Forex Stop Losses

In order to control your risk, you have to learn how to define and place your stop losses. Stop losses are points at which you know it’s time to exit a trade. When you reach this point, you know that the situation has become unsalvageable, so it is far better to cut your losses and preserve some of the invested funds than to stay with the trade and risk losing everything. Not only can this technique help you save a lot of money, but it can also significantly reduce stress. So read on and learn how to use forex stop losses properly!

Forex Stop Losses | Types and Settings

We can divide forex stop losses into four categories: percentage stops, volatility stops, chart stops and time stops. If you base your stop on percentage, you’ll use a predetermined portion of your account (the amount you’re willing to risk in a trade). The problem with this type is that you set your stop at some random price level. It will probably be located very close to entry or it will be set at some price level that doesn’t take any information from Forex Technical Analysis into account. Instead of setting it arbitrarily, you should set your stop in accordance with the market environment. Follow the system rules and not the amount you’re ready to lose.

As for the volatility stop, you’re actually trying to guess how much some currency pair will move. If you use the volatility stop you’ll never leave a trade too early. If you know the average volatility, it can help you set your stop at the right level. The third type of stop losses is based on charts. You basically observe your price actions in order to find support and resistance areas. The last way to stop your loss has to do with time. You simply predetermine when you want to exit and then do so regardless of how unfavorable the market situation is.

Forex Stop Losses | Rules and Mistakes

Placing forex stop losses may not always be easy, especially if you’re still an inexperienced trader. Fortunately, there are some useful tips we can give you, since this is where many traders make mistakes. First of all, don’t place your stops too tight. If you do that, the price won’t have any space to move before it starts to head your way. But you don’t want to place your stop too far as well, since the situation can then easily get out of hand. Another thing you should also avoid is placing stop on support or Forex Resistance Levels because the price can still turn and head your direction upon reaching that level. In addition, it is also recommended that you place your stop before calculating your position size.

Forex Stop Losses | Conclusion

At the conclusion of our Forex Stop Losses article, we’ll repeat one more time all stop setting possibilities. You can place your stop based on the volatility, percentage, charts or time. Every method has its benefits and you can choose it in accordance your trading preferences. Whatever you do, though, always remember the stop setting rules: don’t place your stop too tight or too far and don’t place it on support or resistance levels. If you want to learn more about trading, however, browse around our website – there are more interesting articles that can help you.

MetaTrader 4 in Forex Trading

If you’re about to enter the world of foreign exchange, you should definitely get familiar with MetaTrader 4. It’s the most popular trading platform in the entire forex industry and it’s used by traders of all levels. Because it has so many technical tools and indicators, it’s great for more experienced traders, whereas its customized charts and intuitive design make it very useful for beginners. To learn more about MetaTrader 4 in forex trading and its offers, keep reading and examine the most important elements of this exceptional platform. Stay with us!

MetaTrader 4 in Forex Trading | Installation and Expert Advisor

Let’s start our MetaTrader 4 in Forex Trading article with the very first step – installation. The installation process is quite simple and it won’t take you more than a couple of minutes. All you have to do is download it and fill in the account details. With MT4 you can create multiple accounts, though, so be careful when choosing the account and placing trades.

Once you’ve downloaded and installed your MT4, we advise you to upgrade your platform by installing an expert advisor, a program that automatically follows your trading instructions. Having an expert advisor can be very useful: it replicates the actions when your system gives you a signal and it’s especially helpful when you’re trading multiple pairs or if you simply can’t spend too much time in front of your computer. At this point of our analysis of MetaTrader 4 in forex, we have to warn you that you’ll find many people offering EA programs that don’t perform as advertised, so make sure you inform yourself thoroughly before doing anything.

As for the most important features of MetaTrader 4, we’ll talk about that in the following paragraph, so keep reading.

