Thursday, May 28, 2009
What is a Forex Broker?
If you would like to trade in the Forex market, you gotta buy or sell an amount in a certain currency against another currency. For example, you buy $100 US dollars against Canadian dollars. So you hope $100 will be equivalent to more Canadian dollars in future, so when you sell your $100 US dollars, you get a higher value.
But who will handle all this trading? The Forex Broker. In this day and age, lots of Forex Brokers have opened up on the Internet, allowing you to trade in real-time all from your own computer or laptop. No more calling them up each time you would like to trade. They will provide you with the necessary charts, price quotes for the currency pairs, the tools to trade and sometimes they will even provide you with various indicators to help you do analysis.
You can easily deposit your funds into your account with your Forex Broker once you open it. They will need to ask for your ID and some documents though. Then when they do their approval, you can deposit your cash and start trading. At anytime, you can withdraw your cash from your Forex Broker account back into your credit card, bank account or Paypal account.
Almost all online Forex Brokers let you open your account for free. They only charge you a small percentage of interest when you open trades with them. A lot of online Forex Brokers let you open game/demo accounts to let you practice with a huge sum of fake money before you really move into the real market trading.
I will be highlighting on the Internet’s top Forex Brokers in my other post.
Forex Position Trading
Position Trading
There are basically 3 major ways that a forex player can use to play in the forex market. A very stable way of trading is position trading. Have you ever heard of some forex traders holding on to trades for days, weeks or even months? Well, these people are position trading and they are not looking for a basic win of 10 to 20 pips. They are looking to win hundreds or even until a thousand plus pips!
Position trading is when a trader opens a trade and closes the trade a very long time after the trade is open. Why? You may be curious. Most of the time, these people want to go big. They zoom out on their forex charts to look at the daily or even weekly charts to have a look at the biggest mountain or valley and they want to capture profits from the biggest trend.
Advantages of Position Trading
Compared to other trading styles, position trading is the least risky. There is always something called random noise in the forex market. Random noise occurs when things do not go as planned on certain days and the market may go against the trend for a while. But when doing position trading, a trader focuses on the biggest trend, having very big stop-losses. This, therefore, makes them immune to the random noise and thus, eliminates a lot of risk.
Position trading also eliminates a lot of analytical daily work required for day trading and scalping. Some position traders check their charts only a few times a week!
Disadvantages of Position Trading
Well, position trading is not for the impatient. Some people like to see results, and they like to see results fast. Position trading can sometimes become boring for these people and therefore, they think it is not for them.
But for me, I believe position trading gives a trader a lot of freedom, and the boredom is a small price to pay for being able to not glue myself to the computer to do daily analysis or scalping.
Forex Day Trading
There are basically 3 major ways that a forex player can use to play in the forex market. A very enjoyable way of trading is day trading. There are thousands to millions of day traders around the world, trading on multiple currency pairs.
What is day trading, you may wonder. Basically, in day trading, a trade is opened and will be closed on the same day. Day trades can last from less than an hour to around 2 days maximum. Some traders leave their day trades overnight and check to see if they won or lost when they wake up.
From my experience, day trading holds the most risk. This is particularly true when trading highly volatile pairs like EURUSD, as it is hard to predict what will happen right after you open a trade and you may never know whether the market will do a sharp U-turn against your direction. However, day trading requires less of your daily time to monitor the charts.
Some say that day trading needs a lot of luck. I am not sure if this is entirely true, but I tend to agree. You see, you might have done a really careful analysis and you found out that a currency pair will be going down, 80% probability. So you Sell, but then after 5 hours you found that the market moved sharply up, breaking your careful analysis, causing you to lose. All the studying for nothing. So they say, you need to have luck to ensure that you do not meet with this kind of misfortune.
However, some traders say that they have the proper systems and tools to enjoy a high success rate in day trading and most of them want to keep their weapons secret…
Forex Scalping
What is Scalping?
There are basically 3 major ways that a forex player can use to play in the forex market. One very profitable, powerful but risky way is called scalping. Scalping is when a player watches the market closely, using daily 5-minute, 1-minute or even 5-second charts. He will see opportunities to try and capture 5 to 10-pip movements using big lots and profit just like that, in a matter of minutes.
Generally, scalping can last for about seconds, usually when the market is fast, or until about an hour if the market is slow.
From my experience, scalping is quite profitable, so to speak. I have developed a scalping system called Time Blaster. It has an excellent record of 11 wins and 5 losses, and the pips captured in a win far surpass the pips lost in a loss. The first week of scalping increased the capital by 16%. The second week yielded 12%. However, I abandoned the Time Blaster system because of several reasons, mostly the disadvantages of scalping.
Disadvantages of Scalping
Scalping needs lots of practice. Everything happens so fast, and before you know it, the market might have moved against your direction before you could do anything about it.
Scalping requires the player to glue his or her eyes on the screen to look out for opportunities. That is why, most successful scalpers cannot leave their computer. And some need to rely on automatic scalping forex software.
Scalping is costly. Every time you trade, you will need to pay the broker in the form of spreads. Some scalping systems may require multiple trades a day.
Scalping is risky. Very risky. When you scalp, you have no idea when the market can immediately turn against you, in the form of random noise. Anything can happen when you play in very small timeframes. And sometimes the broker may increase the spread, causing you to hit your stop loss although you are winning.
Why do people scalp?
Most people do not have patience. They want to see cash coming in. And they want to see it fast. Therefore, they do not mind the risk. So, they scalp.
And some people just like to scalp. They treat scalping like a game, just like Dota. Some people treat it like a sport.
My humble opinions
I personally think that scalping can be very profitable, but scalping should only be practiced when you really have the experience. I tried scalping before, but after 2 weeks, my brain burned out. When I shut my eyes at night, I was still able to see the candlebars. It wasn’t a pleasant feeling.
Tuesday, May 26, 2009
USD Dropping on Wednesday
Today seems like another awful day for USD. Yesterday, USD dropped pretty badly and I snatched around 50+ pips or more on AUDUSD and GBPUSD. On Monday, there was a slight retrace but after that USD started falling again.
I believe USD will be going for a free fall until the end of this month. I already won about 100+ pips from USDSGD and 100+ more from GBPUSD last week. I lost 100+ pips from EURAUD though. The Euro market seems to be going down but it looks undecided, with occassional upspikes.