Archive for the ‘Trading’ Category

Peculiarities of trading on Forex by weekdays

Wednesday, January 13th, 2010

As a rule, currency pairs’ movement on Forex market is directed, i.e. trend which is clearly determined after it finished. However, for more efficient work traders should know its direction at the beginning of a week.

Factors forming trend on Forex market:

Two factors can help you to determine the direction of weekly trend:

  1. Friday currency pairs movement on American stock exchange.
  2. Opening GAP (significant difference between the price at the end of previous and beginning of following day) at midnight from Sunday to Monday (Asian session). The result is currency pairs draw their resistance levels, breaking through one of them they turn it into support level, push off from it and will move in this direction the whole week.

Between American session on Monday and Asian session on Friday the channel of pikes resistance levels (by fractals and zigzags) determines the starting point of currency pairs breaking through up and down and as a rule, the whole week move in the preset direction.

The first and fundamental moment of currency pairs’ behavior on Forex market is their movement on Friday at American stock exchange. It is test through released news, strength and trend direction.

If extremely negative or positive news issue did not influence the currency pairs’ fluctuations on Forex market on Friday, it means that brokers and banks were not ready to such fluctuations and movement will start on Monday.

There are two variants of developments, if currency made abrupt jump in trend:

  1. New trend wave, for example 400 pips, which currency pairs moved in for the previous week, turns by Elliot into the first wave and the third wave in the same direction will be equal to 640 pips which is 60 % longer.
  2. Being at the beginning of medium-term trend wave from h4 to daily and weekly charts in this case pullbacks are from 23% to 62% – movement is trend-forming – new week – new jump along the trend.

If during the American session on Friday currency on Forex market did not start its movement it means that brokers can not determine the trend or movement direction for the next week and this direction will be known only on Monday.

We can make a conclusion from all above: depending on the Elliot waves’ behavior Friday determines the currency movement for the beginning of the next week.

  1. If potential trend strength is very big and there was leap in trend on Friday, then on Monday correction or reverse or news wave in trend is expected.
  2. If on Friday currency jumped against the trend, then this Friday movement will turn into correction or the first wave of reversed trend.
  3. If currency did not start its movement on Friday, it means we can expect the formation of movement on Monday or Tuesday.

One more Forex market peculiarity is analysis of news calendar for the next week. Events which can influence trend’s mood and all corrections should be pointed out.

There is also characteristics which was noticed by A. Elder – you should pay attention to the gap which appears at midnight to Monday – whether currency pairs of allies opened up or down and what direction currency will move after that at Asian trading session – as a rule, the same direction currency will move the next week.

To earn at Forex market, you should understand that intraday trend does not exist by itself.

The main conclusion which should be made by a trader: currency moves the main part of its distance before the news release and just a little movement can be noticed when news was officially confirmed in case it has justifies the forecasts.

To be right, trader should observe only two rules:

  1. It is necessary to use strong movement during the whole week in direction of published news.
  2. You should be ready for reverse if the news did no justify expectations.

Added by Alexey Talesnik,

InstaForex Clients´ relationship manager

Automated trading: Robots vs. analysis and research

Saturday, September 26th, 2009

For some reason people inclined to believe, that making deals professional traders rely on just their own skills, experience and foresight, and trading via expert systems is predestination of newbies, who have not acclimatized at the market and gotten hand in making decisions yet. But actually these systems – so called expert advisors – are being written mostly by gurus of the currency market for the purpose of optimization their work and increasing its effectiveness. So the fact of using autoassistant by trader can not point out if he/she has experience.

It is impossible to give an unambiguous answer to the question, what trading will bring more profit: manual or automated? As the saying goes, to each his own. But with no doubt it can be declared, that trusting a good advisor, you make your brainwork much easier (because robot is able to process the information in a fraction of a second) and save time for more pleasant occupations (because it is unnecessary to watch the market fluctuations during long hours). Moreover, utilization of mechanical trading systems lets exclude reflecting of psychologic factor on your bargaining, because experts act according to the distinct algorithm, and no any human emotion can make them deviate from it. Benefit of computer systems is also in that they are adjusted to take the maximum gain while risks are limited to the utmost.

