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Risk Management FXmentor

Risk Management FXmentor Know Where You Live !
By :Peter R. Bain || http://forexmentor.com/risk/

Risk Management FXmentor

Operating Instructions and Pertinent Information:

The following pages of this manual contain examples of each worksheet and comments that explain the various entry fields, output results and Hot Spot actions for the “Know Where You Live” Risk Management software product. It would be beneficial for you to page through the Adobe Acrobat® PDF manual and read each comment prior to watching the videos.

Comments: 

Each spreadsheet cell that contains a small Red Triangle in the upper right corner contains a comment relating to an associated cell or range of cells.

When your mouse floats over the top of a cell with a Red Triangle the comment pop-up box will 
appear to the right of the cell.

Hot Spots: 

Whenever your mouse floats above a Hot Spot the cursor will change to indicate that you have the option of clicking on the underlying spot to perform a helpful action.

As an example by clicking on the center of the title page you will move to the first active cell on “Risk % Goals and Results” worksheet.

Redundant Comments: 

To reduce redundancy we have left out duplicate entries for related cells in a range (i.e. I have included a section of the worksheet titled “Tracker Cur A”. One comment serves to provide an explanation for the next five cells that are named “Scale Out”).

How to interpret ICHIMOKU

Ichimoku Kinko Hyo Technical Indicator is a very useful tool as it provides a good overview of the market in one glance.

Timeframes to use: all.

Main elements:

• There are 2 moving averages:
  1. Tenkan-sen (red line) or conversion line – it’s a short-term MA (usually 9 periods).
  2. Kijun-sen (blue line) or the base line – it’s a longer-term MA (usually 26 periods).
• There are 2 more moving averages which are shifted forwards and shown ahead of the prices:
  1. Senkou Span A (short-term MA).
  2. Senkou Span B (longer-term MA).
     The space between these lines is painted with color and is the Cloud (or Kumo).
• There’s Chinkou Span (green line) – closing price of the current candle shifted backwards.

How to interpret:

Things to watch:

• Where are the prices against the Cloud?
  • If the price is above the Cloud, its upper line forms the first support level, and the second line forms the second support level.
  • If the price is below the Cloud, the lower line forms the first resistance level, and the upper one forms the second level.
  • If the price is inside the Cloud, we have a sideways market. The upper border of the Cloud acts as resistance, and the lower one – as support.
• Where do Tenkan-sen and Kijun-sen go?
  • Tenkan-sen is used as an indicator of the market trend. If this line increases, there’s an uptrend; if it decreases, there’s a downtrend. When it goes horizontally, it means that the market has come into the channel.
  • Kijun-sen is used as an indicator of the market movement. If the prices are higher than this line, they will probably continue to increase. When the price traverses this line, the odds are that trend will change.
• What color is the Cloud?
  • If Senkou Span A is above Senkou Span B, the Cloud is bullish (usually painted lighter) – there are more bulls at the market.
  • If Senkou Span A is below Senkou Span B, the Cloud is bearish (usually painted darker) – there are more bears at the market.
  • If Cloud is thin and horizontal – market’s most probably trendless and sideways. The market’s characterized by uncertainty and indecision.

Signals to watch:

• Tenkan-sen and Kijun-sen
• ‘Golden cross’ – bullish signal that occurs when Tenkan-sen crosses Kijun-sen to the upside. The signal can be strong (buy!) when this cross is above the Cloud; neutral when it’s inside the Cloud and weak when it’s below the Cloud.
• ‘Dead cross’ – bearish signal that occurs when Tenkan-sen crosses Kijun-sen to the downside. The signal can be strong (sell!) when this cross is below the Cloud; neutral when it’s inside the Cloud and weak when it’s above the Cloud.
• Bullish signal when the price crosses Kijun-sen from below to above. The signal can be strong(buy!) when this cross is above the Cloud; neutral when it’s inside the Cloud and weak when it’s below the Cloud.
• Bearish signal the price crosses Kijun-sen from above to below. The signal can be strong (sell!)when this cross is below the Cloud; neutral when it’s inside the Cloud and weak when it’s above the Cloud.
• Ichimoku Cloud
  • If Cloud switches from bearish to bullish state – bullish signal. The signal can be strong is if the current price is above the Cloud; neutral if the current price is inside the Cloud; weak the current price is below the Cloud.
  • If Cloud switches from bullish to bearish state – bearish signal. The signal can be strong is if the current price is below the Cloud; neutral if the current price is inside the Cloud; weak the current price is above the Cloud.
• Chinkou Span
  • If Chinkou Span traverses the price chart in the bottom-up direction – buy. At the same time, watch the current price action and the Cloud: the bullish signal is strong if the current price is abovethe Cloud; neutral if it’s inside the Cloud; weak if it’s below the Cloud.
  • If the line traverses the price chart in the top-down direction – sell. The bearish signal is strong if the current price is belowthe Cloud; neutral if it’s inside the Cloud; weak if it’s aove the Cloud.
  • Note that Chinkou Span has to come through the body of the price candle for the signal to be good.

