Tips and Traders
Any trade requires a market, and the Forex trade also needs one. However the Forex trade is not like other trades because it is based on the currency of countries rather than commodities. Therefore there are specific types of markets developed especially for Forex trading. There are three main types of markets explained below.
Spot markets are, like their name, used for spot trading. Exchange of currency takes place on the spot, and both traders agree on each other’s terms in real time. Even though the exchange of currency takes a certain amount of time for transaction, both the buyer and seller decide to trade together on a “right now” basis. The spot price of the currency pair however, may change drastically. The spot price is the price set when the buyer and seller decide on it. Since millions of transactions are being done every second, the price of the currency on the spot market fluctuates every few seconds. In the forex trade, this rate is called the forex spot rate.
In the forex trade, the forward exchange market is a financial market that conducts trade based on the expected value of a currency in the future. It is determined by a specific rate known as the forward rate. The forward rate is determined by the slide or rise of one currency against another in a currency pair. So, a currency that is sold on the expectation that the value of the currency pair might decline is called selling at a discount; whereas the currency pair that is sold on the expectation that the expected price might increase is considered to be ‘sold at a premium’. Usually, the spot rate of the particular currency pair that is to be sold is taken, and is set to mature. The maturity time is set by the buyer and seller and is usually between a few weeks to a few months, after which the currency pair is sold or bought.
The futures market, as the name suggests, is a market where the exchange is done based on the assumption that the value of the currency might appreciate or depreciate based on the market, and trade on it accordingly. The key difference between forward market and futures market is that in the forward market, the participants (buyer and seller) can negotiate their terms, while in the futures market, the price is not at all negotiable.
Forex trading is the exchange of one foreign currency against another. It is the most active market in the world and is one of the biggest markets also. In 2019 alone, the forex market had an average daily turnover of 5.1 trillion USD. This makes it an ideal source of investment for budding business people.
There are different ways to invest in the forex market. It can be said that there are four types of forex traders, which are listed below.
Scalping is, in the simplest terms, holding onto a currency for not more than a few minutes. They try to attain small pips as much as they can during the busiest times of the day and sell it at slightly higher prices when the activity reduces. It requires extreme focus since the scalpers are necessary to keep their attention undivided on the charts. This is a fast-paced method, and you need to have excellent decision-making skills to be a good scalper. This method does not guarantee you instant money; instead, it provides a small of profits that number increases to a large amount over a period of time. If you are easily stressed and do not like fast-moving markets, this method might not be for you.
If you think scalping is too fast, but you do not want to hold your trade for more than a day, day trading might be your thing. What these traders do is, they choose a side and act on their biases. They may walk away with a profit or a loss at the end of the day, but they walk away at the end of the day, whatever happens, not holding their trade overnight. It takes a good analyst and a better competitive mind to keep up in this type of trading.
This is mainly for traders who cannot pay full attention to trading but can devote some part of their time for trading. It is done by identifying swings in the market, i.e. a swing low or a swing high. At a swing low, the currency price decreases, and it is better to buy more, while it is better to sell at a swing high to maximize profit.
Position trading, just like scalp trading is not for everyone. It takes an immense amount of patience to do this type of trading, and the trades can last between a few weeks to a few years. Position traders are usually very well versed in the trade and therefore have a grasp of the fundamentals of forex trading. This is a hazardous type of trading and should be done by people who have been in the business for years.
Forex trading is a vast sector, where anyone can easily get lost, let alone the newbies. With the 24-hour market place and endless options to exchange or invest money, it can be a daunting experience even for the professionals.
Newbies often make the mistake of considering the foreign market as an instrument to increase their monetary income. Whereas in reality, it is hardly so. You can scarcely make a substantial profit if you’re not good at the game. Hence it is essential to keep in mind the five golden tips that we’re going to present to you, stay with us!
Often you end up losing money, in your initial trading experience. This happens due to insuffiecient knowledge and expertise. Hence, one solution for this problem is to open a dummy account and trade using virtual money that has no value. It is usually called a ‘Demo account’ and is very important for beginners. It lets you decide the strategies to employ what works the best for you before you start real deal. Most of the online brokers allow the users to create a demo account with some virtual money that can be used to trade virtually.
