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What is Forex Day Trading?
A popular form of trading which you may be aware of is trading on Foreign exchange, or Foreign currency. This is known, in short, as Forex. With numerous currency pairs in existence to trade, what about the strategy you put in place while trading? Day trading is a trading strategy which is one of the most common in the Forex market. What is Forex day trading, exactly?To get more news about forex day trading, you can visit wikifx.com official website.
What is Forex Day Trading?
Have you ever heard about intraday trading or Forex day trading? This article will give you a detailed explanation about Forex day trading for beginners.
This type of trading can be practised in any market but is most frequently applied to the Forex-, stock- and index markets.
Why?
The Forex day trader takes advantage of the small price movements within the day or session. The trader opens positions during the day or the session and closes these before the end of that day. The trader takes advantage of the market movements during the day session.
Therefore, these traders prefer liquid markets such as the currency-, stocks- or index markets.A prerequisite for success in intraday trading (or any other type of trading) is having sufficient market knowledge.
Some of those new to trading ask themselves, 'is Forex good for day trading?'. As you now know, because of its liquidity, many new traders start day trading in Forex. If you are interested in learning how to day trade in Forex, you can apply all the information you learn in this Forex day trading article to any market, including Forex.
How to Trade Forex Intraday?
The first step to getting started with Forex day trading is to gain access to the right Forex day trading tools. Many Traders ask, what platform is best for Forex day trading? What is the best Forex day trading software? Whether you are looking for the best Forex day trading platform in the UK or anywhere else in the world, MetaTrader 5 has you covered.
MetaTrader 5 is an elite trading platform that offers professional traders a range of exclusive benefits such as advanced charting capabilities, automated trading and the ability to fully customise and change this Forex day trading platform to suit your individual trading preferences.
Whilst intraday trading might be profitable it is not easy. Intraday trading, as any form of trading or investing, carries risks and should not be assumed without prior training and a vast understanding of the markets.
Experienced traders can attest to the fact that a trading plan which includes detailed risk management rules, is essential. Based on this plan, the trader scans the markets for trading opportunities, the best entry and exit points and assesses possible trading opportunities for a healthy risk/reward ratio.
Understanding the Dynamics of the Stock Markets in Intraday Trading
A thorough understanding of the market's dynamics and the main factors driving market movements is essential.
Intraday traders monitor technical and fundamental indicators to gain insight into the market sentiment and possible future price development. Solid insight into what moves the markets enables the trader to identify the most favourable opportunities and make informed trading decisions.
A Disciplined Approach for Intraday Trading
In all aspects of life, discipline, among other factors, is important.
Discipline: Trading without a systematic and disciplined approach is essentially gambling. Therefore long term success in trading without discipline is next to impossible.Monitoring: A trader must be able to monitor prices during certain periods without acting on emotions and making reckless decisions.
Strategy: follow a set trading strategy that clearly specifies the conditions for entering the market. The trader would scan the market based on the parameters set out in his strategy and would only act when a set up meets his rules.
When the markets move vigorously traders can be tempted to place trades to 'get in on the action' or be reluctant to enter into a position after a few losses. Acting in accordance with one's trading plan can be challenging and requires discipline.
Sometimes the market follows the course you expected, but just because you were able to predict a certain movement does not mean you should use your gut feeling as an indicator to place trades. Even though it can be painful to miss an opportunity you had anticipated, making random trading decisions will ultimately result in losses.
Best Forex Demo Account 2022
If you’re looking to trade forex online for the very first time – you might want to start off with a demo account. This will allow you to trade in live forex market conditions without needing to risk any capital. Then, when you feel comfortable with how currency trading works, you might then consider upgrading to a real money account.To get more news about forex demo accounts, you can visit wikifx.com official website.
Best Forex Demo Accounts Reviewed
Before you consider which forex demo account to use, it is important to remember that your chosen provider is also a brokerage site. In other words, you will need to open an account with a forex trading platform before you can use its demo facility.
As such, you need to look at factors other than just the demo account – such as tradable forex pairs, spreads, commissions, customer support, and more. After all, there is every chance that eventually – you’ll look to start trading currencies with real money.
1. eToro – Over Best Forex Demo Account
etoro review
eToro is now one of the most popular online trading platforms. With more than 17 million global clients, the broker is often the go-to provider for newbies.Not only is this because the trading platform is really easy to use, but eToro is home to a wealth of educational and training materials.
Plus, you’ll have access to a fully-fledged forex demo account facility as soon as you register. This mirrors the real eToro trading platform like-for-like, in terms of supported markets, real time pricing, and liquidity. The key difference is, of course, that you will be trading with paper money.
