Top 10 currency trading tips from Deutsche Bank

An e-mail from Deutsche Bank contained the following list, which will serve an investor well who is contemplating buying foreign currencies as part of their overall portfolio.

Top 10 currency trading tips from Deutsche Bank 

1. Know what moves currency markets. Like any asset class, there are a number of factors that drive a currency's performance. A country’s macroeconomic situation can have a major influence--economic data releases, policy decisions, and political events can change an economist’s outlook on the country, and therefore its currency. There are also technical factors such as interest rates, equity markets, and international trade, which may also have an impact. Spend time getting to know these.
2. Understand the strategies. Yes, there is a method to the madness. As a trader, you need to be aware of three crucial trading strategies, which are often used by currency traders: the carry, momentum, and value trade. Momentum tracks the direction of currency markets; the carry strategy sees investors selling currencies with low interest rates and buying those with high rates; and the valuation strategy takes a position based on the investor’s view of a currency’s value. However, the strategies that you use are up to you.
3. Decide on your trading strategy. Are you macro-driven or a technician? In currency trading, as in any form of active investment, it is important to understand how you arrive at your investment decisions. Are you someone who looks at the big picture (fundamental economic data such as inflation, or central bank decisions) and makes a call on how that may affect a currency pair? If so, then you’re macro-driven. If you are someone who looks at the changes to a currency pair and then tries to understand what this may mean from a macro-perspective over the long term, then you are a technical investor.
4. Manage risk. As with any investment decision, you must decide how much risk you’re willing to accept. Ask yourself, “how much am I prepared to lose on this position?” If you don’t have a convincing or comfortable answer then you should rethink the trade. Do not risk more than you can afford to lose. Think about how you can mitigate your downside risk; make use of trading strategies such as stop losses or limit orders.
5. Stick to what you know. There are 34 currency pairs that can be traded on dbFX, each of which have their own characteristics and considerations to understand and analyze. If you’re participating in the market on a part-time and non-professional basis, it is probably better to concentrate on just a few pairs and commit to thorough and robust research on those, rather than superficial research on the many. Some key things to consider when analyzing a currency pair are its liquidity, transaction costs (the spread), and volatility. As a general rule, major currencies usually have better liquidity, tighter spreads, and lower volatility, versus emerging-market currencies, which have poor liquidity, wide spreads, and volatile movements.
6. Plan your trade, and trade your plan. It’s one thing to have a plan, it’s quite another to execute it. When trading currency, it's important not to get caught up in the moment--the markets are fast moving and in the short-term can be unpredictable. Rather than trying to make a quick profit, stick to your long-term plan based on your research. Good currency traders make money in the long term by being disciplined, not necessarily by making short-term bets.
7. Research, research, research. It’s important to stay current. All currencies move quickly, so checking the price once a week is not going to help you make strong, long-term returns. It is helpful to use an online provider that provides you with up-to-the-minute data and statistics. Traders use data to constantly assess their trading positions
8. Keep your emotions in check. Like many important decisions, it is vital to keep emotion out of any trading decision you make. If you’re upset about missing out on an opportunity and want to trade yourself into a better position, or want to stray from your trading strategy to make up for a loss earlier in the day-- reconsider, because you’ve got the warning signs of someone about to make an impetuous, irrational decision. If you do feel yourself getting emotionally involved in a particular trade, take a deep breath, review your strategy, and establish how such a decision will affect your overall approach before going anywhere near the "execute" button.
9. Don’t expect to win on every trade. That may not sound like much of a sales pitch, but even the most successful of traders don’t win on every trade. What they do have is a robust plan and long-term strategy, which carefully considers the risks. So don’t necessarily be disheartened if a trade doesn’t go your way; review why it went wrong and see if there is anything to learn from the experience. But don’t think that currency trading is an option for those seeking quick money, because like any investment, it only should be played by those with a long-term goal in mind.
10. Don’t put all your (nest) eggs in the currency basket. Foreign exchange is only one of the many asset classes you should be considering as part of a balanced investment portfolio. Forex trading is not suitable for every investor, so if you are committing all of your financial resources to forex trading, be sure you are fully aware of the risks and rewards of doing so, because commitment to one asset-class is not recommended. The same applies for currency trading itself. Risk diversification allows you to mitigate your risk by spreading it out, that is, not placing all your faith in a single trade. Diversification is key, no matter what asset class you’re investing with.

