Category: General


Top Five Trading Strategies in 2018

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Top Five Trading Strategies in 2018

A trading strategy is a pattern- or trend-based approach to forex trading, in which certain specific aspects of the market are relied on for probable trading direction.

What’s happening in the forex market in 2018?

Well, volatility is one major aspect. Traders are spooked, to some extent, by the level of geopolitical instability – you read about it regularly in the newspapers, or, I guess, on your newsfeed nowadays.

Then there is growth. Stocks have been weak lately, and gold has been down, while the price of oil is anybody’s guess. This has pushed a lot of investment capital into forex, where results have been more predictable, despite relative volatility.

Finally, there has been rapid growth in Emerging Markets currencies, as Reuters explains:  “Emerging market foreign exchange trading is growing at a double-digit clip this year; Emerging currency trading represented 17 percent of all daily average spot volumes this year, up from 7 percent in 2015, according to NEX Group, which runs one of the biggest electronic trading platforms.”

Strategy 1: Scalping

One trading strategy that fits volatile markets well is scalping. The term ‘scalping’ comes to us from the investment world, where it means jumping into and out of an investment very quickly to just skim a quick profit.

We like this strategy very much in volatile times, where you profit from a short-term trend, and then cut your risk down by getting out fast.  It’s particularly adapted to forex trading because, the longer a forex trade lasts, the greater the risk you run. So you might bet the euro against the British pound (EUR/GBP) for five or ten minutes one day, take advantage of a jump or a slide, and then out you go with a small positive gain.

Strategy 2: The 50 pip

This is a low-risk strategy that is well adapted to today’s market. You place two opposite orders and cancel the losing one out while taking 50 pips profit. The trick is to find a currency pair with a large daily movement — pick a pair and track it for a few days before you start.

Then place two pending orders: A buy order with a stop 10 pips above the high, and a sell order with a stop 10 pips beneath the low. Whichever order is activated when the price hits the target is the one you keep – you cancel the other one.

Strategy 3: The Double Stochastic

This is an excellent strategy for uncertain times. You will often be told, as a trader, to use stochastics in combination with other types of indicators. But the results of this very common strategy are mediocre.

The double stochastic approach produces far better results. It’s quite simple: You use one fast stochastic and one slow stochastic working together.

You wait for the slow stochastic to indicate a trend. When the trend is clear, you wait for the fast stochastic to confirm it. When that happens, jump in and take advantage.

Strategy 4: Bolly Band Bounce

We often trade in range-bound markets today. So a strategy that is targeted to range-bound trading has become very popular – this one is called the Bollinger Band Bounce. It’s based on using Bollinger Bands – an indicator that tracks price and volatility over time.

First, decide if prices are range-bound. Is an upward movement to hit the same resistance point each time and bouncing back? When this happens, the pair will stay either above or below the middle Bollinger band for some time.

What you then look for is a “tweezer” formation on a candlestick chart – two candles that are at the bottom or top of a trend, but which are exactly the same. When this formation occurs, you can either trade it (as a low or high point) or wait for the bounce to occur and trade the rebound.

Bollinger bands take some getting used to – they are among the more complex indicators in forex, and you should get used to them a bit before jumping in. But they offer many useful strategies, of which the ‘bounce’ is well adapted to today’s market.

Strategy 5: The Exotic Pairs

Here’s a good way to take advantage of the Emerging Market growth trend we’ve seen in forex in 2018.

What traders call ‘exotic pairs’ involve putting a less-traded Emerging Market currency (the baht, the rand, the real, just to name a few) with a major currency like the dollar or the euro.

The advantage here is that you are taking a fairly predictable currency and pairing it with one that is far less traded, and so may work in fairly regular patterns. You will want to observe the exotic currency a bit before jumping in.

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Forex Trading Platforms Explained

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Forex Trading Platforms Explained

In order to trade currency pairs, you need a broker, who places the trades on the market for you, and an electronic trading platform which executes your trades and communicates them to the broker.

There are two types of forex trading platforms: PC-based (usable on Macs some tablets as well), and smartphone-based applications.

