When approached as a business, forex trading can be profitable and rewarding. Find out what you need to do to avoid big losses as a beginner. Reasons Why Forex Traders Lose Money · Befriending the Market · Low Startup Capital · Failure To Manage Risk · Giving in to Greed · Indecisive Trading · Trying To. To avoid a big loss, traders should do their trading actions accurately. However, being a trader, if you want to do your task properly, you have. FOREX INDICATORS BOOKS Pass control to Localization Feature Rendezvous services in Bookmark them communicate their from GarageBand, or rest of the hosting provider is. For configuring SNMP, Scalar Operand. Adoption of thepm.
Otherwise, you are just setting yourself up for potential disaster. Risk management is key to survival as a forex trader, as it is in life. You can be a very skilled trader and still be wiped out by poor risk management. Your number-one job is not to make a profit but rather to protect what you have. As your capital gets depleted, your ability to make a profit is lost.
To counteract this threat and implement good risk management, place stop-loss orders, and move them once you have a reasonable profit. Use lot sizes that are reasonable, compared to your account capital. Most of all, if a trade no longer makes sense, get out of it. Some traders feel that they need to squeeze every last pip out of a move in the market. There is money to be made in the forex markets every day. Trying to grab every last pip before a currency pair turns can cause you to hold positions too long and set you up to lose the profitable trade that you are pursuing.
The solution seems obvious: don't be greedy. It's fine to shoot for a reasonable profit, but there are plenty of pips to go around. Currencies continue to move every day, so there is no need to get that last pip; the next opportunity is right around the corner. Sometimes you might find yourself suffering from trading remorse, which happens when a trade that you open isn't immediately profitable, and you start saying to yourself that you picked the wrong direction.
Then you close your trade and reverse it, only to see the market go back in the initial direction that you chose. In that case, you need to pick a direction and stick with it. All of that switching back and forth will just make you continually lose little bits of your account at a time until your investing capital is depleted.
Many new traders try to pick turning points in currency pairs. They will place a trade on a pair, and as it keeps going in the wrong direction, they will continue to add to their position, sure that it is about to turn around soon. If you trade that way, you end up with much more exposure than you planned for, along with a terribly negative trade. It's best to trade with the trend.
It's not worth the bragging rights to know that you picked one bottom correctly out of 10 attempts. If you think the trend is going to change, and you want to take a trade in the new possible direction, wait for a confirmation on the trend change.
If you want to pick up a position at the bottom, pick up the bottom in an uptrend, not in a downtrend. If you want to open a position at the top, pick a top when the market is making a corrective move higher, not an uptrend that is part of a larger downtrend. Some trades just don't work out.
It is human nature to want to be right, but sometimes you just aren't. As a trader, you just have to accept that you're wrong sometimes and move on, instead of clinging to the idea of being right and ending up with a zero-balance trading account. It is a difficult thing to do, but sometimes you just have to admit that you made a mistake.
Either you entered the trade for the wrong reasons, or it just didn't work out the way you had planned. Either way, the best thing to do is to admit the mistake, dump the trade, and move on to the next opportunity. There are many so-called forex trading systems for sale on the internet. Some traders are out there looking for the ever-elusive percent accurate forex trading system. They keep buying systems and trying them until they finally give up, deciding that there is no way to win.
As a new trader, you must accept that there is no such thing as a free lunch. Winning at forex trading takes work, just like anything else. You can find success by building your method, strategy, and system instead of buying worthless systems on the internet from less-than-reputable marketers. Forex trading is the trading of currencies on the foreign exchange market.
The forex market is open 24 hours per day, Monday through Friday. Many traders enter the market without making any plan. For this reason, they fail to deal with the difficulties and thus fail to earn from the market. You may win some trades out of luck without using a plan. But, you should remember, luck will not always favor you. So, if you want to make consistent profits, you have to make a good plan and use it properly. Newcomers need to set the right goal for making profits.
The right goal means you have to set an accomplishable goal. Many traders set the impractical goal. For this reason, they can't reach their target. Remember, it is better to start trading with a small account and learn the basics. And do not aim for shortcut method as it will never work. So, you have to set a long-term goal that will aid you to do better in the market. On the other hand, if you set an impractical goal, you might fail and become depressed.
Some traders also try to self-harm because of depression. Many traders start trading with low capital. Because of having low capital, traders can't invest money properly. For this, they try to take the leverage for trading more. But, as a trader, you have to understand, leverage is not only giving the chance to make profits but also increases the risk.
That's why traders need to take the leverage by thinking properly. However, the best way is to trade with high capital so that they can invest money without feeling any tension. As the Forex market is very flexible, so if you can act smartly, you might make huge profits. But, to earn money, you have to manage profitable deals. For this, you have to maintain discipline. If you fail to keep the discipline, you can't handle the situation.
