Wednesday, 24 February 2010

Forex Trading VS Options

Discover The Difference...

Forex Trading, also known as FX Trading or by many as the Foreign Currency Exchange, is a financial market where a person can trade national currencies in order to try and make a profit. Perhaps one feels the U.S. Dollar will get stronger compared to the British Pound or the Euro. A strategy can be developed to affect this trade and if the research is correct, a good profit can be made.

Options Trading allows you to buy or sell options on large amounts of stock, futures etc. that you feel will either go up or down in price over a certain period of time. As with Forex Trading, you can leverage your buying power to control more stock or futures for instance, than you could have normally. However, there are differences between Forex and Options Trading. Many of the differences are described below.

24 Hour Trading:

An advantage you have with the Forex Currency Trading System (Forex) as compared to Options trading is your ability to trade 24 hours a day, five days a week if you wish. The Forex Market is open longer than any other market. If your goal is to make double digit gains in a market, it is great to have unlimited time each week to make those trades. Whenever some big event happens around the world, you can be one of the first to take advantage of the situation with Forex Trading. You won't have to wait for a market to open in the morning like you would if you were trading Options. You can trade from your computer instantaneously, all hours of the day and night.

Rapid Trade Execution:

When you use the Forex Currency Trading System, you receive immediate trade executions. There is no delay like there can be in Options or for that matter other markets as well. And your order gets filled at the best possible price instead of guessing which price your order might get filled. Your order certainly won't "slip" like it can with Options. In Forex Trading, there is a lot more liquidity to help with "slippage" than there is in Options Trading.

Liquidity:

Forex Trading has the advantage of being more liquid than any other market, including Options Trading. With the average daily volume in the Forex Market reaching close to 2 Trillion, there is no comparison. The liquidity in Foreign Currency Trading (Forex) far surpasses that in the Options Market. This means when it comes time to trade, Forex Trades will be filled much easier than Options trades will. This speed means more potential profit. Couple this with instantaneous trade execution in Forex Trading, and you have the ability to make a lot of trades quickly.

No Commissions:

Forex or FX Trading is Commission Free because it is an inter-bank market which matches buyers with sellers in an instant. There are no middleman brokerage fees as with other markets. There is a spread between the bid and ask price and this is where Forex trading firms make some of their profit. This means you can save money when you trade Forex compared to Options trading where there are commissions since you would be working with a brokerage firm.

Greater Leverage:

Online Forex Trading can give you much greater leverage than playing Options. However, with Options, you can also manage putt and call options in a way to greatly increase your leverage. Leverage can be very important when you know what a currency is going to do. You can achieve 200:1 or greater in Forex Trades compared to less typically in Options, but it can be close. This means with Forex, there can be substantially more potential profit if you make the right move.

Limited Risk is Guaranteed:

Since Forex Traders must have position limits, the risk is limited since the online capabilities of the Forex Trading system automatically initiate a margin call when the margin amount is greater than the value of the account in dollars. This keeps a Forex Trader from losing too much if their position goes the other way. It is a good safety feature that is not always available in other financial markets. And the Forex is different than Options in that with Options, you only have a certain period of time to trade before the options expire.

When considering the differences between Forex Trading and Options, just keep in mind your preferred trading style and the type of risk you are willing to take. There are definite advantages to Forex or FX Trading that may allow you to profit greatly if you develop a good system and stay within your trading limits. If you are ready to go, then begin investigating a good Forex firm with whom to open a Foreign Exchange Trading Account.


Article Source: http://www.articlesbase.com/ - Forex Trading Vs. Options - Discover The Difference

Wednesday, 17 February 2010

How to trade the FTSE 100

Learn How to trade the FTSE 100 UK...

The FTSE 100 is an Index made up of the 100 largest U.K companies by market capitalization listed on the London Stock Exchange.  Market capitalization measures the size of the company and is calculated by multiplying the number of shares in issue by the share price.  The FTSE was first calculated in 1984 with a base value of 1000 and now represents about 81% of the value of all stocks listed on the London Stock Exchange making it an accurate barometer of U.K business prosperity.