In fact, the forex demo account comes pre-loaded with a $100,000 demo fund balance – suitable for demo trading. In terms of supported markets, eToro gives you access to over 55 forex pairs. This covers majors, minors, and plenty of exotics, too. In addition to forex, eToro also supports stocks, ETFs, cryptocurrencies, indices, and commodities.
All supported assets – including forex, can be traded commission-free at eToro. This means that once you eventually start trading with real money, you’ll be doing so in a super cost-effective way. The eToro demo account can be accessed online or via the provider’s mobile app.
There is no time limit on this, so you can switch between the demo and real account any time you wish. An additional feature that some of you might be interested in is the eToro Copy Trading tool. As a social trading platform, eToro allows you to copy an experienced forex trader like-for-like – at an amount proportionate to what you invest.
Once you start trading forex with your own capital, the minimum deposit is just $200. The platform supports debit/credit cards, e-wallets, and bank transfers. eToro is heavily regulated, including an FCA license. Your funds are also protected by the FSCS.
2. Capital.com - Best Forex Demo Account for Beginners
new capital.com logo
On the one hand, experienced trading pros will look at the Capital.com platform as overly basic for their needs. However, if this is your first time trading forex - or any asset class for that matter, then the platform is likely going to be up your street.
Crucially, Capital.com is super easy to use, is free of complex jargon, and offers a free demo account facility to all users. This allows you to trade in a 100% risk-free manner until you feel comfortable testing your forex skills with real money. While learning the ropes, you might want to make full use of the many educational resources on offer.
3. Libertex – Forex Demo Account with Tight Spreads
Libertex is one of the most established forex and CFD trading platforms in the online space. Launched over 23 years ago, the platform is now home to almost 3 million traders.Perhaps the most attractive aspect of choosing this provider is that Libertex is a tight spread broker. This means that there is no gap between the buy and sell price of your chosen forex pair.
Plus, many of the markets offered by Libertex can be traded commission-free. In terms of its forex demo account facility, new traders could use a €50,000 paper trading balance to perform demo trading for free, which acts as a practice account. This is more than enough for you to get to grips with trading currency pairs in a risk-averse manner.
4. AvaTrade - Best Forex Demo Account for Mobile Trading
Although you are best advised to trade via a desktop device to get the most out of a demo account, some of you might also like the option of doing this through a mobile app.
If so, it's well worth checking out AvaTrade. This popular forex and CFD trading platform has been active in this space for over 12 years and it is regulated in 6 jurisdictions.
5. Forex.com – Best Forex Demo Account for Professional Traders
So far in this guide, we stressed that forex demo accounts are ideal for newbies that wish to learn the ropes of currency trading before risking any capital. However, we should make it clear that demo accounts are also suitable for experienced traders that wish to test or perfect a new strategy.
If this sounds like you, then Forex.com is well worth considering. As the name implies, this popular online platform is a specialist forex broker. It gives you access to more than 80 currency pairs - many of which come from the emerging markets.
An Introduction to Automated Trading
Automations in exchange trading have been around in one form or another since the 1980s, though the concept of rules-based trade strategies dates back even further, to the 1940s. As retail investing has exploded in popularity around the world, popular trading platforms have adapted to enable forex traders to write and publish their own automations or 'trading robots'. Likewise, the evolution of computer processing power led to the rise of more advanced forms of automation.To get more news about automated trading, you can visit wikifx.com official website.
Like many terms in retail investing, 'automated trading' covers a broad range of activities intended to make monitoring markets and executing trades faster and more efficient by outsourcing certain tasks to computer programs.
Basic automation might entail inputting a specific set of buy and sell parameters into your preferred trading software with a command to execute an order when those parameters are met. The sophistication of your automation largely depends on the complexity of your trading strategy and knowledge of programming, with more experienced traders adding increasingly narrow conditions and interlocking sets of commands.
Whether it’s a simple set of buy-sell price conditions or an elaborate combination of if-then commands, all automated trading relies on a computer program to perform each part of the trading process. Once you’ve input your order prerequisites, you’re free to step away from the screen while the faithful robot tirelessly scans the markets for opportunities, moving with lightning speed to act on your behalf when it spots a suitable trade.
As technology has evolved, automated trading has come to include other trading styles, such as algorithmic trading, social trading and copy trading.
Algorithmic Trading
Algorithmic trading allows traders handling large quantities of assets to manage trading costs by slicing orders that might otherwise be too large to execute efficiently under favourable conditions into smaller tranches.
Many traders use 'algorithmic trading' and 'automated trading' interchangeably, but they’re not quite the same. Traders can automate an algorithmic strategy to allow computers to handle each part of the transaction, including when to trade, however, the algorithm that gives the trading strategy its name only handles one component: the division of the order and its execution
Social and Copy Trading
Social trading and copy trading use specially created trading bots to send ‘signals’ to a trader when a particular investor places an order. A separate automation then mimics this order, in the case of copy trading, or simply observes and assesses if you’re a social trader.