Remember, to make the right moves, you have to maintain your discipline. Otherwise, you will start to make mistakes and fail to achieve your goal. Keep in mind, your discipline will help you to ensure your success in the market. By using these techniques, you might reduce your losses in the market. However it is true, you can't avoid the loss for good.
But, you will get the chance to regain your money.
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They might also give up too much profit compared to the expected daily range. Because of this, swing traders should either create a trailing stop, which can be monitored by reviewing the charts a couple of times a day, or trading in a group of traders who constantly check the positions. Also, there is the question of which stop-loss strategy traders use.
A Fibonacci strategy uses Fib levels as a take profit level. A break-out strategy, however, could be suitable for a trailing stop. Then again, for a range strategy, the take profit level could be better suited. A reversal trade might want to incorporate a trailing stop after a certain profit has been reached. In contrast, a trending trade setup could seriously benefit from a trail stop loss as the price extends in one direction. The example of implementing trail stop orders to increase efficiency on your stop-loss brings us to another critical decision with stop losses: where to set your stop loss.
There are two primary problems to consider when setting your stop loss:. Read more about forex chart patterns here. Here are some concrete tools which you can use for your trading to actually place your stop. I am sure there are more examples but here are a few of them:. Stop-loss trading is one of the most important tools in trading stock, Forex, commodities, and cryptocurrencies.
If you want to have longevity in the markets, then you absolutely need to use a stop-loss trading strategy. Throughout this guide to stop loss trading you will learn how to deal with the fear of losing money in trading by using a stop-loss order. If this is your first time on our website, our team at Trading Strategy Guides welcomes you.
Make sure you hit the subscribe button, so you get your Free Trading Strategy every week directly into your email box. It also triggers your receptors in the back of your mind and it throws you out of balance. Stop-loss orders make it easy to avoid the risks of trading psychology and capture your gains.
When you trade with a stop-loss order it will bring more composure, rationality, and peace of mind. A stop-loss order is a risk management tool designed to close an open position at a predetermined stop-loss price. Regardless of the market traded, the stop-loss price can be determined by employing technical analysis tools such as:. Whenever you buy an instrument, your stop-loss is always placed below the current market price.
Inversely, whenever you sell an instrument, your stop-loss is always placed above the current market price. Stop Loss trading is like an exit plan. Once a stop-loss order is exercised, you will no longer own the asset you are trading. Using stop-loss orders enables you to control your exact level of exposure to risk. For example, if you know that your SL is pips or 20 ticks below your entry price, you will not want to risk as much capital as if your stop-loss is only 20 pips or 5 ticks below your entry.
The con of using stop losses is when the market suddenly gaps below the stop-loss price. When this happens, you may end up trading below the initial stop-loss order. To avoid gaps, you can use a stop-limit order which guarantees your order to be filled at the stop-limit price. Using technical analysis, you reached the conclusion that an ideal place to hide your stop loss is below the day moving average at You can calculate your stop loss by simply subtracting your stop loss trigger price from your entry price.
A stop loss is important because it will protect you from losing more money on your trades. By using a protective stop loss you know in advance how much money you could lose on each trade. This can be extremely helpful in implementing sound risk management strategies. Additionally, a stop-loss order can help you hold on to your trade longer and grants you more time to profit on a trade.
There is no such thing as the Holy Grail in Forex trading stock trading, commodity trading, options trading, or cryptocurrency trading. For example, the grid trading strategy is a complex system that requires some trading experience. Is your stop always getting hit only for you to see price action reverse and go back in the direction of your original trade?
When this is the case, you may want to consider adjusting your current trading strategy. A lot of the times traders lament about their stop loss getting hit and then price immediately reverse to go back in their favor. Try reversing the conventional thinking and place your entry where your stop loss originally would have been. Flipping your entry with your stop-loss order is one of our secret stop-loss trading strategies.
Flipping that psychology and putting your entry where your stop loss originally would have been will give you a much higher success rate in your trades. By allowing your stop loss to stay unchanged, you can adhere to your trading strategy and see what happens next. If you want to find amazing trading opportunities that most traders overlook, learn our options trading stop-loss strategy. This article will cover everything you need to know about call option vs put option: Introduction to Options Trading.
For example, in fast-moving markets, you can encounter slippage. The good thing is that you can buy out-of-the-money options OTM , which typically are less expensive than in-the-money options ITM. Secondly, between options vs stop loss, options trading allows the trader to better navigate ranging markets. In consolidation, you can be easily hit due to a whipsaw or stop hunting activity.
If you place the stop at the wrong place it becomes an easy target. By having options set in place instead of a stop-loss order, you can reduce the negative effect that comes with range trading. If you fear that your broker hunts your stop loss, this will prevent that from ever happening again.
