WAYS TO MANAGE RISK

Risk! every business has  a measure of risk attached to it. the business of Forex trading has it's own risk. in fact it is a very risky business. Due to the dynamic nature of the Forex market , one may have to find ways to reduce the amount of risk he or she has so that, one can have less losses when one trades.
there are so many ways to reduce risk. the most important ways are listed below.

EDUCATION
One important way to reduce or control risk for anyone, especially beginners  is to increase ones knowledge of the Forex market, books, tapes and classes will help anyone reduce risk of losing money and increase the possibility of making money in the Forex market. it may not be easy, but it's worth it.

CONTROL EMOTIONS
Forex trading is based on logic not emotions. Anger over a loss, fear that one may loose and other emotions have no place when one is trading. we all make mistakes, we could miscalculate and lose a trade getting angry and trying to get the market back is not sensible. the best thing would be to move on and wait for another trading opportunity.
Trades made based on what one sees with his or her eyes and not on what one feels are more likely to be winning trades.

PRACTICE
one can't overemphasize the importance of continuous practice to sharpen ones trading skill . one can't also overemphasize the disadvantage of not practicing continuously  Practicing on a demo account is an important way to reduce the risk of losing money before one trades on a live account.

START A FOREX TRADING JOURNAL
Having a journal to document progress, profits, losses, trading strengths and weakness,  will help one know  areas that need improvement. it will help one learn more about him or herself, it will help one not to repeat mistakes, this will reduce the risk of losing money and,  increase winning trades.

FOLLOW A FOREX TRADING SYSTEM
To follow a Forex trading system requires a measure of self-discipline, which may not be easy. it's important to follow a trading system if one wants to make any kind of profit and reduce the risk of losing money.

USE STOP LOSS ORDERS
Finally, always use stop loss orders, this will control how much one loss in a trade so that one doesn't loss all his trading money. in another article i will discuss what a stop loss order is.

thanks for reading.

ADVICE FOR BEGINERS

An Advice From My Mentor

Without a doubt, the Forex market is a very profitable market, and many beginners would like make profit in this enormous, volatile market, putting in 100% of their time and energy. it's good to work hard to earn a living but putting in 100% of time and energy is not sensible.

 Leading a balanced live is best. Working all day, all month, all year, will only give one a sore back.Whereas, enjoying the company of yourself, spouse, family and friends will help you to have an incredibly happy heart while you do your Forex trading.

one can make all the money in the Forex market but one will not truly enjoy it without a happy personal, marriage and family life. one can make another pip, another lot, another dollar but one can never make another father, mother, brothers, sisters, relatives and live long cherished and loved spouse and friends.

People are better than money. people make up the living fabric of a happy existence but money is just paper, just a means of exchange. Although, money is important it should not be acquired at the expense of a happy live.

thanks for reading

ELLIOTT WAVE PRINCIPLE

Back in the 1930's an Accountant and Business expert named Ralph Nelson Elliott discovered a principle that can be used to analyze how the financial market work, this principle was based on studying the psychology of investors in the market.

Elliott used wave patterns to describe how investors behave in the financial markets. the first waves pattern he called impulse waves and the second waves he called corrective wave.

This wave patterns could be used in either in a bear or bull market. Although, it was originally used to analyze the financial markets, this principle could also be used in the Forex market. it could be used to identify a new market trend formation.


this is just a brief introduction  to the intensely broad technical analysis subject called Elliott wave principle. there are different aspects of this principle i will discuss later.

MARGIN CALL

WHAT IS A MARGIN CALL?

A Margin call occurs when your usable margin is below the average amount to use to trade. in simple terms you will have a margin call if you loss most or all your trading money in your account. your Forex broker will inform you that most of your trading positions are closed because the money in your account is not able to sustain the trading position.

 more on this later.

What I learnt.

I have come to understand that, the Forex market is not a get rich quick scheme. i thought it was a way to make quick money, i guess i was wrong.

I think that if a new  trader starts trading with a get rich quick mentality, he may loss all his trading money.


I think that for a new trader to be effective he or she must know that, the market is not a get rich quick scheme, where one can just trow in a few bucks and hope to make a lot of cash.

it involves planning, reading and practice.

