Technical analysis accounts for the numerical probabilities, patterns, and forecasts involved in forex trade. It is important to note, however, that forex trading involves more than just figures and numbers. All the factors that affect world markets and commodity prices are pretty much the same factors that affect currency exchange. Simply put, factors aside from historical numerical data also affect the forex market. For a more comprehensive view of the entire forex trading situation, it is therefore important to take these non-numerical factors into consideration,. That’s where Fundamental Analysis comes in.
Fundamental analysis is involved with studying current economic situations and interpreting how these would affect the forex trade. Fundamental analysis covers a lot of ground, and often, the situations it takes into consideration cannot be simply summarized in a short list. Throughout the years, however, a few recurring factors seem to have the biggest impact on forex trade, making them important things to watch out for when joining the trade.
Political Stability
Political unrest often translates to a weaker currency. Similarly, government systems with increased popularity ratings usually lead to the strengthening of a country’s currency. Be on the lookout for any political issues on the country whose currency you are using for trade.
Another noteworthy fact about the effects of politics on forex is that elections also tend to shake the market prices around a bit. Overall, political stability is not a bull’s eye way of forecasting forex prices, but if you are keen enough to observe, you could see some patterns forming, which might be of help in the long run.
Interest Rates
Higher interest rates mean a stronger currency. That is because higher interest rates are generally attractive to investors, as these would mean higher returns for them.
Higher interest rates could also come from an increase in GDP, or Gross Domestic Product. GDP is also a good factor to look out for, as it often precedes interest rates, which means you have the chance to make decisions earlier on.
Employment and Poverty rates
Low employment and high poverty rates mean that the people have a smaller purchasing power. Smaller purchasing power also translates into lagging economic activity. To compensate for this, interest rates have to go down – consequently leading to a weaker currency.
Fundamental analysis is able to tell and view forex trading in many angles, however, it does not truly form the whole picture. To get the entire picture at every angle, it is best to use both fundamental and technical analysis methods.
Tuesday, December 9, 2008
How to Lose All in Forex Trading
Why is it that 90% of all forex traders end up losing every day? Considering the number of newcomers into the trade, a constant 10% rate of success must also be, in actual number, leading to more people being successful in forex trade. Adversely, this also means that people who lose also increase in number – even much more than the increase being experienced by the winners. What is the deal with the increasing number of people who keep losing in forex trade, and what are they doing wrong?
Forex trade losers all tend to subject themselves to practices that are complete no-no’s in trading. However, this same group of people never seem to learn from their mistakes, and just keep on doing what they they do best: losing. It shouldn’t seem much of surprise if in the long run, everything they have invested becomes a part of some disappearing act. Following are some of the common practices of traders that lead them to lose everything they have invested in forex trading.
Not Following the Game Plan
One of the most important things to take note in forex trading is that success is more likely to happen if a sound trade plan is formulated and followed properly. Like most plans, execution ends up becoming much more difficult to do, as compared to the planning process, itself. To put it quite simply, people lose just because they fail to follow their own brilliant plans.
Nonexistent Money Management System
Money management in forex trading truly is a dull subject. It is, however, entirely necessary to follow if you have forex trading success in mind. Nonexistent money management system refers to the simple absence of money management, or the noncompliance of present money management rules: both of which ultimately lead to losses in the forex market.
It is important to follow some sort of money management system in order to be profitable despite losses. Those who fail to follow a money management system will eventually end up losing everything they have investment in the long run. Unless, of course, they are particularly lucky people.
Turn Forex into a Soap Opera
You know how soap operas tend to become too emotional most of the time? Many traders often commit the soap opera mistake by becoming too emotional with their trading choices. With a some news here and a couple of rumors there, many traders fall prey to their anxiety by pulling out of trades too soon, or getting into ones that are sure to end up in losses. Keep your emotions in check, and you’ll be surprised at just how more disposed you are to deciding wisely.
Forex trade losers all tend to subject themselves to practices that are complete no-no’s in trading. However, this same group of people never seem to learn from their mistakes, and just keep on doing what they they do best: losing. It shouldn’t seem much of surprise if in the long run, everything they have invested becomes a part of some disappearing act. Following are some of the common practices of traders that lead them to lose everything they have invested in forex trading.
