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When you first sign up on a betting website, you will be given multiple bonus offers. These bonus offers are one of the ways to earn money to wager. You will have a chance to bet on a sport on these websites without providing a large amount of money using the bonus offer on your sign up.
You can repeat this strategy to multiple websites as every website offers a signup bonus for their new customers. By doing this, you can increase your chance of earning. Just make sure that you are choosing legitimate websites, which is why it is best to still be picky in choosing what site to sign up for.
Betting for the superior team is common as bettors get excited and tend to bet towards multiple superior teams. Betting in favor of the road favorites is not prohibited. You can still bet on the favorite teams, but you will have to make sure that you have a good reason behind it.
These teams do not need to win alone. They need to win by a considerable margin based on what the spread suggests. It is best to study and understand the key numbers for point spread betting in sports, especially in football. Key numbers have a great impact on football point spread betting. Getting more familiar with these key numbers will help you better understand how point spread betting works, which will result in a successful betting experience.
Even though there are so many opportunities to bet through these countless games available, it is still best to be picky in which game you will wager your money. Most bettors have the urge to wage as many games as possible because they think they will profit bigger and faster by doing so.
But it is the complete opposite. You will be likely to gain profit by focusing your energy and resources on one game at a time. Point spread betting is not an easy way to profit from sports betting. You will need to study the ins and outs of this type of betting to be successful. His work with professional sports organizations includes optimizing scout travel, in-depth player analysis and lineup configurations. Correctly predict the winning team Among his greatest innovations was the discovery of neural networks as a powerful tool for sports betting.
While the model was initially developed around NBA betting, it has since been applied to other sports — chief among them, the NFL. From this model, we derive our picks for each game. And the best part is, our system is a living, breathing predictive model — it possesses machine learning capacities that allow to detect trends and potentials that we mere humans could only dream of finding.
For more information, check out this handy dandy video on how it works. Essentially there are six different ways to bet on the NFL. Bookmakers set a spread with a favorite and an underdog. Pretty straightforward stuff. Moneyline betting is an equally common form of sports betting as spread bets. The difference is that with moneylines, bookmakers will set lines representing the favorite and the underdog.
NFL totals betting is rather self-exploratory. A prop bet is a special kind of bet that has nothing to do with the outcome or final score of a game. Some of them are player-based — how many yards or touchdowns a specific player scores. Some of them are based in live betting, i. In order for the bettor to win the wager, all outcomes must unfold accordingly.
This might involve a handful of other bets such as a totals bet and a moneyline bet. According to a prominent Vegas oddsmaker, one of the most integral statistics for betting the NFL is… duh duh duh dahhh… pass yards per attempt. Teams that are successful and efficient in their passing game tend to carry the edge over their less successful opponents.
Taking this little known or acknowledged stat into account in your handicapping will no doubt help you find success in your waging. The team who averages more turnovers per game is likely to give up more scoring opportunities and thus the whole game. So it goes without saying that our model analyzes far more than just turnovers and passing yards per attempt.
Nonetheless, betting in any case involves a level of intuition.
The difference in this betting strategy is it forces the player to have access to multiple sportsbooks. For instance,. In order to successfully arbitrage bet this game, the bettor would need to bet on the Raiders at BetMGM. He would also need to place a bet at DraftKings Sportsbook for the Chiefs.
Ideally, the Chiefs win this game by 7 or 8 points and both bets win. If not, the bettor still is guaranteed to win one of the two bets. Vigs or vigorish is something sportsbooks have used to take this type of betting option away. Typically a spread bet is taken at Very similar to parlay betting but with a twist!
In order to place a round robin bet, the bettor must select multiple bets from three to ten teams. A round-robin then takes these bets and makes as many two-team parlays as possible. If you wanted to bet on three different events, it could equal three different parlays. If one of these parlays hit, you are paid on that parlay. The only downside of round robins is if all of your bets hit, it will not pay out the same amount if you parlayed them all.
As you can see, these three bets are placed into three different parlays. If one of these parlays is successful you are paid for it. In this example, you cannot win two you would win all three if they are successful. Round robins mitigate risk for the bettor but still gives you a reasonable payout if all of your bets hit. We make no guarantee that any of these strategies will result in a winning wager, and the purpose of this article is only to detail some popular betting strategies employed by many sports bettors.