MetaTrader 4 in Forex Trading | Options

As we’ve already mentioned at the beginning of this article, this platform is highly customizable which makes it great for all kinds of traders. In this paragraph, we’ll show you how to set some basic options. For example, when it comes to charts, all you have to do is to click on the insert menu and choose an object to add to the chart (shapes, arrows, lines etc.). After that, you have to click the chart area where you want the object to appear.

If you want to add some Forex Chart Indicators, you also need to click on the insert menu. You’ll notice that they are organized in groups according to their type (trend, oscillators, volumes etc.). When you choose an indicator, you will have to set parameters. Besides that, you can choose its color, line style and so on. Each tool offers loads of possibilities, which means you can access the market in a variety of different ways. Therefore, it is recommended that you invest some time into familiarizing yourself with the platform in order to be able to extract more data.

MetaTrader 4 in Forex Trading | Conclusion

We can conclude that MetaTrader 4 is the most important trading platform in the world for a very good reason. It has many technical and other tools that will help you in your trading, and its design will help you adapt to forex trading in no time. Furthermore, you can upgrade your MT4 platform by installing an expert advisor that will enable you to trade automatically. If you want more tips and educational articles, browse around our website – you are sure to find something that suits you.

Forex Currency Correlations

When it comes to the world of finances, correlation is a statistical measure of how two currencies move in relation to each other. Consequently, currency correlation discovers whether two currency pairs move in the same direction, opposite direction or randomly. Since currencies are traded in pairs, there’s not a single pair that’s completely independent of the others. That’s why you should learn as much as possible about the forex currency correlations! Keep reading and find out all you need to know!

Forex Currency Correlations | Correlation Types

We’ll first list the types of forex currency correlations. They are computed into correlation coefficient which can range between -1 and +1. Perfect positive correlation is the one with a correlation coefficient of +1. It means that the two currency pairs will move in the same direction 100% of the time. If a correlation coefficient is -1, this means that the two currency pairs will move in the opposite direction 100% of the time. This is called the perfect negative correlation. When two currency pairs are completely independent of each other, the correlation will be 0.

Forex Currency Correlations | Six-Month Correlations

When we talk about forex currency correlations we have to emphasize that these correlations change, so you have to follow the shifts very carefully. Sometimes, due to global economic factors like Oil and Gold, they can even change on a daily basis. Other reasons can be related to changes in monetary policies, pair’s sensitivity to commodity prices or some unique economic factors. That’s why it’s very important to take a look at the six-month trailing correlation: you will have a clearer and more accurate perspective.

Forex Currency Correlations | How to Use Them

When it comes to using forex currency correlations, there are a couple of rules that need to be followed. First, you have to eliminate counterproductive trading, meaning you need to stay out of positions that cancel each other. Furthermore, you have to be careful with the leverage, since you have the opportunity to double-up on positions. Hedging is another element that is necessary to highlight when talking about forex currency correlations because it can result in realizing smaller profits. On the other hand, however, it helps to minimize your losses. For example, if you open a long position and it starts to go against you, you can open a small long position in a pair that moves opposite from the first one. Also, you should use currency correlations to confirm your trade entry and exit signals.

Forex Currency Correlations | Conclusion

Forex currency correlations can definitely be a very helpful thing in trading. Currencies are usually related to each other and any trader can take advantage from that notion. In this article we suggested some ways of using them in trading. But the most important thing is that you keep an eye on the changes in currency correlations. This simple principle will significantly increase your chances to win. Also, if you need more tips, don’t forget about our other articles on this website!

Forex Trading Types

As you probably already know, there are many types of forex trading you can choose between. Depending on how much time and patience you have, not all kinds of trades may suit you equally well. Allow us to show you what you can expect when you enter the market. In this Forex Trading Types article, we decided to make a list of trader’s profiles based on the preferred time frame since time is one of the most important elements in any kind of trading. Keep reading and see what suits you best!