Some Forex theorists do not recommend using Ichimoku on short-term time frames. 

However, experience shows that this indicator can be very effective on the H4, H1 and even on the minute charts. Price relation to the Cloud gives a clear picture of what the market is thinking right now. Combination of the Ichimoku with a focus of price action gives a chance for a flexible real-time trade. 

How to interpret ENVELOPES

Envelopes technical indicator consists of 2 moving averages one of which is shifted upward and another is shifted downward. Envelops can be used as bands around price action that signify overbought and oversold levels and can also be used as price targets. This indicator is same as Bollinger Band as both show the price moves to their extremes.

The period set in default is 14 in the Meta trader, whereas the deviation (shift of the MAS) set is 0.1%. The amount of deviation should be set regarding to the market volatility: the higher the latter is, the bigger it should be. In intraday one may use an hourly chart, and 10-period average and 0.3-0.5% deviation should be fine for any currency pair.

How to interpret:

Buy when the price reaches the lower margin on the band.Sell when the price reaches the upper margin of the band.

How to interpret ADX

ADX (Average Directional Movement Index) is a group of directional movement indicators is used to measure the trend direction and strength and to recognize the “buy” and “sell” signals.

The indicator automatically includes 3 lines:

• Average Directional Index (ADX) itself (yellow line)
• Plus Directional Indicator (+DI) (green line) - difference between two consecutive highs
• Minus Directional Indicator (-DI) (red line) - difference between two consecutive lows

How to interpret:

ADX (yellow line) is used to determine if the currency pair is trending or not. A strong trend is in place when ADX is above 25 and there is no trend when ADX is below 20. There appears to be a gray zone between 20 and 25. 

+ DI and -DI (green and red) define the directional movement. In general, the bulls prevail when +DI is higher than -DI, while the bears have the edge when -DI is greater. Crosses of +DI and -DI make a trading system in combination with ADX.

“Buy” signal occurs when +DI crosses above -DI (ADX must be above 25). Stop-loss is usually put at the low of the signal day. The buy signal remains in force as long as this low holds, even if +DI crosses back below - DI. 

And vice versa, “Sell” signal occurs when -DI crosses above +DI (ADX must be above 25). The high of the signal day becomes the initial stop-loss.

1 trader chuyên nghiệp - có 5 giai đoạn mà trader phải trải qua

1) Giai đoạn 1: CHƯA NHẬN RA MÌNH THIẾU NỘI CÔNG

Ở giai đoạn này, các trader mới bắt đầu tham gia thị trường. Họ chưa có kiến thức tốt về phân tích cơ bản, phân tích kĩ thuật. Tuy nhiên, sự thành công của 1 số cá nhân hoặc mong muốn kinh doanh vào một kênh đầu tư lợi nhuận cao đã lôi kéo họ đến kênh đầu tư này.

Điều ngạc nhiên là trong giai đoạn này, các trader có thể có một ít thành công nhất định hoặc thua lỗ không đáng kể và họ nghĩ là họ hoàn toàn có khả năng kiếm tiền ở kênh đầu tư này. Do đó, các trader sẽ tăng số lượng cũng như khối lượng giao dịch. Nhưng sau đó họ sẽ bắt đầu thua.