Not Following the Game Plan
One of the most important things to take note in forex trading is that success is more likely to happen if a sound trade plan is formulated and followed properly. Like most plans, execution ends up becoming much more difficult to do, as compared to the planning process, itself. To put it quite simply, people lose just because they fail to follow their own brilliant plans.
Nonexistent Money Management System
Money management in forex trading truly is a dull subject. It is, however, entirely necessary to follow if you have forex trading success in mind. Nonexistent money management system refers to the simple absence of money management, or the noncompliance of present money management rules: both of which ultimately lead to losses in the forex market.
It is important to follow some sort of money management system in order to be profitable despite losses. Those who fail to follow a money management system will eventually end up losing everything they have investment in the long run. Unless, of course, they are particularly lucky people.
Turn Forex into a Soap Opera
You know how soap operas tend to become too emotional most of the time? Many traders often commit the soap opera mistake by becoming too emotional with their trading choices. With a some news here and a couple of rumors there, many traders fall prey to their anxiety by pulling out of trades too soon, or getting into ones that are sure to end up in losses. Keep your emotions in check, and you’ll be surprised at just how more disposed you are to deciding wisely.
Forex Trader Traits for the Win
Just as there are some clothes tailored to fit a person perfectly, are there people made specifically for a job. Forex trading is not an exception to this rule. In the game that is currency trading, very few end up winners, and it’s not because they have extremely good luck. Maybe a bit of luck, yes, but mostly, forex winners share common traits that make them almost invincible to the roller coaster ride that is forex trading.
Objectivity is the Best Policy
Great success comes to those who are objective in making forex trade choices. There is a reason why forex tools, such as forecast charts and tables, exist – and that is to help traders make sound decisions. As with other forms of trading, forex trading often leaves traders anxious, nauseated, and scared. These emotions, when not kept in check, keep the wise suggestions being whispered by your inner forex pro trader from being heard.
If you are prone to anxiety attacks when making forex decisions, find some effective means of relaxation. Always remember that your tools and your intelligence are enough to make you successful in forex trading. The last thing you need is for these ingredients to be clouded and rendered useless by mere emotions. Learn to focus more on the facts you have been given, instead of that nagging negativity at the back of your head.
Balancing Act
Successful forex traders know how to balance their act pretty well. That is, balance in terms of fear and greed. These two emotions are often the biggest reasons why many forex traders end up losing, instead of winning. Fear in traders often lead to premature trade exits, when waiting it out just a bit more (as based on statistical data) would have led to higher gains. Greed, on the other hand, often make traders jump into trades too fast, which has a high probability of ending up in disappointment if losses instead of personally forecasted gains happen.
Good traders know how to balance these two traits well. By balancing these two traits, along with objectivity, it becomes easier to make the choices that are most likely to lead to the maximum amount of gains.
Trained in the Art of Forex Trade
Practice makes perfect. And although forex trading is a difficult trade to perfect, a little training ought to bring in a substantial amount of success. If you are a forex newbie, demo forex trades are the best way to get some practice. Read up and be informed as to how to formulate trading plans, and use these plans on your mock trade sessions. If something goes wrong, use it to your advantage by keeping in mind not to repeat whatever it is that made things go wrong. At the end of the day, evaluate yourself: where did you go right, and what did you do wrong? These will help you get prepared for the real deal of forex trading.
Objectivity is the Best Policy
Great success comes to those who are objective in making forex trade choices. There is a reason why forex tools, such as forecast charts and tables, exist – and that is to help traders make sound decisions. As with other forms of trading, forex trading often leaves traders anxious, nauseated, and scared. These emotions, when not kept in check, keep the wise suggestions being whispered by your inner forex pro trader from being heard.
If you are prone to anxiety attacks when making forex decisions, find some effective means of relaxation. Always remember that your tools and your intelligence are enough to make you successful in forex trading. The last thing you need is for these ingredients to be clouded and rendered useless by mere emotions. Learn to focus more on the facts you have been given, instead of that nagging negativity at the back of your head.
