How algorithms are changing the future of forex trading  

In simple terms, an algorithm is a set of instructions which can be used to solve a particular problem. When used by computers, algorithms become incredibly powerful, allowing the machines to perform often complex calculations and tasks multiple times in a fraction of a second. Algorithms form the foundation of Artificial Intelligence (AI) and machine learning, whereby processors can be given a set of instructions and can then, via multiple high speed repetitions, ‘learn’ how to perform the task in hand more efficiently.

Although words and phrases such as ‘algorithms’, ‘machine learning’ and ‘artificial intelligence’ might make it sound as if any discussion of algorithms should take place in the lofty realms of top level computer programming, the fact of the matter is that algorithms play a massive part in the everyday life of virtually every person. From the price you pay for something ordered from Amazon to the box sets which Netflix recommends and the route suggested to you by Google Maps, algorithms are used time and time again to enable the smooth delivery of the kind of automated services which we’ve all come to take for granted.

The same kind of change has taken place in the realm of forex trading. Think back just three decades and the world of forex trading was radically different. Most trades were carried out over the phone, information on the value of currencies had to be painstakingly sought out and there was a huge disparity between the amount of knowledge that large institutions were able to access when making trades, and that which the smaller trader could utilise. In fact, back then most of the speculation involving currency was carried out by large institutions and well-funded speculators, with retail traders struggling to gain a foothold.

The arrival of the internet changed the course of the history of forex trading, creating an open, global market place which enabled trading to take place 24 hours a day, five days a week and ultimately resulted in a market which handles more than $5 trillion per day and dwarfs every other kind of market. The development and application of algorithms played a huge part in creating that market and, as the use of big data grows ever more pervasive, algorithms and the forex markets are set to become even more closely entwined in the future.

Algorithmic Trading

Trading using algorithms involves setting out a range of parameters on the platform being used, covering aspects of trading strategy such as the price of trades, timing and the amount to be traded, and then trusting the algorithms to carry out trades which reflect the chosen strategy. As well as simplifying the trading process, particularly for those who are new to forex, algorithms can be used in ways which allow greater speed and keep costs lower.   Among the basic types of algorithm used by traders are the following:


an algorithm which analyses large amounts of historical data and uses this analysis to seek out trading opportunities based on the results of this analysis. Although past performance is not always a guarantee of future behaviour, the sheer scale of data which algorithms are able to analyse means that the trades they make are far more likely to adhere to the reality of the market, spotting patterns which are likely to elude a person attempting the same research.


using algorithms to limit your exposure to risk. When leverage is taken into account, any sudden shifts in the forex market can have a huge impact on the amount of risk a trader is exposed to. Algorithms can be used to set stop loss orders which close positions down as soon as a specific amount of capital has been lost, or to sell when profits hit a chosen level. Algorithms such as these protect individual traders and reduce the degree to which they have to monitor the positions they have opened. They also protect traders from sudden shifts in the market caused by the ‘herd instinct’ of traders around the world noting a position and shifting en masse.

Pricing algorithms

in the past a trader would have to search the markets – often via a third party – to find the price of a pair of currencies before deciding whether to make a trade. The advent of algorithms means that any retail trader has access to a constant stream of prices which is updated in real time to reflect any changes in market conditions.

High frequency trading

the use of algorithms makes it possible for retail traders to make trades in milliseconds – speaking literally – taking advantage of tiny shifts in the price of currencies before the wider market spots this shift and adjusts to correct the position. These can also be combined with risk-transfer algorithms, which lock in an order and protect the trader from the risk of the market moving while the order is being placed. In most cases, this risk will be carried, instead, by the broker, which will often be a bank seeking to profit from the spread between the price at which the currency is bought and sold.


the ultra-high speed collection and analysis of data which is made possible by algorithms opens up the possibilities of retail traders taking advantage of arbitrage, which is the process of setting up positions to cash in on the slight changes in the value of currencies as quoted by different markets. In particular, algorithms make it easier to take advantage of triangular arbitrage, a technique which involves trading a currency through two different currencies and then back to itself, taking advantage of differences in the value quoted. Arbitrage of this kind is only really possible thanks to the speed of trading enabled by algorithms.

The future is set to see the algorithms themselves taking over many of the functions of the trader. It is already possible for traders to set specific instructions for algorithms to purchase a certain amount over a set timescale from specific liquidity providers, and the most advanced algorithms can be set to seek out trades during a specific time period, using market analysis to spot opportunities and machine learning to know who to purchase from.

