This a question or comparison that often crops up when people are deciding what to trade. People usually lean towards one side or the other and their decision is probably influenced by the factors that got them interested in trading initially. Perhaps this was a conversation(s) with friends or family members. Or a documentary, book or or article that they came across about the markets, which piqued their interest. Having made their decision they are unlikely to change direction easily. But as they grow as a trader they may come to take a more holistic approach. For the purposes of this discussion let's assume that the reader is interested in trading but has no immediate preference for either candidate. That being the cases let's look at the credentials of each of them.

Forex

The Forex market is the world's largest financial market by turnover, according to data compiled by the central banks banker the Bank for International Settlements or BIS. More than US $5 trillion worth of Foreign Exchange or Forex is turned over each business day..This is a phenomenal amount of money ! To put this into perspective the daily turnover in Forex is approximately equivalent to 10 times the combined wealth of the world's 10 richest individuals. The weekly figure of US$25 trillion is the equivalent of 1.5 times the annual GDP of the USA. The monthly turnover figure of U$100 trillion is considerably in excess of the total market cap of all the stocks listed on Global Stock Exchanges,which is around US$70 trillion. I think you get the idea. Furthermore the Forex market operates 24 hours a day, 5 days a week, as trading seamlessly moves across Asia, Europe and the Americas. Once inaccessible to retail customers the advent of online trading and direct market access, democratised Forex trading and the introduction of cash settled Contracts For Differences in Forex opened up the market to all investors and traders. As it steered retail trading away from the credit line driven, deliverable trading, conducted between banks and other institutions. Flexible deal sizes and smaller accounts are some of the other attractions that Forex trading offers to retail customers.

Stocks

Though the need for a medium of exchange to facilitate cross border commerce is as old as human civilisation. It is the stock market that can lay claim to being the oldest of the world's organised financial markets. The Dutch East India company established in 1602 was the world's first joint stock company. The immensely successful venture opened up and capitalised on the international trade in spices alongside other exotic commodities and food stuffs. Setting up operations across what is now modern day Indonesia. The idea of raising capital for new ventures, or to expand existing ones caught on. Particular in the United Kingdom as it went through the industrial revolution and then, later on in the USA, as it consolidated into single country, as opposed to a series of separate states and territories. There are stock exchanges right across the developed world today and many in developing economies as well. There are approximately 16 stock exchanges globally where the companies listed on them have a combined a market cap of US$1.00 trillion or greater. More than 43,000 companies are listed on stock exchanges across the globe, according to data from the World Bank. Trying to choose between 43,000 instruments, in which you could trade is a bewildering prospect and so some of kind of selection or filtering process is required.

Stock Indices

One such process in the idea of indexation. Whereby the performance of the largest companies, or those that meet other specific criteria, are pooled together to create a benchmark. That will track the performance of the group as a whole and by extension reflect the “mood “ of the broader market. The innovation behind stock indices came from the financial press. US newspaper publisher the Dow Jones Company created the world's first notable stock index in 1884. This would evolve into the thirty share index that is so familiar to traders today. In the modern world there is an increasingly wide variety of stock indices. Here at Blackwell Global we offer clients access to and the ability to trade in more than 10 of the most important stock indices from across the globe. What's more we offer these indices as Contracts for Differences or CFDs. Which are cash settled and non deliverable and which confer all the other benefits and opportunities associated with trading CFDs on a margin basis. For details about our products please see here and here

Practicalities

As we have already noted people tend to trade what they know, are attracted towards or understand. So for example if in your day job you are involved in the tech or social media industries you may have an affinity with and understanding of technology stocks and the drivers of their share prices. If so, you may like to trade the US 100 stock index CFD which tracks the performance of the top 100 US technology stocks. Conversely you may have lived and worked abroad and seen first hand, the difference that fluctuating currency rates can have on the cost of living and your effective salary. In these circumstances you might well be drawn towards Forex trading.