For PC, Mac or tablet-based trading, the market is dominated by MetaQuotes Corp., a Cyprus-based company. The  MT4 and MT5 platforms are used by most professional traders and have been for the past ten years. These high-quality trading platforms do a lot more than just execute your trades.

First, they list all the currency pairs available via your broker. Then, you can track currency pair prices via your MT platform. You can get charts with varying periodicity, meaning the same pair can be charted for 15-minute periods or three-day periods or for whatever time period you require.

Most traders work at least partly with stochastic or technical indicators — MetaTrader 5 provides over 80 built-in technical indicators and analytical objects for the most detailed price analysis. You can also connect up with a trading signals service to receive them on the platform.

Here is the official description: “The MetaTrader 5 trading system offers an advanced Market Depth feature (with a tick chart and Time & Sales information), a separate accounting of orders and trades, the support of all types of trading orders and execution modes. Two order accounting modes are provided in the platform: the netting mode is adopted on exchange markets, while the hedging method can be used for Forex trading. With the One Click Trading function and the Market Depth option, users can buy and sell currency pairs, equities, and futures with just one click. The Stop Loss and Take Profit options are designed to help secure profits and minimize losses.”

For years, MT4 was the most popular trading platform by far. MT5 is, however, taking some time to achieve the same level of popularity. So y0u will often find even professional traders still working on MT4.

There are some competitors to the MetaTrader platforms, for example, the US-based Dealbook360, which is also about ten years old, offers a great many of the same applications and services. Here is what the Munich, Germany-based software maker promises:

DealBook360 is a comprehensive, yet easy-to-use financial software intended for the global business community (banks, forex brokers, hedge funds, financial companies, etc.) and provides currencies and derivatives trading support. The platform equips all groups of users-Forex traders, dealers, and back office managers – with advanced and feature-rich software interfaces for the most intelligent business approach by automated trading strategies, flexible permissions, real-time risk management, and customizable software environment.” 

Dealbook360 also offers fully automated trading, which MT5 does not. The London-based Spotware has developed cTrader as a competitive trading platform with MT5. It does not provide as many indicators and services as the latter, but it does also support spread betting (which has nothing to do with forex trading, but which some traders like).

As for online apps, there is a wide variety available, at least two hundred on Android alone – and MT5 is also available in app form. If trading from your smartphone is your priority, then pick your broker first. The broker will probably offer a proprietary online trading app, and you’ll want to use that one.

 

How does a forex trading platform work?

The trader makes use of the tools that best complement the preferred trading strategy. For example, traders who use an approach based on technical trends – meaning that they analyze the movement of prices on charts – can customize the kind of charts and indications they require.

Traders who work with trend analysis indicators like stochastics can find a vast selection to choose from. Traders who base their decisions on fundamental analysis, meaning they watch for news events or economic trends, can find news and often lists of relevant economic announcements on the platform as well.

So how do you make a trade? Your account is in a specific currency – you may also have a multi-currency account, in which case you select the currency you wish to trade with. You then select the currency you want to trade into, and for how much. If I have $10,000 in my account, and I want to buy JPY 5000, then the platform will set up the purchase, allow you to put in the stop-loss position and take-profit one as well, and then wait for you to give the confirm click that starts the trading. Remember: Once you confirm the trade, you can’t do anything to affect what happens until you click the ‘Stop’ button – so set the stop-loss and take-profit carefully!

All of this software is free, but usually, you are best off downloading it from the website of the broker you choose – the broker may offer special tweaks and services.    

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How to use Leverage in Forex

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Leverage in Forex

In Europe and in the US, leverage in forex is capped by the regulators, but there’s plenty of room for most traders.

 Why Leverage?

If you invest $2,000 in forex trading, and you deposit on your MT5 platform,  with your broker, you are actually making trades in much larger amounts than that. The $2,000 you put down is added to a large lot or pool of money that the trader puts into the same kind of trade you are making.

To understand how this works, think of the $2,000 you put down not as being worth $2,000, but as representing a much larger sum. The leverage ratio that you choose when you start trading with a broker determines just how much that $2,000 represents.