But everywhere there are its hidden agendas, about which you should better learn beforehand than meet with them during the process of EA’s exploitation. First of all, you have not to rely on a robot completely, because every program is imperfect and able to make a mistake. Paradoxically, but a specialist coding software to automatize trading process can put human factor in it.

The second disadvantage of advisors is in the scantiness of processing the data by them: at the heart of making decision scheme there is estimation of a certain indicators’ readouts. Thus, EAs are allowed not to take into account rates of some indicators, which can be determinative in the concrete market situation. The consequence of that is a decrease of risks’ control by human, which is also imperfection of expert programs.

I should also mention a trader’s estrangement from the market among the defects of advisors. Automizing of bargaining let us handle without permanent analysis of currency movements. In this situation trader is keen on watching deals, which are made by a program, not his own trading.

The notion of “good advisor” implies not only impeccably written code, but in first turn, suitability of his usage for some or another trading instrument in one or another market state. If you want an expert system to make a good profit, it should be right for you. But how to find such a robot?

The best way is to code an EA by yourself and put the ideas of your trading strategy in it. If learning of the programming nuts and bolts is too hard for you, you should work for a while to study at least the main principles, which automated system follows during the process of making decisions. Profitability of chosen advisor directly depends on how good you will get on with it.

Do not let loud advertisement to impose the praised EA on you. Not always the gain is equal to the number of its preferences described in the promotional announcement. You should also be careful with the offers to download a mechanical trading system for free. Sometimes, resources providing such services break author’s rights of the real software creators.

Added by Daniel Shchagin,

InstaForex Clients’ relationship manager

You can also find useful articles from website http://mql4.instaforex.com, which is dedicated to expert advisors.

Currency Trader

Tuesday, September 8th, 2009

Forex-trader, producer, promoter, PR-manager, speechwriter are the termes signifying the types of activity or professions, that introduced new ideas in our life during the last 15 – 20 years. We heard about many of them, instinctively felt that such types of activity can exist, about others we have known at first. For example, I doubt whether somebody knew who are forex traders in the USSR times. Perhaps, nobody or just few people did, because you could be deportated for so called “curency operations”. Nowadays it is the prestigious, respected and interesting profession, allowing earn good money and feel yourself maximally independent.

The content of the trader’s job in general is the trading of securities: safety stock, loan securities, futures, options and so on. The curency trader’s job lies in a trading of “valuable stocks” – the currency which can be issued only by the goverment. Forex trader works at the particularized international currency market Forex, trading sessions at which are held 24 hours a day, 5 days a week. The essense of the trader’s job is making profit from rate exchange fluctuations. He/she can either buy one currency, for example US dollar at the lowest course, then sell it at the highest course, or make it inside out, that is to sell the currency at the highest course and buy it when the course is decreased.

On the one hand, all happenning at the internstional foreign exchange market is simple. Rates of exchange (eur/usd, eur/gbp, usd/jen) can move just in two directions – up and down. But to guess a trend of the movement is whole science and skill. And if you mistake, you will punished immidiately – you can loss all funds at you deposited and these can be the whole fortune. At that this money could belong to other people. That is why playful moods of people attended at the market in some way are possible, but decisive significance is belong to the activities of the professionals. While taking a decision about market operations, this kind of people bases on their skills, experience and, certainly, special psychological qualities, without which any diploma, even Harvard Diploma, is just clean paper to be hanged on the wall instead of drawing.

Any formal knowledge about currency trading is relative enough. Trading education, of course, increases competence, insure against the row of the evident mistakes, but does not guarantee anything special. Moreover, currency market is served by lots of analytical agencies, giving daily forecasts about “where the trend will go” – today, tomorrow or in the foreseeable future. They do this work on basis of so called fundamental and technical researches, which let to look at the market from macroeconomic positions and from the point of view of the market prices movement, supposing that market has already taken into account everything by itself. So, Forex forecasts of these agencies also do not guarantee much. And they can allow a bug, which can force a trader leave the market one day after being kicked.

