Tag Archives: forex

Forex Trading Articles

Low Latency Your Forex Trading Edge

Latency is defined as the delay in the time it takes for data to travel from point A to point B. In the case of Forex trading, this equates to the distance between your broker and their respective liquidity sources.

Latency tends to be one of the most overlooked aspects of Forex trading. From a trader’s perspective the focus has always been on the front end trading software. However, reductions in latency should be one of the most important considerations in selecting a Forex broker. It is essential that an STP broker that connects to various liquidity sources lessen the time that trade messages takes to reach those sources of liquidity.

The Case for Colocation

As is the case with many businesses, a major key to success is “location, location, location”. Numerous studies have shown that the most effective way to limit latency is to make sure the physical location of the broker’s servers are in close physical proximity to the data source. DivisaFX accomplishes this by locating their servers within the same facility where Currenex hosts their servers. This means that trade messages travel the shortest distance possible and offer clients precious milliseconds advantage over other brokers.

Many algorithmic and high frequency traders take advantage of the improved execution times by hosting their trading system in a collocation with their broker. Through a partnership with TradeSpotFX, traders can now use the VPS (Virtual Private Server) service to reduce latency and maximize the effectiveness of their expert advisor or other automated trading system they might use.

Another benefit of server collocation is security. Financial institutions are required by law to adhere to the strictest levels of security and data integrity. They must also maintain server uptime of 99.99% so numerous backups are implemented to insure uninterrupted trading for clients of DivisaFX.

Forex Trading Articles

Forex Modern Portfolio Theory

Forex MPT stands for Modern Portfolio Theory that implies how a rational trader can build his/her portfolio and optimize their prices risks.

The theory states that it is erroneous to think about the possible risks and returns from a single stock entity. It suggests preparing a portfolio having diversified speculation in several assets that should diminish the risk factors.

The Modern Portfolio Theory indicates following risk factors involve in earning profitable earnings.
Systematic risks: These risks involve inflation rate hike, fluctuations in interest rates and financial downturns influence all the investments made in assets.

Unsystematic risks: These risks are specifically defined for economic assets but there are possibilities to minimize them by reducing the portfolio exposure and diversification of the portfolio.

This Forex MPT states that the trader bears the risks of producing less return from the assets then the expectations. The risk involved in each asset is the possible variation from the average return on assets.

This difference in the expected returns from assets will be less if the trader invests in diversified and uncorrelated economic assets portfolio.

While investing in a diversified portfolio, the average variation from the mean returns or the risks involved in each stock does not add significantly to the risks involvement on the portfolio returns.

Relatively, the portfolio risk is measured by the variation between the risk levels on the single entity assets. Thus, traders earn maximum profits from diversified portfolio holding instead of individual economical assets.

This theory presumes those investors are really risk averse and would pick for a less chancy asset, if they were presented two resources that put forward the equivalent returns.

As picking for elevated risk can be practiced only if elevated profits are anticipated from that asset investment.
This suggests that a rational trader would never make investment in a highly-risk oriented portfolio when have other portfolio options having less risk bearing and more favorable returns.

Traders can use a graph to plot the risk outline of different portfolios to examine the risk involved in each entity and the return potentials of that asset portfolio. This also helps to predict the potential frontiers.

Whereas a portfolio on the topmost level of the potential frontier is offering high returns for specific risk level, traders who have the thirst to earn higher returns are likely to choose topmost portfolio potential frontier.

This is the Forex Modern Portfolio Theory explaining the type of risks involved in portfolio and the ways to reduce those risks along with optimizing the prices.

The article gives information regarding the Modern Portfolio Theory and how it can be applied in the Forex trading floor to reduce the risks involved in the diversified investments and well optimization of the investments prices.

Forex Trading Articles

Stop Loss in Forex Trading

A Stop Loss order is placed to protect the trader from losing more money on a trade than they are willing to risk. A trader opens a position either long or short a trading vehicle. At the same time the smart trader will enter a Stop Loss order opposite the opening trade. If the first order was a buy, the Stop Loss will be a sell order for the same amount of units. This helps to keep emotion out of a trade or making it a hope trade. “I hope it quits losing me money soon” is a hope trade. Do Not Begin Trading without an order to protect your capital. Hope trades are for amateurs, and will cause only losses, be it in the stock market, the futures market or the Currency Market.