The nice thing about investing in forex is that you can obtain far more leverage, and thus potentially make much more money, than you could with the same amount on the stock market. The maximum on the New York Stock Exchange (or any other US-based equity trading exchange) is 2:1, but in the US, the National Futures Association (which regulates forex trading along with the CFTC) limits maximum leverage to 50:1 on major-currency trades (it can be lower on specific high-risk currencies like the Turkish lira). In Europe, the maximum is 30:1 percent, as defined by the European Securities Markets Authority.

One of the great advantages of the forex market over stock markets is that you have freedom to use more leverage. But be aware: Use more and you can lose more!

It works like this. For every $1 in your account you can control up to $50X with leverage.  For instance, 10:1 leverage means you control $10 for each $1 in your account. If you have $1,000 in your account this means that you can control $100,000 in positions.

Leverage and Margin

When using leverage, you have to leave a margin. This is a deposit in real money that the broker keeps for safety.

If you deposit $1,000 with your broker, the broker will keep $100 as a margin (the margin rate is 1 percent in this case). So, suppose you bet that the British pound (GBP) will strengthen against the US dollar (USD) – you’re betting on the so-called Cable, named after the big wire that used to run under the Atlantic from New York to London which carried trading info.

With leverage at 10:1, you are controlling $10,000 in trading funds.  assuming that the margin rate is 1 percent, and that leaves you with a usable free margin of $900. Should your trading losses exceed $900, the broker will stop you out of the trade automatically – this is referred to as a margin call and it is not good for your financial health. So use a stop-loss to get you out of a losing trade at a point below that in which you lose all your money.

Margin requirements differ from broker to broker. Some brokers offer very reasonable margin rates as low as 0.2 percent on most currency pairs, as well as flexible leverage options ranging from 1:1 to 1:50. Set your leverage at a level that you are comfortable with, one that will not exceed your risk capital if you have a bad run of trades. The rule that forex professionals use is  never to risk more than 2 percent of your account at any given point.

In fact, it’s wise to cultivate a healthy respect for leverage in forex. Be as careful and prudent using it as you can, at the start, for it will eat up your trading budget in no time. Again, stop-losses are the surest way to manage leverage in forex. Remember: It’s wise to get out of a bad trade as soon as you can – holding out in hope that it will somehow go right is very poor trading strategy. Take your loss, get back in the saddle, and earn it back.

Your broker should support a prudent trading strategy and help you to build one. Brokers are incentivized in this by new rules on transparency. These rules, which date from a few years back in the US when the CFTC introduced them,  and which came into force with ESMA regulations in Europe only recently, force brokers to display the percentage of clients that lose money. The rate of losses reflects on the brokers’ execution of trades, how they work with their clients, the level of education, training onsite, etc. When you are choosing your forex broker, this is clearly a factor to keep in mind.

Understanding the margin and leverage you are using is a key factor in succeeding as a trader. Make sure you are clear about every aspect of these concepts before you click on the ‘start button’ and the trading begins.  

 

 

 

 

 

 

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What to Look for When Choosing an Online Forex Broker

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With the Forex market being home to some $5.3 trillion daily, selecting an online Forex broker to access the world’s largest market is a task which many find overwhelming. There are many online forex brokers to choose from, so here are a few things to consider before committing to one.

Are they regulated?

Regulation is one of the most important aspects to take into consideration when choosing an online Forex broker. You need to ensure that they are regulated and have the security and oversight required before you even think about starting on your trading journey. Unfortunately, many brokers are lurking on the web that are not adhering to strict regulatory rules, discovering the reliability of an online Forex broker is easier than you think. There are several major regulatory jurisdictions to look for. In the UK FSA has regulatory oversight of forex brokers. In Australia ASIC is the main regulatory authority. In the US the NFA and CFTC are the authorities to look for. In some countries like the US only NFA and CFTC regulated brokers can offer their services to US residents.

Are they there to help?

Another important characteristic to keep an eye out for when choosing your online Forex broker is their form of customer service. With the markets being open 24 hours a day, it is vital you have the trading support you need to trade the markets effectively. Efficient customer service is where you can access a live chat and speak with an actual person and not an automatic system. How responsive is the brokers support team? Are they able to answer your questions? Do they have the knowledge to guide you when needed? These are a few things you should take into consideration when speaking with a customer service agent.

