No Limit up / limit down

When it comes to the Futures market, there is a limitation to the number of transactions and the type of transactions that can be made by a trader. If a currency shows a rise or fall that’s beyond a pre-determined daily limit, traders are not allowed to opt for new positions. All that they can do is to liquidate their current position if they choose.

When it comes to Forex currency trading, such trading constraints do not exist. A trader is free to implement any trading strategy. This helps him to protect his financial investment from the effects of unforeseen price fluctuations by issuing stop loss orders.

24 Hour Forex Trading

The Forex market stays open 24 hours. It starts up in Asia at around 24:00 CET on Sunday evening and closes on Friday around 23:00 CET in the US. It is true that there are electronic communication networks or ECNs that supply after hours trading for the futures market and stock market. However, in Forex currency trading the liquidity is very high and extremely competitive prices are offered. This makes it more exciting and a better money-making enterprise.

Bid/Ask Spread rates

Spread rates in Forex currency trading have seen a phenomenal tightening up in these last few years. On EURUSD (which happens to be one of the most liquid and widely traded pair in currencies), most online Forex brokers are willing to give a spread of about 1.8 – 3 pips. This is equivalent to almost 0.014% and 0.023% on the underlying value of the dollar. This is not possible in stock trading, where you see only stocks that are liquid providing tight spreads. It is predicted that in the future, market spreads will vary greatly swinging to anything between 5 to 9 pips.

Sell Before You Buy

When it comes to equity broking, you have to face highly restrictive margin requirements for short selling. What that means is that a customer will not have the liquidity required in order to sell stock prior to buying it. However, in the spot market, it is slightly different. When you are selling one currency, you have to buy another one necessarily. In Forex currency trading, a trader will hold the same capacity irrespective of whether he is buying position or initiating a selling. That’s another reason why Forex trading has more appeal for traders and brokers.

So if you plan to use a forex platform to be able to increase your online visibility and be able to scout for more business prospects, here are some important things that you must note:

1. Automatic mode – One of the most important features of a forex platform is that you can put your business on autopilot mode through it. All you have to do is set your parameters and the rest is history. Your forex platform should mainly be able to help you save up on time and effort so you can also attend to other important things which you needed to accomplish.

2. Reports on strategy performance – Your forex platform must be a very detailed system. It should be able to track how your chosen trading system performs. One of the most important things that you can gain out of the said platform is that it lets you understand if your strategies are working and if they are directly causing the gains and even the losses which you are experiencing. Some even end up giving you charts complete with their specific analysis on how you have been playing in the market.

3. Number of trading accounts – As you may be aware of, the forex business is very dynamic. It is not enough to settle for just one account alone. It would be best to have as much as possible so that you can cover all of your options. Your foreign exchange trading platform must be able to give you access to many different accounts so you can easily use these to place your trading business strategies. Sometimes the success of your business may actually depend on the accounts you have and their effectiveness in the market.

4. Competitive and stable spreads – Forex spreads are important as they scan the crowd for you. They are key competitive tools to identifying just how much business you can make within a specific market. Spreads also allow you to be able to utilize different types of trading strategies. The good thing about forex spreads is that they can be used as baits for you to identify highly profitable businesses.

5. Data streaming – Your foreign exchange trading platform should be able to give you access not just to outgoing data but to incoming data as well. Data streaming is important so that you can continuously learn the business and eventually your own specific market. It is also important to note what the speed of your data streaming is so you can be sure that you are getting all the updated info especially during critical trading periods. Data streaming should also have an automated feature.

Markets Discount

Today news stories are available in any corner of the globe in a split second at the click of a mouse – and this is the problem as well as the advantage!

The news is discounted in a split second and the markets are then looking to the future – by the time you have acted the news is taken into account.

In times gone by the fundamentals would take longer to spread and you had a window of opportunity to take advantage of them – this no longer exists.

Volatility

Has increased dramatically over the last few years and trading individual news stories is not an option anymore.

Take a look at non-farm payroll and check out the volatility – if you can trade that you’re a better trader than me.

So can you trade the news at all?

The answer is yes and no.

We all know the long term fundamentals drive the longer term trends but this doesn’t help you time your entry.

1. Establishing the Longer Term Trends

You can keep the long term fundamentals in mind and use technical over bought or over sold areas to time your market entry. This is effective for long term trend followers.

2. Spotting Contrary Trades

You can also use the fundamentals to catch big profitable contrary trades.

It’s a known fact that markets currencies drop when the news is most bullish and rally when the fundamentals are most bearish. If a currency has extremely bearish news and fails to go lower or rallies than you may have an important turning point at hand.

