3 Simple Ways to Find a Good Stop Loss Strategy for Your Forex Trades

Did you know that most beginner forex traders have no idea how to place an effective stop-loss point for their trades? In fact, many of these traders don't bother with a stop-loss point at all and if you are one of these traders, I am going to tell you that you might as well be giving your money to your brokerage firm.

So what is a stop-loss point?

A stop-loss point is simply a point in which you are willing to surrender your trade and cut your losses. Normally, it is the point where the trader will think that market is likely to continue going in the opposite direction that they were forecasting. Sometimes, in the event that the trader is scalping trades, it is very short (normally 10 pips of the trade).

How to you determine where to place the stop-loss point for your trade?

Most beginner forex traders will randomly place a stop-loss where they feel that they can't lose anymore. This is actually a bad tactic and I am going to explain why the more experienced traders work out a system where the stop-loss points are defined and definite. Simply randomly placing a stop loss point is NOT a good forex strategy.

Most serious forex traders understand that there are certain technical tools to look at when determining a stop-loss point. While I am not going to get into the debate of whether technical analysis is viable or not, I will say this...if you aren't using some form of technical analysis then you are no better off than simply closing your eyes and picking a point to stop.

Here is a short list to help you plan your stop loss strategy effectively-

• They have a clear understanding of Pivot Points- Pivot points are basically an average prediction of where the market may be in the future (next day) based on previous results- It is no coincidence that the market tends to follow tendencies or trends. While Pivot Points are by no means "slam dunks", they are a good indicator to follow and can be used to determine a proper stop-loss strategy.
• They know support and resistance points- Once again, I am not going to go into the mechanics of these points, but a good rule is that if you follow trends, and are betting the market will go up, then placing a stop-loss point below the level of support would be a good bet.
• They place their stop-loss points at a point that is well below a possible retracement- If you have ever traded forex, I can just imagine the frustration you will feel when your stop loss gets triggered and then starts to climb back into the direction that you originally thought it was going to go. Some people claim that this is manipulated by those bigger corporations who have more at stake and can actually move the market. I am not getting into this sort of conspiracy theory but I will say that it is peculiar that it happens so often.

So what can you gather from this? Well, if you are looking sideways at some of these terms, then education into forex fundamentals is in order for you. After all, if you live by a "system" and are trading blind, you will eventually die by the system. Understanding where to place your stop loss points in your forex trades is just as important as trading itself and is something that you should employ on every trade.

Forex Market - News Trading, Part One

The methodology for predicting and trading these trends is simple and straightforward: monitor the economic calendar and trade the news.

Complicated Forex Trading Formulas and Technical Indicators

Tired of complicated, proprietary Forex trading formulas and the endless barrage of technical indicators no one seems to understand? You are certainly not alone. The Foreign Exchange Market, in its most basic form, is really quite simple. It doesn't consist of magic wands, potions, or secret handshakes. You do not have to be an economist, political analyst, or mathematician to grasp it. There is no Holy Grail of Forex trading. There is, however, a better way. Thankfully, it is also the most basic, elemental form of trading on the Foreign Exchange. If a country's economy is in a growth trend, the obvious conclusion is that its currency will grow in strength versus a country whose economy is holding steady or in decline. The methodology for predicting and trading these trends is simple and straightforward: monitor the economic calendar and trade the news.

Is Trading the News Risky Business?

While some will consider this too risky, the facts just do not support their fears. Certain news releases consistently produce 30 to 50 pip moves in a predictable direction. Knowing and following a solid strategy is essential to successful news trading in the Forex Market.

News Releases consistently move the market upon their release.

We are talking about news releases that come directly from government agencies and other research departments devoted to studying and monitoring economic trends. It is critical to know the various news releases and how they typically move the market. Not all releases are created equally. Some are very consistent and predictable. These A-list news releases provide rewarding trade opportunities, provided,

1. you know the expected number;

2. you know how much deviation is required to move the market enough to gain a profit;

3. you know how the market will react if a number comes out higher or lower than expected.

As simple as one, two, three... Knowing the three key factors listed above is not as difficult or mysterious as it may seem. Number one is taken care of in the related news releases. Number two can be ascertained, either through personal trial and error, or by learning from a verified market expert like Dustin Pass, whose extensive research and work in trading the news has made him a recognized authority. Number three is much less difficult a hurdle than it appears. When the numbers do not meet expectation, when they are higher or lower, they will affect each release in a particular way. In Part Two, we will share the A List and B List news releases, talk about their required deviations, and explain how variances in the numbers affect each.

Index Futures Explained

What are Index Futures?

Stock index futures are have recently become very popular and have a large number of contracts being traded daily. Index futures are created to replicate the performance of the underlying index that the futures contract represents. Index futures exists for many global stock markets such as the S&P500, DOW Jones Industrial Average, Russell 2000, German DAX, London's FTSE, French CAC40, and other established world markets.

Index futures can be used to hedge existing equity positions or even to speculate on the movement of an index. Gains and losses will be relatively large compared to index ETF's that trade on the stock exchanges due to the fact that the leverage in a futures contract is very large. For example, one S&P500 futures contract is valued at 250 times the index price. Assume the S&P is trading at 1300, this would render one contract to be valued at $325,000 and can be purchased for a fraction of that number.

Contract Months

Index futures contracts are cash settled and will have no delivery of any security at expiration. Futures contracts roll over quarterly and will expire on the third Friday in March, June, September, and December. The contract with an expiration date closest to the current date is considered the front month and this futures contract will have the bulk of the trading volume; however, contracts with different expirations may be traded at the same time.

Each contract is denoted with a letter indicating the expiration month. H represents March, M represents June, U represents September, and Z represents December.

