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Monthly Archives: November 2016

Forex Trading Terms for Newbie

As you enter the Forex exchanging world you may be acquainted with various diverse terms. You may not comprehend what they mean, and you may require facilitate clarification.

Understanding Forex exchanging language is key to your prosperity as a broker. In this way, probably the most usually utilized terms are characterized underneath:

Bid

Offered This is the thing that the purchaser of a cash would pay for an outside money. This sum is typically in view of current market patterns. This is the value that the dealer is generally hoping to pay keeping in mind the end goal to buy money they later can offer for a benefit.

Ask

This amount is what the seller is expecting to make when selling a particular foreign currency. Just like the bid it is based on current market price. It may not be exactly what a seller will get but it is the goal of the seller to make a profit and sell for at least the current market price.

Spread

The simplest way to define this term is this: It is the difference between ask and the bid price. This is the key to profit (or unfortunately sometimes to loss).

PIP

The smallest price of a currency is referred to as this. Calculations based on this unit is what helps figure out exchange rates more accurately.

Base currency

The currency that you start with is called by this term. It would be compared to another (base currency to determine exchange rate, as well as profit or loss.

Secondary currency

This term is used to describe the current that is exchanged with the base currency. For instance, if you originally traded in the British pound and want to switch to the American dollar the American dollar would become the secondary currency.

Margin

When referring to working with a broker this term is usually used. It is the amount that you would be expected to deposit in a new financial account opened. It is also the commission that would be paid to a broker every time a trade is made.

Leverage

This term describes the weight of a margin. Forex trading deposit accounts are usually set up in this way so that large amounts of security deposits are managed with as little capital as possible.

Margin call

This is a phrase that is used to describe a time when a trader’s deposit does not even cover the transaction made. It is in some ways like having taken out a business loan and not making a profit. Worse yet, it could be a significant loss.

Currency pair

This is simply the two different mediums of financial media being exchanged. It is made up of the base currency and the secondary or “quote” currency. A trading duo such as this can also be thought of as a single unit being bought/sold.

Volatility

This is the measure of the amount of risk involved in making a specific Forex trading transaction. This is an evaluation tool that helps determine whether making a certain type of investment is potentially profitable or not.

Clearing price

The value of a currency pair is described by using this phrase. It is the specific monetary value assigned to a security or asset and it is determined by current bid and ask price.

Manage Risk While CFD Trading

CFD trading stands for “Contract for Difference”. In simple words, it is a derivative financial instrument, which is traded in the market. The trader earns profit from the changes in the prices of stocks and shares. The change in price does not necessarily mean a positive change. A trader can benefit from a rising as well as a falling market. It is not essential to have an upward movement to earn profit. You can also benefit from short selling and earn profit in a falling market.

Another important factor that makes CFDs popular is the fact that it can be traded on leverage. This means that, even if you do not have huge capital for investment, you can trade with a small float and make money. Typically, the leverage ratio is 10:1. Even if you have limited funds, you can trade at a larger level. This is possible because you do not own the instrument physically. CFD is a flexible alternative to conventional trading. Although, this method of trading has many unique features, it has some risks too. As an investor, you must educate yourself about the risks involved in CFD trading.

Risk Factor

Risk management is very important while trading. Whether it is stocks, shares, derivatives etc, you must have the risk strategies in place. Effective risk management is the key to earn profits. Typically, CFDs allow you to invest a small amount and trade at large scale. This means that you can make large profits from a minimal investment. However, you pose the risk of incurring large losses too. Therefore, it is important to evaluate CFD risks before entering into a contract position. Here are some ways in which you can safeguard your interest.

It is important to understand the market thoroughly. You must watch the price movement sharply. This will give you an idea about the potential movement pattern of different markets. A good spectator will make a good investor. Although, markets are volatile and unpredictable, but you can certainly study the trend. It requires a lot of time and efforts. CFD trading requires a thorough knowledge of the market. If you do not have the time to monitor trends or study the market then you must hire the services of experts that offer online trading platforms. You can expect quotes, indices and relevant tips. Not just that, you can also expect market analysis, trend forecasting, client education seminars, risk management strategies and a lot more from the service provider.

There are different types of accounts that you can open depending on your risk appetite. If you are a safe player and don’t want too much risk then a limited risk account would be ideal. However, if you are willing to take risks then the trader account will be a good option.