Balancing Act
Successful forex traders know how to balance their act pretty well. That is, balance in terms of fear and greed. These two emotions are often the biggest reasons why many forex traders end up losing, instead of winning. Fear in traders often lead to premature trade exits, when waiting it out just a bit more (as based on statistical data) would have led to higher gains. Greed, on the other hand, often make traders jump into trades too fast, which has a high probability of ending up in disappointment if losses instead of personally forecasted gains happen.
Good traders know how to balance these two traits well. By balancing these two traits, along with objectivity, it becomes easier to make the choices that are most likely to lead to the maximum amount of gains.
Trained in the Art of Forex Trade
Practice makes perfect. And although forex trading is a difficult trade to perfect, a little training ought to bring in a substantial amount of success. If you are a forex newbie, demo forex trades are the best way to get some practice. Read up and be informed as to how to formulate trading plans, and use these plans on your mock trade sessions. If something goes wrong, use it to your advantage by keeping in mind not to repeat whatever it is that made things go wrong. At the end of the day, evaluate yourself: where did you go right, and what did you do wrong? These will help you get prepared for the real deal of forex trading.
Forex Forecast Tools: Moving Averages
Forex trading is a trade that requires not only instincts, albeit good instincts proving to be extremely beneficial in the long run, but also a bit of smarts. For those who are afraid of math, trading currencies could either make or break you in that aspect. Math is an especially useful tool in forex trade, and although programs used to help predict future market prices and establish trade patterns already exist, a basic background on the principles underlying these programs is vital to forex trade success.
One of the easiest tools available for forex trade is based on Moving Averages. Moving average based calculations are often used by technical market analysts in predicting market prices due to the ease it brings when it comes to spotting trends in more volatile markets. Understanding moving average based calculations may prove to be extremely helpful in the long run, seeing as many other forms of market forecasting are based on this principle. Simply think of moving averages as simple arithmetic calculations, without which basic algebra and complex differential equations will fail to make any sense at all.
Types of Moving Averages
Market forecast computer applications based on moving averages come in many interfaces and names. However, all of them are either simple moving averages, or exponential moving averages. These are the most basic types of moving averages, and most moving average based applications simply come from either of these two.
Simple Moving Average
A simple moving average forecasts prices for a certain day by calculating the average of values during a certain amount of time immediately past. For example, on a simple, week-long moving average, prices can be predicted by simply adding all values for the past week, and dividing the sum by 7. Concretely, if prices for a week were $4, $3, $7, $8, $8, $9, and $7, consecutively, a forecast value for the day immediately following the last figure ($7) can be established at $6.57 (the average of all given values for the week).
Exponential Moving Average
Exponential Moving Averages come in two different forms: percent-based and point-based. Either way, these calculations employ a certain equation that will require the help of computer programs for accuracy, especially when longer periods of time are involved. Compared to simple moving averages, exponential moving averages tend to provide more precise immediate forecasts.
Often, traders use a combination of these types of moving averages to aid them. Exponential moving averages are great for predicting immediate changes in the market pattern, whereas simple moving averages tend to be more accurate in the long-term. A combination of these two types of moving averages ensure both short and long-term success in forex trading.
One of the easiest tools available for forex trade is based on Moving Averages. Moving average based calculations are often used by technical market analysts in predicting market prices due to the ease it brings when it comes to spotting trends in more volatile markets. Understanding moving average based calculations may prove to be extremely helpful in the long run, seeing as many other forms of market forecasting are based on this principle. Simply think of moving averages as simple arithmetic calculations, without which basic algebra and complex differential equations will fail to make any sense at all.
Types of Moving Averages
Market forecast computer applications based on moving averages come in many interfaces and names. However, all of them are either simple moving averages, or exponential moving averages. These are the most basic types of moving averages, and most moving average based applications simply come from either of these two.
