Category Archives: Forex Trading Articles

Forex Trading Articles

Position Sizing at Forex

Those who are new to this forex trading platform for them it is very difficult to resist from being engulfed by the attractiveness of the earning maximum profits in the market.

Even though all the traders are aware of the fact that forex is a risky zone where market is full of frequent up and downs thy used to do common mistakes and then pay huge fine as a compensation for that mistake.

Caution and attention are the keys to come over the hovering ship of the forex currency pair exchange deals and to make position at the market intelligently without occurrence of any big issues.

The formula that can be used to determine the position size to imprint your presence in the market is as follows:

X = R x B/ T x (P1- P2)

Where

X = position size in units of base currency
R = percentage of account trader wish to put on risk
B = Account Balance
T = short and long indicator, -1 in case short position and +1 in case of long position
P1 = Entry Price
P2 = Exit price or stop loss price level

This will help the traders or investors to take active participate in the forex trading platform with the accurate calculation of the exact position size.

Any kind of trading set up no matter it is best in acknowledging trade activities with perfection but still thee are possibilities that any thing can go against your trade position and your winning move can turn up into loss.

Certain degree of randomness or risk always exist in the forex trading platform it is not a big issue to panic but of course precautions should be taken avoid huge amount of losses by implementing good trading practice with preciseness in your trade moves.

When something can not be avoided then we should try to manage such inevitable incidences or occurrence. This is just a part of forex and all the traders should learn to bear the losses if they want to succeed.
Determining the position size would be helpful but important is building your trading psychology to cope with any kind of trading troubles.

Forex Trading Articles

Keys to Unlock Forex Treasure

The idea that motivates the traders to make position at forex trading platform and carve out a simple and fastest way to make money online is the passion to win the trades and earn profitable returns in one deal.

The expectation that a day will come and the trader investing his/her time, money and brain in making buying and selling position in the desired currency pair is another reason that make the traders crazy about forex.

This is the only reason the expectation of retrieving huge amount of money through deals over currency pairs that lead the traders to big losses instead of winning at their trade moves. Not merely the expectation would help you to make money through Forex, if the dreams are higher then efforts should be higher enough to reach the heights of the dreams as well.

So without wasting a moment in here and there and consulting with the fellow members at the forex trading platform the trader need to Learn forex with full devotion in the market trends and outflows of the currencies exchange rates and the changes that come over in the rates in just a few span of time is the reason behind making situation more difficult for the traders.

The key to unlock the forex trading strategies is learning and making hard efforts to pull out the trend reading, understanding and deriving the possible trend moves in the coming future trade session.

Traders must unveil the understanding the accessibility of using and applying trading tools and instruments available at the forex market in the form different financial assets that lead the market trends and inflows.

However, most important is to stay active, pay attention and do not ever ride under the influence of the emotions or feelings of any kind.

All these ideas along with the MT 4 trading platform system fully automatic online trade services available for giving the traders an ease to calculate the pivot points of the trends, better assess ability to acknowledge the profitable pair on which the trade positions can be made and profits can be fetched without the fear of loosing a large sum of money at the forex market.

Forex Trading Articles

Global Effects of Currency Wars on Currency Exchange Rates

Some countries intentionally lower their currency exchange rates to boost exports and stimulate domestic economy.

Competitive devaluation is a term describing a fierce competition among two or more countries that intentionally try to reduce the exchange rates and currency value of their home currency to support local manufacturers and boost exports. The word “Currency war” was coined by journalists covering the world financial markets, and is widely used as a more popular substitute to competitive devaluation.

The currency war was invented in modern times, when the first of such event occurred in 1930s. Prior to that time, countries and governments preferred to maintain high levels of exchange rates and currency value of their home currencies. However, the globalization of the world economy changed the rules of the game. Usually, competitive devaluation is pursued by governments that wish to establish export led economy. In such a scenario, the advantages of lower exchange rates and currency value are obvious – lower cost of goods manufactured and exported resulting in higher demand for domestically manufactured goods due to their lower price on foreign markets. This process has positive impact on the economy by improving unemployment figures and boost GDP growth.

The other side of the coin is that a competitive devaluation jeopardizes foreign debt servicing when it is denominated in a foreign currency. Moreover, a currency war could lead to higher inflation and diminishing living standard in the country because people experience reduced purchasing power of their national currency both when purchasing imported goods and travelling abroad.

There are several methods to force a competitive devaluation and reduce currency rates of a country’s national legal tender. Quantitative easing is practiced by central banks when they fear a potential or actual recession and increase the money supply domestically. This practice involves printing of new money that is intended to support the local economy, which was a major tool to avoid deepening financial crisis in the United States, the UK and the euro-zone in 2007 and later.