The real problem with fundamentals is trying to work out what the participants think of them and how far they have been discounted and in our view you should keep these points in mind when trading:

1. Avoid trading short term news stories such as non-farm payroll and other economic realises.

2. Use long term fundamentals to establish the best trends.

3. Use market reaction to very bullish or bearish markets to look for contrary trades.

Trading the fundamentals is hard when you do so in isolation but as part of an overall forex trading strategy then can help you establish areas of value and also indicate the strength of longer term trends.

You can effectively manage your forex trading risks when you avoid overtrading, fast markets, and drastic price movements. It would be wise to also keep away from taking on new risks at a time when it would appear like a trend or a swing is nearing its end. No one but you can tell how much risk you can take, but for one who is not as comfortable with the potential of loss, cashing in at the slightest indication of an impending reversal would be a wise move to make even when pips are small. If losses are not going to be as much anyway, you can go on and wait things out in hopes that you can gain some more pips at a later time.

A good forex trader can also effectively manage trading risks by having a diversified portfolio. He spreads his portfolio in various positions, therefore, balancing his losses in some trades with gains in other trades. Whether or not you make money in forex trading is up to the way you play your game. A good head on your shoulder, and a support group or a mentor, can keep you abreast not only with the scoops in the forex market but also in how the other players are reading and moving with the forex market.

When you see entry signals, you have to be quick on your feet to think whether this is a trade that you want to get into or not considering the risks vis-a-vis your forex trading strategy. Taking on the risks sans emotions and sticking to your strategy is often the best way to make forex options trading and currency trading decisions. Do not be too emotional about the way you are trading. Assume the worst but hope for the best is a good tenet to follow. If you believe in your trading strategy, give it a chance to work for you.

Start with low-risk trades to get a feel of the forex market if you are a novice. Sometimes, running after bigger pips can result in missed opportunities and great losses for the forex trade. By keeping your emotions under control you will be able to develop your own trading strategy of spreading out risks, enjoying small pips in the short-term, and planning for long-term pips.

First, analyze the most recent price action. What are prices doing? Is there a definite pattern the you can detect? Where have prices been? Have they already run the stops close by? If you are daytrading, has there been sufficient volume during  the hours you like to trade?

Second, do you see any confirmation of your intentions in the recent price action. E.g. You are intending to go long and the last bar on the chart made a key reversal to the downside.  This would not be conducive to going long.

Third, apply the current information to whatever analysis you do. Faith has no place in the market, neither has wishing, praying or hoping. realistic analysis of price action and correct trade execution and management are the only things that will save you from the sting of an unsuccessful trade. If you’re going to pray, do it before you ever enter an order into the market.  Then make sure your prayer is the right one.  Don’t pray for prices to go up, because someone else may be praying for prices to go down. Pray instead for wisdom, guidance and insight.  In trading you, any alone are responsible for knowing what you are doing before you get into the markets. You must do more than believe in your abilities, you must effectively use them to produce the results you want. Successful trading is built on experience, which is in large part knowledge of what works and what does not work. Mistakes teach lessons only to students wanting to learn. If you are afraid of making mistakes, how are you going to learn? A key to success is to not repeat the mistakes, and correct the thoughts or trading methods that caused them.

There are any number of reasons why a trader hesitates before a trade.  The main one is lack of planning.  Without a plan, there is no degree of confidence a trade will be successful, it’s all wishful thinking. Unless they are outright gamblers, traders usually have a strong need to protect their assets and avoid risk. This is especially true for beginning traders. It can take a long time to build up sufficient capital for serious trading. By that I mean sufficient capital to be able to trade for a living. It is quite understandable to fear losing all or part of your initial capital. Beginners tend to seek absolute certainty before taking a risk, and gaining true confidence in you ability to trade successfully can take time. Unscrupulous marketers of mechanical trading systems and methods take advantage of the beginners fears and lack of confidence by advertising “sure-fire” “magic” ways to trade, instead of revealing the truth about the difficulties in becoming a consistently successful trader.

When it comes to short term trading, there isn’t very much time for long deliberations. Market conditions are in continuous flux. Decisions need to be made relatively quickly, and if one waits too long to execute a trade, he or she may miss a significant opportunity. The reasons for hesitation are everywhere, and traders must be aware of them, and create a plan to prevent them.  Let’s look at a few of the things that cause traders to hesitate:

The complex charting software available these days tends to increase hesitation.  Traders think that the more confirmation they can get from indicators, the more certain they can be that a trade will be successful.  However, all indicators lag the market. The notion that an indicator can somehow predict what will happen once a trade is entered is nothing more than wishful thinking. An indicator may give some degree of confidence about entering a trade, but the indicator cannot trade the trade, only the trader can do that. Once a trade is entered, it becomes entirely a process of management. It’s tempting to look at as many indicators and signals as possible. Doing so, however, can be very time consuming. That’s why seasoned traders advise looking at only a few if any key indicators.