You can avoid being stopped out of your trades too often by simply following the stop loss trading strategy tips highlighted throughout this guide. These tips can be applied in every market stock market, forex, cryptocurrencies, commodities, etc.
The more you practice as a trader, the easier it will be to effectively implement stop-loss orders and other trading mechanisms. To succeed with options trading, look at trading the same way as professional traders. Through this stop loss technique, you can better control the risk and protect from volatile markets, ranging markets and fundamental shifts in the supply and demand equation.
Forex traders can use stop losses to mitigate the risk caused by high leverage. However, to minimize the risk associated with lost capital, traders must apply stop-loss strategies in a savvy manner to their trades. Doing so requires a thorough analysis of factors such as Fibonacci retracement levels and candlestick highs and lows and others.
Trailing stops represent a valuable strategy to forex traders looking to maximize their stop loss efficacy. However, there are other strategies, such as take profit, that can accomplish the same end. The most successful forex traders understand how to use these tools when appropriate. Trading Strategy Guides is committed to giving traders the tools they need to create sustained growth and value.
Use the following list of articles for further reference on stops and how to use them to your advantage. You can find the second part of the article here which will give you practical examples where you can actually place stop losses, using the tools mentioned above. We also have training for trading forex without stop losses in our best hedging strategy article. Please leave a comment below if you have any questions The ultimate Stop Loss Guide.
We specialize in teaching traders of all skill levels how to trade stocks, options, forex, cryptocurrencies, commodities, and more. Our mission is to address the lack of good information for market traders and to simplify trading education by giving readers a detailed plan with step-by-step rules to follow. Hi Marketman, thank you, I am glad to read that you enjoyed the article.
Hope that will help as well. In any case glad you liked this article and thanks again. Good trading! Thank you very much. That is indeed a fantastic reminder on what I must do. Thank you again and looking forward to your next article.
Hi Farah, I am very glad to read that the article is interesting and helpful. And I would like to admit - our unconsciousness, probably, is stronger than conscious part when we are "gambling", so, to honestly analyze our own performance as a trader is a first thing to do In general, tops and bottoms are indeed good areas to place a stop loss, although there are options a trader might want to consider when choosing the time frame.
More on that in this Friday's article. The topic seems to be very popular so I will write a part II. Thanks again and good trading! Hi Chris, great article. You mentioned this, but maybe it is worth emphasising clearly - the stoploss should determine your position size. If it doesn't then you don't know how much money you are risking which is scary!
This means every trade will be a different size. Trading a fixed size every time may cause huge losses on a single trade. From your entry to your initial stoploss is your risk in pips. Your position size determines the dollar value of those pips, and of your risk. Nathan has posted an EA previously that automatically makes your position size correct for your risk when you enter a trade.
Yes will indeed emphasis this in the 2nd part, which will be released on Friday the 5th of April. Thanks again and Good Trading! Do you want consistent cashflow right now? Our trading coach just doubled an account with this crashing market strategy!
Please log in again. The login page will open in a new tab. After logging in you can close it and return to this page. Table of Contents hide. Stop Loss Guide. Author at Trading Strategy Guides Website. If the stop order is too far away from the current price, the trader could be vulnerable to large losses if the market reverses against his expectations.
The position of the stop loss can depend on whether you are a discretionary trader or a system trader. In discretionary trading, it is up to the trader to decide which trades to make each time. The trader places a stop order at a price at which he does not expect the market to trade according to his forecast. In doing so, he can take into account various factors that may vary from trade to trade. In system trading, trading decisions are made by the trading system.
A trader either opens positions manually following the trading system signals, or the trading process is automatic. Read more: What is the difference between pips and ticks. Read more: Volatility: types, how to track and how to use. The static stop retains its place once set. The trailing stop adjusts as the trade moves in the trader's favour to further reduce the risk of an error in the trade. No changes will be made to your order until a profit on your open position exceeds 50 pips.
When you move your stop loss to the entry level as in this case , it becomes a break-even stop order: if price reverses and the trader's stop order triggers, he will not get any money, but he will also lose nothing.
Every time the price moves 50 pips from the current stop loss in favor of the trader, the server sends an order to change the current stop loss level to within 50 pips of the current price. In other words, Trailing Stop automatically moves your Stop Loss order following the price.
Trailing Stops are mainly used by traders who enjoy trading trends but do not have the ability to follow the price movement all the time. Trailing Stops in MT4. To set an automatic trailing stop in MT4, right-click the order in your terminal window, select "Trailing Stop" and select the desired trailing stop size.
Please note that the minimum level for the automatic trailing stop is 15 pips. It is important that the trailing stop loss is set on the client's trading platform and not on the server. If the trader closes the terminal or loses the internet connection, the trailing stop will be deactivated, but the stop loss set by the trailing stop will remain active.