Therefore, the symbol for a S&P futures contract expiring June 2008 would read as SPM08. SP is for the big S&P contract while ES represents the E-mini contract.

S&P500 Futures Contract

The S&P500 futures is the most popular index futures contract traded. It contains 500 of the largest companies in the world and therefore, it's movement is indicative of the direction of the entire market. Many day traders use the direction of the S&P futures to confirm a long or short position that they are about to take and since it is traded 24 hours per day, the S&P500 futures is used as a guide to the stock markets direction before it opens at 9:30 am EST.

E-Mini Futures

The e-mini futures contract was introduced to bring more liquidity into the futures market. An e-mini futures contract is valued less than that of the larger S&P big contract but represents the same underlying index and thus allows more traders to participate. The difference is that this contract is valued at 50 * Index price instead of 250 * Index price. This means that each point is worth $50 on an S&P e-mini futures contract and $250 on a S&P big contract.

Conclusion

I can't stress enough that you must tread lightly when you first get into trading futures. The market can create large losses in a very short amount of time if your risk parameters and strategy are not defined clearly. Start with one contract and build on that as your results improve. Remember, you are trading with a massive amount of leverage and there is no reason to be hero and buy 10 contracts on your first day. On the flip side of the coin, trading index futures can reap you a large sum of money when done successfully.

See You At the Top,

mysmp.com

Become A Day Trader To Go Long On Profits

In stock market parlance, day trading refers to buying or selling shares and squaring up the bought or sold positions on the same day. However, sometimes, they carry forward their positions for one day at the most. Individuals who participate in this activity are referred to as day traders.

It is easy to become a day trader, but many do not stick to prudent, common sense financial principles, which is why you must have heard that they lose a lot of money. In reality, this is not true - they most often make money because they have access to sophisticated stock price forecasting tools, the latest news and most of all, they do not take any positions home and hence are not subject to vagaries of company announcements, economic indicators, commodity prices, the sub-prime mess, and so on.

Having said that, let us also add that to become a successful day trader, you need to follow sound financial tenets and get a basic grip on the stock market.

Basic issues faced by day traders

1. Newbies regard day trading as a glamorous, hotshot job - it is anything but that. Day trading is about acting swiftly while purchasing/selling stocks at a price and squaring up positions at a profit. One has to be street-smart and nimble to survive.

2. They must understand the stock markets and different indices - for example, if the utilities indices fall, then they can go short on the weakest stocks in that category, and so on.

3. They need to work with adequate working capital. Brokers registered with the New York Stock Exchange will insist of a deposit of $25,000.

4. Online traders also have to invest in a high-speed broadband connection and subscribe to a sophisticated, proven website that doles out technical recommendations at regular intervals every trading day.

5. They must use their judgment wisely when it comes to booking profits or cutting losses.

Day trading problems and how to overcome them

1. Many do not book profits or cut losses quickly - they wait to gain some more out of the trade. The result is that many times profits evaporate and losses build up. As a trader, you must learn to snake in and out of your positions quickly and be content with small profits or losses.

2. Some do not cut losses at all - instead they take delivery of the security (if they have gone long on it). The result is that they have very little or no capital left because of which they are not be able to trade daily, and that might frustrate them.

3. They should trade within their financial capacity and at no time overextend themselves. Overextending yourself amounts to gambling, not trading.

4. Sometimes they get emotional about the stocks they deal in and feel like holding their position/s for a while. On the other hand, some traders act in haste after watching the price fluctuations on the stock ticker. These are dangerous mistakes no one can afford to make because it is an unwritten rule that a trader should only deal in, and not marry, any stock and he should always stick to his profit/loss no matter how the prices on the ticker move.

5. They must be wary of dealing in stocks of suspicious companies even though such stocks are riding the momentum wave. Typically, they must stick to trading in liquid and reputed stocks and try to avoid the mediocre ones. Having said that, some rare opportunities in mediocre stocks can be taken advantage of by these traders.

6. They must read financial papers and listen to the experts on TV. This information can clue them on in their trading.

This is what you need to know if you want to become a day trader. So, go ahead, organize enough capital, use your judgment and then play the game to go long on profits. Good luck!

Online Trading - Breaking Through Trading Distractions!

In my opinion, the second biggest challenge that you face in your online forex, stock commodity or futures trading is distraction.

Now, I say the second biggest challenge, because the first challenge is to know what the heck you are doing in the first place! Frankly, if you don't know that- and most beginner and many intermediate level traders really don't- then you're going to need all the distractions you can get to keep you away from the markets so that you don't keep losing your money!

However, assuming that you do know what you are doing in the markets and have a sound plan, then the next major challenge that you face is distraction. It goes back to what we have discussed about the need for mental focus. However, the issue of distraction is wider ranging. When we spoke about focus, we were talking about the need to focus within all the vast variety of choices available to you in the trading world.

With distractions, the issue is much wider and potentially worse still. Here, we are talking about literally everything that can distract you from your online trading. If you are a private trader working from your home, this can be an endless list; the postman, your cat, the need to get some bills paid,the shopping,the fact that it's a sunny day and you'd rather be outside,surfing the internet, checking your email, the telephone, odd jobs around the house, and so on. If you are in this position, I am sure you can add to the list.

Even if you are an investment bank trader, there are still plenty of distractions. Some of the above- email and the internet for example still apply- and there are others. Chatter from your colleagues, meaningless bullshit meetings that you must attend and are not allowed to get out of, the endless stream of media "information" and more.