NEWS- U.S BUDGET CUT

There are a lot of technical issues about the U. S budget cut and, it's effect on the  market. but, as the deal has being signed after the stale mate. I will prefer to reserve my comment on the issue.

Blog Disclaimer

THE AUTHOR OF THIS BLOG WILL LIKE YOU TO KNOW THAT, THE INFORMATION IN THIS BLOG IS FOR INFORMATION PURPOSES ONLY. THE INFORMATION IS NOT TO BE USED AS PROFESSIONAL ADVICE. THE AUTHOR OF THIS BLOG DOES NOT CLAIM TO BE A PROFESSIONAL FINANCIAL OR FOREX TRADING ANALYST. THIS BLOG IS JUST A COMPILATION OF THE AUTHORS IDEAS.


PLEASE! BEFORE YOU USE THE INFORMATION IN THIS BLOG, YOU SHOULD DO YOUR OWN RESEARCH TO CONFIRM THE AUTHENTICITY, AS THE AUTHOR WILL NOT BE HELD ACCOUNTABLE FOR ANY LOSS INCURRED, AS A RESULT OF NOT RESEARCHING THE INFORMATION.

THANK YOU.

Technical Analysis Oscillator Indicators

Oscillator Indicators
Oscillators are indicators that move between two points, between a "buy and a sell" signal. Oscillators indicate when a possible reversal may occur in a trend ( Trend is the total direction of price movement).
there are many oscillators, but I will only mention  5 of them.

1. Stochastic
2. Relative Strength Index (RSI)
3.Parabolic SAR
4. Williams percent Range (William % R)
5. Moving Average Convergence Divergence


Stochastic:
Stochastic show strength or weakness in the Forex market, it's also indicates when the market is overbought or oversold. it has 2 lines, the first line is a slow line which is known as % k. this line compares the latest closing price to the recent market trading range. the second line is a fast line and its known as % D. this line is a signal line calculated by smoothing out the slow % K line.

Relative Strength Index
This oscillator is like the stochastic indicator. it shows overbought and oversold situations in the market. its shows strength and weaknesses  it has 2 lines, a fast line and a slow line and it is scaled from 0 to 100. when both lines are below the 20 scale the market is oversold, when both lines are above the 80 scale the market is overbought.

Parabolic SAR
This indicator was designed by J. Welles Wilder Jr. the name parabolic SAR, says how it works. Parabolic or Parabola is a curve and SAR  is an acronym for Stop And Reverse.
(Parabolic SAR  can be used to trade the stock market). on a chart it is shown as points that indicate reversal in price movement, if the point are above the price it's a bearish signal or a sell signal and if the points are below the price it's a bullish signal or a buy signal.

Parabolic SAR works well when the market is trending.

William  Percent Range ( William % R)
The William % R indicator is similar to Stochastic and Relative Strength Index because it identifies overbought and oversold situations in the market.

Moving Average Convergence Divergence
Moving Average Convergence Divergence is used to determine direction, strength and force of a new trend in the market movement.

Moving Average is made of three numbers or lines. the first, is a slow line, the second is a fast line and the third is a histogram that calculates the moving average of the difference between the fast and slow lines.

thank you for reading

HISTORY OF THE FOREX MARKET- ARTICLE ONE

The forex market ( forex is short for foreign exchange) had a very unique history. When there was no highly organized financial institution, no big business or no internationally accepted currency. the only kind of market was a simple system know as trade by barter. this system of exchange involves actual goods without any money like object.
This simple yet, primitive means of exchange was effective in a local area but, had many disadvantages. Therefor, a better means of exchange was needed, one without any disadvantage.

People in ancient times used many valuable things to exchange for goods they needed this is called commodity money. The Encarta encyclopedia states " The value of commodity money is about equal to the value of the material contained in it. The principal material used for this type of money have been gold, silver and copper. In ancient times, various articles made of this metals, as well as iron and bronze, were used as money, while among primitive societies commodities such as shells, beads, elephant tusks, furs, skins and livestock served as mediums of exchange".

Gold and silver and bronze where used to make coins as early as the 6th century BC in places like Greece, Asia, and Europe and obviously they where used as a means of exchange.
 

