Posted on February 20, 2012 by Yohay Elam

How the buddy system can improve your trading

By Yohay Elam

Forex trading can be lonely. A typical day of a forex trader involves sitting solitary in front of a computer screen for long hours, reading news, analysing charts and placing trades.
 
Forex trading involves making lots of decisions on a daily basis. Finding a friend to trade with, share ideas with and learn from can make trading a better experience, and possibly even more successful.
If you ever took a forex course, most of your interaction was  with the instructor. If it was an online distance course, your interaction was likely even more limited and the chance of you making new friends at your same level were probably fairly slim.
 
Using high-tech for a very low-tech goal
 
Joining in forex forums online, reading blogs and trading chat rooms can be fun and can also be a way to make new virtual friends. It can also serve as a platform to interact with people who could potentially become friends in person.
 
While technology is a great tool for facilitating communication easier and making people more accessible, face-to-face meetings have their own benefits. Having a discussion in real life, where facial expressions and body language, play a significant role in conversations, provide a much richer experience than in an online chat.
 
If you can find someone to meet with from time to time, this will be a big boost. If not, even having an online friend trading at the same level as you can be great as well.
Why at the same level? An asymmetrical relationship most likely will not last long. You wouldn’t want to be dependent  on someone else or have them feel dependent on you.
 
There are a host of benefits from having a forex buddy:
 
1. Someone to share information with: In most cases, your current friends probably are not forex traders and will likely have little interest in forex trading. Even if they do show some interest, you won’t go into details with them. Having a forex buddy means someone else with a common interest who you can share both knowledge and experiences with.
 
2. Someone to learn from: By sharing and comparing thoughts on trading with a forex buddy, you might come across tips and ways to improve your trading you would never have thought of yourself. Everyone brings a different approach and outlook.
 
3. Someone to teach: Learning is a two-way street. Just as you can learn from others, you can also turn the tables and teach them something in return. This can help them, but also comes with a benefit to you: when you teach someone, it forces you to become more focused on what you already know. Explaining something to someone else can help you better understand what you might only know in a general way.

 

 

Will you trade on your own? Or do you have trading buddies?

Further reading: 5 Most Predictable Currency Pairs – Q1 2012

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Posted on February 8, 2012 by Yohay Elam

Minimizing risk by using crosses: Thoughts on trading with the news

By Yohay Elam

If you are trading on news events, you may want to consider using a cross. This can help you get around the uncertainty with American releases and unexpected reactions to them.

Fundamental traders always take economic indicators into consideration, checking interest rates and prospects and acting accordingly. When a good figure is released for a certain country, the currency will usually rise. When the indicator is weak, the currency will fall.

The dollar, however, is different.

Since the break out the financial crisis, the USD has acted differently. The currency has risen  on bad US figures as traders flock to the “safe haven” dollar in times of trouble and ditch it on positive US figures, as they have more of a “risk appetite”. In recent months, sometimes the dollar reacts “normally” to the indicators, sometimes not. This has made the dollar very difficult to predict.

However other currencies continue to react normally to their own domestic indicators. The EUR drops on a rise in unemployment and the AUD enjoys an unexpected rate hike.

Example

On March 30 last year, the final release of UK’s GDP was better than expected – a rise of 0.4%. The GBP reacted with increases across the board. A few hours later, however, American CB Consumer Confidence was due. This is a major market mover.

The result was better than predicted as the markets moved up and down strongly and eventually the dollar has won the event – GBP/USD went down sharply and lost a significant part of gains.

But the outcome of the American figure and the market’s reaction aren’t known after the British release. There are five and a half hours, and the trader wants to ride on the Pound.

In this case, the wiser option would be to trade the Pound against another currency. In this case, it could be the Euro that suffers from the Greek crisis, so a currency such as the AUD that did not get any important news the same day, or the Japanense yen.

But why pick the yen? Earlier the same day, Japanese industrial production dropped by 0.9%, significantly worse news than was expected. The yen was on the decrease while the Pound was increasing. GBP/JPY did not drop like GBP/USD, but instead continued to rise after the release of the American CB Consumer Confidence.