As a rule, large scale currency wars occur only during times of global recession when a critical mass of large economies decide to devalue their currencies simultaneously. Recently, many world economists and politicians warned that a new currency war is at the door and the world community should act to avoid a large scale competitive devaluation. China is the usual suspect of implementing policy of competitive devaluation because its economy is heavily dependent of exports, while Beijing refuses to let its national currency float free.

Many leading economic powers like the US benefit from current lower currency exchange rates and currency value of their home currencies due to higher demand for domestically produced good abroad in times of crisis. Germany is one of the few leading world economies that could benefit from a currency appreciation of the Euro because the country runs a large current account surplus. In contrast, most euro-zone economies like Britain would benefit from depreciation of the Euro.

The currency war is a relatively new phenomenon and is still subject to extensive theoretical studying, while all the pros and cons of implementing such a policy are yet to be revealed.

Forex Trading Articles

Forex and MACD Implementation

The main objective trading and investing time and capital in forex trading is to achieve maximum profits at lesser investments or loss on trade moves in terms of forex trading.

To achieve maximum profits, traders should learn how to utilize the technical indicators and apply them to make trade position at the Forex trading platform.
The technical indicators prove to be very useful parameter for measuring the currency pair that is moving with higher probability and the possible behavior of the forex trend in the disordered condition of the charts.

MACD refer to Moving Average Convergence Divergence a more comprehensive technique of using moving averages to determine the trading signals by analyzing the Forex charts. It is introduced by Gerald Appel, the MACD figure out the difference between a 26-day exponential moving average and a 12-day exponential moving average.

The nine-day moving average is usually applied as the trigger line which meant that when the MACD traverses below this trigger line, it is considered as the bearish signal a time to sell off the desired currency in which the trader might have made position at the trading platform, when the MACD traverses above the trigger line it is a bullish signal and is refer to as time to purchase the desired currency in which trade position is made.

The studies of MACD indicated that the early signals or divergences occurring between the market price and the technical indicator. If the trends displays positive and makes higher lows whereas the prices are still summing up then this point indicates that there is a strong buying signal. On the other hand, if the MACD makes inferior highs whereas prices are making new highs, this trails towards a strong bearish divergence and indicates a sell signal.

Thus, we can see that the technical indicators of using MACD for deriving trading signals prove to be most useful for making trade positions depending on the buying and selling signals and the appropriate timing displayed to the traders.

Forex Trading Articles

Trading Cause Of Relationship

Significant awareness has been placed to the fluctuation in forex prices during seasons and weekdays. The hope is that by discovering patterns, you can exploit the trading opportunities they present. Unraveling new ways to understand market dynamics with the use of day of the week patterns is a good thing, but then the costs of transaction may limit returns. But such tendencies are not magic, and correctly analyzing their performance as part of a comprehensive trading plan requires a good understanding of statistics and often a working knowledge of calculus. Additionally, these calculations require capable software and computing power which are hard to come by. The good thing is; you don’t have to be a rocket engineer just to pick up innovative market information from such patterns. With less complicated methods using basic spreadsheets, we figured out that currency pairs cloak exploitable price patterns of weekend effects, which are definitely worth getting into. We could improve predictability of the next price movements by going further and trying to discover the cause of the relationship. One theory states that news and information’s alternate processing has something to do with price movements.

Among the effects are the anticipation of and failure to respond to information because it is processed non-contiguously, which further extends to affecting an investor’s psychology, making his trading decisions bias. Releasing news on weekdays have the tendency to make people react immediately, which makes it good, while news on weekends have a low response from people, which makes it bad. Another theory is that because people receives news more often during the week, forex rates have the tendency to go up, but otherwise during the weekends.

Racking it up as an economic anomaly because neither of the theories mentioned could explain the weekend effect, traders can only use data mining and statistical techniques to take advantage of it. To study this effect, certain data such as the daily forex prices are inferred with the daily returns coming from each market.

A standard reporting system exists for downloading top ten currencies. To study the weekend effect correctly, one would need a full one-year data about the market. An exhaustive study would require several years of data, but our intent here is to demonstrate the current state of the known weekend effect and not to prove or disprove this phenomenon.

It’s a good idea to examine any study in a moving window of time to measure whether it’s increasing or decreasing in persistence, often a factor of whether the investment community is paying more or less attention to a certain approach. The ability to recognize a recurring trend is a very distinct advantage that most hard working traders have. This is not about confirming data that is already present in the market; rather, the weight is on finding new patterns through data mining so as to exploit the weekend phenomenon as quickly as possible.

The day-to-day variations in the closing prices, denoted as percentages, is clearly shown in the saying, ‘here today, gone tomorrow,’ on top of the historical viability of trading over the past year. During the examined time period, it became evident that there is something worth exploring about the returns on all but Hong Kong dollars versus US dollars. This phenomenon is not only known globally, but is one of the most debated topics, and as a result people have come up with countless explanations about it. Just by using standard spreadsheet and employing common knowledge, you can effortlessly watch over and take advantage of these tendencies in forex.