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Section 02 Key drivers of currency movements Key indicators The most overrated indicator GDP is no longer a big deal GDP report has also become one of least important economic indicators on the U. calendar, as it has led to some of the smallest relative movements in the EURUSD. One possible explanation is that GDP is released less frequently than other data in our study it comes out quarterly versus monthly , but in general, the GDP report is more prone to ambiguity and misinterpretation.
For example, surging GDP brought about by rising exports will be positive for the home currency; however, if GDP growth is a result of inventory buildup, the eﬀect on the currency may actually be negative.
Also, a large number of the components that comprise the GDP report are known in advance of the release. Section 02 Key drivers of currency movements Most volatile news reports That traders should follow closely Volatility and profits in forex are measured in pips.
The bigger the volatility the more pips and money a trader can make from a certain trade. Keep this chart by your side and make sure to mark these reports in your calendar! Unemployment indicator, showing if U.
employment is growing or not. interest rates. Inflation indicator. for month prior to the release of the report. Section 02 Key drivers of currency movements Economic indicators What you need to know about them Part 1 What are Economic Indicators? Economic indicators are snippets of financial and economic data published regularly by governmental agencies and the private sector.
These statistics help market observers monitor the economy's pulse - so it's no surprise that they're followed by almost everyone in the financial markets. With so many people poised to react to the same information, economic indicators have tremendous potential to generate volume and move prices.
It might seem like you need an advanced economics degree to parse all this data accurately - but in fact traders need only keep a few simple guidelines in mind when making trading decisions based on this data. Mark Your Economic Calendars Watching the economic calendar not only helps you consider trades around these events, it helps explain otherwise unanticipated price actions during those periods. Consider this scenario: it's Monday morning and the USD has been falling for 3 weeks, with many traders short USD positions as a result.
On Friday, however, U. employment data is scheduled to be released. If that report looks promising, traders may start unwinding their short positions before Friday, leading to a short-term rally in USD through the week. Know exactly when each economic indicator will be released.
You can find these calendars at the New York Federal Reserve Bank's site. What does This Data Mean for the Economy? You need not understand every nuance of each data release, but you should try to grasp key, large-scale relationships between reports and what they measure in the economy. For example, you should know which indicators measure the economy's growth gross domestic product, or GDP versus those that measure inflation PPI, CPI or employment strength non-farm payrolls.
Not All Economic Indicators can Move Markets The market may pay attention to diﬀerent indicators under diﬀerent conditions. That focus can change over time and from one currency to another.
For example, if prices inflation are not a crucial issue for a given country, but its economic growth is problematic, traders may pay less attention to inflation data and focus on employment data or GDP reports. Section 02 Key drivers of currency movements Economic indicators What you need to know about them Part 2 Watch for the Unexpected Often the data itself may not be as important as whether or not it falls within market expectations.
If a given report diﬀers widely and unexpectedly from what economists and market pundits were anticipating, market volatility and potential trading opportunities may result. At the same time, be careful of pulling the trigger too quickly when an indicator falls outside expectations. Each new economic indicator release contains revisions to previously released data.
Don't Get Caught Up in Details While your macroeconomics professor may appreciate all the nuances of an economic report, traders need to filter data to focus on the numbers that can inform their trading decisions. For example, many new traders watch the headlines of the employment report, for example, assuming that new jobs are key to economic growth. That may be true generally, but in trading terms non-farm payroll is the figure traders watch most closely and therefore has the biggest impact on markets.
Similarly, PPI measures changes in producer prices generally - but traders tend to watch PPI excluding food and energy as a market driver. Food and energy data tend to be much too volatile and subject to revisions to provide an accurate reading on producer price changes. There are Two Sides to Every Trade Just remember that no trader's knowledge can be complete all the time.
You might have a great handle on economic data published in Europe - but there are times when data published in the U. or Australia might have a surprising impact on your currency market. Doing your homework before trading any currency can help you make better decisions.
unemployment rate is expected to increase. Imagine that last month the unemployment rate was at 8. With a consensus at 9. economy, and as a result, a weaker dollar. They will go ahead and start selling oﬀ their dollars for other currencies before the actual number is released.
What the heck! This is because the big players have already adjusted their positions way before the news report even came out and may now be taking profits after the run up to the news event. The market players thought the unemployment rate would rise to 9. Now that the report is released and it says something totally diﬀerent from what they had anticipated, they are all trying to adjust their positions as fast as possible. This would also happen if the actual report released an unemployment rate of The only diﬀerence would be that instead of the dollar rallying, it would drop like a rock!
Since the market consensus was 9. looks a lot weaker now than when the forecasts were first released. Instability in the world likelihood of Clinton becoming the next market prods investors to pull out of their president, Lim Say Boon, chief investment financial positions, leading to currency oﬀicer at DBS Bank Ltd.
in Singapore, wrote depreciation. in a report. The Super Tuesday results are being seen as "an outcome for continuity over the disruption threatened by Trump and Sanders," he said. You must remember that investors hate uncertainty! Similar eﬀects have occured with Clinton and Obama.
For Trump the upward trend was also there due to his promise to lower taxes and increase government spending on infrastrucure. Section 02 Key drivers of currency movements Market psychology The golden rule of economic indicators The currency rates often start moving even before the actual data comes out due to forecasts and market sentiment!