There are many similar examples. Traders should keep an open eye to crosses, so they can avoid the high risk events in the US and choose a safer currency to trade against.

 

Also read:Most Predictable Currency Pairs – Q1 2012

 

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Posted on January 3, 2012 by Yohay Elam

Forex Trading Tips – Learn How to Lose

By Yohay Elam

Winning is the goal of every forex trader. However, losing sometimes is also an inevitable part of this battle. Even the most successful trader loses quite a few trades. The key is knowing how to minimize the losses and learning how to deal with the situation. To win in the long-run, you need to know how to lose in the short-run while still remaining in the game.

 

When you lose the trade, the key is to learn from it. Analyze it. You do not need to do this right away. Sometimes a bit of distance from the actual trade can be useful. This allows you to be less emotional and able to analyze the trade more objectively. Acting too quickly and trying to take revenge on the market or entering into trades from a place of desperation is never a useful tactic.

 

How do you figure out what went wrong? There are a few key questions to ask yourself:

 

Did you follow your trading strategy? Maybe you’ve forgotten some calculation during the preparations. Maybe you’ve bent your rules and gone ahead with the trade. Or maybe you’ve made unnecessary changes after the position was open. Well, now you are aware of this, and your next trade will likely be a more precise one.

 

Are you satisfied with your trading strategy most times? It is okay that every trading plan has losing trades. Even the best trading strategy will lose in some trades. The key is to win in the long-run. This means your RRR (Risk Reward Ratio) is good and that you are trading with a lower risk.

 

Do you need to change your trading strategy? Before making any decision you should double check the two points above. If you are certain that you’ve followed your trading strategy and still the losing trade is not just one of the regular losses you can sometimes expect, maybe it is time for a change. Five consecutive losing trades, assuming that your implementation was perfect, is reasonable enough grounds to make a change.

 

Changes to your trading strategy can include:

 

Tweaking some of the parameters of your trading strategy: Back test the losing trades with different parameters, such as entry point, stop loss. Playing a hypothetical “what if” game and see what you get. Sometimes a small change can make a big difference., which could be all you need.

 

Switch to different currency pairs: This is harder to examine using losing trades, since each currency pair has its own “personality” and most likely form different chart patterns. But if your currency pair was moving sideways and now it has broken out and extended the range (or moved in opposite direction), perhaps your system won’t work any more.

 

Look for a new trading plan: Sometimes chart patterns change in all pairs, and in some scenarios, your system may not have been optimal in the first place. If you are certain that this is the case, you should definitely make a change. Refusing to admit that a change is needed will inevitably just lead to more losing trades. We are not trying to be righteous. What’s more important is to win. If the system doesn’t work, abandon it and move on to another one.

 

But what about your winning trades? Analyze them as well. Was the win part of your trading strategy? Great. Was it simply by chance? Feel lucky and humble. Many traders become euphoric after winning a trade based only on gut feeling. This, however, can be the fast track to burning out your account. Confidence is a must, but overconfidence, especially misplaced overconfidence, can be fatal.

 

Also read: 5 Most Predictable Currency Pairs – Q1 2012

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Posted on December 19, 2011 by Yohay Elam

The importance of pacing in forex trading

By Yohay Elam

In order to improve your trading, it is important to pay special attention to the frequency of your trading. In order to have the best control over your account, it is important to learn the value of pacing yourself and your trades.

When some traders find themselves on a winning streak, they start to extend their trading time, hoping to keep the streak going. They sit in front of their computer, monitoring the charts, more and more and they begin seeing trades that aren’t really there. This is not a good for trading or a healthy lifestyle either.

It is even worse for traders having a losing streak: they extend their trading time in the hopes of being able to take revenge on the market. The market, however, is bigger and stronger and this is often the fast lane to blowing through your account.

You can avoid this by planning the times in which you trade.

Scheduling your trading times means that you allocate time just for forex trading. Being concentrated on one task and avoiding being distracted by other things will raise your chances of winning. This rule needs to be applied to every single trade, and you need to cultivate this habit in order to stay profitable in the long run.

