Page 159 – XTrade

Online Forex Trading and Understanding Movements in the Foreign Exchange Markets

Online forex trading is very confusing, due to market volatility. Only the daily trend can guide traders through all this confusion, and towards solid trading.

Online Forex Trading during High Volatility

Online forex trading becomes very confusing when market volatility is high. Market movements seem to make no sense. And risk becomes increasingly harder to control. This is why all traders need to do some homework on the daily trend. By studying the daily chart of the market in question. Forex charts provide all this information, mainly through the daily chart. The reason for thinking like a daily chart oriented investor is based on some facts. First and foremost the daily trading action carries much more weight than any other time frame. It is based on the natural daily global business cycle. Then, there are large size investors, such as investment banks who make their own trading decisions based on the daily chart. Price movements seen on the daily chart are very important. Whereas price movements seen on the one hour or 4 hour charts are much less reliable. Because lack of liquidity occurs for few hours at a time, but hardly ever occurs for several days. And lack of liquidity can produce all kinds of price extremes and false breakouts.

Online Forex Trading is Safer through the Daily Chart

Online forex trading can become much safer through the guidance of the daily chart. Because many false signals are detected early. Even day traders need to pay attention to the daily chart first. Before they focus on any single trading day. After all, if the market goes up, there will be many up days for a day trader to look to make long trades, and not short. Those who want to learn forex basics and are in the process of learning, may make the mistake to think otherwise. They might think, that day traders make the entire market move. But due to the liquidity factor, this is not the case. Only the chart where liquidity problems are spread over a wide time period, the real trend can be inferred safely. And that is the daily chart.

Avoiding Confusion in Market Moves

It is wise to be suspicious of fast-occurring market moves during the trading session, especially during low volume hours. This is when liquidity is the lowest and price volatility is the highest. Currency pairs tend to be most liquid and most reliably moving, during their active trading hours. Trading outside the active trading time zone is characterized by a lack of conviction. And by trends that eventually fail and reverse very soon. Wise traders seek to fade such trends and trade in the opposite direction that market momentum offers them.

Risk versus Reward – Understanding the Basics of Online Forex Trading

Online forex trading comes with risks and rewards. The potential to lose or make money is always hard to calculate. As only few traders can really embrace risk.

Online Forex Trading Explained in Terms of Risks and Rewards

Online forex trading is fascinating and interesting. In many ways. Because it allows wise trades to be patient and to look out for the best trades. Risk and reward are figures often misunderstood by many traders. These figures are often poorly defined and stated in the wrong way. First of all, many educators of forex trading are naive in their definition of risk and reward. In that they focus on single trade figures and calculations. And this is a narrow-minded approach to estimate risk and reward. The forex trading international community is hugely misled by these educators and their misconceptions of market risk. Actual risk and reward in the market, are numbers much more difficult to estimate. Moreover, the very definition of the so called risk-reward ratio, as defined per trade, is totally misleading. More useful definitions of risk and reward, should take into account probabilities and much more data. As it is perfectly possible to trade the forex market profitably, with a high risk-reward ratio, per trade. Even in the classic investment world, most investments offer 15% – 20% return, per year. So by the naive logic of low risk-reward ratio proponents, these investments are bad. Because according to them one has to risk $1,000 to make $150 or $200. So these investments should be avoided, that’s their logic.

Online Forex Trading with A Low Risk- Reward Ratio

Online forex trading offers many good, high probability trades. But traders need to theoretically risk $100 to make just $20 per trade. That’s the way high probability trading works. The risk-reward as defined by those naive educators, is too high. Which is why they wouldn’t touch such trades. The truth is traders cannot predict markets, on a per trade basis. The more one focuses on a single trade, the less predictable the market becomes. Wise forex traders look at the week ahead, and see the entire trading week as a domain for many different trades. Probability-wise, this is a much better way to look at markets. And to use a high risk-reward ratio, per single trade. High risk-reward ratios employ the use of larger stop losses. And this helps absorb market volatility much better. Without getting stopped out for no reason. Moreover, if stop size is large enough, larger than the average expected market range. Then even if a trade is stopped out at maximum possible loss, the trader has plenty of time to enter the market again. And to either ride the recovery trend the next day, and get all their losses back. Or to open a new trade in the new market direction. Should the market continue to move that way. Forex charts help traders identify all these critically important daily ranges and average expected daily movements. Wise traders can be wrong on direction 50% of the time and still be profitable. Whereas low risk-reward ratio users, get stopped out way too often. Resulting in too many missed profits and losses.