What is the spread offering?

This is an aspect that will affect your trading immensely, so it is vital to examine what spreads are being offered. Whether you are trading pairs like EUR/USD, GBP/USD, USD/JPY, USD/CHF, AUD/USD or USD/CAD, a guideline to keep in mind is that the spread should not exceed 5 pips for these major currency pairs. The wider the spread, the more challenging it will be for you to make a profit, thus always opt for an online Forex broker offering tighter spreads.

Do they offer demo accounts?

Before leaping to deposit funds into a live trading account, it is of the utmost importance to trade on a demo account. Though this may give no indication to your success when trading live, it is a great way to get a feel for the platform, discover what the broker is offering, and develop and test your trading strategy. Trading on a demo account will give you an insight as to what your experience will be like trading with the chosen online Forex broker.

How is their website?

Aside from the more technical reasons, an online Forex broker’s website can tell you a lot about how reputable it is. Does the site give you all the information you need? Does it look professional? Can you easily navigate around the site? Does it crash? These are just a few of the questions that you need to ask yourself, before trading.

Your research into choosing an online Forex broker could potentially be the decision between making or breaking your trading results. Be aware of all these items mentioned before delving into a trading journey and trading with a forex broker.

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How Home-based Forex Traders can limit distractions

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Thanks to advances in technology, we are in the fortunate position to be able to work from anywhere in the world, at any time. Many Forex traders have opted to trade from home as opposed to a traditional office environment. However, working remotely does come with its challenges. Trading from an office doesn’t allow you the option to take a quick nap, wash the dishes, make coffee, call a friend, feed the dog; the list of possible distractions for home-based forex traders is endless. Thus, it is vital to set up some ground rules (and stick to them) before even beginning.

To trade the forex market, you need to put in a lot of hard work! That means educating yourself and doing the necessary research, testing on a demo, interacting in forums; trading from home takes an extra level of discipline to accomplish this.

Let’s take a more in-depth look at how home-based forex traders can limit their distractions and focus solely on trading. 

Create an Ideal Space

Before you even begin to embark on your trading journey, it is essential to establish a space in your home that you will use solely for trading. Be it a spare room or a corner in the living room, make sure to set up office space with no distractions. A dining room table is probably not the best choice for a trader. Have a secluded area with a desk and all the equipment you need, including monitors and fast internet connection, to avoid any risk and distractions around you.  

Set a Schedule

Just like working from an office – make sure that you, as much as possible you set hours that you will be working. During these hours you are in your private space and do not accept any distractions from others at home. Discover trading sessions that work well with your schedule, and with those pairs, you usually trade. Manage your time and stick to what works best for you to limit distractions during the trading time. 

Have Reasonable Breaks

Ensure to take small breaks when you feel you are becoming impatient. Go for a walk or anything that will help clear your mind. It is essential for home-based forex traders, as you may start feeling confined as opposed to in an office that potentially has a more open space and more human interaction.  

Surround Yourself with Trading Inspiration

In your ‘special trading space’ make sure to surround yourself with materials that will only improve your trading experience. Ditch the distractions such as game consoles and your mobile phone.

If you want to be a successful trader, you have to ensure that your surroundings not only inspire you to trade but also help you to focus.

It is essential to get into the right frame of mind from the beginning of the time you start your home-based forex trading business. Get prepared, eliminate distractions, and find out what works best for you to enhance your ability to focus during trading hours continually.

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10 Forex Trading Tips for Beginners

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When embarking on your forex trading journey, it is important to keep a few things in mind. Learning the intricacies of the markets, or knowing how to control your emotions and logic, there are many ways to trade the markets effectively. We have put together the Forex Trading Tips for beginners, giving you everything you need to know before you begin trading.

#1: Choose your broker wisely

This is usually overlooked by beginners, only because you do not know what you are looking for in a reputable broker. Find a broker that suits you best; check reviews, try out their demo account, see if the trading software meets your expectations, and if the broker is offering the tools you need to reach your trading goals.

