Probability is often needlessly presented as a complicated phenomena and as such a difficult issue to process for traders. When we break the concept down as a process, probability centres on one key and simple aspect; what will probably happen next.
We're often reminded when trading forex, that it's important not to fight, or trade against the trend. We can extend that thought and experiment to not trading against probability.
Now we need to identify what probability actually is (in terms of trading), where and how it's most likely to influence our trading. So let's quickly look at examples of how probability works, in terms of economic events and the effect various announcements may have on our markets.
For example; if the USA's central bank the Fed via the FOMC, decide to raise interest rates (particularly, suddenly and without forward guidance), then the chances are that the value of the dollar will immediately rise, versus its major currency peers.
The dollar will probably rise if the FOMC raise rates unexpectedly by 0.5% and we can take advantage of this probabilistic event. Other examples would include: if the GDP of a country misses, or beats the forecast by some distance, if unemployment figures disappoint, if certain PMIs miss, or beat predictions. We'll probably witness a highly predictable and rapid effect on the forex markets if these data releases miss or beat forecasts. So isolating and using probability, in relation to a high impact calendar news event, is a straightforward exercise, in terms of fundamental analysis.
Now let's turn our attention to how probability can be observed in technical analysis. If, for example, two simple moving averages cross on a lower time frame, perhaps 1hr - 4hr, perhaps a fast moving average (5 day period), crossing a slower one (21 day period), then the probability is that price is moving and diverging from a mean (average) recent level. Therefore we can potentially predict, with a level of certainty/probability, that price will move in a certain direction; long or short. We can extend this visualisation to other technical indicators, for example; the MACD.
We can extend our theory of probability in more depth, will price probably move in a bullish manner above certain levels and a bearish manner below other levels? For example; if price is above R1, then can we confidently predict (in all probability) only long day trades will prosper, and vice versa for S1 and short trades?
Naturally we've kept this explanation simple, to illustrate how the concept of probability in relation to our trading, can work in our favour. Using our examples we could link all three together to deliver a high probability scenario.
For example; after a high impact, economic, calendar news event is released, if it beats forecast, and we see movement on technical indicators on time frames adjusted to day trading, and the price of our forex pair moves towards either S1 or R1, then can we probably predict what price will do next?
We've often discussed our 50:50 random coin toss theory as a phenomena, when trading forex pairs, although it's an impossible calculation to establish, it's worth considering by how much we'd tilt the probabilities in our favour by employing even the most basis analysis as we've just outlined, in order to find ourselves on the right side of the market. Could we be giving ourselves a 50% greater chance of success, if we trade with the daily trend with the news event release and with R1 and S1 in focus? Probably.
Friday, 22 February 2019
Thursday, 29 January 2015
Gold trading online – Things You Need to Know
Gold trading online has become pretty popular nowadays, especially now that fears of a massive financial breakdown are widespread. Gold and other precious metals are now in high demand because unlike minted currency, they are not affected by inflation. If you are thinking of starting your own precious metals trading account, then there are a number of things that you should know:
There is a low rate of return
The problem with gold trading online, or trading in precious metals in general, is that their prices do not behave the same way as other markets do. A good example is the forex trading market wherein you can expect a good rate of return over a short period of time.
But even though the rate of return is low, the one thing that precious metals trading has going for it is that since their value is not tied down to one particular currency, they are almost impervious to depreciation. If you want a way to save your money's purchasing power, then you may want to invest it in precious metals.
Gold and other precious metals are subject to price corrections
Just like any other tradable commodity, gold and other kinds of precious metals are still subject to price corrections. The problem with trading in precious metals is that if you do not hold onto your gold long enough, these price corrections may cause you to lose money, so you need to take them into consideration when you go into trades.
You can easily trade in gold online
Going into online gold trading is actually more secure than most other trades because you are not required to have physical ownership of the gold you are planning to trade with, thus making it pretty much similar to forex trading. In fact, plenty of forex trading companies also offer precious metals trading in their list of services; so besides choosing currencies, you have the option of trading in gold, silver, and other precious metals.
Though it may seem like trading in precious metals is a relatively safe way to invest your money, there are still some risks involved that you need to take into consideration; and you also need to take note that it may take a long time before you can make a significant amount of profit, depending on the strength of the economy.