Other considerations

There are other considerations to take into account when deciding what to trade. Not least of which is when will you be able to trade. If the answer is not until I finish the “9 to 5” then trading the local stock market or stock index is probably not going to work for you. As you will miss the majority, if not all of the trading session on local stock exchanges. Of course you could trade US stock indices from after 5 pm until the close of business in New York. Or get up at a fiendishly early time in morning, to trade Asian stock indices before work. But that is probably something you want to be doing long term on top of a full time job. The 24 hour a day nature of the Forex market offers more flexibility here and rather than having to focus on hundreds of individual stocks and their performance, you can trade the half dozen or so FX majors. Or just two or three of the most active pairs, such as Euro Dollar, Dollar Yen or Cable, as Sterling Dollar is known. When these are combined with commodity centric currencies such as the Australian Dollar you get a fairly comprehensive global exposure.

Both sides of the coin

Stock Indices on the other hand allow for more targeted approach to trading, and to be able benefit from the opposite side of a trade. For example, the fall in the value of Sterling against the US Dollar, in the wake of Brexit referendum. Was ultimately beneficial for the value of the UK 100 stock index. Which rose sharply in the weeks that followed the vote. This was because its constituent stocks are mostly exporters and the fall in the value of the Pound Sterling made their products cheaper to foreign buyers. If you spotted that opportunity you could have sold the GBP USD Forex pair and bought the UK 100 stock index. Of course you would still have had to have to get the timing of the trades right. But if you did, you would have benefitted from moves on both sides.

Open minded

I think that last example serves to show that you should not be too dogmatic about the instruments you trade and that you should try to adopt, or be open minded about, a holistic approach to trading. Because if you don’t have that the you may be missing out on a significant percentage of trading opportunities that present themselves . The good news is that Blackwell Trader MT4 is a “one stop shop” for trading Currencies, CFDs on Stock Indices, Oil and Precious Metals. The platform is offered free of charge and comes in desktop and mobile variants. Its packed with high quality charting tools and indicators and a single login works across all of the qualifying devices. Why not take a closer look today ?

read more

Back to Previous Page >>

This question should probably read which Forex trades should I make today? Because one the principal attractions of Forex and CFD trading is the fact that they offer traders the ability to trade long (buy) or short (sell) with equal ease. Allowing them to take advantage of trading opportunities, in both directions, as and when they present themselves. But, however we word the question, as with all things related to the Financial Markets, there is not one hard and fast answer. Not least because each day in the markets presents its own challenges and opportunities, whilst each trader's mindset, circumstances and trading strategy will also vary.

Momentum

One approach that we could adopt might be to let the market tell you what to trade. What this effectively means is to let momentum (price action) guide you. For our purposes here let's assume you are based in Europe or trade the European session. Remember that Forex trading takes place within a 24 hour a day, 5 day a week market. But within each trading day there are said to be three distinct sessions. These are the Asian, European and US sessions. As the business day in one region moves into the afternoon and towards its close, so the next region opens for business. In this way the markets overlap to form a continuous trading and liquidity infrastructure. The European, or London session (for that's what it really is) straddles the later part of the Asian session and the opening of the American markets. Given the Global Macro nature of FX trading (Forex markets are often affected and driven by data and news flow that is “ top down” or Macro and Global in nature, rather than localised or “Micro” or bottom up) Then the price action trends or momentum, that have shown themselves in the Asian session, may continue into London trading. And because more than half of each days global Forex volume can be traded in London, those moves may even accelerate during this session. For example research from the Bank for International Settlements (or BIS) shows that a large proportion of Yen trading and by extension therefore Dollar Yen trading, can take place outside of Japan and the Asian session. So price changes in Dollar Yen, that create an upward or downward trend, during the Asian session, could gain additional momentum in London trading.

Contra Views

Looking for, identifying and joining these trends in the Yen, or other Asian pairs and crosses, is one way to answer the question posed at the top of the page. Of course we can't just assume that what started in Asia, or indeed any other session, will automatically continue into subsequent sessions. Indeed some traders will take the view that that these type of trends may in fact lose momentum, or if you prefer run out steam. As the trading day progresses and they move farther away from their home markets. These traders contrarian strategy would be to oppose the trend or more specifically to look for confirmation that the trends momentum is fading and then oppose it.