To deactivate the trailing stop, select "None" in the "Trailing Stop" sub-menu. If you want to disable trailing stops for all open positions and pending orders, select "Clear All" from the same menu. Read more: What is a Trailing stop and how to use it? Once the Stop Loss is set, do not increase it. Only move your stops in the direction of the trade rolling stops. You have already made your decision. If the market went against you and your stop was hit, analyse your trade and see what you did wrong.
Don't get too upset about the failure. What you need is to succeed in the next trade, so move on to the next opportunity. Post Forecast. Algorithm for choosing Stop Loss types There are many types of stop losses. Here's the algorithm for choosing what works for you: Step 1: Discretionary or system stop? Read more: What is the difference between pips and ticks Step 2: Determine the size of stop loss. Stop Loss The size of this stop loss depends on the trader's account size. That's pips per 0. As you can see, this approach is not a logical answer to what is actually happening on the price chart.
Stop on the chart The size of this stop depends on the technical analysis of the price action carried out by the trader. This is usually where a support leve l is determined and a stop loss is placed below it for a long position. Technically oriented traders like to combine these exit points with stop rules for charting stop orders. Volatility Stop The size of this stop depends on the amount of volatility in the market.
If the volatility is high and the price fluctuates widely, a trader will need a larger stop to avoid the stop. In the case of lower volatility, a trader puts a smaller stop. Volatility can be measured using indicators such as Bollinger Bands. Time Stops Time stops are based on a predetermined trade time. Imagine you are a day trader, trading only during a certain session and closing your positions before it ends.
You can set a time limit, after which your position will be closed. You can do this with Expert Advisors EA or with trading robots. Margin Stops There is also one aggressive approach to forex trading that we do not recommend. Some traders take advantage of the fact that forex dealers can liquidate their clients' positions almost as soon as they activate the margin call.
A trader may divide his capital into several equal portions and deposit only one portion into his account. He then chooses the size of the position and the potential margin call acts as a stop loss. Be forewarned that these trades are only appropriate with small amounts of money.
Please note that this type of trading is intended only for a maximum of one open position at a time. Read more: Volatility: types, how to track and how to use Step 3: Static or trailing stop? Step 4: Waiting for trading results Once the Stop Loss is set, do not increase it. Another articles What is Forex and how does it operate. The interbank Forex currency market has been operating for more than 40 years, but the controversy surrounding it has not subsided yet.
There is no doubt about the existence of Forex — it is traded by governments of countries, major international banks, corporations, brokerage and dealer companies, etc. Daily turnover reaches several trillion dollars and is constantly growing. What is Forex, how did it appear and how does it function? There was an urgent need to create a new type of currency system that meets the requirements of the time. The main financial institution of the world economy has become the IMF International Monetary Fund , created to control the financial order in the world.
The value of the US dollar, as the most economically developed state, was pegged to gold, and the currencies of other countries were pegged to the US currency. Thus, the dollar became the world's reserve currency or world money. However, the countries developed in different ways, and it soon became clear that the adopted system did not meet the realities.
In , it was abolished and a market-based currency valuation system appeared. The dollar has lost its status as the only world currency. Then the Forex currency market appeared on the scene, where interested financial institutions sold and bought the necessary currency.
Banks and some other financial institutions made money on Forex by changing exchange rates. Currency prices were set exclusively on market principles. Of course, modern Forex is very different from its progenitor. Together with the Internet and computer technologies, this market has become available not only to the largest financial agents, but also to individuals who have the opportunity to work without leaving their home computer.
Read more: Forex broker: how to choose a good brokerHow Forex differs from commodity tradingThe Forex market is based on currency purchase and sale operations of large financial structures in various countries. Courses are constantly changing, reacting sensitively to changing conditions of various kinds.
It is on these fluctuations that speculative trading of Forex agents is based, earning on the resale of currency. The classic speculative principle of conventional commodity trading is similar to Forex trading. Buying a product at one price, the merchant resells it with a margin or waits for some time, during which, as it seems to him, the cost of the product will increase. You can trade at your own expense or for money taken on credit.
Profit as a result of trading consists of the difference in sales income, taking into account margins and all types of costs, including the main one — purchase costs. Trading at the initial stages of the market formation was highly profitable. Currently, it is almost impossible to make such a profit due to high competition and oversaturation of the market.
Trade in goods is accompanied by expenses related to transportation, storage, rent, staff salaries and taxes. In addition, there is always a risk that the product will not be in demand. You can make trading profitable by taking out a loan or expanding the range or quantity of goods. It is also possible to reduce the price of goods so much that the turnover of goods will sharply accelerate. In any case, the profitability of ordinary commodity trading has fallen. An alternative option is Forex trading, devoid of the disadvantages of commodity trading.