The best trick is to focus on substantially reducing your losses, rather than increasing your profits- they go hand-in-hand. Forex trading can be a very emotional road filled with grief, anger, greed, and the need to make more money. Hence, before you start a trade, fix a limit for yourself. Irrespective of the stakes, exit from the trade when you reach your limit. An Exit strategy is equally important as the entering one. Many professional trades even carve out excellent exit strategies to avoid losses.
Employ trading strategies
Aspiring traders always need to employ good trading strategies that suit your trading style and goals. Most of the newbies just jump into forex trading, buying random currencies and waiting to become rich. It does not work that way. Planning trade is more time consuming than actually doing it. So, study the trading industry first and research about different strategies that best suit your needs.
Once you dive into trading, there is no hard and fast rule that you will go back rich! Although it happens in some cases, it is backed by a lot of patience and persistence. You can’t get rich without having work done, unless you’re gambling or you’re extremely lucky. It is imperative to be diligent with your plan.
Focus on losses
It is better to focus on losses than focusing on profits. Profits might come and go, but what is important is to prevent you from losing money than winning a little. As discussed, set a limit for yourself, even in terms of how much of it you can afford to lose. Once that’s in place, you’re good to trade and become rich.
Forex is a liquid market trading where there is consistent inflow and outflow of money. Many a time you might have come across websites or people ranting about how overwhelming it can be to trade in the foreign market. Well, if you have consistency, patience and awareness of what you’re doing, then it is a cakewalk. Here is a list of 7 essential tips to keep in mind while trading in the foreign market.
Use demo account
You might hear this a lot if you’re researching about the tips for trading. You cannot fly an aeroplane if you’re not trained. A beginner needs to understand how important a dummy account is. If you’re in for a long run, then you’ll have to analyse and chart out the possibilities. Definitely, you cannot do this whilst losing money. So a demo account is a must!
Invest in Education
Educate yourself about anything and everything about the market. Whether you wish to learn from a professional, or indulge in reading books and magazines, that’s your call. It is a wise decision to invest money in learning than to lose it in the market.
Create a trading plan
Once you’re ready to set your foot on the market, and invest your first dollar in the business, create a plan. From day one, till forever, you need to stick to the plans you make. It could include, do’s and don’ts, your wins and losses and also how you plan on saving or spending your investments. Maintain a book or a journal to note it down.
Avoid smaller time frames
Even though smaller timeframes are beneficial at times, it is always better to invest in longer ones, as it is helpful in the long run. For starters, you can start with four to five hours a day. This timeframe can also increase in time and can create room for mistakes. In the long run, you avoid making the same mistakes, and within no time, you shape up to be a better trader than you were previously.
Chase the trends, not the market
Trading trends keep changing every week, and it is important to follow these changes if you’re going for the big win. But having said that, it is also important not to chase the market, i.e. don’t do something because other traders are doing it. As a beginner, it might not be the best for you, but eventually, it will fall in place.
Trade like a machine, think like a human
Thus statement holds when you’re controlling your emotions to overcome the losses. A study shows that a person’s emotions are higher when he loses than when he wins. You need to be prepared to lose big if you’re expecting to win big. This applies to the case of winning as well. Once you win large amounts, it is human tendency to fall for greed, only to lose more money. Get good control of your emotions and stick to your plan.
You never know how luck can favour you on a particular day. So, it is better to start with smaller amounts. Even in case, you’re losing money, and you’ll have your exit strategy in hand and can back out without much loss on your pockets
The currency exchange market can be a boon to some and bane to the others. There are many inexperienced out there, who are struggling to make way to the top. We’ve got your back because we’re going to discuss the top 20 tips everyone should know to become a successful trader, now or shortly:
Chart it out
When you’re placing your first dollar or making your first mistake, you always need to write it down. Maintain a personalized journal exclusively for this purpose and write down all the decisions you make regarding your trading business.