What makes it move?

Company Earnings. 

Traders monitor the earning of companies in the FTSE which are normally released on a quarterly basis. There will be a consensus among analysts as to what that number will be and if the actual number is better than the analysts  expected then the price should rise and if it is worse then the price should fall. The earnings for companies that make up a bigger percentage of the FTSE (i.e. the top 10 by market capitalisation) will have a bigger effect on the movement of the FTSE and should be watched closely.

NEWS

All day long traders are glued to their news screens watching for stories that may impact the economy and the markets.

The news that will move the FTSE can vary from company specific news to global news stories and traders are looking for any news that will cause investors to enter or exit the market.
It is essential to have access to live news as often financial markets will have already moved by the time most people read the story in the paper. Through Getdealings twitter market commentary we bring you the live news stories and rumours the professionals are discussing right now.

Interest Rates.


FTSE traders will keep their eyes open for any potential change in Interest rates as this will have an effect on stock market valuations. The general rule is that lower interest rates are good news for the FTSE as not only do the companies in the FTSE have lower debt payments( making them potentially more profitable) the returns the FTSE could offer look more attractive compared to the lower interest rate you will get from bonds

Article Source: http://www.articlesbase.com/ - How to trade the FTSE

Monday, 15 February 2010

Advantages using automated forex trading systems

10 Advantages to Automated Forex Trading Systems

Becoming a forex trader is one of the ways wherein you can earn the profits that will lead you to the financial freedom that you have always been dreaming of. At the same time, forex trading is also very risky, especially if you have not had the right training.  It is a must that before you start trading the forex market, you take time to learn the basics. You also need to employ a careful understanding of its mechanism. By getting yourself a forex robot trading system that will work even without you manning it, you increase your chances of success. Automated forex trading systems also offer important tips and methods that you may use as you deal with the most changing, unpredictable, and unpleasant market conditions.

Forex robots are computer programs that automatically scan the forex market and automatically make trades based on programmed algorithms.  These trades are made with little or no intervention by a human operator.  These robots are numerous and they are taking the market by storm. But what is really in these products that make them worth the buy? Forget about the burden of making complex computations because the forex robot will surely take charge of all the mathematical concerns you have to face. You can trust it to do the calculations up to the last drop of the risk evaluations. Need you know more? Of course! Read on below for the 10 benefits to having automated forex trading software.

1. You will pay no commissions.  People who take part in the equity market will tell you point blank that you have to secure brokers and pay them with their commissions. However, for forex trading software, you are able to keep all your profits to yourself. You need not pay for any brokerage or clearing fees. You only pay the bid/ask spread.

2. There are no middlemen.  This kind of business eliminates the need for any middleman. This means that with the use of the forex robot, you are able to deal with the market maker in an online electronic exchange method.

3. It promotes only a small transaction cost.  With this business, you are only to pay the “ask or bid” spread. Now in terms of the trading that transpires in the forex market, there are two faintly different exchange rates assigned for every currency pair.  That is, the difference in the price between the buy price and the sell price. This is how the broker makes his money because he or she often quotes two different rates for every currency. The broker then earns his profit based on the difference he places in the exchange rates.

4. Better liquidity.  Forex trading means having the transactions immediately executed and with a forex robot in use, the more promising the business can be! After all, it is a market that is flooded with buyers and sellers who do business 24 hours a day, 5 days a week..

5. It utilizes higher leverage. Because of the large amount of leverage granted to forex traders it does not take a lot of capital to make a substantial amount of profit.  Of course one must be cautious using high leverage because the losses can be magnified as well..

6. The market operates 24/5. Trading is done all over the world and the market is open for 24 hours in a day. Even though some of the major regions are closed for a particular business day, the others are open to do business. Through the help of the forex robot, you can continue trading currency pairs even while you sleep.

7. You can access it online. One of the most attractive features of trading forex...you can do it from home! You don’t need to leave the confines of your home because you can access it by using the Internet.

8. You get to profit from both the bull and the bear market. The bull market refers to the market that goes up while the bear market is the one that goes down. With the forex robot, you can earn both ways.