The advantages of Forex are obvious:Money always remains money — they do not go out of fashion and they do not expire. There is no need for retail premises, offices, employees. Only you will know about your income when trading on Forex. You can plan your day without being tied to a work schedule. You conduct all trading operations directly from home via the Internet. Read more: Bulls and bears, as well as other animals on the stock exchangeForex tradingSo, Forex trades world currencies, in other words, you can buy one currency by paying with another.
The exchange rate is the purchase or sale price of a currency. Trading is conducted in currency pairs. The composition of a currency pair means which currency you can buy or sell. In principle, Forex transactions are similar to bank currency exchange. The difference is that the trader chooses the most favorable rate at a certain point in time, and sells or buys the desired currency, making a profit from it.
Profit can be obtained both by raising and lowering the exchange rate. The speculative principle remains unchanged: the cheaper you bought a currency and the more expensive you sold it, the greater your profit will be. What you need to startThere are no restrictions in Forex trading. However, individuals can only make transactions through intermediary or brokerage companies.
Such a company, on your behalf and on your behalf, will carry out transactions on Forex and will provide you with a special trading program platform for electronic currency trading. Forex makes it possible to make transactions for amounts significantly exceeding the trader's personal funds. Money in the form of an interest-free loan is provided to the trading broker.
Lending volumes are characterized by the term "leverage", meaning the ratio of the trader's own funds to the maximum possible borrowed amount. It is clear that greater leverage implies the possibility of transactions with large amounts. Before starting trading in a brokerage company, you should open a trading account and deposit your own money into it.
This operation takes only a couple of minutes. Read more: How to read Japanese candles correctly? Instructions and examplesForex transactionTransactions take place over the Internet through a specially developed computer program called a trading platform.
This program is presented by a broker. Data is sent to the platform in real time. You will see quotes of many currency pairs on a chart showing price changes. The visibility of the chart allows you to determine the optimal moments for buying or selling currencies. How are decisions made on the sale and purchase of currency? Such decisions are based on the analysis of the currency market. Of the two types of analysis, the trader chooses the one that seems to him the most reliable.
If it is more convenient for a trader to compare economic, political and other facts, then he uses fundamental analysis. Many traders see mathematical and computer patterns in Forex trading principles. Such traders are guided by technical analysis. The trading platform offered by the trader includes all the data for both types of analysis. The information in the platform is constantly updated. The economic news coming here allows us to conduct fundamental analysis, and special technical tools determine the possible movement of quotations based on the statistical data of earlier trades.
It remains for the trader to monitor the signals of the technical indication that serves as the basis for making transactions. Earning on ForexSpeculative profit on Forex appears as a result of buying a currency at the minimum price and selling at the maximum. For example, a trader, assuming that after a while the value of the euro will increase, buys euros. The instruction to the broker to buy the currency is given by pressing the Buy button.
Accordingly, having decided to sell the euro due to the expected fall in the exchange rate, you need to press the Sell button. The instruction will be executed immediately, and all transaction data will be clearly reflected on the trading platform below the price chart. This data will include current currency quotes and the amount earned on the transaction.
The transaction is closed at the moment when the trader decides that the operations have reached maximum profitability. At this moment, by pressing the "Close" button, he completes the transaction, thereby fixing the profit on it. The final result of the transaction is reflected on the trading platform, and the entire amount of profit goes to the merchant's deposit. Read more: How to read and use the Economic Calendar in tradingThe article contains only the basic concepts and principles of Forex trading, which, of course, are not enough for independent successful work.
More detailed information about trading and various trading strategies can be obtained from training programs and detailed analysis of real transactions. You can risk your own money only when the trader is firmly confident in the correctness of the decisions made in various situations. You can make sure of your own readiness by using training trading programs that allow you to simulate a process absolutely similar to the real one without the risk of losing money.
May 22, IndexaCo. Who are traders and why do they earn so much. Acquaintance with the financial market begins with the identification of participants and the exact clarification of their functions. The market assumes the presence of the main actors on it — traders. That is, a trader is a person who directly trades, the main market participant. This term can be applied to all types of markets. If we talk specifically about the financial market, then the trader here operates with assets, earning on their sale and purchase.
Categories of tradersThe entire trading corps can be divided into two groups — professional traders and private traders amateurs. Professionals are part of the staff of various funds, banks and other financial organizations. Accordingly, in the market they act on behalf of these organizations, making transactions with their assets. Simply put, these are certified financiers who go to auctions as if for work. The category of professionals also includes traders who work exclusively for themselves and operate with their own funds.
Since they have no other profession, they can also be classified as professionals. The most numerous category is private amateur traders. Trading is not their main profession, and in the financial market they are engaged exclusively in additional earnings. Such traders do not have a specialized education, and they have to study independently. The financial market is attractive for the possibility of good earnings.
