Tutorial Forex

A good trading system is about much more than just selecting stocks. Certainly that is important as well. However, a good trading system will provide the ability for you to protect against losses, manage your money, add proper leverage when necessary, and also select a stock selection maximizing your reward and minimizing your risk.

The guess work is taken out of the way for you. The stock is purchased when criteria is met, the amount of stock purchased is also based on certain criteria. The stock is sold when criteria met, and there are protective measures against a stock’s demise, and where possible and appropriate leverage is created to maximize the returns without taking on more risk than you can handle.

This trading system will be talked about in 5 additional parts in addition to this intro. This post is designed to explain the trading system, its functions and how it operates.

1) Exit strategy. Every good system trader will first know the exit strategy. It doesn’t matter what vehicle selection you use, if you have no exit strategy, you’re stuck. The trick is to understand that unless you want to get trapped in an investment you have to know when you’re getting out.

A good exit strategy has both loss protection, and profit taking, and sometimes even a 3rd stop. The first 2 might be a maximum loss, and a maximum gain before taking profits, while the 3rd one will be a trailing stop that rides the gains up, and will sell the remaining shares. There are other exit strategies such as hold forever and write covered calls against it to collect income, or protective puts in place of a stop-loss.

2) Protection. Although #1 covers most of the protection, there are several other ways to protect yourself. Protection is vital to allow you to stay in the game. Many people know that if you lose 20% you need a 25% gain to make up for it. Losses not only can result in a series of losses that wipe you out, but they also hinder your ability to gain in the future. a 95% loss for example requires a 2000% nearly impossible goal to make up for this loss. So even if you flip a coin and have a 50% chance of gaining 200% or 50% chance of losing 95% of it, you should probably not take it if all your money is at risk, because it doesn’t have the downside protection A series of wins followed by 1 loss would prevent your ability to stay in the game. Even though those odds SEEM fair, they are not without proper protection. Protection ensures that you won’t have that 95% loss, and it absolutely restricts that loss to a fixed amount, rather than take 100% risk.

Such forms of protections are writing calls, in this situation you are given a premium so if the stock tanks to zero in a worst case scenario you’d still end up with the premium, this is minimal protection, and only protects a marginal amount of decline before the losses continue. The other form of protection would be buying a protective put. This actually in fact does protect against catastrophic losses. The lower your stock goes if/when it crashes, the more you make from your put or puts. You are the one paying a small amount in order to protect against any sort of decline below the designated price. The lower this price, the cheaper the option. If a stock is at $50 and you buy a protective put at a strike price of 40, you will NOT be protected against losses from 50 to 40, but beyond that you will be protected to the downside.

These are somewhat more sophisticated forms of protection. Basic forms of protection are diversifying, and perhaps being short. If you buy a stock at $100, and you short one in the same sector at $100, if the whole sector goes up, you are betting not that the market will go up, not that the sector will go up, but that stock A that you are long will outperform stock B in a bull market, and stock B will under perform stock A in a down market. This offers protection although it may limit the gains as well, Plus, you actually have to be right in your thesis.

In addition, if you are short, and the stock market booms, you may get a margin call and be forced to sell. Also, if you do not use money management, you are at risk of a short term swing requiring you to sell all of your shares of the stock that went up, in order to pay for those that you were short that went up, and if you can’t cover your short, your entire account is in jeopardy of being wiped out.

So rather than being short, I recommend replacing it with buying put options, although this has lots of risks involving time decay as well that you must understand before investing. Using a business entity such as a C Corp or a LLC is another form of protection that can protect you potentially against higher taxes, and personal financial trouble such as a bankruptcy on your record if you intend on using forms of leverage such as loans.

3) Money Management and Control. A good trading system will have a form of control. it will allow you to not give up that control when things go bad. In other words, it allows you to manage your money. Money management is very important. Perhaps one of the most important things is position sizing. If you buy $10,00 of stock for one stock when you only have $10,000 in your account this is very poor money management. Continue to do this, and eventually you will suffer a large loss which will be great, and it will be very difficult to gain enough to make up for it. In addition, if the price goes lower depending on your system, you may want to give yourself flexibility. Extra cash on the sides is another form of money management. It doesn’t have to be cash per say, but some form of safety. Various forms of currency, sometimes some gold, bonds, and money market accounts that are all fairly liquid would be a few examples.

