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How Traders View the Global FX Exchange

The global FX exchange market is full of mystery, facts and myths. To the average trader however, it is a very real thing, where they can test their trading.

Why Traders Consider the FX Exchange as their Ultimate Trading Test

The FX exchange is to may traders, more or less, the ultimate trading test, where skills are tested and myths are busted. Though all kinds of markets and trading methods are tough, nothing comes close to the forex market, because participation is strong, and comes from all over the world. Opportunity for making a big profit is much higher as well. When compared to stock trading, a trader may have inside information, or just information from the trading floor. When it comes to the forex market, all forex trading strategies, for all participants, begin from the same level. No one can have specific advantage over the rest of the participants, because everybody can gain access to the same sources of information. Trading tends to become very technical, on most days, and very confusing during certain hours. That’s why it is considered to be the ultimate trading test. Market participants in the forex market are simply connected through their common forex charts, but trading itself is about as fair as it can possibly get.

Why the Trading through the FX Exchange is So Tough to Master

The FX exchange is very hard to handle at times, so much so that even veteran traders have days where they have to quit trading due to excessive confusion. Those who manage to learn forex trading, to a very profitable degree, do so because they manage to spot profitable, yet low risk trades. These trades usually are found at times where the majority of other traders are confused, and generally currencies trade with increased volatility. Excessive volatility creates all kinds of panic, fear and triggers stop loss orders, creating even more volatility in the process. Traders who lose most during volatile times are traders using tight stops, or who focus too much on intraday events. Whereas, the most profitable traders are the ones who use massive stops, and who can sleep well at night with an open losing trade on. Despite the overnight risk theory, which is more of a myth than a reality, most profits can actually be made overnight. Sometimes, favourable price movement might happen early in the morning, but way too early in the trader’s local time. So day traders tend to miss out on such movements. The forex market is tough, and day trading is even tougher, so much so that most traders tend to fail. Those who make it through though, gain a lot of confidence, they are used to extreme volatility. So even if these traders attempt to trade stocks or commodities, they find risk management much easier to handle.

Why Smart Investors Trade in the CFD Market

The CFD market offers many unique advantages, such as linear hedging, isolation and more. Keeping one’s trades secret is a less known reason for using CFDs.

Benefits of Trading through the CFD Market

The CFD market offers great secrecy to traders willing to hide their investment intentions from the mainstream market. Liquidity in CFDs is great and extremely helpful. But CFDs also provide excellent secrecy for smart and large size traders willing to keep their trades away from public view. Online CFD trading offers so much flexibility to commodity and stock traders, where some of them make millions. Without having to disclose their trades to anybody else, only their broker knows but information is confidential. CFD trading platforms offer very good one way liquidity, while shielding the trader from adverse, extreme market conditions. But confidentiality is also good sometimes, because many smart traders don’t want their trades revealed through a main exchange. Many of these traders trade stocks and commodities where a major trend, or very sharp movement is due to happen. And in cases where they don’t want many people to figure out their intentions, they always use CFDs. CFDs also allow them to go short stocks, at times where markets are going down and here is a high risk of short selling restrictions being imposed in major stock exchanges. CFD trades handle any bear market with no problems, even as other stock traders are unable to hedge falling stock prices. Especially in this case, everyone wants to keep their short selling secret as mainstream investors despise short sellers. There is a feeling that short sellers profit fast and easily out of the buying of long term buy and hold investors. But markets do move fast when they fall — it’s always been that way — regardless of CFD trading activity.

The CFD Market is the Swiss Army Knife of Smart Traders

The CFD market meets the needs of most traders today, and is perfectly suitable for fast trading, up to $100 per point, but also for low frequency traders and investors even above $100 per point. Online CFD dealing delivers on aspects of trading where the classic spot market and futures markets cannot deliver, for all kinds of reasons. Smart traders and investors were the first to spot the advantages and turn to CFDs. CFD trading doesn’t make the financial markets less risky; the risk of losing is always there. But the advantages make trading more efficient, and actually possible where other instruments become useless or too crude to use in a precise manner. Hedging for example requires low dealing costs and linear pricing, Futures fail to meet hedgers’ requirements. Therefore smart traders and investors use CFDs in all kinds of hedging, including cases where they don’t want many people to know what market is being hedged. High profile traders even place small misleading trades on the open spot market. While also placing their massive, opposite, intentional trades through CFDs.

Forex Trading Basics Every Trader Should Know

All traders find their way to mature and wise techniques, through a learning curve which is often long. And which always starts with the forex trading basics.

