Page 192 – XTrade

Dealing with the Problems of Forex Trading Live Online

Forex trading live online tends to be very fast, and emotional. Especially because of the media and the price action seemingly confirming the media’s opinion.

Forex Trading Live Online and Potential Risks

Forex trading live online poses some risks related to emotional high frequency trading. Especially on news and economic report release days. Where new traders are likely to get very confused and disoriented. Trading online at fast pace, is bound to be stressful. And when traders become stressed, they begin to lose judgemental ability, and fall victims to volatility. The idea of forex trading live online is synonymous with stress, big profitability and motivational trading activity. But that is not necessarily so. Markets can become excessively confusing, more confusing than even veteran traders can handle. It is as though markets conspire against you, in an effort to intimidate you. And make you lose and run away for ever, so as to never trade again. Intimidation is there for sure, and this is a risk that even profitable traders face every day. So to deal with this risk of becoming intimidated, you should refrain from using the media as a way to confirm market opinion, and as if trying to figure out the official point of view. The markets are bound to be volatile on news and economic report days, and interpretation of these news and reports is almost impossible. So you should approach the markets with a neutral, directionless mindset, where you simply want to trade based on volatility and short-lived breakouts. Forex trading never worked using the media and public opinion, and never will. What does work, is original thinking, a directionless approach, and volatility trading. That is the case as far as news and report days go. If one trades the longer term trend, then they will have to use a directional trading method, where the trend can be figured out in advance. And that trend cannot really change over a single trading session.

Forex Trading Live and Fast while Having to Deal with Open Losing Trades

Forex trading live and fast poses all these risks of emotional decision making. But most of what you will read on day trading is actually not implementable in practice. Most mentors teach about using tight stops, and controlling risk and emotions this way. This is all nonsense, in fact day traders are better off using larger stops, as well as opposite hedging trades in day trading. This way many losing trades can be avoided by the time the market closes. All the trader needs to watch is volatility, if the market is bound to be volatile, large stops and hedging, is the way to go. If volatility is expected to be low, the trader is better off not trading the early session at all, and waiting on the sidelines. Successful day traders who implement online CFD trading, focus on volatility first. They use the trading calendar as their volatility forecast, and depending on the day, they use one strategy or another. There’s no one size fits all solution to day trading. Each day will fit the profile of a volatile, or non volatile day, and will be either a trending or a flat day. Risk can be controlled using these simple tips, and many pitfalls can be avoided. In summary, it’s all about knowing volatility in advance, using large stops and hedging trades on volatile days, and avoiding the early trading session on less certain days.

The Carry Forex Trading Market

The Carry forex trading market is a very difficult approach to trading. But if planned well, it means that the trader can achieve riskless arbitrage trading.

What the Carry Forex Trading Market is about

The Carry forex trading market is about profiting on the interest rate differentials between two currency pairs. The term Interest Rates sounds like a microscopic, tiny opportunity for profit, which is true most of the time. Since when a person hears the term Interest Rates. They are reminded of the ultra low rates they are getting on their savings bank account. But because forex trading involves the use of leverage, which in many cases is 200 to 1, the effect of the interest rate factor is massive. The forex trading market allows Carry traders to profit on a daily basis (excluding weekends), since they will be getting paid the difference between two interest rates. It is a strange and difficult method, perhaps one of the most difficult forex trading strategies, but it is real. Trading forex this way, removes the work required, for predicting perfect market direction. All the trader has to do is on risk hedging. One example of a Carry trading opportunity of recent years was that between the Japanese Yen and the Australian dollar. At some point interest rates in Japan were zero, and in Australia were 4%. Carry traders profited from this by going long the AUD/JPY currency pair. This meant that they were getting paid interest 4% (times the amount of leverage they used) on their account, while at the same time paying nothing on the JPY component. So it all looks nice and easy, but there the big risk of the market (AUDJPY in this case) falling too much below the trader’s entry price. Which could cause massive losses. So massive that the losses in just few days of declining prices could in fact dwarf the Carry profits collected over many months. So there is definitely risk involved!

The Carry Forex Trading Market and Risk Hedging

The Carry forex trading market comes with its big risks. As live forex rates can move too much against you, even in as short a period as a single trading day. But there are ways to hedge much of the risk through long term correlations. Correlation are long term anyway. And in the case of various currency pairs, where a Carry trade opportunity appears, traders can use correlated commodities for protection. In the above example of AUDJPY for example, the Carry trader is long this currency pair, and depending on the account leverage used, they might commit $50,000 to the Carry trade. And they will make for example around $300 per business day, if the market stays flat. They will make more if the market rises. And they will lose it all if the market falls. But what if the entire trade is hedged against price fluctuation risk in both direction, through an investment in physical gold or a CFD trade in the gold market. In that case, it would have been possible for AUDJPY Carry traders to keep that

Why Forex Trading Online Rules the Markets

Forex trading online has an enormous impact on many other markets, including the commodities and equities markets. Forex is relevant to traders in all markets.