THE INVENTION OF PAPER CURRENCY

Some time in history countries decided to convert the value of their precious Gold, Silver and Bronz to paper currency that had the same value as Gold, Silver and Bronz.


To be continued.

Success Tips For Beginners

This tips are what I use and still use and I would like to share them with others.

1. Find  good Mentors:

There is nothing new under the sun as some people say, mentors know the ins and out of the market and I believe that, if you can find a good mentor who is willing to teach you, you will excel quicker than others who don't have mentors. Someone once told me that, if you have the chance of discussing with a wise man for an hour, you will learn more than reading a whole book. i agree with that statement. Good mentors have a wealth of knowledge and experience to share with you, and i believe that they are very helpful.

2. The right continuous Education:

If you are learning to trade the  market newly, it's important you learn all you can about the  market. Continuous education is the only way to keep up with the dynamic nature of the market. this education you can get by reading forex books, listening to audio's and  attending classes etc.
3.  Continuous Practice:

Practice makes perfect. That statement carries new meaning as you trade. Apart from the required 3-6 months of demo trading, you also need to practice regularly on a demo account to be comfortable with every aspect of trading. As you continue to practice the better and more confident you will be when you trade your live account with your hard earn money.

4.  Well Capitalized Account

Just like in any business you need capital and in your  trading business you also need enough capital. in fact an inadequately capitalized trading account is one major reason why many new traders quite in their first 6 months. even if you don't have a lot of money to trade the above tips can help you build your account. but, know that you need a lot of cash to trade effectively.


5. Patience

The  market is not a get rich quick scheme as many people would like you to believe, rather you need to be patient to really be profitable. impatience is not for real traders. if you are new to the  market just know that your long term profitability depends on how patient you are in each of your trades, because you may meet trading situation when the market seems like it's going against you and you may prematurely exist a trade for fear of losing your money, when if you would have waited a little, it would have been a winning trade. patience is an important characteristic of a  trader.

6. Discipline

Being a discipline person is not easy let alone being a discipline trader. I still have problems in this area. being a discipline  trader is very important, because it could make you  a very profitable trader. if you are new to  trading you will need a trading system to be effective and, this trading system has rules you new to follow strictly to use it properly. if you are not discipline enough to follow your  trading system, I believe it will be difficult to make any money. discipline is an important characteristic of a trader.

7.  Self-control:

self-control is also very important, especially control over your emotions while you trade. if you can control your emotions and enter into trades with sound logic I believe you will do well.

thank you for reading

The Psychology Of Fx Trading

Is there anything like the psychology of Forex trading? I would say yes!  I think that, for you to be a successful trader one must understand the fundamental principles of the market.

just like in any subject, be it Accounting, Economics or Mathematics. the first step in understanding the subject, is to understand the guiding principles that govern the subject. Same goes for trading. one cannot make profit in the market in the long term if he or she does not understand the fundamental principles that govern how trades are made.

there are no short cuts, indeed no quick fix to trade effectively in the  market, despite what anyone might say. I think that, the only way to be successful  is to get  the psychology of trading.

thanks for reading

BLOG ARTICLE REFERENCES

Thomas .J, Yeomans, Fundamentals, Economic Theories Applied To The Foreign Exchange Market.



School of pipsolpgy by babypips.com.



Encarta, Encyclopedia.



Wikipedia, Online Encyclopedia

STRATEGIES PART ONE : SCALPING

Scalping is a short-term forex trading strategy. Scalping involves trading larger lots ( Lots are the way foreign currencies are traded in the  market) with small pips. Scalping trades only take minutes or seconds.

This trading strategy may not be for everyone, because it requires a lot of cash plus it's a very risky strategy.

thank you for reading.

Understanding Pivot Points

Pivot points are very interesting to me. especially when I can use them to increase the number of zero's in my trading account.

THINGS I KNOW ABOUT PIVOT POINT

Pivot point are points reached by a support or resistance level which than reverse in the opposite support or resistance levels. Pivot points can be compared to a pendulum ball that goes back and forth. many traders like me use pivot points to identify important support and resistance level. they are important because at this levels the price can change direction, which could be a loss or a gain.

