All About Day Trading

Forex Currency Trading is affected by several factors which are mostly external to an individual. Most important of these are GDP, trade reports, unemployment and interest reports.

One beauty of FX trading is that there is no lag in the dissemination of information across the globe. It is released simultaneously and becomes available to everyone equally online or offline. forex broker

This is unlike online stock trading where one remains ignorant for a considerable period of time about the news affecting the volatility of a stock.

Most of the times in the stock market, an investor is in the dark regarding the causes of movement in a particular stock. Investors come to know about the causes like insider trading, law suits, revision in earnings etc. much after the market has reacted and absorbed the news.

Only few people have the right information at the right time in stock trading. As a result, most of the investors are at the receiving end in this market. forex broker

This is not the case in currency trading. Here all the information that affects a particular currency becomes known to everyone instantaneously in the whole world. There is hardly any role for insider trading or behind the scene news in a forex market. So information is more open.

Almost every online forex trading platform maintains a global economic calendar. This calendar indicates the major forthcoming economic, financial and business related events all over the world and which can have important bearing on foreign exchange market.

All one has to do is to keep a tab on these important events and their positive affects. If one can analyze them properly, it is possible to benefit considerably overtime.

Aforesaid factors which are having a major bearing on currency exchange are fundamental in nature. Coupled with technical analysis, these are of substantial aid to any forex exchange player.

Of course it is not easy to watch or keep a tab on all the factors that affect foreign exchange trading sentiment. They change in importance over time and condition. But the information is available to anyone and for use to one’s benefit. One can react immediately to any new information.

In stock markets, one is always faced with trading hours restrictions, closing and opening bells and unknown information. Forex markets are credited with 24 hours availability, open information and ease of use. One is not faced with restricted trading hours and one can trade from a few minutes to long hours.

In North America or Western Europe, people know a lot about stocks and bonds. But the rest of the world deals in currency. As there is more of globalization, online currency trading will get a further boost.

Most important GDP figures that affect forex trading are those of USA, Japan, Canada, Australia and Britain. China is also expected to be a major force in online paper trading in not that distant future.

One can do forex currency trading from anywhere in the world. All one needs is a computer and a forex trading platform. As soon as one gets some important economic or financial news, one can react accordingly in real time.

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In developing a personal Forex trading style it is likely a trader will experiment with numerous technical indicators over time but eventually end up with just a handful of favorites which are used on a daily basis.

The use of trendlines is taught in just about every training course out there and popular opinion seems to suggest they should take a reasonably prominent place in any successful Forex trading style. forex broker

This article begs to differ. Yes, trendlines can be useful but in my opinion they are superseded by horizontal lines.

What is the difference?

Trendlines are simply lines drawn across the lows of bars or candles in an uptrend, or lines drawn across the highs of bars or candles in a downtrend.

One Forex trading style may use the Tom DeMark method of drawing trendlines which gets very specific by joining the most recent low with the previous lower low (looking left on the chart) and then extending the line forward (looking right on the chart) for an uptrend. forex broker

For a downtrend join the most recent high with the previous higher high (looking left on the chart) and then extending the line forward (looking right on the chart). These trendlines then give indications of a breakout once they are broken.

Horizontal lines are simply lines drawn across highs and lows on a chart marking support and resistance.

Why are horizontal lines superior?

The ideal Forex trading style is simple and easy to use and it helps if the charts we are studying are clear and reasonably uncluttered.

Drawing numerous trendlines can obscure what is really happening with price action. True, some traders just draw trendlines across main highs and lows and ignore the mini swings. Nevertheless, trendlines have to be constantly re-drawn and updated as price action continues.

On the other hand, just putting in a horizontal line on key levels of support and resistance is simple and easy to see. They have great significance on the higher time frames, especially the 4 hour or the daily charts.

Of particular value is marking the previous day’s high and low and watching price action around those levels. It is possible to catch 10 to 20 pips often as price tests the previous day’s high or low and pulls back. Of course, the probability of a successful trade becomes higher if the previous day’s high or low also coincides with other factors such as a Fibonacci level or pivot point.

Why are horizontal lines probably more significant than trendlines?

When developing your Forex trading style it is very important to look beyond candles. Trading is much more than that. The successful trader understands what is going on behind the scenes. Candles and price action is simply an outward manifestation of what is happening across the desks of thousands of traders across the globe who deal with billions of dollars worth of flows and orders.

