Advantages of Currency Trading

Foreign exchange trading involves buying and selling different currencies. It works on the theory that is similar with share market. As we know that to make the profit, you have to buy at lower price and sell at higher price, or we can also sell at higher price first and buy at lower price. But it’s not as easy as it sounds. By studying certain market conditions, you can actually make profits in forex. All you have to do is to analyze the forex strategy system in a correct way and do the good trade. Why to go for Foreign exchange trading? There is an option to invest in stock market also but here are a few important advantages of currency trading over stock market. 24-hour Trading- Forex trading is done on 24-hours basis. This market is open throughout day and night as somewhere in the world, there must be this buy and sell trading is going on.

Traders involved in forex trading strategy can always get that first hand information and can act accordingly. The currency rate is actually run through telecommunication all over the network of banks 24 hours a day from 00:00 GMT on Monday to 10:00 pm GMT on Friday. There are ECNs (Electronic Communication Networks) which bring together buyers and sellers. Greater Liquidity- There is a superior liquidity in the market as there are always buyers and sellers to purchase and sell foreign currencies. Forex trading market size is 50 times bigger than the New York Stock Exchange and liquidity of such large market ensures price stability. Forex trading stop orders could be carried out more simply. This makes Forex trading signal more liquid and permits Forex traders to take benefit of trading opportunities as they happen rather than waiting for the market to open the next day. 100:1 High Leverage in forex trading - 100 to 1 leverage is commonly available from online forex dealers, which substantially exceeds the common 2:1 margin offered by equity brokers.

This gives them a huge leverage in their trading and presents the potential for extraordinary profits with relative small investments. Leverage can also go the opposite way and may lead to huge losses if you are not careful. Forex trading signals have no commissions. Forex alerts Brokers can earn money by fixing their own speculation between what a currency could be bought at and what it could be sold at. In difference, Forex traders have to pay a commission fee or brokerage fee for every futures transaction they come in to the view. The forex market is so large that no one individual, bank, fund or government body can influence it for a long period of time. In forex trading strategy, you can trade between seven currencies but not everyone trade in all. There are certain trading signals that give indications to the trade. These forex signals are delivered by email, instant messenger or direct to your desktop. Some services even offer auto-trading, allowing you to auto-execute their trading signals direct into your broker account. For more about these forex, forex trading strategy, forex signal visit: www. Official-forex-trading-system.com or you may contact at: contact@official-forex-trading-system.com

5 Strategic Tips for Success – Stock Trading

1. If news that could potentially affect the price of a stock is announced on TV, don’t run with all the amateurs, giving it an upward throttle. The more experienced market makers and traders will sit in a corner, biding their time until the stock is right for shorting it and driving it back down. As the stock price plummets, these amateurs that purchased it at the highest price of the day now have no one to sell it to.

2. Don’t ever trade with money that you can’t afford to lose such as bill money, retirement money, or any other finances that could affect your living style if you were to lose it. Only trade with a stash of money that you have saved up for the specific purpose of trading. Just as a few people have been very successful at

3. The stock markets, there are even more who have failed, losing homes, cars and furniture, and nearly everything. Don’t be one of them!

4. Never get into a trade that has a poor risk-to-reward ratio. You should only consider trades that will bring you a decent profit, otherwise, the risk isn’t worth it.

5. Get out of the trade as soon as you realize the odds are against you. The longer you wait, hoping that the tide will turn again in your favor, the more money you could be losing. Plus, you might find it very difficult to sell.

The Secret to Short -Term Trading

Successful traders know that a market can only move so far in 1 minute that a market can move further in !a href="http://www.5minutetrader.com">5 minutes, even more in 60 minutes and a heck of a lot more in a day or a week. Losing traders want to trade in a very short time frame and thus automatically limit their profit potential.

By definition, they have limited their profits and kept an unlimited loss scenario. It is no wonder so many have done so poorly at this of short-term trading. They have boxed themselves into a no-win situation under the guise, often promoted by brokers or system sellers. That money can be made calling market highs and lows during the day. The merit is bolstered with the seemingly rational statement that by trading within just one day and never holding anything overnight. You cannot be exposed to news or major changes; thus you limit your risk. That's flat-out wrong, for two reasons.

