Friday, May 27, 2016

Why Should You Not Rely on Short Term Trading

The general rule of short-term trading is as follows – the shorter the duration of the, the lesser the profit potential there is. 

Professional forex traders know that the market may make a tiny movement in one minute, it may continue moving in 5 minutes and may further move in an hour, and we cannot determine as to how huge the movement it will make after a day or a week. 


Trading on a short term narrows the potential of profit. That clearly explains why you can barely hear anyone who has achieved great heights from short-term trading. 

Some traders point out that they are working during the day, which is the reason why they have insufficient time in keeping longer trades, and thus why they rely on short term trading. Because of this reason, they believe that it’s wise to close their trades right away instead of leaving it overnight, in order to keep the risks at a minimal level.

But what if the market turned to your favor overnight? You’re basically depriving yourself of potential profits, and you’re just settling for smaller amount of profits. 

Also, you can actually control your risk without having the need to close the trades altogether. There are methods to minimize your losses. Remember, you are able to place stop-loss levels on your trades. When you place an order with a stop-loss, you may only lose a predetermined amount of money, so you don’t have to fear that you will lose more than what you expected.

Most importantly, by exiting your trades at the end of the day, or worse, at random moments (for example 5 minute, 10 minute charts), you’re basically severely restricting your potential profits. The difference between the winners and the losers is that the winners stay in their profitable positions, while the losers exit too soon. This way, they are still losing money – basically by not being able to acquire the potential profits that the winners enjoy.


If you want to increase your profits, you have to learn to stick to your winning positions. Remember, the longer you stick to your trades, the bigger the profit potential there will be. Just look at the successful farmers, they never dig the plants up every few minutes just to know how much they have grown. They just patiently wait and let them grow. 

The traders might obtain some valuable lesson from the natural process of growing. To be a successful trader, you need to learn how to stick to your winning trades, you just have to let it grow naturally. 

Acquire some useful information about forex trading by reading our educational forex articles. Find out who the best forex brokers are, refer to our official website – Wibestbroker.com

Wednesday, May 25, 2016

How Do Trends Form in the Forex Market – Part 2

In the first part of our article, we’ve discussed about the most common reason of trend formation in the forex market. We’ve learned that an imbalance in the amount of buyers and sellers in the market is what usually triggers trends to form.

trends

Another factor that leads to the formation of the trends is when liquidation occurs in the forex market. Liquidation usually occurs when a trader starts closing his open position to stop further losses. This can also happen when the market prices hit the stop loss initially set by the trader, but in most cases it is done manually by the trader due to other market reasons, such as profit taking.

The liquidation phase is basically an outcome of the imbalance that is occurring in the forex market. When the prices start to go in the opposite direction of the traders’ open positions, it encourages them to close their open positions to stop aggravating their losses.

If enough traders exit their open positions, it will cause another imbalance in the forex market. When a flood of sellers enters the market, the market prices will be pushed further downward, triggering a downtrend.

downtrend

For example, the market is currently in an uptrend, which basically means that there’s a lot of traders that has a long position in the market. When the market reaches a price high enough for traders to consider it as profitable, it will encourage them to close their open positions and profit from the price increase. If enough traders decide to close their positions, it will bring a flood of sellers in the market, which will trigger the market prices to move in the other direction (downward). And since the prices are going down, many traders will fear that this trend will continue, so they also start to exit their open positions, bringing even more sellers in the market, and thus pushing the prices further downward. This event will break the recent uptrend in the market and will be replaced by a downtrend.

Learn more about the forex market and improve your trading strategies further by reading our educational forex blogs. Find out who the best forex brokers are by visiting our official website – Wibestbroker.com!

Tuesday, May 24, 2016

How Do Trends Form in Forex Market

Most traders have no idea why trends form in the foreign currency exchange market. They do know that trends are a normal part of the forex market, but they do not know how these trends start. 

The purpose of this article is to give the readers a better understanding regarding the formation of the trends. 


We will talk about the first and the most common factor that triggers the occurrence of these trends, to give you a better idea on how these trends form in the forex market. 

Imbalance in the Forex Market

Basically, an imbalance in the forex market is the most common factor that affects the formation of a trend. When there’s too many buyers than sellers in the market, the price is pushed further upward due to a high demand, causing an uptrend in the market. On the contrary, when the amount of sellers exceeds the number of buyers in the market, it causes the prices to move downward mainly due to a lack of demand, triggering a downtrend in the market.

