Sign up Now to get your free sneek peek inside Quick And Easy Forex Trading!