Sentiment analysis is a kind of FX analysis that concentrates on indicating and consequently measuring the overall psychological and emotional state of all participants of the foreign exchange market. This kind of Forex analysis strives to quantify what percentage of FX market participants are bullish or bearish, in other words being optimistic or pessimistic.
If the forecast promised a positive growth and the actual data comes out even better than forecasted, it amplifies the rise of the currency even more.
Overlap between two The Foreign Exchange market operates 24 hours a day, making it nearly impossible sessions for a single trader to track every market Generally, whenever there is an overlap in movement and respond immediately at the market e. In period. For instance, every morning during order to devise an eﬀective and London Open session. Euro pairs are active time-eﬀicient investment strategy, it is and if you have a good strategy, you could important to understand how much get pips.
liquidity there is around the clock to maximize the number of trading opportunities during a trader's own 2.
News Release market hours. Fundamentals drive the market. During News Release, volatility is experienced and Besides liquidity, a currency pair's trading some pairs could move over pips range is also heavily dependent on depending on the type of news.
For example geographical location and macroeconomic Non-Farm Payroll is the most volatile news factors. release and dollar based currency pairs could move hundreds of pips in seconds. Knowing what time of day a currency pair However, trading news is risky if you are not has the highest or narrowest trading knowledgeable about it.
volatility will undoubtedly help traders improve their investment utility due to better capital allocation. Central Bank Govenor's Speech High volatility oﬀers lucrative profit Speeches from these guys could make pairs potentials to short-term traders. Lower go hundred's of pips and even change volatility under 80 pips per day is better market sentiment with eﬀects lasting into for risk-averse traders, because there are months.
However, its risky to trade these less iregular market movements caused by speeches except you are subscribed to some aggressive intraday speculation. Section 03 Forex timing What Are the Best Times to Trade Forex We strongly advice you to avoid all resources that traders can then purchase currencies from tell you Forex market is a fairy-tale place where diﬀerent continents.
The timing in forex trading is is usually the most active as it involves many crucial! countries of the European Union. The US market comes next, so the time when the London session The Forex market is open 24 hours a day, but it is intersects with the US session usually provides the not active all this time!
In Forex trading money is biggest returns. Expert traders consider 10 AM to made when the market is active when traders are be the best time as this is the period when the bidding on the prices so it is crucial for you to London market is preparing to close the trades learn about the most productive hours of the day and traders are getting ready to move to US and of the week for trading the forex! This creates big swings in currency prices thus opening great opportunities for profit.
There are three major trading sessions of the Forex market: London, US and Tokyo session. Fridays are busy as well, but only until PM and during the second half of the day the movements can be very unpredictable. While it is crucial to understand when is the best time to analyze the charts and make the bids, it is equally important to know when NOT to open positions.
A thin market also comes with higher commissions spreads for each trade due to the decreased liquidity.
In simple words: if you want to sell a currency, it is harder to find potential buyers, so the broker or bank must increase the commission as it takes a risk of not finding a buyer so quickly.
A good example of chaotic trading is shortly before, during and shortly after important news events. In these times of uncertainty, the currency rates can swing wildly and unpredictably, thus messing up trading by creating execution lags, triggering stop-loss orders, etc. Usually, the higher the liquidity, the lower the volatility, and therefore the tighter the spread Spread is like a commission that you pay for the trade.
However, even major pairs can experience wider than normal spreads during volatile periods, such as interest rates announcements, GDP reports, unemployment figures, to name a few examples. There will also be wider spreads during oﬀ market hours, when there is only a fraction of the participants in the market, so the liquidity is lower. This can be seen when the markets open for the Asian session, at GMT Sunday, for example. This widening occurs typically around news announcements or oﬀ-market hours.
Most forex brokers allow you to trade all weekend, but spreads will be significantly wider during weekends when liquidity is almost non-existent. Dealing desk or market making brokers are going to widen their spreads coming into economic announcements to oﬀset the risk they take on by filling orders. Unfortunately, banks do the same thing, so an average forex broker could be better, but only marginally.
What happens before or during important announcements. The volatility jumps before important anouncements and the drastic movements can hit the stop-losses, resulting in a lost trade and investment. wild swings based on rumours etc. So I generally close the position or wait out the increased spread unless it is really pumping. This should not be a problem if you are trading the higher time frames as your stop will probably be quite large and so increasing it by 5 or 10 pips probably won't be too significant risk increase better yet - factor in the widened spread when you calculate your position size as you know that if the trade works out you will be holding for a few days or more, in which time there will be anouncements.
If you can't be at your computer when the news anuncement hits, I would suggest leaving your stop wider for the periods that you can't manage the trade unless there are no announcements over that period. If you are trading lower time frames however, your stops will inevitably be smaller and the increase in stop size may substantially increase your risk. In this case, you may have to decide to close the position before the anouncment or close enough of the position so that the increased stop will equal the same loss as the originally intended loss.
But make no mistake - you will have to widen your stop. The spread will get you. Even if the announcement is in your favour, price generally whips up and down at least a few pips before taking direction. If your stop is anywhere near price just prior to news, chances are you will be taken out not matter what the result.
Just be aware of the anouncement times and factor this in when deciding wether or not to take a trade. It may often seem that these indicators are contradictory. Analyses of longer time periods show tendencies, ignoring accidental changes, whereas daily, hourly ir minute graphs help in choosing the moment to open and close positions. Example Multiple time frame analysis time X Let us look at a daily graph.