Forex Trading Online Helps Traders and Investors

The advent and spread of forex trading online has helped traders and old school investors of all kinds. It has made them look at the financial markets from a new perspective, and pay more attention to currency movements. Movements which prior to forex trading online were much less technical. Currency trading has become much more technically driven, all because too many traders share and look at the same charts. They are all trading forex and pay attention to the same support and resistance levels. And a as result, many currency pairs have a strong degree of technical predictability, around 70% of the time. Exceptions still apply of course, since during the other 30% of the time technical analysis fails, lags, or gives way to fundamentals. Especially when it comes to the US dollar, technical analysis fails much more often than it does with other currencies. But even in the case of the US dollar, online traders are quick to follow on the action of large institutional traders, thereby creating momentum. Collective trading activity can be seen across many currencies, and these almost instantly impact stocks and commodities. The impact varies dramatically from stock to stock, and from one commodity to another, but very often it is there.

Forex Trading Online and Old School Traders

Old schools traders and investors, such as gold investors used to focus too much on key factors impacting the supply and demand in the gold market. But in today’s markets, where forex trading online rules, currencies such as the Australian dollar act in strange and interesting ways. If gold moves in a solid trend, then the Australian dollar will follow suit. But the opposite can happen too. It is possible for the Australian dollar to set a medium term trend, and the lagging gold will actually follow through. These two markets are strongly interconnected. The markets have many more commodities and stocks, where a specific currency pair acts as a key catalyst or even as a driving force at times. Forex traders implement online CFD trading in today’s world, in an effort to trade efficiently both the currency side and the commodity / stock side of the underlying market mechanism. The gold – Australian dollar thing, is actually one unified market. Trading spot forex alone puts traders at disadvantage, trading gold alone, is also a far-sighted approach. But trading both gold and Australian dollar through CFDs allows traders to continuously trade the lagging component, and make consistent profits. All the homework and analysis is focused on figuring out which component is lagging and which is leading.

The Forex Trading Platform Online Traders Prefer

The typical forex trading platform online traders prefer, is always one which offers sophisticated trading tools. All for the purpose of catching more trades.

The Forex Trading Platform Online Traders Prefer is the Perfect Trading Terminal

Traders usually have more than one strategy, and trade more than one market. Though they all develop special skills around one set of markets, or trading hours. Online trading is a must in today’s fast moving financial markets. The forex trading platform online traders choose to use, is one which facilitates all their specialized trading needs. Typically these needs include the ability for placing contingent orders with detailed triggering criteria, and catching opportunities while they are away from their computers. This kind of automation is essential for implementing many forex trading strategies today. The forex trading platform online traders use, has to also provide embedded calculator tools, for performing fast and accurate calculations. This functionality is critical even to swing traders and CFD stock traders, because they can play around with various numerical inputs, and work out insightful and accurate results. The old school handheld calculator cannot match the accuracy and speed of spreadsheet-like embedded calculators, because data is entered in a sequence, and any mistakes are carried through. The good CFD trading platforms especially, offer all this and even more. The wise traders of today’s markets are more like number and chart analysts, rather than simple, passive financial news receivers. Even if one trades on the daily news, without numerical analysis and price targets, they will have no clue where and how the probabilities will dictate the trend on that day.

One Kind of Forex Trading Platform Online Traders Don’t Like

There is one type of forex trading platform online traders don’t like much, and that’s the kind of bad innovation. Any platforms that evolve too fast, without being compatible with previous versions, in terms of user interface, fail to win traders. It is the kind of failed innovation we saw with Windows 8, which is hard for previous version users to become accustom to, if not annoying to use. Such extreme changes in a trading platform are not welcome, as traders are used to a certain layout on their trading platform. And even new traders, who just started to learn forex trading, are not keen on dramatic changes on the trading platforms and in their software. Traders develop trading skills, and in the process of doing so, they become accustomed to pressing certain buttons and seeing certain things, in fixed places on the trading terminal screen. If the trading platform in question appears to be too radical, and too space-age, it does create user compatibility problems. But in reality, not many such platforms exist, all good brokers avoid extreme changes and pay attention to customer comfort. One area of moderate evolution is on forex, and the ability for the trader to see exactly how much money they trade per pip. Instead of using the old format of Lots, which to many new traders may be confusing. This change is good for new traders who don’t understand the pricing of the Pip and Lot size, not a mad step forward, but somewhat unnecessary for most forex traders.

