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This is a discussion on Forex Articles within the General Discussion forums, part of the Trading Forum category; Emotional Trading The markets do not care how much effort you put in or how hard you work, nor whether ...

      
   
  1. #151
    Senior Member ArticleMan's Avatar
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    Are You Overtrading?

    Emotional Trading

    The markets do not care how much effort you put in or how hard you work, nor whether you get lucky or not. It is possible to make profits or losses over long periods of time just by having unusually good or bad luck. As humans we tend to feel we either deserve something or we do not.

    How to Determine if You Are Overtrading

    If my description of these negative feeling strikes a chord with you, you may be overtrading.
    The second thing to consider is the statistical basis of your entry strategy.

    The Pareto Principle

    Here is the golden rule of overtrading: the market does not give many good opportunities.

    Be Picky with Trade Entries

    You cannot force the market to give you an opportunity, you can only be ready to exploit the opportunities it gives you.

    How to Stop Overtrading

    Try to see every day you do not trade as a day when you did not lose any money, unlike most other traders, and be proud of yourself for resisting temptation.

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  2. #152
    Senior Member ArticleMan's Avatar
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    Difference Between ECN & Standard Account

    The network

    The main reason why using an ECN can help you is that it offers liquidity through a network. In other words, there are various bids and offers out there that are available for trading, meaning that the spread between ask/bid can be quite tight. For example, you may see spreads as tight as breakeven. You can buy or sell at the same price, but usually there is some type of commission involved.

    It is because of this that you must pay attention to commissions, because they can be a bit expensive if you aren’t paying attention. In general, the commission works out to be about one half of a PIP. Ultimately, that is cheaper if you are a more short-term trader and have a several in and out positions. However, you may be thinking that even a longer-term trader can take advantage of this, and while that’s true to a point, the reality is that it isn’t as advantageous for a longer-term trader as it is a short-term trader. This is because a longer-term trader doesn’t have to worry about the cost of transactions so much.

    Another thing that you should be aware of is that liquidity can dry up occasionally. For example, if you have the Nonfarm Payroll Numbers coming out, a lot of traders will choose not to be in the marketplace. While your typical spread on the network might be 0.2 pips in the EUR/USD pair, right around the announcement you may see something closer to 15 pips. Obviously, that can drastically change your profitability if you aren’t careful.

    As a general rule though, the network will keep relatively tight spreads most of the time, especially if it is a larger network because there are more traders involved. Ultimately, a profitable trader can take advantage of either type of broker, an ECN or standard broker.

    Standard account

    As a general rule, a standard account is generally thought of as one with the fixed spread. The broker is the counterparty to any position you put on. It’s not always the case, but overall it tends to be. The EUR/USD pair might be offering a spread of something like two pips, and while most of the time that is more expensive than an ECN, when it comes to news related events it can save you quite a bit of trouble.

    The downside of course is that if you are a frequent trader, you might be paying something like 1.5 pips extra per trade. People do not pay attention to the cost of execution, which is a killer over the long term if you are not careful. However, if you are more apt to have a position on for days or weeks, at this point neither is going to make much of a difference as you don’t have a lot of cost involved.

    Pay attention to costs

    Figure out which broker you need based upon the idea of expenses. At the end of the day, the only thing you need to worry about is whether or not the broker can give you a decent and reliable fill, and of course whether or not it is fair. Forex brokers have come a long way over the last 10 or 15 years and are much more reputable. The days of the wild west are gone, so really at this point most traders will find that they can use either an ECN or a standard account and make money.
    If you are worried about the type of broker, the only time it really should come into play is if you are a scalper. Otherwise, any difficulties you run into should not have anything to do with the broker.

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  3. #153
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    Trading with Keltner Channels

    The Keltner Channel is a lesser-known indicator but deserves a wider appreciation than it gets. It can be used to effectively identify either trending or ranging market conditions as well as good points for trade entries. In this article, you will see how the Keltner Channel indicator works and how it can best be used by traders.

    What are Keltner Channels?

    A Keltner Channel is a technical indicator that can be applied to a Forex price chart or any other kind of price chart. A Keltner Channel is extremely similar to a Bollinger Band, so if you understand what Bollinger Bands are and how they are calculated, it shouldn’t be difficult for you to get to understand the Keltner Channel. If you aren’t intimately aware of the Bollinger Band indicator, what you need to know is that a Keltner Channel is calculated as an envelope of volatility around an exponential moving average (EMA). Typically, the 20-period EMA is used. When drawing a Keltner Channel, the center line of the channel is a moving average, and the upper and lower bands which are drawn equidistant from the moving average both above and below it are simply based upon a multiple of the measurement of the volatility of the price, based upon the Average True Range (ATR) indicator, traditionally set over ten periods.
    The only two differences between the Keltner Channel and the Bollinger Band are that the Bollinger Band’s upper and lower bands are drawn by a measurement of standard deviation from the central moving average as opposed to the Keltner Channel’s ATR, and that the central line of the Bollinger Band uses a simple moving average (SMA) while the central line of the Keltner Channel uses an exponential moving average (EMA). Standard volatility tends to fluctuate much more dramatically than average true range, so a Keltner Channel tends to be smoother over time than a Bollinger Band. To give you an idea of what a Keltner Channel looks like and how it compares to a Bollinger Band, the chart below shows both indicators applied to the same price series, with the Bollinger Bands in red and the Keltner Channel in blue. The width of the Keltner Channel is twice the 20-day ATR while the width of the Bollinger Band is twice two standard deviations.