What do most traders do when they see such a curve? If you approach trading as a means of getting your dose of adrenaline, do yourself a favour by staying away from it — you will do less harm to your pockets by going to the latest Louis Vuitton sale or by bidding on that vintage car on eBay for the adrenaline shot.
Serious money demands serious work. Both serious and casual traders, of course, dream of making it big in the forex market, but it is not the goal that counts, it is the preparation and dedication that is important. Forex trading should be considered and treated as a serious business, just like other types of businesses.
Approaching trading from the perspective of a shrewd business person can greatly tilt your chances of success to your side. Jolted from sleep, I drag my feet — with eyes half-open — into my trading room. The time is am and the FOMC minutes have just been released. I click on the headline which summarises what the minutes say. This statement is very similar to the previous one; hence there is not much reaction in the forex market.
Morning Too soon, morning comes. I quickly scroll through the news headlines that are displayed in the news feeds, and select those which relate directly to forex. The market seems pretty boring at this time. The lull in market activity gives me some time to write a bit more of this book, and to work on some trading articles.
To make sure the trade is still sound, I quickly check the news feeds to see if any news or rumours might have triggered this move. The market is moving up and closer to my position; it is now only one pip away. I make sure all my charts are up, and I prepare to monitor this trade. It is now 12 pips away from my opening price, a bit too late for me to get in. And just as suddenly as the price has gone down, it is now moving up again and my order is now filled. The pair keeps moving up, 5 pips then I guess others must be going short too.
After what seems like an eternity, but is probably no more than five minutes, my position is back at break-even, which means I have neither made nor lost money at this point. This bounce trade seems to be taking a while, so I call my friend to let her know we will have to postpone our lunch meeting. Lunch will have to arrive in the form of junk food from my favorite food delivery outlet.
Sometimes I watch my open trade like a hawk; other times, I simply continue with other activities. I set some price alarms and get back to writing my book while waiting for my lunch. After all, it is usually better to do something else while waiting on the market.
After lunch, the alarms ring. Looks like I am close to reaching my profit target. Institutional traders must be back from lunch and are taking profits on their long positions. End of the day With this trade out of the way, I look for upcoming trading opportunities. Trading blogs, especially those that have fresh and relevant material, can be a valuable source of useful and targeted information for busy traders who hold day jobs.
This blogging habit, which constitutes part of my market homework, has helped me in my own trading. I also take the time to interact with the online community of traders by participating in forums such as that as ForexVibes www.
This means that sometimes I will end past midnight, and other times I will be done well before lunch time. This is unlike, say, stocks or futures which traded through the exchanges such the London Stock Exchange or Chicago Mercantile Exchange. Trading of currencies is done OTC over-the-counter , in the sense that currency buyers and sellers from all over the world make a binding contract with each other after agreeing on a price — and this is not carried out through an exchange.
This aspect of spot forex trading is different from forex futures trading which is carried out through an exchange. Forex traders carry out their activities by dealing directly with one another or through brokers via telephone and internet connections.
In this centrally cleared system, the CME will act as the central counterparty and guarantee the performance of all contracts for both buyers and sellers.
Unfortunately, FXMarketSpace is an institutional trading platform and is not open to retail market players. According to the website www. Therefore, as a central exchange for forex retail players is still not a reality, I shall focus on the OTC structure of the forex market in this chapter. Players of the forex market range from those who trade billions of dollars a day, to those who trade just tens of thousands of dollars.
This club is known as the interbank market. Down the hierarchy are the smaller banks, big multinational companies, hedge funds and other institutional investors or speculators, and retail forex brokers.
These large speculators may also conduct currency transactions directly in the interbank market, if they deal in large amounts and have credit standings with the large banks.
Next in line are the independent retail traders who lie at the bottom of the market structure. These individual traders mainly trade through forex brokers as they generally trade in much smaller lot sizes. Central banks of countries are also market players, although they are not always involved in the market.
See Figure 2. Figure 2. Hedge funds and companies are not included in this illustration as the retail trader Small Small will usually not deal directly with Banks Banks any of them.
Without a central exchange, currency exchange rates are made, or set, by market makers — they make the bid and the ask prices based on the currency movements that they anticipate will take place.
The largest banks are the major market makers, and they handle very large forex transactions — often in the billions of dollars — on behalf of their clients, such as other institutions or companies, and also for themselves. Many banks have traders dedicated to trading speculatively for the bank. The resulting massive flows of money handled by these large banks are what primarily drive currency prices. This big money-laden network forms the interbank market where large banks deal with one another, and is where most of the trading activity takes place.
The transactions carried out by these major banks amount to the greatest bulk of the total daily forex volume. These big banks include Citigroup, Barclays Capital, UBS and Deutsche Bank. Brokering platforms The banks deal with one another directly, or through electronic brokering platforms like the Electronic Brokering Services EBS or Reuters Dealing Matching.
These brokering systems get the best available exchange rates for the various currency pairs, and match buying and selling requests from bank dealers. Between these two competitors, they connect at least banks together. Smaller banks that trade smaller amounts also get access to these brokering platforms.