Are Forex Educators Really So Naive?

Most forex educators will try to sell trading systems that somehow look tidy and nice, because that’s what sells best. Anything that looks messy and ugly is hard to sell. But good classic investments are actually ugly in that regard, and do have very high risk-reward ratios. You need to ‘risk’ $1,000 to make $200, period! And this offers the maximum probability of success. Forex trading systems utilizing high risk-reward ratios do result in very messy trading conditions, and stressful too. But these are the trading systems that do make the most money consistently. Forex educators cannot promote such systems because the apparent risk would scare away many forex students.

What Will Happen to Online Forex Trading If Trump Becomes President?

Online forex trading in the US does need to evolve, and regulatory restrictions need to be lessened. Trump is likely to act on these issues and improve things.

Online Forex Trading in the US Needs More Flexibility

US traders are faced with various restrictions when it comes to online forex trading. Leverage is limited to 50:1, and access to top CFD brokers is restricted due to the current regulatory environment. Every forex trader in the US wants to see these restrictions lifted. They all know that they sometimes need higher leverage, even a 100:1 leverage can make trading much better than at 50:1. And then there is the mystery of online CFD trading, which most US traders don’t know. European and Asian traders know about CFDs and their unique benefits. Which are basically pricing linearity and top liquidity. So good are these benefits in CFDs that they are not found in any other trading instrument. Hence US traders are either oblivious to the facts, or know about CFDs but are simply unable to change current regulation imposed by the SEC. It is clear though, that if Trump is elected in the November 8 election, things may get on the way for a change. So that the SEC will finally review all regulation. Starting from the stock market, liquidity risks, and reviewing all that needs to possibly be changed. So derivatives, CFDs and leverage restrictions will be reviewed as well, as these are part of the market after all. Forex brokers and reputable CFD brokers based in Europe will welcome such changes. And ultimately, things will get better for everyone involved in retail size forex trading. As all these brokers, ECN, STP and market makers alike, always look for ways to improve trading efficiency.

Online Forex Trading Needs Good Regulated Brokers and More Trading Options

Traders involved in online forex trading want to have regulated brokers. But they also want to have more flexibility. Which means that in the case of US forex trader, higher leverage and CFDs must be made available. Online forex trading without the use of CFDs at all, puts these traders to some disadvantage straightaway. Then there is commodity trading, where also CFDs offer some unique benefits.

Shorting Stocks in the Stock Market

Playing the short side is almost impossible in the US now, at times when short selling restrictions are imposed. Traders are not allowed to short the stock directly, hence can only trade futures. But futures are priced in such a volatile, and biased way. That small movement trading becomes almost impossible. And large size movement on the stock price cannot be captured in full either. CFD stock traders on the other hand, based in Europe or Asia, can come into the market during the time when short selling restrictions are imposed on US traders. And they can capture the entire price drop, on any stock, big or small drop. And the trade is so linear and effective, that profit is maximized to the maximum degree possible. Access to online CFD trading can put US traders on an even playing field as all these other traders.

How to Know If You Can Trust Your Forex Broker

It is possible to evaluate your forex broker through ratings and feedback by real clients. The brokerage industry is very transparent and word gets around fast.

