Enlightened Individual

We have seen on trading strategies, and will look a bit on automated trading.

Automated trading is a largely debated topic; are there any platforms making the perfect choices? Are there any systems “intelligent” enough to get maximized profit and minimal losses? Of course there are no real substitution for human understanding and logical resonation based upon knowledge. However; most systems are smart enough to look for cues to enter and exit. They act without emotions and does it best to predict trades. They are however limited in knowledge and mostly based upon only technical analysis. You as a human being could read some news that you know for certain is either bad or good for your investments and can act about what you learn about the world. However; you and me have emotions, and are particular strange when it comes to money.

So please; before you decide using a automated Forex trader you should be aware it mostly act upon technical analysis, and are not knowledgeable as you. It might however be an advantage having a computer analyzing a lot of data for you and doing the transactions for you.

There are some requirements you need to fulfill before creating an automated Forex trader;
1) Choose a trading platform
2) Choose a company creating automated trading plug-in
3) Understand how the system should trade and choose strategies fitting you
4) Decide whether to use your home computer, or a hosting company

There are some trading platforms to try out there; and there are companies delivering automated systems. However; these systems most often cost money. Before using any of them you most likely have to pay some money. And you should try both your strategies and software on trial before making actual transaction with it. Once the system is set up you should also watch how the system works, when it makes trade, and what configuration you need fine tuning.

It’s not particular difficult setting up a system and making it use various strategies; but it should be done with care and a basic understanding of what the system is doing for you. You don’t want it to aggressive; nor do you want it to passive. You want to find a balance creating a small additional income without doing to many stupid mistakes.

Another evaluation you should do is whether to use your personal home computer to run the system; or to buy a virtual private server or dedicated server at a hosting company to do the trading for you. There are several advantages of outsourcing the computer, as there is no one there to crash the computer or other unexpected shutdowns. There is also the option of not having to have the computer on all the time saving some electricity and some other things. These things should be carefully planned.

There are three important features to any strategy:
1)    Enter the market by early signals
2)    Leave the market by maximal profit or minimal loses
3)    Avoid false signals

Included is of course the importance of choosing a correct time frame.

Many choose only looking at signals given by graphs; and acting accordingly; much like software for automated trading would do. The best trades might sometimes be triggered by a news article you read, finding the correct signals that indicate its right; and waiting for a signal confirming the largest growth is over. Hence; the best trading strategies are more long term and based upon both knowledge and analytical skills. These are however often more long term.

As you might remember from previous; day trading and short term trading often contain more risks than long term. And be aware; some consider day trading as gambling as it’s really difficult to do successfully.

You might sometimes be successful by using knowledge on short time trading with technical analysis; however; it is difficult and requires a understanding of how news or situations might affect the currency; and you need a understanding of which signals to look for to confirm the knowledge you have is correct. By doing this you might develop your own, personal strategy helping you to earn money much quicker than other strategies that are pure analytical.

I do ask anyone wanting to do trading to educate themselves well to understand why they are making actions, how to control their own human greed, and how to successfully manage their money without risking all of it at once. There is nothing more important than knowledge to be successful within trading. After you understand yourself and economics is the right time to start looking at patterns and signals you find in the software; but the strongest knowledge is human behavioral and how business and politics affect the local currency. Having a strong knowledge will help you to create winning strategies that are not based on pure luck.

Again I empathize how important it is to not use money that are needed for bills or the family; only additional money you can afford to lose. IF you are successful you might not lose anything at all. But be careful with any investment, and do not believe you can get rich without hard work. Hard work and determination is what creates wealth and winners.

-Kentaki-

Previous in the FOREX tutorial for beginners we looked a bit on bid, asks and spreads. These are important words to the FOREX world.

Now we are going to look a bit on leverage; leverage is to lend, or use credits of the broker. It allows you to spend us$ 1000 to control us$ 100.000. To be able to do this the brokers offer different ways of trading:

The Spot Market: this involves a transaction from one currency to another currency. We do the exchange over two days; where the first day is called the “value date” which is the settlement days where you agree upon the exchange, while the “deal date” is the date you agree to do the exchange.

Other trading that you might be a part of is:
Forward and futures
Options
Contracts for differences
Spread betting

I will not cover all these sections right now; but they will be discussed in the future.

Now that you know a bit about the trading you might be thinking about deciding a platform for your trading; this typically includes deciding on a broker, and software to use. As I talked about previous; you should look at the pips rate, but more importantly you should make a research on the broker.

There are unserious actors as brokers; so make sure you read reviews; but also make sure they are attached to a real bank. You should also make sure they are registered with the Futures Commission Merchant (FCM), and regulated by the Commodity Futures Trading Commission (CFTC).

After you have narrowed down the list of brokers that might be suitable for you, you should request a free trial of their software to make sure they have a tool that is easy for you to use; and providing you with the information necessarily for you to use your preferred strategies. You should also evaluate which option is out there for automated trading while you are away. There might come a time where you want to start using automated tools; and you should have chosen a trading platform suitable for both manual and automated trading.  It might be too late to choose a good trading platform at a later stage without having to change broker and software; which is time consuming.

Most brokers also allow you to have a trial account where you can practice making trades without actually risking any money. Trial account and trial software should be one of the most important tools for the beginning FOREX trader.

-Kentaki-