Month: March 2011

By Warren Seah

Forex paper trading can be likened to the process a child has to go through before he can walk on his own. The kid’s parents assist him by providing support until he is able to stand and walk about on his own without being supported. In the same way, forex paper trading helps you get to your feet in forex preparatory stages before trading in a live account.

Forex paper trading assists you in becoming familiar with forex trading system by enabling you to get used to how things are done in live trading situations. You can see that a forex paper trading account goes beyond only the use of virtual money.

It is important to point out this fact as most forex newbies usually view forex paper trading as merely being just about the use of virtual money that would be replaced for free once they have successfully blown the ones they were given.

This carefree attitude of blowing and replacing virtual money is capable of giving such newbies the wrong idea that there is nothing wrong in wasting this virtual money since it has no cost whatsoever attached to it. One of the consequences of this act is its capability to form the idea that loss in forex trading is a normal occurrence in the mind of such people.

While it is true that losses are sometimes recorded in forex trading, it is not normal to lose the whole account as most newbies do with forex paper trading. Losses that could be considered normal are those that fall within the range of calculated losses that had been previously forecasted according to plan of action in place. Just like in a battle where a company of soldiers usually beats a retreat once losses are rising, same way when losses are being recorded in trading you can retreat to put together a better plan of action before making a comeback.

Training in the formulation of an appropriate strategy for the market is one of the advantages that forex paper trading offers forex novices. The choice of forex entry and exit strategies to use in trading is normally arrived at after carefully examining the market condition.

Put another way, the strategies for trading should be a function of the market status. Forex paper trading is a great way to ascertain how discipline and prudent you are. Not minding the fact that virtual money is being used, it is an effective way to practise so as not to let your emotions influence your trading decisions in any way.

Handling of virtual money could be an indication of how you will handle funds in your live account, when you eventually have one. If you have the habit of wasting the virtual money, the tendency is high that you will do same with real money in your live account.

Forex paper trading is a sure way to get acquainted to the rudiments of forex trading. It enables a Forex trader to have an idea of mistakes that any trader is likely to make, and to take necessary pre-emptive steps so that he does not commit such errors when trading in live conditions. Forex paper trading helps forex traders to get over the emotional decisions that could potentially hinder their success in forex trading.

About the Author

Warren Seah

“Introducing 11 Exit Strategies, What Every Disciplined Traders Need … Go Without It You Could End Up Being A PIP VICTIM Just Like Thousands Of Traders Out There.”

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By Owen Trimball

Bottom fishing stocks is a saying used to describe a stock buying technique which focuses on shares in a company whose stock has taken a significant and decisive price dive along with notably higher volume of shares traded.

The overall idea is that the explosive volume is likely to wash the sellers out of the market, leaving it ready for the buyers to come back in and take the share price to higher levels. Hence the expression “bottom fishing stocks” – you’re fishing for stocks at what you believe could be the bottom levels of it’s price action and well positioned for a turnaround.

Buying These Stocks at a Discount

Once you understand option trading you’ll realize that it is possible to both buy (go long) or sell (go short) option contracts. You’ll also know that in the usa one option contract covers 100 shares while in other countries such as Australia, they give you control over 1,000 shares – so you’ll need to take this into account when deciding on the amount of capital you wish to invest. Do you plan to purchase multiples of 100 or 1000 shares?

The best way to illustrate bottom fishing stocks for a discount using options is to take an imaginary example. Let’s say XYZ company stocks have recently dropped significantly to around $17 on high volume – sometimes labeled as ‘capitulation volume’. The stock has since been trading within a range and you believe it can’t fall much further so it will still be value for money if it goes as far as the $15 price level. You also possess enough capital to acquire 500 shares.

Here’s what you can do:

You sell 5 put option contracts for a strike price of $15 for expiry the following month and in addition buy an additional 5 put option contracts at a lower strike price, same expiry date. This is called a put credit spread, otherwise known as a “bull put spread”. You need the bought position as a form of insurance protection in the event the stock plummets even further. You will be given a net credit into your brokerage account. Once this is done, three eventualities can follow:

1. The stock stays around the $17 level by option expiry date. In this case you can keep the credit you’ve received and may decide to sell another put credit spread for the following month. You have effectively been paid for waiting for the stock to arrive at your desired level.

2. The stock falls to $15 and you are exercised on your sold options and the stock is put to you. You now own 500 shares of XYZ and can then employ further strategies using options, for example selling covered calls with protected puts.