9. It is user-friendly. Forex robotare generally easy to install, access, and use. This means that you don’t have to go through the agony of operating it.

10. There is no need to supervise it. The forex robot doesn’t need human interference. Just keep it updated at least on a regular basis so that it can deliver its best performance. Overall, automated forex trading software is a must in this line of business. Get the hang of it and you will surely succeed and experience that superb financial freedom!


Article Source: http://www.articlesbase.com/ - 10 Advantages to Automated Forex Trading Software

Tuesday, 9 February 2010

Learn How To Trade Currencies


Interested In Learning How To Trade Currencies?

Are you interested in learning how to trade currencies? Especially given the global economic slump, there are ever increasing numbers of people trying to find ways to insulate themselves from the vagaries of the economy by finding new sources of revenue. This makes learning how to trade currencies an especially attractive option. The foreign currency exchange market is an incredibly large and liquid market and trades can be conducted online, making getting involved easy for individual investors. All it takes is an eye for detail and the ability to watch the movements of the market.

When you are thinking about how to trade currencies, you'll discover that you are far from the only person doing it. Some of the people out there who are trading currencies are doing it with something akin to genius, while other people barely know what they are doing.

There are all sorts of people investing in this form of money making, and you'll find that the more information that you can put together, the better. Make sure that you know what information you are going to use and what kind of trading you are looking to doing. What currency pair are you going with, and what can you do when you are looking at a 24 hour market that never sleeps? What tools are going to be the most handy, and which ones are you going to be able to get right away.

A big part of learning how to trade currencies is examining how the different major world currencies have been changing in terms of their value relative to one another. You won't get very far simply trading the same pair of currencies over and over again. Certainly the US dollar is an important currency, but you'll also want to trade in the Euro, the Swiss Franc and other currencies.

All of the world's major currencies offer you opportunities to make profitable trades. You'll want to keep an eye on the market and keep in mind that economic instability can be a currency trader's best friend. Rapidly expanding or contracting markets create opportunities for large profits - of course, there is also the possibility of losses, so traders are well advised to know all the facts before getting involved on a large scale.

There is a wealth of information available which can help you get started in making profitable trades on the Forex market. While the guides aimed specifically at Forex trading are a good place to get started, you'll certainly want to make a habit of following world news, especially business news of you want to be a well informed trader.

A well informed currency trader is a successful currency trader, so keep apprised of the latest political and economic news from all over the world. Cyclical behavior is the norm in economies of all scales - so if you can watch these recurring trends and spot when a currency is on its way up or down in value, you can make some very lucrative trades.

If you're interested in investing in the currency exchange market, remember to get as much information as you possibly can before you get started. Knowing how the markets work is key to being able to identify the trends which govern the fluctuating values of different currencies and enabling you to profit from the ups and downs of the world economy.

How to use MACD Indicator


Making Better Forex Trades By Using A MACD Indicator

You know how to make better forex trades by using an MACD Indicator? This is quite important because it can help you strengthen the success rate of your forex trading strategy.

MACD is an acronym for Moving Average Convergence Divergence and it can help you determine which trades are more likely to result in a profitable outcome and which trades you should be avoiding or trading short.
When trading foreign currencies, its important to realize that the market can be quite volatile. This can mean a trade that might have shown signals of being profitable a few hours ago can turn suddenly into a downward spiral.
Success in the Forex market depends on using strategies and tools which help you to minimize losses and maximize the profitability if your trades. A MACD indicator helps you to track upwards trends in currency prices in real time, as well as spotting when a currency has peaked and is headed downwards.

How Do MACD Indicators Work? - The MACD is composed of a few different moving average indicators, each of which is pretty straightforward. One is the signal line (also known as the water line). This shows you the exponential moving average (EMA, for short) drawn from closing prices over the last nine days of trading in the currency market.

The upward or downward trend of a given currency are based on two different EMAs. There is a 12 day EMA as well as a 26 day EMA; taken together, these figures give you a better picture of the movements of this currency.
The MACD line may be above or below this EMA waterline. Based on where the EMA line falls, it indicates whether the currency you`re looking at is on the upswing or headed in the other direction.