Given its exceptional popularity, you might wonder just what makes automated trading so special.
For some traders, the practical benefits make it a better choice than self-managed strategies, leaving a trading bot to monitor the markets frees up valuable time for refining a strategy. Others like the idea of managing risk by simultaneously trading across multiple platforms. In general, however, the benefits of automated trading can be summarized as 'fast' and 'logical'.
Improved Trading Discipline
The same volatility that makes forex a profitable trading environment can wreak havoc on your trading strategy if you allow emotion to take over. Watching the markets rise and fall, glued to your screen and scanning frantically for an opportunity to enlarge your profits or mitigate your losses, you’re likely to trade impulsively and abandon your carefully-planned strategy. Or perhaps you can’t bring yourself to execute an order, even though every indicator says you’ll win the trade.
Because your participation in the trading process begins and ends with developing a strategy and instructing or creating a trading robot to act on your behalf, automated trading eliminates the risk that you’ll deviate from the best-laid plans due to anxiety or over-optimism.
More Refined Strategies
The only way to test a strategy with manual trading? Put your money in the market and track your progress over time in hopes of identifying patterns in your wins and losses. It’s an expensive and time-consuming learning process that requires you to consciously sit out opportunities that arise or hold tight during downturns, both of which are emotionally taxing.
Automated trading, on the other hand, offers the option to see how your trading rules would’ve performed against historical data. Backtesting not only offers you a risk-free opportunity to refine the rules you apply to your trades, it also makes it much easier to assess what’s working in your strategy and what’s not. Without the 'noise' of one-off trades you couldn’t help but execute and months, if not years, of historical market data to use as a testing ground, you have access to clear, actionable information without risk.
Risk Mitigation
Trading robots operating on multiple accounts, or even multiple platforms, can help you to control the inherent risk of trading in highly volatile markets in several ways. Without the need to constantly monitor markets and input orders yourself, you’re free to trade across several asset classes simultaneously, distributing risk as you see fit. Alternatively, you can assign different strategies to individual trading robots in the same asset class, ensuring that you’re always on the right side of a market trend.
Faster Order Execution
One of the first things novice traders learn is seconds count. The adage that time is money was never more accurate than in the context of trading forex, where entering or exiting a trade at the right millisecond can mean the difference between significant profits and just breaking even.
Automations react immediately to market conditions, moving to execute orders as soon as your desired preconditions are met. While the human brain needs to recognize those conditions, process them and then signal your body to take action, the trading bot not only opens your position seamlessly but generates the necessary orders to protect your investment or execute the trade. All in less time than it takes a human trader to blink.
AvaTrade Trading Platform Overview
AvaTrade's holding company is registered in the British Virgin Islands. The firm is headquartered in Dublin, Ireland.To get more news about avatrade pros & cons, you can visit wikifx.com official website.
AvaTrade operates worldwide but operated through regional offices. They serve Australia, South Africa, Singapore, Japan, France, Italy, Spain, Mongolia, China, Abu Dhabi, and more. They serve more than 200,000 active customers and execute 2 million monthly trade orders.
AvaTrade is a platform that provides hundreds of CFD products and a limited number of currency pairs for traders located in more than 120 countries through its two proprietary platforms - Webtrader and AvaOptions - and third-party platforms such as MetaTrader 4 and 5.
The company and its subsidiaries are regulated by various tier-1 and tier-2 jurisdictions such as the Central Bank of Ireland, the Australian Securities and Investments Commission (ASIC), and the Japanese Financial Services Agency (FSA).
Compared to its rivals, AvaTrade's portfolio of available stock, index, and forex CFD is smaller. Their fees for popular instruments and currency pairs such as EUR/USD are a bit higher than the average.Both the proprietary and third-party platforms supported by AvaTrade - MetaTrader 4 and 5 - are excellent, and their features are attractive. No fees are charged for deposits and withdrawals.
AvaTrade's platforms include a web-based and mobile trading app called Webtrader. WebTrader is the company's proprietary trading platform, along with a platform AvaOptions, designed for forex CFD traders.
The web-based platform of AvaTrade, Webtrader, has a user-friendly interface- It allows traders to browse and select the CFDs offered by this trading platform with ease. Prices are displayed next to their ticker symbols along with buy and sell buttons. Traders can tag their favorite securities as some sort of shortcut.
The search function allows the user to search by symbol or name of the asset. The reporting feature provides all the relevant information traders need to analyze their historical transactions. This information includes the market price, realized gains or losses, fees paid, and cost basis.It is important to note that the interface cannot be customized. None of its elements can be moved to suit the users' preferences.
Two-step logins and price alerts are not available. This is a bit disappointing as most platforms send notifications when the price of a security reaches a certain level.