At least for the institutional trader, it is understood that trading is a business. It is literally his/her job. There is daily accountability involved and it cannot therefore be mistaken for a hobby and treated as one. However, for the person working at home, this is a much easier mistake to fall into, especially at the very start, when you may not have decided upon your trading routine.

Speaking personally, I have to say that distraction is something that I have a big problem battling against, since I do operate from home. The problem is that if your mind is not totally focused upon what you are doing in the financial markets, and getting the process right, the margin for error quietly widens and things can start to go wrong.

The key point to come back to is that trading has to be a business, if it is intended to be your primary source of income for yourself and your family. If that is the case, then it is imperative that you treat it with the seriousness that it deserves. That means that even though you may be working for yourself at home, you need to impose some business disciplines that you would find in a standard office environment.

If at all possible, you should establish for yourself a separate room for your online trading. Wherever possible, you need to give very serious thought to closing the door to family and pets in order to concentrate on what you are doing. (Now, I know that this is hard because my two cats basically have total access to me, and I can't see that changing. But as the saying goes: do what I say, not what I do!)

Let's not forget that neither your friends, your pets, nor your family would have access to you if you were working at an office job somewhere, would they? Hence, closing the door closes out an enormous source of distraction.

Use effective time management principles to deal with other distractions. In other words, schedule other things that need to be done appropriately so that they do not interfere with your trading. Maybe you need to fix upon a time when you check and deal with your email once in the day, or at most twice, but you certainly do not keep looking at it every five minutes or so.

Do you know what constantly checking your email all the time is like?

It's like going to your front door every few minutes to see if there is anyone there! Did you ever think of it like that? Well, if you would never do that, why check your email every 5 minutes?!

What's the big deal? Well, it takes time away from you focusing upon your business, which is trading, not email checking or chatting idly. When you break your focus, then it takes a certain period of time to restore it. If this keeps happening the whole time, your mind is working hard just to stand still, i.e. to keep getting back to where it left off last time.

That is why it is so vital to get this under control. If not, it is not the trading that is exhausting you, so much as the sheer amount of clutter that you have allowed to invade your own brain. They say that failing to plan is planning to fail. Hence, starting today, sit down and plan out what you can do to minimize the distractions during your trading day. Consider the email challenge. Consider too scheduling certain activities together, e.g. make all of your outgoing calls at the same time, when you go out to the shops, make sure that you get that post office visit done too. Try to handle pieces of paper that come onto your desk once, and don't keep coming back to them over and over again.

This is all about organizing you, and you are unique. Hence, it is impossible for me or anyone else to give you a list. You have to come up with it yourself, and then go to work to reduce the distraction to your trading. I've given you a broad hint in what we have been discussing, but it is ultimately down to you.

Remember, your online trading is a business, not a hobby. It will ultimately, if it is not already, be your primary source of income and that upon which your family depends. Hence, you owe it both to yourself and to them to get serious and to get professional, no matter whether you trade from home or on the proprietary trading desk of the biggest firm on Wall Street.

Hedge Fund Methodologies - How To Price Spreads And Baskets

Introduction

Hedge funds are always in the media, and frequently regarded as secretive and esoteric.

This is largely due to a a lack of detailed specific information regarding what hedge funds actually do. To help combat this, I have decided to write a short series of articles describing how long/short equity strategies may be defined.

Long/short equity hedge funds generally go long certain shares. And short others. Some may maintain a market neutral position. This means that for every million pounds of stock that they hold, they'll short a million pounds of another stock. Others may have a long bias. For example, maintaining a 70% long, 30% short portfolio.

The portfolio selection processes can be discretionary or systematic. In this opening article, I shall describe the basic pricing process, and move on to technical selection processes at a later date.

Pricing Products

In order to compare stocks, the prices need to be normalised to enable a like for like comparison. For example, if stock XYZ goes up by 10% and stock ABC goes up by 10%, then we'd probably want a market neutral spread between the two to remain static.

This is commonly done by dividing prices by a "base price", where the base price is normally a recent historical price of the associated stock.

For example, if XYZ closed at 232 last night, we could set the base price to be 232. Assume XYZ opens at 250 the next morning. The rebased price would be 250/232 = 1.07759.

It is clear that this represents an overnight increase of 7.759%.

Now assume that ABC has moved from 450 to 459. Using 450 as the base price, the new rebased price would be 1.02.

The spread between XYZ and ABC is therefore:

1.07759 - 1.02 = 0.05759

ie. The spread has moved 5%.

So a trader who'd been long the spread over night, holding a market neutral position, would have made a 5% return on the nominal value of his position.

This concept can be expanded to baskets of shares. For example, if a trader wanted to trade a market neutral position of XYZ against a 50/50 weighted basket of ABC and DEF, the rebased spread would be:

n(XYZ) - 0.5 * n(ABC) - 0.5 * n(DEF)

where

n(X) = (Price of X) / (Base price of X)

In essense, these simple pricing methodologies are used to define new synthetic tradable products. Unlike normal shares, they do not follow lognormal random walks, and do not have an upwards drift. However, some traders and hedge fund managers believe that they possess inefficiencies that can be exploited.

Some of these inefficiencies will be investigated in later articles.

Five Steps to Online Training for Foreign Currency Trading Quickly

So, while these steps are applicable to online training for foreign currency trading in the forex market in my case, if you think about it while you read this, it could easily be the same principles that you need to apply to become a professional currency trader in the trading futures markets, or trading options market.

Lets not waste time here is step: 1) Start trying to save your money today not tomorrow or next month.

To trade in the big league or you need a bankroll to play with, and one that is capable to withstand the ups and downs that are a natural part in the trading currency markets. For me, I know this is a problem for most people, but you need to just get an organized budget together. Then stick to it, and if you want it bad enough then it will start to add up to where you need to be in the online currency trading.