3. The stock continues its decline to way below $15. In cases like this, the stock will be assigned to you, however your bought puts will improve in value and limit your potential losses. You could utilize the profit from these bought puts to purchase more shares and in the process, average down your entry price as part of a longer term wealth building plan.

Bottom Fishing Stocks Using Inflated Option Prices

One of the reasons bottom fishing stocks is the best time to make use of this strategy, is the fact that along with the huge stock selloff, the implied volatility in put option prices will normally be elevated. Consequently the near-money options you sell will probably be at inflated prices, thus bringing you an even greater credit for the transaction. You get paid a handsome sum for simply waiting for the stock to fall further – whether or not it does.

About the Author

Owen has traded options for many years and is writes for “Options Trading Mastery” – a popular site which explores the best option trading systems. Discover some great Option Trading Strategies here and empower yourself for trading success!

By James McKee

As China continues to enter its next phase of economic evolution they face many struggles including an unstable economy. The amount of money being spent in China is mind boggling, entire cities have been erected and yet they sit vacant due to a population that has not yet caught up to Western nations in terms of income. China is beginning to address these problems at the forefront of its domestic policy in a way that is aggressive and effective. China possesses capital reserves that should see it through any storm it encounters, although it is still very possible that China could encounter a problem large enough to exhaust those reserves and cause problems with the Yuan.

What is encouraging for the Yuan is the fact that China is already being proactive and anticipating possible problems with their economy in the near future. There are growing fears in China resulting from unrest and instability in the Middle East that have brought about growing concern for the possible effects to China therein. The cost of food and housing in China remains exponentially high in light of the fact that Chinese currency is still very much devalued in order to keep China viable as an exporter. The rising prices of necessities in China have already lead to a series of protests throughout the country and could lead to more.

The dilemma for China is very simple and yet extremely volatile, on the one hand there is a need to appreciate the Yuan so that the country can move on and move past its industrial age. The other side of the coin is by appreciating the Yuan millions upon millions of workers would lose their jobs because China would no longer be nearly as lucrative for export. If these people are unemployed the entire country could easily find itself undergoing a massive, bloody revolt. Those on the forex currency exchange should carefully observe the actions of China’s central bank and the value of the Yuan.

About the Author

Author is a Forex trader and financial analyst residing in Denver, Colorado. To stay up to date on all the latest developments in the financial world and beyond be sure to check out the forex exchange rates regularly.

By Warren Seah

In the world of trading, the worst enemy to encounter is oneself. The emotional impulses stem from a person normally will win over the rational mind which results in bad trading decisions. Technical analysis is there to help us to put objectivity and rationalization back in place.

Forex technical analysis is a study of price action through pattern recognition and indicators to help us in the aid of forecasting the move of the market.

As technical analyst assumes that all fundamentals aspect of the market will be reflected in the price, all he needs to do is to focus of the price action of the market. The collective power of the market psychology is the force behind the movement of the market and often shows in a patterned way reflected in the charts.

History always tend to repeat itself and these technical indicators are in place to gather the past data of the market and make an indication for traders like you and me to unlock the codes to the possible market future behaviour. You do not need to worry about having to listen to so called expert on the prediction of the market through constant fundamental analysis and more often than not it is mostly their own opinion of what is happening.

What technical indicators do is to pick out the truth of the market psychology through the analysis of past data and present that to you. All you have to do is to find how to use these technical indicators to extract the information needed to support your trade decision. No emotions or unnecessary advices to steer you away from reality.

Human nature always present itself in patterns and cycles which is always reflected somewhere in the history of the charts. You have to spend time to decipher these data and make them useful for you. Do take note that although having indicators to aid you in your trade will be helpful but having too many indicators cluttering up your chart is a no go.

When you have too many, it’s like having lots of advisers telling you what to do and what do you do? You end up analysing most of the time and you lose your chance to trade. At most you should have only three to four indicators on your chart in that way you can fully harness the power of the forex technical analysis.

About the Author

Warren Seah

“Introducing 11 Exit Strategies, What Every Disciplined Traders Need… Go Without It You Could End Up Being A PIP VICTIM Just Like Thousands Of Traders Out There.”

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By Cedric Welsch

Future market trading is an important issue, whether you are a beginner in the market or have been an avid investor for years. There are lots of important and helpful tips and tricks that can help you as an investor to succeed in the market and have the most success whenever you invest any money in the future.