What to Look For in Your Forex Broker

Your forex broker may or may not be the best. Nonetheless, the brokerage industry is so competitive today, that all brokers have to be constantly improving. Or else they will become complacent and will gradually lose their business. As a result, even bad brokers of the past, that had gotten a negative reputation, may have improved beyond recognition today. So what defines a good broker is first and foremost its ability to listen to its clients. And to look out for their clients’ interests. Every forex trader wants to trade forex through the best possible broker. And trusting that broker is essential, since all good business cooperation is built on trust. This is not blind trust, but rather it is a trust based on feedback provided by other clients. Brokers that have many satisfied clients cannot be bad. Or else these clients wouldn’t be trading through these brokers.

Where Your Forex Broker is Allowed to Be Rated Bad

Many traders, especially small size new traders and day traders often blame their brokers. But the truth is that their bad trading is to blame for their own failures. It is always easy to blame trading failure on a broker. All brokers can perform badly at times of extreme market volatility. Where there will be slippage and requotes when trying to place trades. The best brokers do their best to minimize these effects and to operate in their clients’ best long term interests. All in all, what really matters is the feedback provided by large size traders, day traders and swing traders alike. This feedback is very insightful and impartial. So that good brokers that can be trusted are revealed through real life, large retail size live trading stories. Brokers are allowed to perform somewhat badly only during extremely volatile conditions, but not too badly. Your forex broker may actually be better than you think, but you need to see what other traders have to say as well.

Most Well Rated Brokers are Good and Worth Your Trust

Online forex trading requires very good trading conditions, and competition among brokers is fierce. Ratings by real traders reveal the truth about all brokers. And the fact is that you can trust many brokers among the well rated ones. There are some bad brokers out there, and these are also revealed by former clients who share their own experiences. Sometimes there are screenshots and documented evidence revealing what went wrong, and where the broker’s trade software failed. In other cases the whole way of handling clients’ trades is believed to be flawed. But these few bad brokers are revealed 100% by real clients. There’s no place for bad broker to hide, in today’s world. Moreover, traders themselves are savvy people, especially veteran traders. So their collective opinion does form an overall rating, on all brokers involved, which is truly impartial and reflective of the truth. After seeing what seasoned traders – clients of these brokers have to say, you can be sure about your forex broker. The big truth is that the truth cannot hide. All the good and the bad about any broker are sooner or later revealed.

The Benefits of Online Forex Trading

Online forex trading is seen by outsiders as a risky way to invest one’s money. And it is undoubtedly risky. But little do they know about the bigger picture.

Online Forex Trading Brings Investing and Trading Together

Online commodity and forex trading is widely misunderstood among outsiders. As being a risky way to play the markets. But things are not black and white. Classic investing and fast trading actually do overlap, and there is a lot of gray area. There is no easy way to classify one investment or another on the scale of risk and reward. And the same applies to forex trading, of any time frame. This is because profitable traders hardly ever share their secrets. And it is therefore impossible to know how profitable trading can really be. Proponents of forex trading do in general make money trading. Whereas critics of forex trading are usually former losing traders, or jealous outsiders. Whatever their reasons for trading might be, wise forex traders find one priceless thing in the market. And that is fairness! The forex market is the most equal opportunity place to be. A true land of opportunity, where prior background, social class, political connections or money, are not of any help. The little poor guy can still win over other traders who have all these things.

Online Forex Trading Offers Enormous Earning Potential even to Disadvantaged People

Live forex rates are very difficult, perhaps impossible to predict in real time. But wise traders look for clues on the charts. The daily charts provide valuable insight into the underlying trend. But online forex trading is a whole lot more than that. Because there are commodity-specific currencies, where the price of the relevant commodity has a huge impact on the actual currency pair. And commodity specialists, such as producers and merchants. Know how to predict a good portion of price movements in these commodities. Today’s trader can do it all, from forex to commodity trading in a single CFD online Forex trading platform and implement very good strategies. But in the old days some people still were able to achieve some trading success. Either directly from the markets, or by somehow making use of skills or information relating to market price movement.

