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    • Month: December 2016

    Take Profit Order – Forex Trading

    A take profit order is a limit placed on a trade, clearly specifying the exact rate from the entry point. Placing a take profit order ensures that the trader can lock his profit and close the trade.

    The main reason why take profit order is placed by traders is because they do not know how far the market will go. No trader can expect or is always completely right about his forecast of the market. Therefore, they use the charts at their disposal to understand the resistance levels. If they find that a trade is showing resistance at a particular level, they will place a take profit order at that point so that they can exit with the profits earned.

    Take profit order is opposite to a stop loss order. In a stop loss order, you place a limit on the loss and exit. But in a take profit order, you place a cap on the profit and exit when you are ahead.

    This is where understanding how to read charts comes into use. When you check the charts and find that the trend of the market is long term, there is no use of a take profit order, as the trend is likely to continue. The trader can continue to earn profits by going with the trend. However, when the market is going against you, or against the trend, it is essential to place a take profit order. The trend will prevail and it is better to take your profits after reaching a certain expected level and exiting.

    For example, when you buying yen worth $100 at a price of 107 yen per dollar, and place a take profit order at 108, the currency will be automatically closed when the price reaches 108. Therefore, your initial investment was 107,00 and sale was at 10800. You make a profit of 100 yen.

    Take Profit Order, Forex Trading

    Take profit orders are of two types as given below

    Manual take profit orders

    In this type of order, you need the discipline to close the trade when it reaches the expected value. Procrastinating can lead to losses and on the other hand, the price may also rise up higher. The trade is closed manually.

    Automatic Take profit order

    In this type of order, a cap is placed and the trade is closed automatically when it reaches the pre-specified point.

    It is true that placing a take profit order limits the profits on the trade but it is equally true that it protects the trader against a sudden reversal of the market. Unlike stop loss orders, they should be used occasionally when quick profits are needed and exit the market.

     

    No More Bad Forex Decisions

    There is a lot of risks involved with trading on the Foreign Exchange Market. A person can quickly and easily lose all of the money that they had prepared for investing in a single day. Avoiding these very costly decisions can mean the difference between success and failure on the trading market. You can get immensely successful or even lose a fortune in no time.

    Do your research

    The best way to avoid bad Forex decisions is to do your research. Do not rely upon very short charts that show the activity for the past hour. Be more interested in investing for the long haul, rather than the short term. This will help you to be more effective as an investor and make more money, risking less and limiting your losses. By doing your research you can invest a lot of money with the expectation of reaping great rewards.

    Use proper money management

    Limiting the amount of money you invest is another very good practice that can help you to avoid bad decisions. Locking all of your money into a single currency may seem like a good idea if you believe that currency will increase in value. It is important to remember that the currency can change in value very quickly and you can lose a lot of money that way. Limit your trading amounts to an amount that you can handle losing and reap smaller rewards rather than trading large amounts and losing everything.

    Perform regular practice

    Practice makes perfect, or at least better. While there is rarely a perfect environment and perfect risk on the Forex, there is the potential for a perfect trade. This can be achieved through proper research and plenty of practice. When practicing the trading methods, it is important to not use real money. Instead, use a demo program. These programs use the current market values and trends. These demos help you to learn what the market will do and will allow you to invest in a fictional world where you do not have to worry about losing your money. This way when you do enter the trading sphere for real, you know what you are doing and how to avoid those bad decisions that plague so many people.

    Train your brain

    Attend seminars and classes on trading on the Forex market if possible. These seminars are frequented by professionals as well as novice traders. The market is always changing and the frequent re-education of the market can help to ensure that the bad decisions are avoided while good profits are reaped. These seminars are often held by larger marketing firms and do act as advertising for them in most cases. None the less, they do offer a lot of vital information on the market and how to handle the market.

    Are You a Forex Gambler?

    You must strive hard not to consider Forex trading as another form of gambling. All the aspects are there for you to treat it in exactly that way. However, if you persist with such an approach, then the end results will not be pleasant.

    Many novices just become hooked on trading because they like the adrenaline rush when they are right. They also feel that they need to feel part of such a large game which involves a massive daily turnover of trillions of dollars. However, if you have such a mindset, then your Forex psychology is totally wrong especially if you are seeking financial freedom from Forex.

    Perhaps you enjoy trading on the edge and basing your trading decisions on just your gut instincts. However, without supporting your decisions with solid information, you are basically exposing yourself and your Forex account balance to unacceptable levels of risk.

