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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
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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
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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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