    It is immediately obvious from looking at the above chart that there is only a relatively small difference between Bollinger Bands and Keltner Channels, so arguably, it makes little practical difference which of the two indicators are used.
    Now that you understand how a Keltner Channel is calculated, it is time to look at a few easy rules you can use to interpret a Keltner Channel indicator drawn on a price chart.

    Interpreting a Keltner Channel

    Here are a few hard and fast rules of thumb you can use to interpret a Keltner Channel on a price chart:

    1. If the bands are relatively narrow, volatility is relatively low.
    2. If the bands are relatively wide, volatility is relatively high.
    3. If the channel is sloping up, there is an upwards trend over the period which the EMA at the center of the channel is set to.
    4. If the channel is slowing down, there is a downwards trend over the period which the EMA at the center of the channel is set to.
    5. If the price is above the upper edge of the channel or very close to it, and the channel is sloping upwards, then the upwards trend is active and aggressive.
    6. If the price is below the lower edge of the channel or very close to it, and the channel is sloping downwards, then the downwards trend is active and aggressive.

    Now let’s look at how these rules can be applied in more detail to the use of this trading tool. All trading is made on the basis of at least one of two concepts: either that the price is trending / moving with momentum and likely to continue in the same direction, or that the price is about to reverse and go back to where it recently came from, i.e. revert to its mean (average). In both cases, traders want to enter trades in places where the trade is more likely to go further in one direction than the other. Let’s look first at how a Keltner Channel can be used to trade with the trend.

    Trend Trading with a Keltner Channel

    In trend trading with a Keltner Channel, the first step is to use the indicator to determine whether a trend currently exists, and in which direction. This can be ascertained easily: is the channel sloping up, sloping down, or neither. If there is a slope, it indicates the existence of a trend, and the trend’s direction. The longer period the indicator has been sloping in the same direction for, the more persistent the trend, and the steeper the slope, the stronger the trend.

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  4. #154
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    Forex Brokers Fees and Costs Explained

    Every Forex broker charges fees in one form or another and there are trading costs associated with each trade placed. Many traders often ignore the total cost per trade which can make a big difference to the overall outcome of a portfolio. While the most obvious cost is through spreads, there are other fees and costs which are applicable and should not be ignored. Transparent brokers will always be upfront about their fees and list them either on their website, in their trading platform with each trade ticket (or, ideally, in both places).

    Overview of Direct Trading Costs

    Direct trading costs consist of spreads, commissions, swap rates, overnight financing costs, storage fees and custodial fees. Not all costs apply to every trade and it all depends on which asset is traded, if it is traded on margin and the duration of each trade. All costs involved with each trade should be mentioned by the broker; transparent brokers list them in their trading conditions and also provide examples of how costs are incurred and calculated. In addition, trading costs can be found inside the trading platform. This is especially true if the broker offers a proprietary trading platform. Calculators are also provided which allow traders to calculate the cost of each trader before placing it.

    Spreads

    Spreads are the most obvious cost associated with a trade and refers to the difference between bid and ask price. Spreads are the primary income source for brokers who live from the mark-up on raw spreads. Raw spreads can be as low as 0.0 pips in the EUR/USD, the most liquid currency pair which carries the lowest spread. Everything above this level is the mark-up the broker charges.
    While spreads are listed on each broker’s website, traders can easily view them in their trading terminal.

    Commissions

    Some accounts may come with spreads as low as 0.0 pips on the EUR/USD, but the broker charges a commission per lot. Accounts which charge commissions are usually ECN accounts which operate a no-dealing desk execution. Traders get the raw spreads, or very close to it, and in exchange the broker charges a commission.

    Swap Rates

    Swap rates, sometime referred to rollover rates, apply to each position which is held overnight. Swap rates occur due to the interest rate differences in the base currency and the quote currency. Brokers will list how this rate is calculated and there is a Swap Long and a Swap Short rate. Depending if the traders take a long or short positions, swap rates will either be credited from or debited to the account balance. A lot of brokers fail to forward positive swap rates to traders.

    Overnight Financing Costs

    This is a cost related to margin trades. Brokers will explain how the effective overnight financing rate is calculated. It depends on the amount of leverage used per trade and which asset is traded. This is an important cost to monitor as it increases the longer an asset remains open in the account.

