forex guide » Forex Software

Common mistakes seen in the forex trading that stand as an obstruction in the way

admin — Tue, 12 Jan 2010 14:20:04 +0000

A common complaint of novice traders is that they can’t stick with their trading plan. They wonder why, and after they think about it long enough, they come up with unbelievable explanations. For example, they start believing a motive to self-sabotage their efforts lies behind their failures. They may also start to think, “Maybe I secretly don’t deserve success.” Most traders underestimate the power of the little things that get in the way. Specifically, they underestimate how much psychological and physical energy it takes to trade, or they don’t appreciate how much practice it takes to follow a trading plan. And even though they think they are striving for modest goals, they baffle themselves by trying to reach unrealistic standards. For many novice traders, secret, unconscious motives are not at the root of the problem. They merely forget to appreciate how little things can get in the way.

When you can’t seem to follow your plan, try looking at the little things that may interfere. Perhaps you didn’t get enough sleep or maybe you are hungry. Don’t believe me? Try sleeping extra time just for a week. Decide to miss part of the trading day for a week, and see what a difference it makes. Extra sleep can increase your ability to stay alert and will give you the extra energy you need to focus on your plan. You may need to change your life around and get to sleep earlier so that your biological clock is in a different time zone. Get the sleep you need, no matter what it takes.

Trading is stressful, and coping with stress requires psychological energy, and psychological energy is more limited than most people think. Getting angry, frustrated, or disappointed, drains our precious psychological energy. Don’t discount the impact of stress on the depletion of psychological energy. After stress depletes psychological energy, you need to replenish it before you can once again concentrate fully. When you are tired, and the market seems to move against you, it’s hard not to want to just take a break. A tired, worn out feeling often lies below the surface of your awareness. You may think you are rested and alert, but you are not. Get rested, and you will be able to focus on sticking with your plan.

Sticking with a trading plan takes practice. Does this seem like an exaggeration? It isn’t. Just like practicing a tennis swing, you have to learn to concentrate. You must practice focusing on your ongoing experience and controlling your emotions, and this takes practice. It isn’t easy. Your money is on the line and a little bit of your ego, so you can’t expect to be able to stay calm, alert, and focused without a lot of practice.

So when you can’t believe you’ve abandoned your plan once again, don’t jump to the conclusion that a secret, unconscious motive for self-sabotage lies at the root of your problem. It may just be a matter of reducing stress levels, getting plenty of sleep, and allowing you to develop the ability to practice following a trading plan.

Forex Orders – Types and their importance

admin — Tue, 12 Jan 2010 14:09:12 +0000

Market Order
Generally saying, market order is an order to buy or sell at the current market price. As for as an example, EUR/USD is currently trading at 1.2140. As if you wanted to buy this exact price, you would click buy and your trading platform would instantly execute a buy order at that exact price. If you ever shop on Amazon, it’s like using their just a simple-one click ordering. You like the current price, you click once and gotcha; it’s yours! The one and only difference is you are buying or selling one currency against another currency instead of buying something weird or things which are not important to you at the present time.
Limit Order
Limit orders are orders placed by traders to buy or sell at certain prices and normally have the price and duration of the order as oppose to market order. With limit order you either wait for the price to reach the desired figure then place your order or you place your order in advance so that when the exact figure is reached, your order gets executed.
Take Profit Orders
Take profit order is an order placed when you feel that the price will go against you after reaching some positive level, you put your take profit orders to enable you exit with some profit from that particular trade. As oppose to stop loss order which even though your position has been closed but at a negative figure, you have some few losses to deal with.
OCO (One Cancels the Other)
OCO orders are combined orders with both a stop price and a limit price. When one of the orders is executed, the other is automatically cancelled. OCO orders are applicable to open positions, or they can be used to open a new position.
Say for example a trader believes that the UAD/CAD, currently traded at 1.2380/1.23833, will continue trending higher; you believe that should the pair break above 1.2391, it will rise to at least 50 pips. Nevertheless, you expect that prior to this major incline, the pair will retrace to 1.2375. You can place an entry limit at 1.2375, but in case the pair does not hit 1.2375 before climbing higher, you would miss the trade. You then place an OCO order to buy the USD/CAD if it reaches 1.2375 or 1.2391. Of the two, the first bid price to exist in the market will trigger the order.
Stop Loss Order
Traders place stop loss orders to an open position to avoid further losses, if by any chances the price move faster against you, the stop loss order will become your exit strategy. Stop loss order is a good money management practice and traders are normally advised to have them when executing the previous mentioned orders.
Limit Entry Orders
This type of order initiates an open position to sell each time the market rises, or buy each time the market falls. The client believes the market will turn in direction at the level of the order. 1. Buy Entry Limit: An order to buy at a price below the existing exchange value. 2. Sell Entry Limit: An order to sell at price above the existing trade value.
Understanding different types of forex orders and their uses is an essential basic skill. Take your time to study them and try them out using a demo account. And it’d be probably be a great help for you in forex trading.