First, your risk is under your control. The only control we have in this business is to set a stop-loss point, a level at which we exit the trade, all trades. Yes, a market could gap beyond your stop the following morning, but that is a rare experience, and even then we are still able to limit our loss with our stop-loss and absolute willingness to get out of losing trades. Losers hold on to losses, winners don't.

Once you establish a position with stops, you can only lose about that much money. No matter when or how you got into the trade, your stop limits your risk. Your risk is the same if you buy at an all-time new market high, or low.

Not holding overnight limits the amount of time your investment has to grow. While sometimes the market will open against you, if we are on the right track even more of the time the market will open in our favor.

More importantly, by ending our stock trading at the end of the day, or worse yet at some artificial cutoff point such as a 5- or 10-minute chart, we have drastically limited the potential for profits. Remember I said the difference between losers and winners is losers hold on to their losses? Another difference is that winners hold onto their winning positions while losers get out "too early." It is almost as if losers can't stand
being in a winning trade. they are so damn happy to get a winner, they bail out of it far too early (usually, by getting out during the day of entry).

You will never make big money until you learn to hold on to your winners, and the longer you hold the more potential you have for making a profit. Successful farmers don't plant a crop and then dig it up every few minutes to see how it is doing. They let it germinate, let it grow. We traders could learn a great deal from this natural process of growth. Our success as traders is no different; it takes time to create winners.

Advantages of Forex Trading

Foreign exchange trading involves buying and selling different currencies. It works on the theory that is similar with share market. As we know that to make the profit, you have to buy at lower price and sell at higher price, or we can also sell at higher price first and buy at lower price. But its not as easy as it sounds. By studying certain market conditions, you can actually make profits in forex. All you have to do is to analyze the forex in a correct way and do the good trade.
Why to go for Foreign exchange trading? There is an option to invest in stock market also but here are a few important advantages of currency trading over stock market.

24-hour Trading
Forex trading is done on 24-hours basis. This market is open throughout day and night as somewhere in the world, there must be this buy and sell trading is going on. Traders involved in forex trading strategy can always get that first hand information and can act accordingly. The currency rate is actually run through telecommunication all over the network of banks 24 hours a day from 00:00 GMT on Monday to 10:00 pm GMT on Friday. There are ECNs (Electronic Communication Networks) which bring together buyers and sellers.
Greater Liquidity

There is a superior liquidity in the market as there are always buyers and sellers to purchase and sell foreign currencies. Forex trading market size is 50 times bigger than the New York Stock Exchange and liquidity of such large market ensures price stability. Forex trading stop orders could be carried out more simply. This makes Forex trading signal more liquid and permits Forex traders to take benefit of trading opportunities as they happen rather than waiting for the market to open the next day.

100:1 High Leverage in forex trading
100 to 1 leverage is commonly available from online forex dealers, which substantially exceeds the common 2:1 margin offered by equity brokers. This gives them a huge leverage in their trading and presents the potential for extraordinary profits with relative small investments. Leverage can also go the opposite way and may lead to huge losses if you are not careful.

Forex trading transactions have no commissions. Forex Brokers can earn money by fixing their own speculation between what a currency could be bought at and what it could be sold at. In difference, Forex traders have to pay a commission fee or brokerage fee for every futures transaction they come in to the view. The forex market is so large that no one individual, bank, fund or government body can influence it for a long period of time. In forex trading strategy, you can trade between seven currencies but not everyone trade in all.

Choosing a Forex Third Party Signal Provider

With the growing popularity and easy access to the foreign exchange (ForEx) market, more and more people are drawn to it as their financial vehicle of choice. Along with this popularity come all the extras. This includes all kinds of software, trading systems for sale, books, videos, and third party signal party providers. Today I’m going to touch on a few points when seeking out a third party forex signal provider.

Before we get into choosing a provider we need to have a good understanding of what a third party signal provider is. A signal provider is a trader or analyst that generates trades that in turn get placed on your account. You can have several signal providers trading your forex account or just one.

Like anything else, all third party signal providers are not created equal. At first glance a trader may look like a home run. That same trader may well end up completely torpedoing your entire account in one afternoon. To help make sure this doesn’t happen we’ll set down a few guidelines. These guidelines will give us something to look for when choosing our third party signal provider.

1. The first thing I look at is weather the trader is a winner or a loser. This may seem obvious to nearly everyone, but I often see losing signal providers with 50-100 people trading their signals.

