Once a trader has traded on a demo account for some time and it becomes time to trade with real money, such a trader has to decide which currency pair(s) to trade in. Although this is largely a matter of personal preference, a few guidelines might aid the decision.
As a general rule, the more volatile a currency is, the harder it becomes to predict its future movements and hence to trade it profitably. In this regard it might be a better solution to concentrate on the bigger currency pairs, such as the USD/GBP and the USD/EURO, than on currency pairs involving developing currencies such as the Indian rupee. This rule is not, of course, set in stone - third world currencies often present unequalled opportunities for the more experienced trader.
Certain currency pairs tend to display fairly easily discernible patterns over time. The AUD, for example, has been appreciating fairly steadily against the USD over the past decade – forming an excellent longer term trading opportunity. This is where the trader’s timeframe plays an important role. Traders with a longer trading horizon can make use of such longer term trends, while short-term traders have to concentrate on opportunities that arise during brief market fluctuations. As a rule, these are much more difficult to predict.
Certain currencies are directly influenced by commodity prices. The Canadian dollar is an example here. Canada is a major oil exporter, and a drop or increase in the price of oil can serve as a leading indicator for the USD/CAD exchange rate. This presents great opportunities for astute traders.
You will never have a problem with liquidity with major currency pairs such as the EURO/USD. If you trade in obscure third world currencies, liquidity might sometimes become a problem.
Whichever currency pair you decide to trade in, a service such as tradestream could prove to be invaluable.
Most forex robots are built around the Metatrader platform, which was specifically developed for trading futures, options and forex. The key role of a forex robot is to help traders automate specific actions. This tool is appropriate for running mechanical forex strategies that occur without human intervention.
How to use a robot
A quick search of the internet will reveal a wide selection of forex robots. Before downloading a specific product, the trader should check the reputation of the company selling the software. This is important, because many companies that spring up overnight propose incredible deals only to disappear within a matter of weeks. If possible, use a selection of robots, for a trial period, on a demo account. Having located a reliable company, the individual simply has to purchase and download the product. As soon as the software is installed it is ready for use.
To begin, the trader should open the robot, drag it to a chart, click ‘Allow Live Trading’ and activate the software by going to the ‘Expert Advisors’ section. The robot will then start to perform a variety of online currency trading activities right away.
Top advantages of using a robot
A trader who uses a robot correctly can often achieve great results. This is because the robot trades according to pre-set rules, even when the investor is not around. Additionally, it is able to perform objective online trades that are more effective than many subjective activities completed by human traders.
Another benefit of using a robot relates to the forex trading signal. Multiple forex platforms are ready to buy these signals and sell them to their subscribers. This can help the trader maximise the performance of his or her robot.
A trader will only become successful if his or her robot delivers profits most of the time. Unfortunately, there are many poor-quality forex robots around, which prevent traders from achieving the results they should.
Forex day trading is a very specialised strategy. It involves opening and closing market positions within the same day. With this form of trading, no positions are ever held overnight.
Day trading allows traders in the forex currency market to try and benefit from the fast-fluctuating forex rates. There are also different strategies which can be used within this form of trading. One is called scalping, where positions are opened and closed during very short periods of time, such as within minutes or seconds. Another option is keep the position open for hours before closing. A competent FX day trader may well switch from one strategy to the other during the hours of trading.
The main advantage of day trading, particularly for experienced professionals, is that a profit can be turned very quickly. There can, however, be pitfalls for the unwary.
Anyone intending to undertake forex day trading will need to be prepared to stay in front of the computer screen throughout the entire trading session. Where automated trading is being used there will have to be absolute faith in the forex software being used.
In currency day trading traders need to be skilful and have a comprehensive understanding of the forex market. A thorough grounding in forex and a wide knowledge of how the market operates is absolutely essential if anyone is going to make a success of it. This makes a day trading strategy unsuitable for most novices or those unable to dedicate enough time to it. Indeed, most day traders are industry professionals who have the time required to concentrate fully on this form of forex trading.