Forex Trading Types | Scalping

The first type of forex trading types we’re going to discuss is called scalping. Scalping is the most dynamic method of trading forex. Also, it’s the method that creates the highest level of stress. These types of trades usually last for a few seconds or for a few minutes at best and your goal here is to take very small amount of pips as many times as possible, so you should be doing this during the busiest time of the day. In other words, you should trade scalping between 2:00 am to 4:00 am and from 8:00 am to 12:00 noon Eastern Time (EST) because that’s when market liquidity is at its highest. However, since this is very fast and dynamic type of trading, it requires a lot of concentration. You’re a great candidate for scalping if you like excitement in trading, if you can think fast and if you can remain focused on your Forex Chart Indicators for a couple of hours.

Forex Trading Types | Day Trading

Day trading also belongs to short-term forex trading types. Unlike scalping, where you’re taking many trades, here you usually choose one trade a day and you close it once that day is up. It’s perfect for those who have enough time to monitor and analyze a trade during the day, and there are many subtypes of day trading. For example, there’s trend trading where you try to determine an overall trend in a longer time frame. Countertrend trading, on the other hand, is actually looking for trades in the opposite direction. We should also mention breakout trading where one tries to catch a breakout in any direction. But what about slower forex trading types? We have those too, so stay with us!

Forex Trading Types | Swing Trading

The ‘slowest’ trading type to be analyzed here in our article is the so-called swing trading. It’s a longer term trading style where you usually hold your positions for several days at a time. Forex technical analysis is the key here because you have to analyze the charts containing data for several days to make your prediction. You are looking for a move that is bigger than what can happen on a daily basis. If you can’t monitor your trades during the day and if you can stay calm when trades move against you, this might be just the type for you!

Forex Trading Types | Conclusion

As you can see, there are many different forex trading types you can choose between. You should first consider each and every aspect (such as time frames, trading dynamics, and the amount of stress) before making your choice. In an industry such as forex trading, there’s something for absolutely everyone. Carefully analyze your options because making the right decision can set you on a direct path to profit.

Forex Mechanical Trading System

As you all know, nothing is sure in the world of foreign exchange. There are many elements that can affect your judgment. Some of them are extrinsic – market movements, particular economic situations and other factors that one takes into consideration when entering a trade. On the other hand, there are intrinsic factors that are very difficult to fight if you’re a regular human being. At some point you’ll probably get nervous and reluctant about your trading decisions. That’s why having a forex mechanical trading system sounds like a great option! Read our article on the subject and learn something new about trading!

Forex Mechanical Trading System | What is it?

In this paragraph of our Forex Mechanical Trading System analysis we’ll talk about the definition of this system. Basically, it’s a system that generates trading signals in order to identify trends as quickly as possible. However, you should always be very careful when it comes to acquiring something like this. More precisely, you have to be careful if someone tries to sell you one by telling you that it’s the ‘Holy Grail’ of trading which can solve all your problems.

As you know, there’s no such thing in trading. Mechanical trading system is helpful, but it can’t guarantee that you will win. The idea is to eliminate the human factor from trading. Mechanical systems won’t lose faith, won’t have any problems with discipline and they definitely won’t get nervous. But instead of buying a mechanical system that should help you earn a fortune, you can make one of your own. Keep in mind that this is only a set of rules that’ll be followed in trading. Want to know how to make it? Just keep reading!

Forex Mechanical Trading System | Few Simple Steps

There are few simple steps you have to follow in order to create your own mechanical trading system. First of all, you have to set the time frame. This has to do with Forex trading types (some are day traders, some like bigger time frames). Secondly, you should find indicators that will help you identify a new trend (some kind of moving average, for example). Then you have to find indicators that will help you confirm the trend. Besides that, Forex Risk Management also plays a role because you have to determine the amount you’re willing to lose if things go wrong. You should define your entries and exits as well. Finally, you have to write down the rules of your forex mechanical trading system and you have to follow it!

