trading forex

How to Make Profit Trading Forex

Matt —  February 28, 2013 — Leave a comment

Trading Forex involves a lot risk and there are few things one must know when it comes to making profit from trading forex. The first and popular myth that I hear from everybody is – Making money in forex is easy.  However the truth is it is never easy as making profit in forex trading requires dedication toward the work, practice, excellent knowledge of currency values and money management.

Trading Forex is not Gambling

A large section of people call forex trading as gambling however it is not completely the gambling. One can’t guess and try his luck on whether the price will move up or down. There are various traders who act just like gamblers. The important reason why I’m not calling it gambling is because of the fact that forex trading involves study of currency reports, its pattern and analytical calculations which in most cases are based on technical and fundamental analysis.

Making Money from Forex Trading

Ofcourse, making money from forex trading or any other thing in this world requires plan. The plan to start thinking and finding the way. The plan is an important aspect when it comes to trading foreign currencies but creating a plan is not the only way to make money. A trader must follow the plan in any situation constantly. The simple rule which I would like to highlight is – More the trader breaks the rule, higher are the chances of losing money. The formula of creating and following the rules sounds easy but becomes hard when the rules don’t generate money. However, even when the system has failed to generate the profitable income, sticking to the same plan for longer time has generated profit in later stage. As a professional trader, you must control your emotions even in the situation in which you’re losing your money.

Money Management

When it comes to following set of rules to generate profitable income, keeping an eye on money management is of utmose importance. A trader must have knowledge of how much money should be invested for opening a position and at what time and price he should stop. For starters who are looking to get their feet wet in forex trading, its recommended that they choose a reliable forex broker like Alpari who can guide you in your trading journey. Alpari comes with an exhaustive training material which you can check out on their official website www.alpari.com

Keep an eye on your loss

A trader must be aware of how much money he has lost even during the profit. An excellent money management by trader shows that he or she is at least expecting to make profit twice from each trade he may or may not win. This ups your winning chances to 50%.

Trader’s Psychology

It has been observed number of times that going into profit or loss create a psychological problem in trader’s mind which may affect his performance. You must not expect big profit however at the same time cutting down the losses is key aspect of forex trading.

 

In Successful Traders
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Understanding RSI

sarvesh —  November 24, 2012 — Leave a comment

I’m learning the RSI momentum indicator. To really understand why it works the way it does, I like to do a few calculations.

  1. RSI bounces between 100 & 0
  2. RSI is considered overbought when it goes above 70.
  3. RSI is considered oversold when it goes below 30

RSI according to StockCharts.com

rsi

A Few Things I’d Like to Note

RSI has a “smoothing value” like an expotential curve (all the data is included, but data that’s from farther back is history is weighted far less than recent market action in the RSI indicator) b/c of the way the “average gain” & “average loss” is calculated.

Reason Why RS & RSI Fall & Rise Together

When RS is high (meaning average gain > average loss meaning market going up), (100 / 1+RS) is a small #, making RSI high.

When RS is low (meaning average gain < average loss meaning market going down), (100 / 1+RS) is a big #, making RSI low.

In Indicators
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The Fine Line Between Regulation & Killing Industry

sarvesh —  November 24, 2012 — Leave a comment

There is a fine line between regulating industry so that it doesn’t go on the wrong path (e.g. financial industry destroying the nation) and regulation that chokes business. According to Jack Welch, Obama is doing the later – regulations put in the wrong direction that it turns into rubber stamping.

In USA
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Find a Trading Style that Works for You

sarvesh —  November 24, 2012 — Leave a comment

In a previous post, I mentioned that every trading strategy works, depending on who’s using it. When it comes to trading style (there’s a difference), use what you’re comfortable with. Compare me vs. hfmarina.

Hfmarina likes to go 100% in and average in her trade’s when the market’s falling.

I, on the other hand, like to always keep 20% in cash, because that gives me a feeling of security (no matter what happens, I’ll always have 20% left, kind of like a rear guard in an army). Similarly, I also like to average in my trades.

In Lessons I Learned
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Every Trading Strategy Works

sarvesh —  November 24, 2012 — Leave a comment

Whether it’s fundamental based, technical based, value investing, averaging in – they all work for some people. Never mock a strategy b/c there’s always someone that it works well for.

In Uncategorized
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Market Top is Coming Soon – This is So Characteristic of Market Peaks

sarvesh —  November 23, 2012 — Leave a comment

ang

Market tops are characteristic b/c the first wave of stocks that go up have no declined, letting the second wave go up after the first wave of market leaders have declined (similar to what Jim Rogers has said).

