Forex Trading: Are You A Mean Reversion or Trend Following Trader?

Forex Trading For BeginnersOne of the first steps for beginning day traders is to determine one’s trading philosophy. You should have an idea of how you want to approach your analysis and trading, develop a view of how the market behaves, and ultimately place trades based on this philosophy.

Generally speaking, there are two major philosophies in Forex trading: Mean reversion and trend following. Both are quite different, and the millions of Forex day traders around the world typically use one or both of these styles in their day-to-day efforts. Now, you might be wondering: What the differences between these two Forex strategies? Which one is best-suited for me? And what are their advantages? Here is a quick explanation:

Mean Reversion in Forex Strategy

The premise of mean revision trading is the idea that the markets fluctuate around a state of equilibrium. In Forex, that would be the exchange rate for a currency pair moves up or down around a mean average value, and ultimately returns to the mean average. To profit, mean reversion traders enter trades when values deviate up or down from the mean average. And when the currency pair reverts back, the trader exits the trade, hopefully taking a profit as a result.

In day trading, mean reversion is fairly common, because day-to-day currency values tend to remain fairly stable without large swings. In fact, it’s estimated that the markets tend to stay in a specific range 60 to 70 percent of the time, and stability is the ideal condition for mean reversion trading.

In general, mean reverse traders look for indicators as to when a shift is happening, and two common types of indicators are Bollinger Bands and the Relative Strength Index (RSI). Both are used to determine when a currency pair is overbought or oversold. When a security is overbought or oversold, the idea is that it will move back to the average. It’s reached a peak before returning to the median value. The biggest challenge is finding the perfect point to enter these trades as the pair deviates up or down, as it’s sometimes unpredictable to determine how long a deviation will happen before the value returns to the median.

Trend-Following in Forex Strategy

Trend-following traders tend to look for trades that move away from the average for a longer period of time, and as such, it’s typically a long-term trading strategy. Whereas with mean reversion, the idea is that the exchange rate of a currency pair is oscillating between two points, trend-following means the trader is betting that the trend will continue and not move back to the mean.

Because currency pairs tend to stay within a range for about 70 percent of the time, trend-following, in general, results in fewer winning trades. This happens because it’s difficult to predict when a trend might occur. But, because trend-following includes the possibility of a large trend in one direction, the winning trend trades may have greater profitability.

Should You Use a Mean Reversion or Trend Following Strategy?

Now that you have the basic idea of both philosophies, you’re probably wondering which one is better? Well, it depends. Market factors may be in place for relative stability in an exchange rate. In this case, it’s likely that currency pair might enter a period of fairly stable ranging. In that case, a mean reversion strategy might be more beneficial.

And on the contrary, major economic news in a country greatly increases the chance for volatility. In these circumstances, a trend-following strategy might be the better option, as the trader can capture bigger gains if the market moves in the right direction.

To learn Forex trading strategies, Participate in free Forex workshop of Learn To Trade. Learn To Trade is well known Forex trading training organisation which provides various resources to its student to learn this trading system perfectly.

4 Things to Watch For in a Good Forex Trading Method

Forext Trading For BeginnersOne of the inquiries that is most frequently asked is what just what do you look for in discovering a good trading method. As with any financial transactions the risk of loss in Forex trading can be great. Risk or loss in Forex swing trading usually rises in a trading range or sideways price motion that in a market that is clearly moving in a particular path due to the increased chance of a rise in false positives. Some beginning and knowledgeable Forex traders use financial software used for trading to enable them to locate an excellent Forex trading method.

All Forex traders need to have a strong method in place before executing any trade. Those traders that are just beginning will rapidly see that trading can be tricky, leading many to look for Forex trading secrets! This article will illustrate just what most trading methods look like (and why they are critically Missing) and provide you an easy way to look at and consider a trading method.

Among the deficiencies that can be shared by several of the so-called Forex trading methods and programs on the market contain the following:

1. The trading methods are typically incomplete. Many of the trading courses teach hours of ‘theory’, however they spend little to no time educating and delivering you with a step-by-step plan to help you in your Forex trading.

2.They neglect to cover the number one error of the majority of Forex traders, risk management, or how to manage risk in their trades. If the system or method you may be thinking about fails teach you risk management that is consistent with their method, you must reject it!