Professional trader differs from amateur in that he does not toy with market, but play, in other words, works for winning. That’s is why being inclined to risk, he nevertheless needs to control his actions and make them (open position, close position, set stops) in the basis of rational decisions, deep enough research and understanding of the market. For getting stable profit he/she should have a well though-out system of regulations of behaving at the market. Overincomes are lot of either dilettante who is lucky today and is not tomorrow, or professional of the high level, deeply understanding the market and even having possibilities to influence on it. However, for the overwhelming majority working at Forex there is no any ability to affect the market, and they can earn only when they reckon on fitting into an intense trend appeared at rate exchange and guessed by them. Such is the trading psychology, that trader’s mastery also concludes in his/her indifferent relation to the market. There are no places at Forex for heat, emotions concerning the winnings or defeats, “blind” opening positions, relying on luck. Forex is not a casino and you should work at it with clear mind, nerves of steel and fast hands.

Article was added by Svetlana Milyushko,

News editor of  InstaForex

Fear and greediness on Forex

Tuesday, July 14th, 2009

InstaForex Company warns all traders that work at Forex currency market is not only highprofitable, but also highrisky business. Therefore, we advice every participant of the exchange market to follow the definite psychological canons. If you adhere to them or at least remember them, you will able distinctly decrease risk constituent that will have an affect on your work efficiency.

All emotions inherent in us – fear, greed, hope and etc. – in a fast rhythm of stock trading exert the determinative influence upon trader’s behavior. Weak and self-confident, avid and sluggish – all these people are doomed to become victims of the market. Awareness of your own capabilities and preferences, positive and negative qualities can help you to avoid bankruptcy. If you add to this faculty for appropriate appreciation of mental state and suitable behavior of market crowd, the success is guaranteed to you.

The driving force, which makes us work at speculative financial markets, is greed. If your greed is minor, you will not make a lot of deals, losing many good moments. In this case it is recommended to find another occupation that is more composed. If your greed passes all bounds, you will try hard to make as many bargains as possible, exposing yourself to the risk of unclear outlooks. You should better play in casino; it will be congenial for your nature and cheaper for your wallet. The result of avidity’s action will be motivation to the bargaining.

Revealing of are you playing or not under pressure of the greedy vehemence is possible with the help of the following signals. If a trader asks others: “What do you think about this?” If he tells others about his opened positions. If the trader does not have a plan of work, which is made before bargaining, – all this shows that the trader works most probably under pressure of the vehemence, not the mind. The best vehemence drug is making a plan of deals arranging (the financial activity plan).

Next factor advancing the trader to conclude deals a hope for making profit. Of course, activity goal is to earn money. But when the hope dominates under the calculation, you risk to overestimate your own abilities in the situation analysis and make out a mountain (your dream) of a molehill (the reality). The hope should be under the calculation and greed.

The fear appears when you get losses. Some are paralyzed by fear and they can not stop on time and lose everything. Others are forced by the fear to move and sometimes arrange interlocking deals that usually just quicken bankruptcy.

In the critical moment it is better to do something than let the grass grow under your feet and watch how beautiful dreams vanish with the quotations changing. At the same time oppose convulsive actions of a nervous choleric subject to reasonable and systematic steps for overcoming the crisis. Operate right according to the plan made by you before the position opening (accordingly before the fear emerges).

Some traders’ mistakes are unordinary at all. They are based on mental state of the bug. Often a trader, who got a great profit for the certain time frame, leans that all his trades during the passed time period was made at the DEMO-account. The given mistake can also be related to initial fear of real operating.

