Posts Tagged ‘Leverage’
Trading the Markets
Trading the markets for speculation purposes is a challenging task that numerous amounts of people have embarked on. Do you know anyone who successfully makes money trading? The answer is most likely no. If you do I recommend you become as friendly as possible with the person and learn everything you can from him, unless he is charging for his services. That usually means he is not a successful trader.
With the type of leverage that is offered in the futures, options and forex markets, I personally find it hard to believe that anyone who has a successful system that is right for them will be too eager to teach it. Why should they teach if they can be trading the daylights out of it and be making millions with the 400:1 leverage that some forex platforms offer.
On the other hand numerous people have made millions trading. Look at the list of CTA’s on IASG.com, look at John W. Henry, Max Ansbacher, Warren Buffet, Peter Lynch and all the Market Wizards. I recommend reading the market wizards book for some inspiration.
The problem is that most traders go into trading with the wrong attitude. Have you ever heard this phrase “I am tired of working I need to trade to get rich.” It takes 7 years to complete medical school and there is no green arrow red arrow system for performing heart surgery. Trading will pay you much more than doctors make so you should expect to have to do more work than doctors do for a longer period of time to get wealthy and become a market wizard. While you start and practice it is imperative that you do so at a low cost, meaning you don’t blow out your account on bad trades due to poor risk management.
It has been hypothesized that, with proper risk management, a simple system like flipping a coin to buy or sell could be successful. However having the slightest edge should enhance the traders chances a great deal. By edge, I mean something that will make the trader make more money than he looses. An edge can be discretional or algorithmic as long as the trader makes money in the long run.
A perfect example of this is the game of blackjack. The house has a very slight edge less than not more than 2%. But by repetitive play they consistently end up profitable. This is because they have a set approach, and edge, and they don’t get emotional when a player goes on a winning streak. Good traders put themselves in the position of a casino.
Traders can make money discretionally by following support and resistance levels, watching the volume, size and market action. Or, traders can create a trading system by back-testing a certain edge. Calculate the systems expectancy, develop trading and risk management rules, and follow those rules religiously to generate profits. Numerous people will try to sell systems.
It is very important that with any system traders create a reevaluation point. By reevaluation point I mean a point where the trader starts to question the systems effectiveness and begins to look for other systems that he expects to fair profitable over time. The reevaluation point should be decided upon before trading begins. It should be based on the back tested data, and you must take into account concepts that we will discuss such as a drawdown, consecutive loosing sessions, reward risk ratio.
Want to learn more about systematic trading? The key is to develop and utilize a system that fits your trading style and personality. We can help you with finding profitable trading systems, backtesting them, and our programmers will even code your system into your trading software for you!
By: Alex Nekritin
When it comes to trading Forex, a new trader has a lot of choice. They can choose to go with a recommended broker from a friend or family member, or they can choose to go with a broker offering great leverage or trading software. The problem is that neither one of these paths will net them at a broker that is honest and fair, as the recommendation from the friend may not be accurate, and a lot of leverage is not a good thing for a new trader.
I have traded at many, many different Forex brokers. Some have been great for trading, yet brutal on the service end of things. Others have had great service, but may have had high commission rates as a result. One common theme that I noticed, however, was the desperate attempt to build trust: plainly said, there are not a lot of brokerages that a trader can actually trust.
Why? It comes down to disclosure: what are their commission rates, what are the spreads like, and is there a deal desk trading against you? Many brokerages don’t tell you either way, leaving you to wonder if the trading that you are doing is bringing the highest return for your dollar. In my experience, it usually isn’t.
FXDD for New Traders
I started using FXDD several months ago after being disappointed by the customer service of several other brokers. As always, I gave FXDD the benefit of the doubt when I began trading. To my surprise, there were no complications or mistakes. The trading was smooth, and dare I say it, relaxed. The ease at which I was trading amazed me.
FXDD offers daily reports and in-depth analysis, as well as education and support for a new investor. This, combined with a solid trading platform, creates a great environment for a new trader to get their start with Forex.
If you are curious about starting Forex trading, but you don’t want to put any cash on the line, FXDD offeres a free demo account.
FXDD for Established Traders
FXDD overs a few solutions for tax-free trading, as well as advanced charting and tools. Their software is top notch, and it only took me a matter of minutes to figure everything out.
Advanced traders will feel right at home with FXDD, and should any problems arise (for whatever reason), their support desk is always ready to answer your call.