For example, if there are a lot of traders that are placing a buy order in the EUR/USD, it can push the price of the currency pair higher, causing an uptrend in the market. Basically, traders would need to place sell orders that exceed the number of buyers in order to push the prices lower.


If enough sell orders enter the market to the point where it surpasses the amount of buyers, then the price may stop ascending higher and may start to go in the other direction, putting an end to the uptrend and forming a new trend (downtrend).

It is important to understand how these trends are being formed as this information can help a great deal in your trading decisions.

Further improve your strategies in online trading by reading our educational forex articles. See who the best forex brokers are, visit Wibestbroker.com to find out!


Wednesday, May 18, 2016

What Does “Call Away” Mean in Short Selling

We’ve recently discussed about the risks associated with short selling in our previous article. We’ve encountered the term “call away”, but do you fully understand what the term actually means? We will further tackle about that term for you to understand the meaning of that term.

Call away refers to the event wherein the lender of the security demands the trader to return the securities he borrowed as soon as possible. That basically means that the trader is forced to buy back the stocks, whether the current price is favorable to him or not. This can also cut some of the potential profits, as the trader will be forced out of his short position earlier than he expected or planned.


Being called away is pretty uncommon in financial markets, but it usually happens if the company’s stock is suddenly performing well and is continuously seeing substantial growth for a long period of time. This event might scare the lender, giving him the idea that the trader might not be able to pay the borrowed securities back should the market rises further, so he immediately “calls away” the trader.

It can also happen if the stocks the trader borrowed takes too long to reach the expected decline in price. Due to the long overdue, the lender might suddenly require the trader to return the borrowed stocks, forcing the trader to cover his short positions regardless if the current value is the price he wants or not.

As we’ve previously advised, you should first weight the risks associated with short selling before you go and start placing a short sale order. Further expand your knowledge about trading and refine your trading strategies by reading our educational articles. Find out who the best forex brokers are, visit Wibestbroker.com and see!

Monday, May 16, 2016

What is Short Selling

Today, we’ll discuss another strategy that can help you trade better in the forex market. Hopefully, this knowledge can serve as a great tool for you to increase your profit potential in trading.

We’ll talk about how can you make profit from a decline in market prices.

Whoa, wait a minute, you may say. Is it really possible to generate profits from falling markets?

The answer is yes.

Yeah, you heard it right. Generating some profit despite the decline in the prices is possible, if you’ll learn how to use short selling. By now, you might have no idea what short selling is, but you don’t have to worry, as we’re about to discuss what it is.


Short selling is the process of selling a security or currency you’ve never even owned in the first place. With the hopes that the price will go down in the future, the trader basically borrows a certain stock or currency, sell it at the current price, and then buy it back at a later date to replace the borrowed security.

Say for example, you’ve decided to borrow 100 shares of Apple, which is currently valued at $90. At a later date, the demand for iPhone suddenly decreases, pushing the Apple’s stock price to go lower. Due to the low demand of the iPhone, the Apple’s stock went down to $85, which appears as a good time to buy back the stock, so you can return the stocks you borrowed to the lender. And since you bought back the stocks at a lower price compared to the value you’ve originally sold it to, you can bag a profit of $5 per share. From this transaction, you’ve earned a total of $500.

Despite the profitability of short selling, it also involves a high level of risk. It is important to fully understand the risks associated with it before you start short selling. 

Learn more about the forex market and further understand what is forex by reading our forex-related articles. Visit our official website: Wibestbroker.com to find out who the best forex brokers are.

Thursday, May 12, 2016

What is Support in Forex Trading

Trading in the forex market involves understanding the terms that are used in it. We’ve previously talked about the resistance levels in forex trading, and today, we’ll discuss about the support levels.

Support is the price level in which a particular currency’s value has refused to decrease further and it starts to increase in value rather. When the currency market moves downwards and starts to go back up, the lowest point that is reached before the price goes up is called the “support level”.


To easily understand what “support levels” are, think of it as a roadblock. The price goes in the direction of the roadblock, but since the roadblock literally blocks the road, the price has no other choice but to go to the other direction.

The great news about support level is they are not that difficult to distinguish. Oftentimes, the trader does not even need a high level of expertise in chart analysis to find them. It basically means that even someone who is quite new in forex, with enough knowledge and practice, can easily identify support levels. 

Support levels can appear in exact same price several times, however you need to understand that this will not be always the case. Support levels can appear in slightly different prices, it might appear slightly lower than the previous support level, but it still stays close to that price level. It is also acknowledged as a test for the support level (a test of how far the price can go down through it).

