Saturday, October 31, 2009

Being Prepared

FOREX Planning will Keep You from Losing Money

With a little FOREX planning you are prepared for every situation you may face in your trading. This FOREX planning helps to ensure you’ll be consistent in your trading no matter what happens. To make sure you cover everything, your Forex planning should consider:

* Rules for entering, adding to, and getting out of your positions.

* An action plan in case your trading computer, internet connection, broker, power, telephone etc. break down, or fails to be of any real use.

* What you will do if you are unable to trade.

* What you will do if you lose a certain percentage of your account

* What you will do if all the markets are closed and you can’t get out of your current positions.

Unless you have answers for all these scenarios, you stand a good chance of losing money and should invest in some FOREX planning. With the answers, and discipline you’ll be able to tell if you trading system needs to be tweaked, or if it’s just the markets.

Finding t FOREX Broker

It’s not always easy to know what to look for in a broker in any market, much less a market as complex as the FOREX. But, if you want to trade in FOREX you need a FOREX broker. While it might be tempting to simply ask the FOREX brokers what they can do for you, you can’t always depend on them to give you a straight answer. Here are a few things to consider when choosing your FOREX broker.

You will want a broker that has low spreads. Since FOREX brokers don't charge a commission, this difference is how they make money. Low spreads will save you money.

Along with this, you should be looking for a broker attached to a reputable institution.

Unlike equity brokers, FOREX brokers are usually attached to large banks or lending institutions. The broker should also be registered with the Futures Commission Merchant (FCM) as well as regulated by the Commodity Futures Trading Commission (CFTC).

Once you’ve narrowed your choices down to brokers that won’t cost you too much, and that are reputable, consider the trading tools that they are offering you. FOREX brokers have many different trading platforms for their clients, just like brokers in other markets. These often show real-time charts, technical analysis tools, real-time news and data, and may even offer support for the various trading systems.

Before you commit to any one broker, request free trials of their tools. Brokers generally provide technical as well as fundamental commentaries, economic calendars, and other research to help you make good trades. Shop around until you find a broker who will give you what you need to succeed.

About Forex Trading Signals

It is in the year 1997 that forex was first introduced and started working. It is the biggest currency market of today, involving millions of traders and nearly two trillion dollars. It is risky and fast, requiring from you to be smart and able to take fast decisions. Every day new and new people are deciding to start their own forex business. Before you begin trading, there are a lot of things you have got to know. You can not just venture into forex trading without knowing at least the bas

Saturday, October 24, 2009

How to Pick a Money Manager

many forex traders use money managers to deal with the profits they are not trading with in the forex market, or to manage all their investments for an extended amount of time. The best money managers employ a number of experts in different areas of finance, business and economics.

Picking the right money manager is one of the most important decisions you will make with your money. The track records of different money managers vary far more than you would think, and a good money manager can make the difference between your retirement being spent in an apartment outside your favorite city, or on a yacht outside the port of your Caribbean island of choice.

Most quality money managers derive the bulk of their income from taking a small percentage of the size of the accounts they manage. That way, they have it in their interest to see your account to grow.

Avoid money managers that charge significant transactions-based fees. You will have an inherent conflict of interest with any money manager that sees his income grow in a significant way from anything other than the size of the accounts he manages.

Even those systems based on annual profits raise fundamental conflicts of interest. It entices the money manager to pursue overly risky investments: He or she won't have to pay you during the years your account suffers losses, but the years that see record profits, the manager gets a percentage of that.

After looking at how, exactly, your money manager earns his income, you should next examine his record. Looking at the is annual returns is not enough. These should, of course, be high. Indeed, they are the single most important detail in a money manager's reputation. But you should also examine his investment strategy. Do you think it will be a good strategy for the future? Does he base his decisions on thorough research? Does it seem like he is biased towards investments in sectors that you don't think are going to fare well in the future? All of these questions are important, and are well worth the time it takes you to answer

Swing Trading Strategy

Swing trading is a style of trading used in the forex market or with high-cap stocks that aims to make gains by holding positions for a period ranging from one day to one week on average. Other than day trading, it is the most short term style of trading.

Swing trading is a broad term that encompasses several different distinct trading styles, among them range trading, trend trading, and counter-trend trading. See our articles on those topics for more information. It is generally used more often by technical traders. Bolinger bands are perhaps the most useful tool to use when practicing swing trading, and most forex companies offer

The short term nature of swing trading makes it particularly effective for forex traders. In general, the lack of commission fees or significant spreads at most brokerages makes most strategies that are based on short term trades aptly suited to the forex market.

Creating a Trading Plan

t is generally a good idea to create a trading plan ahead of time. Some trading strategies are more conducive to long term planning than others. Day trading and scalping, for instance, can't be planned too far in advance, as both largely rely on the trader's almost instinctive reactions to the market as it moves and changes throughout the day.

But for most trading strategies – even for most types of swing trading – creating a preset plan is an important part of investing. Paradoxically, it is also important to have the ability to change your plans if things do not seem to be going as predicted. Having the discipline to stick to a plan, but knowing when to drop a trading plan like a bad habit is one of those aspects of forex trading that simply has to be learned with time – and a constant yearning to refine your trader's instincts.

Perhaps the most important part of a trading plan are the goals you set. Not in the general sense – everybody's goal is to make a lot of money – but in the very specific sense of how much profit are you seeking with each specific trade. You should know ahead of time when you think the market is going to turn, and you should set your sell orders accordingly. These exits points are critical to your success as a trader.

The little brother of the exit point is the entrance point. A good general strategy is to plot out where the support is that day, and make you purchase at a relatively calm time in the market when your currency pair nears its support line.

Before you do make your purchase, though, you should evaluate how much loss you are willing to tolerate. What is the expected volatility? How confident are you that a break out trend or whatever phenomenon you are looking for is actually going to happen? These are all questions your should ask yourself when you are making your plan and deciding where to place your stop orders.

Management of your capital is perhaps the least exciting part of being a trader, but it is the single most important variable in your plan – not because of the potential reward from proper money management, but because you risk taking a hit you can not get back up from if you invest too much. Similarly, spreading your risk out over various currencies or other investments is of critical importance.

The process of creating an explicitly written out trading not only leads to a very useful document, it also forces you to review your thinking and to look for weaknesses in your strategy and for potential pitfalls in your final plan. Like any important creative process, it forces you to take a second look at your assumptions and to justify certain conclusions that you may have taken for granted.

How to Trade Synthetic Crosses

The trader accomplishes this by going long on one currency and short on the other.  For example, let's say a trader would like to synthesize a Canadian dollar/Japanese yen pair – CAD/JPY.  He or she would go short on, say, $10,000 worth of the loonie, and go long another $10,000 on the Japanese yen. 
It's difficult to find graphing services for synthetic pairs.  Google and Yahoo both offer services that are adequate, but neither really goes all out with extensively customizable charting options.  That being said, they work well enough, and should be enough for you to track your synthetic pairs. 
When one half of your synthetic pair comes from a currency pair that is usually listed with the USD last, make sure you convert the pair appropriately. 
For instance, if you were making a currency pair with the euro, you would take the current value of the EUR/USD and divide your desired dollar amount by that number.  So, if you were purchasing $100,000 worth of one currency and $100,000 of the EUR/USD, and the current value of the euro was a painfully high $1.58, you would want to purchase $100,000/1.58 worth of euros, or $63,291. 
Synthetic pairs are more work, but they open up a considerable number of new options for the trader.  They are not genuine currency pairs, but they protect the trader from variations in the third pair just enough that they behave like something close to an actual currency pair. 

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