The question then becomes: when should you trade? You need to take a few things into consideration before you find the plan that is best for you:

Trading type: Are you a trader who looks for big moves? If so, you should focus on the London and New York sessions. Why? These sessions usually have the highest volatility. If you are looking for range trading at quieter times, you should stay away from these sessions and focus on the Asian session.

Person type: If you are a “morning person” you’d probably perform the best in the morning when you have your best the focus and energy levels. If you are a “night person”, you may want to trade only in the night. The idea is to trade when you are at your optimum and can fully focus on the trading.

Life Limits: If you have a full time job, or a family, or anything demanding your attention and energy, you’ll need to adjust the times you trade to create a better personal life for yourself, and a higher chance of taking profits. Life is not only a bunch of trading opportunities. If your trading and the rest of life collide, you will find it hard to be successful in either.

In an ideal world, when you put up all the facts together, you will be able to find the “ideal” timing for trading. In reality, this isn’t always the case. It is important to avoid being addicted to forex and keep a balance between your life and forex trading. I’ve seen lots of traders lose their head to the charts. They probably didn’t lose a lot of money, but losing touch with reality did not make them successful in trading either.

Trading at scheduled times

Scheduled trading doesn’t mean that you need to trade at every session. In some cases, you will allocate time and test a few possible setups before making any conclusions about whether or not there is something there. Never force yourself into a trade.

Testing the market and avoiding trading during certain market conditions is a very good strategy that can save you money and pull you back from the risk of uncertainty.

Have you ever made a trade during your scheduled time and you still have time left? Don’t run for the next trade. It’s always better to take a break and avoid over-trading. As discussed above, running after the next trade can be disastrous, so can the sense of avenging.

Finding the right time to trade and keeping a good pace: one of the keys to success in forex trading.

Also read: 5 Most Predictable Currency Pairs – Q4 2011

Posted in Educational Material, Forex Tips, Forex Trading | Tagged , , |
Posted on December 12, 2011 by shuang

How to close hedged by trades on MetaTrader 4 using “Close By” [Video Tutorial]

How do you close hedged trades on MetaTrader 4 platform? If you aren’t careful, you could end up paying twice the commission you should. There is a function called “Close By” which can help traders close opposite trades in one step, saving on commissions. We have put up an informative video tutorial on how to use this function:

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Posted on December 1, 2011 by Yohay Elam

Scaling up your forex trading

By Yohay Elam

Let’s say you’ve been trading for a few months now and it seems the results are quite positive. You’ve had both profitable and some losing trades, but, by applying the right risk and reward ratios (RRR), your overall outcome has been a success. This wasn’t just a case of “beginners’ luck”. So what’s the next logical step? You’ll use your trading confidence and will probably consider scaling up, to make even more money. The question is: how do you it?

There are a few methods of scaling up. Some of them are useful, while others could be harmful to your trades.

  • Increase your trade positions at your usual trading times.

    • By using time more efficiently, you can execute more trades and potentially more profits. If you have utilized a strict and careful trading strategy, your experience will help you know how to filter bad trades and restrict yourself only to the ones with high winning probabilities, giving you more room to add trades. However, this must be done carefully. By opening more positions you will put yourself under more pressure and might find yourself looking for trades that aren’t really there.

  • Extending your trading hours

    • If you trading hours have been limited up to now, and you feel you have more time and the capability for longer trading time, you should try to increase your daily trading time little by little, expanding your trading sessions. One thing you should be wary of is that your trading systems might not work equally well in all trading sessions. Instead they might work surprisingly well in certain trading session, but under-perform in other sessions. The best strategy is to try and test your systems using demo accounts before you adjust your live trading plan.

  • Scaling up position sizes

    • This is the preferred method of scaling up your trading. This way you won’t need to adjust your trading times and number of trades, instead you change only position sizes. Assuming that the value of your account has been increasing, you will not be increasing the percentage of each trade you risk. Money management rules all still apply, keeping your risk in check. Here as well, you should always increase the size a little at a time so you won’t feel stressed when you open a sufficiently large trade that might lie just outside of your comfort zone.