In Market
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hfmarina: Why We Speak of the Silver & S&P500 Markets Like It’s a Human

sarvesh —  November 23, 2012 — Leave a comment

In this post, we speak of the market forming a staircase pattern, showing how it’s cleverly forcing all those who want to wait for the market to retrace and buy to chase the market. Clearly, we are talking of the market is if it were a person. Indeed it is.

Currency & commodity markets tend to be played by speculators. In a sense, it is like a battle between the bulls and the bears, which is why in that previous post we said how the market forming a gap was a clever move to force the shorts to cover (a speculator battle between the longs and shorts). This is also why technicals works so well for currencies and commodity markets b/c these speculators are using technicals as weapons to annihilate the other side.

Conclusion Regarding this Mini-Bull Market

Right now, this bounce in prices has no fundamentals to support it (besides a lame excuse in the form of the year end rally). It is purely a technical bounce supported by the bullish speculators.

In Commodities, Currencies
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hfmarina: Very Strong (Yet Dangerous) Market (S&P500 & Silver)

sarvesh —  November 23, 2012 — Leave a comment

If you look at both the S&P 500 and silver charts, you’ll notice that both these markets are showing a ton of strenght.

Why is the silver market strong?

As I mentioned in this post, silver is moving a stair-case like pattern (you have to look at the 30 minute bar chart).

stair

Why is this so strong?

  1. The price jumps, then goes flat for a while. By going flat, the price washes out the momentum, preventing an “oversold” situation from occuring. Then the price jumps again, goes flat, and repeats.
  2. The flat section of the “staircase” is in a VERY TIGHT RANGE, which shows a lot of strenght because usually this range should bounce more.
  3. Most investors, funds, and traders in a situation like this are waiting for a small correction so that they can buy in. When the price moves in a stair-case fashion, there is no retracement, meaning all those who wanted to buy on a retracement will either have to chase the market and most likely buy at the market top, or (as the smarter market parcipants will do) just not participate in this bullishness at all. 

Thus, only those who buy into the market without hoping for a retracement and sit tight can make money in this bullish market. The market will not move for a long time, spurt, not move for a long time, spurt… All one can do is buy and sight tight.

Here’s what the market action will be like:

staircase

Essentially, the market first trades in a staircase fashion (right now), jumping, then moving flat in a few cents range, then jumps, moves flat within a range of a few cents. After a while, the market just goes straight up. Why? Let’s look at this from a psychological perspective. During the staircase price action, investors are constantly thinking “should I buy into this market? Or should I wait for a retracement?” After a while, they’ll see that there’s no chance of the market retracing, and decide “to hell with it, I’m buying since there’ll be no retracement”. That’s what causes the diagonal price action.

Why is the stock market strong?

Simple. Whenever the market reaches a major resistance point that every expects the market to fail to break, the market does break it simply by jumping (making a gap). This is a very strong movement. It takes everyone by surprise, and all the shorts who expected the market to fall once it hit the resistance level now have to cover their shorts, pushing the market even higher. For example, the market did this on November 19 2012 & November 23 2012. The resistance barrier for the S&P was 1390 – many people expected the market the hit this resistance and fall back. Instead, it totally broke through his by creating a gap, jumping right through the 1390 barrier.

bounce

Why is the market dangerous?

This kind of a major correction can’t last long. As I mentioned above, the smarter market participants, usually the big money, will simply sit on the sidelines instead of buying into the market. In addition, everyone gets in really fast into this market (especially in the diagonal market action stage because everyone think’s there will be no retracement to buy deep). Thus, this rally will last for a very short time, most likely ending by December 10 2012.

In Commodities, Stocks, USA
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Characteristics of Bubbles & Bubbles Popping

sarvesh —  November 22, 2012 — Leave a comment

Most people believe that the end of bubbles only have 1 stage of “craziness” when the market rises day after day without stop. They’re wrong. The end of the bubble stage usually has 2 stages of “craziness”, divided by a 10-15% retracement (anything more than that might indicate that the bubble has already popped).

Usually, this intermediate retracement should last somewhere around a month. If the retracement only lasts a week and then quickly soars back to its old high, it’s very likely that the market is forming a double top (and will not break its old high).

Let’s Look at Historical Bubbles

Tech year 2000

chart coming soon

Apple year 2012

chart coming soon

Silver year 2011

chart coming soon

In Lessons I Learned, Market
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hfmarina: Extreme Market Strenght – When the market rises like a “staircase” and has no retracements.

sarvesh —  November 22, 2012 — Leave a comment

The market is at its maximum strenght when it moves upwards in a staircase-like price action (rise, then pause without retracement, rise, then pause without retracement, repeat) as is the case with silver at the moment:

slv

This creates a case where all those who wanted to buy on the markets simply can’t buy (because the market has no retracement), forcing them to chase after the market. Very dangerous for those who don’t get in.

In Technical
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