Lines in the Sand

Another approach to picking out what to trade on any given day might be to look for prices that are approaching “ lines in the sand”. For example horizontal support and resistance, or indeed session or period highs & lows. A break of, or failure at one of these key price levels could be the just the kind of call to action that traders are looking for. As they can inform their trading and give them a price point or levels to base a fresh position around. For example, a retest to an area of horizontal resistance, that was in play for several weeks earlier in year. (Particularly if it remained intact during that period) presents a really interesting opportunity. If the current price tests to this resistance, but fails to make further headway. Then logic suggests that this testing and rejection could signal a selling opportunity. Whilst if the price moves above the historic resistance or high, sustains that move (and in an ideal world prints higher still) then we have the makings of potential breakout to the upside.

Other Measures

Forex traders are famous for their use of indicators, which they usually deploy in conjunction with price charts. There are quite literally hundreds of these indicators but they largely all serve the same purpose. Which is to highlight the points where price action could change direction or under certain specific circumstances over or under shoot. One of the most popular indicators, particularly amongst those that are relatively new to trading and or technical analysis, is RSI or the Relative Strength Index. This indicator compares the characteristics of current price action to those of historic price action. In doing so the indicator endeavours to show traders when a price is exhibiting overbought or oversold behaviour, from which it could well correct. To do this the indicator sets upper overbought) and lower (oversold) boundaries, within the maximum and minimum indicator values of 0 &100%. These boundaries are set at readings of 70% and 30% respectively and the indicator plots a line between these values. That line represents the current price in ratio to the historic price period. Usually a rolling calculation of 14 prior periods, be they days, hours or minutes. Traders might choose to open a trade as the RSI indicator line approaches the respective overbought (70) or oversold (30) boundary. Particularly if the move to the RSI boundary coincides with a test, by the underlying price, of support or resistance levels or of period highs and lows. Note though that indicator line can move through the upper or lower boundaries without the underlying price correcting and that RSI readings vary depending upon the duration of the periods being measured.To the extent that a 1 minute RSI reading may suggest a price is oversold whilst the daily measure could indicate a price remains overbought. Which signal you choose to follow will depend on your trading style and time horizons.

Data driven

Of course you may prefer not to use Technical Analysis at all to generate or identify trade ideas. But prefer to rely on Fundamental Analysis instead, as many traders choose to do.The good news is that if you do adopt this approach there will be plenty of potential trading opportunities for you. Remember that we noted above that Forex is driven by Global Macro data. That is big picture, top down news and information. Much of this Macro information comes in the form of economic data releases that track the performance of key metrics within an economy or groups of economies. Many of these data points are common to both the developed and developing economies and are calculated using the same methodologies. Which means that direct comparisons can be made between the data for various currencies / countries. What is more, this data, is for the most part, released in an orderly fashion at pre-announced dates and times.That information is collected and displayed in an economic calendar, which Blackwell Global clients can access for free here. The data releases are also classified in terms of their expected market impact. From high to low and the calendar can filtered by this metric, as well as by individual currencies. So for example if you are only interested in upcoming “high impact events”, in three or four FX majors. You can set the filters for this and exclude all other events from the calendar view. Previous data points and where available, a consensus forecast for the upcoming release are also displayed. Armed with this data users can literally trade the calendar. Though of course a correct interpretation of what the data release really means for price action is essential. It’s important to note as well that liquidity may be reduced and volatility heightened around major news events. Such as Non Farm Payrolls (US unemployment data) and key central bank meetings, as many market participants move to the sidelines for a few minutes before and after the data release. Whether you utilise Technical Analysis and indicators or follow data driven Fundamental approach to trading one of the best ways to refine your strategy, before you trade it in the live market, is via a Demo Forex trading account .This offers users a risk free, yet highly realistic simulation of the live trading environment. Once you have honed a strategy that works for you. You can apply for Live trading account, make a deposit and start to trade for real.

read more

Back to Previous Page >>

As we discussed in our article “What are CFDs and how do they work ? “ CFDs were first developed as part of the evolution of Financial Futures markets. But in the decades that have followed their creation, the protege could be said to have eclipsed its creator. In this article we will look at what makes CFD trading such a popular alternative to trading Futures.