    Also Read: 5 Most Predictable Currency Pairs – Q4 2011

Posted in Forex Tips, Forex Trading | Tagged |
Posted on November 3, 2011 by Yohay Elam

Money Management

By Yohay Elam

You’ve probably read about money management many times, a word forex brokers wouldn’t be unfamiliar with. Yet very few managed applying it in their day-to-day forex trading. How can you turn money management from a buzzword, into an actionable trade plan.

 

Risk is involved in most types of investments. The concept would be to take control, and be aware, of your risk . This could help you avoid margin calls, in addition to being an easy way to control your account.

 

1. Always use a stop loss: Putting a stop loss in any trade will get you out of your trade, and prevents a situation where you loose a lot from one trade. Although this states the obvious for the vast majority of traders reading this, I still know traders who don’t use a stop loss order. This precarious deed is done also by folk working at forex brokerage companies and trade with their account. Sad but true.

 

2. How much money are you risking: There are lots of money management methods out there emphasizing the risk/reward ratio. Some take 2:1 and others take 3:1. That’s awesome. But many ignores how many dollars they are risking per trade. Is the sum too high? Check with your forex broker. There are two mathematical factors that could help reduce the amount of money you risk:


Set a tighter Stop Loss: Setting a tighter stop loss lets you lose less money in a losing trade. Sounds good? Not really. A tighter stop loss can put your trade in a riskier situation. Lowering the money you risk doesn’t mean you should increase the chance a stop loss being hit. It shouldn’t depend on the amount of money risked.

Lowering the position size: A lower position size still gives you the option to place a stop loss at a level that is right for you and the money at risk are lower. On the other side of the coin, your reward is also lowered. Although most people attempt to trade large positions, always keep in mind that we are trading with leveraged money, not real money that we have on hand. By lowering the position size you still get to trade your position in full, just with lower risks.

 

3. Account Risk: By now you’ve learned to monitor the amount of the cash you are risking. But to be frank, what is your burn rate? Suppose you start your trading account with $1000 USD. And for each trade your risk is 20% of your account capital. If you stick with this high risk it only takes 5 trades to blow up your account. And for new forex traders, it’s not uncommon to see 5 or more consecutive losing trades at a time. Risking a big portions means you burn out your account quickly before you had enough time to learn and increase your winning rate.

 

Thumb Rules: Never risk more than 2% of your account per trade!

This may sound very strict, but it helps you stay in the battle of forex trading and will help you accumulate a long term sustainable profit.

A forex demo account is probably very useful for practice, but only a real live account brings you the emotional stress. If you start applying the 2% rule in your trading, you will understand the power of money management.

 

Posted in Educational Material, Forex Tips, Forex Trading | Tagged , , |
Posted on October 26, 2011 by admin

Transparent MT4 to ECN trading now just $1 per lot

Since the T3 Integration Bridge was first released a year ago, we have been working hard to constantly improve our Metatrader to ECN trading bridge for forex traders. Our developers are hard at work expanding the capabilities of our bridge solution, as well as adding additional tools and platforms to be announced in the near future.

We also want to make the T3 Integration Bridge the best possible value, making a transparent trading solution accessible to all forex traders. Which is why we are proud to announce that we are eliminating our tiered commission structure in place of a simpler, lower technology fee.

Effective today, we are introducing a flat $1 per lot fee, regardless of monthly turnover.

The new fee will mean substantial savings over the former commission structure, especially for lower volume traders. We strongly believe that verifiable, transparent trading should be accessible to all traders at a fee that is affordable. This change really does level the playing field for traders.

It’s important to note that this is solely a fee change. The T3 Integration Bridge itself remains unchanged. Traders will continue to enjoy the same transparent MT4 to ECN trading bridge with multi-way execution, and even receive new additions to the service over the coming months for the new, flat $1 per lot fee.

Customers registering for live trading with the T3 Integration Bridge will be subject to the lower pricing immediately.

If you are already a customer with Fair Trading Technology, you will be contacted by our customer support team with further information on how to switch your account to the new flat fee.

You can find more information on the T3 Integration Bridge fee page.