#2: Make a trading plan

If you are looking to progress throughout your trading journey, it is essential to set out a plan. Try out a demo account to see what does, and what doesn’t work for you. How much time you are looking to spend daily trading is also another factor to take into account, thus you will be able to plan accordingly. Look into how you will educate yourself; does your broker offer an education center? Making a plan will give you a guideline of which approach you need to be taking to have a profitable outcome.

#3: Start by trading the major currency pairs

Currency trading can be perceived as complicated at first, especially for a beginner trader. Try to stick to the most widely traded pairs to start with to get a feel of how the markets work. The major pairs are the ones that are traded against the US Dollar. Keep practicing until you feel confident in forex trading the majors and then move onto others such as the exotics.

#4: Keep your emotions at bay

Panic, excitement, and greed need to be eliminated from your trading journey. Of course, it is not always possible to avoid these emotions, however being a calm trader will help you reduce your risk as you will have a clearer mind to trade. Begin with small amounts, so as not to get too overwhelmed, and try to take a more logical approach to trading as opposed to an emotional one.

#5: Know your probabilities

There is no absolute right way to trade Forex and generate profits. It’s all about risk analysis and probability. Ensure to manage your risks at all times to have as harmless losses as possible. Here again, practicing will give you more of an insight as to how you can effectively manage your risk.

#7: Educating Yourself

Education is essential for a new trader. There are always ways for you to evolve and learn upon your trading journey. Read books and articles, test strategies on demo accounts, and find any information or help you can to learn how to trade the markets. Even advanced traders keep educating themselves because it is not only skills which will give you potentially profitable results, but knowledge too. Learn the terms, strategies and how to read the charts so that you can have a productive trading experience.

#8: Take your time and be patient

Even though the markets are moving extremely fast, make sure to remain patient. If you panic when trading there is a greater likelihood of losing money. Take the time to relax and study the markets, and work out what works best for you. Do not place a trade due to impatience.

#9: Discipline yourself

No one gets rich on one single trade. It is important to discipline yourself to manage your risks. Do not place all your funds on to one trade with the hope that it will be in your favor. Keep patient and discipline yourself only to make trades that you can handle, financially and emotionally.

#10 Never give up

Persistence and determination are key when trading. Inevitably there will be times where you will want to give up before even having developed your skills, but it is essential to know that the more you practice, the more you will learn, and in turn the more confident a trader you will be.

Learn from your mistakes, perfect your strategies and move onward towards creating a trading environment that will lead to success.

 

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Benefits of Using a Forex Trading Demo Account

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Trading Forex may provide unlimited opportunities; but before jumping into the deep end, it is essential to test the waters, and that is where a Forex trading demo account comes in. A demo account gives you the chance to enjoy a hands-on experience of what it feels like to trade currency pairs in the market, minus the risk.

It is always important to seek for a broker who offers you the opportunity to try out trading on a free demo account, before committing real funds.

It is the ideal way to discover the user experience, find out what works best for you, test strategies, alter any vital mistakes you are making, as well as learn the features and quality of the platform before you embark on a real trading journey.

Let’s take a look at some of the top reasons why you should test your trading skills on a demo account.

Learn how to use the Software

Opening a demo account is the perfect way to find out how the Forex market functions. Play around with the platform, figure out the charts and learn precisely how Forex trading works; without risking a single cent.

Keep in Control

It’s your time to trade without the risk. Discover how fluctuations work, when you should trade, and when it’s time to sit back until your next decision. Familiarize yourself with the trading procedure and figure out what trading style suits you best. 

Develop Your Skills

A demo account is the ideal way to take your time in developing new strategies and see what works best for you. Discover aspects of trading Forex such as, how to analyze price action, correlations between currency pairs, volatility and chart figures.

Adapt to the Environment

It is a great way to get a feel of how the platform functions and gain a deeper understanding of the brokers trading conditions. Learn how to place orders, configure different types of charts, margins used, leverage and many more important aspects which need to be mastered before committing to real funds.

Take advantage of a Demo Account to learn how to trade, how the platform primarily and broker works, and how to develop strategies, without having to deposit funds.

Learn how to trade the markets today on FX Trading Pro Demo Account

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