A previous high or low in price action, especially on the higher time frame, means that the bulls or the bears won the battle in that trading session. If a number of traders committed a large amount of equity to a currency at a certain price, then obviously that price point is going to be fiercely defended in the future by those traders.

So horizontal lines drawn across levels of support and resistance mark very real points at which we can expect a reaction from price.

Trendlines on the other hand tend to be more speculative in my opinion. Watch price reaction at horizontal lines of support and resistance as opposed to trendlines and you will notice that price respects key levels of support and resistance more often than trendline levels.

Should trendlines be included in your Forex trading style?

That is an individual matter. They can certainly be helpful in offering confirmation of a trade after taking into consideration other factors. But to trade on trendlines alone can be very risky. On the other hand, it is possible to trade almost entirely on what support and resistance tell you at certain times when key levels are being tested.

Generally though, a successful Forex trading style will combine a number of factors. My favorites in order of importance are:

Support & Resistance levels on the higher time frames
Fibonacci retracement and extension levels
Pivot points
Candle patterns
200 EMA (Exponential Moving Average)
If you are in the process of developing your own Forex trading style you may arrive at a different priority list. Why not experiment with horizontal support and resistance lines and trendlines and decide for yourself which gives the most reliable indication of price movement?

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Even if you have just started your journey into forex trading and strategies it is very probable that you have already come across the term “breakout strategy”. This type of trading strategy is very common in currency trading and it involves some of the most old and well tested strategies available within the financial market’s themselves. On today’s article I want to talk to you a little bit about these trading strategies, the definition of a breakout strategy, what one of these techniques usually implies and how they can be used to achieve good average yearly returns in forex trading.

A breakouts strategy is usually defined as a trading system which uses the movements of the market outside a previously defined range to enter and exit positions. A breakout system attempts to exploit crowd behavior and the way this behavior makes the market develop substantial trends. A breakout system attempts to follow trends after they have already been active for a significant period of time, assuming that the trend will continue in the direction of the market. forex broker

Due to the fact that trends do not happen all the time in trading and due to the fact that prices tend to whipsaw significantly breakout systems usually need to live through very extensive periods of draw down. Most breakout systems can have periods of loses that range from 1 to 3 years so if you want to trade a strategy like this you need to remember that most of the time you will most likely be losing money. As a matter of fact, very popular trading systems – like the turtle trading system – which are based on breakout strategies have such extensive and usually significantly deep periods of draw down.

Breakout strategies have their moment when the market develops a strong directionality towards one side often being able to make up for years of loses with a single profitable trade. However breakout systems that attempt to profit with a fixed Take Profit value usually suffer from the same deep and extensive draw downs – often with many consecutive loses – only achieving success once the market gets directionality and strong trends are achieved (with a large number of consecutive profitable trades). Therefore it seems that attempting to profit from trends through breakouts will inevitably give periods of extensive draw downs, reason why breakout strategies are very robust, yet not very popular. forex broker

Systems based on breakouts – as all other trading systems – have to be developed with long term profitability in mind and with a good idea of the risk and profit targets that will be reached. It becomes extremely important to evaluate the performance of the system over extended periods of time as a statistically significant number of trades must be assessed so that a bigger picture – not including intermediate profit and draw down cycles – is shown. Traders willing to trade breakouts must be armed with strong, long term simulations and a true understanding of how the market works and why the system is able to exploit a tradable market inefficiency, otherwise failure is almost granted.

If you are looking for a strategy that will bring profits across several instruments with a good probability of being long term profitable then breakout trading systems will be a very good place to start. Long term tested systems – like the before mentioned Turtle Trading System – is a good place to start when looking for a robust and reliable trading strategy. However, great care must be taken to apply all system rules precisely as small deviations or negligence to implement some rules – like the ATR adapted money management – will certainly bring loses in the long term.

As you see, breakout trading may be very challenging – as all long term profitable trading is – but in the end, a strong understanding of the trading strategy used and long term simulations with accurate predictions of risk and profit targets will allow you to trade your system with confidence and success despite the long periods of temporary draw down that will appear between equity peaks.