By automate, we don’t expect you to buy robots or create bots to make decisions for you. Once you study the pattern of your trading, you will get a good understanding of what works for you and what doesn’t. If you’re sailing in the right boat, do not try and improvise it. Just automate your emotions and practice to continue in the same path.
Don’t reply on fake accessories
Once you talk about cash flow, there are many companies and products in the market that claim to help you win big amounts. Don’t fall prey to such tactics. Hence, without diverting your attention, concentrating on improving in
Keep it simple
Always have a clear vision and believe in your strategies, without over contemplating things.
Follow the trends
There is no one way to trade. You do what’s best for your plan. Hence without having too much to think, follow the directions blindly, at least in the initial phases of it.
You do not possess the alchemist’ stone. So, be patient. If today is not your ay, then tomorrow can work in your favour.
Profit is not only about winning money, but it’s also about shortening your loses and learning how to invest it in the right place.
Understand your needs
Before you start investing in any market, you should have a clear picture of what you want to gain out of it and how you’re planning to do so. It is the first step to any trading.
Stick to your plan
Once you’re aware of what you want, draw a framework which includes the initial capital, how much you’re affordable losing and how you plan to win it back.
Choosing a broker is equally important because they’re the ones that carry out and help you in executing your plans. Make sure you hire a professional to get your work done.
Professional brokers generally have various account types. Make smart decisions in choosing your account type, sometimes a small step can lead to a big glory.
Whatever is your level of experience in the trading sector, it is always vital, to begin with, small amounts and work your way up with organic investments, instead of pouring money to make up for your losses.
Pick a currency pair
It is a vast ocean with millions of fishes. It’s better to pick a pair that works for you, know your strategies.
Study the market
It can be a daunting experience to understand all at once. However, if you’re clear with where to begin, then you can research thoroughly about it and then start to trade.
Do what you understand
If you do not understand the strategies, then let it go. Do not indulge in practices that confuse you.
Control your emotions
Emotions of greed, anger, pain and happiness can lead you to take impulsive actions.
Take a break
If you feel your emotions are taking control of you, then always take a break. Markets are off on the weekends, so that will give a good break off the system.
Focus on single pair of currency, once you’re comfortable, you can move on to the other pairs.
Since the markets are off on the weekends, it gives you an excellent chance to study the patterns, wins and losses and pick up your A-game for the upcoming week.
Don’t give up
There are wins and losses in all sectors, if you want to become a professional trader and make big long term plans, then do not give up.
Even the most seasoned foreign exchange traders struggle at least once at some point in their trading business. The setback can be due to various underlying reasons. But here, we’ve listed down a few things to avoid, that can enhance your next trading experience.
Don’t hop from one strategy to another
This is a common blunder that is employed by almost all traders. There is n number of books, magazines, videos and tutorials out there in online as well as offline markets that can get you off the hook. But, you need to bear in mind that those tactics and strategies are not personalized for you. They’re jotted down to help people in general. But if you want to make something out of it, it is your responsibility to be consistent throughout your strategy. Stick to one and move on. In the long run, if you don’t see a difference in your capital, then you can switch it up a little to match your goals.
Don’t expect too much
Let’s get this straight. There are hardly a couple of people out there that have turned into millionaires solely by trading. If you want to be one among them, you either have to work really, like really hard, on your strategies and game plan or consider it a hobby. Do not expect to become millionaires in just a few trades and expect money to flow into your account. Once you set foot on the track you will substantially make a profit, but got to have patience.
Focus on strategy, not on the concept
Most of them, who dive into the trading business, tend to set their focus on the strategy that they’ve to employ. This is not a bad thing. It is imperative to target the strategy, but what is more important is to know and learn the concepts. The baseline remains the same, on while people employ strategies based on their needs and goals. For instance:
- Patience is the key
- Invest in small amounts first
- Study the market
There are the concepts that ought to be followed irrespective of the strategy. However, based on your needs, whether you’ve to employ the day trade or anything else, is completely and individual choice.