Desktop platform
The desktop platform is similar to the MetaTrader 4 platform. The upside is that it allows for alerts and notifications. Compared to the web-based version, the design of the desktop platform is not as nice. The customization of charts and the interface itself is enabled. The reports section is good, similar to the web-based version. No two-step login is available for the desktop version.
The mobile version of AvaTrade has a good-looking user-friendly interface. It offers a lot, considering the narrow screen space of a mobile phone. The search function works great, and the same goes for the reports function.
There's a unique feature that can be accessed via the mobile app. This is the AvaProtect order, designed to prevent financial losses at an extra fee. AvaOptions has a mobile app version, and they are available for iOs and Android.
AvaSocial - Copy Trading
Avatrade copy trading integrates through DupliTrade and Zulutrade. This ranks them among the best copy trading brokers such as Pepperstone and eToro. Avatrade launched AvaSocial in the UK, with which traders can follow and copy the best traders.
AvaTrade Trading Fees
AvaTrade Trading fees and spreads are competitive and in line with the industry average. The average spread charged S&P 500 index CFD is 0.5, while the average spread charged for trading a Europe 50 index CFD is one pip. The cost of the EURUSD pair is 0.9 pips, right around the industry's average.
To estimate the cost of trading with this broker, we have assumed a hypothetical $2,000 position held for one week with leverage of 20:1 for stock index CFDs and 5:1 for individual stock CFDs.
AvaTrade Research
AvaTrade research tools are good. It includes a news feed, an economic calendar, an idea hub, and many other resources. These are embedded into the broker's platforms - Webtrader, MetaTrader, and AvaOptions.
For trading ideas, AvaTrade offers a section known as ‘Analysts View' or ‘Forex Featured Ideas'. Traders can find hints into potential trading signals spotted by other traders for most of the financial assets covered by the platform.The economic calendar covers a wide range of economic and corporate events around the world, rating them based on the potential impact they may have on the financial markets.
AvaTrade news feed is one of the best out there. It features an excellent visual interface that tracks the number of publications per day, the orientation of such news - positive/negative - and the type of news covered. This feature is known as ‘Market Buzz'.
Difference Between Forex Demo and Real Account
One of the primary reasons people prefer to go for demo forex trading is because it allows you to trade with virtual money.To get more news about forex demo and real accounts, you can visit wikifx.com official website.
It helps in training yourself and understanding trading before you choose to invest your hard-earned money. Forex brokers provide demo accounts to the clients. Clients who are new to the industry can learn and improve themselves by trading with these accounts' aid.However, according to studies, even after a person has earned ample experience after trading with these demo accounts, things might turn out to be different as they begin to change with the aid of real funds. Trading with virtual money is more accessible than trading with real money, as you do not need to risk anything.
What is a demo account?
Forex demo account refers to a trial account where investors use a specific amount of virtual money when they are new to trading. It is regarded as an educational tool and provides a risk-free start to trading.In addition to this, you can test your strategies without putting anything to risk at all. Trading in the demo account provides many good services to newbies who otherwise would have lost a lot of real money.
As you choose a demo account, you can learn the tips of watching the market closely. It also offers a better feel and understanding of how the forex market operates without exposing yourself to any risk. In addition to this, it also helps you in learning the latest features of the trading account.
What is a live account?
In the forex live account, you will gain success in depositing and trading with real money. Hence, any profit or loss is going to be accurate as you start to use live accounts. If you are willing to start trading with live accounts, it is necessary to validate them first. However, many forex brokers allow you to deposit the money and begin trading without any validation process.
On the other hand, some people might ask you to verify the account and to do so; you need to address documents and upload Identity proof before you deposit any money and start live trading.
Trade-related differences between live account and demo account
Specific trade-related differences exist between demo and live accounts, resulting in many performance differences while trading. For example, when using a demo account for trading, no emotional commitment is evolved as you are not putting any real money at stake. However, when you are using a live trading account, the traders might experience a psychological block. The fear and worry of losing real money can be distracting and robust.
You will be surprised to know that trading psychology is regarded as one of the primary factors that significantly differentiate between live and demo accounts. As your money is not at a stake while using the demo accounts, you can think clearly and become unemotional and rational. But, as soon as you start using live accounts, everything changes.
However, it is possible to get over these psychological roadblocks and train yourself to remain unemotional and rational. To overcome the transition period, you need to give yourself some time. It is recommended to start trading on live accounts by investing in some accounts and similarly practice a while as you did with your virtual accounts.If a person fails while trading with demo accounts, there are no actual losses. However, the trader might develop certain discipline-related habits, which might cost a lot of money during live trading.
Traders tend to increase risks or overtrade while trading in demo accounts as no stakes are involved. However, it would help if you kept in mind that such behaviors can have serious negative consequences as they plan to use live trading.