Opportunity is Always There

Inherent market risk prevents many trading opportunities from being fully exploited. And it always will be this way. Because some people will never trade or even invest in commodities and currencies. The market never becomes saturated, and despite the advent of automated trading programs and sophisticated trading, the risk and reward will always be there. Markets do change over time, in terms of volatility and trading patterns. But the fundamental principles of risk and reward are always present. And it’s a two way impact, as commodities impact currencies. But also currencies impact commodities. Therefore wise CFD traders do not treat these markets as being separate from one another. But rather as one large market. The average online forex trading platform today offers CFD instruments for implementing unbelievably good trading ideas.

Online CFD Trading and Spread Betting – What are the Differences

Online CFD Trading versus Spread Betting

Online CFD trading is significantly better than spread betting. Though the main advantages are hidden at first, and are later fully revealed in actual trading.

What Online CFD Trading and Spread Betting Offer

Both online CFD trading and spread betting seem a lot alike, especially in slow moving markets. Spread betting is more convenient for beginner traders. As market prices are quoted in whatever currency the spread betting account is based in. CFD markets are quotes in the currency that the specific market is based in. For example CFDs on crude oil and gold, will be quotes in US dollars. And this may be confusing to beginner traders, not very familiar with the US dollar. CFDs are subject to capital gains tax, because they are classed as real trading instruments. So all gains, and some losses, through CFD trading, are taken into account for calculating tax liability. Spread betting is classed as gambling, and is exempt from capital gains tax. Generally, spread betting appears more convenient and appeals more to beginners. Spread betting however is not suitable for serious, dedicated fast trading such as day trading. Spread betting pricing can deviate significantly from actual market price. Whereas CFDs are extremely linear in their pricing. Which enables traders to trade at any speed. Since they follow actual market price very closely, and reliably. CFDs also offer uniquely large liquidity, even better than that of direct market access. This liquidity is available always, to retail traders for up to $100 per price point.

Online CFD Trading Wins Hands-down over Spread Betting

When it comes to serious trading, and the need for consistent profitability, CFDs win the argument. All beginner traders are slowly finding out that spread betting is like child play. Spread betting looks appealing only to naive beginner traders. As traders learn more and more about the markets, they realize that CFDs are a much better choice. Even when faced with hefty capital gains tax on profits, CFDs are still better! Because the strategies used cannot possibly be nowhere near as good through the use of spread betting. Capital gains tax maybe as much as 30% in some countries. And yet, the unique edge of CFDs allows for profitable trading. Spread betting is quite inefficient, due to its poor, non linear pricing. So much so, that most trading strategies suffer 50% to 80% reduction in their profitability. Hence, it makes sense to trade through fast and reliable CFDs and pay even 30% tax on profits. Rather than have half the profits, and pay no tax at all. Day trading especially, is almost impossible to do through spread betting. And in most cases, spread betting works well when trading with few pennies or few dollars per point. But as soon as the trader goes above $10 per point or trades faster, liquidity and delay problems hinder proper trade execution. CFDs are extremely efficient up to $100 per point, a limit which most retail traders never have to reach.

Amateurs and Serious Traders

Online CFD trading has been chosen as a smart trading tool, by even stock option traders and hedgers. Exactly because part of their complex trades needs to be perfectly linear, and to offer very low dealing costs. CFDs have much lower dealing costs than spread betting, because the spreads are tighter. And dealing costs are lower than those of option too. More importantly though, it is linear pricing that makes CFDs second to none! No other derivative trading instrument is as linear as CFDs. A good CFD trading system will always take advantage of this superior linear pricing. Especially in choppy, small range market conditions, where it is often totally impossible to profit through spread betting or options. The CFD trading risks are no greater than those of direct market access trading. And simply the inability to predict market price movement. Except that CFDs offer better liquidity than even direct market access trading, and no dealing restrictions are ever imposed. Amateur traders however can still lose, no matter how they choose to trade. Amateur traders will typically lose money even through CFDs, and will blow their accounts within 6 months. That’s because trading and risky and difficult. But if they are successful in predicting the markets. Then CFDs will offer at least twice the profitability that spread betting can offer, on the exact same strategy!