I use pivot points for my short term trades especially for scalping, taking advantage of all those small price changes between pivot points.

HOW TO CALCULATE PIVOT POINTS

You don't need to know how to calculate pivot points many forex plate forms do it for you. But, just for fun (as they say where i come from no knowledge is a waste). to calculate pivot point you will have to know the last sessions Open, High, Low, and Closing prices.

this is the formular to calculate pivot point:

PP = ( High + Low + Close) /3

Since pivot points are directly related to support and resistance levels, you will have to calculate the pivot point for each support and resistance level.

Formular for the first pivot point support level:

Support 1 = ( 2* PP) - High price

Formular for the first resistance pivot point level:

Resistance 1 = ( 2* PP) - Low

This is just for the first level, I really don't won't to go any further before I get accused of being a mathematical show off, and as I said earlier this calculation is already done my most plate forms. And from what I have seen many of this  trading plate forms even give additional pivot point, like pivot points in between support and resistance levels, and many other features.

Thank you for reading.

TWO FOREX TRADING ROBOTS

there are many good and bad robots out there. in another article I will tell you how to choose the good ones and avoid the bad ones. but for now this are two robots I'm studying.

FAP TURBO

so many people have written about this forex robot and you may know about it. they say it's very flexible and adaptable, they say it could be used effectively both in a short term trading plan for a trading strategy known as scalping or in a long term trading plan for big profits. for me I believe this is sales pitch and hype the best way to prove this, is to use it.

 MEGADRIOD

the megadriod is said to have artificial intelligence, it can think on its own. I have not used it but if, it can think on its own, I guess I will try it out on a demo account.

thanks for reading.

WHAT ARE ROBOTS?

the forex market is a very profitable market. but many may not have time to learn the guiding fundamental principles that would increase their probability of being successful. but, with robots busy people can also trade  and earn some money. But, what are  robots?

FOREX ROBOTS

in my own opinion  robots are automated software that can trade the fx market. robots are programed to make complex trading decision in the absence or presence of the human trader.  robots can be compared to video game software that is programed to play games against a person, so that on a boring day anyone can sit back play a game and waste his or her time.

just like everything  robots have there advantages and disadvantages, let see some.

ADVANTAGES OF  ROBOTS

To be a successful trader a person has to trade according to his or her personality and  robots fit into the personality of almost everyone. all a person needs to do is buy them, install them, use them and than relax and they do all the work.  robots can trade all through the year. now let's look at the disadvantages

DISADVANTAGES OF  ROBOTS

to use  robots well one must know about the  market and this is a disadvantage for people who may not have time to patiently learn the principles behind trading decisions, let's be realistic if one knows nothing about the market how does he or she know his not being sold a fake  robot and how sensible is it to invest your hard earn money into something you know nothing about. so one needs at least a basic education about  trading to use  robots effectively.

robots make money but they also loss money. many  robots sales people online say their  robots is the best and promise huge profits if one buys the robot, don't get me wrong good  robots do make huge profits, but not all promise about a  robot is true, in my own opinion the great number of unsuccessful  traders who use  robots show that some  robots can actually make one loss all his or her trading money.

also the foreign exchang market is dynamic and not all  robots may have being programed to adapt to it's erratic nature. this could lead to loss of money or missing profitable trading opportunities. Also,  robots are very expensive.

thanks for reading

TYPES OF ROBOTS

I will provide more information later.


 ROBOTS


1. FAP Turbo

2.  Megadroid

3.  Growth Bot

4.  Cash Evolution

5.  Autopilot

6.  Ambush

A Very Cool Technical Indicator- Stochastic

Stochastic indicator is an oscillator ( an oscillator is an indicator that can only be at two points- overbought or oversold).

the financial analyst Dr. G. lane in the 1950's promoted the use of stochastic, he observed that in an up trend, prices may close near there high and in a down trend prices may close near there low.

stochastic has two lines one line reacts to price movement fast, while the other is slow to react to price movement, why this occurs will be discussed later.

stochastic is scaled from 0 to 100, and as stated earlier it shows when the forex market is overbought or oversold. when the faster line cross over the slower line and goes up above the 70 scale the market is overbought (at this point a lot of traders are buying so it's time to go short). when the faster line cross under the slower line and goes down below the 30 scale the market is oversold, at this point its time to go long.

just like every indicator stochastic could give wrong data, with this in mind stochastic should not be the only indicator used to trade. i believe that other fundamental and technical indicators should be used with it, and incorporated in to a reliable trading system (i will say what a trading system is later).

finally, stochastic also shows when a previous trend will end, when it shows this, it could mean that price is about to change direction.