4) Leverage Leverage is about using your abilities to gain, the strength of your trading system and various tools to minimize risk, and increase gain. When you take on leverage, you should be able to reduce your position size in comparison to your capital, and still have a similar reward or gain.

Forms of leverage include options, the further out of money option you purchase, the more leverage you have if that stock does make a strong move. You can also sell options to raise capital to invest in some cases.

Another from of leverage is a loan. Whether it’s a credit card, a home equity loan, going on margin, or a business loan for an asset holding company, or even taking a company public and using the capital to invest, the idea is to gain money at x% and to invest it and make a greater return than x%. if you can do this, and manage money well, and protect yourself, Your gain is only limited to the amount of capital you can borrow at the maximum of slightly less than what you expect to gain. Generally however, if you use a loan, you should have a form of cash flow or income that will cover the costs of the loan just in case your investment goes wrong. That’s another form of money management while using leverage. Money management should be treated much differently under different forms of leverage.

5) Finally, the stock selection vehicle. You need some method to select your vehicle, based on this and your other factors you will determine time horizon and a methodology of trading. The system will help you choose your trading stocks, and exactly what to do with them. You can play around with different trading systems, but generally you should first attempt a good exit strategy and make sure your controls on parts 1-4 of your trading system are sound, and try tweaking them

Stock Trading Systems that are well defined will leave very little room for error. If you learn to use a trading system, you can choose to enhance the essential skills it takes to making your trading system better.

Unfortunately, many day traders are slaves to the computer screen and can miss a moment. Focus on building the better trading system, and not placing the better trade, and you will give yourself some valuable time. If you are really using a system, you don’t need to be the one to place the trades, and can instead higher someone to do the work for you. You can use that extra time to improve your system, or find new ways to invest, or learn how to become a better trader.

You can learn other tips like this at the System Trading|Stocks Trading Systems blog, which is full of tips for day trading, options, swing trading, momentum trading, and advice on building a trading system.

Moving averages (MAs) are a very popular tool used by most of the forex traders. They are a lagging indicator of the price action. Using moving averages short and long term trends are easier to identify.

Moving averages are calculated on the users specifications and can be formatted to different style of trading and time frames. For example, if you use a 90 time frame moving average, the prices of the last 90 times frames is added together and divided by 90.

A moving average can be calculated based on the opening, high, low or closing price. Most traders prefer to use the closing price because it is the most important. There are three types of moving averages. 1) Simple Moving Average. 2) Weighted Moving Average and 3) the exponential moving average.

The simple moving average is calculated by dividing the price in each time frame by the number of time frames. A weighted moving average gives more weight to the current prices as compared to the last few time frames. In an exponentially smoothed moving average, the chart is calculated gradually with less emphasis on the prices in the latter time frames.

What are Bollinger Bands? Bollinger bands are plotted at a standard deviation above and below a moving average. The base of a band is moving average and the bands width is determined by volatility. Since standard deviation is a measure of volatility, the bands are self adjusting. Widening during volatile markets and contracting during calmer periods. The bands bracket almost 90% of the market action.

They are curves drawn in and around the price structure that provide relative definitions of high and low. Knowing when the prices are high and low, the trader can make rational investment decisions by comparing price action with the action of indicators.

Bollinger bands can be applied to currency trading, futures, indices, mutual funds and most other trading. Usually sharp price action tends to occur as the bands tighten and as volatility lessens. When the price moves outside the bands, a continuation of current trend is implied.

A move that originates at one band tends to go all the way to the other band. When bottoms and tops made outside the bands are followed by bottoms and tops made inside the bands, reversal of the trend is strongly expected.

When the bands are flat and narrow, this indicates that price volatility is lower as compared to previous time periods. The 10% price action that takes place outside the bands is most likely going to approximate areas where prices will return to within the bands.

When the bands begin to flare and widen, this indicates increased volatility and start of a new strong trend. Wide bands are usually taken as an indication of a very strong move.

I don’t know about you, but I hate to be treated like an idiot. I hate long winded, cheesy, high-pressured sales pages that have nothing more to say than brag about how smart they are and how stupid I am unless I buy their whatever. This is what stands out as different with the Forex Ambush 2.0 website. They actually have a proper website, not just a sales page.

I think you know what I mean. Say you want to buy a software program that can do “whatever”, and it costs about $150-$200. I EXPECT to visit their website and to interrogate that website for every detail I want to explore about the software. And I expect to be able to send them my questions and to make pre-sales contact with the vendor.