    So, how can you differentiate between when you are gambling and when you are opening a sensible Forex position?

    One of the main differences is information. For instance, if you possess little and poor quality information, then more likely your trades will just be gambles.

    If you are a trader who studies just very short-term charts to evaluate your key Forex parameters such as support and resistance points, then you are still gambling. Similarly, if you trade fundamental news events in a mindless way without grasping a full comprehensive of market expectations, then again your approach is very amateurish and doomed to failure.

    In contrast, if you trade using a well-developed and thoroughly tested strategy, then you can consider that you are making a serious effort because your chances of success are greatly increased. You must understand quickly that there are no magic formulae or mystic chants that you can utilize to ensure instance Forex success.

    Instead, you must approach your Forex trading with a professional mindset knowing that to achieve profits will require significant amounts of hard work. Forex is such a complex subject that even such an approach will not guarantee you success, but at least your losses will be under much better control.

    If you undertook a comparison between performing these two types of trading, then you will be quite shocked at the end results. When you trade just on your whims and impulses, then you will subject yourself to an emotional roller-coaster as you witness your account balance fluctuating rapidly. Eventually, you will almost certainly lose all your equity using such an approach.

    In contrast, if you were to trade with discipline using concepts such as risk and money management, then your experiences should be completely different. You will find that you will make fewer, but more careful trades. As such, although you may not realize constant profits, you will notice that you are losing smaller amounts. These are good signs because preserving your bank balance must be your number one priority. After all, you will no longer be able to play the Forex game without money.

    Top 4 Things Successful Forex Traders Do

    In the world of Forex trading, there are no traders who never make any loss and there’s no any single strategy that will guarantee you to make a profit. It all depends on your observation, study, attitude and patience. So, here are the top four things that you must have in mind to at least guarantee you a higher ratio in winning than losing.

    Proper Planning

    You need to have a proper planning in trading. You need to know your own strengths and weaknesses. Next, set your own goal and time frame. You can choose to trade in the short term to avoid you from worrying throughout the whole night or long term if you are confident that the market will grow stronger. Remember, whatever techniques that you are using, pay full attention is needed to trade successfully.

    You must always keep yourself updated with the news and observe the currency chart at all times. Then, choose your technique. Familiarize with the technique and try to use it while trading. If the technique doesn’t work for you, try another method. Do not fix yourself with a single technique only as the market fluctuation is not always consistent

    Personal Attitude

    To trade successfully, you need to have a good personal attitude. First of all, be patience and observe the trend carefully before making any entry. If you have missed out the opportunity, wait for another one. You must also maintain a good discipline in forex trading. Buy and sell currency when it’s time for you to do so. Don’t be greedy because the trend is not consistent all the times. Lastly, set your rational target. Don’t expect to make $2000 profit for $200 investment. At times, the number of winning supersedes the quality of winning as in overall.

    Choose Your Pairs

    After you have study the market trend, choose your favorite currency pairs for trading. Get some pairs that you are familiar with to ease your trading as well as to choose the suitable methodology.

    Control Your Risk

    Lastly, you must be smart to control your losses. Try to minimize your trading risk by doing thorough research and proper study. If you are not able to decide whether to sell or buy certain currency, don’t risk yourself. Wait and observe the trend for a longer period of time.

    These are some of the important notes that any traders must pay attention at. Lastly, happy trading!

    Avoid Characteristics That Will Make You Lose Your Shirt

    The world of forex trading is one of big money and high risks. Everybody sees this market as an opportunity to make a fortune. Nevertheless, seasoned analysts and traders have paid a price to became disciplined and knowledgeable; they know that certain ways of thinking will only help them leak out money faster.

    Novice traders beware: if you ever want to be successful in forex trading, avoid being one of these people:

    The Irresponsible

    You better learn how to own up to your mistakes as well as to decide on what to do so you can reach that goal. Responsibility includes learning the ropes of the trade, doing proper research on your assets and brokers and ultimately knowing that your own success lies in nobody else but yourself.

    The Sheep

    Sheep follow the majority and takes all of their cues from the experts. While going with the flow is not a bad thing in itself, always trusting on expert opinion has proven to be the wrong move for countless traders. A trader must develop his own style of strategy and think that will work for his plan and investments.

