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Why Your CFD Trading System Platform Matters

Having a good CFD trading system is about selectivity, and the ability to dig deeper and deeper in every trade and set of market circumstances. And while the financial industry is based on statistics and probability, their formulas are based on risk measurement in a very general way. Just like car insurance firms, who adjust insurance premiums from driver to driver, so as to cover their own risk accordingly. This kind of statistics is very broad based, is diversification-based and not necessarily good for retail traders. The retail trader needs to avoid excessive asset diversification, and focus more on the single trade. Car insurance firms have no way of knowing who drinks and drives, who drives carelessly etc, so they use primitive statistical facts to charge higher premiums to drivers who fit these high risk profiles. If these firms had very specific information on risky drivers, they could avoid them altogether. Drivers who may cause millions of dollars of damage, in a single accident. Well guess what, CFD traders can go this deep in many single trades, and identify big losers and possible winners. So there is no need for much diversification. Moreover, if hedging strategies are used, through CFDs, there might not be need for diversification almost at all. It’s one smart trade, on one market, and that’s it! The probabilities can still be very good. Online cfd brokers allow this kind of sophisticated trading, and wise traders take full advantage. Any good CFD trading system can beat the odds, just as long as the trader is able to identify the uniqueness of each trade. Diversification and high frequency trading, based on large sample statistics can still work — it’s not that the theory is flawed. But the profitability is nowhere near as good as that of the wise CFD trader who makes unique trades, and no two trades are exactly alike. Online CFD trading has come a long way. Most CFD traders actually are not fully aware of the hidden benefits of CFDs. And these have to do with hedging a single trade, any trade, in a very good way. So that the trader doesn’t have to worry about diversification, and statistics of large samples. Rather they have to worry about trade-specific parameters, such as volatility, trade size and timing. Probability theory applies, but in a different way.

The Best CFD Trading System

Evidence evaluated in actual CFD trading and hybrid systems utilizing CFDs, does suggest that a CFD trading system can be made to be far superior to any non CFD based system. Rather, CFDs allow traders to hedge risk on a single trade, in a very efficient way. Without using advanced CFD trading software, or premium trading tools such as Expert Advisors and the like. Simply, by focusing on the uniqueness of the day, of the week, and the trade itself, traders are able to create asymmetrically low-risk / high-reward trade possibilities. These strategies do exist, and they are more strategies than actual systems in that they require a lot of personal judgment. And therefore they cannot be emulated, cannot be easily taught, and are impossible to prepackage and sell. But any wise-enough curious CFD trader will figure them out to some extent.

Simple Forex Trading Strategies that Work

The idea of developing solid forex trading strategies is based on the necessity of getting around market noise and false trends with a strategy or rather family of forex trading strategies. One such strategy is based on daily trend analysis through swing trading theory. This analysis identifies the underlying daily trend, and makes the assumption that news cannot change that daily trend. The forex trader then looks for days where the market deviates away from its established trend, that is it trades in the counter direction. And the assumption there is that the market will get back to its previous trend. Entire currency trading strategies are based on this theory, and the assumptions are very safe to make. Things can go wrong, but not without any prior hint. The daily chart carries a lot of weight, and many warning signals. Anything from divergence signals to LSS pivot levels, can act as a warning signal. It is extremely unlikely that the market will make a sharp move, out of the blue, without any signals in place. Most traders miss these signals because there is too much ambiguity and there are many conflicting ones as well. A forex trading business opportunity could be based on any such strategy, with focus on the daily chart. Meticulous planning is required, but the goals and objectives don’t have to be rigorously defined. Traders need to be careful with assessing probability, volatility, the impact of volatility, and various other parameters. In any case, the daily chart is the most useful chart, because the time frame based on the daily session, is the most accurate one. Swing point analysis provides all the basic information about the trend. And when in conflict with moving averages, traders need to focus on the swing point theory. Then, there is chart pattern analysis and day to day analysis which also powerful. These patterns carry more weight than off-chart indicators.

