Author Topic: Beginners Guide To Forex  (Read 3913 times)

Caesar

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Re: Beginners Guide To Forex
« Reply #15 on: November 03, 2019, 08:07:02 AM »
When To Trade

For all intents and purposes,  the forex market is open 24 hours a day, 5 days a week between 22:00 Sunday and 22:00 Friday GMT, so wherever you are there should be a time when you can trade.
Within that period,  the 4 main markets have their own local opening/closing times.
Sydney 22:00-06:00 GMT
Tokyo 00:00-08:00 GMT
London 08:00-16:00 GMT
New York 13:00-21:00 GMT

The busiest time, when most trading is done and the market is most liquid,  is 13:00-16:00 GMT daily as this is when the London and New York markets overlap.

Roughly 21% of trading takes place during the Asian session (Sydney and Tokyo hours), 32% during the London period, and 19% during the New York session.

Caesar

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Re: Beginners Guide To Forex
« Reply #16 on: November 05, 2019, 04:58:01 PM »
Choosing A Broker Part 2

Regulation of brokers

A definition
The objective of regulation is to ensure fair and ethical business behaviour. In their turn all foreign exchange brokers, investment banks and signal sellers have to operate in compliance with the rules and standards laid down by the Forex regulators. Typically they must be registered and licensed in the country where their operations are based. Licensed brokers may be subject to recurrent audits, reviews and evaluations to check that they meet the industry standards. Foreign exchange brokers may have capital requirements which require them to hold a sufficient amount of funds to be able to execute and complete foreign exchange contracts concluded by their clients and also to return clientsí funds intact in case of bankruptcy.[citation needed]
Each Forex regulator operates within its own jurisdiction and regulation and enforcement varies significantly from country to country. In the European Union a license from one member state covers the whole continent under the Mifid regulation and has resulted in regulatory arbitrage where companies select the EU country that imposes the least controls such as CySEC in Cyprus. Not all foreign exchange brokers are regulated and many will register in jurisdictions that impose low-regulatory environments such as tax havens and corporate havens that form part of offshore banking.
Source:Wikipedia
The above should help clarify why I recommend not using brokers regulated in Cyprus or some of the more exotic offshore nations. If a broker chooses to base themselves in these places, they are not doing so for the benefit of retail traders. Note this covers signal sellers as well as brokers

Caesar

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Re: Beginners Guide To Forex
« Reply #17 on: November 08, 2019, 01:11:27 PM »
K.I.S.S.
Keep It Simple, Stupid! At the risk of offending anyone, this should be one of the golden rules for new traders.

Keep your charts simple.
Donít over-complicate them with indicators that you barely understand.
Keep your pairs simple.
Trade a currency pair you understand a bit about. Exotic pairs may seem tempting to you, but do you understand what moves the Klingon currency? Likewise, itís probably a good idea as a beginner to trade pairs where you are available to trade during their busiest times, that way you have more chance of catching a big move or closing a trade ahead of news events (Not during News Events, I would never recommend this for inexperienced traders)
Keep your trading simple
In general, try not to over-complicate any aspect of your trading. Try not to over analysis the charts or news events, this can lead to trade paralysis where traders can neither enter new trades nor close existing trades because they are confused by information overload.


« Last Edit: November 08, 2019, 01:14:10 PM by Caesar »

Caesar

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Re: Beginners Guide To Forex
« Reply #18 on: November 11, 2019, 09:24:58 AM »
Create a Journal

Starting a journal to log your trades is one of the best things a new trader can do. A journal can be just a note/notebook or an excel document. An excel document is particularly useful as you can add screenshots of the trades you open.
Note your trading plan at the start of the journal, that way you can refer to it before, during, and after each trade if you need to.
In the journal, note the date and time, reasons for opening the trade, expectations, Stop Loss and Take Profit positions, and how you felt when you entered the trade.
You can add progress notes about how the trade behaves, if thatís in line or contradictory to your thoughts, anything you feel relevant.
Finally, when you close the trade, note the outcome, how you felt during and after the trade, and how you feel you could have improved it.
This may seem like a lot but, particularly when you are just starting out, it will help you develop and fine tune your trading. As you become more experienced you will likely reduce your notes as your trading plan settles and your emotions become detached from your trading.

Later on you may want to open a myfxbook or similar account, which will track your trades and give you a wealth of information about them. I would suggest not doing this until you have a bit of experience trading as the amount of information can be over-whelming and might actually harm your trading. Also, by making your own notes you will gain a better understanding of yourself as a trader, something myfxbook will never give you.

Caesar

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Re: Beginners Guide To Forex
« Reply #19 on: November 12, 2019, 10:05:41 AM »
Why Do So Many Traders Fail?