Large companies Companies and businesses are involved in the forex market because of their need to pay for products and services which are denominated in other currencies. Since these commercial entities deal in smaller quantities, compared to that of large banks, they usually trade through banks instead of directly accessing the interbank market themselves.
Large overall trade flows can have a significant impact on the forex market, as they play a role in the supply and demand of currencies. Sometimes companies may also be involved in currency speculation for the purpose of generating additional revenue.
Central banks Central banks hold the key to controlling the supply and demand of national currencies; hence they play a very important role in the forex markets. Examples of some prominent central banks include the US Federal Reserve Bank the Fed , the European Central Bank ECB , the Bank of England BOE and the Bank of Japan BOJ — with the Fed undoubtedly being the most influential among all the other central banks in the world.
Issues that are of most concern to central banks are those relating to: inflation price stability , economic growth and the unemployment rate. One of the ways that central banks control these factors is through the setting and adjustment of interest rates, which will affect the valuation of many currencies. Sometimes central banks intervene directly in the forex market when they are not satisfied with the current exchange rates of their currencies.
That is, they may find that the current exchange rate is either too high or too low for the overall benefit of the economy. The Bank of Japan is well-known for its intervention in the market. Hence, when the BOJ deems that the Yen is getting much stronger against, say, the US dollar or the Euro, it may step into the open market to deliberately depress its currency by selling Yen against US dollars and Euros.
This act of central bank intervention may cause other institutional players to follow suit, and further drive the currency exchange rate towards the rate that is favoured by the intervening central bank. Most of these institutional speculators have international portfolios that consist of both domestic and international assets like stock or bonds to diversify their holdings.
They tend to be very aggressive participants of the spot forex market as they often facilitate currency transactions when purchasing or selling foreign assets. For example, an investment manager who is in charge of an international stock portfolio will be required to buy and sell foreign currencies so as to pay for any purchase of overseas stocks.
Hedge funds, being largely unregulated, often practise very different styles of wealth generation from investment management companies; they tend to adopt more aggressive forms of trading with the aim of generating a high return on investment. Sometimes, a portion of their assets under management may be allocated specifically for currency speculations, with the objective of maximising their overall profits.
Large hedge funds and investment management companies are capable of moving the forex market in their transactions. Forex brokers The emergence of sophisticated online forex brokers made forex trading feasible for private individuals. In the past, only wealthy individuals could speculate in the forex market, but now things are very different.
Anyone can simply open a trading account with a retail forex broker and trade currencies online with little money upfront, as forex brokers tend to offer highly leveraged margin accounts for individuals. There are basically two types of forex brokers: 1. market makers: who set the bid and the ask prices themselves, and 2.
Electronic Communication Networks ECNs : consolidate various bid and ask prices from market makers and other participants connected to their platform, and display the best available prices. These are explained in some detail below. Market Makers Market-making is a lucrative business for banks and brokers, and forms the backbone of market liquidity. By quoting the bid and the ask prices on the screens of electronic brokering platforms, or through telephone calls, they are essentially providing liquidity and inviting other qualified parties other banks, hedge funds, corporations or retail customers like individual traders to deal with them.
In doing so, market makers must be prepared to buy or sell from other market participants. Some market makers may have established credit links with banks that trade on the interbank market, or they access electronic brokering platforms like EBS or Reuters for pricing.
the price at which the market maker will buy bid price , and the 2. price at which it will sell at ask price from a customer. During periods of high liquidity in which there is a great deal of trading activity, spreads of the actively traded currency pairs are usually kept quite narrow, between pips. When the market is very quiet with little trading action going on for a particular currency pair, for example just prior to the New York close on Fridays or during news releases, dealing spreads tend to widen, sometimes by a huge margin, as a way for market makers to protect themselves when they feel that they may have to carry additional risks.
Market makers usually operate a dealing desk, which refers to the market maker trading with the customer, and the presence of dealing desks means that the market maker may potentially trade against the customer. They may move their currency quotes pips away from the interbank rates.
Independent traders should always be sceptical of claims by some market makers when they say they do not operate a dealing desk. Electronic Communication Networks ECNs ECNs are electronic trading platforms that match buy and sell orders automatically at the specified prices. Traders tend to be more aware of their existence in stocks or futures markets. An ECN broker gets its currency pricing from several liquidity providers such as banks, market makers or other traders who are connected to the system.
When an order is placed, it is routed to the best available bid or ask price in its system. Unlike the case of some market makers, spreads on ECNs are variable rather than fixed. Although ECN-type brokers typically charge a small commission, you can usually get tighter spreads on many currency pairs due to the large liquidity pool available.
Risks of trade manipulation are also minimised when using genuine ECN brokers as compared to brokers that operate dealing desks. This aspect of OTC shifts the odds of success against individual traders, especially if the forex broker acts as a market maker. Since traders have to deal directly with their brokers, the latter will usually hold the opposite side of the transactions.
Because of the inherent conflict of interest that exists, this arrangement does not sit well with many individual traders as they fear that the market maker will trade against them, and that is not an uncommon practice in the market making industry.
No information on volume Since buy and sell transactions are not cleared by a central system, there is no way of knowing the total volume of trade. Lack of volume data can pose a challenge to stocks or futures traders who have made the switch to currencies as they may have become used to checking volume. No singular exchange rate at any one time Exchange rates do differ from place to place, screen to screen, depending on which parties are offering what.