Forex Trading Strategies of the Wise Traders

Wise veteran traders do use methods which rely on creative thinking and are not restricted to one style or another. These forex trading strategies may borrow one thing from day trading, another from swing trading, and another from investing. You might think that investing is not relevant to day trading, but you’d be wrong. The mindset of the investor is necessary in order to understand week-to-week fundamental trends in a currency pair. Things such as interest rates, inflation reports, and the state of the economy of a country are medium-to-long-term factors. And relevant at least once every three months. These factors can have catalytic impact on a single trading week. And they can determine whether the currency in question will for example recover from a sharp decline or not. So even though day trading forex live review reports and theories fail to mention long term factors, these factors are important. Swing trading theory attempts to define solid support and resistance levels. That is what many traders need to know. But the answer is often a range of prices, rather than a couple of thin pivot numbers. The market can sometimes breach a pivot level and yet not reverse. That’s what a false breakout move is.

Essential Forex Market Basics

Some key forex market basics which really do work are the LSS pivots, divergence indicators, and swing point analysis. Entire trading strategies can be developed around these alone, without taking into account any other methodology or indicator. Unfortunately, many vendors today present the forex market as a trading online made easy product. And they promote all kinds of nonsensical indicators just to satisfy people’s superstitious and numerological beliefs. Anything from astrology to Fibonacci number theory is used to accomplice this. And of course these methods fail miserably in actual trading conditions, because markets could not possibly work that way. Superstitious people lack critical thinking and will always buy these products. Wise traders on the other hand want to see evidence, real hard evidence that an indicator performs better than a coin flip. Otherwise they might as well be tossing coins prior to making trading decisions and keep things simple. But indicators such as LSS and swing point analysis are very fundamental, and they do work. LSS pivots provide clues on momentum. And swing point analysis helps determine the real trend on the daily chart. Even the best forex trading strategy, no matter how good, can still be enhanced through LSS pivots and swing point analysis. Veteran traders have found that the few good indicators that helped them most are these basic indicators. There are also divergence indicators, and daily range analysis, which can also enhance existing trading systems. In any case, traders simply should refrain from using any new method offered to them by vendors and authors. Or any indicator which claims to offer easy success. Forex market basics are about true indicators, which provide difficult but possible profitable trading to beginners.

Important Forex Market Basics

Forex market basics also include important aspects such as volatility analysis. Volatility is hardly ever seriously taken into account, and neither is money management. These two concepts alone are conveniently avoided by many so called gurus and vendors. While the indicators and tools available on volatility are primitive and almost useless in most cases. Volatility has to be studied first, using good analysis. And then money management has to be applied based on volatility expectations. Trading online practice offers unique new insights to all new traders seriously devoted to the task of profitable trading. Traders need to focus on the reality of volatility of the forex market, first and foremost, and then on few other basic principles. Many other indicators out there claim to be based on basics, but these are basic misconceptions and basic superstitions, and not the real forex world.

How to Trade Forex Profitably in the Long Run

All traders who know how to trade forex profitably, base their ideas and strategies on probability, and statistics over large samples of data. Day traders tend to use disciplined trading methods, having many limitations. Whereas swing traders treat each and every trade in a unique way, as if it never happened before. And even though they treat each trade differently, they still base their ideas on probability. In simple mathematical terms, a factor which favors the trade going well is expressed as a number over 1. And a factor which suggests that the trade will turn out to be a loser is expressed as a number less than 1. By assigning appropriate weight to each such factor, for example 1.05, 1.09, 0.95, 0.8 etc. The overall risk can be assessed in a crude but meaningful way. The actual probability of the trade going well or not will depend on the final algebraic product of these numbers being greater than 1 or not. And this whole approach requires a calibration of the numbers around past profitable trades. Even the best forex trading strategy, unbeknownst to the actual user, can be expressed in terms of basic probability theory. So every forex trader can in fact use probability theory to some degree, to figure out things that would other have remained hidden. Oftentimes, the whole secret of success in a well-calibrated probability based trading strategy, is whether a factor is 0.95 or 1.05. This little difference on a couple of indicators can make all the difference on the trade. Data analysis and processing can successfully model the physical world, and financial trading too. In other more sophisticated models, probability theory attempts to predict market direction over the next 30 to 40 minutes. And it has succeeded in doing it. This is how some traders learn how to assess risks, and how to trade forex profitably in the long run. Because visual observation alone is not enough to assess the risks, not unless one is extremely experienced.