The risk of the widespread use of algorithms is that it will reintroduce the traditional gap between retail traders and larger institutions, as the larger institutions will be able to invest heavily in the latest technology and execute trades at a speed which retail traders find hard to match. The other risk is that removing the human factor from trading will impact on the way the markets behave. While algorithms may be free from the tendency to respond in emotional terms to changes in market conditions, they may also be inflexible during times of high turbulence, carrying out trading strategies which cause the markets to shift even more dramatically. The future involves accepting that algorithms are here to stay and shaping their use in a way which maintains forex markets which are highly liquid, with easy access and low volatility.

The benefits of bonuses

Taking the first step into trading forex can often be the most daunting. You want to trading forex but just can’t quite take that initial step to making your first investment. This is where a bonus offer, for example like that offered by Vantage FX, can really help you to get started.

What is the offer?

Vantage FX offers to give its new clients a 50% bonus offer (full terms and conditions can be found on their website). It basically works like this, if you deposit $300 they give you $150, if you deposit $400, Vantage FX gives you a bonus offer of $200 and if you deposit $500 or more, Vantage FX will deposit $250 in your trading account for you to trade with.

In order to get the bonus:

  1. Apply and open an account
  2. Deposit funds
  3. Claim your bonus
  4. Start trading

The bonus of the bonus

Welcome bonuses can be advantageous to newcomers and experienced traders.

Firstly, as a new comer, may have been practising on a demo account for some time but still haven’t taken that first step to trading with money. Trading on a demo account is extremely useful and good practise, but the trading psychology is different when there is real money involved.

As a newcomer, at some point you need to dip your toes in the water and see how you behave a trade with real money. Using the bonus here, can be extremely comforting. It provides a bridge between demo account trading and live account trading with your own funds.

Using the bonus funds provides you the opportunity to analyse your real-life trading examples, the good bits and the bad parts! You can make mistakes and essentially it is not costing you anything.

For more experienced traders who are on the lookout for a good broker, the bonus will also help you. You can test out the new broker using a bonus given to you by them. You can test drive the account for spreads, execution, pricing, platform user-friendliness, charting etc, all the things that are important to you as a trader and you need to experience in order to take an informed decision about the broker.

Checks the T’s & C’s

Before opening an account an applying for the bonus funds make sure that you understand the terms and conditions clearly, they can be found on the website. If you have any doubts the Vantage FX client services department are extremely helpful and are always on hand to answer any questions


Tips On How To Be A Rock Star Day Trader

You can’t be born with it. You can’t learn it from an Ouija Board. If your lifelong dream of being a rock star ended when you discovered you couldn’t sing or play an instrument, you at least had a backup plan. Right? If Plan B is to become a rock star day trader than you came to the right place. Here are our tips on how to make that happen:

All Day, All Night Opportunities

The beautiful thing about Forex trading is that the markets never close. Well, at least something is going on around the clock in different parts of the world. The sked looks like this:

London – Open 8:00 AM to 5:00 PM GMT.

EUR, GBP, USD all active currencies at this time.

United States – Open 1:00 PM to 10:00 PM GMT.

USD, EUR, GBP, AUD and JPY all active.

Asia – Open 10:00 PM GMT Sundays to 9:00 AM GMT.

Perfect for night trading rock stars.


Know The Peaks And Valleys

Throw away your Magic 8 Ball because here’s when you can benefit most with the all-day, all-night trading schedule. You have a super-sized peak time when the United States and London markets overlap. That would be between 1:00 PM and 4:00 PM GMT. Another active time to check on what’s happening is between the start of the London markets and the close of the US ones. In other words, pay attention to both of these sessions.

Stay On Top With Forex Signals

Here’s where some logic comes into play. So, if you’ve been getting your Tarot Cards read, it’s time to move on. With daily usage of Forex signals you can get the jump on trading opportunities before your card reader will know what’s happening. So, with logic as your guide, checking your Forex signals every 10-minutes is dumb. Shoot for reviews just before London opens, most definitely when London and the US are open together and near the close of US.

Just In Case, Fuel Up On Caffeine

We are not going to ignore the Asia markets because they can be tons of fun as well. You will need to dose up on coffee to get the full benefit and making daily use of Forex signals just before Asia opens is a good start. Follow it up with a check near closing, that is if you are still awake and coherent.

Who Cares If You Can’t Sing?

When you’re a Forex trading rock star, it won’t matter. Using these tips will help you get there.

