Foreign exchange or currency trading signals refer to indicators that signal traders about the perfect time to make a move in the forex market. For example, it indicates the perfect time to enter a trade or sell a certain currency. The signals can be developed and provided by a human analyst or computer. All of these indicators are also time-sensitive. This means that these are capable of providing traders with the most ideal time-frame or lead time to take action. This is the reason why most alerts are available on websites, SMS, email and other means of communication that support immediate and fast access.
The indicators play a crucial role when formulating a trading decision. These are valuable in deciding whether to enter or exit the market. It also enables traders to determine whether it is best to sell or purchase a currency pair at a provided time. Providers of the signals make sure that the offered alerts use systems related to stop loss, take profit and entry. While there are numerous forms of alerts or signals available for traders, it is crucial to select one which you can easily comprehend and suits your trading platform, strategies and needs.
There are alerts that are available in simple buy or sell indications offered at price messages. There are also those that can be accessed in either line graphs or pie charts. Aside from the conventional buy or sell alerts, it is also possible to get the OB/OS signal. This indicates that a currency is already oversold or overbought when the alert reaches a particular level.
Volatility is also another useful form of signal. This refers to a statistical measurement frequently presented in the form of a line graph. It works by measuring the likelihood and frequency of a currency pair to obtain deep falls or high rises within a short period. SL/TP signal also stands for stop-loss/take-profit. It refers to a particular point wherein the prediction system offers a suggestion to stop incurring losses using downward trending currency pairs. It also suggests obtaining the profits acquired based upon an upward trending pair.
Currency trading signals can either be manual or automated. Both are also accessible online either for free or with a price. However, a trader should make sure that he takes extreme caution when selecting the best trading signal system for him. If possible, choose a system which offers a free trial. This can help in testing the suitability of the alerts to your platform and strategy and their usefulness in formulating the soundest trading decisions.
Thursday 20 November 2014
Tuesday 4 November 2014
Techniques for Setting Stop Loss Orders
Leverage is a trading tool that all forex traders use when they trade in order to increase the amount of their profit. However, it is also very risky because it also intensifies the chances that your trading account will be wiped out if a trade goes against you. It is very tempting to use high amounts of leverage, both because it can greatly magnify profits but also because it is so readily available. In fact, your broker may even offer you leverage of as much as 100:1, which means, for example, that if you have just $500 in your trading account, you can trade as much as $50,000.
Hence, in order to reduce your risk of losing too much, you have to learn to set the appropriate stop-loss orders. Here are some of the approaches you can take in setting stops:
1. Static stops. In this method, you set your stop loss a certain number of pips from your entry price. For example, if you are trading the USD/JPY currency pair and you enter at 1:9800, you may opt to fix your stop loss order at 20 pips. This method is ideal for traders who are risk-averse and willing to limit their potential profit in exchange for also reducing their potential losses, as well as new traders who are still learning the ropes.
2. Static stops based on market indicators. With this method, the trader considers what the market conditions are before setting their stop loss orders, by monitoring indicators such as price swings or average true range. This method is ideal for traders who have more experience in the markets and can more accurately analyze the risk of a trade.
3. Trailing stops. In contrast to the first two methods, these stop loss orders can be moved based on the way the trade is going. The trader adjusts the stop and limit orders based on the way his trades are going. For example, if the trade is going his way and he wants to increase his profits, he can remove or increase the limit order. On the other hand, if he wants to protect himself, he can increase the stop order to a level close to the entry price. There are a number of ways you can create trailing stops, such as dynamic stops in which you move the stop every time the trade moves a pip in the trader’s favor; fixed stops in which the stop adjusts in increments every time the trade moves in their favor; manual stops in which the trader monitors the trade and manually moves the stop based on how the trade is going. These methods are recommended for traders with a high level of experience in the markets since they can be tricky.
Hence, in order to reduce your risk of losing too much, you have to learn to set the appropriate stop-loss orders. Here are some of the approaches you can take in setting stops:
1. Static stops. In this method, you set your stop loss a certain number of pips from your entry price. For example, if you are trading the USD/JPY currency pair and you enter at 1:9800, you may opt to fix your stop loss order at 20 pips. This method is ideal for traders who are risk-averse and willing to limit their potential profit in exchange for also reducing their potential losses, as well as new traders who are still learning the ropes.
