Money Management in Forex

Money Management in forex is one of the important factor for consistent profit. Due to its volatility, the Forex market is inherently risky. Money management in Forex is therefore a non-negotiable success factor for both beginners and experienced traders alike. Successful traders in the long run about the single most important factor in trading, and the majority of them will tell it’s a strict way of managing your money and risk. Even the best strategy in the world won’t be of much help if you don’t take care about your risk per trade, reward-to-risk ratios, don’t use stop-loss orders or trade too aggressively. Money Management in Forex

Courtesy: Equidious forex signals

RISK PER TRADE

Risk per trade is the amount of your trading account that you’re ready to risk on a single trade. It’s a key aspect of prudent money management that prevents you from blowing your account. Many money management techniques state that the upper limit of your risk per trade should be 2% of your trading account, or even less if you’re a beginner in the markets.

NEVER GO WITHOUT SL

A stop-loss order is the only guarantee that you won’t lose a substantial amount of money on a single trade. Although certain market conditions can lead to your stop-loss order not being executed at the set price, most of the time they work just well to prevent losing your entire account on a few trades.

REWARD TO RISK RATIO

Placing inappropriate take-profit levels can be as damaging to your trading results as placing inappropriate stop levels, as you won’t be able to maximize the profit potential of your trade setup.Your take-profit level also determines the reward-to-risk ratio of your trade, which simply represents the amount of your risk relative to the potential profit of the trade. While R/R ratios of 1:1 mean that you’re risking the same amount as your potential gain, trades with R/R ratios of 2:1 or 3:1 have double or triple the amount of potential gain relative to the risk.

BETTER LEVERAGE

Leverage offers the opportunity to magnify profits made from the risk capital you have available, but it also increases the potential for risk. It’s a useful tool, but it is very important to understand the size of your overall exposure. Your broker may give you some leverage on your account to enable you to trade for bigger profits. However, you need to be careful when using this facility.

CONTROL YOUR MINDSET

If you do your analysis right, have confidence in your entry and exit levels and let the market determine if you were right or wrong.Having a strict and written trading plan that contains not only your trading strategy, but also the way you manage money and risk, can help you to avoid emotional trading.

AVOID AGGRESSIVE TRADING

Trading too aggressively is perhaps the biggest mistake new traders make. If a small sequence of losses would be enough to eradicate most of your risk capital, it suggests that each trade has too much risk. A good way to aim for the correct level of risk is to adjust your position size to reflect the volatility of the pair you are trading. But remember that a more volatile currency demands a smaller position compared to a less volatile pair.

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What are the Forex Market Players?

There are various participating entities taking part in forex trading. The main players or the main market participants in currency exchange are Central Banks, largest investment firms or commercial bank, hedge funds, mutual funds and retail forex brokers etc.

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Participants in Foreign Exchange Market:

Participants in Foreign exchange market can be categorized into five major groups, viz.; commercial banks, Foreign exchange brokers, Central bank, MNCs and Individuals and Small businesses.

• Central Banks:
  • Central banks are extremely important players in the forex market. Open market operations and interest rate policies of central banks influence currency rates to a very large extent.
  • Central banks are responsible for forex fixing. This is the exchange rate regime by which a currency will trade in the open market.
  • Floating, fixed and pegged are the types of exchange rate regimes. Any action taken by a central bank in the forex market is done to stabilize or increase the competitiveness of that nation’s economy.

• Small Business or Investors:
  • Small businesses also use foreign exchange market to facilitate execution of commercial or investment transactions.
  • The foreign needs of these players are usually small and account for only a fraction of all foreign exchange transactions. Even then they are very important participants in the market. Some of these participants use the market to hedge foreign exchange risk.
  • Hedgers: There are many businesses which end up creating an asset or a liability priced in foreign currency in the regular course of their business. For instance, importers and exporters engaged in foreign trade may have open positions in several foreign currencies. They may therefore be impacted if there is a fluctuation in the value of foreign currency. As a result, to protect themselves against these losses, hedgers take opposite positions in the market. Therefore if there is an unfavorable movement in their original position, it is offset by an opposite movement in their hedged positions. Their profits and losses and therefore nullified and they get stability in the operations of their business.

• Commercial Banks: 
  • The major participants in the foreign exchange market are the large Commercial banks who provide the core of market. As many as 100 to 200 banks across the globe actively “make the market” in the foreign exchange.
  • These banks serve their retail clients, the bank customers, in conducting foreign commerce or making international investment in financial assets that require foreign exchange.
  • These banks operate in the foreign exchange market at two levels. At the retail level, they deal with their customers-corporations, exporters and so forth.
  • At the wholesale level, banks maintain an inert bank market in foreign exchange either directly or through specialized foreign exchange brokers.