Some Forex Trading Basics to Always Remember

Success in the currency markets starts with the usual forex trading basics, which sometimes are not so usual and popular. In order to learn forex trading better than most, one has to be an original thinker and keep some of these basic tips while at the same time ignore other such basic tips. One very important tip is to try and be a specialist, and focus all your market research around few currency pairs. Another such tip, is to avoid high frequency trading, at least in the beginning, and go for the more relaxed and less stressful approach of swing trading. Learning to trade while having to deal with live forex rates and news driven volatility, is hardly a good start. And while the industry seems to push for this kind of trading, the truth is that most forex day-traders who make money, do in fact make money, but too little money. In fact, most profitable forex day-traders end up making less, per hour, than they would be making if they were working at a fast food joint. There is absolutely no gain in trying to be a smart day-trader, when one cannot handle the risk and volatility. Most new traders cannot cope, it’s that simple! Other important basic tips are things like focusing on the 4-hour chart, and going down to the minute charts because they create too much confusion. Thereby sabotaging the trader psychologically. Many good trends can be identified on the 4-hour chart perfectly. Other tips also focus on volatility and predictability, and advice new traders not to trade economic reports, or any kind of information which is portrayed as easy, but is in fact impossible to trade. And above all, it is important to maintain a cool approach to trading, and refrain from using so called low risk-reward ratios. These low ratios are actually bad ratios, this basic tip seems to be against common sense, but the probability of success, as defined per trade, does strongly favour the high risk-reward ratio approach.

Forex Trading Basics to Ignore

Apart from the so called low risk-reward ratio, there are more forex trading basics, which are actually bad tips. Many such tips are tips like the idea of placing stops right below or above yesterday’s low or high. This is in fact one of the worst tips ever, and all wise traders have long ignored it. Many other popular basic tips may or may not be wrong, but they are poorly defined and therefore do not constitute serious trading advice. The idea of not being allowed to add to a losing trade is one of those ambiguous tips, where one has to question the logic and the benefits of this basic tip. It is also a big mistake to take other traders’ advice too seriously, so that you feel the need to learn from veteran traders by attempting to emulate their trading methods to the letter. Things such as stop placement, stop loss size, profit target and news trading are all big factors. They cannot be measured and quantified, so as to be used in the same way on every single trade. And one trader’s stop loss size cannot possibly meet the needs of another trader. Therefore it is pointless to follow other people’s trading in an effort to duplicate their trading results, it won’t work. Trading has to be original and creative. The global market acts as a forex currency converter, it follows some basic principles, but at the same time it also has its own rules. Some currency pairs in particular, such as EURUSD are perfectly capable of defying technical analysis. So anyone who believes too much in technical analysis is likely to be disappointed when even the best chart patterns and signals will let them down.

Why Invest In Forex Today

Investing in stocks and commodities is too difficult for some to handle. By devoting time to invest in forex however, traders will have some unique benefits.

Why Invest in Forex Today

The forex market offers much more range of choice and flexibility than any other market. So that hardly ever a day goes by when there is no an interesting potential for trading, in some currency pair. All this flexibility makes things easier for the beginner, who want to learn how to trade forex in a feasible, realistic way. Sure enough, good trading requires you to be a specialist and not jump from market to market, so you might think that having to choose one pair out of so many, on a daily basis leaves little room for being a specialist. But it is possible, all one has to do is choose few currency pairs of interest, pairs that are not crosses of the same currency. That way, flexibility really becomes possible, and each different pair will trade independently of the other. Which is what flexibility really is all about. You will need to use all the usual tools, such as charts, LSS pivot numbers and so on, which is all possible in today’s embedded software, all in one forex calculator. The forex market is very liquid, reliable, allowing you to trade with confidence and even possibly become very profitable within your first year or so. There is no rule that you will have to go through a 5-year learning curve just to have your first profitable month. It is possible to be profitable from an early stage, as long as one refrains from impulsive trading. Many traders lose money trading forex, but also a good 30% actually do win, as opposed to the 5% myth. Broker statistics show that anything from 20% to 60% of their clients actually have profitable years. But there is no guaranty that those profitable will remain so forever, or that losing clients will always be losers. Trading habits and methods change, and so do these statistical figures.

Why Invest in Forex and Persevere to Win

Real life trading has shown that those who persevere in their efforts to trade well, actually become profitable sooner or later. These clients never regret their decision to invest in forex, and end up making a full living trading currencies. It comes as no surprise, since some investment banks actually make as much as 60% of their profits in the forex market. And what is forex trading if one does not persevere for success, just like those investment bank traders did. These banks are taking the same risks every day, as every other trader on the planet does. And their techniques for trading are not written in the bank’s manual, but they come from its traders. In fact, the bank’s managers, are not aware of how each trader makes decisions and ends up making money. That is secret to each individual trader who works there, and if a trader feels underpaid, they are free to go and join another investment bank. These traders are all single minded people, and they simply follow only the general guidelines that their employer requires. Some investment banks have no requirements at all, show them that you can make them money in the forex market, in any way possible, and they will hire you to trade for them.