Not cutting loses
Like already mentioned, trading business involves making money as well as cutting down our loses. Most newbies make the mistake of concentrating more on the winning money, than paying attention to how much they’re losing in the process. It is human tendency to ignore the situations when they’re going wrong. But when trading, it cannot let your emotions get the better of you. If you ignore the amount you’re losing, then you might end up blowing out your account, which obviously shouldn’t happen. So, pay attention to how much you’re losing. Once you reach a limit, employ your exciting strategy and back off for the day.
According to a study, forex trading is followed for two particular reasons: Hedging and speculation. Hedging is followed to prevent any company from losses. The profits they get from overseas are converted to their currency in the foreign market, whereas speculation can be referred to as day trading. There could be other possible reasons for an individual or an organization to trade. But, without necessary plans and solid strategies, switching up from time-to-time, you could lose the profit margin. Here, we have put forward some tips on how to choose your strategies. Take a look!
How you’re going to trade!
Before you decide what strategy works for you, you need to have a clear picture of how you’re planning to trade. There are four different ways you can trade:
- Day trading: This method involves opening and closing the trade on the same day, with a time frame of a few hours.
- Swing trading: It is the strategy where the trading positions are open for weeks. It works best for commodities, and stock markets, where analyzing the weekly charts is crucial for business.
- Scalping: This strategy involves keeping the position open only for a few hours. They’re usually followed by professionals that have higher knowledge in the exit strategies as well.
- Occasional trading: If you want to consider trading as a pastime or hobby, then you can choose this path.
Once you decide how you’re going to trade, you have to set your mind on whether you want to deal with higher risks, with higher profits or lower risk, followed by lower profits. The latter is recommended for beginners as they have a lesser chance of losing money.
Professionals often combine different strategies to increase their risk and money earning factor. This is because, if one of them does not tend to work in their favour, the other strategy will come to their rescue. However, for beginners, it could be a daunting experience as it would add more research and work into their calendar.
There is no black or white when it comes to foreign market trading. According to your plans and goals, you got to choose the one that works best for you. Most of the beginners go for the day trading strategy as it is followed by the least risk and has a lot to offer in terms of experience.
The best way to learn and employ strategies or methods is to learn from experienced people. Some videos and books offer free knowledge in terms of choosing the best strategy for your needs. It’s almost criminal not to make good use of such information.
Although it is your plans and goals that help in determining the best strategy for you, the above- mentioned ways could help you decide and set your foot on the right path.
Foreign exchange or the Forex is a global, decentralized liquid share market where there is an exchange of foreign denominations. It requires utmost skill, patience and persistence to get everything right about this market. More often than not, it never goes fully right. Regardless, it is important for you to follow these five tips to get the best foreign trading experience:
Understanding the market
The Forex market is professionally structured by a lot of factors that interconnect the various factors with other foreign markets as well. For instance, The Canadian Dollar (CAD) and Australian dollar (AUD) are changed by their commodity prices. A massive amount of these countries’ GDP includes mining and from natural resources. Hence, it is vital to understand the relation between your home currency and the ones you’re trading for. A good amount of research can prevent you from making bad decisions and get you good at the game.
Choose a professional broker
You need to provide paramount importance to the process of choosing a broker. Due to the increase in popularity of the trade markets are foreign exchanges, there are tricksters that make it easier for you to fall prey. Make sure the broker is a professional one and is clear about what you want. For instance, if you’re going to trade off of Fibonacci numbers, then make sure your trader has the same platform.
Foreign trade markets are places where you can make the best decision and expect the best to happen. However, there is something called expectancy that determines the rate of your system’s outcome. A simple formula issued to calculate it. All you have to do is measure all your success and losses and substitute it in the formula
E= [1+( W/L)]X P-1
Where P stands the average profits from your total trades and, L stands for the average losses.
Keep track of the wins and losses
This practice will not only help you in analyzing further, but also prevent you from making repeated mistakes. Chart out your wins and losses, and the reasons that caused you to do so. Mood changes and emotions also play a crucial role while trading in these foreign markets. Scrutinize these points and make sure you do not repeat it in your net trade bidding.