So you say "How much money will you need?" Unfortunately I can not be the one to answer that because it will depend on the trading strategy that you chose to implicate, and the amount of leverage that you need to plan on trading with in the course of a day. Also the amount of money that you can take out in profits, is just simply what is extra from what you need in the course of day trading. Though you should not count on having a bare minimum for you currency exchange balance, it you leave a little more in each day then you may be able to start to take more risk. And if you understand that risk means that you have a chance to make a lot of more money, then your on the right track. But I can say, that I see plans from $1000 to a years salary.

The Next Step: 2) Get online training for foreign currency trading.

Common sense will tell you that you need to get training in you subject before you go about risking you money. So with that said, there is plenty of free information to get your self started. With the free information you can get yourself familiar with the terms that they use in the currency trading market, with terms like "fx" meaning forex, or "cdf" meaning, channel definition format. If you just learned something with the last sentence then you know what I mean, because this is also free information that you are reading.

But when that is not enough there is many programs out today, mostly when you register for a trading platform then they will provide you with what you need to get informed in you field of currency trading. The part of the education process that I really am talking about here is necessary, and that is coming up with a good trading strategy that you are personally comfortable with currency exchange rates and among other things, as well as being financially sound with the money management strategy to ensure the long-term viability of your trading strategy plan.

Then the next step:

3) Which can also be simultaneously done with the last step. This is to sign up with demo trading account from a larger online trading broker. Then you can start practicing with your new found trading strategy, while not losing all you money to start, because the demo account uses play money and not real money. At your regular job or, if you have some free time and internet access at your work place, then maybe you can start to get a feel for how a normal day is while practicing trading.

So on to step 4: If you are then already making money trading on "paper," so to say, and are comfortable with your trading strategy plan, then you need to go ahead and get started having fun with fx trading for real only on a part-time basis. Don't include all apples in one basket just yet. You need to start out slowly and gain a decent comfort level. Then as your confidence builds up and you have learn from a couple mistakes, then you can start to move money from your savings to increase your bankroll.

Lastly step 5: When you can estimate that your average gains/loses from real trading, from following step 4, are at a level where and when you are comfortable, to say if you were to trade full-time using your present bankroll, you would be making enough profits that slightly go over and exceed your current employment salary, then and only then you are ready to quit your job for once and all, and trade full-time.

Remember, you want your currency trading profits to go over and exceed your present job salary. This will give you the opportunity to maintain a decent current financial level. Also at the same time you can then live with minimal stress in you life and continue to increase your trading bankroll, which will enable you to make more money as the size of your available funds grows sizable larger.

Lastly it is important to have patience with yourself and your online training for foreign currency trading , at each of the steps mentioned above. Mostly the seasoned traders will tell you to maintain emotional equanimity and understand that fear and greed are a traders weakness. If you can keep these strong emotions under control and keep you head straight, the discipline in establishing the while following steps, then you can look forward to making it as a everyday professional trader.

If you liked that and you want to get an even better grasp on Forex go to Prolificinfotoday.com and find more useful free currency trading information Article Source: http://EzineArticles.com/?expert=Chad_Nauman

How To Choose A Forex Broker

This can be a daunting process. Perform your due diligence as if you were going to buy a company. The following ideas might be of help:

Any forex broker worth his salt will be registered as an FCM which is a Futures Commercial Merchant with the Commodities Futures Trading Commission (CFTC). Having found a registered forex broker is but only the beginning of your search.

There are other important considerations. For instance, the broker of choice should be linked to a firm with substantial financial clout because the broker often 'lends' a trader up to 99 per cent of the funds for trading. This is because forex trades are highly leveraged.

The Federal Deposit Insurance Corporation (FDIC) does not insure forex accounts. Consequently you cannot expect the White House to assist any brokerage company or to refund you should the market go belly-up. For financial peace of mind, utilize the services of financially stable institutions with sufficient funds to absorb substantial losses because of adverse market conditions and therefore fast diminishing deposits should their client base make a run on the financial institution with large withdrawals.

In addition you want your broker to answer the phone when you call, right? Communication. Being able to reach your broker can make a big difference to your bottom line. Sometimes a substantial one. Or do you want to hear the smoky voice of a little kitten telling you he is not available because of some other considerations? Remember the forex market place is active 24 hrs worldwide so you may need to reach him after normal working hours. Your normal working hours that is unless you are trading full-time in which case it doesn't matter. It's like 'Joe pick up the bloody phone before I bitchslap you to kingdom come. The bloody market has gone south and I want my money like right NOW. I said right now, d'ya hear?''

Forex brokers use spreads which is the difference between a bid and ask price. That means what the broker pays to buy vs the amount he sells a currency for. This is different from the standard commissions charged by bond or stock brokers. This could be a fixed spread on trades or variable spread. Depending on your investor trading style or risk profile you would opt for one kind of spread versus another. Fixed spreads tend be larger though.

Qualified clients are offered a standard account upon completion of the application form and having indicated that the requisite funds for trading are at your disposal (in other words you have the booty that is going to make you a s*&^load of moolah, catch my drift?) So yadda yadda you have to state that you understand the risks yadda yadda inherent in forex trading excuse my verbosity ;) yadda yadda. So now you have a neat little standard account which trades currency in wait for it, units of 100 000. That means, Mr Wiseguy that you have to buy 100 000euros worth of currency. That's right. Holy Camoly. That's a beeyatch. I don't have that kinda money. Well what did ya think? This aint the local casino esse.