DEMO ACCOUNT TRADING – FEATURES OF DEMO ACCOUNT

admin — Wed, 06 Jan 2010 10:23:59 +0000

>> Trading with demo account for 3 – 4 weeks sounds reasonable enough before investing real money. In the practice account, you are not only presented with the opportunity of practicing your forex strategies, but also you can test several trading platforms and brokers with different tastes.
>> The forex practice account will let you practice the Forex trading a/c absolutely free which proves to be a boon for the beginners, it sounds to be good for a newbie and is in many ways.
>> One of the cool features you will get in demo accounts are you are offered with virtual money. The amount of practice money or virtual money may differ from $ 10,000 to $ 1, 00,000. The more money you get, the more practice trades you will be able to achieve.
>> Another feature you will get to know in demo account is Time limit. Some forex brokers limit demo trading to certain amount of day s (usually, for 1 month) but though you will find out several other brokers who are willing to extend the demo accounts for an unlimited period.
>> Though demo accounts seem to be very appealing, but there are hidden costs within. Some forex brokers allow you to renew the practice account for a fee. Make sure you find out how much it cost before you give away your credit card information.
>> Before you put your hands in a demo account, please be sure about the amount you need to invest in your trading as each forex broker differs in terms and conditions of trading. And plus be aware that demo account is a simulation of the live account.
>> The main benefit of a practice account lies in being able to learn the forex market and key functions of trade without risking a penny.
But please be careful, currency trading is not so simple as it sounds, several brokers have introduced no frills platforms with low minimum deposits to get the virgin trader started and one or two have take=n it a step further and allowed people to open a free practice account where you can begin trading with make-believe money until you have the confidence and knowledge to risk your own hard-earned cash.
So you see some of the features of the demo account trading above, now let’s plunge into the cons of demo account trading. Shall we?
>> Demo account, no matter how well designed, still hugely differs from the real account. There is probability of slippage, requite orders, slower order executions and much more.
>> Loosing virtual money won’t affect you in any way. You simply reload the account and trade on. But if this was the case in real a/c, you’d probably have been losing hundreds and millions of dollars. Here you have to take care that greed and fear are two main enemies of every trader. So better train yourself to cope with the negative emotions and this is possible with only the real a/c.
>> The forex market has suddenly become very appealing; if you can make this much money in the practice area imagine how well off you would be if you were using real money? This is where your expectations go wrong, you then go ahead and open a real Forex account and deposits your own cash.
>> Your confidence is up and you feel like you know what you are doing. You make a risky trade with your own cash and it fails. Suddenly your Forex career is over and you are sad looking at a significant loss, it seems when it’s your own ‘real’ money the practice you got with virtual cash counted for nothing.
That’s why if you are trading a demo account, trade it safely. Judge the both positive and negative aspects of demo trading and move on….