Simple Moving Average
A simple moving average forecasts prices for a certain day by calculating the average of values during a certain amount of time immediately past. For example, on a simple, week-long moving average, prices can be predicted by simply adding all values for the past week, and dividing the sum by 7. Concretely, if prices for a week were $4, $3, $7, $8, $8, $9, and $7, consecutively, a forecast value for the day immediately following the last figure ($7) can be established at $6.57 (the average of all given values for the week).
Exponential Moving Average
Exponential Moving Averages come in two different forms: percent-based and point-based. Either way, these calculations employ a certain equation that will require the help of computer programs for accuracy, especially when longer periods of time are involved. Compared to simple moving averages, exponential moving averages tend to provide more precise immediate forecasts.
Often, traders use a combination of these types of moving averages to aid them. Exponential moving averages are great for predicting immediate changes in the market pattern, whereas simple moving averages tend to be more accurate in the long-term. A combination of these two types of moving averages ensure both short and long-term success in forex trading.
Forecasting in Forex: An Introduction to Technical Analysis
Success in Forex trading takes more than just a trip to a fortuneteller. A similar concept of foreseeing the future, however, might do the trick. Quite a number of forecasting methods are already established, and for this article, great focus is given on an introduction to the Technical Analysis method for forecasting Forex trading patterns.
Technical Analysis is a method that can be used to forecast market price changes and fluctuations. Like fortunetellers, technical analysis uses certain tools to predict patterns in market prices. However, unlike fortunetelling, which uses tarot cards and crystal balls to help predict the future, technical analysis uses charts, tables, and often, statistical mathematics, to predict the future of Forex trading.
Underlying Principle of Technical Analysis
Technical Analysis simply relies on past and present numbers and figures. It takes into complete account the numerical pattern of the market for as far back as possible. And since it only considers numbers as the primary source for market price forecasting, other probable causes for market price changes, such as inflation, socio-political factors, and the like, are simply disregarded
Advantages of Technical Analysis
Technical Analysis is a purely objective tool, thus making it a pretty stable means of forecasting market trends. Often, this objectivity makes it an extremely accurate tool for success in the Forex trade. It is good to take note, however, that technical analysis forecasts tend to be more accurate for the most immediate future. This means that if you want to take advantage of some forecasted price changes, you should act on it right away.
Disadvantages of Technical Analysis
Technical Analysis has quite a number of disadvantages, some of which many forex traders consider as insignificant, but are nonetheless true. These disadvantages are mainly rooted in the fact that technical analysis focuses only on numbers, specifically prices, to predict future market patterns. However, many factors other than previous market trends affect future market prices. In fact, anything that can affect the prices of other trades and commodities can also affect forex trade. These factors include, but are not limited to: inflation, economic and political stabilities of key countries, interest rates, trade psychology, and supply-demand situations. Technical analysis disregards these factors completely, which could render it inaccurate in situations wherein these factors could have a great impact on forex trading.
Technical Analysis method of forecasting market prices has its own advantages and disadvantages. However, it is up to you to weigh these advantages and disadvantages, and see if technical analysis is a tool you can use to help you in the forex trade.
Technical Analysis is a method that can be used to forecast market price changes and fluctuations. Like fortunetellers, technical analysis uses certain tools to predict patterns in market prices. However, unlike fortunetelling, which uses tarot cards and crystal balls to help predict the future, technical analysis uses charts, tables, and often, statistical mathematics, to predict the future of Forex trading.
Underlying Principle of Technical Analysis
Technical Analysis simply relies on past and present numbers and figures. It takes into complete account the numerical pattern of the market for as far back as possible. And since it only considers numbers as the primary source for market price forecasting, other probable causes for market price changes, such as inflation, socio-political factors, and the like, are simply disregarded
Advantages of Technical Analysis
Technical Analysis is a purely objective tool, thus making it a pretty stable means of forecasting market trends. Often, this objectivity makes it an extremely accurate tool for success in the Forex trade. It is good to take note, however, that technical analysis forecasts tend to be more accurate for the most immediate future. This means that if you want to take advantage of some forecasted price changes, you should act on it right away.