    The Thrill-Seeker

    Let us get one thing straight: forex trading is not a game. Serious traders do it because they want to make money. Having fun is not a feature. Sure, there is a satisfaction to be earned from the market but anyone not serious about it has no place in the business.

    The Impatient

    While the action is certainly part of the market, most of it is a waiting game. An impatient trader will jump the gun on a bid/price even though he or she knows the chances of a better position will come. Many have succumbed to the impatience and recklessness of having money now instead of investing it long term. Profit from trading comes from staying updated with the current flow, knowing when to wait and when to go for it.

    The Over-Thinker

    Some forex traders think they are a cut above the rest with complex ideas and dazzling theories. Most of them have failed. Keeping your strategy simple and clean-cut works best in the long run. While some traders have the tendency to overcomplicate their plans reasoning that new times call for new ways, keeping track of profit and how you got it should help you not to over-think your strategy.

    The Overly Emotional

    Giving in to anxiety clouds judgment because you start being afraid of losing money and taking risks. A lot of people forget that forex trade involves risks and it is part of the job. The ability to stay positive and bounce back also makes a sturdier, more confident trader.

    The Undisciplined

    The biggest mistake to make out there in the market is to invest money without any discipline. So many traders have lost their fortunes just because they want an easy way to profit without the hard work and study to attain it. Forex trading requires attention and understanding of the market, and such dedication to learning requires discipline.

    The half-hearted

    Perhaps the most important character trait to throw away is half-heartedness. Forex trading requires cool-headedness, objectivity and the ability to make those hard decisions that will come your way. To enjoy the fruits of your hard work, you must earn them by being a person of the trade who definitely understands what he or she is getting into.

     

    The Psychology of Traders

    Developing the proper trading psychology is crucial if a trader is to have any trading successes. This is an area that many novice traders tend to overlook while they are educating themselves. Sad to say, there is no magic formula with which a trader can forgo having to develop the correct “Trader’s Mindset”. As mentioned earlier not having the proper “trader’s mindset” can result in a costly and negative experience with trading in Forex.

    Nevertheless, before all else, we need to be able to recognize that the psychological aspect of trading is tantamount. For us to correct our shortcomings and minimize the losses that we suffer when we trade, we first need to know what is the problem and the issues surrounding the problem. Success in Forex trading is a combination of proper trading strategy, prudent money management appropriate capitalization and having the proper psychology. All these factors must work in synchronization in order for a Forex trader to be successful in his trading.

    Some of the common psychological issues that a new trader will face are:

    A fear of having to take a loss

    This is a result of a trader’s ego. In fact, this reason is the most common reason why Forex traders fear having to take a loss. As a result, they try to go against the market trends trying to beat the market.

    Exiting a trade prematurely

    A novice trader will exit a market position prematurely mainly due to the fact that he lacks confidence. He exits his position before he should because he wishes to relieve himself of the anxiety of closing a market position.

    Holding on to a losing position for too long

    This happens because a trader refuses to acknowledge that he made a mistake. He holds on to the losing position hoping things will turn around and correct his mistake. Again, this is due to ego.

    Obsessive Trading

    Because of the thrill of making profits, traders can sometimes feel euphoria when they made a good trade. The danger is that it can also fuel an addictive need to seek this thrill with no thought of loss.

    Feeling angry after a loss

    Traders feel this way because they think that they are being victimized by the market. They got into this situation due to the fact that they had unrealistic expectations in the first place.

    Guilt feelings in making excessive profits

    Sometimes due to poor self-esteem, traders feel guilty when they make excessive profit. They believe that they don’t deserve the profits that they make thus limit themselves to how much they will make.

    Over thinking or second guessing the trading strategy

    This is the result of wanting a “sure thing” in a world filled with uncertainties. Traders do this because they fail to understand losses are part and parcel of Forex trading. They choose to disregard that risk is inherent in any investment endeavors.

    The human mind is the most difficult aspect of Forex trading to overcome. There is no short cut to this except through realization, and coming to terms that we all are human and are prone to mistakes. Once we can recognize this, we can begin to watch out for these “undesirable” mental blocks and take steps to eliminate them.

    Textbook Mistakes in Forex Trading

    Novice forex traders often overlook the obvious: many before them have made devastating mistakes. Making the similar wrong decisions all over again just does not make sense. What a smart currency trader should do is to learn from them and build this experience into his or her strategy.