I'm still studying this indicator and i will provide more details later.

thank you for reading.

My first trading lecture

      As I remember it, it was funny. I woke up in the morning prepared and left. on my way I was a little excited, I thought to myself  "what would I learn?" I hope it will be fun! to be honest I didn't know much about trading.

   I arrived at the hall where the class was to hold. A lady to my right was sitting on a white plastic chair with a white plastic table in front of her. she was wearing a red blouse and black trousers with a conspicuous necklace and a big bangle. she look up at me as I approach her, we exchange pleasantries, I handed her my entrance money, she gave me a slip, I walk in and took my sit waiting for the program to start.

   the teacher came in, he was wearing a light brown suit with a white shirt and black shoes. at first, I actually thought he was also a student but as he walked to the stage, i knew he was the teacher.
The hall was full! by my count I think they where up to one thousand people in the hall and more people where coming in. within 30 minutes an image from a projector flashed on the wall at the stage, the teacher welcomed everyone and with a brief introduction of himself he started the class. he introduced the basic concept of  trading- buying and selling foreign currency- and he talk about how  trading in it's early days was for only top financial institutions and big companies basically, because they had the big cash required to trade, and how little guys like us where not allowed to trade, but as the internet was invented anyone who was interested could trade.

what he was saying was interesting, than a guy touched my arm, distracting me, I turned to him wondering what could be so important. the guy started talking about the cloths the teacher was wearing, how the suit may be cheap and how on stylish the black shoes where. in my mind I said gee's this guy must be a poor jealous fashion analysis, but, openly I just laughed.

  About two hours into the class, the electricity went off . than something happened which I did not expect.

Article One: Technical Indicators-Moving Average Convergence Divergence (MACD)

Moving Avergae Convergence Divergence (MACD) indicator was invented by Gerald Appel in 1970. he used it to identify changes in strength, direction, force and period of a trend in stock prices. although MACD was originally used for stock trading it is now used for  trading.

MACD is a lagging indicator, which shows the average of historical price movement and indicates new trend formation, be it bullish (buy) or bearish (sell).

MACD usually has three numbers. the first, is the number of periods used to calculate the faster moving average. the second is the number used to calculate the slower moving average. the third, is a bar chart or signal line used to calculate the moving average of the difference between the faster and the slower moving average. the first number is the faster line while the second number is the slower line of the MACD indicator. the first line responds to price movement fast, because the number of periods used to calculate the faster moving average line is short, while the second line responds to price movement slowly, because the number of periods used to calculate the slower moving average line is long.

when the MACD moving average lines move towards each other they are said to converge and when they move away from each other they are said to diverge this gives this indicator it's name Moving Average Convergence Divergence (MACD).

This indicator is best used when the  market has a definite trend, and it may give a wrong or conflicting data when the market is ranging.

Moving Average Convergence Divergence (MACD) crossover:

in 1986 Thomas Aspray added a histogram to Geralds Appel MACD indicator. he did this so he could know when the  MACD lines cross each other.

when the lines cross it's called a crossover. MACD cross over usually indicates a new trend formation. if the faster moving average line cross under the slower moving average and goes down it could indicate the start of a new bearish trend and if the faster moving average line crosses over the slower moving average and goes up it may indicate a new bullish trend. when the lines cross, at the point they cross the difference between them is zero, this means that there is no difference between the faster moving average and the slower moving average.

NOTE: just like all indicators the MACD may give false signals which could result in loss of money. The MACD is a good indicator but it should not be used as the only technical indicator while trading. other indicators should be used to complement it, this should be coupled with a sound understanding of fundamental analysis and all the other economic activities that control the forex market.

thank you for reading.