Giai đoạn này có thể kéo dài từ 1 – 3 tuần , hoặc 1-3 tháng

2) Giai đoạn 2: NHẬN RA MÌNH CHƯA ĐỦ CÔNG LỰC

Ở giai đoạn này, nhà đầu tư bắt đầu nhận thấy mình còn thiếu kiến thức về thị trường này. Họ sẽ nghiên cứu bằng sách vở, web-site, vào các diễn đàn giao dịch để học hỏi kinh nghiệm và cố gắng thử cách này đến cách khác để kiếm lời, từ các công cụ phân tích kỹ thuật như MA, Fibonacci, DMI, ADX… cho đến các robot tự động trên mạng, hoặc cả các hệ thống giao dịch của các bậc tiền bối đi trước, và thậm chí cả các INDICATOR mà bạn tự nghiên cứu ra theo cách của bạn.

Tuy nhiên, điều đáng buồn là trong khi mọi người khác có thể kiếm lời, bạn vẫn sẽ thua. Vì bạn chưa tìm ra được bộ công cụ phù hợp với bạn, và bạn chưa có được cảm nhận tốt về thị trường sẽ đi như thế nào trong hôm nay.
Giai đoạn này thay đổi tùy theo mỗi người, có thể là một vài tháng, có thể là một vài năm. Trong giai đoạn này, bạn có thể sẽ bị cháy 1, 2 tài khoản. Và tôi khuyên bạn nên cháy tài khoản ảo thay vì tài khoản thật. Và cho đến một lúc nào đó, bạn sẽ nhảy sang một trang mới trong sự nghiệp trader của mình, đó là giai đoạn 3.

3) Giai đoạn 3: THỜI KHẮC THAY ĐỔI

Trong giai đoạn này, bạn chợt nhận ra rằng các hệ thống giao dịch sẽ không tạo sự khác biệt cho các trader. Bạn thấy rằng bạn có thể kiếm tiền chỉ với đường trung bình đơn giản SMA nhưng phải kèm với một cái đầu lạnh và phương pháp quản lý tài chính tốt. Bạn sẽ bắt đầu tìm hiểu về tâm lý giao dịch, quản lí nguồn vốn và thời khắc Thay Đổi sẽ đến với bạn.

Đến lúc này, bạn sẽ nhận ra rằng, không có ai, bao gồm bạn và cả người khác có thể dự đoán được thị trường sẽ đi về đâu trong 10 giây nữa, 20 phút nữa. Bạn sẽ bắt đầu đề ra hệ thống giao dịch của riêng bạn và đặt ra các ngưỡng rủi ro để ngừng giao dịch. Tỉ lệ thành công của bạn sẽ tăng dần, và bạn biết hệ thống giao dịch của bạn hoạt động tốt dựa trên quản lý nguồn vốn và đòn bẩy tốt.

4) Giai đoạn 4: NHẬN RA MÌNH ĐÃ ĐỦ NĂNG LỰC

Trong giai đoạn này, bạn chỉ vào và ra thị trường khi hệ thống của bạn cho dấu hiệu. Bạn có thể thua dễ dàng nhưng bạn biết bạn thắng nhiều hơn thua, và bạn sẽ hạn chế việc thua đến mức tối thiểu. Giai đoạn này kéo dài khoảng 6 tháng.

5) Giai đoạn 5: KHÔNG QUAN TÂM MÌNH ĐỦ NĂNG LỰC

Giai đoạn này, tài khoản của bạn sẽ tăng lên nhanh chóng. Bạn vào/ra thị trường như một cổ máy, và việc đó bạn xem bình thường như lái xe. Bạn biết cách kiềm chế cảm xúc, và giữ một cái đầu lạnh khi giao dịch. Trong các diễn đàn, bạn là ngôi sao, và mọi người sẽ lắng nghe những gì bạn nói.

Giao dịch có thể không còn hấp dẫn với bạn nữa, vì như mọi thứ trong đời khi bạn đã quá giỏi bạn sẽ có dấu hiệu chán, và bạn chỉ xem đó là một công việc kiếm tiền mà thôi. Mặc dù bạn là một trader thành công, nhưng bạn sẽ không buồn nói với mọi người, bởi vì đó chỉ là một công việc như bao việc khác mà thôi.