3. They concentrate on fundamental analysis. The Forex methods that only focus on fundamental analysis are extremely time-consuming and subjective. These methods involve one to have a much deeper comprehension of the more complex economic and financial concerns. Without this knowledge, you simply can not succeed with these methods.

4. Many Forex strategies demand a trader to be engage in the “day trading” of Forex. In other words many of the methods and systems out there call for you to sit in front of your computer practically 24/7 to be able to ‘react’. For most would be Forex traders this is basically impossible.

So what makes up a “good” Forex trading method?

Based mostly on the methods and techniques that have been created over the last several years, there is a simple 4-part measurement that anyone can use to decide if a Forex method is a good one to use for success. The following are the 4 things to look for in good Forex trading method:

5. The technique has to be complete and teach the setup circumstances, entry rules, initial stop rules and exit strategy rules while leaving no decision to chance.

6. The technique must teach and focus on the specific guidelines for risk management and money management in accordance with the specific trading method.

7. The method must make use of technical analysis, but not be a totally mechanical or automated system.

8. The technique has to be practical in terms of time spent making use of it: for instance it should only require 20-40 minutes a day.

These methods should assist you to weed out the great from the bad amongst the Forex trading approaches. By focusing only on the best trading methods even though providing a comprehensive explanation of how to apply, safeguard and trade the due to strategies which
can prospect to triumph in Forex trading.

Forex Trading Times

Forext Trading For BeginnersKnowing what the best times to Forex is a crucial component to effective and efficient Forex trading. During the trading week the Forex market is open 24 hours a day, but just because it is open around the clock does not mean prices are always moving in a way that makes a particular market worth trading. Money is made in the Forex market when the market is volatile and moving, not when the market is calm and relatively quiet.

So, as a Forex trader you need to know when the most active Forex trading times are, as this will aid you greatly in the timing of both your entries and your exits as you navigate the markets. The two most active Forex sessions are the London session and the New York session, during these sessions price action provides the best trading environment. The Asian trading session is often less volatile and thus less likely to result in major moves within the various Forex pairs.

The Forex market contains three distinct trading sessions; trading starts in Australia and Asia, and moves around the globe into Europe and finally ending the day in North America as trading closes each day in New York. The various Forex trading hours are as follows:

• Asian trading session (including Australia and New Zealand): the Asian trading session opens at 6:00pm EST and closes at 4:00am EST

• London trading session: the London trading session opens at 3:00am EST and closes at 12:00pm EST.

• New York trading session: the New York trading session opens at 8:00am EST and closes at 5:00pm EST.

As you can see from the above list of times to trade Forex, there are periods each day where the sessions over-lap each other. It is within these periods when volume and volatility typically rise to peak levels. The London and New York trading sessions over-lap between 8am and 12pm EST, this is typically considered the best time to trade Forex. The reason it is considered the best time to trade is because this is when the world’s two most active trading centers cross; as London trading comes to an end, New York trading is opening, and they are both open at the same time for 4 hours each trading day. As a result, many traders strictly trade within this 4 hour window because it generally brings the best liquidity and volatility.

Beyond knowing the best Forex trading times, it also helps to know which currency pairs to trade. Generally speaking, the “major” Forex currency pairs are the best, the reason they are widely considered to be the best Forex pairs to trade is mainly because they offer the smallest spreads and highest liquidity. This means you pay smaller fees to trade the majors and they move in a “safer” manner than the “exotic” currency pairs, which can tend to jump around and move a relatively illogical way. In the end, make sure you know the best times for Forex trading and the best Forex pairs to trade; these are some of the basics of learning Forex.

Using Forex Managed Accounts on Small Investments

Small Forex managed accounts are ideal for the investors who have some preoccupations and can not observe or trade in the market on a consistent basis.Forex Trading For Beginners

Traders who are engaged in jobs but still looking for ways to enter into the Forex market without investing hours in front of the computer, can now open a small Forex managed accounts for some passive income. In a market where over two trillion dollars are traded every day, a small managed Forex account make big profits for you.

Forex small managed accounts are managed by a trader, paid for by an investor, and result in high return. There are two types of small managed Forex accounts–either automated or managed by human traders or brokers.