There is a wide array of execution issues that account for performance differences between demo and live accounts. For example, a Forex broker generally does not requote a price while using a demo account. However, as they are using live accounts, they might requote the prices often.
The dealing spreads and price feed of demo forex trading are also different from live accounts. In a demo trading account, the broker might go for executing demo stop losses. However, there are increased risks of a considerable amount of slippage when it comes to real trading.
If specific broker errors arise when trading with a live account, it takes a good amount of money, effort, and time to resolve them as they reach out to the forex broker's customer service department.
Forex Vs Stocks: Top Differences & How to Trade Them
Traders often compare forex vs stocks to determine which market is better to trade. Despite being interconnected, the forex and stock market are vastly different. The forex market has unique characteristics that set it apart from other markets, and in the eyes of many, also make it far more attractive to trade.To get more news about forex vs. stock, you can visit wikifx.com official website.
When choosing to trade forex or stocks, it often comes down to knowing which trading style suits you best.But knowing the differences and similarities between the stock and forex market also enables traders to make informed trading decisions based on factors such as market conditions, liquidity and volume.
1) Volume
One of the biggest differences between forex and stocks is the sheer size of the forex market. Forex is estimated to trade around $5 trillion a day, with most trading concentrated on a few major pairs like the EUR/USD, USD/JPY, GBP/USD and AUD/USD. The forex market volume dwarfs the dollar volume of all the world's stock markets combined, which average roughly $200 billion per day.
Having such a large trading volume can bring many advantages to traders. High volume means traders can typically get their orders executed more easily and closer to the prices they want. While all markets are prone to gaps, having more liquidity at each pricing point better equips traders to enter and exit the market.
2) Liquidity
A market that trades in high volume generally has high liquidity. Liquidity leads to tighter spreads and lower transaction costs. Forex major pairs typically have extremely low spreads and transactions costs when compared to stocks and this is one of the major advantages of trading the forex market versus trading the stock market. Read more on the differences in liquidity between the forex and stock market.
3) 24 Hour Markets
Forex is an over the counter market meaning that it is not transacted over a traditional exchange. Trading is facilitated through the interbank market. This means that trading can go on all around the world during different countries business hours and trading sessions. Therefore, the forex trader has access to trading virtually 24 hours a day, 5 days a week. Major stock indices on the other hand, trade at different times and are affected by different variables. Visit the Major Indices page to find out more about trading these markets-including information on trading hours.
4) Minimal or no commission
Most forex brokers charge no commission, instead they make their margin on the spread - which is the difference between the buy price and the sell price. When trading equities (stocks) or a futures contract, or a major index like the S&P 500, often traders must pay the spread along with a commission to a broker.
Forex spreads are quite transparent compared to costs of trading other contracts. Below you will see the spread of the EUR/USD highlighted inside of the executable dealing rates. The spread can be used to calculate the cost for your position size upfront prior to execution.
5) Narrow focus vs wide focus
There are eight major currencies traders can focus on, while in the stock universe there are thousands. With only eight economies to focus on and since forex is traded in pairs, traders will look for diverging and converging trends between the currencies to match up a forex pair to trade. Eight currencies are easier to keep an eye on than thousands of stocks.
How can I transition from forex trading to stock trading?
To move from forex to stock trading you will need to understand the fundamental differences between forex and stocks. When you boil it down, forex movements are caused by interest rates and their anticipated movements. Stocks are dependent on revenue, balance sheet projections and the economies they operate in amongst other things. Find out more on how to transition from forex to stock trading.
Are there any differences between forex and commodities trading?
Forex and commodities differ in terms of regulation, leverage, and exchange limits. Forex markets are a lot less regulated than commodities markets whilst commodities markets are highly regulated. In terms of leverage, it exists in both the forex and commodities market, but in the forex market it is more popular due to greater liquidity and lower volatility (leverage can amplify losses and gains).
Also, like stocks, commodities trade on exchanges. Commodity exchanges set roofs and floors for the price fluctuations of commodities and when these limits are hit trading may be halted for a certain time depending on the product traded. The forex and stock market do not have limits that can prevent trading from happening.
What are forex signals?
Forex signals can be defined as "buy" and "sell" suggestions and, in conjunction with technical and fundamental analysis, they provide information on the best time and price to enter a trade and profit from the predicted move in price.To get more news about free forex signals, you can visit wikifx.com official website.
Understanding when to open or close a trade is key to successful forex trading and is a crucial part of learning how to trade currency pairs. Professional traders have years of experience analysing chart patterns and scrutinising current events and news announcements to help them assess when to open or close a forex position. Technical analysts will look for signals to guide them when entering and exiting trades.
