Casual Forex Trader

Yes, I’m going to talk to you about forex divergence trading, which should be a little bit different than what you’re used to when it comes to trading. I know there are a lot of you in this market that are just scared of risk and wish that you could more easily identify the selling points.

Well, there are ways to know when to sell near the top and buy near the bottom. If you were in a long trade, it would be sweet to know exactly when to sell because its tough watching the ups and downs. There is a way to do all this that is known as forex divergence trading.

The key to finding the proper prices is through a concept known as a oscillator indicator. There are a lot of different oscillators that you can use, but it really doesn’t matter which one. After you start focusing on this, you’re going to pick up on this much easier and probably will be able to pick this up by just looking at a graph.

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I wanted to talk to you about sniping forex trades and what that means to you. Sniping, at least in a market sense, was first introduced to me on eBay. When you snipe on eBay, you end up waiting to bid on an auction until the last minute and steal it away form those bidding. The idea behind it is very simple. Instead of bidding up the price for days in advance, just wait and snipe at the last minute, which should result in a much cheaper price than in some sort of bidding war.

The process of sniping in the forex market, you have to anticipate when there is going to be a huge move in some sort of currency. This can sometimes be a little trickier to understand, but once you can identify the (sure thing) events that will cause a currency to jump in price, you snipe in and buy.

The most obvious thing to snipe with is the Federal Reserve (or any other Central Bank for a currency). The central bank of all countries set the interest rates in which banks can get cash. It’s really just a way to expand the supply of currency or reduce the supply of currency entering the market.

When the actual supply of currency is increased, you can expect that the value of the currency will go down. This happens when the interest rate is lowered.

When the actual supply of currency is decreased, you can expect that the value of the currency will go up. This happens when the interest rate is raised.

You can snipe in when you anticipate a move in either direction and profit. That’s all there is to sniping forex trades.

From Chezz Larsson
I thought it would be important for me to help you stay organized when you trade. A lot of people don’t understand this, but it actually makes you a much more effective trader. When you can easily look through all your trades and understand it in a relatively short manner, you’re obviously going to be better off with your trading. This is why I think a trading journal will be very beneficial for you.

Personally, all I use is Microsoft Excel for this, but if you don’t have that you can just use OpenOffice‘s version of it (which is free). A lot of people get intimidated by spreadsheets and I was once like you. I remember having friends at university that used it and I could never figure out why. It just had a bunch of cells you could write in. It didn’t seem like anything user friendly or fun to maintain.

All you want to do is put all the important information in about the trades you make. Here is a list of what you should include:

• Time of placing trade and selling trade
• Attempted Strategy
• The Pair
• Entry and Exit
• Profit/Loss
• Comment – On the trade

This is really all you need for your trade journal. You just want to have the basic information about the trade there. This isn’t going to be a Bible of accurate and profitable trading, but it should help you learn and understand. Understanding is really the key and that is the value it will give you.

A lot of people don’t want to invest a lot of money or any money when they are starting out. And seriously, I can’t blame you. The economy isn’t doing that well and it can be scary dumping your money into something that you’re really not sure is going to return you any money. Profiting in forex is great because it is dependent on leveraging currencies, which can be done in good economic times and bad ones. Demo accounts can be your best friend or your worst enemy.

Let me explain how…

Demo accounts are nothing more that simulations of the market. It’s your way to play, without actually having to invest real money. I know there is a lot of people here saying “well that’s genius. I can practice until I learn everything, than use real money.” The problem with demo accounts is that they’re based on past market performance or typical past behavior, which can often be too reliable in a way.

Like if we were talking about stocks and you “pretend” to buy it at a specific price and it goes up each day, that would be a real good simulation because you get to see the real time market, you’re just pretending though.

So when you test some strategy out in a demo account you have to make sure that you aren’t literally getting hustled. You’ll find that behavior in the demos are more normal and typical, which doesn’t exist in the real markets. In today’s market, moving from a demo to real market can be very dangerous. Currencies are moving in rapid speeds, sometimes breaking fundamentals. It’s hardly a “normal” situation and that means you can easily be burnt out of all your money.

I think the only true way you can know if you’re getting somewhere is by testing in the real market as well. I’m not talking about putting your money out there but at least “pretend” to buy. Just pretend to buy at a specific point and see what happens.

The economy is probably the most volatile it has been in most of our lives. It’s actually quite groundbreaking. I turn on CNBC and I see the markets continue to tumble day after day. The bailout bill has been passed that was supposed to give the market a little hope, but it hasn’t done anything. The only real good news is that oil has gone down. It even looks like it might fall below $80 a barrel today.

Forex traders are a bit scared. They’re not scared because there aren’t profit opportunities because I mentioned in my previous post that this is a recession free market. The fear isn’t of everything going down the tubes, the fear is of the volatility in the market.

Volatility is probably about the biggest killer of wealth during any sort of tough economic situations.  It’s not that things are actually bad. Trades don’t really represent what should actually be happening. People are dumping trades and not exactly buying because they’re afraid that the volatility might get them.

That’s the problem, people don’t really believe the forex markets are bad, it’s just that you don’t know which side your trade is going to come out for you and that is extremely risky.

Being able to read the forex market is important. There are a lot of places to make money, even in these troubling economic times. A lot of trading has to do with yourself. I don’t want to turn philosophical on you, but the way you trade really speaks volumes about how well you’ll profit. I’m a big fan of not trying to know everything. I know that seems odd, but you’re not going to be a genius in this business.

What you need to do is take advantage of those skills you have. That’s what it’s all about. All great businesses don’t try to be everything to everyone. They try to stick to what they do best. It’s not the trading method that will end up making you money, it’s your behavior.

Here is an obvious fact, bad analysis will give bad results. You have to make sure your analyzing is proper or you’re just wasting your time. You need two types of analyzing techniques. The first is the technical/math like one and the other is fundamentals. I’m a fundamental person because I like simple rules that dictate all action. Other people don’t get that and prefer the technical. Make sure you learn both and see which one meshes best with your personality.

Be smart and always use what meshes with you. This is all about taking advantage of those skills you have, rather than trying to do what other people are doing.

I wanted to take the time to talk to you about what you need to know about fixed spreads and variable spreads. When you’re looking at a broker, it is important to understand this concept. It is important because it can end up costing you money over time.

Basically you have two types of spreads; variable and fixed. There is a debate about which is better among the traders out there, so I’m just going to show you the facts and you can come up with what works best for yourself.

Variable spreads means there you’re going to have the difference between buy and sell prices fluctuate for a particular pair of currencies. What happens is if there is a more volatile period, your broker will actually widen this spread. The spread at its smallest during the more calm and inactive times.

Fixed spreads are just fixed. It doesn’t matter what time of the day it is or how volatile it is. You’re going to have a spread of roughly 2 or 3 pips for a typical pair of currencies.

Basically when you look at them both, if you’re using a fixed spread, you’re sort of paying more during the inactive times and less during the more volatile times. I guess what you determine to use should reflect the type of trading you do. If you’re someone that traders in the evening after work when it isn’t busy, you could probably get away with a variable spread. If you’re someone that is going to do this during the more busy times of the day, than fixed would probably work for you.

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