As the age-old adage goes, if you fail to plan, then plan to fail. Trading is a risky business.
“Risky” means that, like other endeavours in life, you need to plan ahead in order to manage the inherent uncertainty of the markets, and make sure that your risk capital (which, after all, is what allows you to stay in the game) is never depleted. Notional funding, proper position sizing, and discipline are key to this part of the equation.
“Business” means that you are to treat this endeavour as a business and not as a gamble. If you had a business plan to show Warren Buffett, would he approve and invest in you? Buffett invests in businesses that will be around for the next 100 years—or at least for the foreseeable future. Businesses that are strong, with a clear strategy, with a competitive moat. You need to structure your trading business in the same way.
Developing a clear edge (your moat), sitting on your hands until your edge is in play (patience), diversifying your bets without diworsifying them, and managing correlations are key to this part of the equation. But also being in a personal position to make trading work for you. Don’t think about paying the bills with your trading. Rather, make sure you have diversified income streams that allow you to learn, survive, and then thrive, without being pressured to perform.
You need a clear and concise plan to guide you along your path to consistent trading, as your plan becomes the foundation for rational decision-making, instead of reckless emotion-driven mistake-making. But not any old plan will do. It needs to be unique and special to you. It needs to be your plan—one you own deep down.
Traders use this approach for a variety of reasons. For example, it may suit them to trade early in the morning before they head off to a full-time job or to trade for just a few hours after they finish their day job. For other traders, it’s both a discipline and a lifestyle choice. It lets them relax out of hours without having to worry about overnight exposure, or positions and prices moving against them when they are asleep or unable to monitor the markets. When you consider that Global Foreign Exchange markets operate continuously from late on Sunday evenings, London time, all the way through to the close in New York on Friday evenings, then this approach starts to make perfect sense.
The difference between a bid (buy) and offer (sell) price is the spread. We understand that the cost to trade is a major consideration for our clients, so we work hard to ensure we offer some of the most consistent and competitive spreads in the market. It’s our mission to source the best possible bid (buy) and offer (sell) price for clients to execute orders at market or their choosing. That’s why we source our pricing directly from a range of top-tier investment banks and global liquidity providers.
Soft commodities are used as raw materials and ingredients in the production of food and textiles, which are then consumed in their final form. We also call these genuine consumables.
They are seen as trade or commercial oriented markets rather than investment markets. The distinction is now being broken down by the use of CFDs (cash-settled, non-deliverable contracts) that allow traders to speculate on the rise and fall of soft commodity prices without making or taking delivery of the underlying.
Soft commodities are produced and traded on a global basis and are woven into the fabric of everyday life. But just because they are commonplace, don’t be mistaken for thinking they are uninteresting or static in nature.
Let’s look at the commonly traded soft commodities and the influential factors that impact their price.
Candlestick charts are among the most popular style of charts and widely used by today’s traders. Dating back to the early 18th century, the candlestick notation was developed by Japanese rice merchants who would use their accumulated knowledge to make predictions about the commodity’s price.
During these events, we tend to see a strong reaction in response. This is especially true when holding positions around key economic data points, central bank meetings or political events, where markets can build up a huge amount of interest in and market positioning into these events can become extreme.
Aside from known event risks, such an FOMC meeting or a US Nonfarm payrolls report, holding positions into a weekend is one of the classic times when the risk of gapping is higher.
This trading style is a low (profit) margin, high volume strategy that requires attention and dedication. If you choose to become a scalper, you‘ll need to dedicate several hours a day to trading. If you work full-time be aware that it’s a style suited to those who are willing or able to get up early or stay up late and trade around various market openings, for example, Japan open, London open, US open, Australian open etc.
Scalping also means keeping any negative P&L from losing trades to the lowest possible amount. This is done through a process known as scratching trades which closes non-performing trades for a flat or minimal loss. Scalpers will aim to have more winning than losing or scratched trades by a multiple of approximately 2:1, though that ratio could be lower in some circumstances.
In this guide, we’ll share the two simple ways to help you create a scalping strategy using the Simple Moving Average and the High-Low indicator.
The trader is forged in the fire of battle, and that is where you need to be if you want to gain mastery.
In saying that, you do need to have some simple structures in place to support you when you are starting out, and this is what we will cover today.
Let’s get started by investigating the role a Forex demo/practice account plays in your trading progression.
Price circuit breakers – or what is commonly known as the ‘limit up’ and ‘limit down’ rule – were implemented to address extreme price moves in equities and the broader equity index. The limit up and limit down rules have been set to allow time for quick reflection and assessment, and to understand if the move is correct and valid.
The Champion Day Trader– “Buzzy” Schwartz”.
Marty Schwartz’ trading was at one time accounting for 10% of the volume per day on the S&P 500 futures contract. He is the author of “Pit-bull, Lessons from Wall St’s Champion Trader”. To the uninitiated, the champion day trader may seem like a person of action. But they are just as comfortable stalking their trade as they are decisive when it comes time to execute. Typically surrounded by multiple screens, the day trader monitors dozens of inputs waiting for a trade with an edge to appear. Some trade rapidly, in and out of the market in a heartbeat, taking 5 pips here, 10 pips there. Others may be more serene, placing only one or two trades per session, carefully waiting for the optimal time to catch the day’s move. The champion day trader may be boisterous and rowdy, but they have learned to separate their ego from the trade. If the market does not go for them? They’re either out, or going back the other way. To the day trader, it’s all the same. What matters is whether they cut their losses short and let their profits run – not whether they are right. They may only win with half of their trades, but through superior risk management they end each day well in the black. Oneforex Trading Style: Short-term/Intra-day
In effect, you agree with us as the counterparty to take a view in one currency before swapping it back at a date of your choosing, with any running profits or losses cash-adjusted to the account.
Holding a position depends on your trading strategy and plan. Swing traders might hold a position for days or even weeks, while scalpers might hold it for a few seconds. When holding a position, the price of the currency pair you’re trading isn’t the only price you need to watch; you should also be aware of the swap or funding charge.
The swap charge is heavily influenced by the underlying interest rate corresponding to each of the two currencies involved. The swap charge is applied should you hold the position at the daily rollover point, which is 00:00 server time and known in forex trading as ‘tomorrow next’ or ‘tom next.’
Intraday traders won’t need to worry about swap charges, as they’ll naturally close their positions before the daily rollover point. But for anyone else holding a position overnight or longer, you need to consider this in your trading considerations.
When we talk about FX majors, we’re referring to the currencies of some the world’s leading economies, which are also the most actively traded of FX instruments. They combine with other leading currencies to form FX rates, but we’ll go into more detail on this later. The most active of the majors are the EURUSD or eurodollar, USDJPY or dollar-yen and GBPUSD known as cable. Also considered to be FX majors are rates such as AUDUSD, NZDUSD, USDCHF.
The table below shows the daily percentage market share of the individual major currencies based on data from the BIS tri-annual survey, which is known as the FX markets bible. Note that there is some double counting here as the US dollar is involved in the majority of FX transactions.