5 Forex Day Trading Mistakes To Avoid

5 Forex Day Trading Mistakes To Avoid

The international currency market has very low entry barrier, making it one of the most accessible day trading financial markets in the world. If you have a personal computer, an internet connection, and few hundred dollars, you can theoretically start forex trading. However, just because it is easy to start trading doesn’t usually mean it is easy to make a profit. There are tons of pitfalls new forex traders and investors faces.
In this high leverage game of retail forex trading, there are some certain practices that, if used frequently, are likely to lose a trader or investor all he has. There are five common mistakes that retail forex investors often make in an attempt to significantly increase returns, but that end up resulting in lower returns or even losses. These five potentially devastating mistakes can be completely avoided with discipline, knowledge and an alternative approach.

Pre-Positioning for News

Forex traders and investors usually know the news events that will move the financial market, yet the direction is never known in advance. An investor may even be fairly confident what a news announcement may be – for example, that the Federal Reserve will not or will raise interest rates – but even so cannot conclusively predict how the financial market will react to this expected news item. Often there are additional figures, statements or forward-looking indications provided by news reports that can make movements extremely illogical.
There is also this very simple fact that as volatility increases and all sorts of orders hit the market, stops are triggered on both sides of the market. This often results in a whip-saw like action before a trend finally emerges.
For all these valid reasons, taking a position before a news report or announcement can seriously jeopardize an investor’s chances of success. There is no easy money in forex trading; those who believe there is may encounter larger than usual losses.

Trading Right after News

A news report or announcement hits the markets and then the market starts to behave aggressively. It looks like easy money quickly to hop on board and grab some pips. If this is executed in a non-regimented and untested manner without a solid trading strategy behind it, it can be just as costly as placing a gamble before the news report is out.
News announcements and reports often cause whipsaw-like movement because of a serious lack of liquidity and hairpin turns in the market assessment of the report in question. Even an executed trade that is in the money can turn easily and quickly, bringing large losses as large movements and swings occur back and forth. Stops during these crucial times are largely dependent on liquidity that may not be present, which generally means losses could potentially be much more than imagined.
Forex traders should wait patiently for volatility to subside and for a definitive trend to develop after news reports and announcements. By doing so, there is likely to be much fewer liquidity concerns, risk can be effectively managed and a more stable price direction is likely.

Risking More Than 1 percent of Capital

Excessive risk does not usually equal excessive returns. Virtually all traders and investors who risk large amounts of capital on single trades will eventually lose in the long-term. A common rule is that an investor should risk (in terms of the difference between stop and entry price) no more than 1 percent of capital on any single trade. Professional traders usually risk far less than 1 percent of their trading capital.
Day trading also deserves some special attention in this area. A daily risk maximum should be rigorously implemented. This daily risk maximum can be 1 percent (or less) of trading capital or the equivalent to the average daily profit over a 31 or 30 day period.
The real purpose of this method is to ensure no single day of trading or single trade hurts the traders account significantly. By adopting a well-calculated risk maximum that is equivalent to the average daily gain over a 30 or 31 day period, the investor knows that he will not lose more in a single day/trade than he can make back on another.

Averaging Down

Forex traders soften stumble across averaging down. It is not usually something they planned to do when they began trading, but most investors have ended up doing it. There are several challenges with averaging down.
The main issue is that a losing trading position is being held – not only potentially sacrificing money, but also time. This money and time could be utilized for something else that is proving itself to be a better position.
Also, for every trading capital that is lost, a larger return is needed on remaining capital to get it back. If an investor loses 50 percent of his capital, it will take a 100 percent return to bring her back to the original trading capital level. Losing large chunks of funds on single days of trading or single trades can cripple capital growth for long periods of time.
While this strategy may work a few times, averaging down will inevitably result in a large loss or margin call, as a trend can sustain itself far longer than an investor can stay liquid.

Unrealistic Expectations

Unrealistic expectations in forex trading come from many sources but often result in all of the problems mentioned above. Our own expectations are often imposed on the market, leaving us expecting it to act according to our wishes and trade direction. The market really doesn’t care what you want. Investors must accept that the market can sometimes be illogical. It can be volatile, choppy, and trending all in short, medium and long-term cycles. Isolating each move and profiting from it is just not within the realm of possibility, and believing so will often result in frustration and constant errors in judgment.
The best way to do way with unrealistic expectations is to formulate a trading strategy and then trade it. If it yields steady profit, then don’t alter it – with forex leverage, even a small pip gain can become large. Accept this return as what the market gives you. As your trading capital grows over time, your trading position size can also be increased to bring in higher returns.