Hesitation is often related to a lack of confidence in the trader’s trading strategy or trading ability. There are numerous reasons for such lack of confidence. Some of the reasons are shallow and mostly on the surface, like being distracted by watching financial TV while trading.  Other reasons are more deep-seated, and actually reflect psychological problems dating all the way back to early childhood.  A trader may not believe that his or her trading plan is adequately developed.  Nevertheless, they are determined to trade, so they muster up their courage and finally jump into a trade almost guaranteeing that the outcome will be a matter of pure chance.  Some traders may question their trading plan because they know that they did not spend enough time preparing it. Sometimes hesitation is intuitive, warning the trader to avoid the trade. All too often, traders are not tuned into their own intuitive feelings.  In the case of intuition, hesitation can act as a motivator. If the trader feels the hesitation is because of lack of adequate preparation, then that trader must learn to spend more time preparing for trades. By studying the markets a trader can come to see new higher probability setups, thereby reducing doubt and indecision, and in turn stop the hesitation because of more adequate preparation.

Hesitation sometimes reflects a deep desire to be right and a fear of being wrong. It has been our experience that many of the people who are attracted to trading fit into this category.  Great care must be taken by physicians, engineers, scientific types, and mathematicians, who seem to be the most prone to this type of hesitation. They are often perfectionists afraid to face their inadequacies. By putting off a decision, they don’t have to face their limitations, and can pretend they are better traders than they really are. If I had the time and space, I could give you dozens of examples of this kind of hesitation.  The perfectionist’s reality states that everything must be in order and follow rules.  They think strictly inside the box.  They want everything to be perfect, so they continually second guess and doubt themselves and what they are doing. They believe that they cannot cope with being wrong. This occurs in trading decisions as well as other life decisions. Extreme perfectionists often think that once they make a bad trade, it will be the start of a downward spiral and a complete blowout of their trading account.

Hesitation very often relates to low self-esteem or other deep-rooted psychological issues. We see these more times than we would like to.  Traders with low self-esteem usually lack confidence, not only in trading, but other areas of life. Beneath it all, they doubt their ability to trade, and hesitate making a trade until they the guilt of not doing so overcomes their fear.  At that point in time, they enter a trade out of pure compulsion driven by guilt.  This exposes them to a trade with no real plan to support it.  They become victims of pure chance.  We also find that traders who hesitate may have a conflict regarding their success. They can actually fear success.  They have been told by parents or others that they were no good, that they would never amount to anything, that they were “bad.” These people strive for success at one level of their consciousness, but at a deeper level, they secretly believe they cannot attain it, or do not deserve it.

Identifying, directly facing, and eventually eliminating a problem of hesitation is the only way to truly deal with it. Chronic hesitation will eventually destroy the confidence a trader needs for success. If the problem is not dealt with and the traders continues to hesitate, miss important market moves, and see his or her equity begin to dwindle, that trader runs the risk of becoming a phantom trader, a pretender, becoming convinced that the imaginary trades being made are real. If you are prone to hesitation, it’s vital that you deal with this problem early in your trading endeavors. Identify the reasons for it, confront the problem, and make changes as soon as possible. These are changes you have to make within yourself.  If you will truly engage in self-examination with the object of eliminating hesitation, you can trade become consistent and successful in trading profitably.

2. Identify non-random price behavior, while recognizing that markets are random most of the time. Look for repetitive price patterns and setups, but realize that once you begin trading them, they may become short-lived. If or when they stop working, be patient. Most of the time they will begin working again. When we released Andy’s E-mini bar, it stopped working for awhile, but those who stuck with it send us glowing letters telling us they are satisfied with the results. When you have a provable method, give it a chance to work. When you see an overall one-year equity curve showing that the method earned $7,400 trading one contract at a $10 commission, work your way up to a 10 lot and you will be making in excess of $70,000/year. Then collect more than one method or setup so you can make considerably more.

3. Absolutely convince yourself that what you have found is statistically valid and tradable in the way you like to trade. Not all statistically valid situations will be comfortable for you, nor will they fit your management style.

4. Set up trading rules; but remember, rules may have to change.

5. Follow the rules, but never to the point of destruction. You created the rule. If it stops working, change the rule, or throw it out entirely.

6. Learn to trade for fewer ticks but with more contracts. Most people do it exactly the opposite way.

The bottom line: personalize your trading to yourself (independence); and do the right thing consistently (discipline).