Cash transactions take place between countless parties at any one time, and there is no exchange which records all these transactions. Some independent traders are not even aware of this peculiar aspect of OTC dealings. Since there can be a few different prices for a currency pair at any one time, you may not be able to see what is the best available price if you trade through only one market maker. Generally, though, the rates provided by market makers to retail traders are quite close to the pricing quoted in the interbank market.
No standard data Exchange rates differ from one market maker to another because there is no consensus specified by a centralised market.
Different market makers have different rates at the same time although usually not differing by more than a few pips. A trader would have to accept what is being quoted by his broker unless he compares prices with other brokers. Price charts from different price feed vendors will also look slightly different as they each have their own data source.
Although, in general, the currency prices are quite similar. The forex trading day Also, being a hour market, boundaries of a trading day are blurred. Traders from around the world are in various time zones. Traders from, say, Singapore would display a different timing from their US counterparts — who tend to display EST Eastern Standard Timing on their price charts.
While the trading arena has had a boost from the CME-Reuters joint venture of a central forex exchange, it remains to be seen if that can benefit independent traders. Trade manipulation by some market-making brokers is something that is difficult for traders to prove, and something that is easy for the culprits to dismiss. However, despite the limitations that come with the OTC territory, spot forex trading can be extremely financially rewarding for those who are aware of the limitations and know how to deal with them.
And trading forex is not one of the easiest ways — despite what many new traders believe. Many traders fail, and they empty their trading accounts before they learn how to exploit the forex market to their advantage. Although there are also traders who are successful in forex trading, their numbers are small compared to the majority of losers.
Many times, traders are not aware that they have the power and might to shift the odds to their favour, that they can dramatically increase their chances of success if they want to. The main reason why many traders get defeated by the market can be attributed to their lack of knowledge. In this 21st century, where the buzzword is knowledge, it is not just a matter of working hard, but also a matter of working smart.
Knowledge is the key that can open many doors — if you have an intimate knowledge of how something works, you can then come up with ways to exploit what you know to your advantage.
This applies to forex trading as well. You need to know how to identify high probability trade setups and how to manage your money wisely. For every transaction in the forex market, there are winners and losers. Your goal is to make more overall profits than losses over a period of time, and to emerge an overall winner.
My approach to consistent trading success lies in three main pillars, or the 3Ms: Mind, Money and Method. It is often said that we are our own worst enemy. Human beings are emotional creatures, and most of our decisions are guided more by emotions than logical thinking.
Our mind is capable of playing tricks on us; we can get seduced into unfavourable situations by our emotions. Emotions can work for us or against us. Sometimes they can save us from landing in a pile of sticky mess, but sometimes they can land us in it. We can also turn the tables around by playing tricks on our mind, making it believe whatever we want it to believe.
Do you have the mental strength? Whether you are new to trading currencies or a forex trader who has some experience, here are some questions to ask yourself: Do you really have a strong desire to succeed in forex trading? Sure, every one wants to succeed in something, but do you have the desire to want to succeed in forex trading? First of all, this field is not for every one, for you must have the passion for it. If you just want to try your luck, or dabble, in trading, you will just end up among the majority who lose their money.
You must have the deep desire to want to accomplish your goals, because without this desire, your thoughts will not materialise into action, and it is action that could transform your goals to reality. To be a successful trader, you must be highly self-motivated, have a concrete plan of action, and not be afraid of failure. Are you prepared to devote a lot of time and effort into picking up trading skills and knowledge? To be really good at anything, you need skills and knowledge in that field.
A huge amount of time, effort and money is required for a trader to attain consistent success in forex trading. Despite the availability of forex trading-related resources on the internet, and in the bookstores, traders can find it quite daunting to learn about trading on their own as they do not know what there is to be known. I recommend that you check out those which are offered by skilled and practising instructors. Note: Be wary of signing up for courses or seminars that are full of hype, for they can be very misleading.
Avoid those that give you the impression that you can attain consistent profits after two days of intensive learning, or those that require you to purchase expensive software. While there are some shortcuts to gaining knowledge via courses or seminars, there is no substitute for honing your trading skills in the market.
Are you willing to accept losses as part of trading? Every one makes mistakes, and mistakes are inevitable. Got a trading loss? Then whip out your trading log to record what your mistakes are and what you have learnt from that losing trade. Always have something positive to take away from your losses, and treat it as a learning experience. Know that there will be other trades coming your way. Are you willing to take sole responsibility for your trading decisions?
You read some market analysis, and then trade according to what the analyst is saying. That trade turns out to be a loser, and you turn around to blame it on that market report. It is dangerous to blame losses on other people, the forex market, or the stars, for you are the only person responsible for pulling the trigger.
And if you blame others you will never be able to find out how you can improve. Fear and greed Fear and greed are the two dominant emotions that affect not just the state of our mind, but also the currency market. In fact, the fluctuations of these two emotions are the main drivers of the currency market. There are, of course, other emotions that exist in the market such as disappointment, regret and so on, but fear and greed are the principal forces that tilt the scales of supply and demand of currencies.
When traders feel overly optimistic about a country or its currency, they become consumed by the great hope that the currency would appreciate in value against another currency. They are then guided by this hope and greed to buy the currency pair now so that they could hopefully sell it at a higher price in the future. Greed then grows into euphoria, as traders continue to buy and buy, thus taking currency prices to newer highs. When people are buying a currency with great hope, they are also selling the other currency in the pair with great fear.