3 Factors That Drive The U.S. Dollar

3 Factors That Drive The U.S. Dollar

It all boils down to how the economy is performing when it comes to the decision of whether to sell or buy the United States Dollars. Generally, a strong economy will normally attract financial (and otherwise) investment from all over the globe due to the perceived safety and the ability to effortlessly achieve an acceptable rate of return on investment (ROI). Investors and forex traders always seek out the highest yield that is “safe” and predictable. Investment from abroad generates a strong capital account and a resulting high demand for U.S dollars.
However, consumption of goods and services by the United States of America through Importing from other countries causes the U.S Dollars to flow out of the country. If the exports are lesser than the imports, there will be deficient in the current account. With a very strong economy, a country can attract significant foreign investment and capital to offset the trade deficit. The United States can therefore continue as the global consumption engine that fuels the world economies despite the fact that it is a debtor nation that borrows much of the money to consume. While most major currencies in the world often groove to the tune of country-specific fundamentals, the United States Dollar can be a little more fickle as it sometimes dances to a different beat.

Factors Affecting Dollar Value

When it comes to the point of taking a position in the U.S dollar, the forex trader and investor need to carefully assess the different factors that affect the value of the U.S dollar to try to accurately determine a trend or direction. The methodology can be divided into three main groups as follows:
• Technical factors
• Supply and demand factors
• Sentiment and market psychology

Technical Factors

As forex traders and investors, we have to always gauge whether the demand of dollars will be lesser or greater than the supply for dollars. To help us accurately determine this, we need to pay close attention to various event items and news, such as the release by the government of various statistics like, GDP data, payroll data, and other important market and economy measuring data that can help us to conclusively determine what is happening in the economy and to estimate whether the economy is weakening or strengthening.
Additionally, we also need to determine the overall sentiment regarding what the market players think the outcome of events is going to be. Sometimes, sentiment drives the market rather than the fundamentals of demand and supply. To add to this mix of prognostication, besides the

Martingale System

Forex Trading Using the Martingale System

Most forex investors (traders) will probably reply with a resounding “Yes!” if there were asked whether they would be interested in a trading strategy that is practically 100 percent profitable.  Amazingly, such a trading strategy exists and it dates back to the 18th century. This strategy is mainly based on probability theory and if your pockets are deep enough, the success rate is almost 100 percent.

Known in the financial trading world as the martingale, this strategy was most commonly executed in the gambling halls of Las Vegas casinos. It is the major reason why casinos now have minimum and maximum bets, and why the roulette wheel now has two green markers (0 and 00) in addition to the popular odd or even bets. The challenge with this strategy is that to achieve 100% profitability, you need to have deep pockets; in some cases, the pocket must be infinitely deep.

No one has infinite wealth, not even the government, but with a theory that heavily relies on mean reversion, one missed trade can completely bankrupt an account. Also, the total amount risked on the trade would in most cases be far greater than the potential return. Despite these obvious drawbacks, there are ways to significantly improve the martingale system. In this piece, we will explore the means and methods you can employ to considerably improve your odds of succeeding at this very high-risk and difficult strategy.

What is the Martingale Strategy?

Made popular in the 18th century, the martingale trading strategy was introduced by the renowned French mathematician Paul Pierre Levy. The martingale system was originally a type of betting style based mainly on the premise of “doubling down.” A lot of the work done on the martingale strategy was done by an American mathematician named Joseph Leo Doob, who sought to disprove the possibility of a 100 percent profitable betting strategy.

Martingale System

The system’s mechanics generally involve an initial bet (trade in this situation); however, each time the bet (trade) becomes a loser, the wager is doubled such that, given enough time, one winning trade (bet) will make up all of the previous losses. The 0 and 00 on the roulette wheel were mainly introduced to break the martingale’s mechanics by giving the game more than two possible outcomes other than the red versus black or odd vs even outcomes. This eventually made the long-run profit expectancy of employing the martingale system in roulette games negative, and thus destroyed any incentive for utilizing it.

To deeply understand the mechanics behind the martingale system, let us look at a simple instance. Suppose we had a coin and engaged in a betting game of either tails or head with a starting wager of $1. There is an equal probability that the coin will land on tails or head, and each flip of the coin is independent, meaning that the previous flip does not impact the eventual outcome of the next flip. As long as you stick with the same directional view each time, you would eventually, given an infinite amount of money, see the coin land on heads and regain all of your previous losses, plus an additional $1. The strategy is mainly based on the mathematical premise that only one trade (bet) is needed to turn your account around.