Forex Ambush 2.0 claims 100% accuracy, and I have found no evidence yet of a losing trade. How can this be so? Well basically it does what I would expect all forex trading software to do. It uses an artificial intelligence engine to monitor a (unstated) number of forex indicators to anticipate when a currency has been oversold and is due for a reversal.

Think about it. Metatrader has many forex indicators. Each indicator plots an aspect or dimension of the market that has just occurred. The forex indicators may be measuring volumes of trade, or comparing pricing pressures in some way.

Many people don’t trade with expert advisors. Rather, they do all their trading by relying on the indicators built into metatrader already. Different traders have their own systems of which indicators have helped them in the past. Each indicator gives a graphical measure of an aspect of the markets, and using several indicators give a more comprehensive picture.

Having 5 or 7 indicators all being tracked and monitored builds up a more comprehensive picture of what is going on and what pricing movements are likely to occur in the very near future. At one moment in time, each of the indicators may contradict each other, or from time to time they may all line up confirm that a profitable trade is coming up.

Logically, large banks and trading organizations would have been using technology like this for years. But things are different now. Now mums and dads can have access to the forex markets, to forex trading systems and forex trading software like Forex Ambush 2.0.

Forex Ambush 2.0 does seem to be many steps in front of its competitors. The developer certainly seems to have taken forex robots to a new level of performance, and the vendor certainly intends to take the technology into the wider market place for the masses to use. The combination of indicators it monitors and correlates definitely has given me an edge in my forex trading.

It is not a problem to me if Ambush misses a trade, as long as it is always right when it tells me to trade. After reviewing Forex MegaDroid and Fap Turbo, where they consistently got better than 95-97% accuracy, 100% success is not so far away.

Perhaps Forex Ambush is just that bit more conservative, I really don’t know. I have used it for 3 months now, and I have not lost one single cent yet. Like most expert advisors, don’t expect a flurry of fast and furious action all day long. Forex robots of this caliber often go several days with no trades at all. As I said, I don’t have to be 100% right all the time – but I hate to be wrong ever. I’d rather miss a trade than make a wrong trade.

Candlestick patterns can reveal a lot about the underlying market sentiments. Using one of these candlestick patterns without knowing about the previous trends wouldnt be very useful. Based only on the market activity of the previous few days, most candlestick patterns are valid. For instance, some of the candlestick patterns indicate a change in trend.

Usually the context in which you find the candlestick pattern tells you a great deal about what you should do based on that candlestick pattern. Lets consider simple candlestick patterns first.

The Bullish White Marubozu: It represents the day when bulls control the market and push prices higher from the opening to the closing. The longest white candle is the most bullish of the candlestick patterns. Chances are the bulls will be back for more buying the following day with the long white candle closing near the high.

One common feature of the long white candle is an open near the low of the day and a close near the high of the day. This means that buying has been taking place all the day. With the long white candle, the low price on the candlestick is a good support level.

The Bullish Dragonfly Doji: For a Doji to be created, a day must begin and end with the same price. A Doji is formed when the opening and the closing prices are the same. So essentially there is no stick in the candlestick.

Doji patterns are usually associated with a market turn. Doji depicts a day where the battle between the bulls and the bears has been fairly equal. A Doji may not look very exciting to you. But dont be fooled.

A Dragonfly Doji is unique in that three of the four candlestick patterns- the open, high and the close are all equal. The price action depicted by the Dragonfly Doji bodes very well for those hoping that prices go higher. The low of the Dragonfly Doji day is considered a near term support level. You can make smart trades based on the Dragonfly Dojis.

The Bearish Long Black Candle: A long black candle means that sellers take over at the beginning of the day and push prices lower and lower until the end of the day. The long black candle is the direct counterpart of the long white candle discussed earlier. The long black candle is as bearish as it gets.

Price sensitivity is very low for these sellers. These sellers are selling just to get out of their trades. Seeing this type of enthusiastic selling must give you the confidence after the appearance of the long black candle that the bears will be in control for a few more days. The long black candlestick pattern is a good bearish signal. You can capitalize on this fact.

Most of us would work from home if we could. With the Global recession, millions of people now have no choice but to work from home. Forex trading could be just the opportunity you have been looking for. Can’t wrap your head around it? Let me explain it then. All of the World’s larger currencies must be exchanged so that International trade can happen. The market price a currency is worth is decided by the supply and demand pressures the forex market exerts. This market pressure all comes down to how many buyers and sellers are in the market for a currency at any time. These buyers and sellers are matched with each other by banks and brokers. Software is what allows all traders to meet through their broker or bank. Some forex software is automatic, some is manual.