Posted in Forex Trading | Tagged , , |
Posted on October 21, 2011 by Yohay Elam

Withdrawing in Forex Trading

By Yohay Elam

Trading forex to make money? The answer is usually yes. The next question is: When do you plan on withdrawing your profits?

If you do not have a withdrawal plan in place here are some of the advantages of making one and ideas about how to do it.

Unfortunately, many brokers see your full deposit as their revenue. Too many cases involve unfair brokers and reckless traders. Let’s assume that your broker is fair and you are cautious, trading according to a set plan.

The next step is making a strategy for withdrawals, a Take Profit point for your account as a whole. There are several advantages:

  • Seeing the bigger picture: provides a framework for your trading, moves, the greater goal and not just trading for the sake of trading.
  • Putting losses into proportion: loosing is not a tragedy but rather part of pattern of winning some and losing some while getting closer to your own trading goals.
  • Motivation: to remain motivated, especially if your plans include making profits. Staying motivated also keeps you from becoming overconfident. If you enter a winning streak, you might get the feeling that you can “beat the market” and  increase position size and trade with less caution. This can result in heavy losses and erased profits. Having some money set aside will allow you to enjoy your profits and keep your focus on your trading.

How can you set a withdrawal plan? Depending on your character there are different targets.

  • Withdrawing at a certain percentage of profit: Long term sustainable forex trading means that your return on investment will be a bit better than benchmark indices (especially in bearish markets).However, doubling, tripling or quadrupling your account in a short time is not a realistic goal. Setting a target around how the indices for a good year in the stock markets have performed is a good way to set you own profit.
  • Withdrawing at a certain account size: similar to the above, but with a small twist: preventing your account from growing too much will help you avoid the earlier mentioned overconfidence.
  • Withdrawing on a monthly basis: The target can remain profitable on a monthly basis and withdrawing the profits. This will be lower and higher each month, but it will still provide a time framework – a timely goal for withdrawal.

When do you withdraw your forex profits? How do you set your targets? Let us know!

Further reading: 5 Most Predictable Currency Pairs – Q4 2011

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Posted on October 6, 2011 by Yohay Elam

Carry Trading? Beware of Overweight!

By Yohay Elam

For some time before the crisis the carry trade was popular but eyed by many.  Are we seeing the return to long term carry trading in the future? Probably not.

The carry trade was usually done by buying AUD/JPY or NZD/JPY. You sit on a position for some time and cash in on the interest rate differentials. A traditionally low or non existent rate is seen in Japan, while very high rates exists in Australia and New Zealand. The high rate remain even after the crisis and cuts.

The Yen was, during the crisis period, sought after as a safe haven currency. The “risky” Aussie and Kiwi were dumped. The interest rate differential was not enough to cover the loss in exchange rates.

Is it back?

Although the yen has regained strength, it seems to have reached a bottom against the dollar. A few times during the past year and an intervention to weaken the yen took place. It is understandable that Japanese officials are “closely monitoring”  the current foreign exchange rates.

Sitting on AUD/JPY may not only provide a profit through the carry trade, but may also ride on the next intervention. When that will be no one knows.

Well, let’s slow down.

There is nothing that says that an intervention in Japan is certain to happen.  The Japanese authorities already intervened when USD/JPY was at higher levels, only to see their short lived action result in an even lower rate. Even when coordinated with other countries the intervention was short lived. The Yen may stay at its current standpoint or strengthen slightly.

Further, the Aussie and the kiwi pose greater risk now as both these countries rely heavily on demand from Asia. This demand is also the reason that helped boost their economies and currencies after the crisis. A demand so strong that it helped Australia avoid an official recession.

A new direction can now be seen as Asia is unable to decouple from the rest of the world and will need to decrease their growth. This, however, paves the way for weaker currencies for the countries involved.

Relying on interests rates alone can be tricky as rate cuts can happen in either country.

Did you carry trade in the past? Are you using this method now? Let us know!

Further reading: 5 Most Predictable Currency Pairs – Q4 2011

 

Posted in Educational Material, Forex Trading, White Label | Tagged , , |