Let us assume that you have $20 to wager, starting with an initial wager of $1. You bet on heads, the coin flips that way and you win $1, bringing your equity up to $21. Each time you are successful with the bet, you continue to bet (trade) the same $1 until you lose. The next flip is a loser, and you bring your account equity back to $20. On the next bet (trade), you wager $2 with the hope that if the coin lands on heads, you will completely recoup your previous losses and bring your net profit and loss to zero. Unfortunately for you, it lands on tails again and you lose another $2, bringing your total equity down to $18. So, according to martingale trading strategy, on the next bet, you wager double the prior amount to $4. Fortunately, you hit a winner and gain $4, bringing your total equity back up to $22. As you can see, all you needed with the martingale strategy was one winner to get back all of your previous losses back and a little profit.

However, let us consider what happens when you hit a losing streak. Once again, you have $20 to wager, with a starting bet (trade) of $1. In this scenario, you immediately lose on the first bet (trade) and bring your balance down to $19. You double your bet on the next wager, lose again and end up with $17. On the third bet, your wager is up to $4 and your losing streak continues, bringing you down to $13. Next, you wager $8 and lost again bringing you account balance to $6. Now, you do not have enough money in your account to double down, and the best you can do in this situation is bet it all. If you lose, you are down to zero and even if you win, you are still very far from your initial $20 starting capital.

Forex Trading Application

You may think that the long string of losses, such as in the above scenario, would represent an unusually bad luck. But when you trade foreign exchange (currencies), they tend to trend, and trends can last a long time. The key with the martingale system, when applied to forex trading, is that by “doubling down” you essentially lower your average entry price.

Like we said above, you need a very deep pocket to be successful with the martingale trading strategy. If you only have $2,000 to trade, you would be bankrupt before you were even able to see the pair you are trading reach your mark. The currency may eventually turn in your favor, but with the martingale trading strategy, there are many scenarios when you may not have enough money to keep you in the market long enough to see that happen.

Why Martingale System  Works Better with FX

One of the reasons the martingale trading strategy is so popular in the forex market is because, unlike stocks, foreign exchange rarely drop to zero. Although companies can easily go bankrupt, countries cannot. There will be times when a country’s currency is devalued, but even in cases of a sharp decline, the currency’s value never reaches zero. It’s not impossible, but what it would take for this to happen is too scary to even speculate.

The currency market also offers one unique advantage that makes it even more attractive for investors or traders who have the deep pocket (capital) to follow the martingale strategy: the ability to earn interest allows investors to offset a portion of their losses with interest income. This generally means that an astute martingale trader (forex investor) may want to only trade the strategy on currency pairs in the direction of positive carry. In other words, he/she would buy a currency with a high-interest rate and earn that interest while, at the same time, selling a currency with a low-interest rate. With a large number of lots, interest income can be substantial and could work to significantly reduce your average entry price.

The Bottom Line

As attractive as the martingale system may sound to some forex investors or traders, we emphasize that grave caution is needed for those who might want to practice this trading strategy. The main problem with this trading system is that often, seemingly sure-fire trades may blow up your trading account before you can turn a profit or even recoup your losses.

In the end, traders (investors) must question whether they are willing to lose most of their account equity on just a single trade. Given that they must always do this to average much smaller profits, many traders feel that the martingale trading strategy is entirely too risky for their tastes.

All about Fibonacci Trading

All you should know about Fibonacci Trading

Fibonacci trading can significantly improve forex performance for both long and short-term positions, identifying key price levels that show hidden resistance and support. Fibonacci used in conjunction with other types of technical analysis builds a very powerful foundation for trading strategies that perform well through all forms of market conditions and volatility levels.

12th-century mathematician, Leonardo de Pisa discovered a numerical sequence that appears throughout nature and in classic works of art. Though his discovery was theoretical, these Fibonacci numbers show remarkably profitable applications in our modern financial markets,  vividly describing the relationships between price waves within trends, as well as how far this waves will carry before reversing and testing prior levels.

The .386, .50 and .618 retracement levels comprise the main Fibonacci structure found in charting packages, with .214 and .786 levels adding more depth to the market analysis. These secondary ratios have taken on greater significance since the 1990s, due to the deconstruction of technical analysis formula by funds looking to trap investors using those criteria. As a result, whipsaws through primary Fibonacci levels have increased, but harmonic structures have remained the same.