Using the MACD Indicator in Your Forex Trades - Once you learn how to read the charts and come to an understanding of what the MACD`s movements mean you will be able to make better forex trades more easily. As any experienced Forex trader can tell you, knowing the trends in the foreign currency exchange marketmakes all the difference. Thanks to the one and four hour charts your MACD indicator will give you, you`ll be able to see the prevailing trends in the market and take advantage of them.

By learning to watch both sets of charts you should be able to pin point which currencies are trending upwards and which are trending down. When both the 4 hour and the 1 hour MACDs are trending up your chances of entering a profitable trade are more likely.

Before making a trade, it`s recommended to have a look at how the MACD indicator is moving on your hourly chart. A MACD indicator above the waterline means you have the best chance of making a trade which will work well for you by trading long on this currency.

Of course its important to recognize that no single indicator will give you accurate trading results every time. This particular charting system works best when used in conjunction with other signal indicator software and tools as well. However if you do choose to use it on its own to monitor the movements of particular currencies then it is possible to use the MACD indicator to give you a higher chance of trading profitably.

If you want to be as successful as you possibly can as a Forex trader, then a MACD indicator is one tool which you can`t afford to be without. It`s a wise investment in your trading career.

Forex Trading Systems


What Forex Trading Systems do you use?

You should build your own trading system

A trading system on the Forex market is a type of strategy that allows traders to trade with a set of rules. There are many free trading systems and strategies printed in trading articles, journals, books and on trading-related websites. I would have to say that if you are not inclined to learn how to develop your own trading methodology, then perhaps you should consider giving your money for someone else to invest. Give it to someone who is trading a system that he developed and tested himself because he is more likely to have the confidence and courage to follow his own trading system.

Why you need a forex trading system?
  1. It’s easy to trade with a system.
  2. A good system provides consistent result.
What makes a good trading system?
  • It’s simple. Forget complicated systems with lots of rules - it’s a proven fact that simple systems work better - and are less likely to fail, in the brutal world of trading.
  • A trading system with profitable expectation.
  • It provides good ratio of reward/risk.
  • A system of comprehensive risk management including market exposure weightings, stop-loss provisions and capital commitment guidelines that preserve capital during trend-less or volatile periods.

Once you learn how to develop trading systems and strategies, you can then be better equipped to test them as well. By this point you might even find that the system created by yourself is the best one for you, because it becomes the system more suited to your profit objectives while operating within your risk tolerance levels. It is likely that once you develops this level of competence, you will simply acquire other trading systems only to dissect them, grab the parts you likes and add them to your own system.

For me, the irony is that for a trader to know which system to purchase, you must first learn how to create a system. And after knowing how to create a system, he will no longer have the need to buy one.

Monday, 8 February 2010

The Forex Trading Diary

So, how important is it to have a trading diary?  

Before entering a long or short trade, we should ask our self WHY am I entering this trade.  Will the price will go up or down?  Are there enough technical indicators to favor this trade?.

A trading diary would help monitor and do further analysis of all trades placed.  So
what should my trading diary contain?  Well, here is one I personally use and have found very useful - as a result I have prevented making the same mistakes in future and can clearly see where I have gone wrong and why!

Trading Diary Example: FOREX OR DAY TRADING STOCK MARKETS


Buy (Long)
Sell (Short)





Trade No
Date
Price
Date
Price
Currency
Pair / Stock symbol
Profit / Loss In Pips
Trade duration
Reason for entering trade
Reason for closing the trade
     1
8/2/2010
1.5546
-
-
GBP/USD
30
45 mins
MACD/Doji
Reversal signal






































































  

Good luck trading :) Don't forget to leave your comments and suggestions here...

Tuesday, 2 February 2010

How the Stock Market Works

Stock Market Basics: Understanding How the Stock Market Works

In the stock market it's not impossible to watch a stock move up dramatically in a matter of hours or days. Investors and traders can make great money and fatten their wallets every time this happens.