OTC

One of the main drivers of the growth in CFDs was the fact that they could be traded OTC or Over The Counter. As opposed to being traded via an exchange, as is the case in traditional Futures trading. Whilst that is much less of a distinction in today's all electronic markets. At the outset of CFDs this was a big deal. Because it meant that CFD prices could be created and disseminated by the contract provider in real time. Rather than relaying an essentially delayed or indicative price from the trading pits on various exchanges, as was the case in Futures trading at the time.

Direct Market Access

Because CFDs could be traded OTC in real time, at prices generated by the CFD provider. They were the perfect candidate for electronic trading and DMA or Direct Market Access. A process through which clients trade directly with the market via trading software, without any intermediation, unless specifically requested. The internet and specialist trading software connected CFD traders from their homes and offices and ultimately anywhere they found a reliable internet signal. Futures markets would eventually evolve into electronic exchanges and mouse clicks replaced face to face,open outcry trading. But the Futures exchanges were and still remain, largely focused on their traditional institutional, wholesale and professional customers. And not on the needs and requirements of the retail investor. A niche that brokerages such as Blackwell Global sprang up to fill.

Standardised, Not Flexible

Futures exchanges were by and large created to service the needs of Producers and large scale Consumers of commodities and agricultural products. Both of these groups wanted certainty around the price, the quantity and quality of the commodity traded. As well as the timing and location of its ultimate delivery. Standardised contracts, that were traded on a monthly or quarterly basis, which controlled a known amount, of a specified quality of the underlying. That had to be delivered by a fixed date, at a specific location, met these requirements perfectly. And though the advent of Financial Futures in the early 1970s moved trading away from the Producer and Consumer relationships of the past. It did not change the Futures exchanges focus on the wholesale end of the market. Contract sizes remained broadly fixed and were usually far too big for most private individuals to even consider trading.

Long or Short

Because CFDs were and are Contacts For Differences and are therefore settled in cash and not the delivery of the underlying instrument, which the contact is over. Users do not need to have delivery arrangements in place. Nor do they need to have access to a supply of the underlying in order to sell a contract on that instrument. In Futures markets, particularly in Commodities and Metals, traders need to be able to demonstrate they can take or make delivery of say Crude Oil or Gold, at the locations specified by the exchange or clearing house. True these services and facilities are usually provided by Futures brokers or their clearing agent. But they are provided at a cost and are subject to the rules and policies of the relevant exchange and clearing house. CFD traders do not need to consider these matters for one second as the contracts they trade are non deliverable. Instead they can focus solely on their trading and money management strategy and getting that right.

Simpler Pricing

As there is no delivery in CFD trading, just settlement in cash between buyer and seller. It also follows that there is no real need for multiple prices for each instrument, that clients need to keep an eye on, unlike Futures trading. For example a leading US Futures exchange is currently offering 14 or more separate delivery months and associated prices on its US Crude Oil contract. This is just the kind of thing major Oil Producers and Consumers, who need to hedge their exposure want to see. But for retail traders and others that are purely interested in near term price movements, this information is likely to be a distraction and just so much market noise. Blackwell Global offers it clients a single rolling spot price on its US Crude Oil CFD contract.This means you have just one price and one chart to watch in US Crude Oil. Though in truth you will likely want to keep an eye on the price of UK Crude Oil and the US Dollar as well, as and when you are trading Crude Oil CFDs. Because CFDs are open ended contracts, without any fixed expiry date. Their pricing is also often more straightforward, than that of monthly or quarterly Futures contracts. Futures contract prices are calculated inclusive of the cost of carry to their expiry date. Put another way they are priced to reflect the cost of borrowing the funds necessary to hold the assets that make up underlying contract, until the day on which it expires. So for example the cost of holding a Futures contract for one month, will usually be less than that for holding it for three or six months into the future. This is one of the reasons that creates a differential in the price of far month contracts, over nearer delivery months, within Futures trading. In CFD Trading the financing or cost of carry is calculated and charged on rolling basis. But only if you hold those positions overnight. Intra day traders do not pay financing charges on their CFD Trading.