The main difference between manual and automated forex signals is that manual signals are generated by a person who often is a professional trader. Automated forex signals, on the other hand, are generated by computer software that analyses the market price action based on algorithms.
Free and paid forex signals
Some providers offer free signals (either as a trial or for an unlimited period of time), while other providers offer paid forex signals.
Entry and exit forex signals
Some signals providers only give entry signals, meaning that they provide a signal on when to open a position. Others provide only exit signals, meaning that they provide a signal on when to close a position.
Algorithmic forex signals
Some traders use trading robots or Expert Advisors (EAs) for their forex signals. An EA is a set of rules or an algorithm that places trades when specific criteria are met. EAs can be created by anyone with enough technical knowledge and are often sold online. Find out about automated trading with the MT4 platform.
Benefits of forex signals
They are time efficient. In forex trading, researching and analysing are very important skills that require a lot of time. With forex signals, traders don't have to necessarily spend time analysing charts and patterns. However, you should still do your own independent research and not rely solely on signals.
They help to minimise risks. If used correctly, forex trading signals can help you reduce the risk of losses by suggesting the right time to either enter or exit a trade and consequently where to place your stop loss.
It is a quick learning curve. Forex signals can help traders to understand how these signals correspond to their trades.
Are forex signals reliable?
With a trusted forex signals provider, forex signals can be very reliable source of information. However, it should be noted that, there are some unscrupulous and less reliable services out there so it is important to exercise diligence when using a forex signal provider.
The biggest disadvantage of using trading signals is that the forecast is not always accurate. However, this risk can be minimised by taking some precautions, such as training and practise. Clients of CMC Markets can trade with £10,000 worth of virtual funds on our demo account, without risking real money. Register for a demo account now.
6 BOLLINGER BANDS® TRADING STRATEGIES + VIDEO
Bollinger Bands are a powerful technical indicator created by John Bollinger. The bands encapsulate the price movement of a stock, providing relative boundaries of highs and lows. The crux of the Bollinger Band indicator is based on a moving average that defines the intermediate-term "trend" based on the time frame you are viewing.To get more news about bollinger band, you can visit wikifx.com official website.
But how do we apply this indicator to trading and what are the strategies that will produce winning results?
In this post we'll provide you with a solid foundation on the bands, plus six trading strategies you can test to see which works best for your trading style.
Most stock charting applications use a 20-period moving average for the default settings. The upper and lower bands are then a measure of volatility to the upside and downside. They are calculated as two standard deviations from the middle band.
In essence, the Bollinger Band indicator was created to contain price the vast majority of the time. In fact, Investopedia claims that the bands actually contain the price 90% of the time [2].
If you are new to trading, you are going to lose money at some point. This process of losing money often leads to over-analysis. While technical analysis can identify things unseen on a ticker, it can also aid in our demise as traders.
In the old days, there was little to analyze. Therefore, you could tweak your system to a degree, but not in the way we can continually tweak and refine our trading approach today.
We make this point in regard to the settings of the bands. While the configuration is far simpler than many other indicators, it still provides you with the ability to run extensive optimization tests to try and squeeze out the last bit of juice from the stock.
The problem with this approach is that after you change the length to 19.9 (yes people will go to decimals), 35 and back down to 20; it still comes down to your ability to manage your money and book a profit.
Our strong advice to you is not to tweak the settings at all. It's better to stick with 20, as this is the value most traders are using to make their decisions, versus trying to look for a secret setting.
#1 STRATEGY - DOUBLE BOTTOMS
The first bottom of this formation tends to have substantial volume and a sharp price pullback that closes outside of the lower Bollinger Band. These types of moves typically lead to what is called an "automatic rally." The high of the automatic rally tends to serve as the first level of resistance in the base building process that occurs before the stock moves higher.
#2 STRATEGY - REVERSALS
Another simple, yet effective trading method is to fade stocks when they begin printing outside of the bands. We'll take this one step further and apply a little candlestick analysis to this strategy.
For example, instead of shorting a stock as it moves up through its upper band limit, wait to see how that stock performs. If the stock goes parabolic or gaps up and then closes near its low while near the outside of the bands, this is often a good indicator that the stock will correct on the near-term.
#3 STRATEGY - RIDING THE BANDS
The single biggest mistake that many Bollinger Band novices make is that they sell the stock when the price touches the upper band or buy when it reaches the lower band.
Bollinger himself stated a touch of the upper band or lower band does not constitute a buy or sell signal. In his book, John states, "During an advance, walking the band is characterized by a series of tags of the upper band, usually accompanied by a number of days on which price closes outside of the band."
#4 STRATEGY - BOLLINGER BAND SQUEEZE
John created an indicator known as the band width. This Bollinger Band width formula is simply (Upper Bollinger Band Value - Lower Bollinger Band Value) / Middle Bollinger Band Value (Simple moving average).