Forex, however, is the biggest financial market in the world and for those traders with the skill and competence, as well as the confidence to take the risks, day trading can be a very rewarding occupation.
The chosen forex broker is likely to have a big influence on trading style. The broker can have a crucial role to play in deciding whether an individual is successful or not. When looking for a broker, it is important to find one that can cater for all your needs and offer the tools required to make money effectively.
Before signing up for a live account with a company, it is well worth trying out the various software and trading platforms available. Most will give access to a full or sample version of their trading platform, at least for a limited amount time. Be aware of companies that offer different spreads between their live and practice platforms.
When testing, you should spend some time investigating whether the information and forex charts you need are easy to find and whether opening and closing orders and positions is easy. It is important to be able to rely on the broker to act as soon as possible on your decisions.
The best forex brokers offer customers easy ways to get in contact with them. It is useful to be able to discuss any issues or problems immediately when investing real money and many traders acknowledge this by offering a range of communication options, including live chat and telephone services.
They also provide helpful tools like tradestream to analyse trends in the market, as well as advice and information from industry experts. Some major forex brokers also offer optimised smartphone apps that can be incredibly useful for those who like to trade on the go.
Many investors who become involved in trading forex are perpetually looking for the holy grail of trading; a single technique or system that will guarantee a quick way to riches. In their search they often stumble across the Martingale system.
This system originated in the world of gambling. What it basically boils down to is that you start betting small and if you are wrong, you place exactly the same bet again, but this time doubling the bet size. If playing roulette, for example, you keep on betting on one colour, red or black and every time you are wrong, you double your bet. Statistically, the argument goes, you have to be right sooner or later, in which case you will have a guaranteed profit.
Applying this method to forex trading implies that you start off by going long or short on a particular currency with a relatively small short term trade; for example, five minutes. If you go long and the price of the currency goes down during the next five minutes, double the money on your next trade and go long again. If the theory works as it should, you will eventually be right and hence make a guaranteed profit.
If all of this sounds too good to be true, it probably is. It requires virtually unlimited funds to ensure an eventual ‘win’. For instance, if you go long and the market suddenly nosedives, it can keep on going the wrong way for a very long time. It is likely that by that time you will be placing very large trades and you might eventually wipe out your entire trading account before the market turns around.
The Martingale method, when used as a forex trading system, is one that looks very good on paper, but in real life has probably wiped out more gamblers and most likely traders as well, than any other ‘system’ we know of.
Noticing and acting on signals in a timely fashion is one of the most important elements of forex trading. Most traders work during a set period of time each day. As the market is constantly open during the week, traders inevitably miss out on some excellent opportunities.
It seems foolish to forgo valuable market movements, simply because they occur at an inconvenient time. Many forex brokers now offer the opportunity to trade using portable devices. Their apps offer enjoyable and profitable ways to make money on the move. For many, this has expanded the time during which they can make money on the forex markets.
Train, bus and taxi journeys can now serve as opportunities to trade, meaning individuals never need to miss out on uptrends again.
Smartphones and tablets also have an advantage over PCs and laptops in that they turn on immediately. This allows traders to act instantly if they receive a signal from websites like forexloft.com.
While mobile applications cannot provide all the functionality of full trading platforms, they make trading on the go simple and extend the period of time during which traders can work.
Someone who wishes to travel overseas and who needs foreign currency would go to his or her local exchange office, pay in the required amount of local money and then receive the amount of foreign currency which corresponds to the current exchange rate.
In the world of Forex trading this does not happen. This is because of the principle called ‘leverage’ which is also known as ‘trading on margin’. Let us explain.
With a Forex transaction which is leveraged at 50:1, the trader only has to put down 1,000 GBP to trade an account worth 50,000 GBP. If the same trade is leveraged 100:1, the trader can trade with 100,000 GBP by only depositing 1,000 GBP. Some online Forex brokers even offer trades with a margin of 400:1, which means that with 1,000 GBP the trader can manage a Forex trade of 400,000 GBP.