So what now? Buy lemons and make lemonade? Hold on there for a mo. Brokers know that's a sh*tload of money so they offer leverage. No I don't mean the lowdown on the ex that's gonna get you off the maintenance court's hitlist. That means you put in for instance 1 percent of the total amount, the broking firm the rest. :) Bingo home and dry. Hmm. Not quite. Remember the risk. So you have huge profit potential but the downside is that there is also a very high risk factor. The margin call policy of the broking firm is important-know what it is.

There are other solutions. For instance some brokers will indeed offer some kind of 'mini' trading account which means that trading happens in smaller units instead of standard lots, such as 1, 000 which means you, budding forex trade tycoon, get to invest say 300USD as opposed to 3000USD. That is a minimum far more reachable by most investors. If not, play the lotto quick pick 10USD a pop, no problem :) There is a downside. Regrettably trading with such a mini account does mean that the reduced leverage requirements also reduces the profit potential but hey you can't have your cake and it eat it, right? You want to trade? Play by the rules. Especially the ones that talk about affordability. Don't wipe out your life earnings and Aunt Sarah's study loan with one bad trade. Protect the investment capital. In gambling parlance protect the betting bank. Without a betting bank it's game over, thanks for playing, bye!

Okay now onto software and technical tools. You will need those preferably supplied by your broker so you can be more effective. Any kind of investing is complicated and has varying degrees of volatility attached to it, particularly forex trading. To begin with perform several paper trades using trial accounts so that you can become efficient with the software and research data available, preferably using real-time prices. Spend monopoly money on your leaning curve or blow he whole enchilada on the learning curve and make next month's investment funds selling big macs at you know where. You have been warned. Do not go past Advance do not collect 200USD at the start go straight to ... shall I continue?

Okay in the final analysis what are you looking for? A solid broker with deep pockets and that rarest of commodities, integrity and by that I don't mean he pays his monthly drinks tab at O'Hagan's down the road.

Spend as much time on this as you would a good husband or wife. After all it's your money, right?

For more information about the world of Forex visit the author's website http://www.dealsforex.com Article Source: http://EzineArticles.com/?expert=Llewellin_Jegels

Essentials of Successful Day Trading

Day trading refers to trading, i.e., buying and selling the stocks within the same trading day in such a way that all trading positions are generally completed before the close of the market on the trading day. Day trading is opposite to after-hours trading which allows the investors to buy and sell shares and keep them for longer periods.

Earlier, the day trading was done exclusively by the large financial companies, banks and professional investors. Of late, it has gained acceptance from the casual investors due to the advancement of trading technologies, changes in legislation and the advent of the computers and the internet.

Day trading is a full time business with possibilities of profits and losses. As a day trader, you need to nurture a right attitude towards profits and losses. An occasional loss should not prove depressive enough to make you lose your heart altogether and deter you from continuing with your trades.

According to Bruce Kovner, if you personalize losses, you cannot trade. As a good trader you should not have any ego. You must learn to swallow your pride and get out of the losses. You must gain the strength to take your losses without wavering in your determination to win. This can be done when you eliminate fear, doubt and hesitation from your mind as these negative thoughts may prevent you from taking a balanced approach. Eliminate the emotions that can vitiate the chances of your success.

On the other hand, a good profit from trading should not cause so much euphoria that you lose sight of your focus and take unnecessary investment risks that defy common sense. At the same time you must always be ready to learn from your mistakes and be open to constructive suggestions.

It is also recommended in this context that you should maintain a journal of your important day trading events detailing reasons about profits and losses. You should try to analyze which strategy won you profits and what mistakes led to losses. Mistakes are more likely to occur while making the technical analysis of the charts and graphs. Your own journal can become a handy reference material to guide you through your future day trading problems. It will also help you to avoid mistakes and develop your winning strategies.

It is very important to learn the art of risk management in day trading. Risk management can make a lot of difference between success and failure. You must control your emotions and urges and ensure that you are around to trade tomorrow.

Great day traders are great profit and risk managers. It is always advisable to take small and affordable risks. It is generally recommended that you should risk % to 1% per position. In any case the risk should not exceed 2% of your investment. The idea is that you should be able to trade the next day as well, which would not be possible, if you blow out most part of your capital today. If you do not have any money to trade the next day, how are you going to earn your living or make profits? So your each position should be so small that you can give a damn to your losses. Suppose you are investing a total of $20,000, a loss of, say, % will not amount to too much.

You should develop a winning mindset based on the mental/emotional rules of a winning trader. Develop a detached attitude towards trading and reduce the stress that is usually associated with gains and losses in stock trading. This will enable you to travel your path with confidence.

Stock trading remains unpredictable despite the advancement in research and analysis techniques. It is somewhat like a game of roulette. Each flip is independent of the other. If you bet on black and win, it does not follow that black would win you again. Your next trade has nothing to do with your previous one. Each stock has its own features and has to be analyzed in its own perspective within its own parameters.

The stock trading market is an ever-changing entity. It presents unique challenges in different scenarios. If you want to succeed in day trading you have to develop an intuition in dealing with the unprecedented financial situations every day. You, therefore, must develop an ability to adjust to the changing market circumstances.

Pricing and Features for Sogotrade Investment Packages: online investment Sogotrade Interest Rates and Fees: trading stock options Article Source: http://EzineArticles.com/?expert=Micheal_James

Open Outcry in the Futures Pits

What is an Open Outcry?

The open outcry system for trading futures contracts is nothing more than a verbal auction between buyers and sellers of a commodity. Using the open outcry system for placing buys and sells, the buyer will "cry" out their best offer price and the seller will cry out their best offer price. When a buyer and seller both cry out the same price, a futures contract is made.