2. The next thing I look at is how long they have been a winner. If a trader has been winning for a week that means nothing to me. I recommend that you don’t trade any signal provider with less than a few months of results to show you. Any one can place a few good trades one week and get lucky. If you are going to be trading this trader’s signals they need to be established.

3. Look at the max draw down. This is the largest peak to trough draw down in equity that the trader has historically had. Some traders refuse to take a loss. This causes them to hold on to losing trades forever or until they turn to a winner. Turning a loser into a winner sounds great, but it will eat up a huge chunk of margin and may never turn around. If it doesn’t turn in your direction, you will have your entire account destroyed by a trader that could have taken a 30 pip loss but held on until it was an 800 pip loss.

4. The first three are easy to look at. They will be displayed right on the main screen of signal providers to choose from. Once you get a few signal providers you are thinking of using, its time to dive a bit deeper into their history.

a. Look at their actual trades. Do they have a good win rate because they have opened a ton of trades all at the same time on the same currency pair? They may have 20 winners in a row. This looks great, but if you look a bit deeper you will see that its really only 1 winning trade places 20 times. Not as impressive is it?
b. Look at their draw down on individual trades. Do they let a trade go 300 pips against them and then close it out when it hits 5 pips of profit? This is a trader who lets their losses run out of control and cuts their winning trades short. It’s not a trader that you want in control of your money.
c. Do they add to losing positions? A trader who constantly adds to losing positions hoping it will turn for them is not someone you want trading your account.

5. Choose a signal provider that suits you. Some traders may provide larger returns over time, but take bigger risks leading to bigger draw downs. This might be OK with you. If you are more conservative and cannot stomach large drops in equity you probably should choose a more conservative trader.

These are just a few things to look for when choosing a third party signal provider to trade your forex account. You should always trade a demo account before opening a live account with real money. Remember it’s your account. In the end you choose the signal providers, and you are responsible for what happens.

Getting Into The Lucrative World Of Forex Trading

For many years the foreign exchange market was the preserve of major players such as national banks and multi-national corporations. In the 1980s however new rules were introduced which permitted smaller investors to enter the market through a margin account. In simple terms, a margin account allows you to trade with more money than you actually have in your trading account. For example, a 100:1 margin account allows you to participate in trading up to $100,000 with an investment of only $1,000.

Now, although this entry level has clearly opened up the market to the smaller investor, care needs to be taken as Forex trading is not an easy undertaking and is certainly not without its risks. For this reason the very first thing that any novice trader needs to do is to sit down, study the foreign exchange markets carefully and learn the ins and outs of trading before putting any money at risk.

In addition to some basic training, the newcomer will also need to find a good broker as all trading must be conducted through a broker. Here a personal recommendation is often the best place to start but, in the absence of this, you should choose a broker who is registered with the Commodity Futures Trading Commission (CFTC) as a Futures Commission Merchant (FCM). This will provide you with protection against both abusive trade practices and fraud.

It is normally a fairly simple process to open an account with a broker and once this has been done and funds have been added to your account you can begin to trade. Brokers will normally offer a number of different accounts to suit individual clients and most will have "mini Forex accounts" which will allow you to begin trading with as little as $250. The margin on which you the broker will permit you to trade will vary from one account to the next.

One thing that you should always look for when your are selecting a broker is the ability to cut your teeth by carrying out simulated, or paper, trades for a reasonable period of time. This is a facility which the vast majority of good brokers will provide and which simply allows you to trade in the normal manner but to do so on paper and without any money changing hands until you have found your feet. Many of the online brokers provide simulated trading accounts which allow you to make free paper trades for up to 30 days.

One of the things which worries a large number of newcomers to the world of Forex trading is the subject of trading charges and brokerage fees. Unlike many of the other markets, the Forex market is free of commission and so you can make as many trades as you like without worrying about running up huge brokerage fees. Your broker will make his profit from the 'spread' on each trade, which is simply the difference between the buying price and the selling price of a currency pair and is a subject all of its own.

Becoming A Forex Trader Means Mastering The Tools Of The Trade

The Forex market is very much a technical market and as such it is supported by a barrage of software tools which are not simply helpful to the foreign currency trader but are an absolutely essential part of trading in a market which enjoys both high volume and considerable volatility. It is essential therefore that traders not only know what tools are available to them but are skilled in their use.