Automated small Forex managed accounts are completely automatic programs which are designed by experienced traders and offer unmatched simplicity to the investors. It takes into consideration all indicators and statistics open to it and once it receives a signal, it trades accordingly. But these systems lack the human intelligence and instinct, which undoubtedly play an important role in decision-making.

The second type of forex small managed accounts employees human traders with market experience of many years. The biggest advantages of such accounts are they can be personalized depending on your need.

The typical investment in a small managed forex account can be from $5,000 to $10,000, which leaves the very small investors out of the loop. A managed account which is either traded by another person or an automated system can earn up to 20% per month or more depending on the performance of the system.

Small managed forex accounts are the best option before you leap into the market if you are receiving professional training and preparing yourself on how to trade in the market. You can fine-tune your own trading system and strategies and learn how the market may respond to specific news and patterns.

Searching for a good managed small forex account is a troublesome task. Some trading systems may take too many trades causing you to margin out too soon and some may generate poor signals. Make sure that the trading system can substantiate its data with proven results and perform back tests on their system in real-time. The broker you chose must be established, registered, and has credibility within the market.

Many brokers offer their services for small managed forex accounts for private or individual investors. They may offer some preferences for high investments for portfolio diversification and effective risk management. The brokerage firms have pool of experienced financial advisors who can provide ready-made, excellent and even personalized solutions in trading and programs for you. Your small investment may be clubbed together with other investments to earn the kind of profit you are looking for with substantial risk management procedures.

Your small managed forex account starts operating the moment you authorize your broker to take investment decisions on your behalf and can start to manage your funds. The advantages of using a small managed forex account to trade are —

1. You need not to trade yourself and can engage in other activities.

2. You no longer deal with trading emotions.

3. Lesser chances of making mistakes, especially so with automated forex.

4. You will have time to develop strategies and can take advantages of trading multiple systems and multiple markets.

5. You invest small amounts but receive high returns with proper risk management facilities.

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Forex Money Manager – Have You Considered This Option?

Forex Money Managers are online managed Forex accounts that offer to manage, trade the markets on behalf of clients in Forex. Forex fund managers are ready to provide their services to you. It goes without saying that this option gives investors a great number of advantages due to the fact that vast majority of managed Forex accounts make more cash when compared with ordinary retail investors.forex trading for beginnerss

For an average retail Forex trader who is just starting out in Forex trading, it forms a rather difficult activity to master Forex trading. Most novice Forex traders fail within a couple of months. It must be pointed out that most novice Forex traders lose money not only when trading currencies but also when dealing with managed Forex accounts which fail to be reputable. The problem is that finding a really reputable and high performing money manager is rather a challenging exercise but worth the efforts

Benefits of a Forex money manager
The significant benefits of choosing to invest through Forex fund managers is that investors don’t need to come to the table with huge investments in order to access this particular managed Forex accounts. The general assumption is that a vast majority of managed Forex accounts require investors to invest at least one million dollars. While this is true, but in most cases managed Forex accounts require only a $5,000 approximately to get started. One of the key benefits of managed Forex accounts is that an investor retains the full control over their investment.

A Forex fund manager is one of the most sought after commodity, as more people look to the Forex markets to increase returns on their portfolios. So why hire a Forex money manager to look after your funds? in the first instance, it is the belief that they will make you money. So what would compel investors to choose a Forex money manager and how, in practice, can a Forex money manager help to assist an investor get superior returns? The fact that investors get the ability to access the complex and volatile world Forex trading with a small amount well managed in expert hangs with low deposits of $5,000 gets you in to most managed Forex accounts.

Forex money managers offer retail investors a lot of possibilities to invest in the Forex market, where before they just didn’t exist. Finding a reputable and high performing foreign exchange manager can sometimes be hard, but it well worth the search.

Why choose a Forex money manager
Having your investment looked after by a Forex money manager offers a variety of possibilities and advantages for the retail investor. Most Forex fund managers do make more money than an ordinary retail investor. Questions as to why so many people are now investing with a Forex money manager or why hire a Forex money manager to look after your funds are best answered below

  • In the first instance, it is the belief that they will make you money
  • On average most novice Forex traders tend to lose their investments with the first 3 months
  • Investors either tend to switch back to investing in stocks, or can look to find a suitable Forex money manager to manage their money in the Forex market.

