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Best FX Exchange Tips and Tricks for Trading Profits

Traders of all stripes — from the wizened profitable pro to the chastened newbie loser — are often at a ‘loss’ in trying to explain the logic and system of their modus operendi, “method to their madness”, if you will. Even the most sophisticated of algorithmic systems require constant tuning. Man-machine combinations, whatever their level of sophistication must continually innovate to out-smart other man-machine combinations pursuing the same fx exchange profit. This inherent multi-dimensionality means that both circumstances (physical realities) and perceptual responses (human motivation) should, in the larger sense, be continually accounted for.

Into this daunting conflagration, the individual trader should be using all the tools at her disposal, including forex converters and forex calculators. A top-notch forex broker, with rapid execution and propagation of fx exchange rates is also essential.

FX Exchange Explained

A special mention of the role of interest rates is also warranted. When any of the 8 major central banks change their interest rates — whether in response to endogenous or exogenous economic or political causes — the delicate balance of cross-rates in existence must realign to restore an equilibrium. In general, an increase in a currency’s central bank interest rate level increases demand for that currency on the practical and theoretical levels. A change in interest rates requires new input to forex converters and forex calculators in arriving at sustainable equilibrium rates.
Of equal importance is the inflation rate. As per forex converter, countries enjoying relatively low inflation benefit from increasing purchasing power relative to higher inflation countries. This differential translates into an appreciating currency. With the super-low inflationary regime hoisted on the world economy by the world’s central bankers since the financial crisis of 2008, this factor has been suppressed, but with the massive expansion of global sovereign debt, the resurgence of inflation is only a matter of time.
Another critical macro-economic determinant is the current account deficit which represents the excess of imports over exports between a country (or bloc) and its cumulative trading partners. While logic determines that this ratio account cannot remain out of balance indefinitely, the time horizon to correct it can be decades.
Similarly, a country’s terms of trade, that is the ratio of its export to import prices, must also return to a parity, but again the process is only assured in theory, which could require years to clear at the margin.
FX exchange traders value consistency, discipline and fortitude in an economy and one proxy for this is the level of public debt. Particularly if the debt is owed externally, uninvited shocks can convulse an economy, and its currency worth, if collective wisdom deems it ripe for failure. While domestically owed debt can be ameliorated with money printing or government bond issuance, here again, the day of reckoning is inevitable.
Similarly, countries with political stability and overall positive economic performance are rewarded by forex brokers and forex traders with premiums on their currency

In this article we have abstracted from the daily headlines and attempted to understand those factors which drive foreign exchange price movement

Forex Market Basics

The term “forex market” refers to both a general concept and a specific institutional setup. As a generic term, it refers to an omnipotent instantaneous equilibrating mechanism whereby anyone on the globe can evaluate the value of anything is his native currency, 24/7. Forex news is justifiably a top feature of most business broadcasts. And as such, it is one of the defining terms of our age. Without it, human activity would rapidly revert to conditions that were in existence as recently as 150 years ago, with 75% of the world’s population in abject poverty and an average life-span of 30 years (as opposed to 10% and 71 years, as exists today).

What is forex Trading?

But it is “forex market” as an active corporeal framework that is of greater interest, warranting elaboration and investigation. This market refers to a variety of means of exchange for currency trading. It is through this clearing mechanism that accounts, both national and personal, are cleared. Even here, the definition is relatively expansive as it encompasses both the institutionally definable, that is banks and other financial institutions whose cash holdings are real monetary claims (currency backed by political sovereignty and agreements) as well as the unquantifiable and amorphous derivative trade. Currency trading in the defined, known institutional markets has a current daily volume estimated in excess of $5 trillion, while estimates on the forex markets, including all derivatives, is a multiple 5 – 10 times that.

Forex market risk

Understanding and managing this derivative market has been a major preoccupation of market participants and regulators alike. Of the 2,300 pages and 398 regulations in the U.S. Dodd-Frank legislation promulgated in the wake of the financial meltdown, a significant fraction deals with the problem of defining and managing forex market risk. As with much of the government response, the attempt is to micro-manage the risk and exposure, by, for example, banning US citizens from trading CFDs was a typical attempt at a legislative dictat of a problem manifestation rather than addressing the cause. This response ignores the moral hazard issue of absolving the party incurring the risk from fully incorporating and accounting for it. It furthermore wades into the definition of “derivative”, an evolving and expansive concept without end. Attempting to impose a fixed static conception will inevitably stifle and distort the underlying processes.