Smaller Deal Sizes

At the beginning of this article we noted that CFDs are today mostly traded OTC or Over The Counter and that their prices are calculated and distributed by the CFD provider. In effect it's their price rather than an exchange's price. The ownership of that price means that the CFD provider can also set the parameters of trading in that contract. One of these parameters is the minimum deal size. We also noted earlier that Futures exchanges and their contracts evolved to serve the needs of the wholesale markets and institutional customers, which they largely still do. For example the lot size (or standard minimum deal size) for one of the world's most popular US Crude Oil Futures contracts is for 1000 barrels of Oil. Whilst Blackwell Global's US and UK Oil CFDs have a minimum size of a 1 /10th of standard lot or just 100 barrels of Oil. This is just another example of the flexibility that CFD trading offers when compared to Futures trading.

Availability of Leverage

Both CFDs and Futures are leveraged products. That is to say that traders place a deposit or initial margin on each trade and post variation margin as required, to meet any running losses during the lifetime of a trade. But this is another area where CFDs offer more flexibility than their exchange traded peers. The leverage or margin level for a given Futures contract / delivery month and is set by the relevant exchange and or clearing house. This margin rate will apply to all participants. The phrase margin refers to the deposit per lot that a trader must lodge to open and hold a position. Such that a margin requirement of say 20% implies a leverage ratio of 5 : 1. That is 5 * 20 = 100. Margin requirements per lot on the leading US Crude Oil Futures contracts are, at the time of writing circa $2800.00 per lot. which is equivalent to an approximate leverage ratio of 17:1. In CFD Trading the margin or leverage levels and their application are set by the CFD provider. At Blackwell Global we set our margin levels based on the client's account size rather than the individual products they are trading. Blackwell Global offers margin ratios of up to 400: 1. * *For further details about leverage & account operation please see Account Overview. What's more if a client decides they would like to trade with us using a different level of leverage to that which is allocated to them, they can request to do so. Remember though that leverage, wherever it's applied is a powerful trading tool. But is one that cuts both ways. It can magnify trading profits but it magnifies trading losses just as well. Please ensure that you fully understand the risks involved before you engage in any form of margin trading. To see the benefits that CFDs offer to traders for yourself why not register for a free Demo Trading Account with which you can experience highly realistic simulated trading without risking any of your capital. When you are ready you can apply for a Live Trading Account make a deposit and trade the markets for real.

read more

Back to Previous Page >>

Forex trading effectively involves the exchange of one currency for another. So there are by definition two components (or a pair of currencies) in every trade. The term Forex pair simply reflects this duality. Forex rates (the prices of Forex pairs) move continuously, as they respond to new information and drivers, alongside changes in investor sentiment and the natural ebb and flow of supply and demand that is common to any marketplace.

Balancing Act

If investor sentiment around a particular currency is positive, then that positivity can create additional demand (buyers) for the currency. If that extra demand outweighs the available supply of that currency, then the price, which sellers demand to part with the currency, will rise. Conversely if new information emerges that creates negative sentiment around a currency, demand for that currency may fall. Whilst the supply (the number of sellers) will rise. In these circumstances buyers will reduce the amount they are prepaid to pay to own the currency or withdraw their bids and the price of that currency will fall. Of course as we established above, in Forex trading the value of a given currency is reflected in changes to the relative value of that currency, against a counterpart or pair.