Disadvantages of Technical Analysis
Technical Analysis has quite a number of disadvantages, some of which many forex traders consider as insignificant, but are nonetheless true. These disadvantages are mainly rooted in the fact that technical analysis focuses only on numbers, specifically prices, to predict future market patterns. However, many factors other than previous market trends affect future market prices. In fact, anything that can affect the prices of other trades and commodities can also affect forex trade. These factors include, but are not limited to: inflation, economic and political stabilities of key countries, interest rates, trade psychology, and supply-demand situations. Technical analysis disregards these factors completely, which could render it inaccurate in situations wherein these factors could have a great impact on forex trading.
Technical Analysis method of forecasting market prices has its own advantages and disadvantages. However, it is up to you to weigh these advantages and disadvantages, and see if technical analysis is a tool you can use to help you in the forex trade.
Monday, December 8, 2008
For Newcomers: The Good Things about Forex Trading
Trading comes in all shapes and sizes, which isn’t exactly a good thing for newcomers to face. For someone trying to go into trading for the first time, an important and quite intimidating question immediately comes to mind: What am I going to trade? All types of trading industries have their own advantages and disadvantages – information that might not be easily accessible for those who are just starting out.
Current trading trends, however, point to Forex Trading as becoming extremely popular, especially with beginners. Trading Forex has quite a number of advantages that fit newcomers. Following are the top five good things that seem to pull in trading newbies.
Trade All Day
Forex Trading goes on for 24 hours a day, 7 days a week. For those who are still starting out (and planning on making it big in the trading business, eventually), leaving your day job for something you know relatively little about might not be an attractive option. With Forex, you can still go to your day job, and sneak in a few hours of trading before going to bed. This means you still get to have that monthly paycheck, while earning something on the side. Forex trading gives you the freedom with regard to time – something which other types of trading are not always able to do.
Trade Anywhere
Forex trading only requires three things for success: a reliable computer, good internet connection, and a sound mind. No special time slots and confusing places. The fun part is that you can trade with people from all corners of the world, at the comfort of your own home. That’s virtual traveling while earning at the same time!
Low Trading Cost
Forex trading does not have commission fees that take a big chunk out of your supposed income. Transaction costs are also relatively smaller (typically less than 0.1%, or 10 pips). Larger dealers could offer transaction costs at less than 5 pips, whereas fast-moving markets might offer wider spreads (retail transaction costs).
Market Freedom
Unlike other trading systems, Forex trading is difficult to manipulate. This means that there are no specific people or corporations controlling Forex. In Forex trading, the vastness of the entire market does not pave way for monopoly-like manipulation, even by the world’s biggest banks. All’s fair in Forex trading.
Liquid as Water
Forex trading has the highest liquidity of all markets. There are always buyers and sellers, which makes it possible to enter and exit the market at your own whim. This type of flexibility cannot be achieved in any other type of market.
All these advantages point to two main characteristics of Forex trading: flexibility, and freedom. If these are what you're looking for in a new trading venture, then Forex definitely is for you.
Current trading trends, however, point to Forex Trading as becoming extremely popular, especially with beginners. Trading Forex has quite a number of advantages that fit newcomers. Following are the top five good things that seem to pull in trading newbies.
Trade All Day
Forex Trading goes on for 24 hours a day, 7 days a week. For those who are still starting out (and planning on making it big in the trading business, eventually), leaving your day job for something you know relatively little about might not be an attractive option. With Forex, you can still go to your day job, and sneak in a few hours of trading before going to bed. This means you still get to have that monthly paycheck, while earning something on the side. Forex trading gives you the freedom with regard to time – something which other types of trading are not always able to do.
Trade Anywhere
Forex trading only requires three things for success: a reliable computer, good internet connection, and a sound mind. No special time slots and confusing places. The fun part is that you can trade with people from all corners of the world, at the comfort of your own home. That’s virtual traveling while earning at the same time!
Low Trading Cost
Forex trading does not have commission fees that take a big chunk out of your supposed income. Transaction costs are also relatively smaller (typically less than 0.1%, or 10 pips). Larger dealers could offer transaction costs at less than 5 pips, whereas fast-moving markets might offer wider spreads (retail transaction costs).