How are ECN (Electronic Communication Network) and Market Maker Different from each other in a forex system?

admin — Thu, 10 Dec 2009 15:19:23 +0000

ECN’s are not superior to Market Makers in every way. There are advantages and disadvantages on both sides. So check them out:-
Minimum Deposits
There are retail market makers out there today that allow traders to begin with $1 in their accounts. That’s not to say that this is a great feature, but it does present options to people who may not have the kind of money it takes to open a Current account. It’s a good thing too, because ECN contract sizes are often multiples of $1 million, and some ECNs expect a daily volume of $25 million. Shackled with those types of minimums, you had better be well capitalized (with a capital “C”).
Leverage
ECNs don’t allow the type of high leverage that is typical of market makers. To most people this is no great loss, since it is generally not advisable to use anywhere near the leverage that is available at most retail market makers.
Transaction Costs
Whether they call it a spread or a commission is really irrelevant at the end of the day – no matter what, you have to pay to play. ECNs typically give you the prices they are dealt from their liquidity providers, with the exact same spreads, but then charge a commission for every round turn trade. This allows them to give discounts to high volume traders, lowering their costs, but to most traders, it is really irrelevant whether they are made to pay a commission with a tight spread or no commission with a higher spread. It works out to be roughly the same, depending on which brokers you are comparing, and what current spreads are like.
Volatility
The potential volatility is higher on ECNs because of their unfiltered slice of the market. By risking some exposure, market makers can generally mitigate this. Depending on the type of trader you are, volatility may be your friend or your enemy.
Stability of Business Model
The fact that a market maker is the counterparty to many of its clients’ trades exposes it to market risk. While this risk should be well managed through appropriate hedging with higher-tier counterparty, this may or may not be the actual case. Furthermore, even if the risk is well managed, it is still a risk. An ECN does not have to worry about this, as it provides only a service for which it charges a commission. At no point is an ECN exposed to market risk. What this means is that the likelihood of an ECN becoming insolvent is much lower than that of a market maker. This has serious implications for client funds which the broker is holding. On the other hand, any market maker worth its salt should keep client funds segregated from the company’s operating capital, itself be well capitalized, and keep risk management tight, therefore keeping clients relatively insulated against the possibility of broker bankruptcy.
Susceptibility to manipulation
While ECNs offer a “truer” participation in the market, the picture there is not necessarily prettier. The added transparency only brings to light the dog-eat-dog world that is the forex market. Trading with a market maker insulates your from that to some degree, but this can also be used to hide things from you. It is nice to have guaranteed stops, though, and you won’t find those on any ECN. Basically, in trader’s experience ECNs are great for experienced day traders and scalpers, while market makers are better for everyone else, as long as they are deemed to be “honest”.

Which time is it best to invest in the forex system?

admin — Sun, 06 Dec 2009 18:13:46 +0000

Sometimes it`s wise not to be the early bird when investing in forex, instead wait and see what the day will bring before you take action. The 10 A.M. rule is a great example of this concept, and is an example that protects your capital. Let`s say you want to buy a forex stock, for whatever reason; a trend play, or a market rally that you think a currently hot sector will participate in. You know that a great time to buy would be on a gap down, but the market is in rally mode and instead of gapping down, the forex stock gaps up. But buying the gap up is a bad trade. Now what do you do?
You use the 10 A.M. rule, and wait until after 10 A.M. for the right forex stock investing time to buy the stock. If the forex stock makes a new high for the day after 10 A.M., then, and only then, you should trade the stock. Of course, you will use stops to protect yourself, like you would on any trade.
Anyone who`s followed the market knows that a forex stock will often gap up early in the morning, only to suddenly sell off and reverse into negative territory. By following the 10 A.M. rule, you avoid the risk of this sudden reversal. If the forex stock does make it to a new high after 10 A.M., there is still trader interest in the forex stock, and it stands a good chance of gaining momentum and heading even higher.
Here is an example of the 10 A.M. rule on a gap up: A forex stock closes the day at $145. After hours, the company announces a two for one forex stock split. The next morning the forex stocks gaps up to open at $161. It trades as high as $166 before 10 A.M. For two hours after 10 A.M. it trades lower and doesn`t reach $166. At 2 P.M., it hits $166.50. The forex stock is now safe to buy, using the 10 A.M. rule.
Using a version of the 10 A.M. rule, you could watch for a hot sector to appear in the morning and follow the forex stocks in the sector that are up for the day. If the forex stocks are still making new highs at midday, they stand a good chance of finishing the day near their ultimate highs for the day, and could be good trading opportunities. This also applies in a down market and to stocks in forex that gap down, opening at prices lower than where they closed the previous day. In this situation, you should not short a forex stock that has gapped down unless and until it makes a new low for the day after 10 A.M.
Using the 10 A.M. rule ensures that you will never end up chasing and buying a forex stock when your chances of making a profitable trade are low. Remember, trading is all about probabilities. The more forex stock investing trades you make with a high probability of success, the more successful you will be. The 10 A.M. rule is a valuable addition to your trading plan, giving you a straightforward way to avoid making costly mistakes and to increase your number of profitable stock investing trades in forex. So ensure yourself you are trading in the live market in the real time. Happy trading!