Although many traders do not use this method of trading, the traders that do use them are more likely to be winning traders in the long run. They have analyzed the trade and have a very good idea of how much risk they are willing to accept as part of the trade. If the trade goes against them, the Stop Loss will protect the capital and keep the loss at an acceptable level. Without an order in place, the trader has to manually get out of the position by putting in an order to close the position. This is where the good trader and the lucky trader part company. The good trader controls losses and the lucky trader just depends on being able to move when he is forced to move. This where the trade can turn into a hope trade and the trader lets emotion control the trade rather than logic. This is the easiest way to turn a small loss into a big loss. Do not be a fool and trade without Stop Loss orders.

Placing Stop Loss orders is an art form and there are considerations to be made. One is where to place it, perhaps at the level in which the trader first entered into the trade. Traders might prefer a trailing stop loss to protect a profitable trade. The trailing stop could be used as the trade makes money. Entering new orders and canceling the old order at the same time makes this a trailing stop. This can also be used as a way to further protect a profitable trade by closing up the current price level and the stop order price. Eventually the order will be triggered, but the profit may be greater than just getting out of the trade by feel. As with all trading, the idea is to use as little risk as possible and still give the trade some breathing room.

Stop Loss orders should be used at entry and then later to keep as much of the profit as possible. These are two very distinct and different uses of this valuable order. It means lower losses and more possible profit.

Remember that Forex Trading involves substantial risk as well as chance for substantial profit. Protect yourself with Stop Losses and other tools at your disposal, and trade wisely.

Forexpros.com

Disclaimer:
FusionMedia or anyone involved with FusionMedia will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

Forex Trading Articles

The Joy of Forex

Looking up the term ‘forex’ on the internet will deliver millions of results and if you start delving into some of the articles on the subject of Foreign Exchange Trading I guarantee that you’ll see a lot more success stories than failures. On the surface it can appear that forex trading is a sure fire get rich quick scheme. However nothing in life is so certain and the key to being a successful foreign exchange trader starts with getting a good forex education. If you think you can pick it up as you go along then you’re well on your way to becoming a forex trading disaster.

Forex training courses are a great way of dipping your toes in the water, so to speak, as you’ll get to play the foreign exchange markets without risking any money. This is called ‘demo trading’, in which one sets up a trading account but instead of actually playing the market with their own money, one instead pretends with monopoly money. This is a perfect way to practice forex trading and hone your skills without risking your home, or your beer money.

Quality forex training is not free, although there are plenty of supposedly ‘free’ courses online; many of these are nothing more than a few articles and anecdotes bearing little resemblance to a ‘course’. If you want something worth its salt, you’re going to have to pay for it, however this is a worthy investment as opposed to blindly trading with no experience or education. Don’t be taken in by forex trading software either. These claim to monitor the markets for you and can automatically buy and sell for you when the time is right, but these are of no use to the inexperienced trader.

The only way to be successful in foreign exchange trading is by getting on a decent forex training course. Out of all the forex training courses available, find one which offers a broad syllabus, covering all aspects of currency trading such as trading analysis, trend spotting and strategy development to using trading software to help you better monitor the markets. A sound forex education will also prepare you for the inevitable losses which every forex trader will experience.

Remember, forex trading is not an instant money maker; it’s a job which one works at. The harder one works, the better the rewards and getting a good forex education will give you the best start you can get in experiencing the joy of forex.

Forex Trading Articles

Keep up With New Systems in Forex

With the ongoing progress in every aspect of the human being’s life the forex trading too is not left untouched. The forex traders too are taking the help of forex robots and the latest automated forex machines. These are becoming popular because they are easy to use and save a lot of time. You have to be very careful when you are going for a new updated forex system because lots of these claim a lot but they don’t deliver. When you get your own automation system and are using it for the latest trends and the movements then you also need to plan some of the moves manually. But after purchasing a system you cannot do much about it. Suppose after you bought the system and some new and improved system came up after that then you can not do much apart from following your own method. There may be some of the forex traders who spend very little time in front of the computer. But at least you can catch up with the latest technology and the trends.

In the trade forex market there are many forex traders and the brokers who have enough time for the business planning’s and the strategies. In the free time the people can keep an eye on the foreign exchange currency activities. The danger with the forex trading is that if you do not devote much of your time in the latest news activities then you will be left behind in the ever changing forex world. That may lead to huge losses and that can have negative effect on the hard work. One seeing some amount of success initially any one can get carried away and can commit some stupid things.

Coming to the other forex opportunities the first thing the forex broker must keep in mind is that of the self discipline and the patience level. Being the trained and experienced forex broker there are many skills through which they can capitalize on. There are so many opportunities which are just waiting for you to putting this into practice. So, it is good for you if you keep yourself updated on the latest technology and the systems.