A trader can make profit using this knowledge if they know how to trade using support and resistance levels. So it is important to read articles regarding this matter to improve your trading strategies and increase your profits.
Learn more about the forex market and further refine your trading strategies by reading our forex articles. Find out who the best brokers are by referring to our official website: Wibestbroker.com!

Tuesday, May 10, 2016

What is a Forex Trading System?

A forex trading system is a set of specific rules or parameters which aims to determine specifically when to sell or buy a particular currency pair.

There are two kinds of forex trading systems – manual and automated. A manual system involves sitting in front of a computer screen, looking for signals and the best entry/exit points in the market .

Automated forex trading systems work just like a manual trading system, only that they’re working automatically. In an automated trading system, the trader basically teaches the program what signals to look for and how to interpret and act on those signals. These softwares allow traders to set specific rules for entering and exiting the market. Once programmed, it can be automatically executed through a computer. 


An effective and well-developed automated trading system is actually beneficial for forex traders, as it enables the trader to save time and effort in forex trading. These softwares don’t only automate the generation of signals, but it also automates the actual trading, so the trader won’t have to spend their time on analysis and execution of trades.

Most traders believe that automated trading systems are actually beneficial for them, as it removes the emotions out of trading, something that often leads to bad and irrational decisions. However, this can’t be true for all forex traders, as there are actual situations in which active thinking and emotion is preferred, something which even the best softwares and technologies can’t replicate. 

You should always keep in mind that before using any kind of trading system, whether it is manual or automated, you should first determine the benefits and the drawbacks of using these systems, so that you can make the most out of your trading journey.

Learn more about what is forex and further understand how trading in the forex market works by reading our educational articles. Visit our official website: Wibestbroker.com to know who the best forex brokers are!

Thursday, May 5, 2016

What is a Bear and Bull Market

In the financial market, we always hear the terms “bear market” and “bull market”, as it is commonly used to describe the market’s condition. Despite the popularity of these terms, not everyone fully understands the definition of these terms. 

Bull and bear markets are used to tell the condition of the market in general, whether the market is in an upward or downward trend.


Bull market refers to a market that is appreciating in value. An appreciating market, also referred to as a bull market, happens when the market is showing a high level of confidence and the prices are going up. Usually, during a bull market, the investors are confident that the uptrend will continue. 

Bear market, on the other hand, refers to a market that is depreciating in value. During a bear market, the economic performance is bad, and the prices are falling in value. 

These two terms are commonly used in the stock market, but it can also be used in other forms of trading such as bonds, forex, and commodities. 

Where Did These Terms Come From?


There is no clear explanation as to how the traders end up using these terms, but the most common explanation is that the bull and bear markets are named after the way in which each animal attacks its prey. A bull thrusts its horns up into the air when attacking its victim, while a bear swipes its claw downwards to attack its prey. 

Learn more about the forex market and further understand what is forex by reading our educational forex articles. Find out who the best forex brokers are, visit our official website -- Wibestbroker.com!

Tuesday, May 3, 2016

What is a Candlestick Chart in Forex

In the forex market, a candlestick chart is a type of financial chart used to display the movement in the prices of a currency. Each candlestick is equivalent to one day, so a one-month candlestick chart may contain 20 candlesticks to represent 20 trading days.

The candlestick chart is considered as the most favorite tool used by many traders, and it is because of a valid reason. Candlestick charts are known to provide more information compared to other price charts. The candlestick is a thin vertical line displaying the period’s trading range. The wide bar in the middle of the vertical line, or what is considered as the candle’s “body”.



The candlestick chart is basically a combination of a line chart and a bar chart. The candlestick line contains the value of the currency at open, high, low and close of a certain day. The candlestick has a wide bar, which is considered as the body. The candle’s body shows the range between the open and the close of the trade that day. 

When the candle’s body is filled with black, or red, it indicates that the close was lower than the open. However, if the body appears as colorless, transparent or filled with green, then it means that the close was higher than the open. 

Just above and below the candle’s body are the “shadows”. Traders considers these as the wicks of the candle, and it is the shadows that represent the high and low prices of that day’s trading. When the upper shadow on a down day is short, it indicates that the close was near the high. The relationship between the day’s open, high, low and close determines the appearance of the daily candlestick.

Learn more about the forex market and further understand what is forex by reading our educational forex blogs. See who the best forex brokers are, visit Wibestbroker.com to find out!