Apart from this, the CFD trading service provider will also provide an advanced platform to facilitate trading. Moreover, the platform is a technological marvel and can be used on your mobile phone making it possible to trade from anywhere. Besides, this trading software is 100 percent reliable and does not have a downtime. Indeed, a competitive product, which is a must have for CFDs.

 

Money Management Tips

There are so many money management strategies out there for traders that it is hard to know where to begin. Many traders choose a strategy at random without considering how that strategy will work with the other aspects of their trading. Here are a few simple things every trader should know before picking a trading strategy.

Money management is an important part of any trading strategy. Many traders feel that money management will hinder their trading, or that they can do without it. But time and time again it has been proven that incorporating money management into trading is the best way to limit risk and to increase returns. But before choosing a money management strategy, there are a few things you must remember.

First of all, money management will have the largest impact on how fast or how slow your account will grow over time. Money management will allow you to control how much growth you see in your account, as well as how quickly you see that growth. This can be hard for some traders who want to see fast growth, and want a large return on their account. Sometimes money management can make your progress more slow than you would like it to be. However, money management will also help you to increase your account size while decreasing your risk, and that is perhaps even more valuable than fast account growth.

Secondly, traders should always use anti-martingale money management techniques. Martingale money management might get you lucky once or twice, but they are not going to be how traders should trade the markets. There are many effective anti-martingale strategies for traders. It may take some time to find the one that works best with your trading, but a good money management strategy is worth the wait.

You should also always trade with enough capital to withstand early drawdowns. You should understand the potential drawdowns that can occur with your trading strategy, and you should make sure you have enough capital to withstand and to trade through any drawdowns in order to see your account grow.

Finally, a trader’s psychological makeup and goals should always be taken into consideration. There might be a perfect position size that would give a trader the greatest return on their investment, but if it is not appropriate for the individual trader, there is no point in using it.

It is always important to remember that money management cannot turn a poor strategy into a winning one, and it cannot make an unmotivated trader better, but it can make a good strategy great. If you would like to learn more about the importance of money management, and different approaches to money management, check out Rockwell Trading’s money management course, in which we discuss all of these topics and many more.

 

Know How Many Markets Should You Trade

Time after time, I get notification from merchants who demand that they “practice” in a solitary market. Despite the fact that they may feel a feeling of solace and even authority by exchanging only in one market, this sort of approach is a genuine misstep. As informal investors, we are occupied with beneficial markets. Yet, what characterizes a productive market has nothing to do with the sort of market it is; somewhat, it relies on upon how it is drifting. Subsequently, a fruitful merchant ought to confer him or herself to exchanging inclining markets, regardless of what they are.

By constraining yourself to just a single market, you restrict your odds to benefit. There are times when a market is drifting and simple to exchange, yet there are times when markets are recently moving sideways. The more markets you watch, the more open doors you get the chance to find a pattern every single day. As I jump at the chance to state, “Discovering great exchanges implies de-choosing the terrible exchanges,” however you can just avoid awful exchanges by having various wellsprings of good exchanges.

You can see the problem with only trading a single market with the following analogy. Let’s say that you want some ice cream. You walk to the corner store and ask the lady behind the counter, “Do you have ice cream?” The lady responds, “Sure. What do you want: strawberry or vanilla ice cream?” Actually, you were looking for chocolate ice cream, but since you only have these two flavors to choose from, you compromise and pick the vanilla ice cream. That’s not exactly what you were looking for, but it’s close enough. After all, it’s ice cream and you don’t walk away empty handed.

Now think about the following scenario: You are in the mood for ice cream and walk into a Baskin Robbins. You say “I want ice cream” and the man behind the counter smiles and says: “Of course! What flavor do you want?” You respond: “Chocolate” and he asks you “Dark Chocolate, White Chocolate, Belgium Chocolate, Milk Chocolate or Truffle Chocolate?” Now you have choices and you will get exactly what you want.

When you are trading only one market, you have limited choices and you will be forced to compromise. After all, you don’t want to walk away “empty handed,” and you might take a trade that only partially fits your trading plan. You will constantly be forced to settle for a less than an ideal trade because you’ve limited your options by looking at only a fraction of the available markets. Trading only one market means that you implicitly accept the limitations of that market, allowing it to set your possibilities rather than looking around for the best opportunities available for profit.

Once seen in this light, it should be obvious why trading only one market is never an advantageous strategy. Trading multiple markets is like walking into a Baskin Robbins if you want ice cream. You have many choices and can pick the market that fits your own personal style and trading goals. You will only take the best trades, and, therefore, increase your chances of making money with day trading.