The article was added by Dmitriy Golynskiy, Clients’
relationship manager of InstaForex

Day-by-day trading

Thursday, July 9th, 2009

Everybody knows that Forex does not sleep and does not close. Since the rise in Asia till the sunset in New York bargains are made on Forex. Here is the question: what does Forex intraday trade constitute, if, in fact, trading sessions are held without breaks during the whole week? That is why technically intraday trade is a deal closed when trader does not sleep. Also a deal can be considered as intraday if it is sealed or closed during the trading sessions at the Asian, European or American stock markets.

Informally intraday trading is an indicator of trader’s mastery and experience level. Thus, for example, a newbie trader wants to jump into the market, win and go out. More experienced intraday trader prefers wait till the market comes to him. The newbie player takes intraday trade as alternative of the deep market analysis. Whereas, the experienced trader knows that intraday trade itself is a result of its analysis.

A history of your intraday trade plays an essential role. You see, starting analysis, probing a position where a price is testing a trading pattern, the key support or resistance levels of Fibonacci, trend line or moving average. In the ordinary sense, your next trading day takes its trading models reasoning from the previous days if not weeks.

Finding of your next intraday deals is the result of some decision-making rules application. The actual condition for trade signal receiving is waiting till the right confirmative moment. The next important step consists in deciding what direction the next deal will have. Will it be “buy” or “sell”? Choosing the direction of your next deal you do not try to forecast the market at all. You wait till the market comes to you itself.

The attractive feature of Forex market is concerned with plenty of opportunities for trading during a day.

Let’s try to determine how many good trading chances does intraday currency trader have during one day. Sensitiveness analysis would show that we have 6 major currency pairs (EURUSD, GBPUSD, USDCHF, USDJPY, USDCAD, AUDUSD), and at least the 2 most widespread cross pairs (EURGBP и EURJPY). This provides us with 8 pairs for intraday trade.

When we look closely at every graphical interval of a currency pair for getting a trading signal, we greatly increase potential for deals. Intraday trading at Forex market can often provide more trading opportunities than in a medium-term outlook. A market participant doesn’t has to catch any deal, he/she should choose carefully from the number of existing chances. A trader must sift out potential bargains, searching for patterns and choosing the key time interval. A great idea is to focus on the trend lines and channels in any time frames.

The newbie trader can make it a rule to determine trading opportunities using 4-hour time frame. This period is rather long so that the price could develop wider ranges acceptable for trading. During 4-hour time frame currency pairs often show ranges that provide the distance apart the resistance and support levels enough for reaching intraday trading goals.

In that way if we evaluate that we can intend on 2 trading chances for a currency pair during the given 4-hour period, then we can await in common 16 trading opportunities that can justify closing of the deal.

If we closely analyze these opportunities and choose only 1 deal during the 4-hour span of time, then we have more than enough to consider Forex intraday trading as serious chance.
There is nothing unordinary in cluster effect advent, when an operation with one currency pair is accompanied by operations with all other pairs, and suddenly nearly the same time numerous opportunities appear. Otherwise, distribution of the trading chances is not accidental, that is why patience in waiting of the best chance is the determinative skill.

Eventually, bargaining is a logical conclusion of analysis, but it is not spontaneous action. Whereas, there is no one common rule regarding what trading signal is to choose, we can diminish conditions in such a way that a deal will be rational and supported by combination of the technical factors.

Any day trading models, that can make you wish to arrange a deal, appear on Forex market. The experienced traders wait for deals with a high probability, if they are sure the deal will work. The mental state and optimism also can support trader’s confidence.

In the long run, profit and losses statistics will show if you follow up the deal or if you trade for win. Either you seek after grasping a quick gain for paying for your dinner at a restaurant or trade for mortgage payment, intraday payment on Forex has a potential for achieving different trading aims because of its market patterns.

Forex intraday trading offers a wide spectrum of trading opportunities, but it requires a lot from the trader. Currency exchange trader who wants to be successful, must be armed with the arsenal of technical instruments and have a set of the distinct rules.

The article was added by Evgeniy Galaev,

InstaForex Chief Manager of the Client Relations Department