You should be trading in a good foreign currency trading system, but why?

admin — Sun, 06 Dec 2009 18:07:43 +0000

Unlike all other investments, the foreign exchange market has an average daily turnover of $3.5 billion which is a very big sum when compared to other investment parts. The forex market can prove to be a good place to make profits but though you’ll expose yourself to high risks. The point is that you ought to be skilled in risk management in the process of trading.
Engaging into a foreign exchange as a profitable venture is said to be ‘not for everyone’. Probably because the foreign exchange market can gain you good profits but can also make you lose everything in one shot – that is if you are not prepared and you are not equipped with skills and knowledge to engage into this venture. However, if you have what it takes to get into a good forex trading venture, then there are lots of reasons why it is a good one.
Lists of factors which make it reasonable to enter in a good forex trade are as follows:-
1. Forex trading allows you to make profits at the comforts of your own home. The currency exchange market is among the largest markets in the world but despite that, you don’t have to go out to a physical market. You can earn right there in front of your PC. With the convenience of the internet, you can trade and make transactions through it and through your phone lines.
2. The foreign exchange market operates round the clock and 24 hours a day and from Asia to the United States. Unlike any other trading markets where you wait for it to open, you can do transactions any time of the day as well. Because the market is always open, you can also respond to the market trend faster than other trading markets.
3. You can do business anywhere in the world, for as long as you have internet access. Not only can you do business at home but you can also bring it with you anywhere you go. You can travel around the world and still not miss anything on your investments.
4. Foreign exchange does not have middlemen who take a part of your profit or your investment. This way, you can trade and transact directly. Engaging into foreign exchange does not also involve commissions and exchange fees that are usually among the little losses of cash that you have to consider in other moneymaking ventures. The transactions costs involved in forex trading are also low.
5. Whether the market is rising or falling, you can still make money in the forex market. You just have to choose what currency to buy and sell. Indeed, you just have to make a good forex trading strategy.
6. Foreign exchange trading does not require big investment too. You can actually start with a few hundreds of dollars and you can already trade and make profit. Of course, you need to make your strategy in making that investment grow. Another thing that makes a good forex trading investment is that, it also allows high leverage which allows up to two hundred times you’re the investment you put in.
Truly, the forex market can be profitable. If you are a risk-taker and business minded person and you think you can be good fit in the foreign exchange market, then you do have a great chance to make good profits in it.