Conclusion
Though there are more efficient or more aesthetically pleasing brokerages, FXDD is a dependable, solid brokerage that offers feature-rich trading at a low cost. The value that they build for their clients is quite obvious, and I expect nothing but growth for this company. I would place more of a recommendation for them, but their information for new traders is somewhat lacking in depth.
By: Alexander Fedorov
Forex trading has become very popular in recent times as a way of making money on the side using extra funds. In fact, a few people have even been able to turn their Forex trading activities into a regular source of income. When you play on the Forex market, you are running a risk, but you are doing so because Forex trading offers you an opportunity to make a good profit. It is not for everyone, and certainly not for people who are risk-averse and very cautious about money. It also requires a person who is willing to do the work of studying the market, because being able to read the market trends is crucial in making a profit out of Forex trading.
You may be thinking about getting into Forex trading. With that in mind, let us examine what goes on in Forex trading. Essentially, Forex trading deals with the foreign exchange market. This is a 24 hour global market where people are constantly buying and selling different world currencies. A typical Forex investor will attempt to buy a foreign currency at a low rate, with the anticipation of selling it at a higher rate. An investor must do a lot of these trades, and make money out of most of them, in order to get ahead in the world of Forex trading. By handling large volume of trades, an experienced trader can make a great deal of money in a very short time. But experience and success do not come easily. It takes time for a trader to gain a keen understanding of the foreign exchange market, and a lot of time and money must be put into it.
Forex trading can be risky for two reasons. One reason is that, in order to make a significant profit, a Forex trader easily has to get into marginal trading. In marginal training, only a small percentage of a lot is paid for by the trader’s own money, while the rest is leverage. In other words, a trader makes use of borrowed capital when doing a marginal trade. The greater the leverage involved, the greater the risk to the trader.
The other reason that Forex trading is risky is market uncertainty. Even the most experienced Forex trader cannot make perfect predictions on how the foreign exchange market will perform. The market can easily be affected at anytime by unexpected events, especially events that make the news, such as wars in elections.
If you’re still interested in getting into Forex trading, then be prepared to work hard and do your homework, and also be prepared to take on the risks.
By: Joseph Ducat
As you enter the Forex trading world you might be introduced to a number of different terms. You may not know what they mean, and you might need further explanation.
Understanding Forex trading jargon is vital to your success as a trader. Therefore, some of the most commonly used terms are defined below:
Bid-This is what the buyer of a currency would be willing to pay for a foreign currency. This amount is usually based on current market trends. This is the price that the seller is usually expecting to pay in order to purchase currency they later can sell for a profit.
Ask-This amount is what the seller is expecting to make when selling a particular foreign currency. Just like the bid it is based on current market price. It may not be exactly what a seller will get but it is the goal of the seller to make a profit and sell for at least the current market price.
Spread-The simplest way to define this term is this: It is the difference between ask and the bid price. This is the key to profit (or unfortunately sometimes to loss).
PIP-The smallest price of a currency is referred to as this. Calculations based on this unit is what helps figure out exchange rates more accurately.
Base currency-The currency that you start with is called by this term. It would be compared to another (base currency to determine exchange rate, as well as profit or loss.
Secondary currency-This term is used to describe the current that is exchanged with the base currency. For instance, if you originally traded in the British pound and want to switch to the American dollar the American dollar would become the secondary currency.
Margin-When referring to working with a broker this term is usually used. It is the amount that you would be expected to deposit in a new financial account opened. It is also the commission that would be paid to a broker every time a trade is made.
Leverage-This term describes the weight of a margin. Forex trading deposit accounts are usually set up in this way so that large amounts of security deposits are managed with as little capital as possible.
Margin call-This is a phrase that is used to describe a time when a trader’s deposit does not even cover the transaction made. It is in some ways like having taken out a business loan and not making a profit. Worse yet, it could be a significant loss.
Currency pair-This is simply the two different mediums of financial media being exchanged. It is made up of the base currency and the secondary or “quote” currency. A trading duo such as this can also be thought of as a single unit being bought/sold.
Volatility-This is the measure of the amount of risk involved in making a specific Forex trading transaction. This is an evaluation tool that helps determine whether making a certain type of investment is potentially profitable or not.
Clearing price-The value of a currency pair is described by using this phrase. It is the specific monetary value assigned to a security or asset and it is determined by current bid and ask price.
By: Paul Richerd