Depending on who you speak to, the failure rate for new forex traders is somewhere between 70 and 95%. Thats right, as many as 19 out of 20 new traders will fail and either blow their account or quit because they couldnít make it worth the time. Most regulated brokers now show what percentage of their traders lose money. This does not reflect badly on the broker, it shows how badly prepared many new traders are.
So, why is this?
There are more reasons than you might imagine, Iíll list as many as I can here and will add more as they come to mind, or as my fellow traders remind me of them. So, in no particular order;

Not Maintaining Trading Discipline
One mistake many traders make is to let emotions control trading decisions. Becoming successful forex can mean achieving a few big wins while suffering many smaller losses. Experiencing many consecutive losses is difficult to handle emotionallyÖ Trying to beat the market or giving in to fear and greed can lead to cutting winners short and letting losing trades run out of control. Adhering to a well-constructed trading plan is key in maintaining trading discipline.

Poor Risk and Money Management
Too many new traders are so focused on how much they can gain in a trade that they forget how much they can lose.
Traders should know exactly how much of their account is at risk and are satisfied that it is appropriate in relation to the projected benefits BEFORE they open a trade, and should place their Stop Losses accordingly. As the account grows, capital preservation becomes more important. Using different trading strategies and currency pairs, together with the appropriate position sizing, can insulate a trading account from unfixable losses. Later, traders can split their accounts into separate risk/return tranches, perhaps with different brokers, where only a small portion of their account is used for high-risk trades and the balance is traded conservatively. This type of strategy can help ensure that low-probability events (Black Swan events) and broken trades are less likely to destroy oneís trading account.

Leverage
Leverage gives traders an opportunity to enhance returns, but is a double-edged sword that magnifies the downside as much as it adds to potential gains. The forex market allows traders to leverage their accounts as much as 1000:1, which can lead to massive trading gains in some cases and crippling losses in others. The market allows traders to use vast amounts of financial risk, but in many cases it is in a traderís best interest to limit the amount of leverage used.
Not only does leverage magnify losses, but it also increases transaction costs as a percent of account size. If a trader with a $500 account uses 100:1 leverage to buy five mini lots ($10,000) of a currency pair with a five-pip spread, they incur $25 in transaction costs [($1/pip x 5 pip spread) x 5 trades]. So, before the trade even begins, he or she has to catch up, since the $25 in transaction costs , or 5% of their account. The higher the leverage, the higher the transaction costs as a percentage of account value, and these costs increase as the account value drops. This is great for the broker, and one reason why new traders are encouraged by them to scalp since the revenue for the broker is high, relative to the small account value.
In some countries leverage is legally limited to 50:1 or less and new traders in particular may find this a sensible level. If a broker is offering you leverage of 400, 500, or more, then they are almost certainly operating outside regulation and you should be asking yourself 'Do I really want to place my money with a company like this?'

Trading Without A Plan
Similar to money management in many ways, this refers to the extraordinarily high number of new traders who simply jump into trading with no idea of what they can reasonably expect to get from a trade, how they would get it, and often absolutely no knowledge of the forex business. Its like opening a High Street shop without knowing what you are going to sell, how much you need to sell at, or if prospective customers would be interested in what you sell.
Take the time to learn forex. Only then will you understand how to devise a strategy and trading plan that suits you as an individual. We are all different, with different hopes, pressures, finances, etc, so you canít simply copy someone elseís strategy and plan, it needs to be tailored to you.






Caesar

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Re: Beginners Guide To Forex
« Reply #20 on: November 13, 2019, 04:20:59 PM »
Emotions And Greed

Emotions and Greed will destroy your account. No doubt about it, if you canít get both of these under control then your days as a forex trader are numbered.
Greed, excitement, euphoria, panic or fear are all perfectly natural emotions but we need to separate these from our trading lives. So how do we do this?

Begin with small amounts.
By reducing our risk, we can be calm enough to realize our long term goals, reducing the impact of emotions on our trading choices. Think about it, compare how you would feel if you risked and lost a few dollars you found in an old jacket you were about to throw away, with losing next months rent? It makes sense to start small until youíve built up some experience.

Have a plan
Create a simple trading plan, something along the lines of ďIf Xyz/Abc does this, then go long (buy)Ē, ďIf Xyz/Abc does that, then go short (sell). If Xyz/Abc does neither of the above, do not tradeĒ. Then stick to the plan. Sometimes you may miss out on a potential profit, other times the trade may reverse just after you enter, and you lose money. But because you stick to a plan, this is easier to accept because you know that even the best plans will have bad days. The key is, you partly automate your trading, not by buying an EA but by behaving robotically and sticking to your rules, removing a lot of the emotions. If the plan consistently fails you, you can always revisit it to see how it can be improved.