Source:http://seekingalpha.com

Guide to Forex Trading

Simple guide to Forex Trading:

1. Set a Stop Loss: Before entering any trade, decide beforehand the amount you are willing to lose and stick to it. Set a stop loss on the trade before you enter. Do not fluctuate your stop loss if you are in a losing trade. During times of extreme volatility it can be difficult or impossible to execute orders. Stop orders become market orders when executed, so the order may not be filled at the desired price. As a result, the initial risk can be estimated, but not guaranteed.

2. Let your profits run:

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 Do not be emotional about a trade – you will lose some and win some. Know the reason why you entered a trade and stick to those reasons. The less emotional you are the more successful you will be. Stick to your game plan – move your stop loss as the market moves in your favor and let your profits run. During times of extreme volatility it can be difficult or impossible to execute orders.

3. Don't be influenced: You have your own game plan stick to it. If you are influenced by others you will constantly be changing your mind. Learn to insulate external sources once you have made up your mind. You will always find someone who will give you a logical reason to do the opposite.

4. Keep your position sizes within your limitations: Successful traders know that in order to profit you trade for the long term. Trading is a game of probabilities, and over the long run as long as you stick and implement sound strategies and stay consistent – success is much more likely to come. To be a successful trader you should never take a position that puts substantial capital in jeopardy. In actuality you will rarely find successful traders who risk more than 10% of their account in any trade. You might want to start small and increase your trade sizes as your confidence grows.

5. Know your risk vs. reward ratio: The minimum ratio you should be using is 2:1, so if you are successful on 50% of your trades you are doing well. For instance, if you are long GBP/USD and you want to earn 30 pips you should not risk more than 15 pips. You should never risk 30 pips in order to make 10 pips. If you do, you’ll make a lot more successful deals then unsuccessful ones, but the poor ones will ruin any of your chances for profit. Your risk vs. reward analysis is extremely important to trading successfully.

6. Have adequate capital: You should never trade with money that you cannot afford to lose. Always make sure that you have enough credit. For example, you should can ask yourself the following question: “if I were to lose 50% of my opening balance in 6 months will I still be able to afford to trade?” Only if the answer is yes should you start trading, click to open trading account. One of the keys to successful trading is mental independence, which means your trading freedom must not be influenced by your fear of losing.

7. Trending or Neutral: Learn to analyze the forex market – is it a trending market or a neutral market? In a trending market, follow the trend. In a neutral market, buy on lows and sell on highs. As long as you use stop-losses you are controlling your risk.

8. Don’t fight the trend: Don’t try to buy on dips and sell on highs in a trending market. The old saying "the trend is your friend" is a good one. Why fight it – go with it!

9. Averaging – don’t do it: One of the most common mistakes traders make is the continuing adding of a losing position. Averaging will be the death of short-term trades. For short-term trades, preserving capital is the most important thing, and putting too much capital at risk will jeopardize success. In short-term trading, if a strategy is right the market should move in the correct direction within a relatively short period of time. However if it's wrong, the short-term traders should realize that they traded incorrectly, and they should take the loss and move on. There is not much room for pride in short-term trading. You should never add to a losing position.

10. Chasing a bad idea: This happens all the time. You see a potential trade and then decide to wait till the next day to see if it sets up. By the time you see that it did exactly what you thought, it may be too late. Review your reasoning for the trade, make sure your initial reason is still there and if not, forget about the trade. There will always be trading opportunities, so be patient and strike.

11. Understand the way the market thinks: You should understand that all the information (except for newly released information which the market adjusts to within a short moment) is already built into the price of the cross. You should know what indicators are coming, particularly the majors, and you should know what is already anticipated by the market. There are many publications of market anticipation for major indicators.

12. Trading - a game of probabilities: You will not be correct 100% of the time – it’s a fact. Good, experienced traders all know this. It’s a numbers game, and you’ll make some and lose some. The idea is simply to win more than you lose, not to catch all the fish in the pond. Understand that trading is a game of probabilities, and if you do the right thing, in the long run you will come out ahead. Learn from mistakes. When you start forex trading, you may well lose more than you make. Think about what you did wrong and try not to be emotional about the trades. If you stick to your game plan and learn, hopefully your profits will out weight your losses.

13. Know why you are in the trade: Keep a trading log, and write down why you entered a trade. Don’t be impulsive. Have a plan. This way you will learn which strategies work for you in the long run and which don’t. If trading before or after releases works for you, look for them and trade those.

14. If the logic goes you go: If the reason you entered the trade disappears then so does your reason to remain in the trade. If you think you’re at a low and it breaks through, get out. Then reevaluate and decide once more.

15. Have a maximum run: If you have 4 or 5 bad trades in a row, take a break. Something isn’t working. Go away and regroup. Don’t be afraid to take a break.