At the heart of Forex trading is a wealth of information which has to be not only constantly updated but which also has to be accurate. Such data, which is essentially displayed through a series of computer screens, needs to cover both current currency price data and historical price data and the systems in use needs to be able to analyze and display this data in a form that is of value to the trader.

In addition traders need to have fast and easy access to current and historical political and economic data and have to have the ability to analyze currency movements in relation to such information.

There are two fundamental forms of trading in operation today - reactive trading (in which a trader buys and sells in direct response to political and economic events) and speculative trading (in which a trader buys and sells on the basis of his prediction of the direction in which the market will move in response to current political and economic events). Whether a trader is buying and selling on a reactive or speculative basis it is essential that he has accurate and up-to-date information on which to base his decision.

But information alone is not enough and traders also need to have access to a range of tools that allow them to analyze this information, whether such analysis is fundamental or technical in nature.

Fundamental analysis is based upon the belief that the market moves in response to such things as political events, economic news, changes in trading patterns, movements in interest and similar events. Tools required here will therefore include such things as software programs that can plot currency movements against trade data and interest rate data and use historic data to build models which predict movements in a huge variety of different political and economic conditions.

Technical analysis by contrast is based upon the belief that the market follows a pattern which has been well established over time and that future movements in the market can be predicted by analyzing and charting historical data to produce a series of models which can be used to predict future patterns.

Whatever your position either as a reactive or speculative trading and whether you are buying or selling on the basis of a fundamental or technical analysis of the market the one thing you need is information. In essence this means using a range of complex analytical tools and you will need to take the time to familiarize yourself with the tools available to you and then to master the skill of using these tools.

Option Trading Tip - Make A Promise & Get Paid Cash!

Writing Naked Puts is simply selling a put option on a stock that you would be happy to own should the price come down to your desired buy price.

When we write a naked put we are effectively 'promising' to buy someone else's shares in the future should the stock price fall below a certain level.

For doing this we are instantly paid spendable cash for each share that we 'promise' to buy. If the stock does not fall below this level (the strike price), then we simply keep the cash without having to buy the stock.

TIP:

Just like covered calls, only write naked puts on stocks that you would be happy to own and if you want to be more conservative, only sell the contract equivalent of the amount of shares you wish to buy, should the stock fall below the strike price.

As each option contract represents 100 shares of the underlying stock, you can work out how many contracts you can afford to write simply by dividing the amount of capital you want to invest in that trade by the strike price of the option you want to sell and then divide that number by 100.

Here's the formula:

Capital/Strike Price/100 = Number of Contracts

So if you have 20,000 to invest in one trade and let's say that the strike price of option is $10, then you can safely write 20 contracts.

By 'safely' I mean that you can afford to buy the stock should you be assigned.

Another thing to remember is that should you be assigned, you would effectively be buying your shares at a discount.

Let's say for writing the $10 put option, you received $0.50 cents per share (5% yield).

Because you receive this $0.50 per share, your overall purchase price (should you be assigned) is lowered by $0.50 to $9.50.

Should the stock fall and you be forced to buy it, a great way to keep this cash flowing and at the same time continue to reduce your risk is to simply turn around and start writing covered calls on it.

That being said, it's never a good idea in my opinion to write naked puts on a falling stock. Always look at a stock's chart for:

1) Moderate uptrends.

2) Sideways trends, especially 1-2 months AFTER a steep sell off.

If you go to: http://www.stockcharts.com and pull up the QQQQ chart for the first quarter of 2003, you'll find a great example of this second pattern.

During this time I began writing naked puts on the QQQQ and then when I was eventually assigned I then wrote covered calls on the QQQQ profitably for a number of months.

In sideways or rising markets, writing naked puts to potentially aquire stock (and be paid while you wait) and then writing covered calls on the stock when and if you are exercised, may well be the ultimate strategy for generating a cashflow income from the markets.

Also, considering that a large majority of options are never exercised, much of the time you may never even be required to buy the stock.

When it comes to writing naked puts, you often get paid for a 'promise' that you don't end up having to keep. Now that's what I call leverage!

Option Trading Tip - Credit Spread Cashflow

You may or may not have heard of credit spread option trading but they can be used to profit in bullish, neutral or bearish conditions.

They are a cashflow generating strategy that involves both the buying and selling of either calls or puts of different strike prices but same expiration date to establish an overall 'credit' i.e. spendable cash.