This seems great for every one that wants to try their fortune in the stock market, but the problem is that if you don't know what stocks to look for and how to properly approach them you could end up wasting cash instead of making your profits grow. That's why the most important aspect of stocktrading is the knowledge FILTER you employ to make your buy and sell decisions.

There are many "fantastic" stock systems and trading software out there, but you need to test them in order to discover which ones help you the most. That's part of your homework as a stock trader. Test, test and test again.

Complicated stock trading strategies that rely on a "boat load" of technical analysis indicators can make you slow, and being slow when trading stocks can be as dangerous as not knowing what to do in the first place.

The worst thing that can happen to a beginner trader is to get information overload. It's better to go step by step, and test a practical stock trading strategy that can show you how to focus on concrete ways to make money while picking SOLID hot stock trading opportunities once at a time.

In essence, You can be sure that the trading method you employ to approach the stock market and pick stocks can make a big difference in your results as a trader.

Fortunately some sites on the web can show you how to take advantage of stocks in a practical way every week by minimizing risks. One of those sites is MomentumStockPick, they focus on picking certain stocks that can generate excellent gains on the same day.

Article Source: http://www.articlesbase.com/ - Stock Market Basics > Understanding How the Stock Market Works

Monday, 1 February 2010

What Is The Best Day Trading Strategy?

How Do You Choose The Best Day Trading Strategy?

By: Jimmy
The wealth of information available for you in order to learn how to day trade can be overwhelming. Speaking from experience, when I first started intraday trading I found it hard to see the wood for the trees. What with all the books, blogs, magazines, videos, seminars and all other media out there, it is not surprising that the majority of day traders fail to even break even. Statistics just released indicate that just over 97% of new day traders, who have been blinded by the potential wealth in the markets, fail to break even within a year. This is a huge statistic, and can be directly attributed to information overload. So how exactly does a trader choose the best day trading strategy?

Consider this - for every trade there are two opinions. If you buy stock then someone else has to sell it to you. Conversely, if you sell stock, somebody else has to enter the market in order to buy it from you. So who is correct? Clearly both traders cannot be right - they both have different strategies to help guide them into market entries and exits. Let us take this example further - let us assume you made the wrong decision and you are now at a loss. Exactly what signals did your day trading strategy tell you with which to buy this stock?
Believe it or not, there is a silver lining to the cloud when you make consistent losses. By simply keeping a day trading diary you have the opportunity to go back through the day and examine each of your trades. I attribute my success as a day trader purely down to the fact that I kept such a diary. During the heat of the day, at times it can be hard to take a step back and really analyze if you are making the right trading decisions - by keeping the diary, after the trading day has completed you can go back and check each of your trades. If it was a winning trade, what exactly made you take it? Establish this factor and multiply it in your strategy. More importantly, if you took a losing trade, what made you take it?

This last point is essential. Perhaps you are struggling to break even as a day trader? By evaluating your days trading decisions you then have the opportunity to correct your strategy going forwards.  For example, did you take a losing trade by going long stock when the 10 day exponential moving average passed the 3 day? If so, maybe look at adding a buffer in your strategy - so under certain circumstances you go long only when price has passed 1% of the average.

Examining your trades doesn't have to be a chore. After your trading is complete, get a big cup of hot chocolate, sit back in your favorite all black converse sneakers and read through your notes.
Put simply, this is how to develop the best day trading strategy you can. Specifically, this is because you are developing a style of trading suited specifically for your chosen timeframes and personality. To reiterate this, it is pointless taking other traders strategies as maybe they trade at a slower or quicker pace than you are comfortable with. I appreciate this does sound like much trial and error - and it should! This is the way the best day traders in the world have molded how they trade.

In conclusion, the way in which to develop the best intraday trading strategy is to build your own one. And the way in which you do this is by examining and evaluating your previous winners and losers. Good luck and happy trading.

About the Author
Jim is a professional day trader, and has been trading for 10 years now. He takes pride in the fact he helps other traders turn the balance sheet around within days. In his spare time he runs a website about his favorite all black converse trainers.
(ArticlesBase SC #1589949)
Article Source: http://www.articlesbase.com/ - How Do You Choose The Best Day Trading Strategy?


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