Forex Mechanical Trading System | Conclusion

We can conclude that a reliable forex mechanical trading system can be very useful to all types of traders. Although it can’t guarantee a positive outcome, it can definitely increase your chances to win. Designing one is quite simple: the most important is to find a good set of indicators and to define your risk, entries and exits. Also, it’s important, to stick to it and not change it at the first sign of trouble. Try to make one on your own, you won’t regret it!

Forex Trading Tips

The foreign exchange industry is growing on a daily basis and more and more traders want to participate in this game. Unfortunately, most of them never manage to further develop their trading careers. Instead of making money, newcomers lose their funds because they don’t really understand how the foreign exchange works. That’s why we decided to make a list of Forex trading tips that should help you get the real picture of this interesting world. Stay with us and learn all you need to know!

Forex Trading Tips | Undercapitalization

The very first thing of the Forex trading tips we have to give you concerns undercapitalization. As we’ve already written in our analysis of Risk management, you need money in order to make even more money. You probably know that nowadays one can open an account for only 50$, but just because you can enter the game with 50 bucks it doesn’t mean you should do it. Actually, you definitely shouldn’t do this!

Instead of thinking that you can earn a lot of money with small investments in a short period of time, you should be more realistic and think of the foreign exchange trading as of your own business. That means that you have to have a Forex trading plan you will follow and that you always know how to react if something goes wrong. You should ask yourself  are you going to trade full time or part time, would you like to make a living out of trading and so on. Anyhow, if you think that way, you’ll notice that there’s no business you can do without having any capital. But there are more Forex trading tips we have to give you, so keep reading!

Forex Trading Tips | Leverage and Margin

Let’s begin this paragraph of Forex Trading Tips article with the definition of leverage. Leverage means that you can control a large amount of money using very little of your own money. For example, if you want to control the position of $200,000, your broker will set aside $2,000 from your account, making your leverage 100:1.

This $2,000 deposit is called margin and your broker uses it to maintain your position. Brokers take margin from all of their traders in order to make “super margin deposit” in order to place trade within the interbank network. The more leverage you have, the less space there is for market to move before a margin call. That’s why you should have low leverage, especially if you’re a beginner in the Forex world.

Forex Trading Tips | Conclusion

Let’s conclude: if you want to succeed as a trader, you need to have enough money to begin with. If you enter trading without enough money, you will probably fail. Furthermore, you need to set your leverage and margins properly. If you’re at the beginning of your forex journey, don’t set your leverage bar too high. Keep in mind our forex trading tips: collect enough money, make a plan, don’t panic and you’ll definitely become a successful trader!

Forex Risk Management

In foreign exchange everything is about the risk. The possibility of earning money is what makes this game so interesting. The possibility of losing it, on the other hand, fills trading with adrenaline. In this article we’ll talk about forex risk management. We’ll discuss how much money you need to start trading, how much you should invest and how to survive periods when you’re not doing as planned!

Forex Risk Management | Education

Let’s make this clear at the beginning: most businesses fail due to undercapitalization, and the forex industry is not an exception. In other words, you need money to make more money. Every trader needs trading capital. How much money you need depends on your personal approach. However, there are a couple of things we would like to consider in this paragraph of our Forex risk management analysis.

First of all, education. If you’re a newcomer in the field, you have to learn a few things about the foreign exchange market and trading in general. If you don’t want to pay mentors or you simply can’t afford one, you can always look for some useful Forex Tips and Tricks online. There are many forums and sites where you can find information for free. On the other hand, if you decide to pay for education, it can shorten your learning curve big time. Besides for education, some traders pay for some trading tools that don’t come with their brokers’ trading platforms.

Forex Risk Management | Losing Streak and Capital

When it comes to the trading capital, you have to accept the fact that losing money is also a part of this game. With many traders you can open your account for less than 1,000 USD, but we advise you to save up as much as possible in order to avoid the undercapitalization trap.

As we’ve mentioned earlier in our Forex Risk Management analysis, losing money is also a part of trading. There’s no trader who can win every trade. Also, there’s no trader who can avoid having a losing streak. The most important is to withstand periods of large losses, which is possible only with a good Forex trading plan, also known as your forex strategy.