    Storage Fees

    Some brokers will charge traders a storage fee for holding certain assets. This is an unnecessary fee, but will be charged for holding positions in the account which comes on top of swap and/or financing fees. In essence it is a fee charged for maintaining positions in your portfolio. Brokers who charge storage fees should be avoided.

    Custodial Fees

    Equity, ETF and bonds come with custodial fees which are usually a small percentage charged annualized, but may be deducted monthly with a minimum. Not all brokers offer equity or bond trading and use CFDs which are great to get in on the price action without the need to incur custodial fees.

    Overview of Indirect Trading Costs

    Indirect trading costs are costs which are not charged per trade, but include costs such as withdrawal charges and account inactivity fees. Deposit charges are waived by all brokers, which is standard industry practice. Some brokers even reimburse their traders for deposits made via bank wire which is usually charged by the trader’s bank. Withdrawal fees are usually not charged by brokers, but third-party fees may apply such as bank wire charges. All charges relating to deposits and withdrawals should be listed on the brokers website.

    In general, all fees which a broker can charge will be listed in their website under trading conditions.
    Traders should carefully review this section as the lesser known costs are only mentioned there. In case this information is not provided, the broker is better avoided. Customer service can be contacted, but again, a transparent and trustworthy broker will not hide their costs. Costs like spreads and swaps are best accessed directly from the trading platform as they can change quickly due to market conditions. Using cost calculators provide by brokers can also be used in order to determine precise costs per asset and volume traded.

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  5. #155
    Senior Member mlawson71's Avatar
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    How to manage risk in Forex trading

    Why it matters


    First and foremost, one must highlight why this is extremely important. No matter what your trading strategy is, it is bound to run in a series of losing trades. If you do not control your exposure during them, you may end up with serious losses. And here is the principle which some beginners may not understand: The first step towards making money in the forex market, is to stop losing.


    This may sound logical and even obvious, but there is a hidden meaning behind the simplified statement. Whenever you lose money, your total account balance goes down, which implies you would have to trade with smaller lot sizes. This way you would need to gain a lot more, just to return to its previous state.

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  6. #156
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    Forex Regulations in Canada

    The Forex market is the largest, most liquid sector of the global financial system with a daily turnover of over $6 trillion; it is also the fastest growing one. Some governments, usually in emerging and frontier markets, ban retail Forex trading outright, while the majority regulate it so that Forex trading can be done in a safer environment for traders.

    To better understand why most brokers prefer to set-up operations elsewhere and then attract Canadian traders, the regulatory environment in Canada needs to be better understood. Forex is either regulated as a security or a derivative, but the type of regulation differs as provincial and territorial securities and derivatives legislation applies in addition to federal regulation at the national level. This creates a challenge, whether a company wants to act as a broker or an advisor, as Canada lacks universal legislation for the entire country. From an operational perspective, this creates a quagmire.

    Many people are surprised to learn that Canada has fifteen different regulatory bodies which regulate the Forex market. They include: the Canadian Securities Administrators (CSA) and the Investment Industry Regulatory Organization of Canada (IIROC), while the remaining thirteen are provincial and territorial regulators. Having up to fifteen regulators further complicates operations for Canadian Forex brokers, while providing excellent protection for traders. Regulation can often be a double-edged sword: while necessary to create a fair and competitive market, it can also hinder innovation. A delicate balance is required, and Canada hasn’t really found it yet.

    The Canadian Securities Administrators (CSA) is an umbrella regulator for all the provincial and territorial regulators across Canada. The goal is to improve, coordinate and harmonize the Canadian financial market as an informal body. The CSA mainly operates through meetings, conference calls, and daily cooperation among the 13 local regulators who exist in Canada. The CSA did create a passport system which granted access across all regulated provinces and territories to a firm, by dealing only through its main regulator; Ontario is the exception. This was meant to create more efficiencies through harmonized laws and make the Canadian market more competitive.

    Every broker or advisor active in the Canadian Forex market must be regulated by the Investment Industry Regulatory Organization of Canada (IIROC). This self-regulatory organization was formed through a merger between the Investment Dealers Association of Canada (IDA) and Market Regulation Services Inc. on January 1, 2008. The Investment Dealers Association of Canada was originally formed in 1916 under then name Toronto Board of Trade with its primary objective to coordinate the financing of Canada’s war effort during World War I. It was renamed in 1934 and became the IDA.

    While the IIROC is the main regulator for Forex trading, and has powers to fine, suspend or expel members by exercising quasi-judicial powers, it has been often criticized as an ineffective regulator. Another major area of criticism is that many laws have simply been copied from the U.S. which has further limited the global competitiveness of the Canadian financial market.

    In addition to regulating the Forex market, the IIROC also stipulates the maximum leverage a broker can offer to clients. Leverage has been a widely misunderstood trading tool and regulators across the financial system have taken steps to reduce maximum leverage while failing to spot the real problem: the lack of risk management coupled with false or misleading advertisements by brokers. The maximum leverage a Canadian-based broker can offer retail clients is currently between 1:45 and 1:50, subject to reviews and changes by the IIROC.

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