How to Trade Forex Profitably the right way — Probability theory is seen by many as being too weak to be useful in direct applications, especially by many academics themselves, who only know to use this theory to make charts for inferring general knowledge; But it also has powerful applications, where it provides conclusive, actionable results.

How to Trade Forex Profitably and Wisely

Those who know how to trade forex profitably and more wisely than most, rely more or less on the same indicators that every body else is using. The difference is that they have assigned a different weight of importance to each one of these indicators. So they know when to fade an indicator which they followed very closely in the days before, and when to follow it again. This complexity of the forex market is the whole task of trading. Only few know how to handle it and navigate through it. Most forex courses offer tips and methods which fail to address this complexity, and as a result attendees of these courses learn very little information. Complexity makes the markets more interesting and trading non-routine, which is great as nobody likes routine tasks. But this riddle, that the complexity of indicators presents, is overwhelming to new traders, and makes them lose. And when one has been losing money trading for too long, may end up losing faith. And yet the same traders have a lot of faith in their infant skills when first handling complexity. This kind of naive wishful thinking is what makes people see the world from a distorted probability perspective, rather than a realistic one. So that the probability of winning the lottery seems high, but an equally likely form of cancer somehow seems less probable. Successful traders put probability ahead of wishful thinking, and welcome all adverse moves in the market. They are always reminded that market price will follow the path of maximum confusion. And that’s all they need to start their analysis. Long before they put faith in their forex trading business opportunity.

Why Learn Currency Trading Basics

Many traders think that having to learn currency trading basics is redundant as they already master their trading relatively well. But what if you ever face tasks such as having to calculate the dollar value of a pip, or the overnight interest charge. And you don’t actually know the formulas for calculating these figures. A review of the basics, in greater depth, can help you improve your trading strategy and pay more attention to important details. Details which in some advanced trades may prove critical. In fact, the more a trader advances their trading methods and pushes into new territory, the more critical the basic definition of forex trading becomes. This is why the effort of trying to learn currency trading basics, in more depth, is well worth it! You can learn these basics while you practice currency trading ideas and concepts. It’s a fact of life, that all theories and educational materials become much more interesting when there is a strong motive for learning all these materials. All foreign exchange currency trading online for beginners provides that motive for beginners and others, to learn from a brand new perspective. Perhaps the most boring aspect of forex is that of money management. And even that becomes very interesting, when one puts things into practice. Because the learning trader gets to see the positive impact of a good money management system right away. As large losses become smaller and profits continue to be generated. And the risk of blowing the trading account is removed through a series of steps which at first seem counter-intuitive.

Learn Currency Trading Basics The Fast Way — Learning can be colorful and interesting, when the benefits of utilization are seen in action. Learning just for the sake of learning or for passing exams, is not a true motive.

Learn Currency Trading Basics and Make Good Habits out of Them

If you learn currency trading basics covering definitions, choosing entry points, and money management. Then you will have covered all key aspects. Money management however can get much more complicated as one seeks to maximize the efficiency of a trading strategy. Ultimately, money management becomes a multi-variable algebra problem, which may seem intimidating. But if traders formulates the problem right, they could in principle optimize their trading beyond recognition. All by algebraically (and through the use of a spreadsheet) calculating key parameters, such as trade size at any one moment, stop loss size — and also hedging trade possibilities which are part of all serious CFD trading strategies. But in order for these calculations to be right, the trader has to know the basic definitions well. Instead of using just number of pips, exact pip dollar figures have to also be used. And on entry points, the trader has to use more parameters so as to define market risk in terms of volatility. Not just a number of pips reflecting maximum acceptable dollar loss. And if the account used is large, even more parameters have to be used, so as to take into account the fluctuation of the value of the entire account. Based on the fluctuation of the currency the account is in, versus all other major currencies. What would happen for example, if a trader has a $100,000 account, trades profitably, but the US dollar index is about to decline 20%? That would cause a subtle loss, which only good money management can protect against. As you dig deeper, you will see that all advanced problems lead back to basic definitions. A lack of knowledge of those definitions, is a severe limitation to solving these advanced problems.