• Foreign Exchange Brokers:
  • Foreign exchange brokers also operate in the international currency market. They act as agents who facilitate trading between dealers.
  • Unlike the banks, brokers serve merely as matchmakers and do not put their own money at risk.
  • They actively and constantly monitor exchange rates offered by the major international banks through computerized systems such as Reuters and are able to find quickly an opposite party for a client without revealing the identity of either party until a transaction has been agreed upon. This is why inter-bank traders use a broker primarily to disseminate as quickly as possible a currency quote to many other dealers.

• MNC:
  • MNCs are the major non-bank participants in the forward market as they exchange cash flows associated with their multinational operations.
  • MNCs often contract to either pay or receive fixed amounts in foreign currencies at future dates, so they are exposed to foreign currency risk.
  • This is why they often hedge these future cash flows through the inter-bank forward exchange market.

• Retailers:
  • The retail market designates transactions made by smaller speculators and investors.
  • Speculators are a class of traders that have no genuine requirement for foreign currency. They only buy and sell these currencies with the hope of making a profit from it.
  • The number of speculators increases a lot when the market sentiment is high and everyone seems to be making money in the Forex markets.
  • Speculators usually do not maintain open positions in any currency for a very long time. Their positions are transient and are only meant to make a short term profit.
  • These transactions are executed through forex brokers who act as a mediator between the retail market and the interbank market. Individual traders or investors trade forex on their own capital in order to profit from speculation on future exchange rates. They mainly operate through forex platforms that offer tight spreads, immediate execution and highly leveraged margin accounts.

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Trading is an art of making handsome amount.

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Do you have “FOMO Traders” Characters?

FOMO is Fear of Missing Out type of traders, which influences our daily trading habits and decision making capability in Forex Trading.

There are following causes which leads FOMO Traders:

High Expectations

FOMO Traders thanks that one needs to double the account by next month and you are missing out if you do not make a lot of money as soon as possible. This leads to higher risk and large position sizes. One wrong trade and you will regret of choosing wrong position sizing and trade.

Over Confidence

When you come from a winning streak and feel invincible and then take random trades or too large positions because you think we can “feel” what the market is going to do.

Lack of Confidence

After a few losing trades, many traders will try to play catch up and then enter random trades just to get into the market and hopefully somehow generate a profit.

No Rules

When you do not have a system or rules, to begin with, then FOMO is your default mode, always jumping in and out of the market, not really knowing what you are doing.

Lack of Long Term Perspective

When you do not understand that there will be hundreds and thousands of new trades waiting for you. Many amateurs put way too muchimportancet on one trade alone and want to force this trade to win whatever it takes.

Impatience

When you do not want to wait for the setup and just want to get into a trade because you fear that the price might run away.

Wrong Mindset or Too Emotional

Every Forex trader wants to improve their forex trading success. Successful trading is difficult and building the correct attitudes and beliefs is the way to develop the habits and skills necessary for profitable trading. Without a profitable and successful trading mindset, you will be swimming upstream against your emotions/fears, thoughts, and unconscious habits which undermine your success.

Join 300,000+ traders who stay ahead of the market, submit your details with us by filling our CONTACT FORM.

For the Best Forex Signal| Accurate Stock Signal| Profitable Comex Signals, Try Equidious Research Services. We have a team of best and well experienced Research Analysts.

Trading is an art of making handsome amount.

Enjoy Trading!

Trade War : Will it be helpful for US economy & sagging Dollar ?

De-globalization is the idea which picked up energy after BREXIT. Trump’s choice to force duties of 25% and 10% on steel and aluminum import will add to de-globalization talk. US, under Trump, has hauled out of Trans Pacific Agreement and began arranging NAFTA. Worldwide exchange has begun redirecting from way of multilateral exchange settlement to plurilateral exchange agreement.

Forcing of levy by Trump, in bearing of US first arrangement, is probably going to harmed US and different economies associated with related exchange with Uncle Sam. Canada, Brazil, EU, China, Russia, UAE are the significant nations who are enjoyed exchange of both the wares. Car and development industry expends near 65-70% of US steel request. As per an article distributed in Reuters, a normal US vehicle devours 1-1.2 ton of steel .US steel generation cost is in the middle of $825-875 for each ton. In the event that we consider, imported steel cost in the middle of $650-750, 25% import levy may add $150-180 to the vehicle’s expense. Aside from steel, aluminum is additionally utilized in car which is likewise likely add to creation cost. US imports near 7 million tons of Aluminum as neighborhood creation isn’t equipped for providing to US request. Canada is the significant provider of both Aluminum and steel to US, which is as of now shaken by NAFTA arrangements. Retaliatory activities have been cautioned by EU, China and Canada. EU has arranged rundown of items, $3.5 billion worth of exchange, on which 25% import obligation will be mixed, in the event that Trump advance with the arrangement.