So just like any other investments, in gold trading online, you should never invest money that you cannot afford since there is a chance that it will remain frozen for a long time and may not even increase in value unless there is a significant decline in the economy that causes printed money to drop in value; but in any case, gold and other precious metals are still a good investment.
There is a low rate of return
The problem with gold trading online, or trading in precious metals in general, is that their prices do not behave the same way as other markets do. A good example is the forex trading market wherein you can expect a good rate of return over a short period of time.
But even though the rate of return is low, the one thing that precious metals trading has going for it is that since their value is not tied down to one particular currency, they are almost impervious to depreciation. If you want a way to save your money's purchasing power, then you may want to invest it in precious metals.
Gold and other precious metals are subject to price corrections
Just like any other tradable commodity, gold and other kinds of precious metals are still subject to price corrections. The problem with trading in precious metals is that if you do not hold onto your gold long enough, these price corrections may cause you to lose money, so you need to take them into consideration when you go into trades.
You can easily trade in gold online
Going into online gold trading is actually more secure than most other trades because you are not required to have physical ownership of the gold you are planning to trade with, thus making it pretty much similar to forex trading. In fact, plenty of forex trading companies also offer precious metals trading in their list of services; so besides choosing currencies, you have the option of trading in gold, silver, and other precious metals.
Though it may seem like trading in precious metals is a relatively safe way to invest your money, there are still some risks involved that you need to take into consideration; and you also need to take note that it may take a long time before you can make a significant amount of profit, depending on the strength of the economy.
So just like any other investments, in gold trading online, you should never invest money that you cannot afford since there is a chance that it will remain frozen for a long time and may not even increase in value unless there is a significant decline in the economy that causes printed money to drop in value; but in any case, gold and other precious metals are still a good investment.
Sunday, 28 December 2014
Forex Trading by Professional Traders
In Forex trading, leverage or the capacity to make use of something to control something bigger means an investor can have a little capital in an account that controls a bigger amount in the market. This is referred to as trading in margin. There is no fee necessary as interest payment on the margin. Also, any trader who has an account can trade once the broker offers margin.
Professional trading
Majority of traders in Forex who have already reached the professional level and trading full time have a different way of conducting their work as compared to what beginners in the trade may expect. Majority of professionals do their trade in the market a lot less often than what people think. This is actually true for veterans in the industry who do four hour charts or and price action trading.
Getting insight on professional trading
A typical routine of a professional price action trader in Forex is different from what beginners and most people imagine. If you plan on engaging in this business, it may be helpful to obtain an insight about what professional or full time trading entails. This can provide a better picture of what your existing trading activity needs to improve on.
Being on top condition physically and mentally
This is highly essential for adhering to an effective plan in Forex trading and for making analyses of the charts.
Monitoring the markets
A professional trader regularly monitors open trades from trading the day before. The actions of the trader involve adjusting stop losses, bringing the trading journal up to date, or maybe just observe.
Analysis of charts
An expert trader conducts his trading with only a limited number of markets and is also very much aware of his preferred currency pairs as well as the arrangement he has preference for. These comprise a more efficient analysis of the markets. A professional trader looks into his charts for his particular market edge. If his edge exists and it is able to convene with the parameters of risk reward, he goes into the trade and leave until the time of market analysis that will follow. A professional also always keeps his trading journal updated before and after engaging in a new trade.
Value of temporarily breaking away from the markets
Among the most difficult for new traders to believe is the theory that when you do nothing, determines your success or failure. The idea may be a little strange; however, if you specifically know what you need in the market because you are very familiar with the trading edge, it is no longer important if you spend a lot of time in chart analysis.
Professional trading
Majority of traders in Forex who have already reached the professional level and trading full time have a different way of conducting their work as compared to what beginners in the trade may expect. Majority of professionals do their trade in the market a lot less often than what people think. This is actually true for veterans in the industry who do four hour charts or and price action trading.
Getting insight on professional trading
A typical routine of a professional price action trader in Forex is different from what beginners and most people imagine. If you plan on engaging in this business, it may be helpful to obtain an insight about what professional or full time trading entails. This can provide a better picture of what your existing trading activity needs to improve on.
Being on top condition physically and mentally
This is highly essential for adhering to an effective plan in Forex trading and for making analyses of the charts.
Monitoring the markets
A professional trader regularly monitors open trades from trading the day before. The actions of the trader involve adjusting stop losses, bringing the trading journal up to date, or maybe just observe.