Also, let’s mention that you shouldn’t risk more than 2% of your trading capital per trade. Even this percentage is considered to be quite high, especially if you’re a beginner. That’s how you’ll always stay protected from losing a big amount of your capital at once.

Forex Risk Management | Conclusion

Forex risk management is crucial for every trader. First of all, we advise you not to start trading if you don’t have enough money. Instead of entering the foreign exchange world with small funds, you should rather save some money and begin with a bigger fund. Besides that, you should have a trading plan that will help you survive bad trading periods and you shouldn’t invest more than 2% of your trading capital per trade. To learn more about handling your money, read our other educational articles here.

Forex Trading Plan

This is the article where we talk about the importance of having a forex trading plan that you’ll stick to during your time on the market. Besides that, we’ll talk about the discipline in trading. We want to show you that every trader should follow their trading plan rather than trading hazardously and by feeling. Keep reading and see how planning can help you come out on top.

Forex Trading Plan | Why Do You Need One?

Forex trading plan is something every forex trader should have. Think of it as your trading GPS: it will always tell you what stage you currently at, and if you’re on the wrong track, it will show you the way to get back on the right path. It will always show a way to your trading destination, that is – constant profitability. With a sound forex trading plan, you will always have a framework that will help you measure your trading performance, allowing you to trade with less stress and less emotional input. An alternative to trading plan would be the so-called “cowboy trading” – trading without any forex trading plan at all. Sure, you can rely on your gut or Forex Signals from strangers, but that’s no longer trading. It’s called gambling and it usually goes with an emotional turmoil. You should remember one thing: if things don’t go too well, there’s either a problem in your forex trading plan or you’re not really sticking to it.

In the next paragraph of our article we’ll talk about another very important trading element. Stay with us and check it out!

Forex Trading Plan | Trading Discipline

In this paragraph of our article, we’d like to emphasize the trading discipline. This is a very important thing, especially if you are a beginner. Beginners usually think that following a trading plan isn’t that big of a deal. This attitude grows with every random win trader has.

Although you indeed can win some trades without following your plan, further trading without a plan can cause you some serious troubles. You should differentiate between justified wins from unjustified. A justified win is a result of following your plan, it is its consequence. An unjustified win is when you’re rewarded for abandoning your plan. It might seem as a great thing, but in the long run this is no more than an accident, not a rule. Overall profit is what counts, not just some random wins you have every now and then.

Forex Trading Plan | Conclusion

Forex trading plan is crucial for every trader’s success. It helps you to navigate through your trading world and it keeps you on the right track. For following your trading plan you’ll need to be disciplined: that’s the crucial part. You can occasionally win even if you don’t follow the plan, but it’s definitely not a wise thing to do. To create your own forex trading plan read our other educational article and build one that will suit you perfectly.

Forex, oil and gold

In the foreign exchange business, there are many parameters you have to take into consideration when making your investment choices. For example, many currencies and currency pairs are in direct relationship with certain assets. In this article on the relationship between forex, oil and gold we’ll discuss the effect two of the most important assets – gold and oil – have on some major currency pairs. Read on and find out what you need to look out for and what can be expected when it comes to these two important commodities.

Forex, oil and gold | Gold and Currency Pairs

We will begin our analysis of forex, oil and gold correlation with one of the basic assets in the market – gold. First, let’s make one thing clear: during the times of economic unrest, investors usually prefer gold over the USD. Although it’s one of the safest and most stable currencies, the USD still can’t be compared with gold. Unlike other assets, gold always maintains its value, so having some gold on the side is always a wise strategy.  With that in mind, we can state that the relationship between gold and the USD is inversely proportional: when the dollar rises, gold falls. However, when it comes to the ‘gold – currency pairs’ relationship, gold has a positive correlation with AUD/USD. That’s because Australia is at the moment the third biggest gold producer in the entire world. In other words, when gold rises, AUD/USD also rises. When gold falls, AUD/USD will fall, as well. Another currency that has a strong correlation with gold is the Swiss franc. Since a big part of Switzerland’s money is backed by gold reserves (about 25%), the USD/CHF pair has a negative correlation with this asset.