The idea, using daily charts, is that when the indicator reaches its lowest level in 6 months, you can expect the volatility to increase. This goes back to the tightening of the bands that I mentioned above. This squeezing action of the Bollinger Band indicator often foreshadows a big move.
The Foreign currency Exchange (FOREX) market is the largest and most liquid financial market in the world. The average daily trade in the global FOREX markets exceeds US$1.9 trillion (Source: the Triennial Central Bank Survey of Foreign Exchange and Derivatives Market Activity conducted by the Bank for International Settlements (BIS) in April 2004, and published in March 2005). These huge funds are traded by governments, banks, and large institutions. For comparison, the biggest stock market on the Earth - NYSE Group (The New York Stock Exchange), has a daily trading volume of approximately $86.8 billion (Source: NYSE Group, Inc. 2006). FOREX has a 18.4% average growth rate per year since 1989. It offers trading 24 hours a day, five days a week, non-stop over Internet. This kind of massively liquid and long uninterrupted trading hours mean that under normal conditions there is no problem entering or exiting a trade.To get more news about forex robots trading, you can visit wikifx.com official website.
But, in this huge market, as the story goes, at least 90% of new FOREX traders lose all their money within their first 3 months of trading. Why? Most losing traders who inquire about FOREX trading are quite intelligent, they just lack the right tools, the "Secret Weapons" to win. They are not beaten by other traders, they simply are beaten by themselves, by humans' weaknesses.
1. What is the first big weakness of human beings? if I say it should be "greed", is there anybody will disagree? Many times we have got 1% profit, but we feel it is not fat enough. We want more, 2% or 3% will be better. While the profit really goes to 3%, we will think how about 10%? Not enough forever. But the market is so volatile, especially in Forex market, we often encounter this depressive situation: profit turns into negative from positive. and this kind of depression happens again and again.
2. Fear. All people have fear. In Forex trading, currency rate is easily jumping or dropping hundreds of pips. Few of people can make sure how the market will go. In Forex market, people all use leverage to trade, from 50:1 to 500:1, leverage will enlarge the profit or loss from 50 times to 500 times. Leverage is the wonderful feature of Forex, and it lead fear into people's heart too. If the market goes against people, big drawdown comes, their fear comes too. Is there anybody not scary to lose money? Under the pressure of fear, people easily and often make wrong decisions, stop loss too early, then regret soon.
3. Lack of confidence. Seems better than fear, huh? But it is still not a good thing. Many times human traders are so happy once they see a little bit profit in their accounts. They are worrying what if the profit turns into loss? People always take a tiny profit and run, then regret while they see the market goes further and further along the right track. If they were confident, they would have made ten times or even a hundred times of profit.
4. Hesitation. Not only newbies, but also old-hands easily hesitate to act in Forex market. You've probably heard the saying "past performance does not predict future performance". Even a very experienced trader who has made many successful trades in his/her history, while he or she is facing a new situation, needs thinking twice before making a so simple decision: Buy or Sell? For new traders or amateurs, they need longer time to think, and this kind of hesitation always leads them to confusion and missing the best and fleeting chance.
5. Weariness. How many people can keep working for 24 hours? No sleep, no rest? How about 48 hours, 72 hours, etc? Even an iron man can not use his eyes watching computer monitor, his brain thinking fast changing questions and his hands calculating complex formulas, day and night, 24 hours a day, 6 days a week, non stop. Especially, no mistakes allowed!
6. Negligence. Have you ever got trouble just because of a small negligence? such as took a wrong bus, missed an exit on highway, dialed a wrong number, misunderstood boss' order, ignored a no-parking sign, omitted a whole page of questions in an examination, left resume at home while a vital interview, misspelled a keyword in a quote form for a VIP customer, etc. Hi, man, when was the last time you forgot your mama's birthday, or worse, the wife's, or the worst, girl friend's? Mama always forgive your negligence. Wife... well, it depends. Girl friend? Huh, wish you good luck.
7. Lack of discipline. Humans always think that we are smarter than machines. Sure we are. Not only we are smarter, we have freedom too. But everything has its nature, character, and rules. Rule means discipline. If we just feel smart and free in Forex trading, making decisions based on our feelings or knowledge only, and ignore discipline, there will be endless disasters waiting us ahead. Forex trading is like fighting in war, soldiers can not survive in war without discipline, neither can traders in Forex market. While we have to stop loss we must cut off and run, in spite of how bloody and painful it is, when we must take profit we can not hate the profit is too small. Discipline is discipline, perhaps some smarties can win a while, but only those people can keep obeying discipline forever can win forever.