    Revisiting and learning again from these assumptions and wrong steps will increase one’s chances of succeeding in the business. If you are a novice, then the experience of others can only enrich you. Every time you trade, remember not to make these mistakes:

    Wrong timing of stops

    While stops are certainly important in forex trading, the wrong timing can topple your whole strategy. You surely might be thinking of putting a cork in your money leak, but the key to doing that is the right timing: the trade should still be leaning in your favor. Proper money management should be at play here. Risk should be at the minimum before placing a trade. Calculate and research your options.

    Underestimating the risks of leverages

    You might be thinking of instant profit if you use a 300:1 leverage on a trade. However, are you sure profit will come in? A lot of people think of leverages as free poker chips when, in fact, the risks are high. It is all about making sure you have a good solid hand. Even then, experienced traders are always careful to only risk 2-3% of their investment balance on a trade. Assess your risks and gains and do not be dazzled with the money and the excitement.

    Relying on signals and indicators too much

    It is as if you are just a sheep following a trend. Signals and indicators are just that: assistants and cues that help you make a decision. Remember that your strategy and assets are unique to you, so technical indicators do not always apply to you. You still need to work. There is no magical formula or machine that can do the work for you.

    Day trading

    Some people might think that day trading holds no or fewer risks, which may be true to some. However, there is a reason why long term trading still holds: it gives you more time to wait out a position that will be in your favor, yielding more profits. Day trading can work, but only for a select few.

    Getting sucked in by “miracle” software

    There are dozens of so-called powerful platforms and software that say you can beat the system and reap huge profits. Some of them can help but a lot of them are duds. The main thing to remember is that there is no sole software out there that is foolproof. It’s okay to get indicators and advice from a few, but in the end, it is your decision. Before putting your money where your program’s mouth is, you better test it thoroughly.

    The same thing goes for systems and strategies on paper. Even if you have back tested them, would the conditions you have used to test be the same conditions that will happen in the near future?

    Getting overwhelmed with emotions

    Forex trading requires objectivity, cool thinking and the ability to make sound decisions. Be too afraid to risk and you will not profit at all. Be too reckless and you will lose your shirt in no time. Here is a smart thing to do: read up on forex trading psychology. Watch yourself and do not work obsessively. Have a life.

    There is a reason why forex trading is so popular yet only a select few have built their careers on it. A lot of beginners have failed, but where they have fallen, you should pick up and do better.

     

    Forex Trading is Simple

    When you look into Forex trading at a commoner’s perspective, you will feel that Forex trading is very complicated and troublesome, especially when you read that risks in this business is always included, thus making you afraid if you are interested in taking a shot at being a trader. But when you muster the courage to become a trader, you may think of the Forex trading world as complex and complicated with all the things you need to learn.

    New Traders Complicating Forex Trading

    The first reason why Forex trading becomes hard for a newbie is a lack of self-confidence. This is when you look at sources to read for some tips, tricks, and real rules of the trade. Newbies do not have experience, and you need the expertise of other people so that you do not make a mistake of losing your money. However, one thing ironic is that such tips and tricks being shared to save people from avoiding lapses are usually results of experiences from committing mistakes.

    This is where you cannot really decide on taking risks and continually skipping from one system to another. You keep on switching from one indicator to another, not even understanding the nature of the indicator in which you are setting your trading aspects with. You often believe in what you see than knowing the actual behavior of the market by doing the math. You may even end up to a point wherein you are locked on a “paralysis by analysis”.

    The second burdensome factor that trembles a newbie is the fear of losing money, which many people are experiencing. This is one eternal truth that must be learned by every trader. Losing is part of the game and you cannot have a 100% chance of being successful, even if you do your best of achieving it.

    The Experience of Paralysis by Analysis

    It may sound a bit of wordplay, but the whole thought is in its very words. When you are reading and relying too much on indicators, you may be focused on what the indicators will tell you, and not observing where the market is going. You can be surprised if you encounter that moment where merely watching the market trend could have saved you so much time and effort. You have been paralyzed with what you should do because of being too analytical with your market activity.

    Simplicity of Forex Trading through Trends

    When you get away from the complications of indicators and other in-depth reports and readings, you will notice one tool that can make you see the big picture of Forex trading. Watching how trends go in 3 months, 6 months, or 1 year will make you think that this system of trading is never complicated, to begin with. There are only two major trends in the market, which is rising up and falling down. When the lines are going from the lower left to the upper right, it is an upward trend. When the trend is from the left up going right down, then it is downward. That should be as simple as you can interpret it.