Reflections of a Trader

I must admit I love trading. I have loved it all my life. When I was about 8 years old I learned what the stock market was, I don't remember how I first learned of it. I do remember asking my Uncle about it all the time. I suppose he may have introduced it to me. He showed me how to interpret the stock prices, that were published in the newspaper daily. No internet back then.

Apparently, I must have made an impression on him, because for my ninth birthday he bought me one share of Mead Paper Company. My first share of stock, he explained to me, that this meant that I owned a small piece of the company. That was it, a fire was lit in me that burns to this day.

My Uncle passed away in 1988, at the young age of 37. By this time I was 18, I had not talked to him in a few years about the markets. He moved around alot, and he was in failing health the last three years of his life. Back then, I thought his knowledge of the stock market was boundless. Looking back today, I realize that wasn't the case. He he did have dreams, and those dreams still live today through me. I am grateful that he took the time to pass them on.

Today, I trade E-minis and Currencies. I truly think that for some folks, this is the best job on the planet. I know it is for myself. I have'nt become Peter Lynch or Warren Buffet, heck I'm probably closer to Jimmy Buffett. One thing is still true, I am as passionate about trading today as I was 30 Years ago.

One thing has changed now though, I feel stronger about introducing others to trading, than I do about actually trading for myself. Looking back, that may have been my Uncles' passion also. Not the trading, but the sharing.

A Guide to FOREX Trading

The foreign exchange (FOREX) market is the purchase or sale of a currency against sale or purchase of another. The object in Forex is to exchange one currency for another in the expectation that the price will change so that the currency you bought will increase in value compared to the one you sold. Through Forex education and training it is possible to speculate the direction of the market and receive a good return on your investment.

The major participants in the FOREX include commercial and investment banks and central banks. Other participants include corporations, hedge funds, and millions of speculation traders like you. Some of the top banks in the world such as Bank of American, Credit Suisse, and Morgan Stanley are major players when it comes to the FOREX. In order to make money within this realm, you will be competing against all of the major banks as well as individual traders.

When beginning in the FOREX, it’s important to select a reputable broker. After all, the broker is going to be the one paying you when it’s time to cash out. A broker acts as a middle man between you and the FOREX. When you place a trade in the FOREX, your position is filled by the broker and the broker sends the order off to the banks. When it’s time to be paid, your money is with the broker and they need to be able to cover your positions in the market. Most brokers offer a 3 to 5 pip spread on all the major currencies pairs, such as the ERU/USD, GBP/USD and the USD/JPY. A 3 to 5 pip spread basically means that the FOREX must move 3 to 5 pips before your trade is in profit. One pip can be worth any amount, depending on how much money you’re willing to risk per trade.

There are two types of traders, fundamentalist and technical traders. Fundamentalist study the cause of market movement, whereas technicians study the effect. Most traders identify themselves as both a technician and fundamentalist. Most fundamentalist will have knowledge of charts, indicators and chart analysis. Similarly most technicians are aware of the fundamentals. However, the problem is that the charts and fundamentals are often in conflict one another. It’s usually a wise decision to have a bit of training in both fundamentals and technical analysis.

One of the most important factors in the FOREX is learning to manage your money. Traders will experience losses in the FOREX; therefore it is essential that a trader utilizes proper money management. In many cases money management is a simple concept, yet to practice money management consistently is very challenging. Generally speaking money management is knowing when to cut your losses. For each trade, a trader should be looking to make three times the amount they plan to lose. This way a trader only has to be right 33% of the time in order to be in profit.

Pivot Point Prophet

Pivot points have been used by floor traders for years, they are a commonly used indicator of support and resistance areas. A few years back I began to experiment with pivot points. After I got comfortable with them, I began to really like trading with them as an additional indicator.

Now pivot points are not your run of the mill indicator for market price action. This is one of the few indicators that is also used as a stand alone trading system, there are traders who have made entire careers by only trading this indicator. I do not and will not ever endorse using any one indicator as your sole indicator.

I use pivot points, along with other indicators to find areas which present low risk trades. If I am watching to make a trade on a crossover of the 5 and 10 period moving averages. I will watch for cross over just after the moving averages have moved past a pivot point. I definitely do not take a trade that has a pivot point that the price may reverse off of. I have seen plenty of trades be whipsawed (A sudden reversal of price direction) by making this error in judgement.

By using the pivot points to keep you out of whipsaw zones you can improve your odds by about 9-12% to have a profitable trade.