One tip for beginner investors is to get started in penny stock trading. Although a lot of people have negative things to say about penny stocks, you can actually be quite successful with them if you take your time and are smart about it. Do not start by throwing a bunch of money around and just hoping to get lucky; rather, patience is key and you need to be selective and strategic if you want to be successful in your investing. Start with small, slow and simple trades, with low risk stocks that have a good potential return. Over time, you should move onto larger stocks although you may be tempted, as many new traders are, to stay focused on low value, these can be a risky investment if you stick with them for too long. Avoid online stock trading at least at first, as it can give you a false sense of security.

When it comes to equity trading picks, there are important facts investors always must be aware of. That includes the offer price, asking price, and also the price earning ratio. You always need to follow the stock chart and take note of the momentum of the stock, so you can always be aware and know how your stock is doing. Purchase books and follow RSS feeds online to ensure you are always aware of the latest happening trends. The most successful investors are those who devote a great deal of their time to investing.

Always analyze the market and stay on top of current trends. You cannot expect the information to come to you, so whether you spend a few hours every morning researching and reviewing to find out current market information, or go about it another way, the most important thing is that you stay up to date and always know what is going on in the market. There are different stock picks, market fluctuations and other information you need to be aware of to be successful. Future market trading can be very profitable if you are good at what you do.

About the Author

If you can be consistent with live forex news education, and even the forex broker reviews feeds, that should be key to trading success.

By Warren Seah

The usage of time frames to trade varies from trader to trader but most importantly a trader should be comfortable and proficient in using his/her favorite time frame to trade. The selection of time frame also reflects the trading style of a trader.

More often than not a novice trader will just stick to one particular time frame to look at for a start. As a trader grows more confident in looking at a single timeframe, he needs to get a broader view of the market and that is where multiple time frame is needed to provide that view.

As a guide in order to get started, three timeframes are preferably to be set up with long, medium and short term frames. Normally a long term time frame will at least three times the medium time frame and the shorter will be three times smaller.

For example if I am comfortable with a medium time frame of 15mins, my smaller time frame will be 5 mins and my larger time frame will be one hour.

A medium time frame should be chosen as the main time frame to decide whether a trader should trade and the larger time frame to observe the overall trend in the market and identification of main support and resistant lines. The smaller time frame is to pin point the precise entry and possibly an exit too though a medium time frame could do the job for exit purposes.

Every time frame has an effect on every other time frame and by constantly using multiple time frame analysis, you are able to improve your success as a trader. What you constantly need to look out for is whether there is agreement between as many time frames on the market direction you are looking for. The higher the number of agreements the higher chance of getting your trade profitable.

That being said, due to my own experiences these are just some guidelines for you to follow. What you need is to combine fundamental and technical analysis or whichever you are comfortable with and to practice as much as possible to get a hang of trading with multiple time frame.

About the Author

Warren Seah

“Introducing 11 Exit Strategies, What Every Disciplined Traders Need… Go Without It You Could End Up Being A PIP VICTIM Just Like Thousands Of Traders Out There.”

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By Owen Trimball

The great thing about a straddle is that it’s non-directional. This means that you can make money without forecasting market direction. In other words, it doesn’t matter whether the stock price goes up or down in the near future – you can still make money either way – as long as it moves somewhere. The method behind a straddle is that you simultaneously purchase the same number of call and a put options, with the same expiry date. The plan is, that the profit from the winning option will more than compensate for the loss on the losing one, with a good profit remaining.

The straddle trade is a “slow moving” trade that can take anywhere from a few days up to a month to do its thing, so it’s not like you need to be watching it every few hours. It works best on stocks that are in a period of price consolidation with the expectation that a breakout may be coming soon. If you are a technical trader, one of the best chart patterns I have found for straddle trade setups, are what are commonly known as “triangle” or “wedge” formations. This is where the recent highs and lows of the daily bar charts are coming together. In other words, the highs are getting lower while the lows are getting higher, so that if you draw a trendline over the highs and lows, you’ll see them converging into a point. You want to trade straddles as near as possible to the convergence of the two trendlines. The most volatile straddle breakouts come after you see this pattern forming for about 3 months. Anything shorter than that, may result in a breakout that doesn’t have sufficient momentum to give you the maximum profit.

Another vital thing when taking out straddle trades, is that is that you need to ensure that when you buy the options they have at least 60 days to expiry. 90 Days is better. If you do this during a period of price consolidation, such as in the triangle pattern above, the option prices are likely to be the cheapest around that time, due to low price volatility. This is ideal for straddle trades.