Finding a decent and high performing foreign currency manager can sometimes be hard, but it well worth the search.

So what is so great about these so called managed Forex accounts? Opting to make use of a managed Forex account gives investors the access to quality Forex fund managers who have the requisite experience. On the higher end of the scale, there are fund managers that require investors to put in atleast a minimum of a million dollars, but at the same time a majority of managed Forex accounts seek retail investors to access the potential gains of the currency market with as little as $5,000.

So what are the advantages of investing in a managed Forex account, and how, in practice, can a Forex money manager help to assist an investor get superior returns? For starters, investors don’t need to be a millionaire to access a managed Forex account. However, with the majority of managed Forex accounts, retail investors can access the potential high returns of the currency market with as little as $5000.

Forex money managers are paid a percentage of the profits they generate. For example, if you make $100 in the Forex market, the manager might keep $20 or $30 of it as a performance fee. Although the performance fees might seem a bit too high, remember that you might not have made any profit in the first place if not for trading with the help of a Forex money manager. And in the same note, if the Forex money manager does not make any money in your account, you typically do not have to pay for the service. This is basically a no win no gain kind of a business model and a choice that novice traders with disposable investments can look to in order to maximize their returns.

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New Automated Forex Software – Key Buying Features For Forex Traders

Any new automated Forex software to the market will come as a breath of fresh air to Forex traders particularly if there hasn’t been a new release on the market for a while. Traders will be well aware that the launching of a new automated Forex software package will often mean new, innovative and creative time tested formula’s for selecting even more profitable trades. Forex Trading For Beginners

Without a doubt Forex traders expectations will be that a new product introduced to the market will be able to assist them increase their ability to achieve still higher returns on their investments in the Forex markets whether they be experienced or novice Fx traders.

Working Smarter

Given that Forex traders live in a world dominated and constrained by time, working smarter, faster and more efficiently is the generally accepted catch phrase of successful traders and has been for some-time now. They say that information is power and in the forex markets that is certainly applicable and is the key to trading profitably. That being said it would be perfectly logical to assume that those that have access to information first will be the first to capitalize.

Smart traders will already have a working plan and strategies in place to ensure profitable trades, however the smart trader also recognizes that one never stops learning and there is always something new to learn. The day a trader stops learning is the day he/she needs to seriously look at giving the game away because there is only one direction from that position and that is backwards.

For the serious and smarter players however they are always on the lookout for tools that can give them an edge over millions of other players in the Forex markets. New automated Forex systems are definitely one way to go. There have been a number of good automated systems on the market, however some are now a little dated and will need to be modified to include some of the latest information technologies.

Check out the Developers

Developers usually come from backgrounds in the Forex markets or program development fields. They will either have both the skills and backgrounds to enable them to create an automated forex software package themselves or they will collaborate with others that have complimentary skills to undertake such a project.

This is important to Forex traders when assessing or evaluating a new product on the market. Credibility of newly introduced software to the market is vitally important. The more experience and knowledge the developers have of the Forex markets and program development the more credibility they will have.

Developers will always undertake rigorous research before embarking on a project such as this, including long periods of back testing and a thorough analysis of other leading automotive Forex software on the market. The goal being, to bring something new and exciting to the market, something a little more advanced and more profitable than their nearest rival or competitor. Having that competitive edge over rivals is ultimately what forex traders are looking for.

What traders are seeking

Traders are looking for ways to make their job easier. They are constantly on the lookout for automated Forex software systems that will not only have all the features that existing products provide but also something new and innovative that can improve their existing positions finacially. The whole idea of introducing a new product to the market from a developers point of view is that they have recognized a gap in the market that is not being serviced or provided for. If the product can produce this it will have a competitive edge and will have a major point of difference over its competitors.

Additional to these points traders want automated forex software that is relatively easy to use, affordable and will add value to a traders existing position. Having these benefits in place for traders will undoubtedly have potential users reviewing the developers product with meticulous care in anticipation of what this could mean to their future online business success.

It will be the very reason that Forex traders will be interested in purchasing any new automated Forex software product to the market. If the new product cannot meet these requirements the undertaking would have been a waste of time.