Learning Currency Trading : USD/CHF

The symbol USD/CHF stands for U.S. dollar and Swiss franc. It tells us about the number of Swiss Franc needed to buy one US dollar.

About the Swiss Franc, traders say that it happens to be their safest resort in the forex market during the times of political unrest and economic instability. It is regarded by both the newcomers and the old-timers of the forex market to be one of the most reliable currency pair when the volatility of the market is at its highest.

General facts and information:

Switzerland is not only one of the safest countries in the world, but is also a wealthy nation with an economy that is completely reliable. The Swiss economy is safer than most other nations because of the relatively more peaceful political environment that presents either very little or no problem at all to the economic standing of the country.

Swiss Banks have always been in the news and are said to be the financial reserves for most of the notable personalities around the world. Furthermore, Switzerland has emerged as a safe haven for investors and those who wish to avail the remarkable private banking services offered by the Swiss. In recent years, Switzerland has proven itself to be extremely important and lucrative for investors and bankers.

Also, Switzerland is home to one of the largest consumer firms such as Nestle and other multinational corporations, which enhances the need for increased trade in terms of the USD/CHF. As US happens to be the world power and economic giant, the trade between Switzerland and US is inevitable that continues to strengthen the importance of the USD/CHF as a currency pair.

However, it is to be kept in mind that the USD/CHF currency pair is not as liquid as other currency pairs, especially when compared to the GBP and EUR.

Factors affecting the pairs:

Interest rate is the preliminary factor that determines the relative weakness and relative strength of the currencies in the USD/CHF pair. A lower interest rate stands for a weaker currency. Conversely, a high interest rate means a relatively stronger currency.

Volatility of the market considerably affects the Swiss Franc, the worth of which decreases with a decreasing market volatility. However, conditions get most favourable for the Swiss Franc when traders anticipate heavy losses in the forex when the major forex players suffer political and economic discontent. The same trend is also applicable to the USD.

The Swiss Franc is more or less tied to the trends followed by the EUR. The trends followed by euro can easily be taken as heralds for the next move to be taken by the Swiss Franc, allowing traders to make large profits. This might, however, not always be the case.

 Taking advantage of news trading to make money while trading:

Especially for the Swiss Franc that follows the trends followed by the EUR, currency trading news are going to be crucial in helping traders to formulate their next move in the forex world to prevent major losses. Economic indicators and forex exchange broadcasts are important in making sure that traders reap nothing but profits.

Understand Technical Analysis in the Forex Market

Most people have this perception that forex trading is all about poring over charts and figures. While that may be true to a certain extent, there are a whole bunch of other things involved. For instance, there are a host of different price action strategies that forex traders use in order to find and execute better deals. Analyzing different deals and figures is much easier said than done. In the past several years, technical analysis has been one of the most hotly debated topics among forex traders.

Technical analysis is essentially a statistical analysis of price changes in the past. The objective of carrying out a technical analysis is to forecast future price changes in the market. In many financial circles, this area has often been met with severe skepticism. Most traders are generally divided in their opinions: some believe that technical analysis actually works, others believe that it’s an absolutely useless tool for predicting changes in the price action and are those who believe that the tool itself is a self-fulfilling prophecy.

The technical analysis today is certainly not similar to how it used to be before. There are plenty of different algorithms and networks that are used by traders in order to carry out technical analyses today. Most people have this opinion that technical analysis is a grain of secret knowledge that must be studied with utmost care and precision. In truth, it is nothing of the sort.

In fact, studying a chart requires little to no effort. The chart depicts nothing but a bunch of facts and figures relating to the past prices. There’s nothing else that you can glean off the chart. Simply looking at the chart is unlikely to give you an idea about future price movements. However, looking at the charts is essential if you want to gain some information about the prices.

Price information is crucial because the decisions made by the trader give him predictive power in the market. However, you should know that technical analysis itself does not produce price movements. For instance, what if the Federal Reserve decides to increase the interest rates without any prior announcement? Or, what if the Chinese Government suddenly makes an announcement saying that it will no longer purchase US Treasuries? There is no chart formation at the moment that can be used to depict such changes.