Some simple rules to take care of while trading the forex system

admin — Wed, 02 Dec 2009 19:48:18 +0000

>> Before you start placing your market analysis, get to determine the general trend of the market.
>> Try to reduce your risks as much as possible. Be sure to never risk more than 3-4 percent of your capital on any trade.
>> Make use of intraday charts to fine-tune entry and exit points.
>> Stay current on the global market. It’s hard to predict what’s going in the forex market but newspapers and media will prove to be of good help for you.
>> Perhaps you have heard the proverb, “The more the simpler, and the more the better.” So try to keep your trading simple, it’s always not good to go complicated.
>> Try not to listen to the crowd. Listen to your heart and don’t you try to trade if it is bothering you.
>> If you are using oscillators to analyze your forex market, try not to be fully dependent on it at the beginning of any important moves because they may be misleading but they can be a good determinant at the exit points.
>> Be sure to read the charts correctly. The charts reflect the bullish or bearish psychology of the marketplace.
>> The forex market is analyzed by two types:- Fundamental Analysis and Technical Analysis. The fundamental analysis is used to know the causes of price movements in the forex market while the technical analysis is used to determine the effect caused by the price movement in the forex market.
>> It’s always wise to master interday trading rather than trying intraday trading in the beginning.
>> Remember that, “Trading systems that work in an up market may not necessarily work in a down market.”
>> Before you get started trading in the live market, prepare a plan and trade according to it. Decide where you should be and what steps are you taking to achieve your dream and work according to it. Trade with your planning and not with some high expectations, hope or fear.
>> Putting tight stop losses with retail brokers is a recipe for disaster. When you put on a trade commit to a reasonable stop loss limit that allows your trade a fair chance to develop.
>> Whenever you get profits from your trade; don’t just give away half of your part as a charity but rather it’d be good to invest that profit for the next trade.
>> Assure yourself about your broker that the broker you are dealing with is a reliable one. There are too many brokers available and it’s hard to find a good one for yourself but you can look on chats and forums and reviews to find the right broker for you.
>> Though demo accounts in forex are a facility for beginner traders but they aren’t always good depending on one’s character. Some traders just treat their demo trade as a child’s play and even succeed; but entering in the live market can be hard. It’s not mere a child’s play; it’s a harsh competition among the traders that’s why it’s good to be serious while trading your trade.

Forex Has Unearthed Some Great Financial Potential

admin — Mon, 23 Nov 2009 07:32:17 +0000

Forex is an abbreviation for the foreign exchange market. A terminology which has unearthed some great financial potential in various untapped financial markets all around the globe. It is also referred to as retail forex, just forex, spot FX, FX etc. this is undoubtedly the largest financial market in the global arena. With a mind blowing volume of currency being traded in the forex [approximately $4 trillion / single day. Even financial gurus can never dream of comparing a sum of that magnitude with the volume dealt with in the New York central stock exchange which doles out just 25$ billion dollars a day. This is a clear indicator to pinpoint the enormity of the forex trade. To fact that the online forex market is amounting to more than three times the total sum of the stocks and future markets combined together is ample proof to its potential and enormity
To make the concept more ingestible let us see how forex rates operate in order to discern what exactly is forex. Forex trading involves the simultaneous purchase of one particular currency through the selling of another type of currency. The sale of currency in exchange for another currency is forex. in other words trading of money is forex. The trading is usually done through a broker or a dealer and the Trading is performed only in pairs. In simpler terms the pairs constitute the euro for the US dollar and the British pound for the Japanese yen etc.
The fact that in the trading there is no actual physical trading is really confusing to the fledgling trader. It is simpler to assume the buying of a certain currency as equivalent to buying of a share in a certain nation. For example if the trader is buying some Japanese yen currency then he is indirectly playing a role in Japanese economy by buying a small portion of the Japanese currency. This is due to the fact that the currency price directly has an impact on the market analyst’s line of thought about the current and predicted health of that country’s economy. In general, the exchange rate of a currency versus other currencies is a reflection of the condition of that country’s economy, compared to the other countries’ economies.
Online Forex Trading is unique since it seldom has any physical location nor does it possess a central exchange to facilitate direct trading. The forex market is a simulated marketplace and is widely regarded as a over the counter marketplace or in other words interbank market. This is because the entire market is run through electronic medium which is encased inside a secure network of banks all the time 24*7. Till the advent of the 1990s only heavy financial bigwigs could participate in the forex trading since the initial requirement were very demanding. They were allowed to trade only if they had a backup of close to fifty million dollars even to begin with. This was to enable only large banking firms and financial heavyweights play the game. But the advent of the internet age has opened up new avenues for retail players who are now able to deal even with paltry sums through retail forex trading.