2. Static stops based on market indicators. With this method, the trader considers what the market conditions are before setting their stop loss orders, by monitoring indicators such as price swings or average true range. This method is ideal for traders who have more experience in the markets and can more accurately analyze the risk of a trade.
3. Trailing stops. In contrast to the first two methods, these stop loss orders can be moved based on the way the trade is going. The trader adjusts the stop and limit orders based on the way his trades are going. For example, if the trade is going his way and he wants to increase his profits, he can remove or increase the limit order. On the other hand, if he wants to protect himself, he can increase the stop order to a level close to the entry price. There are a number of ways you can create trailing stops, such as dynamic stops in which you move the stop every time the trade moves a pip in the trader’s favor; fixed stops in which the stop adjusts in increments every time the trade moves in their favor; manual stops in which the trader monitors the trade and manually moves the stop based on how the trade is going. These methods are recommended for traders with a high level of experience in the markets since they can be tricky.
Sunday 2 November 2014
Forex Trading Spreads: The Key to Broker Selection
For Forex trading aficionados, cost is the most important criterion in the selection of a broker. In this regard, a good understanding of the trading spread comes to play. In case you have not noticed, majority of forex brokers earn their dough from the difference between the buy and sell orders. This difference is called the spread. It, therefore, stands to reason that brokers who offer the narrowest spreads represent the best choice cost-wise.
Newbies should, however, be aware that in the foreign exchange market, spreads may vary between currency pairs and over time. As a general rule, some brokers offer the lower spread between one pair, say EUR/USD, and the highest spread for the USD/JPY pair. Brokers typically keep the reason to themselves.
A low spread on one currency pair may not necessarily be so for other pairs. This discrepancy should always be considered if you are eyeing to trade more than one pair. Another thing to watch out for are promotional materials with fine print Some unscrupulous brokers circulate or publish promotional literature in brochures/flyers and on the Internet that contain low spreads; but in actuality, they indicate in fine print that the spreads shown are sample spreads that may not be accurate. Do not be duped by such tactics.
Test the Waters
If you want to have a fairly good idea about the potential spreads of an online broker, opening a demo account would be a great move. Try opening a demo account for two or three currency pairs. Demo accounts are usually supplied with the same live quotes including those of spreads that actual account holders have access to. With the demo account, you will have a better idea of the spread for currency pairs you plan to actually trade later on. Additionally, you also get to observe how the spreads change over time and comparing brokers will be much easier.
Research Is Important
There is also a website called FX Intelligence where interested traders can compare broker spreads live or in real time. However, if you are after spread changes over a period of time, go for the demo account as that is not possible in this website.
Before Taking the Plunge
While spreads are of utmost importance, your research should not stop you from looking at other fees which may be charged to you. It is not enough that you are offered a low spread if the broker charges inactivity fees and other fees which are not charged by other brokers. Evaluate your options after choosing three to five brokers with the lowest spreads.
Newbies should, however, be aware that in the foreign exchange market, spreads may vary between currency pairs and over time. As a general rule, some brokers offer the lower spread between one pair, say EUR/USD, and the highest spread for the USD/JPY pair. Brokers typically keep the reason to themselves.
A low spread on one currency pair may not necessarily be so for other pairs. This discrepancy should always be considered if you are eyeing to trade more than one pair. Another thing to watch out for are promotional materials with fine print Some unscrupulous brokers circulate or publish promotional literature in brochures/flyers and on the Internet that contain low spreads; but in actuality, they indicate in fine print that the spreads shown are sample spreads that may not be accurate. Do not be duped by such tactics.
Test the Waters
If you want to have a fairly good idea about the potential spreads of an online broker, opening a demo account would be a great move. Try opening a demo account for two or three currency pairs. Demo accounts are usually supplied with the same live quotes including those of spreads that actual account holders have access to. With the demo account, you will have a better idea of the spread for currency pairs you plan to actually trade later on. Additionally, you also get to observe how the spreads change over time and comparing brokers will be much easier.
Research Is Important
There is also a website called FX Intelligence where interested traders can compare broker spreads live or in real time. However, if you are after spread changes over a period of time, go for the demo account as that is not possible in this website.
Before Taking the Plunge
While spreads are of utmost importance, your research should not stop you from looking at other fees which may be charged to you. It is not enough that you are offered a low spread if the broker charges inactivity fees and other fees which are not charged by other brokers. Evaluate your options after choosing three to five brokers with the lowest spreads.
Subscribe to:
Posts (Atom)