Analysis of charts
An expert trader conducts his trading with only a limited number of markets and is also very much aware of his preferred currency pairs as well as the arrangement he has preference for. These comprise a more efficient analysis of the markets. A professional trader looks into his charts for his particular market edge. If his edge exists and it is able to convene with the parameters of risk reward, he goes into the trade and leave until the time of market analysis that will follow. A professional also always keeps his trading journal updated before and after engaging in a new trade.
Value of temporarily breaking away from the markets
Among the most difficult for new traders to believe is the theory that when you do nothing, determines your success or failure. The idea may be a little strange; however, if you specifically know what you need in the market because you are very familiar with the trading edge, it is no longer important if you spend a lot of time in chart analysis.
Tuesday, 18 November 2014
Types of Forex Traders
The Forex market would be incomplete without the multitude of traders who do business in all hours of the day. These traders have different personalities and have different preferences.
Are you a Forex trader? What type of trader are you? See which among these personalities have the same attitude as you.
Types of Forex Traders
1. Day Trader
• The day traders are the most appealing and the most popular type of forex traders.
• Day traders, as the name suggests, conduct trading and generate profits within the day. They use shorter timeframe charts, and look for quick turnover trades. They also don’t hold anything after the session close.
• Day traders need to be attentive and patient; they also have to develop their logical skills.
2. Technical Trader
• Technical traders use technical analysis to trade; they also make the most of trading rules and models using previous price and volume information.
• These types of traders rely on the premise of history repeating itself; prices move in trends, and the rise and fall of prices can somehow be predicted.
3. Scalpers / Scalping Trader
• Scalpers tend to trade for small gains; they take profits quickly with minimal exposure. They open and close a trade within minutes, and they take advantage of small price movements with large amounts of leverage.
• These types of traders need skills to respond to market changes; stress is caused by screen time and frequent trading.
4. News Trader
• News traders make decisions based on news announcements since news and other economic reports tend to have impacts on the forex market.
• News traders face a lot of risks because of the market’s volatility.
5. Position Trader
• The position trader looks to gain profit from holding long positions, and usually use either daily or weekly charts. With them, trading can last for a couple of months, and they aren’t affected by short-term fluctuations.
• These traders are more interested in the market’s structural movements rather than the day trader’s short-term movements.
6. Long Term Investor
• Long term traders tend to invest a lot of money, and expect to get twice or thrice the invested amount. They prefer to use either the weekly or monthly charts.
• They benefit from their actions by having more reliable long-run profits, but they have to make sure they can cover volatile movements alongside open positions.
There are various types of Forex traders. Have you realized which type of trader are you? Understanding your trading personality makes you improve your tactics better, hence giving you more chances to profit.
Are you a Forex trader looking for an Arabic Forex broker in Egypt, here below is list for you to choose from:
Are you a Forex trader? What type of trader are you? See which among these personalities have the same attitude as you.
Types of Forex Traders
1. Day Trader
• The day traders are the most appealing and the most popular type of forex traders.
• Day traders, as the name suggests, conduct trading and generate profits within the day. They use shorter timeframe charts, and look for quick turnover trades. They also don’t hold anything after the session close.
• Day traders need to be attentive and patient; they also have to develop their logical skills.
2. Technical Trader
• Technical traders use technical analysis to trade; they also make the most of trading rules and models using previous price and volume information.
• These types of traders rely on the premise of history repeating itself; prices move in trends, and the rise and fall of prices can somehow be predicted.
3. Scalpers / Scalping Trader
• Scalpers tend to trade for small gains; they take profits quickly with minimal exposure. They open and close a trade within minutes, and they take advantage of small price movements with large amounts of leverage.
• These types of traders need skills to respond to market changes; stress is caused by screen time and frequent trading.
4. News Trader
• News traders make decisions based on news announcements since news and other economic reports tend to have impacts on the forex market.
• News traders face a lot of risks because of the market’s volatility.
5. Position Trader
• The position trader looks to gain profit from holding long positions, and usually use either daily or weekly charts. With them, trading can last for a couple of months, and they aren’t affected by short-term fluctuations.
• These traders are more interested in the market’s structural movements rather than the day trader’s short-term movements.
6. Long Term Investor
• Long term traders tend to invest a lot of money, and expect to get twice or thrice the invested amount. They prefer to use either the weekly or monthly charts.