However, there is no doubt that technical analysis is quite effective in the foreign exchange market. Not only does it allow investors to get an idea about past price performance, but it also makes it easy for investors to figure out their next step. The forex trading market is an incredibly complex financial market. It remains active round the clock, with traders from all over the world participating. Using technical analysis is important for people who want to make careful investments and wish to save money in the long run. It will allow you to get an idea of the market and make it easy to determine which currency pairs you should buy next.

What You Should Know About Leverage in the Forex Market

Two of the most important concepts that traders need to know are leverage and margin. If you want to become a profitable trader in the market, you need to know about these terms. A margin is the loan given by your broker that allows you to put up your funds and the securities in your account and use them as leverage in order to engage in larger trades.

However, in order to get approval for using margin, you will need to open a margin account. The collateral for the loan is the securities and cash that you deposit in your margin account but the money you borrow to use as margin doesn’t come for free. You will have to pay an interest on the amount that you borrow. In general, you can expect to pay interest rates of anywhere between 5-10% on the margin.

Just like margin, you should know about leverage as well. You can use the margin in order to create more leverage. Simply put, the additional buying power afforded to margin account holders is known as the leverage. In layman’s terms, you will be able to pay less than the full price of any trade, thus making it easy for you to enter much bigger positions, which would not be possible if you were simply using the funds in your account. If you were to talk to a forex broker, they would generally express the leverage in a ratio.

Most reputable brokers leverage in a ratio of 1:100. However, there are certain brokers that offer leverage as high as 1:400. This means that if you had $1,000 in your account, you will be able to make trades as high as $400,000. While this may seem like an excellent idea, you should know that you will also lose money 400x times faster. Using too high a leverage is generally frowned upon in the forex industry. If you end up losing a single trade, you will have to pay back a very high amount.

Another important thing that you should know about using leverage is over trading. As a forex trader, it is your job to make sure that you set up a proper trading routine. The forex market remains open round the clock and many new traders often get stuck in to the excitement of trading and trying to make more money. The added advantage of round the clock trading, coupled with the additional leverage, means that many people feel often end up over trading.

Over trading is a seriously bad thing, and you will easily end up losing a huge amount of money within a matter of minutes. The reason why so many brokers offer such high leverage is because they know most traders are easily tempted. If you want to avoid losing money in the long run, it is generally advisable that you set up a specific trading routine. This way, you will be able to make more profitable trades in the short term.

Why Use Stop Loss Orders?

Before we talk about the reasons why you should consider using stop loss orders, it is important to understand what stop loss orders really are. Stop loss is basically an order that you place with your broker. If you have a security that you want to make a profit on, the stop loss order will give power to the broker to sell the security as soon as it reaches a defined price. Many forex traders use stop loss orders in order to maximize their profits.

Basically, the purpose of a stop loss order is to minimize the loss incurred by the investor on a particular security. Even though it is mainly used by investors for long positions, stop loss orders can also be executed in short positions. Most people think that professional forex traders should not use stop loss orders. However, here are a few reasons why you should seriously consider using stop loss orders while dealing with your broker:

Safety

When you invest money in any type of business, your main aim is to preserve your capital and generate a profit on top of it, but keeping your investment safe can be difficult due to the volatile nature of the forex market. As the name suggests, stop loss orders are designed to stop your losses.  In case the value of a currency falls lower than the loss you can stomach, your broker will automatically sell it at the defined prices, thus saving your initial investment.

Convenience

Another reason why you should consider using stop loss orders is because they are relatively more convenient. Most people often trade on the foreign exchange market when they have free time on their hands. Nobody continues to trade all the time. Needless to say, you won’t be monitoring the activity on the market at all times. What if the value of a currency falls considerably in the past few hours? You will suddenly incur a huge loss.

Rather than throwing away money like that, placing a stop loss order will secure your position and make it easy for you to save your initial investment. This is a particularly good option for people who are going on a vacation and wish to stop trading for a while. If you are stuck in a situation that prevents you from watching the market for an extended period of time, you should definitely consider placing stop loss orders.

There are plenty of traders who have mixed opinions about stop loss orders. Some believe that this tactic is only used by amateur traders who do not have an understanding of the market. Some traders believe that stop loss orders should only be placed at specific levels. Either way, stop loss orders are a great option for people who want to minimize their losses and wish to generate some serious cash in the market.