As we all know, foreign markets are closed during the weekends from Friday night to Sunday night. It is the best time to analyze what has happened over the week and predict its outcomes for the following week. Most of the news companies and websites who are into this business, layout strategies, analysis and patterns to predict the outcome of the following week. Have an eagle’s eye for such patterns and sink in all the information. It could work in your favour, you never know!
Forex Trading is the exchange of foreign currencies over the counter or otherwise and is one of the largest businesses in the world. How big? The 2019 Forex Market saw a daily average turnover of more than 5 trillion dollars USD. That is the kind of market this is.
So to take full advantage of this market, you will have to analyse the market and its extent. There are three main ways to analyse the forex market, which are listed below.
Price movement is studied by traders in technical analysis. The theory of technical analysis states that it is possible to look at historical price movements and estimate the potential price movements and the current trading conditions. The main reason for using this method is that theoretically, the price reflects the current market conditions. It essentially means keeping an eye out for recurring trends in the market and making a trade on the assumption that the pattern repeats itself. The best way to spot and act on repeating trends is by following a chart. Charts provide visual representations of previous data, and using this; it is possible to predict the outcome of the trade to a certain extent.
The central aspect of fundamental analysis is based on supply and demand. Just like in economics, studying the supply and demand market of the Forex trade can increase the chances of fair trade. It involves analysing the political, social and economic aspects of the society to get an idea about the supply and demand of a particular currency pair. The easy part of this is that the price determines the supply and demand of a specific pair; the hard part is that there are a lot of factors determining the supply and demand, and identifying them can be tricky. Understanding the country of the currency you are trading in is very important because it gives an insight into where the pip value may go in the future.
Even though theoretically technical analysis states that price can give a clear picture of the current market situation, it is much more complicated than that. If that were the case, this trade would not have existed because everyone would have done it the same way. Here is where the power of opinion comes in. Traders have their own idea about how a trade might go, and this influences their judgement. And sometimes, to some extent, this might even work against the odds.
Even though all three are considered separate, it is essential to know that knowing all three can potentially help you in the long run. Since each method has its misgivings, it is better to use all three methods together in order to get the best results.
Insider trading allows the Insider to have an advantage at his trading. This is simple words is the selling and buying of the company stocks by any person who has access to non-public information about the stocks? What is non-public information? This is any information that has the power to influence the value of company stocks and has not been made public. This information can be acquired by anyway. However, some laws prohibit and combat Insider trading, there is also an issue of Corporate trading where employees of the company use the information at their disposal which is completely legal.
What is Insider trading?
The state definition of Insider trading can be broad but to put it in the simplest form, it is the buying and selling of company stocks by a person who has access to the information that is yet to be made public. However, this illegal and there is the STOCK act passed against it, but there can be a difference between legal and illegal Insider trading.
Legal vs. Illegal Insider Trading
Legal Insider trading is part of the business. This is called Corporate Insider trading where employees of a company trade the stocks of their companies, but the illegal Insider trading depends on the corporate information that is not meant for the public. It gives Insider a boost in the game and this advantage helps him to manipulate the prices to a large extent in the market. In other words, it undermines the fairness in the equity market as well as is a breach of trust.
Classic Insider Trading
A top executive of a company has access to information that can be beneficial in trading. This is a trust that the company puts on him. If he buys or sells stocks based on the information that he has about the corporation, it falls in the category of “insider trading”.
Tipper and Tippee
This is the smartest form of Insider trading. It is when an employee has the access to the non-public information but he doesn’t trade himself but passes that information to another person so that they can profit from it. The law deems both the Tipper and the Tippee illegal and considers it a breach of trust.
This involves the unfair use of the company’s information for personal profits. This is, however, a broad term, and can apply to a lot of scenarios.
The initial attempt to regulate and prohibit Insider trading was in 1934, but as soon as the business started making progress, this was followed by other steps. As for now, the STOCk act passed in 2012 by the Obama administration prohibits Insider trading ad not only that it applies to the Congress, the top-level executives, government employees, and also puts ethical obligations on President as well as the Vice president. However, there is a certain type of legal loophole as far as congress is concerned, but as far as the application is concerned, there is no one immune to the STOCK act.