For instance, it was popularly believed the .618 retracement would involve countertrend swings in a strongly trending market. That level is now routinely violated, with the .786 retracement offering strong resistance or support, mostly depending on the direction of the primary trend. Investors and market timers have adapted to this slow evolution, altering strategies to accommodate a higher frequency of violations and whipsaws.

Fibonacci Trading

Historical Analysis

Fibonacci grid applications can be roughly divided into two major categories, trade preparation and historical. The second category requires a thorough examination of long-term trends, identifying harmonic levels that triggered major trend changes. Most active market players will spend more time focused on the first category, in which Fibonacci grids are placed over short term price action to build exit and entry strategies.

There is great synergy between the two applications due to the fact that price levels uncovered through long-term historical analysis work perfectly well with short-term trade preparation, especially at key inflection points. Since forex pairs oscillate between contained boundaries through nearly all economic conditions, these historical levels can impact short-term pricing for years.

Given the small number of popular crosses compared to the bonds or stocks, it makes perfect sense to perform a historical analysis on each pair, outlining primary trends and levels that might come into play in coming years. Perform this task by zooming out to monthly or weekly charts, and placing grids across secular bear and bull markets. The analysis only needs to be performed once as long as price action doesn’t exceed the lows and highs of the long term grids.

Trade Preparation

Begin your trade preparation analysis by placing a single grid across the biggest trend on the daily chart, identifying major turning points. Next, add grids at shorter and shorter time intervals, looking for convergence between major harmonic levels. Similar to moving averages and trend lines, the power of these levels tracks relative time frame, with grids on longer term trends setting up stronger resistance or support than grids on shorter term trends.

Many forex investors focus on day trading, and Fibonacci levels work in this venue due to the fact that daily and weekly trends tend to subdivide naturally into smaller and smaller proportional waves. Access these hidden numbers by stretching grids across trends on 15-minute and 60-minute charts but include daily levels first because they will dictate major turning points during the 24-hour forex trading day.

Having a hard time figuring out where to place ending and starting points for Fibonacci grids? Stretching the grid across a major low and high works well in most cases but most investors take a different approach, using the first lower high after a major high or first higher low after a major low. This approach tracks the Elliott Wave Theory, focusing on the second primary wave of a trend, which is often the longest and the most dynamic.

Fibonacci Trading with Other Indicators

The reliability of retracement levels to stop price swings and start profitable counter swings directly correlates with the number of technical elements converging near or at that level. These elements can include Fibonacci retracements in other time periods, Trend Lines, gaps, moving average, prior highs/lows, and relative strength indicators hitting oversold or overbought extremes.

For instance, multiple grids on a daily chart that align the.618 retracement of one trend with the .386 retracement of another trend raise odds that currency pair will reverse near or at that level. Add a 50- or 200-bar moving average and the odds increase further, encouraging bigger positions and a more aggressive trading strategy. This methodology is applicable to exits as well, telling forex investors to take profits when price reaches a retracement level that shows multiple alignments.

The Bottom Line

Add long-term Fibonacci grids to favorite forex pairs and watch price action near popular retracement levels. Add shorter term grids as part of daily trade preparation, using alignments to find the best prices to exit or enter positions.

When committing Fibonacci Trading add other technical indicators and look for convergence with retracement levels, raising the odds that prices will reverse in profitable counter swings.

Successful Forex Traders

How Successful Forex Traders Manage Profits

From the time they execute that first trade to the time they have accumulated decades of experience under their belts, many investors ask, what is the right balance between executing trades based on anticipation versus trades based on confirmation? Our suggestion: tackle this question head-on.

The most successful forex traders are usually great planners and great anticipators. They align support and resistance levels, indicators, structures, patterns, probabilities (the list goes on), in order to place trades that yield positive results.

This does not in any way mean that they have to be right all of the time and neither do you. In fact, you can experience some amazing profits by initially being wrong with your first setup and entry, but with time, the market will, in fact, follow suit with the original analysis and provide the needed direction. At that point, it is all a matter of how well our profits can be managed.

This is a fantastic problem to have as an investor. “How well can I manage my profits?” is a far better issue than “how can I discover winning trades?”

successful forex traders

The markets will move to their respective waves, rhythms, and trends. We as traders or investors notice that certain instruments have their own characteristics and tendencies. Certain markets break-dance, while others waltz and some might even mosh. If one of those styles fit your particular trading strategy, you could be profitable. Better yet, maybe you have trading plans and strategies that will humble your most diverse wedding DJ.