Forex trading involves leverage. Leverage is where for every $1 you commit, you are controlling perhaps $100 or $200 etc. The leverage on your account can be chosen by you and also the broker you chose to work with. What the software does is it makes your buying and selling decisions for you – so you don’t need to be the expert. Automatic and automated forex software trading systems provide you with expertise of a trader without you being an expert. Now when it comes to these forex robot and software programs you have a lot of different choices ahead of you. Just to name a few:

Which is the biggest software robot on the market? Without question it is called Fap Turbo. 37,000 users have bought this forex robot over the past 9 years and it really is the industry heavy-weight. Fap Winner is the additional package you must buy as it gives Fap Turbo and Fap users the best insights and settings to use to get the best profits out of them in changing market conditions. As the biggest, you will definitely need this expert advisor forex robot in your tool kit. But there is more.

Forex Maestro: In the Internet there are groups of experienced traders who get together and work on programming the perfect software robot for trading forex. This is where many of the forex robots are developed – behind closed doors as experienced programmers and traders design and build the next biggest and greatest forex software tool. Forex Maestro is just such a program. There is much speculation that actually Maestro was released without the programmers consent. But the fact is that it has been successfully selling on the market now for quite a few months.

Forex Funnel: Forex Funnel say it’s designed to trade the USDJPY pair on a 1 hour chart, but actually you can trade profitably on other pairs. It is best to go with what they recommend, so stick with USDJPY as there maybe some aspect of that pair they are exploiting. It is a very aggressive expert advisor, and it is only suited to larger trading accounts – not less than $5,000 because it can draw down quite a large portion of your account before swinging into large profits. Perhaps not for the new forex trader, but certainly worth a look at when you have a few months trading behind you.

The trick to making the right decision for you is to find a very good review website that will openly and honestly talk about and compare all the main forex robot products available. You must get past the hype and high pressure sales tactics of the vendors and find someone with years of experience who has bothered to explain them all to you. Good reviews are not reviews that try to sell you on an expert advisor. Good reviews are ones that only talk about the facts, honestly pointing out the pros and cons of each, and advise you as to what level of trading experience you should have to use it.

All in all if you want to buy a robot, but you know nothing about this – these sites for the reviews are going to be the first step you are going to want to take. Once you read through a few – or all the reviews and you make your decision you can always come back to the site and look at what else the site might offer. For instance, my site I built not only has a lot of reviews on these programs, but they also offers articles such as; Benefits of Robots for Forex Trading, Brokers – How to find one, how to pay him, and Forex Trading Platforms and Forex Robots. This site could essentially be your be all to end all!

Forex trading is alarming to some new investors. You have to know the terms and the language of investing. And you have to be sure of what youre doing in order to make your first trade successful. Knowledge and understanding of your product is very helpful. There are many websites on the web waiting to help you, but it can stress you out trying to find the right one that will make you money. Having an education on the matter will help.

Forex is simply a shortened version of the term Foreign Exchange. Forex trading is trading the currency of one country with that of another. Unlike in Wall Street, there is no central place where this trading is done. All Forex trading is carried out on line or through phone with a network of a huge number of bankers, currency traders and brokers. What must be emphasized here is that the timing of the trade is vital in forex market. If you trade at the right time, you will be rewarded by a sizeable profit.

You have to do your homework in order to learn this type of forex trading. But once you learn it, it can be a very lucrative business.

The things you have to learn for this type of business are risk control and management in trading. You have to know the craft before you take the risk, otherwise you will become discouraged at your failure and you wont even want to continue to trade. As you begin, keep a record of what you do. Be aware that you will lose money at first; this is part of the learning process. Set a financial limit and try not to go beyond that limit. This will help minimize the amounts you lose during the learning process.

You must pay attention to opening and managing an account as part of your training process. Learn by opening a dummy account to trade with virtual money. This will help you feel confident when you begin trading with real money.

There are many resources available online to get a forex trading education and for new investors, model or demo accounts are often offered for free by many of the same online sources.

You can also find information online about free seminars on forex trading offered in various cities. One should not hesitate to ask questions in order to learn.

A solid forex trading education is critical for making sound trades and the information above will help you go about discovering the right program for you and your goals.