Open outcry may seem a bit unsophisticated but it is actually a very methodical process and can offer quite a bit of insight into the psyche of the traders in the trading pits. The system requires that traders cannot bid below the highest bid, nor can sellers offer higher than the best offer. This keeps the markets very efficient and keeps the bid and ask spreads very tight.

Advantages/Disadvantages of Open Outcry and Electronic Systems

Open outcry allows for floor traders to understand the emotions of the other traders on the floor when orders are being called in. This intangible information is essential for many of the traders on the floor. Being able to see a traders greed or fear offers much more than watching a chart on your computer. Many traders will key off of the "noise" in the pits to determine the volatility in the markets at a specific price point. There are a few services on the web that offer this live feed from the pits.

One key drawback to the open outcry system or any floor based trading system is that traders are not privy to the limit order book which will give the trader an insight into the depth of the market place. This is especially useful during periods of low volatility when pit noise is not useful.

Conclusion

In conclusion, it can be said that there are benefits and drawbacks of both electronic trading and the open outcry system used in the pits. The key difference between the two lies in the type of information that is available to both types of traders. Pit traders using open outcry or hand signals have more access to strategic information while electronic traders have more data to look at, such as time and sales and level II.

See You At the Top,

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Kunal Vakil is the co-founder of mysmp.com (My Stock Market Power) which provides free trading articles to investors. Please visit http://www.mysmp.com/ for more free articles. Article Source: http://EzineArticles.com/?expert=Kunal_Vakil

Cringe-Inducing Trades And Profits

Professional traders know all about the guts and glory of live trading. Trading discipline is the only difference between unprofitable and profitable traders. Watching a violent swing in the charts that can put a dent in your trading capital can be tough to swallow.

Avoid the Cringe of the News

To preserve your trading capital and avoid a heart attack, it is best to stay away from news related market activity. Even proven strategies are proven to fail when there is a large amount of volatility and gut instinct present in the market. After data releases, such as the Nonfarm payroll or inflation statistics, the markets will go wild with volatility.

Plan to Avoid the News

A trading plan planner should always be kept to outline under what conditions your strategy works best, but also to include times when the strategy is not as profitable. Key news dates should be written down in an easy to see area of your workstation. Markets like to respond to news 15 minutes before the actual news release and continue for hours after the news breaks. Avoiding high volume news times is the best way to preserve your trading capital and keep the cringe-inducing trades to a minimum.

Preservation Equal to Growth

To master day trading is to know when not to take a trade. Preserving your capital is equally as important as growing your portfolio. If the market loses 30% one year and a profitable trader preserves his capital, he's outpaced the market by 30%. While wealth was not created, he made an effective gain of 30% after comparing to other investors. In a downtrend, trading discipline is critical to keeping your head and your profits.

Monitor the Trends

Cringe-inducing trades are often the product of a sideways trend, rather than a downtrend or uptrend. The uncertainty that comes with a sideways trend makes it that much more difficult to swallow than a well defined uptrend. A sideways trend can snap at any time, sending the price up or down at a violent pace.

Stay True to Your Trading Strategy Plan

The most common mistake made in testy markets is to interfere with your trades. Moving stop losses, taking early profits, or letting a loser run are all dangerous. It is best to let the proven strategies work their magic over the long run than to interfere with the odds on the short run. Creative techniques, such as trading smaller trade sizes or avoiding the trade all together, is the best way to prevent a loss.

About the Author: Leroy Rushing is an active, professional day trader ; trading coach; and author. He is the Founder and CEO of Trading EveryDay, a distinguished provider of educational trading products and services that are available worldwide. Trading EveryDay also has many articles with unique perspectives on day trading . Article Source: http://EzineArticles.com/?expert=Leroy_Rushing

Interest Rate Futures Explained

What are Interest Rate Futures?

Buying an interest rate futures contract allows the buyer of the contract to lock in a future investment rate; not a borrowing rate as many believe. Interest rate futures are based off an underlying security which is a debt obligation and moves in value as interest rates change.

When interest rates move higher, the buyer of the futures contract will pay the seller in an amount equal to that of the benefit received by investing at a higher rate versus that of the rate specified in the futures contract. Conversely, when interest rates move lower, the seller of the futures contract will compensate the buyer for the lower rate at the time of expiration.

To accurately determine the gain or loss of a rate futures contract, an interest rate futures price index was created. When buying, the index can be calculated by subtracting the futures interest rate from 100, or (100 - Futures Interest Rate). As rates fluctuate, so does this price index. You can see that as rates increase, the index moves lower and vice versa.

How do you calculate the gain or loss on the futures contract?

Typically, the interest rate futures contract has a base price move (tick) of .01, or 1 basis point however, some contracts have a tick value of .005 or half of 1 basis point. For example, for Eurodollar contracts, a tick is worth $12.50 and a move from 94 to 94.50 would result in a $1250 gain per contract for someone who is long the futures.

Hedging with futures

Many participants in the interest rate futures market hedge their positions that have an interest rate risk with an offsetting futures contract. As the hedge becomes profitable and traders see less risk in the market, the hedge will be peeled off.

Other participants will use interest rate futures to hedge forward borrowing rates. For example, it is currently March and I need to borrow money in June for 1 month at Libor plus 2. The current LIBOR rate is 2.75% and let's say the 3 month LIBOR futures are 3%. I will basically be locking in a 5% forward rate by shorting or selling the LIBOR June 1 month LIBOR futures contracts.

What Types of Interest Rate Futures are Traded?

Interest rate futures in the US markets are traded on the CME (Chicago Mercantile Exchange). Below is the list of short term interest rate futures contracts traded on US and foreign interest rates.