It is good to exploit market behaviors that are conducive to our trading style and strategies. It will take your time and effort to identify these attributes. This may not be in every financial instrument or market, but it is enough to trade repetitive traits and patterns in order to only take the trades that set up according to your plan.

Knowing when to anticipate or confirm

So how does an investor know when it is time to anticipate and time to confirm? Well, in all honesty, it is completely up to you.

Anticipation is good when you are planning trades; confirmation is necessary when you are executing trades. A trade is just a trade in a sample of many trades of varying scope, size, and difficulty.

Sometimes after fighting some anticipation trades that went awry or that you had to work through, you have a spell of only trading confirmation. Then, you crazy bored by taking so few trades that you feel like you are foregoing opportunities because of your commitment to confirmation. Other times, you are very pleased you passed on the anticipation trade and waited for confirmation, particularly when a stubborn move would have caused some uneasiness and stress.

Plan your trade and trade your plan

When traders or investors are preparing for a setup, the self-talk is either confident or fearful. If you have logged your trades and witnessed the market’s tendencies and traits, you have a history with the market that has exhibited what it likes to do. It does not mean the market will always do this or that it will never fail you on some occasion, but it will produce repetitive setups that significantly tip the probabilities in your favor. This allows you to trade with some confidence, knowing you have seen the trade work before so it would not surprise you to see it work in the same pattern again. If this trade does not work to your plans, there will be other trades that will do.

You have probably heard the following adage several times: It goes, “plan your trade and trade your plan.” In theory, it is true, but in reality, sometimes you need to have plans (plural) and have a PLAN A/B/C/D in other cases. If you have one plan and it is working perfectly, by all means, stick to it and do not deviate from something that is working excellently.

Evaluating Successful Forex Traders

In your journey as a trader or investor, once you realized the dabbling with the trading plan was not helping you see higher returns, you should begin searching for commonalities with you worst and best trades. This assessment is no different than evaluating pros and cons. The pros should be the winning trades, the cons should be the losing trades or less enjoyable trades. You strategic list may have received a little face-lift, but you should go easy on the BOTOX because the fundamental principles are the same and the setups are similar. Be careful not to develop a strategy monster that will send conflicting signals leaving you directionless and paralyzed. If you find yourself dabbling, remember, you can always go back to the drawing board and focus on a simple foundation and strategy.

We all want the market to move in our direction with utmost precision, but the truth of the matter is that we are not market makers to any degree. In fact, if our planning was so great, why are we not calling the perfect bottoms and tops or lows and highs? Hindsight is 20/20 and trading is certainly a lot easier after the fact, but in order to trust the right side of the trading chart (i.e. future price action), we need to have tested and/or experienced the repetition necessary to give us the needed confidence to take the setup and the trade.

This is the place anticipation meets confirmation. Trading certainly is not about hitting home runs, hole-in-ones, or bull’s-eyes, but it is successful enough for base hits, greens in regulation, or consistent marks.

The Bottom Line

If we are not among the market makers, we are merely the remora on the shark or the plover bird on the crocodile. Why use those specific animals? Because too many investors feel the market is too dangerous and deadly. Although the market is certainly capable of causing stress and grief and has taken its fair share of victims, as long as you respect its ferocity, we can still survive its bad moods and find some profitable crumbs (trades) in the process. In fact, it is quite possible to be incredibly profitable during these times of tantrum. In order to be like successful forex traders it is recommended you find your balance between anticipation and confirmation and arm yourself with strategies and plans that you trust and have seen work time and again.

Forex Trading Secret

The Secret to Forex Trading: Limit the Downside

The Foreign exchange market can be a formidable opponent. The daily Forex Trading transaction volume is approximately $7 trillion, and it is regarded as the most liquid market on the planet. In most respects, undercapitalized retail investors appear to be outmatched as they take on global central banks, hedge funds, investment banks, market makers and everyone in between.

The odds against becoming a profitable Forex investor are high, but many small-scale traders still try to tame this beast. The experience can be Sisyphusean, as individual greed, mental mistakes, and market-conditional outliers send traders back to square one with emotional and financial scars as a parting gift.

Traders and investors hate it, love it, don’t understand it, or fall somewhere in between. How many times have we heard the popular saying “Cut your losses quickly and let your profits run?” It may be the most abused cliché in the financial world, but it still rings very true. Trading and investment require a significant amount of grit and perseverance to overcome the statistically guaranteed adversity. This is especially true in the Forex trading, which handsomely rewards winners while ruthlessly exposes a trader’s weaknesses and flaws.

forex trading

Forex Trading for Beginners

So is investing in currency markets really as simple as cutting your losses quickly and letting your profits run? Ask any successful trader or investor and the answer may surprise you.