Positive Features To Look For

• The automated Forex software package no matter how sophisticated should be relatively simple to use, easy to understand and uncomplicated. Software designed to take away tasks that would normally have to be done manually by the novice or experienced trader. This is a major benefit for any Forex trader.

• The automated Forex software will be programmed to generate above average returns making it even more appealing. The software theoretically, should be the answer to anyone having money problems as was recently stated by one promoter.

• The automated Forex software will be programmed to inform a Forex trader exactly what to trade and when to trade with mathematical precision taking the risk out of any trades that a trader in the past may have been unsure of.

• This automated Forex software will be programmed to not only determine the best time to buy but is able to predict that when a purchase is made, the price will go up and the Forex trader will profit from the trade.

• The automated Forex software will be programmed in such a way that even Forex traders with no previous experience can get involved in the $4+ trillion a day huge Forex market. Having access to automated Forex software that can do all the hard analysis work for traders makes it a must have tool. This has got to be one of its biggest features.

The big question in most Forex traders minds will be, what’s this software’s point of difference? Is it any different from similar products on the market and if so how? Will it add value to their present situation, is it easy to use, cost effective? etc. The answers to these questions will ultimately determine whether Forex traders will add this new automated Forex software to their existing armor of Forex trading tools.

Conclusion

There will always be a demand for products or services that can help Forex traders achieve their business goals much faster. A new automated Forex software should be programmed to provide Forex traders with the opportunity to turn a few dollars into hundreds and hundreds into thousands with a few clicks on the mouse.

Obviously the trader will need to be shown how to use the new software including features like how it interpret insider, buying and selling signals. Providing easily understood cutting-edge training manuals and video’s is essential for to get a new system up and running so that traders can generate cash returns in quick time.

Before making a buying decision Forex Traders should be prepared to look at the top three products on the market and after a thorough review eliminate two based on some basic criteria and go with the option left

Stop Loss – Have You Insured Your Forex Trades?

Forex trading is a very profitable business but it can be also a very risky business that is if proper money management is not employed. If a Forex trader don’t make proper use of stop loss placements and trailing stop loss or take profit levels, he will be taking on high risk which means that any trades may bring his equity account to the risk of ruin. These tools are very essential, and it is very difficult to make profit in Forex without making proper use of these tools.Forext Trading For Beginners

What are stop loss orders?

It is a type of order which will automatically close a trade at a set level in order to prevent further losses. Often, it is used as a safety precaution and is most needed when a trader made a bad trade.

For instance, say you just bought the EUR/USD at 1.4000 because you expect the euro to appreciate and reach 1.4100 (+100 pips) in the short term. You want to protect yourself by placing a stop loss below 1.4000, say 1.3980, so that if the price does not go your way the trading platform can automatically close the order to prevent you from losing more than 20 pips.

Stop loss orders not only free the forex trader from the computer, it forces him to limit his losses prior to making the trade by way of money management.

While placing stop loss is one of the sound principles of money management, on the other hand, it may cause some trades to hit the stop loss, this is often called a stop out. This is one of the most cited reason why beginning traders are afraid to place stop loss. Another reason will be because of a broker’s (scammer in disguise) stop loss hunting activity (it is most important to stick with a regulated brokerage company)

Trading Insurance For Forex Traders

A stop out by the price hitting the stop loss will cost the forex trader money just like the cost of insurance, but the trader didn’t lose it all and he can regroup and relook at his trading performance at the end of trading day. Stop loss is like an insurance policy- property insurance insured the property and indemify for losses.

In the event that the house is damaged, the insurance company will indemify the losses and the money can be used to rebuilt the house and help the owner overcome emotional shock and financial troubles.

Ensuring a stop-loss is placed in every trade is the first step to proper money management. Putting a money management plan into place may create some additional costs in both time and money. But these costs can work to a trader’s advantage in the same way like paying for a monthly insurance premium cost can protect policy owner against catastrophe for a variety of situation in day to day life.

By implementing a stop-loss is like an insurance policy, a trader is protecting himself from the worst-case scenario, limiting his risk and ensuring that his equity account will not be completely devastated in the event of a catastrophic event that he has little or no control over. Basically, it means that he can come back to trade another day.