Three Month Eurodollars

Eurodollars refer to US dollars that are currently being held on deposit in foreign commercial banking institutions. The ability for banks to be able to have access to fund US dollar loans to foreign purchasers of US goods without the currency exchange rate risks makes the Eurodollar futures very attractive for hedging purposes. For this reason, the Eurodollar futures market has exploded in the last 20 years and has become the most highly traded futures contracts out there.

CME's Eurodollar contract reflects pricing at 3 month LIBOR on a $1 million offshore deposit.

One Month Libor

One month LIBOR contract is very similar to the Eurodollar contract; however, it represents a 1 month LIBOR on a $3 million deposit.

EuroYen

Euroyen are similar to Eurodollars and represent Japanese Yen deposits outside of Japan.

13 Week Treasury Bills

Treasury backed instruments are considered risk free investments as they are backed in good faith by the United States government. T-bill futures contracts are available in quarterly contracts.

One Month Fed Funds

Federal funds represent reserves Federal Reserve member banks in excess of the reserve requirement for banks. These deposits are not interest bearing deposits and therefore banks lend these funds out to other member banks for overnight term.

91-Day Cetes (Mexican Treasury Bills)

Cetes are government issued short term paper issued in Mexican Pesos. Similar to the US Treasury market, Cetes is the basis for short term lending rates in Mexico.

28-Day TIIE (Mexican Interest Rate)

The TIIE is the benchmark interbank interest rate that Mexican banks use to borrow or lend from the Bank of Mexico.

See You At the Top,

mysmp.com

Kunal Vakil is the co-founder of mysmp.com (My Stock Market Power) which provides free trading articles to investors. Please visit http://www.mysmp.com/ for more free articles. Article Source: http://EzineArticles.com/?expert=Kunal_Vakil

How To Manage The Passion Of Trading

Being a trader is more than just a day job. Traders will often find themselves studying the numbers on unrelated events. After taking the plunge into the world of technical investing, you might find yourself looking for trends and chart patterns on things as simple as a weather chart.

Seeing Charts Everywhere

The professional trader will rarely leave work at work. Trading success with technical analysis will bring a trader to actively discuss key issues after hours, such as late day breakouts or momentum strategies. The markets are a bit of an obsession for the average day trader.

Traders who use technical analysis have the hardest time getting away from work. Everywhere you look there are patterns, specifically chart patterns. After years of looking for patterns on stock prices, it is hard to ignore the patterns in everyday life. Finding established chart patterns in a sea of data is easy for a professional trader. It is very likely that traders become obsessed with numbers and chart patterns.

24/7 Trading Makes Stepping Away Difficult

Because trading is such an up and down event, stepping away from the trading desk can be difficult. With the world markets open anywhere, anytime, 24/7, it is hard to ignore the computer screen in favor of a relaxing event. Even financial freedom is not enough for some traders to ignore the markets; buying and selling can be a lifestyle rather than a simple way to make money.

After years of successful trading, life-changing results, such as a ten-bagger in a retirement portfolio, is usually not enough to get away from the markets. Look at any of the most successful professional traders - even though they have financial prosperity, they are still on a quest for more. Financial freedom is just a status rather than a gateway to retirement.

Find Another Passion to Manage Your Trading One

Finding an activity to do each day is paramount to keeping a level head. Ignore your day trading strategies and the late day breakouts and focus on something you like to do. Many trading firms have game consoles, libraries, and even arcades that cater to their employees. Trader burnout is easy to achieve when you spend hours each day looking at candlestick chart patterns. The constant emotional rollercoaster of watching your positions go from the red to the black and back to red can be nerve-wracking. The best thing to do is find another passion to take you away from the day to day and to something you enjoy.

About the Author: Leroy Rushing is an active, professional day trader ; trading coach; and author. He is the Founder and CEO of Trading EveryDay, a distinguished provider of educational trading products and services that are available worldwide. Trading EveryDay also has many articles with unique perspectives on day trading. Article Source: http://EzineArticles.com/?expert=Leroy_Rushing

An Introduction to Day Trading

While being a day trader used to be a personal decision that the government had no interest in, the Security and Exchange Commission (SEC) recently stepped in and developed some day trader account management rules that you may become subject to depending upon how you trade.

There is a new category of day trader called the "Pattern Day Trader" or "PDT". This definition applies to people who make four or more day trades within any five day period, but only if those trades exceed six percent of that person's total trading activity in the same time period.

What is a Day Trader?

A day trader is an investor who opens and closes a position in the same trading day. For example, if you buy 10,000 shares of XYZ at 11 AM, and sell all 10,000 shares at 1:30 PM on the same day, then you completed a day trade. Do that enough times within 5 days and you are a Pattern Day Trader.

What are the new SEC rules?

If you are determined to be a PDT then you are required to maintain a minimum balance of $25,000 in your margin account. Traders who are not subject to the new rules only need to maintain a $2,000 balance in their margin account.

Because the SEC rules are not clear, many brokerage houses require PDT customers to maintain a $25,000 balance even if they are trading from a cash account.

Is Day Trading right for you?

Day trading is not something to be entered into lightly. While there is a great opportunity for gain, there is an equal opportunity for loss. Day traders require a great degree of knowledge and skill in order to be consistently successful. Of course, no one is born with that knowledge and skill and there are plenty of ways to learn all about day trading if you think that you are interested.

It takes discipline to be a day trader. Greed and fear are the two biggest enemies of day trading investors. When you get too greedy you set yourself up for losses by having too much money invested at once, or by not exiting a trade when you should. Fear stops you from making a trade because you don't want to risk losing the money, or it forces you to close a position earlier than you should because you think it's going bad on you.