Nature of a Forex Pair

Let's take a closer look at what these changes mean practically and how a Forex pair works and what it represents in practise. So what do we mean when we say that the value of one currency is measured by the change in its relative value in another currency. Well that is simply how Forex pairs work, or indeed what they are for. The exchange rate between the British Pound Sterling and the US Dollar reflects the relative values of each currency, compared to the other, at a given moment in time. if you want to think about that in a different way then think of it like this: The exchange rate reflects the amount of goods and services that a unit of currency A will buy you in currency B. So at an exchange rate of US$ 2.00 to the Pound, a seller of a single Pound Sterling would be able to buy US$2.00 worth of goods and services in the USA. At an exchange rate of US$1.20 however, the amount of goods and services a seller of a lone Pound Sterling could buy, in the USA, falls to US$1.20, a 40% reduction. Of course the inverse or opposite is true for a seller of a single US Dollar buying goods and services in the UK in Pounds Sterling. This constantly changing relationship is expressed by the Currency or Forex pair known as “Cable”. After the transatlantic telegraph cables that first transmitted exchange rates in the late nineteenth century, between London and New York .

The Matrix

As we have noted already changes in sentiment, supply and demand, or the emergence of new information about a currency and its underlying economy, can and will affect its value, relative to other currencies. These changes in value do not happen in isolation however. But rather they take place within a matrix of Forex Pairs and Crosses (Crosses are classically considered to be those exchange rates which do not contain the US Dollar and or more recently the Euro as a constituent). So that a change in the value of the GBP USD pair (Great British Pound US Dollar) is also likely be reflected in the value of the GBP JPY cross (Great British Pound Japanese Yen), the USD JPY Pair (US Dollar Japanese Yen) and the EUR USD pair (Euro US Dollar exchange rate) and so on and so on. In fact if the changes in value are significant enough, they will have a ripple effect across the values of all Forex Pairs and Crosses, no matter how far removed they are from the original currencies. Note that all Forex pairs and crosses are denoted by a specific code or Mnemonic. Which combines the three letter “ISO 427” code for each individual currency. This is the bold annotation we have used in the examples immediately above

Variable Nature

The scale of any movement in the price of other Forex pairs and crosses will depend on a variety of factors and variables, which include interest rate differentials (both now and in the future), economic performance, as well the nature of their underlying economies plus many more. The sensitivity to and likely direction of these corresponding moves is denoted within a measurement known as correlation. A statistical calculation that is expressed as a percentage or ratio,which in the case of Forex can have either positive or negative values. A high positive correlation between two Forex pairs suggests that change in the value of Forex pair A, will be reflected by a move in the same direction, in the value of Forex pair B. Whilst a strong negative correlation between two FX pairs or crosses implies that change in the value Forex pair C will be reflected by a change, in the opposite direction, in the value of Forex pair D. Correlations between Forex pairs and crosses are variable. To the extent that they can differ significantly depending on the time frames they are measured over, say 10 minute, 30 minute or hourly periods. Or from one observation point to the next, for example new daily, weekly or monthly calculations. What's more not only can the strength of this correlation vary or changeover time, so can its direction.

A Dynamic Marketplace

These dynamic relationships between the various Forex pairs and crosses make Forex one of the most exciting markets to be involved with. Presenting traders, as it it does, with countless opportunities on each business day. The skill of the trader is to be able to recognise those opportunities and to interpret what they mean for the prices of Forex pairs and crosses. Simply because, if we understand this information correctly we have the potential to profit from its application or translation into trades. So to return to the example of the GBP USD Forex pair, or exchange rate, used earlier in this piece. If major news breaks which is positive for the US Dollar and negative for the Pound Sterling, it follows that this may also be positive for the valuation of other currencies versus the Pound Sterling. Or put another way, negative for the value of Sterling Forex crosses. As well as being potentially positive for the US Dollar versus its peers, or Dollar pairs. That amounts to a lot of instruments and a lot of potential price changes to consider and track.