That is why the number of amateurs exploring the market is constantly growing. The contingent of amateur traders is very mobile: someone, having failed and disappointed, leaves the market, counting on easy earnings also do not stay for a long time, but new, active and ambitious traders are constantly arriving.
Trading in the financial marketIn order to make a deal on the financial market, a trader needs to give an order to a broker about the desire to sell or buy an asset. Of course, the result of such operations should be profit. In order for trading to be profitable, you need to deeply know the market processes and patterns of movement of the value of assets.
Not everyone can boast of fundamental knowledge, so success does not accompany everyone. But perseverance and hard work are usually rewarded. Forex is not easy for a beginner, but the financial market has never been easy. If a trader from our days could be transferred to the stock exchange a century ago, he would also hardly be able to work right away.
Firstly, he would be deprived of electronic devices and the Internet, from which you can draw the necessary information for trading, while maintaining contact with the broker. Secondly, he would be very limited in the possibilities of technical analysis.
The theory of technical analysis itself did not exist at that time, and traders used separate provisions of Charles Dow, which were later systematized into a single theory. Today, the trader has all the tools to make the right decision. Prices are presented in graphic images of more than a dozen types, clearly demonstrating current and future fluctuations.
The latest developments in the markets are published by many media outlets, including such reputable ones as Bloomberg or Reuters. Current currency quotes are transmitted online. The revolution in trading in financial markets has taken place in just a hundred years. Previously, a small circle of people had the opportunity to become a trader, but today the market is open to almost everyone.
Read more: Five stages of becoming a traderFinancial market trading instrumentsFinancial market traders use technical and fundamental types of forecasting in their work. The technical one is presented graphically, and the fundamental one is based on economic data. By tracking the information on the terminal, based on the learned patterns, the trader predicts future quotes.
The terminal is the most important tool of a trader, which is a platform for communication with a broker and an analytical tool. Modern terminals provide information on prices, various indicators and graphical tools. Modern trading is also impossible without automated trading systems, which are called robots or Expert Advisors in the professional slang of traders.
Such systems trade autonomously according to the initial parameters. Such a parameter, for example, can be the volume of transactions. There is a lot of talk about the feasibility of using robots, but, in any case, no machine can be more effective than a competent trader. Another serious tool can be considered an economic calendar with announcements of economic events: speeches by economists and heads of banks, politicians, publications on economic topics, etc.
So, a modern trader trades on the Internet using Internet trading platforms. Before the appearance of platforms on the Forex market, only large financial organizations participated in trading — banks, funds, etc. With the advent of the Internet, exchange trading has become accessible to ordinary users — knowledge and only a few hundred dollars are required.
Trading strategyTraders have different views on the market situation — it is they who determine the trading strategy. One of the important characteristics of the strategy is the duration of transactions. According to this characteristic , several types of investors can be distinguished:long-term, making long-term transactions for several years. The analysis is based on global characteristics and indicators;short-term, making several trading transactions during the year;positional, working on a long-term strategy.
Transactions last for several days with profit taking during periods of reduced activity holidays, vacations, etc. As a rule, such traders have a small trading capital, and trading positions are realized quickly;a scalper who makes trades in a very short period from a few seconds to 10 minutes. With a large number of operations, profitability is not ensured for every transaction. Traders working on this strategy are forced to constantly stay at the monitor and monitor suitable transactions.
Read more: The main components of a Trading StrategyWhat does a currency player doFirstly, he trades various currencies. The principle of successful trading is simple — it is cheaper to buy and more expensive to sell. The trader operates with currency pairs consisting of two currencies.
When buying such a pair, a trader buys euros for US dollars. The main advantage of the Forex market for traders is its liquidity. There is a constant supply and demand in Forex, and trading is conducted without interruptions five days a week. The choice of currency pairs for trading is wide: you can trade "majors" the so-called pairs that are traded through the dollar or "crosses" without using the dollar. A trader should be ready to trade not only theoretically. No less important is the right psychological attitude, which is often ignored by beginners.
Having familiarized themselves with a couple of strategies, they rush headlong into trading, risking losing all their money and forgetting about the two main enemies of the trader — fear and greed. Greed often kills capital, and fear does not allow it to increase.
Many newcomers seek to get rich instantly by opening deals and not thinking about money management. Most often, such traders simply lose all their money. Mistakes appear, and money goes away. Risk management is very important for a trader. When opening a trade, a trader must accurately imagine the possible volume of not only profits, but also losses.
Minimizing risks is the main task that a trader should be able to solve. Read more: How to become a trader from scratchFrom amateurs to professionalsA successful amateur of stock trading can become a professional. Professional trading has clear advantages: the trader now works only for himself, he does not need to go to work in the office, he plans his own working hours. But the main thing now is that the trader is the owner of his own capital, and only his well—being depends on his work.
