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Trading with a
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Trading successfully is by no means a simple
matter. It requires time, market knowledge
and market understanding and a large amount
of self restraint. ACM does not manage accounts,
nor does it give market advice, that is the
job of money managers and introducing brokers.
As market professionals, we can however point
the novice in the right direction and indicate
what are correct trading tactics and considerations
and what is total nonsense.
Anyone who says you can consistently make
money in foreign exchange markets is being
untruthful. Foreign exchange by nature, is
a volatile market. The practice of trading
it by way of margin increases that volatility
exponentially. We are therefore talking about
a very 'fast market' which is naturally inconsistent.
Following that precept, it is logical to say
that in order to make a successful trade,
a trader has to take into account technical
and fundamental data and make an informed
decision based on his perception of market
sentiment and market expectation. Timing a
trade correctly is probably the most important
variable in trading successfully but invariably
there will be times where a traders' timing
will be off. Don't expect to generate returns
on every trade.
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page 1/6 |
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Trading with a
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Use what other traders use: In a perfect
world, every trader would be looking at a
14 day RSI and making trading decisions based
on that. If that was the case, when RSI would
go under the 30 level, everyone would buy
and by consequence the price would rise. Needless
to say, the world is not perfect and not all
market participants follow the same technical
indicators, draw the same trendlines and identify
the same support & resistance levels.
The great diversity of opinions and techniques
used translates directly into price diversity.
Traders however have a tendency to use a limited
variety of technical tools. The most common
are 9 and 14 day RSI, obvious trendlines and
support levels, fibonnacci retracement, MACD
and 9, 20 & 40 day exponential moving
averages. The closer you get to what most
traders are looking at, the more precise your
estimations will be. The reason for this is
simple arithmetic, larger numbers of buyers
than sellers at a certain price will move
the market up from that price and vice-versa.
Technical analysis (what to look at):
Coming up
Fundamental analysis (what to look at):
Coming up
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Trading with a
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Let's enumerate what a trader needs to do
in order to put the best chances for profitable
trades on his side:
Trade with money you can afford to lose:
Trading fx markets is speculative and can
result in loss, it is also exciting, exhilarating
and can be addictive. The more you are 'involved
with your money' the harder it is to make
a clear-headed decision. Money you have earned
is precious, but money you need to survive
should never be traded.
Identify the state of the market:
What is the market doing? Is it trending upwards,
downwards, is it in a trading range. Is the
trend strong or weak, did it begin long ago
or does it look like a new trend that's forming.
Getting a clear picture of the market situation
is laying the groundwork for a successful
trade.
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Trading with a
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Determine what time frame you're trading
on: Many traders get in the market without
thinking when they would like to get out,
after all the goal is to make money. This
is true but when trading, one must extrapolate
in his mind's eye the movement that one expects
to happen. Within this extrapolation, resides
a price evolution during a certain period
of time. Attached to this is the idea of exit
price. The importance of this is to mentally
put your trade in perspective and although
it is clearly impossible to know exactly when
you will exit the market, it is important
to define from the outset if you'll be 'scalping'
(trying to get a few points off the market)
trading intra-day, or going longer term. This
will also determine what chart period you're
looking at. If you trade many times a day,
there's no point basing your technical analysis
on a daily graph, you'll probably want to
analyse 30 minute or hour graphs. Additionally
it is important to know the different time
periods when various financial centers enter
and exit the market as this creates more or
less volatility and liquidity and can influence
market movements.
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page 3/6 |
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Trading with a
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Time your trade: You can be right
about a potential market movement but be too
early or too late when you enter the trade.
Timing considerations are twofold, an expected
market figure like CPI, retail sales or a
federal reserve decision can consolidate a
movement that's already underway. Timing your
move means knowing what's expected and taking
into account all considerations before trading.
Technical analysis can help you identify when
and at what price a move may occur. We will
look at technical analysis in more detail
later.
If in doubt, stay out: If you're unsure
about a trade and find you're hesitating,
stay on the sidelines.
Trade logical transaction sizes: Margin
trading allows the fx trader a very large
amount of leverage, trading at full margin
capacity (in ACM's case 1% or 0.5%) can make
for some very large profits or losses on an
account. Scaling your trades so that you may
re-enter the market or make transactions on
other currencies is generally wiser. In short,
don't trade amounts that can potentially wipe
you out and don't put all your eggs in one
basket. ACM offers the same rates regardless
of transaction sizes so a customer has nothing
to lose by starting small.
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page 4/6 |
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Trading with a
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Gauge market sentiment: Market sentiment
is what most of the market is perceived to
be feeling about the market and therefore
what it is doing or will do. This is basically
about trend. You may have heard the term 'the
trend is your friend', this basically means
that if you're in the right direction with
a strong trend you will make successful trades.
This of course is very simplistic, a trend
is capable of reversal at any time. Technical
and fundamental data can indicate however
if the trend has begun long ago and if it
is strong or weak.
Market expectation: Market expection
relates to what most people are expecting
as far as upcoming news is concerned. If people
are expecting an interest rate to rise and
it does, then there usually will not be much
of a movement because the information will
already have been 'discounted' by the market,
alternatively if the adverse happens, markets
will usually react violently.
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