Day trading is very risky and you should never invest more than you can afford to lose. Yes, you can earn a full time living being a day trader, but more people fail than succeed, so you have to be prepared for the worst.

Your best bet is to find a day trading program or strategy that you are comfortable with and then stick with it. There are plenty of strategies available, but remember this: Past performance is never indicative of future results. What worked yesterday for day traders may not work today. Trade responsibly!

Caterina Christakos is an experience investor and internet entrepreneur. To learn how to diversify your portfolio go to: http://www.commoditiesandfuturesexplained.com Article Source: http://EzineArticles.com/?expert=Caterina_Christakos

Day Trading Online

Internet has revolutionised the world with latest techniques and by the end of 1990, this revolution forced the stock market to go online for day trading. This new change in the stock market, make things easier for people to go for day trading online.

Research the Market Well

There are many people who think that day trading online are very risky and so they remain away from it. One should have good knowledge about the online trading company. Regular investors have all the recent updates of the stock market and so they invest in stocks at the right time. They make a research of the whole market which might take days or even weeks to know about the market scenario of the stock trading companies.

If you are a good day trader, then chances are high that you will get much bigger returns and you can also trade several times a day. Price outline shapes very quickly and so, it requires an efficient, quick response as soon as a trading indication is perceived. Unless you have a good knowledge on the stock market trading, you cannot make good returns. So, it is always fruitful to have a good understanding of the market.

Get An Experienced Stock Broker

One of the most important things one should know is that unless you get a good stock broker , you cannot make higher returns in the stock market. You will find many brokers which will serve you to get some good returns but in today's world, it is very difficult to get a decent one. There are many frauds that make you go bankrupt and you are left with no other options. The bottom line is that you should get an honest broker who have got good experience in the market and who can show you the right direction.

Look For Tips And Tricks

If you are looking for day trading tips and tricks, you can get more information on the web. There are websites which provides you with tips and tricks of day trading. So, you can have a really good idea about day trading online. You should be, however, be ready to take some amount of risk when you invest in trading and stock markets. Do not be overconfident and you should always keep in mind that the secret to good trading is to trade the way you know. So, you should trade stocks after consulting with a good broker. So, make a good research on the market and make a great trade to earn something big in life.

Why Choose Sogotrade: cheap trading stock options Contact Sogotrade: Contact Online stock trading company Article Source: http://EzineArticles.com/?expert=Vijay_Kumar_Sharma

Learning to Trade Commodities - An Alternative to Falling Equities?

Learning to trade commodities can be a great way to continue with profitable investing in the financial markets despite the current high volatility in the equity markets. The fallout from last years sub prime crisis, and the so called credit crunch has battered work stock indices over recent months with large falls in value widespread.

Investors have been looking to withdraw their money from equity stock investments and opt for alternative, less volatile investment opportunities. Learning to trade commodities is one alternative that many investors are taking. One of the advantages is that the commodities markets are to a certain extent uncorrelated to equity markets.

Commodities markets have undergone a period of sustained growth in recent years thanks in part to both booming populations and economies in China and India. As these economies industrialise rapidly their demand for raw commodities such as steel, iron, etc is rapidly increasing.

Obviously there is only a finite supply of iron ore and other commodities in the ground. Combine this limited or constrained supply with a booming demand and you have the main reason for recent rises in commodities prices. Assuming you believe these economies are going to continue to grow, then learning to trade commodities may be very profitable in future.

One point worth making is that the commodities can be equally volatile as the equities markets. Unlike equity stocks, there are no balance sheets or past earnings to study when investing in a raw commodity. Instead the markets are often moved by sentiment which is very often driven off factors such as political unrest in a certain country, severe weather events like hurricanes or floods.

Learning to trade commodities is certainly not for the faint hearted then however it can provide a good alternative to the troubled equities markets.

If you want to find out more information about learning to trade commodities , smart stock investing or you simply want to learn to invest money please visit the authors website. Article Source: http://EzineArticles.com/?expert=James_C_Kerr

Chaikin Money Flow - Technical Indicator

Chaikin Money Flow - Overview

The chaikin money flow (CMF) was developed by Marc Chaikin and attempts to determine if a stock is under accumulation or distribution by comparing the closing price to the high-low range of the trading session. In Lehman's terms, if the stock closes near the high of the session with increased volume, the CMF increases in value. Conversely, if the stock closes near the low of the session with increased volume, the CMF decreases in value. The chaikin money flow indicator was developed as an expansion to the On Balance Volume indicator.

Chaikin Money Flow - Formula

The chaikin money flow indicator is calculated by summing the accumulation/distribution line for "x" periods. Traders generally use 21-periods for calculating the indicator.

Trading with the Chaikin Money Flow Indicator

Zero Line Crosses

The basic trading premise with the CMF indicator is if the indicator is above 0 this is a bullish sign, while a reading below 0 represents a bearish signal. Reading above +.25 or below -.25 indicate strong trends and positions can be added on minor corrections.

Trend Lines

Like many other indicators, traders will draw trend lines on the indicators themselves and look for both breakouts on the indicator and the price on the chart. This method is very subjective, since the trader will have to accurately identify the trend on the indicator.

Divergence

Divergence can show up in the indicator when the chaikin money flow indicator makes a higher high, while the price action makes a lower low. This implies that there is less selling pressure pushing the security lower, thus a bounce is in order.

See You at the Top,

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Al Hill is the co-founder of mysmp.com (My Stock Market Power) which provides free trading articles to investors. Please visit http://www.mysmp.com/ for more free articles. Article Source: http://EzineArticles.com/?expert=Alton_Hill