US shoppers are probably going to get affected as buyer surplus will be redirected to government’s assessment kitty since it is exceedingly far-fetched that trading economies will lessen rate so as to be focused. US ventures like vehicle, aeronautics, development, aluminum bundling will confront the brunt of expanded crude material expense and effect on deals. US is as of now loaded by twin deficiency and require remote money to cross over any barrier. Corporate tax break will liable to include $300 billion shortage over next 2 years. China and Japan holds more than 50 % of outside capital investment in US treasury. Treasury war is one of the retaliatory response which influenced nations can pick. This situation of dumping US bonds is profoundly impossible as it will in the end hurt treasury holding nations remaining bond portfolio .

Greater expense of definite merchandise will hurt investment funds of US buyers. US steel and aluminum industry are progressively capital concentrated. So machine will add benefit to makes bottomline and business won’t be profited much. Work in industry ,reliant on wares as crude material ,will be affected in the event that US purchasers don’t free tote to spend additional greenbacks. Inflationary weight will be checked whether US buyers keep obtaining at same pace. Treasury yields can ascend because of inflationary weight, quicker pace of financing cost climb and affected nations falling back on treasury war. In last 2 occurrences of tax climb in 1995 and 2002, greenback saw deterioration in esteem, however it was joined by different reasons moreover. Last couple of lodging and development information were appearing of first time purchasers because of more expensive rates of single family home which ascended by over 5% in 2017. 30 years home loan rate is drifting @4.3% which is close to multi year high. Expanded expense of development and weight on treasury yield (thusly affecting home loan yield) will build danger of droop in lodging area.

USD ought to at first devalue against worldwide monetary forms, if Trump proceeds with arranged tax climb. Progressively, difference in central banks policy will make US treasury increasingly pertinent to speculators looking for generally safe fair return venture and help greenback to win lost ground.

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4M's of Forex Trading

The following are 4 important factors influencne the forex trading which Equidious Research follows in order to have consistent profit:

Money Management:

Money Management in forex is one of the important factor for consistent profit. Due to its volatility, the Forex market is inherently risky. Money management in Forex is therefore a non-negotiable success factor for both beginners and experienced traders alike.

Successful traders in the long run about the single most important factor in trading, and the majority of them will tell it’s a strict way of managing your money and risk. Even the best strategy in the world won’t be of much help if you don’t take care about your risk per trade, reward-to-risk ratios, don’t use stop-loss orders or trade too aggressively.

Market

As the largest financial marketplace, forex is affected by an incredibly diverse amount of factors. These market fundamentals are the key pieces to determining when a currency is going to rise in value and when it’s going to fall. Trading on the fundamentals – also referred to as trading the news, is the study of news events and economic statistics to determine trading opportunities. These traders pay close attention to changes in economic

indicators such as interest rates, employment rates, and inflation. By assessing the relative trend of these data points, a trader is analyzing the relative health of the country’s economy and whether to trade the future movement of their currency.

Method

This include trading plan, various indicators line exponential moving avareage, simple MA, RSI, Bollinger’s Band, Time Frames, Ichimoku Cloud, MACD etc and various strategies.

Having a Forex trading plan is one of the key elements to becoming a successful Forex trader. Many traders never even make a trading plan, let alone use one regularly. It’s very important that you do both; make a trading plan and use the one you make…don’t just make one and then never look at it like many traders do.

Myself

If you do your analysis right, have confidence in your entry and exit levels and let the market determine if you were right or wrong.

Having a strict and written trading plan that contains not only your trading strategy, but also the way you manage money and risk, can help you to avoid emotional trading.

AVOID AGGRESSIVE TRADING

Trading too aggressively is perhaps the biggest mistake new traders make. If a small sequence of losses would be enough to eradicate most of your risk capital, it suggests that each trade has too much risk. A good way to aim for the correct level of risk is to adjust your position size to reflect the volatility of the pair you are trading. But remember that a more volatile currency demands a smaller position compared to a less volatile pair

.

For the Best Forex Signal| Accurate Stock Signal| Profitable Comex Signals, Try Equidious Research Services. We have a team of best and well experienced Research Analysts.

Trading is an art of making handsome amount.

Enjoy Trading!