Trading forex can be a good source of extra income. One has to be careful before jumping into the vast ocean of forex trading where the number of products available to trader is plenty. There are many steps which can be followed to become a better forex trader. The first thing is to limit trading to a maximum of three-four currency pairs. It is necessary to observe these currency pairs on charts regularly in different time frames. Having more than four currency pairs on charts can be confusing. It is also important to have some important technical indicators such as Moving average, Relative strength etc plotted for these currency pair charts. While trading forex, it is also important to adhere to the plans which are formulated before entering into the trade. It is important to maintain strict stop loss orders. It should be noted that in order to becoming a better forex trader, it is important to honor the stop loss orders. These serve as a risk management tool for the trader. They also bring in a lot of discipline while trading a fast market such as forex.
Learning technical analysis and price action is also a good step towards becoming a better forex trader. While trading forex, the charts have to be observed from time to time. It is important to understand the entry and exit signals, a technical indicator generates. Generally it is important to have a combination of 2-3 technical indicators before entering a trade. Some tools like Fibonacci are also widely used by forex traders. The technical indicators work on a probability basis and should be strictly used with stop losses. Learning technical analysis is only the first step. It is very important to be disciplined. Watching the markets continuously helps and enables one to spot good opportunities. It is also important to decide on a timeframe to trade. The charts of the currency pairs have to for the specific time frame. While observing a hourly chart, it also helps to have a look at the daily chart in order to spot the daily trend.
A trader can improve his knowledge of the macroeconomic factors while affect the forex markets. It is important to keep track of the daily economic data of important economies such as US, Europe and Japan. It is very important to be aware of activities in other markets such as Equities and fixed income on a broad level. It can be helpful to stay abreast of any developments in markets. The actions governments take can have considerable impact on forex markets. An eye on export import data also helps a serious forex trader.
Behaviorally, one can learn a lot of aspects to become a forex trader. Maintaining a cool head is very important in a serious pursuit of money such as forex trading. It is important not enter a trade on an emotion or gut feel. One should also avoid any impulsive trades such as revenge trading. Revenge trading is when a trader enters into an immediate position without thinking much after a heavy loss.
Tuesday, January 10, 2012
Risks due to Market Psychology
There are various risks which arise due to Market Psychology. The financial market attract lost of the brightest minds. Each day new techniques become a fad in the market. This is especially true for many technical indicators. Different technical indicators work differently in each market, This is due to the psychology of the traders operating in that market. Technical indicators usually study the market psychology in the form of charts. The market participants are known to show herd-behavior. It is well known that the emotions of Greed, Fear, Joy act on human beings and they act differently when subjected to these emotions. Hence, it can be understood that not everyone takes a rational decision based on available facts. Hence many times, the herd is usually wrong. This is a huge risk due to market psychology.
Most of the technical indicators give a buy signal when the trend for a stock is up for a long time. It is only due to the greed and the trend that a buyer will buy the stock. However, it may be quite different from the true market value of the stock based on fundamentals. Hence at times, buying a stock at a very high price may prove to be risky. The same is true otherwise. A distressed stock may not attract any investors and may not move up for a long time even though it is undervalued. Many technical indicators work on a self fulfilling prophecy basis. Hence many don't have a solid reasoning behind them. They might work well at times and attract many traders. Hence they seem to be working because everyone is using these techniques in their trading decisions. These are some of the risks arising due to market psychology. A field called behavioral finance studies the effect of behavior on the trading decisions people take.
Most of the technical indicators give a buy signal when the trend for a stock is up for a long time. It is only due to the greed and the trend that a buyer will buy the stock. However, it may be quite different from the true market value of the stock based on fundamentals. Hence at times, buying a stock at a very high price may prove to be risky. The same is true otherwise. A distressed stock may not attract any investors and may not move up for a long time even though it is undervalued. Many technical indicators work on a self fulfilling prophecy basis. Hence many don't have a solid reasoning behind them. They might work well at times and attract many traders. Hence they seem to be working because everyone is using these techniques in their trading decisions. These are some of the risks arising due to market psychology. A field called behavioral finance studies the effect of behavior on the trading decisions people take.
Saturday, June 4, 2011
Credit Card Facts - USA
The average American Family has 8 credit cards.
55 million Americans pay off their credit card bill in full each month.
35 million Americans pay only the minimum payment required each month.
The credit industry's jargon for someone who pays his or her bill in full every month is "a deadbeat."
The average American family carries a credit card debt of roughly $8,000.
A credit card company must give its customers 15 days notice when changing the terms of the cardholder contract.
The credit card issuer can raise your APR automatically for any of the following reasons: You went over your credit limit on another card; you failed to make a payment to another creditor; you applied for and received a loan.
The Office of the Comptroller of the Currency, part of the U.S. Treasury Department, regulates the national banks which issue most of the credit cards in the U.S. (banks such as Chase, MBNA and Citibank).
If your credit card is stolen - or if your card number is stolen - and used by a thief to charge purchases, you are only obligated to pay the card issuer a maximum of $50.00.
A high FICO score indicates that the individual is likely to pay their bills.
There are no legal limits on the amount of interest and fees that banks can charge for a credit card because two U.S. Supreme Court decisions permit banks to charge what the market will bear.
Courtesy:- PBS.org
55 million Americans pay off their credit card bill in full each month.
35 million Americans pay only the minimum payment required each month.
The credit industry's jargon for someone who pays his or her bill in full every month is "a deadbeat."
The average American family carries a credit card debt of roughly $8,000.
A credit card company must give its customers 15 days notice when changing the terms of the cardholder contract.
The credit card issuer can raise your APR automatically for any of the following reasons: You went over your credit limit on another card; you failed to make a payment to another creditor; you applied for and received a loan.
The Office of the Comptroller of the Currency, part of the U.S. Treasury Department, regulates the national banks which issue most of the credit cards in the U.S. (banks such as Chase, MBNA and Citibank).
If your credit card is stolen - or if your card number is stolen - and used by a thief to charge purchases, you are only obligated to pay the card issuer a maximum of $50.00.
A high FICO score indicates that the individual is likely to pay their bills.
There are no legal limits on the amount of interest and fees that banks can charge for a credit card because two U.S. Supreme Court decisions permit banks to charge what the market will bear.
Courtesy:- PBS.org
Sunday, May 8, 2011
Why Eating with hands makes more sense?
I have always wondered, which is better?: Eating with hand or a spoon? I have always been prone to eat with spoon. However, I have come to conclusion everytime, I burn my tongue by eating extremely hot food stuff (temperature wise). Also, I believe, eating with hand puts less strain on your muscles around the mouth. My grandmother says that eating with spoon might be a reason for more wrinkles around mouth in todays people. Well sounds funny, but might be true. However if you decide to use your hands actively for eating, please make sure to cut your nails on time and also ensure your hands are clean.
Monday, April 25, 2011
Silver Rallying
Silver closed at over Rs.73/gram. Finally, it is getting the recognition it deserved. I personally believe, a Rs.100 / gram may not be too optimistic. Afterall, when Oil can reach $100 a barrel,why shouldn't silver reach at least Rs.100 per gram :-) .. Just Kidding.. However, a good hedge..
Tuesday, March 15, 2011
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