Which Forex Pairs to Trade

It would be virtually impossible for a single trader to watch and monitor all of these prices, their changes and interactions, simultaneously. Not least because studies show that the human mind, on average, can only focus on or retain information about 6 or 7 things at anyone time. As a consequence of which traders tend to focus on a short list of instruments in which to trade. That list could be a permanent fixture,that focuses on a handful of currency pairs that a trader follows closely and is very familiar with. For example USD JPY GBPJPY and AUD JPY. Or those Forex pairs which regularly exhibit the highest trading volumes such as EUR USD, GBP USD and USD JPY . But equally a trader may prefer to trade what's moving or likely to move on a given day or session. For example if based in Europe and trading the European session, the trader may choose to trade those Forex pairs that have been moving within the preceding Asian session. Hoping to benefit from that momentum, or perhaps to oppose it, in expectation of it fading and the price of the relevant Forex pairs correcting or re-tracing earlier moves. Alternatively the trader may like to be guided by the Economic calendar of events. As there is a regular well documented flow of key economic releases, from both developed and emerging economies. Of course a trader may prefer to look for specific, predetermined signals or indicators, that appear in the charts of Forex pairs and crosses. Of course this creates another potential “logjam” of information and traders will often use a screening tool or system to sort the “wheat from the chaff” leaving them with a manageable number of charts to look at and interpret.

Take a Look for Yourself

One of the best ways to get to grips with the concepts we have discussed in this article and get first hand experience of how they act on the prices of Forex pairs and crosses is to open a demo trading account. A completely risk free and free of charge service, that provides users with access to an authentic simulation of the live trading environment. This is an ideal tool with which to try out trading in Forex pairs and crosses. To watch the news and data flow and resulting changes in price and sentiment that creates and to familiarise yourself with chart studies and indicators that can help you to understand how Forex pairs work and which to trade.

read more

Back to Previous Page >>

Whilst we can't recommend that you become a full time trader because everyone's circumstances are different, the idea may have crossed your mind and if that's what you want to know more about how that might be achieved then read on. How do I achieve this? Is a question that most “wannabe” or part time traders will ask themselves at one time or another. After all it’s many people's dream to be their own boss and to spend their time doing something that they enjoy and can make money at. There is a simple straightforward answer to this question which is:

“ Make more money than you lose and make enough money to cover your out goings and overheads, whilst increasing your capital at the same time .”

Now of course it's much easier to say those words, than to achieve the result they describe. But that description is the reality of what you will need to achieve consistently to successfully trade Forex & CFDs for a living. By now you will have had a chance to reflect on that statement. But don't stop here ! Please Do read on. Because whilst becoming a full time trader won't be easy and will require effort, application and aptitude on your part. It’s not an impossible dream. The good news is that help is at hand. Moreover there are steps you can take to help you achieve your goal.

Understand the Markets

You could quite easily spend your whole life trying to understand the intimate workings of and drivers for the financial markets. And at the end of that process you might still not have reached your goal. Simply because every day can be and is a learning curve in the markets. However you don't need to know the minute details of each instrument, market,the participants and their intimate histories. Rather you need to know and recognise what's important in a given market and how that information affects price. To put that another way imagine you are waiting for a decision on interest rates and monetary policy from the Bank of Japan. You hope to trade Dollar Yen when the news is out. You might like to do hours of background reading about monetary policy and its relationship to the Japanese economy and don't let me stop if you do. However whilst that will be useful background information it may have little or no bearing on what happens to the price of Dollar Yen, when the BOJ news breaks. The things that will have an affect are likely to be factors such as how closely that news matches traders expectations, for the event and how those traders are positioned approaching that event. So if the market is mostly long Dollar Yen (that it is it expects the Dollar to strengthen and Yen to weaken) and it anticipates news, from the BOJ, that should weaken the Yen. For example a cut in interest rates or an expansion of QE. But it doesn't get that news. Then in these circumstances there is every reason to think that the Dollar Yen rate should fall rather than rise. As traders on the long side look to cut or reduce their positions. Whilst those that were short Dollar Yen and expected the Yen to rally, add to their positions and try to cause the longs the maximum amount of discomfort in doing so.