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Finding a quality Forex trading course that actually teaches you how too profitably trade on your own can be very difficult. Many Forex educational courses consist of overly complicated indicator based trading methods that only end up hiding the price action setups that occur naturally as a result of market dynamics. Beginning traders often do not know what to look for when trying to find the best Forex trading course out there; this article will give you an overview of some of the features that you absolutely want to see in a trading course. forex broker

The first thing you should ask yourself before buying a Forex trading course is, what style or method of trading is this course teaching? The bottom line is that simple is better when it comes to trading any financial market. Any experienced or professional trader understands that mind-set and discipline are the determining factors of success in regards to Forex trading or any trading for that matter. This is the main reason why a simple trading method is always going to be taught in the best Forex trading course. A trading course that is either very expensive or very technically complicated is most likely written by someone who has not figured out how to consistently profit as a trader yet. The best Forex course will be written by a professional trader who naturally will be using a very simple method, such as price action trading, because they have realized that complicated methods only work to damage your market mind-set.

The next big issue in regards to finding the best Forex trading course is finding out who wrote the course and what kind of experience they have. What do you know about this person? If you can’t come up with answers to either of these questions than its time to run for hills so to speak. An educational trading course written by a professional trader will be backed by years of real market experience and trading success. You want to learn from someone who is teaching you with the same simple strategies that they have been utilizing successfully for years. Essentially what you want is professional Forex mentor; most people selling a trading course hide behind a fancy webpage that promises big results with little effort. The best Forex trading course will be written by a pro. trader who readily puts himself or herself out there and isn’t afraid to stand behind their product. forex broker

Finally, a high quality Forex trading course will not just be a trading course. It will come with other valuable learning tools such as educational videos and articles and on going support. Too many people are just trying to make a quick buck today in the world of Forex education. It can be tough to tell the charlatans from the genuine professional trading educators; however, generally the genuine educators will offer numerous free resources in addition to the product they are selling. The best Forex course will be backed by periodic material updates as well as numerous other learning resources like trader forums and instructional videos at no additional charge. Take the time to learn a little about the Forex trading course you are buying and the person behind it before you buy it, learning from a genuine Forex mentor will reward you in more ways than you know.

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The Forex market (or foreign exchange market) offers unparalleled advantages to investors today and there are many reasons for choosing to trade in worldwide currencies. Here are just five of the reasons for choosing to trade in global currencies:

The 24 Hour Nature Of The Market

Unlike many of the world’s trading markets which operate from fixed trading centers and within strict hours, often limited to as few as five or six hours a day five days a week, the Forex market is open 24 hours a day.

Not only does this mean that traders can take advantage of international events, reacting literally as they happen, but it also means that traders can determine their own working day and trading hours. If it suits you to work in the mornings then that’s fine but, equally, you are free to trade during the afternoon, late evening or even in the middle of the night if this suits your lifestyle.

Low Trading Costs

With traditional markets, such as the equity market, traders will pay not only a spread (the difference between the price for buying and for selling a stock) but will also pay a commission to the forex broker. Even on small trades this commission can typically be in the order of $20 and for larger trades can be well over $100.

The very nature of the purely electronic Forex market means that many of the traditional costs of trading are eliminated and you are essentially reduced to paying only the spread. In addition, the highly liquid nature of the currency exchange market also means that spreads are often much smaller than those seen in other markets.

The Ability To Trade On High Leverage

In markets which provide the opportunity to trade on leverage such leverage is typically quite low. In the case of equity markets for example professional equity day traders will normally operate on a leverage of ten times their capital. In the Forex market it is not at all uncommon to find traders being permitted to trade at one hundred times their capital. forex broker

The only downside to such high leverage is that it can of course lead to high losses as well as high gains. However, within the Forex market, risk management is normally very tightly controlled.

Limited Slippage In Trading

Currency trading provides immediate execution of trading orders based on real-time prices at which firms are prepared to buy or sell the quoted currencies. In almost all cases therefore this means that the price you see is the price you pay.

This is not always the case in other markets where there can often be a delay between placing your order and that order being executed, during which time the price moves.

The Ability To Profit Regardless Of Market Conditions.

While traditional equity markets follow rising and falling trends (the typical cycle of Bull and Bear markets) the Forex market does not suffer the structural bias of such markets.

Currency trading always involves two currencies so that if you are long on one currency then you are short on the other. As a result, the potential to profit will always exist whether the market is rising or falling.

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