Their are several ways people figure the pivot points for any given day, I personally get mine from another online trader, his pivot points are the most accurate I have seen. Pivot points are a great tool for traders, I use them everyday but always remember the most important part of trading is your money management.

What is Forex?

The first forex firm appeared in 1927, in Stockholm, in a barber shop. Since then it is developed and the IT techniques are making it a global market.

In 1927, a Swedish firm has begun its activity as a currency exchange service for travelers. The society’s siege was at the Central Station in Stockholm. According to the legend, the owner of Gyllenspet’s Barber Shop in Stockholm observed that his some of his clients were tourists in need of currency for their excursions. He has the idea to save major currencies and keep it on hand.

The firm was acquired by the Swedish Railways, and then it was sold to Rolf Friberg in 1965. This firm had a unique status, being the only licensed to conduct currency exchange, apart the banks.

The family Friberg still owns the company, expanded in Denmark, Norway and Finland, having over 50 shops. Like at begin, the shops are located in train stations and airports.

The Euro apparition led to an important decrease of Forex business, and the firm opened new directions, like applying for banking license or realizing regular transactions, similar to the postal service.

The firm has a very attractive slogan: make more money for your money! What more attractive for anybody than the word money?!

The main firm’s concept is still the same: to offer travelers from all over the world the appropriate currencies at the best rates, at the lowest service charges, at any hours and from well situated locations.

Forex still have many locations all over the world, with a turnover in 2004 of more than 22 billion SEK from the branch offices in Sweden, Norway, Finland, and Denmark. It is the world’s biggest foreign exchange bureaus. The main firm’s plan is to open more subsidiaries in new locations and develop the existing ones.

Forex is also the name often used for foreign exchange; all over the world, foreign currencies is bought and sold. The currency traders are making a profit from buying and selling currencies as their value is fluctuating. This fluctuation is based on daily variability in the global market, the supply and demand in international commerce and domestic stocks.

The exchange rate between two currencies is how much one currency is worth in terms of other currency; it is called also forex rate. There is not a bigger market in the world than the foreign exchange market.

There are two currency types: direct quotation (home currency – foreign currency) and indirect quotation (foreign currency – home currency). Every one of us is daily updated with the direct and indirect quotations; if a unit currency is strengthening (appreciation, the currency becomes more valuable) or inverse (depreciation).

Usually, investors are speculating on daily currency fluctuations and this is a constant profit source; this forex business profit mechanism. There are some online forex trading, having real time prices, dealing in currencies and global equity prices. The software is allowing evaluating the exchange process and realizing it online.

The firms working online are usually commission free, with the industry’s margin requirements. The acquire the customers confidence, the online forex trading firms is offering some advantages never founded in banks: 24x7 forex trading, room services with limit order deals and day trading.

How You Can Be Sabotaging Your Trading - And Not Even Know It!

Whilst trading routinely involves decision making, there are no more important decisions you have to make than when to close positions. Quite a few traders often overlook this part of trading or underestimate how important that it is. It is selling that impacts directly on whether or not you make any money trading. Buying shares is simply a means of putting yourself in a position to make money from trading.

There is a typical experiment which is conducted in Economic and similar classes, which relates well to selling shares. It involves dividing a room of people into two groups. Everybody in the first group is handed an imaginary coffee mug. People in the second group receive nothing.

Everybody in the first group is asked to write down on a piece of paper how much they would be prepared to sell their coffee mug for. Everybody in the second group is asked to write down on a piece of paper how much they would be prepared to buy the coffee mug for.

The amounts from all people within each group are compiled and an average calculated for each group. Generally speaking the average amount from the owners of the coffee mugs is double that of the average amount from the potential buyers of the coffee mugs. This observation supports the Endowment Theory.

The Endowment Theory suggests that people who own something place a greater value on it than those who do not have it. This is applicable in the sharemarket, and can affect your decision making when deciding to sell shares that you should be selling. Often you will find yourself owning shares and believing that they are worth more than what the present share price is. The only unfortunate thing about that is the real price is what it is presently trading for on the market and not what you think they should be worth.

This can affect you by convincing you not to sell shares when you may be best advised to sell them to stop any further potential loss. You may have bought shares for $4.00 and set a stop loss at $3.50 for example. A week later the shares are trading at $3.50 and you have received your cue to sell them. Thoughts enter you mind about how it was only a week ago that you paid $4.00 for them and how you think they are still worth that especially when you consider the report they released last week concerning future growth, for example.

These thoughts can paralyse you to take no action and not cut your losses and consequently have you breaking one of the most important time tested rules you can follow.