16. Study: Learn new ideas, keep up to date, and don’t trade other people’s ideas. You should always know why you are in the trade.

17. Have Fun: Enjoy what you do. Keep calm and stay as unemotional as possible – you will be more successful.

Source:http://www.avafx.com

Forex Technical Analysis

Forex Technical Analysis: 

Technical analysis is a method widely used in stock markets and other traditional markets. They use price history and a series of algorithms in their attempt to predict future prices. You can find on the market different methods and algorithms for predicting the market’s price, but in the end they will always base their methods on past price movements. Technical analysis, however, is a bit different.

The first method used by technical analysis is using the technical indicators. Usually a technical indicator is nothing more than a graphical representation display somewhere on the screen. Usually, the price is represented. The most notorious example is the MACD indicator.

Other methods can use measure resistance and support or trend lines. These methods are based on analyzing the chart and observing the recent history. The method is trying to find a pattern for price movements. Usually the price either follows a certain pattern or it oscillates between a minimum and a maximum. If the price follows a pattern, you can predict where it will go by using trend lines. If it bounces forth and back between a minimum and a maximum then using resistance and support lines you can predict when it will change its direction.

Technical analysis can be very helpful but its predictions are not flawless. Only you can decide if to trust a technical analysis and make a trade or wait for another opportunity. On the market you can find a wide variety of indicators and technical tools. Since most traders have access to them, the slightest difference in interpretation can make a huge difference on transactions. If some traders want similar price range and they all try to buy at that point then the price can bounce quite drastically in a short period of time.


Technical analysis is different from one trader to another. Each individual has its own desires, needs and interpretations. Every trader has its own goals too, so they have different ideas about how these goals can be reached and how to set up their indicators. All these differences make the individual’s trading system. Take any number of traders and you will see that, even if they use similar tools, the results will never be the same. The current market still works only due to all these differences.

For forex trading technical analysis is quite useful. It will only show a small part of the market but you can learn a lot about trading from it. Understanding technical data will help you read the charts better and you will develop certain skills and thus you will see faster when a price movements appears.

Technical Analysis

Technical analysis refers to the study of indicators and charts in order to determine the future price movement based on the past price variation. The technical analysis is quite different from fundamental analysis, since technical analysis uses mathematical techniques and charts to examine different aspects of price movement. Due to the development of Internet, all these indicators and charts are widely available to every user connected to the Internet, and not just for professional traders and brokers, like was in the past.

Charts will give you plenty of information about any price movement regarding a certain currency, if you know how to read them. Most traders consider that a chart tells the story of the currency it represents. Since there are more than 50 technical indicators you, as a trader, can get access to a huge amount of information about currency movement. From any historical analysis you can predict the future movement of that currency.

A good trader will certainly search a trend line. Trend lines always show the price movement of a certain currency (down or up). If you can find a trend, then you can determine quite accurate the price movement. A trend is always a good friend in this type of business, and all traders rely on them for future price predictions.

Technical indicators are used to study some particular aspects of a certain currency. These indicators are quite similar with the well known economic reports since they study the movement and health of a currency in comparison with economic reports that study the growth and health of a certain economy.

Source: http://www.tradingforex.net/lesson-6-forex-technical-analysis

What should you know about Forex Signals ?

What is Forex Trading

An Introduction to Forex Trading

Forex Trading is trading currencies from different countries against each other. Forex is acronym of Foreign Exchange.For example, in Europe the currency in circulation is called the Euro (EUR) and in the United States the currency in circulation is called the US Dollar (USD). An example of a forex trade is to buy the Euro while simultaneously selling US Dollar. This is called going long on the EUR/USD.

How Does Forex Trading Work?

Forex trading is typically done through a broker or market maker. As a forex trader you can choose a currency pair that you expect to change in value and place a trade accordingly. For example, if you had purchased 1,000 Euros in January of 2005, it would have cost you around $1,200 USD. Throughout 2005 the Euro’s value vs. the U.S. Dollar’s value increased. At the end of the year 1,000 Euros was worth $1,300 U.S. Dollars. If you had chosen to end your trade at that point, you would have a $100 gain.

Forex trades can be placed through a broker or market maker. Orders can be placed with just a few clicks and the broker then passes the order along to a partner in the Interbank Market to fill your position. When you close your trade, the broker closes the position on the Interbank Market and credits your account with the loss or gain. This can all happen literally within a few seconds.

Source: http://forextrading.about.com/od/forexbasics/a/what_is_forex.htm 

What should you know about Forex Signals ?

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