This sounds wonderful, doesn’t it? Take the example of a trade leveraged at 100:1. If the price of the currency only moves 1% in the right direction, the trader will make a profit of 1,000 GBP.
However, what many novice traders forget is that it works both ways. With the same trade leveraged at 100:1, if the price of the currency moves 1% against the trader, he or she would make a loss of 1,000 GBP. Another way to put this is that this trader would lose 100% of the initial deposit.
The higher the leverage, therefore, the less adverse movement in the price of the currency is required in order to wipe out the trader’s initial deposit. Of course, if the price goes in the right direction, the profits would also be much higher with a high-leverage trade.
For novice traders, it is probably wise to steer clear of very highly leveraged trades. These traders are more likely to make mistakes and with higher leverage these mistakes will cost them much more than with lower leverage trades.
At a time when electronic trading is ubiquitous, investors require the necessary tools to help them analyse a plethora of market information, and to respond to the information in a profitable way. forex trading software facilitates timely and effective currency trading.
A quick search of the internet shows all of the various online forex systems available for investors to download.
Many platforms provide access to a forex demo, so investors can actually try out the software system for themselves before committing to it. Investors should ask themselves, before they sign up for a particular platform, what their exact needs are, and at what the level of expertise and experience they consider themselves.
In terms of forex indicators or charting software, installing one system alone is generally not enough for an investor seeking to analyse all market indicators. In an overall sense, software allows the forex trader to conduct timely trades in response to changes in the market. The software facilitates both timing and precision efficiency. Using the online trading platforms, a trader is able to combine charts and indicators to help in creating strategies. The forex signals on each chart meet at a point at which they agree on a potentially profitable trade.
Software also helps a trader conduct a detailed analysis of winning and losing trades for future reference.
The best forex software incorporates robust security features to protect accounts from unauthorized access, and therefore, providing investors with peace of mind.
Once a would-be trader has opened a demo forex currency trading account with a forex broker, also often referred to as a forex brokerage, they should start to develop a system to guide their trading activities, something to help make trading decisions easier.
Fortunately, most forex brokers will have trading software such as the well-known Metatrader, which offers built-in forex charts. Once a trader has learned how to interpret forex charts, the whole business of trading becomes much easier to understand.
The secret of being successful in using charts in forex currency trading is not to overdo it. Do not try to become a master of all the different techniques in as short a time as possible. Instead, concentrate on one type of chart; for example candlestick charts and learn a selection of patterns that consistently work for you.
It will also be necessary to decide the timeframe in which to trade. This can vary from being a day trader, concentrating on very short-term market movements, to being a long-term trader who only follows trends lasting a few months or even years.
Automated forex trading is a system for currency trading in which orders to purchase or sell currencies are made automatically, using an underlying program. Once a pre-determined set of criteria have been met, the order to buy or sell is put in place.
The two major methods of automated forex trading are fully automated trading and signal-based autotrading. With fully automated trading, also known as robotic forex, a computer algorithm is deployed to determine such things as price, timing and quantity of the trade. It is possible to work around the edges of a forex robot and tweak it to suit a particular user’s needs from a technical point of view but control is largely given over to the program.
A system that uses forex signals works differently, in that orders are placed using a trading system. This might work, for example, using a system whereby traders would make the strategies they have used readily available by way of signals to anyone who might want to use them. Investors can then use of any of these signals to carry out trades on their own accounts. For inexperienced investors, a forex signals system can be useful in the sense that they can replicate previously successful methods for their own benefit.
In an overall sense, a key advantage of an automated forex system is that a greater number of trades per market can be generated compared to a human trader acting on his/her own initiative. It is a widely held view that automated trading has the effect of removing the vagaries of human psychology from the currency trading markets.