A professional stock market player lives by certain interests - news related to stock markets, currencies, economics, stock statistics, commodity prices. Plunging into this atmosphere, after a while the trader begins to understand this, makes decisions based on independent analysis. For a professional, there is no limit to the accumulation of information and knowledge. He is constantly improving — only this is the key to his success in the profession.
Who are ECN Forex brokers. Their advantages and disadvantages. ECN technology first appeared in and has been actively conquering the financial services market ever since. But let's figure out how this transaction execution system differs from others, what advantages and disadvantages it has, and whether all traders really need to choose ECN accounts for Forex trading.
What is the difference between an ECN broker? First of all, it is worth clarifying that ECN is not some special category of brokerage companies. And in order to understand how this system differs from others, we suggest considering the most common systems on the market.
DD brokersThere are two sides to trading in any market: the seller and the buyer. A broker, as a rule, is an intermediary, a way to enter the market and make transactions with the seller directly. If we talk about Forex trading, the broker must provide direct access to liquidity providers. But this is not about dealing centers. DD Dealing Desk brokers are counterparties that set their own quotes, above or below the market, and also offer a fixed spread.
Such brokers are also called market makers, that is, companies that "make the market". The advantage of such a broker is the low size of the minimum deposit, the disadvantage is the lack of direct contact with liquidity providers and freezing of orders. This order execution system in translation means "without the participation of a broker", that is, the broker does not interfere in the trading process and cannot influence quotes, the size of spreads and other factors.
The NDD broker provides clients with access to the interbank market, that is, traders trade directly with liquidity providers. The task of an NDD broker is to bring transactions to the market, and the company's earnings are based on the commission that traders pay for placing transactions. STP brokersThis type of broker belongs to the NDD system: the company does not participate in transactions, does not affect the size of quotations and does not set its own rules.
The STP broker trades using a computer system. The system transfers orders to the interbank market, that is, transactions are carried out without the intervention of a broker, and customers receive direct access to liquidity providers. The broker does not interfere in the trading process in the same way, traders get access to market quotes, and transactions are brought to the interbank level.
However, unlike STP, which uses a fully automated program to withdraw transactions, ECN broker cooperates with a network of international banks and other liquidity providers directly, and its trading platform is linked to them. This allows you to ensure the highest possible speed of execution of orders and also guarantees their accuracy.
Read more: The history of the origin of the Forex marketWhat is an ECN accountActually, some brokers offer ECN accounts to clients, which allow them to take advantage of all the advantages of ECN order execution, namely, direct access to liquidity providers and fast execution of transactions. This means that the ECN system will be available only on this account, and on others, a different way of executing transactions is used. Also, beginners should take into account that ECN accounts often have a higher minimum deposit level.
Therefore, brokers who offer an ECN system and at the same time set a low deposit need to be carefully checked. It is enough just to find a company that offers ECN accounts. But not everything is so simple. In order for cooperation with a broker to be reliable and long-term, and work to be comfortable, when choosing a company, you should pay attention to the following criteria:Trading platformThe most common Forex trading terminals are MetaTrader 4 and MetaTrader 5.
However, some brokers create their own platforms that differ in both interface and functionality. Therefore, when choosing an ECN broker, professionals are advised to proceed from personal preferences and take into account whether the necessary instruments are available in their own broker platforms. Novice traders are recommended to choose brokers with MT4 and MT5 platforms. It's not just that their functionality is enough for both beginners and professionals. There are a lot of video and text materials on how to work on these terminals, while brokers' own platforms often remain without "instructions".
InstrumentsTo trade with an ECN broker, it is advisable to choose instruments with sufficiently high volatility. They give traders the opportunity to earn higher earnings, provided that they use the ECN system. Instruments with high volatility include currency pairs Forex , cryptocurrencies, CFDs and commodity futures.
It is not necessary to use all these instruments, but it is desirable that the broker provides them. Only a trader can determine which leverage to choose based on his trading skills. Beginners are recommended to set leverage of , professional traders choose higher leverage, up to In any case, it is worth remembering that leverage multiplies the amount of profit, but the higher it is, the greater the losses will be in case of an unsuccessful transaction.
Minimum transaction volumeIt is impossible to trade micro lots 0. RegulationThis point is relevant regardless of which broker the trader wants to cooperate with: stock, Forex or any other. When choosing a company, you should definitely pay attention to regulations. If a broker is under the supervision of one or more regulatory authorities and has a license to provide financial services, then you can safely cooperate with him.
Regulators ensure that the broker fulfils its obligations to the client, and a license is issued only if the broker meets international or local requirements. Checking the regulation, the trader initially weeds out all the "kitchens" — the companies of scammers. It is worth paying attention to the year of the company's opening and the site: "kitchens" do not bother with the interface, make the site simple and little informative, and they exist for no more than a year.
