Category: Forex Education - Page 13

Profitable Tips for Forex Trading

Trading on the Forex can be more complex than it appears to be, and it may take novice traders some time before they have the ability to earn a decent profit from their investments. However, you can avoid most of the mistakes made by beginners simply by educating yourself on how the Forex market works and how to choose currency pairs wisely. Following are several tips for novices and intermediate traders, and a few of them may even be new and helpful to seasoned Forex veterans.

Track Down a Dependable Broker

Having a dependable broker on your side can make all the difference in the world when trading on the Forex, but it may take a little time and effort to locate one. In most cases, the best brokers work for large Wall Street investment firms. However, it is possible to find great brokers with powerful and reliable trading platforms online.

When you have an experienced Forex broker on your side, you will receive the most favorable bid and ask prices, and your trades will be executed quickly if not instantly. In addition, many firms that trade in large volumes will understand the macroeconomics behind each trade. A good broker may also provide access to breaking news that may affect the market and tools to help you conduct research and analyses.

What is leverage and Margin Call?

by rcanessa

Leverage and margin call are two basic Forex concepts whose definitions may seem unrelated to each other at the beginning. Despite this, the fact is that both terms are closely related so we will explain what they are and and why they should be known by any investor interested in investing in the Forex market.

What is leverage?

Leverage is a tool which allows to trade with large trading volumes using an amount of money (initial capital) much lower. This increases the potential of benefits but at the same time increase the risk of losses. The most usual leverage level provided by most Forex brokers is 1:100 and 1:200.

The best days to trade in the Forex Market

by rcanessa

Because it is no a centralized market, Forex is open 24 hours a day Monday through Friday. However, not all time is equally suitable to enter the market. In fact, there are periods that offer excellent earning potential while others should be avoided since they have low liquidity and movement.

Many traders know that the period corresponding to the London session is the period that has more movement compared to other sessions, however, there are certain days in the week in which markets tend to show more movement.

Usually it is best to trade during midweek, as in this period is when most of the action occurs in the market.

Friday markets remain relatively active until 12:00 pm EST and thereafter the activity falls until the closing occurs at 5:00 pm EST. This means that on Friday, traders work only half a day since most are kept off the market for the rest of the trading session.

Except for the more conservative traders who prefer the slower and less volatile markets, the most suitable periods for Forex trading are those with higher levels of liquidity and volatility as they present the most extensive movements and clearer trends. This increases the chances of success of the trader.

Line Forex Charts

by rcanessa

In technical analysis the technical traders use various types of price charts. The simplest of these types of charts is the line chart which is used to obtain an overview of price movements in the market. In this case it shows the closing prices at selected intervals. Line charts are very clear and facilitate the detection of the most obvious chart patterns but lack the detail level offered by bar charts and Japanese candlestick charts.

In these price charts the points for price are joined by lines. In general the price used is the closing price of the period (which may be 5 minutes, 1 hour, etc..), but it can also display the average price, the buy/sale price, and many other options that vary according the trading platform that we use.

Forex market sessions

by rcanessa

As every investor with some experience in the Forex market knows, one of the main advantages of this financial market is that it operates 24 hours a day from Monday to Friday, which gives the trader the opportunity to take advantage of the many opportunities offered by the market throughout the day. This is because the financial market is not centralized as is the New York Stock Exchange, for example, so at all times there are large and small traders worldwide who perform currency transactions whose total volume is much higher than any other market. This makes the Forex market an excellent investment option as there is liquidity to open and close positions at all times. In other financial markets, the smaller trading volume sometimes makes it not possible to find a counterpart to buy or sell when a trader wants to open a long or short position.

However, this does not mean that it is profitable to trade in the Forex market at all times, as there are periods in which the market is relatively calm and without any clear direction or trend so it is difficult to find good opportunities to obtain profits (these are the periods of lower trading volume for which there are relatively few investors transacting in the market).

Should we trade in the Forex Market during the opening of the main exchanges?

by rcanessa

A question that has many traders specialized in the Forex market is whether to open a position when any of the major exchanges like the New York Stock Exchange opens its daily session.

The fact is that during these periods is when the trader can get the biggest gains since these are the moments when the main future and stock exchanges open, there is a greater market participation of companies, institutions, funds and traders, and therefore there will be a higher volume of transaction in the markets including Forex.

How affects the control of inflation the Forex market?

by rcanessa

The increase in prices over time, which is inflation, in an economy experiencing growth is inevitable. Furthermore, it is accepted by most economists that a moderate rate of inflation is positive for the economy. In this regard, central banks try to control inflation to be kept within certain limits in order to exploit the positive effects of inflation and reduce the impact of negative effects. In this sense, monetary authorities maintain a constant struggle to control inflation and other monetary forces affecting the economy.

Increases in interest rates

Increasing interest rates is one of the main measures taken by central banks to reduce inflationary pressure when this is high. Moreover, it is easy to apply strategy whose effects are usually seen reflected faster in the economy in comparison with the effects of other methods. By raising interest rates, the central bank raise the benchmark interest rate at which commercial banks will look when granting loans to their clients.

Diamond Reversal Chart Pattern

by rcanessa

Diamonds Chart Patterns Explained

The diamond chart pattern is a very rare and exceptional form of chart formation which looks same like the head and shoulder or an inverted head and shoulder pattern. It is a reversal pattern which appears in a V shape. The diamond patterns will not frequently occur in the market bottoms and it usually takes place during the major top. As these diamonds chart pattern executes as a variant of head and shoulders chart patterns, the traders have to withstand their desire for differentiating the top that resembles a diamond formation. The basic reason for avoiding this pattern is that, the diamonds chart pattern will evoke a break in the trend very sooner when compared to the head and shoulders chart formation.

Basically there are two types of diamond patterns: the diamond bottoms which are formed in bearish trends and the diamond tops which are formed in bullish trends. In both cases the pattern is formed by two juxtaposed symmetrical triangles.

How to move the stop loss in a trading operation?

by rcanessa

We have already discussed in previous articles how important the stop loss is. For those who are not yet clear on the subject, the stop loss will be that price level from which our trade would cease to be valid and should be closed.

The stop loss can be automatic and programmed in the broker itself or manual. In the manual stop loss the trader makes the final closing of the transaction after checking the price in the market.

Knowing how to define the stop loss is very important. Depending on the distance of the stop loss from the price, we will have more or less profitability in the trade, provided that we respect an efficient money management.

The stop loss, once defined, may have a double evolution.

On the one hand we can have a fixed stop loss that does not evolve with the price. This type of stop loss is normally used on transactions with a high Risk/Profit ratio, so we are going to look for a price target that is much farther from the stop loss level.

Types of Forex Trading Accounts

by rcanessa

The first type of account that one usually opens with a retail Forex broker is a demo account. This simply lets the trader get a hang of the trading process and execution methods. Afterwards, a trader usually moves into either one of these three common types of accounts.

Standard Forex Accounts

The most common type of Forex account, this trading account has access to standard currency lots worth $100,000. Since the rules of leverage and margin are in order, this means that you don’t necessarily have to immediately invest $100,000 of capital to start a standard account. For a standard lot for trading, you only need to have $1,000 in the margin account.

Most brokers provide better perks and services to standard account bearers because of its adequate up-front capital. It is also the only type of account with each pip worth $10, meaning you get higher potential gains.

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