The downside of straddle positions is that they cost more to enter, than other trading strategies such as spreads. Nevertheless, on the US markets where option contracts only cover 100 shares, they are still quite affordable. You also want to avoid stocks that are historically slow moving, because the whole idea behind a straddle is to anticipate a short term price breakout that moves far enough before expiry date, to give you a net profit. Another indicator that a price breakout could be imminent, is an upcoming earnings report. Alternatively, a large movement in the overall market can also affect individual stocks.

Coming back to “triangle” patterns, there are three main types. Where the highs and lows are converging, this is called a “symmetrical triangle”. However, you often see the lows getting higher, but the highs being equal because they are hitting a resistance level. This is called an “ascending triangle”. The reverse of this is the third type, namely, descending triangles. These are ideal conditions to implement a straddle strategy.

The final thing you want to check before placing your straddle trade, is the “implied volatility” in the option prices, compared to the “historical volatility” of the stock price. Ideally, the former should be lower than the latter. Any decent options broker will be able to provide this information.

Straddle option trading is one of the safest and most stable option trading strategies available, because you’ve eliminated the need to predict market direction. It does have some risk, namely, that the stock goes nowhere, in which case, time decay on your bought positions will work against you. But if you’ve purchased when the volatility is low and price is cheap, your losses will be minimal.

About the Author

Owen has traded options for many years and writes for “Options Trading Mastery” – a popular site about the best Option Trading Strategies including option straddle trading

By Cedric Welsch

The currency trading or as it is more commonly known as, FOREX or Foreign Exchange trading, involves daily trading of more than 2 trillion US dollars. This is the biggest trading market in the world, definitely much bigger than the stock market and you can do trade 24 hours a day. However, before you jump into it, you need to have a proper currency trading plan. There are certain currency trading tactics, which have proven to be successful in the past, and following them may come handy for you, too.

One of the valuable tips is that while trading in Forex; never add to a losing position. Your experience in the field will allow you to judge the power of a position more competently and will let you determine with increasing precision where to stop. However, until you reach that level of mastery, a golden rule while trading in currency is to never ever involve in a trade about which you have doubts and are not 100% happy. This is because Forex market is a high-risk market and any hasty decision can cost you dearly.

In addition, before you enter a particular currency trade, set a profit objective and see what are the realistic chances of achieving that profit. Be sure to remain flexible and back out any time you think you should, based on the current market info. In currency trading, there are also three different types of markets, the up trading, the down trading and the range bound and you need to have different sets of plans for these different markets. To minimize the risks, you can also trade in futures and forwards markets, the trades that do not involve actual currency but contracts with settlement dates. You can go this line especially when the currency market is too volatile and trading in currency involves a high amount of risk.

Never selling a dull-market in a Bull-market and never buying a dull market in a Bear-market is another valuable currency trading tactic. If you are a newbie in Forex trading or you do not have enough time at your disposal to do the trades yourself, you can also go for currency trading software, which performs the trades for you. Some of the more efficient of these softwares, like Forex Tracer, can predict the market with 90% or more precision and is capable to rake in good money. However, in case of big market fluctuations, these softwares are not very precise, so be on your guard while using them. These currency trading tactics will hopefully serve you well, but keep it in mind that experience, fortitude and capital are the biggest factors to Forex success and you will have to devote some good time before you master the skills of Forex trading.

About the Author

Not all forex daily news you listen to can be helpful. Only concentrate on forex news that can contribute to really making profits.

The ninth trading week of the year comes to a close as investors continue to monitor global events and key economic indicators.

By Zac, CountingPips.com

One of the more interesting Apps or forex trading programs I’ve come across lately is called the Currency Strength Meter. This is a free program that works with the MetaTrader platform and runs on your desktop.

The meter extracts currency data from MetaTrader and calculates a numerical strength value for each of the eight major currencies that continuously updates all day long.

It is a tool that was made to give you a quick snapshot of how the major currencies are faring in the forex markets.

This program was the brainchild of forex trader Henry Liu and looks just like this when running:

The value for each currency is derived from the relative strength against the other seven currencies using movements of the daily ranges of the 19 related currency pairs, according to the explanation in one of Henry’s videos.

The strength data collection starts at the end of the US session at New York 5:00 PM and does a 24 hour loop which ends the next day at New York 4:59 PM (strength meter resets).

Henry features a video that explains his top 7 uses for his program that you can see here.

The strength meter may be worthwhile to check out for intraday traders or for just overall major currency watching.

You can read more about it or download from here