Therefore, preference should be given to brokers who have been on the market for a long time. Liquidity providersAn important factor that will allow you to distinguish a real ECN broker from a Forex kitchen. When choosing a company for trading, it is necessary to check which liquidity providers it cooperates with. Reliable brokers, as a rule, cooperate with global suppliers. If information about suppliers is not available on the site, and the support service responds with the message "this is confidential information", then most likely this broker has nothing to do with the ECN system.
Read more: What is margin trading: pros, cons and risksSoftwareThe success of trading depends on the quality and speed of the software, or rather, the correct execution of orders. Therefore, a trader, regardless of the type of trading strategy, should pay attention to the operation of the terminal. It is important that the program does not hang, does not crash, and does not give an error or requotes. This is especially important when choosing an ECN broker, because the ECN system is characterized by instant execution of transactions, and software problems only hinder this.
Minimum depositIt's worth starting with the fact that brokers with ECN accounts initially set a higher minimum deposit level. It is a rare case when the price of opening an ECN account is available to all users. The high threshold of the minimum deposit is one of the main reasons why it is not recommended to open such accounts for novice traders: a beginner will easily lose the entire deposit and will be left with nothing since he has no experience in trading. Therefore, if you are a novice trader, think carefully about whether you really need an ECN Forex Broker.
If yes, then choose companies in which the minimum deposit is relatively low, since the risk of losing all capital is quite high. These criteria are basic, both experienced traders and beginners can use such a checklist when choosing an ECN broker. To make it easier for traders to navigate, we have collected ECN brokers in the rating, where the minimum deposit amount and regulatory authorities of each of the companies are indicated.
Professionals should start from individual needs and wishes. When should I open an ECN account? There is no doubt about the popularity of ECN brokers: they are preferred by thousands of traders from all over the world. But let's see if such companies can really be called universal, or if there are cases when it is unprofitable to open an ECN account.
First of all, an ECN broker makes it possible to trade with liquidity providers directly. The trader does not depend on the broker, on quotes within the company or on other nuances. The broker is simply an intermediary. This means that the trader will get access to real market data. And this condition is beneficial to all traders. At the same time, ECN brokers offer a floating spread.
This condition makes trading more difficult and unpredictable because a novice trader will not be able to assess the market situation and understand when it is better to open a deal so that the commission is lower. Also, this condition is not suitable for clients who are actively investing with conservative risks, because it will not be possible to calculate the exact amount of the commission, its size is constantly changing.
Read more: I got a margin call: we explain what it is and how to avoid itDo not forget about the high-speed execution of transactions. This condition seems attractive, but in fact, it is not suitable for all traders. High speed is an important criterion when it comes to scalping. Traders with such a strategy really need to cooperate with ECN brokers, because the profitability of their work depends on the accuracy of order execution.
Novice traders simply will not be able to take advantage of ECN technology. It is necessary to take into account the instruments with which the trader works. When trading cryptocurrencies, currency pairs and other assets with high volatility, the speed of transaction execution matters.
But if a trader chooses to trade instruments with medium or low volatility, then the speed of work does not play such an important role, because the price of an asset simply will not have time to change in one or two seconds. So, if the speed of execution of transactions is important to a trader and he works with highly volatile instruments, then it is definitely worth opening an ECN account. In other cases, it is necessary to build on the trading strategy and the client's requirements for trading conditions.
Is an ECN account suitable for beginners? Novice traders and investors, when choosing the first broker, often pay attention to absolutely all criteria in order to eventually choose the best of the best. This strategy can be understood because most traders want to choose a company for long-term cooperation, but there are criteria that are not so important for beginners.
These include the availability of ECN technology. This system really has a number of advantages over dealing centers, and many novice traders are captivated by it. But it cannot be said that the presence of ECN accounts is a mandatory criterion and when choosing the first company for trading, you should pay attention only to ECN brokers.
An analogy with cars would be appropriate here: to learn how to drive, it is not necessary to buy a Lexus or a sports car. Yes, they will surpass some Opel in terms of characteristics, but their functionality is redundant for a novice driver. To get basic driving skills, it's enough to start with driving an Opel. Exactly the same principle works with ECN accounts: a novice trader can open them, but it is not necessary to do it at the very beginning when there is no experience in trading yet.
After all, a beginner, having gained experience, can always change the type of account or broker. Read more: Who are Market Makers and what are they doing on the market? Advantages of ECN technologyECN brokers appeared not so long ago, in , but over these 20 years, they have become popular both among professional market participants and among those who are just taking the first steps in trading.
We can talk about the advantages of ECN brokers for a long time, but we suggest first highlighting three main advantages:Fast execution of transactions. No requotes. Low spreads. Often these three factors are enough for a trader to pay attention to companies with ECN technology when choosing a broker. However, these are not the only reasons why it is worth choosing ECN brokers to work in the Forex market. It is equally important to understand how the broker earns.
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