• They benefit from their actions by having more reliable long-run profits, but they have to make sure they can cover volatile movements alongside open positions.
There are various types of Forex traders. Have you realized which type of trader are you? Understanding your trading personality makes you improve your tactics better, hence giving you more chances to profit.
Are you a Forex trader looking for an Arabic Forex broker in Egypt, here below is list for you to choose from:
Sunday, 9 November 2014
Comparing Forex Brokers and choosing the Right One
With the current rise in popularity that forex trading enjoys, more and more prospective investors are turning to forex brokers for help in managing their investment funds. Following are a few factors you need to consider in evaluating possible brokers you will assign to handle your trading activities:
Available Forex Currency Pairs – Make sure that the broker has the particular currency pairs that you are interested in trading. Although there are brokers who offer a wide range of options, some actually have only a limited number of pairs. This, however, should not be a concern if you are thinking of trading only the major pairs. But if you want to trade high volume pairs, find a broker who offers more options. There are even forex brokers who offer other products like futures options and stocks that you can trade on the same platform. Just be sure to check out the respective commission rates.
Downloadable vs. Web-based Trading Platform - Trading platforms that you can download and install such as the MetaTrader or Sierra Charts are ideal if you want to trade from home or from anywhere. However, if it would not be possible for you to install the software you will need to trade from, find forex brokers who have internet-based trading platforms instead.
Spreads – If the broker you are considering is a market maker, compare how their spreads fare against other brokers. Note that spreads can easily change with the latest news.
Managed Forex Account – If you do not have time to trade on your own or too busy to learn the workings of the forex market, then an account handled by a professional manager may be for you. However, this may expose you to incompetent and poor performing brokers, or worse, to scam threats.
Broker’s Performance – Evaluate the brokers’ performance over a given period of time. Some brokers have good track records that produce profitable results for clients most of the time. But before signing up, discuss how much commission they charge and their risk management strategies. Other questions to ask: Does the broker have margin requirements? What if your account falls below a specified amount? Is the broker under government and private regulation?
Demo or Trial Version – Look for a broker that offers a demo version you can test to have a feel of the real trading market.
Deposit and Withdrawal Charges - Some brokers do not charge for deposits and withdrawals. Some charge for either one or both.
If you can afford it, try opening small live accounts with a few brokers for comparison testing. Observe how the spreads will go at certain indicators or timeframes. There are brokers that perform better with long term positions, while there are brokers that are ideal for day traders. Ultimately, the key is in finding the forex brokers who can work best with your particular needs and preferences.
Available Forex Currency Pairs – Make sure that the broker has the particular currency pairs that you are interested in trading. Although there are brokers who offer a wide range of options, some actually have only a limited number of pairs. This, however, should not be a concern if you are thinking of trading only the major pairs. But if you want to trade high volume pairs, find a broker who offers more options. There are even forex brokers who offer other products like futures options and stocks that you can trade on the same platform. Just be sure to check out the respective commission rates.
Downloadable vs. Web-based Trading Platform - Trading platforms that you can download and install such as the MetaTrader or Sierra Charts are ideal if you want to trade from home or from anywhere. However, if it would not be possible for you to install the software you will need to trade from, find forex brokers who have internet-based trading platforms instead.
Spreads – If the broker you are considering is a market maker, compare how their spreads fare against other brokers. Note that spreads can easily change with the latest news.
Managed Forex Account – If you do not have time to trade on your own or too busy to learn the workings of the forex market, then an account handled by a professional manager may be for you. However, this may expose you to incompetent and poor performing brokers, or worse, to scam threats.
Broker’s Performance – Evaluate the brokers’ performance over a given period of time. Some brokers have good track records that produce profitable results for clients most of the time. But before signing up, discuss how much commission they charge and their risk management strategies. Other questions to ask: Does the broker have margin requirements? What if your account falls below a specified amount? Is the broker under government and private regulation?
Demo or Trial Version – Look for a broker that offers a demo version you can test to have a feel of the real trading market.
Deposit and Withdrawal Charges - Some brokers do not charge for deposits and withdrawals. Some charge for either one or both.
If you can afford it, try opening small live accounts with a few brokers for comparison testing. Observe how the spreads will go at certain indicators or timeframes. There are brokers that perform better with long term positions, while there are brokers that are ideal for day traders. Ultimately, the key is in finding the forex brokers who can work best with your particular needs and preferences.
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