News Trading

One of the most substantial tools in the trading world is news trading, which basically is the technique of trading economic news reports. The news on the economic world helps the traders in many ways as they involve a lot of market updates, mergers, announcements of different financial related events, policy changes etc.

The first vital thing to know is how to use news trading to your advantage. For successful trading in Forex, the trader technically analyses everything about the market and other financial aspects. But the other important thing involves checking the news releases frequently. Most of the traders wait for the visualization of information or financial data releases and then start their trading based on them.

News trading can be a very useful tool as it gives an overview of the market and the position of different currencies to the trader. But the success of the trade actually depends on how the trader responds after the relevant news is conveyed to him. Traders have to carefully analyze the changes in the market. Once a trader is ready to start his trade based on a financial event, they need to check which pair of currency will fluctuate enormously by this event. Usually any fluctuation in event or data release from a specific area affects the currency of that area the most.

There are basically eight major currencies that a trader can focus if he wants to practice news trading. These are USD, EUR, GBP, JPY, CHF, CAD, AUD and NZD. As we can see the available currencies are spread all over the world and there can be more than 15 derivatives that can emerge from these currencies. There is always some data to share which the traders can make use of. Different countries have different timings of vital news releases because of their varying time-zones.

To trade news, one has to know what is probable in that time period and what is most significant. For example, the inflation, interest rates, trade balance, different financial surveys etc. are important releases for a news trader.

There are different methods for trading news and they can be useful for the traders but there are a couple of risks involved as well. During an important news release, a lot of traders broaden the spread which can make the costs go up but it can hurt as well. One can get locked, meaning that their trade is possible but it won’t show on the board and you cannot make any changes then. Also slippage can occur at this time and it will throw you at a very different price from when you entered.

But before even talking about methods or strategies of trading news releases, one should know which news to base your trade in. Always look for the release which can move the world of Forex the most. Mostly major news releases come for the Unites States as it is the economic giant of the world so the trader should watch out for news releases from US first and try to trade using dollar. 

Very Low Slippage

Slippage is a term often heard in Forex trading and stock markets. It basically refers to the difference between the expected price of a trade and the actual price that is executed. This slippage usually occurs during times of volatility within markets and during constant fluctuation of stock prices.

Slippage in Forex occurs when there is a limit order or stop loss that presents itself at a rate which is worse than what was set in. For example, a new event or a volatility in the currency markets might make an order at an expected price difficult to be carried out. Hence, the traders will trade at the next best price rather than the expected price of the trade.

Suppose one wants to purchase EUR/USD at 1.3000 and order at that price, but it actually goes to a price of 1.3001. This means that there has been a slippage of say, 1 pip.

It is important to note because it happens to be one of the many factors forming the transaction costs of a particular trade. Along with spreads, commissions and swaps, slippage factors in the total transaction costs. The higher the slippage the worst off the trader is. Low slippage actually means that a trader has avoided losses and is good for forex trading.

High slippage affects the profit potential of a trade very negatively, almost destroying it. When brokers see the slippage going towards negative, they offer what is known as a price improvement. A price improvement is also positive slippage.

Brokers always look for low slippage during trading since it minimizes risks and losses. Due to fluctuations, chances are that a trade will always have sort of slippage, hence it is best for it to be as low as possible. For traders to make a trade with very low slippage, it is important that they look for brokers who have access to an advanced technical and management system.

Typically an ECN broker, one who is a part of an electronic communications network, will be able to have all trades processed by a computer and even broadcast the client’s orders straight to the market. This will ensure that the traders get all the real market’s quotes and prices.

The internet actually has some great places where slippage can be compared and performance can be tracked properly. Zulutrade.com for example, is listed as having very low slippage in the markets. Other than that, traders can also try to maintain low slippage by avoiding a trade during times when high impact news have just surfaced.

Traders can also attain low slippage by setting a market range and having some price improvements strategies in handy. Brokers are usually tasked with making a trade that has low slippage so the client can save up on money and expand their profit potential. Avoiding a trade during ‘dead’ hours can also help maintain a low slippage.