On the other hand, when currency prices go down, fear and greed are also the main drivers of the move. All in all, fear and greed are behind the steering wheel of the currency market. So, while you must learn to recognise these emotions in the market, the problem comes when you allow them to distort your logic when it comes to making trading decisions, as most of these decisions will turn out bad, and are likely to cause you to regret your actions later.
Since there is no way of banishing these emotions for good, the best thing to do is to control these emotions, instead of letting them control the way you think and act.
Face and control your fears Since greed can be categorised as a kind of fear, which is the fear of missing out, I will discuss the primary types of fears relating to trading, and how they can be overcome.
The first step to preventing fears from ruining your trading performance is to recognise the various forms of fear that is connected to trading.
And once you recognise the type of fear you are experiencing, the easier it is for you to handle that emotional obstacle so that you can trade better. That is the key to emotion-free trading. It is not about pretending that those fears do not exist, but how you handle them that matters. Here are some common trading-related fears. Fear of missing out Why do so many people rush to departmental store sales, or rushed to buy technology stocks during the dot-com boom?
Any kind of buying mania stems from a very strong emotion that is commonly invoked in people, and that is the fear of missing out. In trading, this fear manifests itself especially during a sharp rally or decline of a currency pair.
Your heart begins to pound really fast, and you have a million thoughts zipping through your brain, with most of the thoughts urging you to buy now, now, now. I am losing out! Traders suffering from this type of fear are usually the ones who get onto a trend too late.
Be disciplined and hold off that mouse whenever you sense that this type of fear is creeping up on you. Think instead of all those traders who are pouring dumb money into the market, and be glad that you know better than them not to join in the craze. Fear of losses Trading is a game — there will be winners, and there will be losers. Sometimes you win some, sometimes you lose some. Losses are bound to happen, no matter how accurate a trading system may be.
The fear of losing is most prominent in new traders as they do not yet have adequate trading skills and knowledge to help assess and evaluate trading opportunities with a high level of confidence. This can lead to trading paralysis, whereby traders become afraid of pulling the trigger when it comes to entering or exiting trades as they fear losing money or a big portion of their trading capital.
However, if you have a reasonable stop-loss order in place, that is in accordance to your money management rules, you should have no reason of being fearful of damaging the trading account based on just one trade. That is what stop-loss orders are for — to guard against huge losses. When you do encounter hesitancy in pulling the trigger, evaluate if you have valid reasons for doing so or if you are simply held back by fear.
Traders just have to get used to the reality that losses are inevitable. The trick is to ensure that your losses are kept small so that you do not harm both your trading account and your state of mind.
A trader does not have to be right. It does not matter at all whether he or she is right or wrong; what counts is whether he or she is profitable in the long run.
Traders should not be hung up on the outcome of single trades, or even a few trades, as trading performance has to be assessed over a period of time. What matters is that you end up profitable over a period of time. Once you place less emphasis on being correct on a current trade, your fear of making wrong decisions should abate, thus enabling you to make better trading decisions without feeling burdened by the overwhelming pressure to be correct in that trade.
Remember that there will be times of losses and times of profits, which is why it is so important to enter only trades that have a high probability of success. Focus on the big picture Do not get caught up in feeling invincible or pessimistic after a win or a loss. As trading is a very highly charged and emotional activity, it is very easy for traders to oscillate between emotional highs and lows. The outcome of just one trade should not affect your overall performance, unless you have violated proper risk management guidelines by betting the farm on a single trade or by over-leveraging.
A trade is just one of many trades. When you are wrong on one trade or several trades, try not to beat yourself up or feel regret. Instead, analyze to see where and how you could have done better in those trades or what mistakes you may have made, and record what you have learnt from them.
If there was really nothing that could have been preventable, just accept that the market is unpredictable. The outcome of one or a few winning or losing trades should not be magnified. Other trades will surely come. I strongly believe that once a trader has honed his or her trading skills, the ultimate factor that will affect his or her overall profitability is money management skills.
Money management is all about managing the possible risks, and it is the defining factor that separates winners and losers in forex trading. Novice traders think of how much they can harvest from the market; experienced traders think of how much they can lose to the market.
Many traders are so eager to trade to make big money that they completely overlook money management. Poor money management also explains why so many traders get wiped out by the market. Money management is about fully optimising your trading capital. It allows you to be proactive in managing risks, and to cope with trading losses — which are part and parcel of the game. It is an essential tool to ensure that you will have more than enough to last another day in the trading game.
No matter how good a trading system may be, there will be times when you will experience a series of losses. Success comes to those who have set down rules for money management, and have the discipline to follow them through their trading. Preserve your capital The shining light that attracts all traders to the forex market is the prospect of being able to grow their money by tapping into the online trading platform as their own in-house money tree.
In almost any field, it is true that most people are drawn to short-term benefits, but are myopic when it comes to long-term planning. Trading is no exception. When risk capital is put aside for trading, you are hoping that this amount of money could be transformed into a much bigger amount; otherwise, what would be the point of risking it?
But if this capital runs out, what can you bank on to make your desired profits? After all, money begets money. To drive home the importance of capital preservation, I will discuss the concept of drawdown, and how that is relevant to money management.