The Quest for the Best Forex Indicator

Traders use many methods and indicators for trading. In their efforts to find the best forex indicator the goal proves to be elusive, but their efforts do pay.

What is the Best Forex Indicator

Many traders have embarked on the quest of finding the holly grail method for trading the markets. Among them is the goal of finding the best forex indicator, for predicting currency movements. It all looks possible on the forex charts, at least in hindsight but when one deals with live forex rates and fast trading things are really put to the test. Markets are tough to beat, some believe that all indicators are bound to fail big time, at some unexpected time. And that the predictability of the financial markets is severely limited. Maybe that is the case indeed, after all, if one has found the holly grail and their trading is limited and well hidden, we will never know. Some technicians believe that the information is somehow encoded on the market charts, in metrics such as momentum and daily trading range. Others believe that the secret lies in intermarket analysis, and others believe that all indicators are good once in a while, but no single indicator can work in continuous mode. Indicators tend to be all over the place, and never agree with each other at any randomly chosen time.

Figuring out the Best Forex Indicator from Price Action

The best forex indicator may be some indicator which best predicts a particular time frame, where false signals are somehow revealed easily to the trader. It is unlikely that one indicator, no matter how good, can work on various time frames. The global forex converter mechanism hides many dangers to investors and traders. And it does so because history does not exactly repeat itself, rather something new, never seen before, is bound to happen every now and then in the markets. This is the reason why forex robots end up failing after a while, because the programmer cannot dynamically model the markets in their computer code. Traders who have been successful, so successful that their trading cannot be attributed to luck and the use of simple indicator, are likely to actually have used simple indicators. It all boils down to how they used these indicator and how they were able to filter out false signals. It is unlikely that the holy grail is some kind of mathematical formula or algorithm, if it is then it would have to be enormously complicated that only the quantum computers of the future would be able to handle. Then again, it might be a simpler formula used together with the trader’s own judgement. The most logical explanation is that super successful traders did a lot of research beforehand. Research that was specific to the time period of trading, and the markets they traded so successfully.

How to Implement a Forex Investment

A good forex investment should be implemented in a selective way. By taking into account macroeconomic factors and the state of the national economies involved.

A Good Forex Investment Starts with Original Thinking

When one decides to implement a forex investment in any kind of currency, they inevitably have to analyse both that currency and their own national currency. Investing in foreign currency for anything beyond one month, requires imagination and original thinking. Much of the data can be found on forex charts, while finding other less obvious data requires ignoring the media and public opinion, and even possibly analysts’ opinions. Conventional wisdom for example, would have you believe that if interest rates go up in a specific country, then that country’s national currency must also appreciate over time. But this isn’t always the case, in fact it is perfectly possible for the said currency to depreciate over that period, thereby ruining one’s expectations and investment. The very first thing the investor should do, is look at long term charts, and see how that foreign currency has performed over the years, first against their national currency, and then against various other currencies. Much of what conventional wisdom teaches is right, but is only part of the truth. What really matters is how competitive and attractive a currency is to foreign investors, or how valuable it is to commodity buyers around the world. Economic numbers and interest rate policy are not enough to produce solid, durable price movements. So currencies can still trade in the most unexpected way possible, and investing becomes complicated.

Forex Investment Implementation through CFDs

Many investors who specialize in forex, when considering a forex investment always look at long term momentum and fundamental data. They prefer to invest through CFDs, and look for long term trends. As CFDs are more cost effective, and can even provide linear hedging for covering Carry currency investments. Live forex rates fluctuate up and down every day, and form trends over many days. These trends may reveal the existence of momentum, of false trends, as well as soon to happen trend reversal processes. These moves are fuelled by investors’ expectations of the near future, and not by current economic activity. Conventional wisdom often fails, because it focuses too much on current events. Sure enough higher interest rates will attract Carry investors, but these investors buy that currency long before rates are set higher. And then, what if another currency becomes more attractive, that would be one more reason not to invest in the high interest rate currency any more. All these factors are often ignored by analysts appearing on the media, and the markets end up proving them wrong time after time. That’s why making an investment on their advice is not a good idea. Investors should be original in their approach, and see the markets through the eyes of institutional investors around the world, such as investment banks. The markets are always different, every time, and history does not repeat itself in an exact, predictable pattern.