Market Freedom
Unlike other trading systems, Forex trading is difficult to manipulate. This means that there are no specific people or corporations controlling Forex. In Forex trading, the vastness of the entire market does not pave way for monopoly-like manipulation, even by the world’s biggest banks. All’s fair in Forex trading.
Liquid as Water
Forex trading has the highest liquidity of all markets. There are always buyers and sellers, which makes it possible to enter and exit the market at your own whim. This type of flexibility cannot be achieved in any other type of market.
All these advantages point to two main characteristics of Forex trading: flexibility, and freedom. If these are what you're looking for in a new trading venture, then Forex definitely is for you.
Sunday, December 7, 2008
Best Forex Broker – Tips for Choosing The Perfect One For You
It is a known fact that there really are so many Forex brokers around the world when it comes to online trading of currencies. Picking the perfect one is very critical if you seek to take full advantage of your Forex trading profits.
The first thing you need to understand is that a great Forex broker acts with regards to assisting you to place orders and provide you with excellent service along with it. Some traders who are just beginning pick broker assisted accounts. After that, they rely on their brokers to land them big bucks. But it is not advisable to use broker-assisted accounts. In order to achieve success in Forex trading, you must be able to understand the importance of your role and be responsible for your own trading success.
Here are some tips in order to find the best Forex broker available:
Consider the Spreads Offered.
The competitiveness of Spreads is critical and you have to make it as competitive as possible. Costs of transactions rise up moreover when your trading is frequently active. The more you are able to make the spread tighter, the more profit shall flow in. Nowadays, many brokers provide spreads from 3-5 pips. This type of spreads is what you need to watch out for.
Payment Method
Always seek a Forex broker which can get online payments to your own Forex account. You must guarantee that the method of payment is very secured. This is critical because it's an awesome facility for speed trading because transactions done online is really quick. Being able to secure online deposits can make your Forex trading much easier.
Considering the Offered Leverage
There are leverage brokers that surprisingly vary with regards to one broker and another. You must remember to look for a good broker that can grant you a minimum of 200:1. This will increase and even reach your full potential when it comes to profit. Be aware of this for many brokers shall give varying offers that can even reach 400:1. Just make sure that the leverage offered fits your needs and that you can go on with it in the long run.
These are only few of the helpful tips that can help you handpick the best Forex broker among the rest. Being able to pick the top and most appropriate one for you is very critical to the success of your Forex trading. So choose wisely and always pick the one that can assist you in reaching your maximum profit potential.
The first thing you need to understand is that a great Forex broker acts with regards to assisting you to place orders and provide you with excellent service along with it. Some traders who are just beginning pick broker assisted accounts. After that, they rely on their brokers to land them big bucks. But it is not advisable to use broker-assisted accounts. In order to achieve success in Forex trading, you must be able to understand the importance of your role and be responsible for your own trading success.
Here are some tips in order to find the best Forex broker available:
Consider the Spreads Offered.
The competitiveness of Spreads is critical and you have to make it as competitive as possible. Costs of transactions rise up moreover when your trading is frequently active. The more you are able to make the spread tighter, the more profit shall flow in. Nowadays, many brokers provide spreads from 3-5 pips. This type of spreads is what you need to watch out for.
Payment Method
Always seek a Forex broker which can get online payments to your own Forex account. You must guarantee that the method of payment is very secured. This is critical because it's an awesome facility for speed trading because transactions done online is really quick. Being able to secure online deposits can make your Forex trading much easier.
Considering the Offered Leverage
There are leverage brokers that surprisingly vary with regards to one broker and another. You must remember to look for a good broker that can grant you a minimum of 200:1. This will increase and even reach your full potential when it comes to profit. Be aware of this for many brokers shall give varying offers that can even reach 400:1. Just make sure that the leverage offered fits your needs and that you can go on with it in the long run.
These are only few of the helpful tips that can help you handpick the best Forex broker among the rest. Being able to pick the top and most appropriate one for you is very critical to the success of your Forex trading. So choose wisely and always pick the one that can assist you in reaching your maximum profit potential.
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