In other words, it is the amount of money that you lose — it is usually expressed as a percentage of your total trading equity at any given time. Drawdown is not an indication of your overall trading performance, as it is calculated when you have a losing trade against your new equity high or your original equity, depending on which is higher.
Recovering from drawdown As drawdown gets bigger and bigger, it becomes increasingly difficult to recover the equity. Many people are not aware that in order to recoup the percentage of equity that they lose, they will need to gain a bigger percentage just to break even.
The answer is no. It will require an Let me show you with numbers. OK, that is not scary yet, but if you start losing more and more of your capital bigger and bigger drawdowns , the faster you will go down the rabbit hole. While many traders hope for that One Big Win that will magically transform them into millionaires overnight, they are more likely to be confronted with the One Big Loss that will threaten their survival in the forex market if they do not exercise careful money management.
If a trader has a big loss, he or she will have to spend more time to get back to where he or she was before, instead of using the time to make profits. Traders who burn out quickly in the market are those who do not show respect for risk.
On the other hand, traders who have flourished are those who fully understand the importance of stringent money management and incorporate that into their trading approach. There is no way around to recouping slowly, unless you want to drive yourself to total destruction by risking more and more of your equity to try to make back your losses. Holding on to a losing trade for too long is the biggest cause of a big drawdown. Be well-capitalised Most new traders run out of money even before they see any profits in their trading account.
Indeed, those who are new to trading most likely do not have a good understanding of the risks and dangers that are lurking in the market, and few even know what drawdown means or have even heard of this word. Many of them do know that trading can be very risky if they do not know what they are doing or how things work in the currency market and, to them, one of the obvious but incorrect ways to limit this risk is by allocating just a small amount of money to their trading account.
There are also many new traders who begin their trading business with little initial capital as they simply do not have enough money.
Whatever their reasons may be, being under-capitalised will be more than just a mistake; it is often the prelude to trading failure. Forex traders who want to set themselves up for success must be well-capitalised. Never mind that some retail brokers are offering a minimum account deposit of just a few hundred dollars — a paltry amount that almost every one can afford.
Sufficient initial capital must be available to cushion the impact of a string of consecutive losses, so that you do not wipe out your trading account. A series of losses is really not that uncommon in trading, and all traders must be financially prepared for it. Those with insufficient trading capital tend to set really tight stops, which will naturally then lead to a higher probability of being stopped out.
They also tend to have a good chunk of their account eaten away by unreasonably large losses in relation to their trading account, if they do not set tight stops. So it seems that whichever way they turn, they are setting themselves up for failure, unless they are willing to trade smaller lot sizes. Looking outside of trading, many other businesses fail because the owners often do not have enough capital to tide them over the initial starting phase.
Forex Brokers Kenya. Other Countries. BrokerTested Awards Broker Comparison. XM vs IC Markets. XM vs Pepperstone. eToro vs Trading IC Markets vs Pepperstone. Trading vs Plus All comparisons. B2B Directory Listing. Liquidity Provider. White Label Provider. Technology Provider. Platform Provider. Market Data. Copy Trading. Payment Provider.
Turnkey Solution. Back Office Systems. License for Sale. Brokerage for Sale. Other directories. About us. Forex Trading For Beginners PDF Post author By George Rossi Post date August 18, No Comments on Forex Trading For Beginners PDF Forex Trading Beginners in Forex Trading Learn Forex Trading PDF Best Beginner Forex Platforms Forex Trading Platform List UK Forex Brokers US Forex Brokers Kenya Forex Brokers South Africa Brokers MT4 Forex Brokers Beginner Forex Trading App Beginner Copy Trading App.
What is Forex Trading? There are two primary ways forex traders make money: Taking profit from the change in the exchange rate Making profits or losses from the interest rates differentials of two currencies Beginners in Forex Trading? Some of the areas where the brokers are focusing more to attract beginner traders are: User-friendly trading platform interface Excellent educational material Low trading fees Transparent services Excellent customer service The offering of a demo account Out of all the focused areas, educational resources offered by the brokers are the most important to getting beginner traders started.
Forex brokers have now started to offer detailed education for both beginner and advanced levels to traders with: Forex PDFs Forex courses Trading Video Tutorials Trading Webinars Newbie traders also need to master the craft of trading, so the offering of a demo account has also become normal, see best demo accounts apps. Learn forex trading pdf PDFs Portable Document Formats are one of the most popular document types used for learning forex trading.
Some of the most popular trading topics for PDFs are: Forex Trading Tips for Beginners Who Want to Earn PDF Forex Leverage for Beginners PDF Advanced Forex Trading Strategies PDF Trading Forex on MT4 and MT5 PDF Here are the pros and cons of PDFs: Pros Cons 🔐 Secure 📝 Unable to Edit 💽 Portable 📁 Layout Limit 📖 Easy to Read 📊 Not Suitable for SEO 📚 Small File Size 🖼️ Poor Photo Quality Best Brokers Forex for beginners PDF To select the Best forex broker for Beginners with PDF materials and trading platforms suitable for beginners, we tested and reviewed several forex brokers.