Tips on Forex Market Analysis

Forex market analysis relies on chart patterns, chart indicators. But also on off-chart oscillators and indicators, and fundamentals analysis. Forex charts are confusing because all these different indicators tend to disagree with one another. And also a single indicator can give conflicting signals even on two correlated currency pairs. Wise traders assign an order of importance on their indicators. And through the years, they have figured out that chart patterns tend to override all other chart-derived indicators. It’s only the fundamentals, and more specifically the medium term (quarterly fundamentals) that can override anything else. In all other cases, chart patterns provide the basic road map for trading a market. Off-chart indicators are helpful in that they often provide leading signals, often not seen on the charts and their patterns. But these indicators suffer from poor timing, and they fail to predict the exact day where the signal in question will likely be triggered. Chart patterns, especially on the daily chart, help to improve the use of these off-chart indicators. So for example, the CCI indicator may provide a divergence signal, which warns of a possible reversal or correction. But no exact day can be detected on the CCI graph. This is where swing point analysis and several patterns on the daily market chart may provide sufficient clues. Forex market analysis can be greatly improved through the use of these concepts. The hardest part which will always remain a puzzle to traders, is dealing with medium term fundamentals. Fundamentals in general are very hard to make sense of. Because they are not as simply as buy or sell. Many times, they act more like complex signals which impact the markets in more ways than one. And each component of the impact acts at a different moment in time. Fundamentals are so complicated that no economics model can beat them. And even top investment banks always have conflicting opinions on quarterly and annual market outlook. Sometimes one analyst is right, and sometimes some other analyst, using a different approach, is proven right. The bottom line is that one cannot trade the forex market based on the recommendations and opinions of even the top investment banks.

What is Forex Market Analysis — Investment banks are large and well financed. They also trade a great deal through futures contracts (whose pricing is non linear and can diverge from market price). This divergence often reflects an increase in the risk premium, similar to how car insurance premiums can go up if a driver is seen as too risky. This and other kinds of divergences between spot market price and futures prices, allow wise CFD traders to figure out the intentions of the investment banks. And these methods work well when the market is about to reverse. CFD traders are smaller by comparison but they trade and act much more wisely. Futures traders themselves are clueless, and if they are not investment bankers, they will have a hard time figuring out the next market move.

Improving Forex Market Analysis

In order for traders to improve their forex market analysis methods, they would have to better define their objectives and time frames of interest. The daily chart carries a lot of weight, much more than other time frames. And it is also more useful for short term trading, than the weekly chart is. The first success in online trading can be achieved through analysis on the daily chart first. Traders can also use the 30 minute or 60 minute charts as a secondary time frame for fine tuning their analysis. But it is always the daily chart which seems to contain more information than any other chart. Because of the swing points that are formed daily, the high and the low, and the different active trading hours. The daily chart is also much more immune to market noise and intimidating trading action. It does produce false signals, but wise traders have learned how to figure them out. Wise traders use CFDs to trade or just hedge various commodities and currencies, including of course important commodity currency pairs. Online CFD analyses used by these traders range from chart patterns, to more sophisticated methods. One of them is watching for divergences between the spot market and the Futures market. Or even divergences between two Futures contracts having different delivery dates. Futures contracts do sometimes provide leading clues through these divergences, because they have no linear pricing. And the Futures themselves act as an indicator. Sometimes these divergences can be quite dramatic. Wise CFD traders use Futures and their divergence patterns as indicators, and they trade the actual market through the highly linear CFD contracts.