Forex Trading Methods - Scalping Vs Day Trading

Forex Trading Methods - Scalping Vs Day Trading

It's best to go over some short definitions and descriptions of each of these two forex trading methods.

Scalping

Scalping is basically short period trading. These periods where a trader holds a position can vary from seconds to minutes. Scalping is effectively trading the minutest moves in the market for usually a small profit.

To give an example a leveraged trading account with 100,000 EUR/USD position will earn/lose $10 per pip movement. That means a small 3 pip movement either way will add $30 to or lose $30 of the traders deposit.

Even though effective scalping involves highly leveraged positions the exposure to risk is lessened to some degree by the amount of 'time' that a trader holds his/her position so large movements are rarer (but beware can occur).

Scalping is a popular method of trading practiced by 'newbies' thrilled with the cat and mouse game of the market and some traders make a good living out of it but most traders, in fact close to 90% either break even or lose their deposits.

An added factor to consider is that brokerage houses do not like scalpers. Why? The reason is simple. When a position is taken by a trader the broker has the opposite position and needs to cover that position especially if the broker feels that the traders position is the right one for market conditions. If the broker then covers that position and a few seconds/minutes later the position is squared then the broker has a currency exposure and brokers are companies that generally don't like exposure. Most make their money on spreads and trading against their clients positions. Those scalpers that make money consistently find that most brokerage houses terminate their accounts. That doesn't mean to say that it will happen immediately but when a trading pattern does arise of scalping don't be surprised if your broker 'divorces' you!

Day Trading

Day trading is not really referring to the holding of positions by traders for a day but is more descriptive of the type of forex trader that prefers to hold on to a position for a longer period of time than a few minutes at most. These positions usually last for more than an hour, few hours and in some cases days.

A day trader is a 'different animal' to the scalper in that he/she is more comfortable with exposure to the risk of larger currency fluctuations. It's not because they have fatter wallets it's usually down to having more experience and a different trading temperament.

The profit motive for a day trader is also different. A day trader will look for larger moves within a single trade and be aware of and use for example greater technical analysis to calculate the best entry and exit levels.

Brokers tend to prefer these traders as they can do two things, firstly trade against their client by covering their exposure and go the other way if they have an opposing view or square (net out) the position.

Again there are a lot of losers in the day trade market due primarily to inexperience and a 'gambling' mentality that many participants in the forex market have.

The people who consistently make profits understand the market through experience of trading and knowledge acquired and are persistent and understand forex trading methods that are available and in what situations to use them.

Why Do We Not Give Up Our Jobs and Use Them?

Forex Trading Robots - Why Do We Not Give Up Our Jobs and Use Them?

I checked a forex trading robots track record the other day and if I ran my trading account size on its track record I would be making $324,000 a year! Not bad for an outlay of a few hundred bucks. People fall for these track records, yet they always lose why?

Because their greedy, think forex trading requires no effort or they simply don't read the disclaimer which is tucked away in the small print.

If you see a track record of a forex automated trading system on the net with this disclaimer then it probably spells a wipe out of equity here it is:

"CFTC RULE 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown".

So they are not real time profits there paper profits made looking backwards! Would you trust the above?

I know I wouldn't!

It amazes me how many people buy these unproven systems.

Most of the track records are so good, you wonder why the vendor even bothers selling it - he could make enough money by trading it. Of course he doesn't, because he knows it won't win and that's why you never see a real time track record.

Do savvy forex traders use them, do you see them in bank dealing rooms or do you ever see anyone who has made long term money with them - No you don't.

Today there is a huge industry in these trading systems and they appeal to the naive and greedy traders, who won't to make money with no effort.

Of course in life you get out what you put in and forex trading is no different.

Forex trading can offer you the ability to make huge profits and even a life changing income - but you must have the right mindset and get the right forex education.

A forex trading robot probably will destroy your equity - but you don't have to take the lazy path!

Forex is a challenge, an exciting one, with huge rewards so accept the challenge, get the right forex education and you can enjoy currency trading success.

Currency Trading Basics And Tips

Currency Trading Basics And Tips

I'm here to share with you some of my tips and the currency trading basics that build the foundation of a profitable long term income. This is the largest market in the world with over three trillion dollars US being traded each day, so there is a huge opportunity to make a profit.

• Trade For The Exit: Exit, is another word for selling. We have been trained in society to think about things counter-intuitive in the currency trading market. We look at prices and try to find the best deal. Well, in the currency market, there are a lot of cheap prices, but that isn't a smart move. We're not buying as a consumer, we're buying with the intention of selling it sometime in the future(1min - months). That means, we haven't profit unless our exit price is a lot higher than our buying price. This means you have to start looking a trades, not by the buy price, but by the expected potential of where a currency will go. If you can sell a currency a month from now for 20% more than you bought, it is irrelevant how much you pay for it.
• The "Fed": The "Fed" or Federal Reserve is the central bank in the United States. The information on this point applies to all central banks in any country. You probably have heard that the fed's job is to control inflation. The thing you rarely ever hear is that they control the supply of money in the economy. Since currency still follows supply and demand, this means the fed can quickly change the direction of a currency with any policy change. You'll often hear that they "cut" interest rates or "raise" them. This is how they control the supply of money. A cut will allow more money to enter the economy, which drives down the price of the currency. A raise will slow the amount of money that enters the economy, which drives the price up.
• Don't Be Smart: You don't have to figure and develop these sophisticated trading plans and ideas. Keep things simple because simple works. If you can break everything down into simple daily tasks, you'll do much better.