That the informal sector and understanding of “what is forex trading” is larger by a significant multiple than the formal part, forces participants of all kinds to understand how this process arrives at price determination. The forex news of interest is necessarily much wider in scope than that which concerns central bankers. In short, a messy evolving environment that defies the neat regimentation and clarity sought by regulators. Both the informal and formal sectors are active almost 24/5 (22/5 for the most part). Thus, a weekday event almost anywhere on the globe has an immediate immediate forex market implication to be rapidly interpreted by the larger framework and the more narrow currency trading,

Analysts, observers, students, pundits and all sorts of participants are thus well-advised to study the whole of forex news to understand what is forex trading and the subset of currency trading.

Why You Need to Learn Forex Trading

The best way to learn forex trading is to start with a few simple objectives and methods, then slowly progress further into more challenging trading tasks.

The Benefits of Making the Effort to Learn Forex Trading

Some argue that trading cannot be taught by mentors, and some argue that self-taught people usually have fools for teachers, implying that individuals cannot learn by themselves. While neither of these arguments is necessarily definitive, all traders more or less learn from the opinions and analysis of older, more experienced traders. But that doesn’t mean that one cannot question the teachings of a senior trader, no matter how successful they have proven to be. The benefits of making the effort to learn forex trading are in that regardless whether one chooses to learn it all by oneself, or have a mentor to guide them, the objective is to learn how to be an original thinker. All it takes is a small change, and a popular trading strategy becomes almost unique and proprietary. Trading online is quite a challenge, and mentors can hardly prepare you for the psychological aspects of trading and dealing with fast moving live forex rates, while holding onto a losing trade. But there are things to watch out for — psychology first among them — as well as money management and overall account survivability during adverse trading conditions. Every seminar, book or source of information may provide clues as to how to deal with these factors. All these little bits of information can actually, slowly make up a complete trading strategy, one that can deal with markets from A to Z, no matter the conditions. And one which is bound to outperform any automated trading software as well.

Learning and Memorizing

It is best to trade with real money, as we all tend to remember certain events best, when these events happened during intense emotions. We all remember certain events that happened 10, 20 or more years ago, with extreme detail while we forget events that happened only a few days ago. This is because the memorable events occurred during extreme emotional state. These events, bad or good, become strong memories. In order to learn forex trading well, one has to trade with real money, at significant size, and keep a trading journal of the losses, the disappointments as well as the profits and the happy times from the profitable trades. What is forex trading without emotions? It’s a non-event, when someone trades a demo account or with real money at very low size. The whole trading endeavour becomes a minor event, which you will hardly remember a few years down the line. How did the market react when this or that indicator gave off a signal, which indicator let you down, and so many questions of this nature that if not taken into account, we will forget about them and make the same mistake over and over again. Until it happens with relatively large amounts of money, at which point it will become unforgettable.

Forex Trading Strategies for Success

Learning to trade for success is a long hard road to take, the best forex trading strategies are the ones that start simple. So that traders are not overloaded.

Simple Forex Trading Strategies Ensure Path in the Right Learning Curve

All new traders want to reach the end of the learning curve, as fast as possible. But this is not possible because the learning curve is unimaginably long and tough to follow. The best forex trading strategies come with such long learning curves, and a lot of trial and error. The traders developing these strategies take things slowly and easy, without pressure and the necessity to win here and now. It is this urgency that sabotages and ultimately fails so many traders. Trading online is difficult and challenging, often beyond the levels that most new traders could bear. These traders who rush into things without knowing what to expect, and what is forex hiding from them, end up finding out the hard way how nasty and disappointing trading can get.

Why Complex Strategies are not Good to Start with

The best forex trading strategies are the ones that start simple and allow the trader to build on them, using their imagination. So they simply provide the brainstorming of ideas and encourage the trader to add a little more technique each time they make use of them. Complicated strategies overload the trader and ultimately kill all imagination and original thinking. Looking at forex charts for hours and hours helps traders get more ideas, and finally settle down to the ones that work best. Developing a really good strategy is like making premium wine, where it starts simple but it takes a long time, and a whole series of carefully planned steps to come to the final product. Software developers too work using the same principle. The first version of the software is very basic, so that the developers understand it in full, then they add a little more code each time, finding the bugs one by one as they go along. If the software was developed all at once, it would have so many bugs that it would be impossible to find them and correct them. So trading is not different, in that it takes time to become successful, and complexity has to come in slowly, without overwhelming the trader. Many trading strategies start with something simple, such as a 10 day moving average, or some kind of momentum gauge. Then more and more indicators are added, and with different criteria each. One indicator applies to such and such circumstances while another indicator applies later, and so on. So one has to think of successful trading as being some kind of premium wine, which takes years and years to make. There are no shortcuts to this.

