OKE FOREX: July 2012

Friday, 27 July 2012

Micro trend

Micro trend trading belongs to the area of day trading. However, it is different as a day trader may not necessarily have to wait for some daily trend to develop, but can use other trading strategies to enter a market of his choice. A trader who wants to trend a micro trend has to wait for some momentum to develop (or a reversal to take place) before executing a trade.

Since a trader needs momentum, the best thing he could do is to pick up volatile securities and trade only those in these minor market tendencies. If we take eur/chf pair (in Forex) it is not very volatile. Or a better example would be eur/gbp, especially during Asian session. A skunk would not squeeze a pip in these market conditions. However, you start picking gbp/jpy or gbp/usd pairs and you see a different picture. That�s what you are looking for when you want to catch and ride a micro trend. The same can be said about other securities: stocks, commodities, bonds and etf�s.

There are certain times when volatility unavoidably increases and one can expect that. In other cases you can never be sure what is in store for you. Those certain times are economic news releases that affect all financial markets and volatility spikes in almost all financial instruments.

What you need to do first is to select candidates for your trades. You will hardly be able to spread across all markets or trade multiple securities. You will have to select two or three and to monitor them more closely than others. I would look through other securities, but concentrate on two or three.

Secondly, you have to determine appropriate time frames on your charts. Since these are short term moves you are chasing, be sure not to pick out large time frames. In my subjective opinion, 5 and 15 minute charts are best to watch for this type of trading style.

Then, you will have to determine your profit and loss targets. Daily momentum (in Forex) usually lasts one session and then prices fall back in to ranges. It is quite often for prices to rally for about two hours and then lose direction. So, you have to be realistic about your expectation for the day. And always set your profits bigger than your stop losses.

Fourthly, you wait for the trigger. Triggers depend on a strategy you choose. You might wait for a breakout of some level, or crossover of moving averages or a break of some chart pattern and etc.

Fifthly, enter the market when you see the trigger and go with the flow. If the trade goes wrong you have your stop loss order to protect you. If it goes where you expected you will have bigger profit than your previously set loss.

Good luck in trading micro trend.

Thursday, 26 July 2012

7 random advantages of swing trading

In this post I want to continue the topic of swing trading and to cover the advantages of swing trading in financial markets. I think I will have to talk about disadvantages too. But that will be in my future posts. I have already mentioned in my previous post that I consider myself a swing trader. Let me give reasons why I have chose this way to trade the markets.

Firstly, you have bigger opportunities to have better risk/reward ratio. One should know that in order to have consistent profit in trading one must have his profits bigger than losses. A swing trader usually stays longer in the market and as if the price goes in the direction he has predicted he will have much bigger profit than his initial stop loss order is. If you compare that to scalping where a trader might close 20 consecutive trades profitably and then one bad trade wipes away all of his profit due to large stop loss and too small profit targets.

Secondly, it gives you a chance to take advantage of current momentum in the market. When markets move nowhere it is difficult to make money, but when they catch momentum and start running in one direction, it is quite easy to have winning trades.

Thirdly, you do not have to sit glued to your computer screen all day long. Doing a daily analysis for about half an hour is enough. Monitoring your open trades does not take a lot of time either.

Fourthly, it does not give you so much psychological stress and does not require so much accuracy, concentration and ability to react fast as is necessary in day trading. Stress handling is essential in trading and in swing trading you have an upper hand.

Fifthly, your trades are prepared and you are proactive rather than being reactive. You plan your trades and do not react to some rumors, news and other similar things that a day trader might have in mind while making his trades.

Sixthly, you do not have to worry about exact entry level. This is impossible for day traders. If you missed your entry level by 20 pips (in day trading) it is worthwhile thinking whether to take a trade or not. In long term trading this is never a problem as you are planning for a ride of 500 pips or more (in Forex). The same can be said about stock or commodity trading (sorry for ignoring you guys).

And lastly (it naturally flows out from point number six) you do not have to worry so much about exit levels. By this I mean that you do not have to make spontaneous decisions as exit levels are also pre-planned.

P.S. By the way, if you are trading Forex, you can also make money from interest (if you are go long on high yielding currencies).

Ok, hope you enjoyed the post.

Wednesday, 25 July 2012

Learn day trading

Contrary to most �day trading gurus� I do not hold to a position that day trading is easy. It is not. I know that some brokers in Forex market would allow you to download a demo version platform and then from second day bombard you with emails and messages about opening a mini or a standard real account. I think that the biggest mistakes of all who come to financial markets to trade is that they want to get rich quickly and without paying a painful price of learning. It can�t be true. Even pros who made millions in stocks or commodities will tell you that. I will give you examples of excellent traders and their mistakes when they started trading in my future posts.

For the time being we have to state very clearly that there are no short cuts to success in day trading. I do not believe there are short cuts in other areas too. Well, maybe winning a lottery could be one single short cut (ok, getting married to some wealthy guy (girl)). But that will not grow you as a personality. We need to be mature to handle large amounts of money. We do it by growing rich slowly.