How can you backtest your forex trading system?

admin — Sat, 07 Nov 2009 08:50:33 +0000

A backtesting means ensuring good profits for you by analyzing the historical data in the past of your forex trade. There is plenty of software available for backtesting forex, if in any case you are unable to backtest your trade manually.
>> It’s always wise to double-check your historical data to ensure whether it is representing accurately the real-world trading scenarios of the type that your system is supposed to handle or not, before initiating your backtesting process.
>> If possible, you should try to utilize the historical data reflecting both positive and negative world conditions. There are so many causes which can influence the world both positively and negatively, so you ought to keep yourself informed on the performance of your system whatever the glob sphere’s situation maybe.
>> Make it a habit to use the “Out of sample” data. That is the data from which the system was build to initiate with. And if not, you will be only testing data that already produces results that match your system’s principle.
>> Ensure that the historical data goes back far enough to provide accurate testing results under a variety of market conditions. If your data extends back only through the latest bull market, you won’t know how the system will perform in a bear market.
>> If you work under specializing specific currency pairs, then you must keep all your data covered regarding those currency pairs. Utilize a broad range of data if you want t get flexible in trading the additional currency pairs in the future.
>> It’s always better for you to keep some doubt rather than just totally depending on your software. If by any chance, your software is showing that you have developed a failproof trading system, then either you or your software is wrong. After all you know that nothing in this world comes perfect and nothing foolproof. Everything has its advantages as well as disadvantages.
>> Your data models must provide a realistic amount of slippage, and it is much more important during volatile and fast-moving market conditions when you are sure that some slippage will occur.
>> If you are serious about backtesting your system, then why not make capital management a part of it? After all, the idea is to earn a profit at the end of it all. There is no sense backtesting years of old trade data as you would have run out of money to invest if you had followed the trading system’s recommendations.
So, why is backtesting your system important?
Backtesting any trading strategy allows a trader to simulate its expected performance by the use of historical price data. The traders are able to test their trading strategies and find out how well they would have done if they had executed their trade in the past by the help of backtesting. By backtesting system, you will ensure yourself whether your system is going to make profit or not.
If you are using a backtesting system, you will able to free some part of your time so that you can adjust your values, like moving average, in order to improve your system’s performance. And improving a system’s performance means high chances of profit with reduced losses. So, better try this out.

What not to do if you wish to be in safe zone? – Forex Trading Software

admin — Sat, 07 Nov 2009 08:46:24 +0000

There are many Forex brokers available here and there. They will make you big promises which sound too good to be true and really are. You should be aware of those frauds and cheaters while purchasing the right currency trading software for you. As if you love automated trading, then you definitely will use automated trading software so that you ought to pay extra attention while purchasing one for you. Here are the claims that most of the brokers make, which if you believe; you will lose. So try not to believe them and fall in the trap.
1. Our software limits risks. It is usually seen that all the cheap automated forex software packages come with really very low benefit. They will lack proper money management. With the help of stops they will trade more than enough randomly, will take too much risks in most of their trades, or even maybe cut their profits very soon.
2. With no any other competitors along with us, our software has made huge gains within 2 years or something like that. This is one of the very popular promises among the cheaters that they use to lure traders like you, we and everyone. They will even try to show you how they did it, which is nothing much than a fake. But to configure whether it is a fake or a truth, you must seek for audited performance figures from a third party source. But most of the cheap software costing about a 100 dollars will give you an unaudited figure from themselves? So, how can you trust them? Is there any doubt that you will have to depend on them? Of course not, you won’t have to depend on them. And while making a purchase of the currency trading software, it’s always wise and likely to get an independent audit by a trusted third party organization, over at least two years before you buy any system for yourself.
3. Our software will give you accuracy exactly upto 90%. It is normally seen that a winning trade ratio is over 90% but the way the real traders make it through is with the help of real backtested figures.
But it is usually seen very rare and it is possible by those who are the real players of the foreign exchange market so don’t believe that a piece of cheap software can do it for you. The forex market is an unpredictable market, so don’t expect just a mere cheap piece of software will do it for you.
4. Our software will ensure you big gains with much reduced risks. There are automated software packages that are seen to be claiming gains up to 100% with a much reduced risk amount. But you must remember; nothing in this world is 100% and there is no any such piece of software that will ensure you profits of 100% rather than a piece of scam software. Winning trades in forex is not a child play, but a real world where you have to be a real player.
So, are you going to fall in the trap of these so-called proven software?