- See more at: https://www.hiwayfx.com/forex-articles/very-low-slippage#sthash.a497Naje.dpuf

Learning Currency Trading : USD/JPY

Introduction:

USD/JPY stands for U.S. Dollar/Japanese Yen. The symbol denotes how many Japanese Yen are needed to acquire one US dollar. In the currency pair symbol, the USD is the base currency and the JPY is the counter currency.

This pair is made up of an American and an essential Asian currency. The unique aspect of this particular currency pair is that it offers a wider forex market operation time range owing to the large differences between the time zones of US and Asia. The Japanese Yen is largely traded in the forex market during the Asian working hours in the daytime, hence, giving more time to trade for traders elsewhere in the world.

This pair is favoured not only by the novices in the forex market, but also by the veterans. The reason lies in the value of Yen being a safe resort for traders during times when the volatility in the market is exceptionally low.

General facts and importance:

According to a survey conducted in 2013, the USD/JPY currency pair shares 20 per cent of the world’s trading volume. The statistics are further bolstered by the fact that the Japanese economy is one of Asia’s fastest flourishing economies. The US, on the other side, is the key economic player in the global market, hence making the currency pair important and popular.

The Japanese Yen enjoys the status of being the most liquid Asian currency. At times, the Japanese Yen has also served as the proxy for the economic progress of the Asian continent as a whole. As the fourth most traded currency, the Japanese Yen occupies a central position in the forex market. Many pundits have already anticipated the Japanese Yen to become one of the reserve currencies in the near future besides the USD. Japan has emerged as the world’s largest exporter and has rebuilt itself following the devastating Second World War to become the second largest national economy in the globe. Despite the economic setbacks, the economic standing of Japan in Asia and its ties with major players in the forex market like the US, EU etc. cannot be underestimated.

Factors affecting the pair: The pair is not only highly volatile, but also presents high liquidity making it a favourable choice for traders. However, the currency pair is very easily affected by factors such as volatility of the market and the economic conditions of Japan. The Yen is favoured particularly during periods of low volatility to help traders make money via carry trade. As soon as the volatility of the market increases, Yen loses its value.

The Bank of Japan is also notorious for meddling in forex matters that further devalue the Yen and punctuate the economic growth of the currency. This in turn, weakens the position of Yen against the USD in the pair.

Taking advantage of news trading to make money while trading: To maximise the profits you reap while trading, keeping yourself up to date with the latest currency trading news is going to be mandatory. Knowing about the expected changes in the market and the latest trends will help you in formulating your strategy accordingly.

Learning Currency Trading : GBP/USD

Introduction:

The quotation GBP/USD stands for British Pound/U.S. Dollar and articulates the number of USD required for obtaining one GBP. In the symbol above, the GBP stands for the base currency while the USD is the counter currency.

GBP/USD currency pair is one of the world’s most heavily traded pairs, which absorbs over 12 per cent of the total market share almost every day. Ranking fourth in the list of the most oft-traded pairs, the GBP/USD is particularly important when trading with Great Britain and other European countries.

Like all other currency pairs, the GBP/USD pair undergoes abrupt and evident changes on a daily basis. However, very similar to the EUR/USD pair, this currency pair is also unpredictable and exhibits extremely high volatility, making it hard for many traders to predict its next trend.

Great Britain and the United States together form one of the biggest giants in the world market, both of them being home to the most of the world’s most important and largest multinational corporations. The two also tend to have exemplary economic stability and progress, thus making the GBP/USD currency pair crucial in the forex market.

General facts and importance:

With a daily turnover of the pair being 12 per cent, the GBP/USD duo serves as an important pair when it comes to transactions and reserves. Not only this, the pair is said to have the highest liquidity in the market. Consequently, the pair can be one of the best choices for traders who have just stepped in the world of forex and need to make sure that they get a start that is safe.

The exchange of GBP/USD in the world market is continuous and rarely ever ceases, that further adds to its volatility and liquidity. Besides, there is always a rumour and a potential chance of the United Kingdom amalgamating in the Eurozone. Such possibilities give birth to political debates, which serve to affect the strength of the GBP. If the debates go against the proposal of joining the EU, the value of GBP generally augments. The pound weakens when the arguments favour the merging of UK in the Eurozone.

The rapid changes and increasing volume of trade leaves the traders with a very narrow or no chance of arbitrage at all. Even the bid-ask spreads are bleak. Despite these short comings, the pair is appreciated by the traders for its high volatility and liquidity.