In order to learn some profession go to university or special institutions and study there for years. And they pay a lot of money for that. Learning day trading is no different. It takes years to become successful and you do that by investing your time for learning, analyzing, reading books, watching videos, looking at charts, practicing, making mistakes, going through disappointments and finally reaching success.

No software or some ebook will make you a successful day trader. You will have to find your own way to success. I will try to do my best for you to get as much useful information on the topic as I can. Please, be patient with me.

I am planning to write more on the topic. In fact, I am going to write a series of articles on the topic. For a long time I simply concentrated on writing posts on trading news in Forex and swing trading. I am going to expand on various topics in my articles and write series on investing, day trading, swing trading as well as going deeply into other various trading strategies.

Sorry that this post was very abstract. I promise to give more examples and more interesting information in my future articles.

Check the post below on what I have already written on day trading:

Day trading strategies and rules for dummies

Is day trading for a living possible

Disclaimer

Tuesday, 24 July 2012

Investing introduction

Investing is one of the ways how you make money to make money. It can be done both actively and passively. As a beginner starts he will most probably be very actively involved in making a lot of investments operations. It should be a goal of any investor to employ his money in such a way that it would bring him stable passive income. It is by no means a get rich quick scheme. Real investors try to see an asset or security that is very cheap, but has potential to appreciate over time and they start buying those assets or securities (and keep them as long as fundamentals for those instruments are sound).

If you want to see and experience what real investing in financial markets such as Forex, stocks and commodities is all about I recommend trying innovative social investment platform of Etoro. Initial deposits are as low as a few hundred bucks. The best dealer I have heard of so far!
http://www.etoro.com/A41516_TClick.aspx

It is different from speculation, because an investor will not seek to profit from daily fluctuating prices and will not do so much guesses. An investor will ignore a lot of daily market fluctuations as he is more interested in long term picture, not some minor pieces of economic news that might influence markets to go up today and back down tomorrow (or vice versa). So, if you are interested in day trading you will probably not be an investor. Well, things might change over time, but a day trader seldom is an investor. (I consider myself to be a swing trader, which is closer to investing than day trading, but it is still not investing. I do make some investments from time to time).

Before you even start you will have to decide whether you are planning to do it all by yourself: all the analysis, reading, making predictions and then intelligent guesses as well as choice or you are going to delegate all of the above mentioned things for some investment company such as: hedge fund, pension fund or maybe a private �market guru�. Whatever you decide to do you will have to employ your money one way or another.

�Keeping your money in the sock� or a bank is not a very efficient way to preserve your money as inflation will decrease the value of it over the long run. I hope you see the importance of investing now.

This was my initial post on the topic and I am going to write a series of articles on the theme. So, keep on coming back to find out more. Have a nice day!

Monday, 23 July 2012

What are commodities

In my post I have often mentioned the word �commodities�, but did not fully explain what it means. Let me do it today. A commodity is a raw material or object that is either extracted from below the surface of the earth, such as: gold, silver, oil or simply comes out of the earth: grains, coffee, soybeans. We could also treat various kinds of meat as commodities as well as products that are produced from raw material. These can be: sugar, apple juice and etc. They can be bought in the Futures market where the goods are traded in contracts or some of them, such as sugar and the above mentioned apple juice as well as cocoa (and a few more) can be bought in your local store.

If you want to see and experience what real investing in financial markets such as Forex, stocks and commodities is all about I recommend trying innovative social investment platform of Etoro. Initial deposits are as low as a few hundred bucks. The best dealer I have heard of so far!
http://www.etoro.com/A41516_TClick.aspx

Anybody can trade commodities

Nowadays, any trader can trade these securities via some internet broker with the help of trading platform in the same way that stocks, currencies or bonds are traded. On the one hand, in this way you do not really buy physical materials (you do not get physical delivery of commodities). On the other hand, it is much better and more secure to trade these than stocks, currencies or bonds. Why? Because, unlike the other above mentioned securities these will never go bankrupt.

Why commodities are better than other securities?

Stocks of any company lose all value, because a company can go bankrupt. Currencies are very volatile and you have to be a pro to trade them. And bonds of a country can also lose value if a company goes bankrupt (which is very real at the moment (take Greece or Spain for example). This will never happen to commodities as they cannot go bankrupt. We will always need gold, sugar, rice and meat. So, if you want more security in your trade commodities is the place to go to.

However, you should remember that as any other financial instrument for investment commodities have become an object of speculation. They are trade on margin with high leverage in the futures market and if you are not careful you can lose a lot of money doing the same thing that experienced speculators and investors do.

Ok, I hope you understand the basic concept of a commodity. In my future posts I intend to go over each commodity (or maybe the most popular ones) and look at the specifics of it. In the meantime you can read more on the topic in Wikipedia.

Here is the article:

http://en.wikipedia.org/wiki/Commodity