The Evolution of Forex Trading Platforms

Forex Trading Platforms have come a long way since the early days. Just like everything else in the IT industry, it’s all about becoming more user friendly.

Forex Trading Platforms Keep on Evolving

The forex trading platforms of the early days were more like spreadsheets full of numbers, rather than graphically rich trading terminals. Today’s forex trading platforms offer rich graphics. So as to eliminate the possibility of making a mistake or executing the wrong trade. But also, they have a lot of automation, such as contingent orders, a trading tool which didn’t exist in the early days. Trading forex has a lot to do with gaining an advantage of view on the market, over other traders. And even back in the day, wise traders were able to predict turning points in the market, even without even using the best forex trading platform available at the time. Top trading tools were at a premium price, and only investment bankers could afford them. So has the wise trading advantage has been lost in today’s markets, because of too many traders using top platforms? Definitely not! The wise trading advantage of the old timers relies on trading techniques, market analysis, and chart reading at a glance. The advantage is certainly there, because the market itself makes it possible. Despite the fact that 1000s of traders look at the same market charts. Charts that are made out of clear, color graphics. Each one of these 1000s of traders looks at them differently, and not two traders think exactly alike. And a s result, there is a difference of opinion, there are different trading objectives and various time frames of interest. So, the wise trader still maintains an advantage. And despite all improvement and trading tools available on these platforms, profitable trading always depends on some secret, manual process. Such as thinking process, chart analysis and unique fundamental analysis.

Forex Trading Platforms Evolve – Wise Traders still Think Manually

To make the argument that just because forex trading platforms evolve so well. And allow for automated trading, Expert Advisers etc, manual trading is redundant, is simply wrong and misleading. Fully automated trading has never been a match for manual trading. And in fact is no different to other jobs which also require deep thought process, and automation can never fully replace. Translators and programmers are two such jobs. Automation has helped them develop and has made the job tools so user friendly. But even to this day, it is impossible for a computer to produce a complex accurate translation, or to create a computer program, all by itself. Trading is just as complex if not more so. In fact, the FX exchange mechanism carries risks and uncertainties which cannot be modeled mathematically. Not unless the designer makes assumptions, assumptions that this or that will not happen. But Murphy’s law always finds its way in through such assumptions. So the bottom line is that trading platform evolution is not threat to creative thinking and manual trading. They will always be there for original thinkers to figure it out and use it.

What Forex Trading Brokers Wise Traders Use

Forex trading brokers offer all kinds of promotions and advantages to their clients. Wise traders however are not sold on promotions, but rather on efficiency.

Forex Trading Brokers Serious and Wise Traders Use

Serious and wise traders, trading anything from commodities to currencies, use forex trading brokers of top liquidity. Liquidity means that the forex trader gets a better price every time they open or close a trade. Top brokers are working in a very competitive advantage and manage to offer low spreads to their clients. But even if they had to charge high commissions, their quality services would still be worth paying these commissions. To the small size trader liquidity advantages don’t become apparent, because the amounts of money made or lost to the market are too small. But to traders risking $100s per trade, the extra profit margin that good liquidity brings, dwarfs dealing costs. Even if forex and commodity traders had to pay big fixed commission per trade, which many stock brokers charge today, the top forex trading brokers would still be worth doing business with. Wise traders don’t care about sign up bonuses, and fancy offers. It’s all about liquidity, trade execution speed, and reliable platforms. And rightly so, because the bottom line is all about maximizing profitability. Trading online is a serious business, and all wise traders take a selective approach which is about trading less often, but with more money committed to each trade.

Good Forex Trading Brokers VS Popular Brokers

Good forex trading brokers are not necessarily the most popular ones, or the ones you see advertised in the media. In fact, the good brokerage firms are the ones that have high client retention numbers. They might have fewer clients, but these clients are satisfied with the level of service provided. Ultimately, a broker which has been rated as good, by few large size traders, who put liquidity to the test, is indeed a good broker. As opposed to a broker which has been rated as good, by 1000s of micro account traders, risking $1 per trade, and to whom liquidity issues, if they exist, will never be revealed. Liquidity issues surface at large size, and medium size high frequency trading. That is the ultimate test for all brokers. And while no perfect broker exists, the differences from one to another can be dramatic. In order to learn how to trade forex well, and from a real world perspective, one has to go for a good broker. The next step, is of course to become selective, think each trade through before execution. And to also avoid too much diversification. It is better to trade few markets, ones that the trader can master well. Many amateur traders tend to do the opposite, which is using a broker offering the most bonuses, which come with all kinds of strings attached. And then try to qualify for that bonus by attempting to increase trading activity, over too many different currency pairs. And that’s not the right way to profit from the forex market.