What are the Most Suitable CFD Trading Platforms for Smart Trading?

CFD trading platforms come in many different kinds, and when it comes to specialized trading, some are more suitable than others for each specific market.

CFD Trading Platforms for the Specialist Trader

Each specialist trader knows that they need more of certain features and less of other features in their highly focused strategy. Some CFD trading platforms offer more flexibility, more ease of use, and better suit the needs of flexible traders. Traders who may switch from fast trading to slow trading or vice versa. Traders who engage in trading CFD contracts for efficiency reasons. These traders demand reliability from their brokers and trading platforms, as well as good levels of liquidity. They care less about commission costs, the need for having a larger size monitor or using all kinds of mobile devices to be in touch with the market at all times. Specialist traders study their markets at home, and never whilst on the move. They are confident to trade on the move only when they have their market analysis notes with them. The trading platform has to be good enough to work on a mobile device, and at least display the market charts accurately, and to update prices fast. Some new traders fall victims to technology convenience, thinking that all these smart phones and tablets can enable them to study the markets while away from their offices, but this is not possible. Brokers do encourage trading on the move, but without the proper guidance that the study
at home office can provide, good trading becomes almost impossible to implement.

Traders Want Simple, Reliable Trading Platforms

CFD trading platforms in particular, have to be fast and efficient, since the CFD trading Australia’s traders want and demand is all about efficiency. This efficiency relates to higher profit margins per trade, not commission costs. These traders are wise enough to know one market from another, and how each specific market is best traded. As long as the platform is reliable, good trading will be possible. As far as automation goes, things such as contingent order placing and automatic triggers for these orders, different platforms vary significantly. Occasionally, all traders will need automation of some kind, though it’s not super-critical to success. Those who learn forex trading for example may first avoid overnight trades, as they have been told by their mentors. But they soon find out that most profitable trading hours in a currency pair, might be while they are sleeping. So automation and contingent orders may provide some solution to this problem, but even a primitive, but still reliable platform, coupled with a longer term trading strategy will work just as well. After all it is very unlikely that the automated orders of those new traders will be 100% right on the timing.

Why Traders Prefer Online CFD Trading

Online CFD trading offers same profitability as the spot market, but at better liquidity conditions and better efficiency, which no other instrument offers.

Online CFD Trading Gains in Popularity

More and more demanding traders switch to online CFD trading, as it offers them better exposure to the market, without the big liquidity risks. Most CFD trading platforms are suitable for trading up to quite large size, typically up to $100 per pip for currencies, and also quite high for stocks and commodities as well, such as gold. So these limits are not actual limits, but rather levels below which all CFD platforms offer the best benefits a trader can get, and a good trading strategy is significantly enhanced as a result. The online trading Australia’s brokerage industry offers today is very good and competitive. In fact Australia’s brokers offer more to their clients in term of level of service, leverage and even liquidity than many US brokers offer to their clients. CFDs in particular are most popular in Europe and Australia than anywhere else. Traders prefer CFDs for various reasons, but solid liquidity has to be the number one reason. The second most obvious reason is high leverage, which makes trading and investing in commodities so much more affordable. With leverage rates up to 200 to 1, one can only imagine the possibilities in the hands of a wise commodities trader. Oftentimes, gold and silver traders use CFD contracts because of these reasons, as gold in particular tends to become illiquid at times and even the best brokers suffer as a result. Poor liquidity means traders cannot close profitable trades fast enough while the market starts moving against them on profit taking, this factor alone can eat into profits very fast. So the CFD gold trader has a huge advantage over the spot gold trader during such times.

Every Trader Wants to Have Maximum Efficiency

Efficiency in trading is key, whether through better liquidity or better leverage, the wise trader knows how to handle the conditions as best a they possibly can, all in the interests of trading success. The reason online CFD trading caught on so well is precisely because of these traders, who will not settle for anything less than the best out there. As soon as something new and innovative comes out, they spot it, and grab it. CFD trading was an innovating step towards better trading. The CFD trading Australia’s brokerage firms offer is of professional level, and can meet the needs to all traders trading up to $100 per pip /point in most markets. For larger trading volumes, some CFD brokers may be better than others, but it certainly possible to extend CFD trading with the right broker, even beyond $100 per pip or point. In the case of gold alone, CFDs have won hands down, and no other trading instrument even comes close to CFDs.