Now it’s time to take a look at the “liquid” part of our forex, oil and gold trio. Keep reading and learn how trade currencies depending on that commodity!

Forex, oil and gold | Oil and the USD

Given the fact that oil is always quoted in USD, you can expect that oil price movements will affect Currency Crosses between that currency and the countries with significant oil reserves (Canada, Russia, Brazil). We will take a look at the relationship between USD/CAD pair to show how this works and the reason why we are going to discuss its influence on USD/CAD lies in the fact that Canada is one of the biggest oil producers in the world. More precisely, they export over 3 million barrels of petroleum and oil to the USA, meaning they are that country’s largest oil supplier. Since this demand is so big, it creates a big demand for the CAD. Consequently, if the US demand rises, prices will rise because manufacturers have to order more oil to keep up with demand. That means that when oil goes up, USD/CAD goes down, and vice versa.

Forex, oil and gold | Conclusion

As you can see from our analysis of the relationship between forex, oil and gold, gold and oil can have a massive impact on several of the most important currency pairs. If you keep an eye on those assets and incorporate them into your trading tactics, you will definitely increase your chance to win. These are two of the most important assets and you simply have to track their behavior if you want to be a serious trader. However, there are more things to learn, so browse around our website to improve your skills and to find a broker that allows you to trade all these commodities.

Forex Harmonic Patterns

Patterns are a very important part of the foreign exchange business because they help us visualize market conditions. In other words, they bring the facts we know about the market closer to us. If we look at them in order to predict future movements, we have to know exactly what to look at and how to interpret it. In this article, we’ll discuss some complex patterns called forex harmonic patterns. Stay with our experts’ analysis and learn something new!

Forex Harmonic Patterns | Basics

At the very beginning of our Forex Harmonic Patterns article, we should say that these patterns help us notice retracements of recent trends. They are geometrical patterns that use Fibonacci methods in order to mark turning points. That’s why these patterns are very precise: they show movements of a certain magnitude and provide very accurate reversal points. Since they use the Fibonacci principle, you have to keep an eye on the Fibonacci levels: you may see a pattern that looks like a harmonic pattern, but if there are no Fibonacci levels involved, there’s no harmonic pattern either. It can be hard to learn how to observe forex harmonic patterns in the correct way, but that’s also a matter of practice, skill and experience, so don’t give up.

At this point of our Forex Harmonic Patterns analysis we would like to underline that patterns can be found within other patterns. Also, non-harmonic patterns can be seen within the context of harmonic patterns, and the fractal nature of the markets allows the harmonic patterns theory to be applied to a time frame of any size.

Forex Harmonic Patterns | Important Patterns

Let’s now take a look at the most common types of forex harmonic patterns that can appear on your chart. Obviously, since we’re looking at the chart, we’re talking about Technical Analysis here. The simplest pattern is called ‘ABCD’ and it can be bullish or bearish. The lines AB and CD are usually called legs, and BC represents correction or retracement. The length of the AB line should be the same as that of the CD line. Another important pattern is the so called Three-Drive, which has three legs and two corrections and can also be both bearish and bullish. The last one is called the Gartley Pattern, and it’s basically an ABCD pattern that is preceded by a significant high. This is a very common pattern, and it has many ‘animal’ variations – types of the Gartley pattern named after animals (the crab, the bat and so on).

Forex Harmonic Patterns | Conclusion

Forex harmonic patterns can see a bit complicated, but there’s a good reason for that: they are very precise, meaning they can help you a lot in your trading. In order to learn how to handle them, you should first learn how to handle Fibonacci: once you’re done with this, everything’s going to be much easier!