It is a great option trading strategy for taking advantage of the 'time decay' that option selling provides, but with limited risk.

The amount of potential profit of course is limited to the credit received when the trade is first made.

Let me give you an example of this powerful, yet underutilized option trading strategy.

Let's say that the QQQQ (The Nasdaq 100 tracking unit) is trading at $30.50 and we believe that it will continue to go up in price.

To create a vertical credit spread using puts (selling puts is profitable if the market rises), we could do the following:

1) Sell the $30 put (expiring this month).

and

2) Buy the $29 put (expiring this month).

TIP:

In my experience, it's always best to sell short-term, 'Out-of-the-money' option premium for 3 main reasons:

1) Out of the money options have lower deltas, meaning the stock has to move further before the value of our sold option increases (remember we want it to decrease).

2) Selling 'current month' options (30 days or less to expiry) is when time decay is at it's most rapid and the value of our sold option is eroding away with each day.

3) Contrary to buying options, if the stock does moves very little or not at all, we win!

Let's say we received $0.90 cents per contract for selling the $30 puts and we paid $0.40 cents per contract by buying the $29 puts.

This transaction gives us an overall credit of $0.50 cents per contract ($0.90-$0.40).

If we sold 20 contracts of the $30 Put and bought 20 contracts of the $29 Put, this would give us a total credit of $1,000 (2000 shares x $0.50 cents).

So basically, if QQQQ expires at any price above $30 we will make our maximum profit, which is the initial credit we received ($0.50 cents).

On the other hand if QQQQ expires at any price below our breakeven point of $28.50, we will be facing a loss.

Let's look at all the possibilities.

Once we have entered the trade the QQQQ can either:

1)Go up a little bit.

2)Go up a lot.

3)Go sideways.

4)Go down a little bit.

5)Go down a lot.

The beauty of this style of trading is that we will win in four out of five of these situations, and in many instances we can even win in all five!

Let me demonstrate how.

The QQQQ is trading at 30.50, if it moves up a little bit to say $30.80, our sold option ($30 Put) will expire worthless and we will keep all of the premium.

If the QQQQ moves up a lot to say $32, the same will occur and we will get to keep the premium.

If the QQQQ moves sideways and stays around $30.50, again the ($30 Put) will expire worthless and we will get to keep the premium.

If the QQQQ goes down a little bit to say $30.15, the same will occur and we will keep the premium.

OK, so far so good!

The only way we can LOSE in this trade is if the QQQQ goes down a lot to below $29.50 (which is the higher strike price minus the premium).

If it were the end of the month of expiry and the QQQQ was trading below $30 (our sold option strike price) we would be exercised and our total loss would be the difference between the sold option strike price and the current stock price less the total credit we received.

Our maximum loss will be realized at any price at or below our bought option strike price.

$30 - $29 = $1, less the premium of $0.50 cents = a maximum loss of $0.50 cents per contract or $1000 (20 contracts - 200 shares x $0.50 cents)

However, before it gets to this point, we would intervene. If the QQQQ is falling strongly then we were obviously wrong in our initial analysis.

Before we entered the trade though, we decided that if the QQQQ fell through support at $30 (which it does) we would move to plan B.

At this point we can do a little 'magic'.

With the click of a mouse through our online broker, we can instantly jump from the bullish camp to the bearish camp!

We do this by buying back the options that we sold which in this case is the $30 puts, and this removes all of our obligation.

At this point though, we have taken a loss BUT, we are still long the $29 puts which would have already increased in value.

If the QQQQ wants to go down, then we are going to let it and just ride the $29 puts as far as they will go.

The more the QQQQ falls in price, the more our option will increase in value.

If it falls far enough, which in this case it does, (falling to $28.50) then we will not only make all our money back, we will start to move into a profitable position.

With credit spreads, we give ourselves the flexibility to change our position mid stream, and the chance to not only recoup some of our losses (if we get it wrong), but to possibly move from a loss into a PROFIT!

And this is just the plan B if things go wrong. Plan A, on it's own, has statistically, a very high probability of success.

If on the other hand we had the view that the QQQQ would go down, we would simply construct a vertical spread with Out-of-the-money Calls.

We would sell the $31 Call and buy the $32 Call for an overall credit and should the QQQQ close below $31 by the end of the month, the spread would expire worthless and we would simply keep the premium.