UK was the world’s largest economy and the pound served as the unofficial currency in which reserves could be made. Even today, the UK is pivotal to the direction of the world trade, thus, making the GBP an important player in the forex market. The US, on the other hand, is the world’s super power and also has a very stable economy. Almost all international reserves are made in dollars and commodities are sold at prices that are fixed in USD. The importance of the pair cannot be undermined.

Factors affecting the pair:

Nothing affects the strength of one currency relative to the other better than the interest rates. The country with the higher interest rate would have the stronger currency. The conditions of the local markets and political situations in either of the two countries will affect the trade and value of the pair in the long-run.

The weakness of the GBP against the USD is often attributed to the strict regulations implemented by the British government. The labour laws in the UK also affect the strength of the GBP against the USD.

Taking advantage of news trading to make money while trading:

Keeping yourself updated with the latest trends in the market and the predictions made by economic pundits is essential if you wish to succeed as a trader in the forex world. Missing the news or the early morning economic indicator can have long-lasting adverse effects. Before the market starts and after it stops operating, filling yourself with information on what’s new is going to prepare you for the best and the worst.

Learning Currency Trading : EUR/USD

Introduction:

EUR/USD is frequently used to denote the approximate value of USD that needs to be exchanged in order to obtain a single EUR. In the quotation EUR/USD, the EUR represents the base currency while the USD is taken as the counter currency.

EUR/USD is perhaps the world’s most widely used and oft-traded currency pair. The reason for the popularity and excessive use of the pair lies in the fact that each of the two currencies are representatives of the world’s most powerful economies; namely, Europe and the United States respectively. The wave of changes throughout the world market is almost always attributed to the fluctuations in at least one of the two currencies.

General facts and importance:The world’s largest and most successful multinational corporations have their headquarters in either Europe or America, and even both. There is little doubt in the fact that despite tremendous growth of businesses and corporations around the world, the European and American blocs still seem to overshadow the rest in terms of operation and significance. These multinational tycoons, being operational in Europe and America, are actively involved in the trade of these two currencies. With such frequent exchange and trade, all these firms have to make sure that they secure their assets and hedge the risk that is inevitably involved in the exchange rate.

The EUR/USD exchanges rarely every halt. The pair enjoys the status of being the only currency pair that is loved by the traders around the globe even when the currencies offer minimum arbitrage chances. The opportunity to benefit from a currency arbitrage when dealing in EUR/USD is also next to improbable because the exchange is so recurrent that there hardly is space for further exploitation that arise from variances in quotes.

The most attractive feature of the pair is the perfect balance of volatility and liquidity. Especially for those who are not exceptionally adept at dealing forex or are new to it will find the EUR/USD pair to be the best choice for a beginning.

Around 70 per cent and even more of the world’s transactions are carried out in terms of EUR/USD. Given that the US Dollar is the world’s most oft-traded and most popular currency followed by the Euro, it is no surprise the pair dominates all other currency duos.

Furthermore, since Europe and the US are the world’s biggest economies, the two currencies are important when it comes to investments. The prices for almost all the essential commodities, gold and oil for instance, are set in US dollars. US dollars are the most favourable option when it comes to reserving currency in international banks. Also, the EUR is unique as it serves as the currency for the entire European Union.

Factors affecting the pair:

Primarily, the interest rate governs the strength of one currency against the other in the pair. The higher the interest rate, the stronger is the standing of the currency. However, since EUR represents the entire EU, political disagreements from time to time often impart a negative impact on the EUR, making it weaker against its paired currency.

Since the pair is highly volatile, it presents the opportunities for profit in the forex market. Offering just the right amount of volatility and liquidity, this pair happens to be the most popular currency pair in the world.  

Taking advantage of news trading to make money while trading:

To make the best out of your trading activities, it is essential that you stay abreast with the latest trends and changes in the market. Trading is all about strategy and right timing. Lagging behind in what’s trending and the news that help you gauge the market’s weather can be potentially damaging.

Earnings releases and economic indicators along with broadcasts on liquidity etc. can help you leave indelible marks of success in the market by shaping your strategies beforehand.