One part of the proverb may hold true – cut your losses quickly. But letting your profits run may be easier said than done, as it relies more on the investor’s ability to make profitable moves in the first place.

The right side of the chart may be the hardest section to predict with any kind of precision. The technical and fundamental analyst battle for supremacy on what school of thought will win the trade, while actual traders or investors are in the trenches grasping at profits or getting slaughtered as the next wave unravels. Investors who are positioned correctly have the ability to manage profits, while traders who are fighting the flow are either experiencing marginal calls or pressing their eject buttons. Letting your profits run mostly requires a disciplined indifference to Profit/Loss fluctuation, and that is certainly an adjustment for the investors who are identifying opportunities to manage winning trades.

The currency market is a rather technically pure market with global transactions occurring around the clock. The market’s structure generates an intricate puzzle of resistance, support, trends, ranges, patterns, channels, highs, and lows, and they are all interconnected and explanatory in real-time, and certainly in hindsight.

If an investor ever asks why in the Forex market, there is most likely a news announcement, headline, or technical reason for the movement – making it great for after-the-fact explanations, but live trading surprises and fakes out investors with nasty unanticipated volatility. This simply connotes that managing trade size and risk is important to reduce the noise and capitalize on the actual movement or direction the market has to offer.

Limit the Downside

A solid financial education can provide a solid application-based foundation. Support and encouragement are also necessary to stay positive as an investor. It is recommended you have a support network to tap into when you find yourself struggling. Rather than throwing everything out and starting over, investors can keep the core principles (market structure, resistance, support trends) and surgically remove the flaws that are costly to the Profit/Loss curve. Lean on a support network of investors who are performing well and adopt some survival skills during the tough times.

It is very vital to identify what is and has been repeatable in the forex market. There are a variety of ways to apply winning strategies and consistent trades to the market’s structure and predictability. Most successful investors are far more conscious of the downside than the upside. The upside where unexpected profits are taken is often little more than the market being overly generous. The currency market is full of surprises, but unfortunately, most of those surprises are to the detriment of the investor. Consider the upside as generosity, and keep the downside at the forefront in your strategies.

The Bottom Line

The most vital part is to remember to cut your losses quickly. Losing is the worst part of investing, but when the losses are manageable, small and seemingly insignificant relative to your total equity, you will be fine. If you find a means to let your profits run, congratulations on doing something that most investors don’t. But most crucially, find a way to cut your losses quickly and you have a chance to survive the chaos the currency market throws your way. Then, aim to take adequate advantage when it’s behaving to your liking.


Breakout Trading Strategy

Different trading phenomena in forex.

A breakout is basically an asset’s price movement through a known or established level of resistance that is typically followed by a significant increase in the amount of volatility and heavy volume. In other words, breakout occurs when the currency pair’s price goes outside of its known support or resistance level with an increased volume.

The underlying asset is purchased by investors or traders when the price goes below (breaks) a level of support or when it goes above (breaks) a level of resistance. A typical breakout forex trader or investor will place a short position if the currency pair’s price goes below (breaks) support levels or place a long position if the currency goes above (breaks) resistance.

After being traded beyond the known price barrier, there is an increased trading volume and volatility and the prices for that particular currency pair typically head in the breakout’s direction. Breakouts are a vital indicator of future price trends.

Forex Breakout trading Strategy

Who to use Breakout Trading Strategy?

While you are able to utilize volume to trade stocks or futures, you cannot employ it in forex trading. While this leaves you at a severe disadvantage, you have to ensure that you do your utmost best to mitigate risk and adequately prepare yourself for to take full advantage of a good breakout.

When trading breakouts in the foreign exchange market, instead of using volume, you should focus on volatility. If you observe a major price movement within a short period of time then you know that volatility is very high. However, if you notice that there is muted price movement within that time frame then volatility is low.

Many forex traders or investors who jump into the market when volatility is high tend to suffer the consequences. High volatility in the forex market can leave you stressed and anxious, making it difficult to make solid decisions.

So, instead of doing what most others do and suffering the consequences. Utilize low volatility to your advantage. Target the currency pairs with very low volatility so you can better time and plan for when a breakout occurs and volatility increases so you can reap the benefits.

Trading forex using breakouts is not easy and it is not for every trader or investor but those that do it and do it well, reap the many benefits. Breakout trading is not just for trading alone, there are loads more Breakout trading strategy you can use to considerably increase your gains.