8. Inconsistency. Long term or short term? buy or sell? prosperity or depression? over bought or over sold? high or low? support level or resistance level? fundamental analysis or technical analysis? including automated trading or manual trading? etc. There are too many inconsistent news, facts, information and methods, strategies in Forex market, easily cause human traders make inconsistent judgments and decisions. And these inconsistencies will cause only one same result: failure!
Learn to Trade Forex
With benefits like 24-hours trading, high liquidity and low transaction costs, the foreign exchange market, or forex market, attracts experienced and novice traders alike. The massive growth of the currency market has seen many traders jump in before they've taken the time to learn to trade forex and this can be a mistake. If you want a quick but comprehensive understanding of what is forex, how the market works and why it's important to open a demo account, then read our comprehensive guide on how to trade forex.To get more news about forex education, you can visit wikifx.com official website.
Forex Trading for Beginners
Like most specialised industries, forex trading comes with its own jargon and set of terms. There are certain forex trading concepts you should be familiar with to understand the dynamics of this unique market, identify opportunities and trade successfully.
Currency Exchange Rates: Bid, Ask and Spread
To understand what is forex, you may first need to open a demo account and understand the concept of currency exchange rates. The price of a currency is always quoted in terms of another currency. For instance, EUR/USD would be the price of a Euro expressed in terms of the US dollar. In other words, it represents the number of US dollars you can exchange for €1. If for example, the EUR/USD is 1.1749, it means €1 can be exchanged for US$1.1749.
You may notice, however, that in forex trading, price quotes on trading platforms are showed with two rates not just one. For instance, the EUR/USD exchange rate may be displayed like this: 1.1749 / 51 or 1.1749 / 1.1751. The first figure (to the left) is known as the bid price and represents the maximum price at which the market is willing to buy the US dollar. So, if you sell €1, you will receive US$1.1749. The second figure (to the right) is known as the ask price and represents the minimum price at which the market is willing to sell the US dollar. So, if you buy €1, you will need to pay US$1.1751.
The lower, or tighter, the forex spread, the more liquid a market is said to be and the lower the implied cost of trading. Spreads in stock trading are typically much higher than spreads in forex trading.
What is a Forex Trading Platform?
As a beginner in forex trading, one of your first decisions is which forex trading platform to choose. The trading platform is the software that gives you access to the forex market and seamless trade execution. A robust forex trading platform facilitates fast and safe trading, while also providing various options for trade analysis, customisation and automated trading.
The award-winning Orbex MT4 platform has an extremely user-friendly interface with highly powerful software running in the background. The platform offers advanced real-time charting options, free forex signals, high flexibility and enhanced security and stability.
Trade from the comfort of your home, with the Windows or Mac version of the Orbex MT4 platform, or trade on the go by downloading the Android or iOS version. The cloud-based Orbex WebTrader app provides free, instant and secure access to your account from anywhere and on any device.
Leverage in Forex Trading
Leverage is essentially a loan that brokers offer traders, so they can place trades that are of a higher value than the funds they currently have in their trading account. As a beginner in forex trading, it's critical to understand the benefits, as well as the pitfalls, of leverage.
Leveraging, also known as trading on margin, gives you the opportunity to multiply potential profits, providing the market moves in your favour. Remember there is no guarantee that the market will, in fact, move in your favour. If the market moves in the opposite direction, leveraging will multiply the losses you incur. Forex leverage is therefore a powerful tool, but one which needs to be used with caution.
Risk Management in Forex Trading
The forex market offers significant opportunities to make profits. However, every opportunity is accompanied by a degree of risk. While risk cannot be completely removed, there are some risk management techniques that traders can use to hedge risks. These techniques are particularly important when using forex leverage.
Stop-Loss Orders
A stop-loss order is placed to minimise losses in the event the currency exchange market moves against you. The exchange rate of a currency pair moves up and down continuously throughout the day, even within a fraction of a second. It is unwise to exit a trade at the slightest drop in the exchange rate of your currency pair. However, if the rate drops below a certain point, you may choose to exit. With online forex trading, you can set the currency rate at which to exit the market well in advance. This is exactly what a stop-loss order allows you to do. Essentially, a stop-loss order acts as a safety net to minimise your losses.
When you open a position, or set a pending order, you can also specify the stop-loss price. If the forex market moves against you and the exchange rate reaches the low price you've specified, the trade is automatically closed, limiting your losses.
Take-Profit Orders
It's easy to feel optimistic when the market is moving in your favour. However, in any form of currency trading, it's important to make objective decisions, based on logic and discipline. A take-profit order can be considered as a predetermined exit strategy that comes into effect when the market moves in your favour.
Similar to a stop-loss order, a take-profit order is executed automatically at a price specified by you. The difference being, a take-profit order is executed at a currency rate better than the current market rate, while a stop-loss order automatically closes a trade at a currency rate worse than the current market rate. This means that your trade closes on a high if you are not at your desk and able to stop it before it falls.