Power struggle

Animal spirits drive the markets by quite simply combining supply and demand, together with human emotion and sentiment. When supply is abundant prices can fall. Whilst when demand is in the driving seat, then prices will likely rise. Of course we can substitute the word buyer for demand and seller for supply. Or if you prefer go one stage further and use the term fear as a substitute for supply / sellers and greed as an alternate for demand / buyers. The ratio of Supply to Demand, of Buyers to Sellers, of Fear to Greed is what ultimately drives prices. Think about all the pulling and struggle for supremacy that takes place within a tug of war. Or all the pushing and shoving and battle for dominance that you see in a rugby union scrummage. These are both perfect metaphors for the constant push and pull of the marketplace. In both cases if one team is much bigger than the other, then that team will exert their influence much more easily. But if the teams are more evenly matched, then the team with the better technique will probably carry the day. As as a successful Forex and CFD trader you will need to use your judgement (technique) to decide which team you want to be on, at which point to join that team, and for how long.

The Trend is your friend

One way to do this is to spot a price trend, join it and stay with it until ends or changes. The header of this paragraph is a popular saying amongst Technical Analysts, who use charts of price and volume to predict future price direction. The phrase implies that joining a trend is a sensible thing to do. For many participants in the Forex and CFD markets trend following is a cornerstone of their trading strategy. Of course to join a trend you need to be able to identify one. But that need not be as complicated as it sounds. An uptrend can be defined as a series or progression of higher highs and higher lows in the price of an instrument. Whilst a downtrend is quite literally a progression of lower highs and lower lows in that same price. So for example if we are watching a particular instrument,over a series of 5 minute periods. And for each 5 minute period we note the opening price, the high price, the low price and the closing price. We are creating a record of the price action for that instrument. If our record shows that for 5 of the 6 periods we monitored the instrument over, we saw a new or higher high, accompanied by a series of higher low prices. Then we would have identified an uptrend in the price of that instrument. If we saw the opposite behaviour, that is lower highs and lower lows in the majority of the 5 minute periods in our study, then we have identified the existence of a downtrend. Of course what we need to determine is whether these trends will continue and if so for how long. This is exactly the reason that traders create and use charts and add indicators to them

Further Reading

Ten thousand hours ?

Of course there is much more to Successfully Trading Forex and CFDs for a living. But the text above will hopefully serve to get you thinking about what's important to that endeavour and what isn't. Most important of all is the process of becoming an expert. Because that is how a successful (profitable) full time trader should be described. Experience is important and the old saying that it takes 10,000 hours of work to achieve this has some truth in it. However we shouldn’t automatically confuse experience for aptitude or ability. The influential Farnam Street blog makes this point on this very subject.

“Put another way, someone with 20 years of experience, might be repeating one year of experience 20 times.”

Modern thinking is that we gain can expertise or deep knowledge of a subject or an ability, when we practice and concentrate really hard. Such that the practice pushes us to edge of our competence. It's at this point, that learning takes place, as we master, or gain an understanding of new skills and abilities. Furthermore that it is the setting goals, that are fractionally ahead of our current ability, working towards those goals, through practise, attaining them and then repeating the process with fresh goals that drives this deep learning. By focusing on the important and the essential and ignoring the peripheral, you can, in theory, greatly reduce that 10,000 hour figure. You will need dedication, of course and the time and resources for practise (more on that in a moment) To quote Farnam Street again

If you want to make it there (to expertise) the road is bumpy. It has to be. Only a difficult road will cause you to grow and learn. And you have to personally want to travel this road, because it will be long and if you can’t motivate yourself you’ll never get where you need to be.

Resources

Blackwell Global offers its clients access to Free Demo Trading Accounts .These accounts allow traders to practice trading Forex and CFDs in a risk free, yet highly realistic simulation of the live markets .You can practise trading for as long as you need to. Test strategies and your trading intuition create charts identify trends, plot indicators back test performance and so much more. All without risking any real cash and at no charge. We also offer our customers access to educational guides and articles as well as dedicated research from both inhouse and external analysts. The ancient Chinese proverb from the philosopher and founder of Taoism Laozi says “A journey of a thousand miles begins with a single step” so why not take the first step on trading journey today ?

read more

Back to Previous Page >>