XM — Best Platform CFD trading for beginners pdf RoboMarkets — Best MT5 Forex trading pdf Broker Capital. com — Best Forex Trading Guide for Beginners PDF CMC Markets — Best Demo Account for Forex Trading Best Platform CFD trading for beginners pdf We have picked XM as the best forex broker for beginners with edycation PDFs for CFD Trading. XM offers trading services on MT4 and MT5 and also provides a demo account.
Best MT5 Forex Trading pdf Broker We have picked RoboMarkets as the best tutorials on forex trading MT5 Broker. Best Forex Trading Guide for Beginners PDF We have picked Capital. Best Forex Trading Demo Account Beginner We have picked CMC Markets as the best demo account for forex trading and PDF education resources. Forex Trading Platform for Beginners List Apart from the shortlisted brokers, here is a complete list of forex brokers that offers excellent services to beginners along with PDF books and materials, which we have tested and reviewed.
Top Beginner Forex Brokers in the UK Demand for retail forex trading has jumped in recent years, and this prompted many beginners to jump into the trading markets. Some of the top Financial Conduct Authority-regulated forex brokers in the UK suitable for beginner traders and good edudcation PDFs are: IG Markets CMC Markets XM Top Beginner Forex Brokers in the US with free PDF education Forex brokers in the USA must be registered with the Commodity Futures Trading Commission CFTC and be a member of the National Futures Association NFA.
Some of the US-regulated forex brokers that offer suitable services for beginner traders are: Forex. com TD Ameritrade IG US Forex Trading in Kenya for Beginners PDF In order to operate in Kenya, forex brokers must be registered and authorised by Capital Markets Authority CMA.
Here are some of the forex brokers regulated in Kenya offering quality educational resources: FXTM FXPesa Pepperstone Forex Trading for Beginners PDF South Africa Forex brokers have to be registered and licensed by Financial Sector Conduct Authority FSCA in order to operate in South Africa.
Here are some of the forex brokers operating in South Africa and offering suitable PDF learning materials: AvaTrade FXPro IG Tickmill MT4 Forex Trading PDF Brokers As MT4 is the most popular platform to trade forex, many beginner traders being their trading journey with this trading platform.
Some of the good MT4 forex brokers for beginners also with PDFs for MT4 are: XM CMC Markets AvaTrade Best Forex Trading App for Beginners Mobile trading has become a thing now, and many brokers are offering excellent trading services on mobile devices. Some of the excellent forex trading apps offered by the brokers which are useful to beginners are: IG Markets CMC Markets eToro Copy Trading for Beginners Forex copy trading services are very popular among beginner traders as they can earn profits while still learning about the forex market.
Some of the good copy trading apps for beginner traders are: eToro Naga Trader ZuluTrade Darwinex. Author of this review By George Rossi. Author of this review I am a well-rounded financial services professional experienced in fundamental and technical analysis, global macroeconomic research, foreign exchange and commodity markets and an independent trader.
Now I am passionate about reviewing and comparing forex brokers. Leave a Reply Cancel reply Your email address will not be published. FxPro Review. Admiral Markets Review. BlackBull Markets Review.
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You should consider whether you can afford to take the high risk of losing your money. Want to become a Forex Trading expert? Well, this might be your lucky day!!? We have finally decided to put all of our experience and knowledge into this Forex Pdf. This Forex Trading PDF is written in such a way that even complete beginners can understand it and learn from it. In other words, we have read tons of Forex books, opened and closed thousands of trades; have filtered out? all the needed basics for beginner traders, and simplified them.
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18/8/ · Best MT5 Forex Trading pdf Broker. We have picked RoboMarkets as the best tutorials on forex trading MT5 Broker. RoboMarkets (also RoboForex) is one of the few Forex is a decentralized international market of currencies that operates worldwide. It is also the conversion of these currencies. It is one of the most active markets that exist and whose 28/10/ · Types of Trading Forex PDF. Forex trading is a global market that trades currencies and commodities. The forex market is open 24 hours a day, 7 days a week. There 13/8/ · August 13, Strategy. Forex trading PDF is the process of buying or selling currencies with the intent of making a profit. Forex traders usually buy a currency if they ... read more
When traders feel overly optimistic about a country or its currency, they become consumed by the great hope that the currency would appreciate in value against another currency. At the end of , the data on MEWs showed a large decline from the year before in the United States. Perhaps, you may even view it as just a vast network of computers which are designed to cheat the trader sitting in front of his or her computer and trading electronically. Basically, the charts allow you to predict the future course of a currency by finding patterns in its past price movements, and after all this what we need to win a Forex trade. Oil-producing countries have amassed huge sums of money, and what they do with their increasing petrodollars impacts currency values. Chances are that your account will be decimated before you can recoup your losses and go into profit.Some of the good copy trading apps for beginner traders are:. Once you want to apply any of the strategies listed here simply run a Google search using the title of the strategy as the search term and you'll find plenty of information that will allow you to obtain the knowledge you need to put that strategy into effect. dollar and gauging whether it is forex pdf wait is also a trading or weak is by looking at the Trade-Weighted Index TWI. Traders looking for leading indicators of a housing recovery will likely see it in increases in hous- ing prices tracked by this monthly index, forex pdf wait is also a trading, posted at www. This is because technical indicators can never capture all of the vari- ables that influence price movements. When trading majors where the U. This characterises Stage 1 of a trend, and it is where aggressive traders get into the currency market, hoping to be right about the new direction of the trend and reap potentially the most profits by getting in early.