Donít revenge trade
Itís very tempting to enter a new trade simply to try and make up losses from earlier trades. Please donít do this, your judgement is likely clouded by the loss youíve just had. Better to turn off your pc and do something relaxing for a few hours, returning only when you feel refreshed and clear headed

Be patient
If you can't see a trade that fits your trading plan, turn your pc off and take a break. If the opportunity isn't there you can't force it. Don't take trades for the sake of it, forex will still be around later today, tomorrow, and next week.
« Last Edit: November 13, 2019, 04:23:01 PM by Caesar »

Caesar

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Re: Beginners Guide To Forex
« Reply #21 on: November 15, 2019, 02:40:40 PM »
Cut Losses, Let Profits Run.

Sounds easy, and it is, but youíd be surprised how many new traders struggle with this.

The basic idea behind this is that you should first endeavor to manage your risk by using stop losses in a disciplined way. Decide BEFORE you enter a new trade where your stops will be. Iíll discuss this in another post but itís important to use these to limit any losses to acceptable levels.

Next, allow your profits to accumulate when you have a winning position. Traders often use trailing stops for this purpose but I believe these are of limited use and, in most cases, will probably mean you get stopped out earlier than you wish. Setting a fixed stop and a take profit at positions in accordance with your trading plan is probably better for new traders. You can always move your stop above break even manually as your trade moves into profit.

In trading, itís not what you make, profits take care of themselves; itís what you donít lose that really matters. Most traders, even newbies, win more often than they lose...fact! Research has found that, across the 15 most commonly-traded pairs, traders close in a winning position approx. 60% of the time.
So, how come they blow their accounts?
Simple, the same research, across the same 15 pairs, found that while the average number of pips won in a successful trade was 55.2, the number of pips lost in unsuccessful trades was a whopping 100.8 - almost twice as many!
This highlights why new traders need to Cut Losses, Let Profits Run, and one of the keys to this is knowing how and where to place your stops when you first enter the trade.

Fixed Stops
First, calculate the maximum amount of pips you would be prepared to lose before entering the trade. For example, say you're trading 10,000 units of EurUsd. Each pip movement has a value of $1. If you can only afford to risk $20, and your brokers spread is 1 pip, then you could place your stop at no more than 19 pips (20 minus 1 for the spread) from your entry point.

However, this doesnít mean you should place it there. Consider the following;
   1.What is your Risk:Reward (R:R) level? If youíre looking to win 20 pips with a R:R of 1:2, your stop should be at around 10 pips.
   2.Where are the Support and Resistance (S&R) levels? As price frequently returns to these levels, its prudent to place your stop on the side of these that you don't expect price to reach - if you enter a buy trade at 1.1200 and Support is at 1.1185, its worth making sure your stop is below 1.1185, so long as you don't go outside your 19 pips acceptable risk.

Trailing Stops
These are stops which can follow your trade as it moves into profit. Say you set the Trailing Stop at 10 pips. As soon as your trade is 10 pips in profit, the Trailing Stop is activated, right on your breakeven point. This ensures that, even if price then reversed and fell, you would be stopped out without a loss. Its useful if you are away from your pc and want to protect your trade to a degree but I wouldn't recommend using it if you are able to watch live, for the reason that since price rarely moves in a straight line, a Trailing Stop is likely to stop you out of many trades before you can maximise your profit.


« Last Edit: November 15, 2019, 02:43:15 PM by Caesar »

Caesar

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Re: Beginners Guide To Forex
« Reply #22 on: November 16, 2019, 02:02:41 PM »
Bad Runs

We all get them, bad runs. You think you've cracked it and kapow!! you go on a losing streak that wipes out weeks of profits. So, what can we do about these dry runs? Iíll be interested to see how others deal with them, but hereís what I do myself.

First, Iím not throwing the baby out with the bathwater. I know my strategy and trading systems are sound, so Iíd be a fool to disregard them. My Money Management is tight, but not watertight, so thats one area Iím working on - Iíd rather lose a few pips than a bucketload right now because, no doubt about it, losing affects your confidence.

Second, Iím not entering new trades while existing trades are running a loss - I may miss a few opportunities but its prudent to protect what money you have.

Thirdly, Iím getting out ahead of high impact news - you may have already noticed that the market reaction to news is extremely unpredictable.

And thats basically it, until the dry run ends I would trade like a kitten. No risky moves, double checking everything, holding onto my money until I turn things around. I might not get rich in the coming weeks, but I sure as hell won't go bust either!
« Last Edit: November 16, 2019, 02:30:30 PM by Caesar »