Written By: Erich Richter. Middling Sports Betting Strategy In terms of risk, middling might be the least risky option for sports bettors. Jacket Text From the author of the best seller 'The Financial Spread Betting Handbook' comes a book about constructing winning spread betting strategies. Seven strategies are presented covering all types of market; up, down and sideways. Key ingredients for each strategy include overall market direction, entry and exit techniques and bet size determination.
The strategies are used on a wide range of instruments including stocks, commodities and currencies, and trade duration tends to be in weeks. Examples of each strategy are fully illustrated with charts and commentary - there are over charts in this book, taking the reader step by step through strategy implementation.
Other books by this author 7 Charting Tools for Spread Betting. The Financial Spread Betting Handbook Media Coverage MoneyMaker Magazine There are two common misunderstandings about spread betting, one being that it is just gambling, the other that is just for the short term. Read more. SIGnet Malcolm Pryor is an active investor, trading coach and author, editing the website www.
Casino Online Author of ? Media Review A carefully written book that chartists will find useful. Media Review Pryor does a good job of explaining his views and trades and uses clear charts. Media Enquiries If you'd like to get in touch with the author for interview or comment, or you'd like a review copy of this product, please contact us at pr harriman-house.
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All you have to do is predict whether a particular stock, security, or market, anywhere in the world, will go up or down over your chosen timeframe. If you re right, you win; but if you are wrong, you lose and could end up paying more than your initial deposit if you don t close your bet in time.
Huge range of investment choice Most providers will give you access to a range of be UK Shares Most commonly on the UK Stock Index, although, some providers will allow smaller companies. Spread Betting is currently one of the most taxefficient ways of investing in the stock market. But exactly how tax free is it? You pay no UK Stamp Duty, which means you save 0. No Betting Levy. No need to declare it on your tax return. It s only tax free if you are a UK resident.
Dividends: The holder of a Spread Betting contract is not entitled to any dividends. However, if a company is likely to go exdividend before your bet expires, the brokers will often adjust the price of the bet by building the value of the estimated net dividend into the price you are quoted. Stick to what you know Although there is a huge choice, investors generally stick to companies, indices or currencies that they know and watch carefully. Please remember that Spread Betting is aimed at short term traders, and consequently the impact of any dividend can often be ignored.
Important The levels and bases of taxation may change and are subject to individual circumstances. In addition, any capital losses cannot be netted off against capital gains from other investments. Sectors Take a view on a market sector such as Banking or Telecoms.
In our opinion there is no better Spread Betting service. The costs are low, the information is second-to-none and the online, mobile and telephone service is exceptional. Hargreaves Lansdown provides Spread Betting in association with IG who are an award-winning provider. The price When buying and selling the underlying shares, you are quoted two prices, for example: Vodafone Ordinary Shares p This is the amount per share you receive if you sell p This is the amount per share you pay if you buy The principle is the same with Spread Betting.
You are quoted two prices and you buy at the higher price and sell at the lower price. Your objective is to correctly predict which way the price will move, so that the price you receive when selling is HIGHER than the price you pay when buying the difference between the two prices is used to calculate your profit or loss.
Going short Unlike conventional share dealing, Spread Betting also allows you to sell first and buy back later with the aim of profiting from a falling price - this is known as going short. See Page 9 for more information. Instead of buying a quantity of shares you simply decide how much money you would like to bet per point. Important All of the examples included within this brochure are for illustration purposes only.
This example shows the impact of a price movement on your profit and loss only, and excludes the impact of financing, margin etc. Let s look at how this works in practice, taking the previous example, where Vodafone is quoted at p to sell, and p to buy.
You might decide that Vodafone is due to rise and choose to buy at 10 per point. This means that when you close your bet you would receive 10 for every point that the Vodafone price rises above the price you paid; similarly you would pay 10 for every point that the price How price movements can affect your profit and loss - GOING LONG Price goes up 10p to pp Opening purchase value p Closing sale value p Points moved 9 points Profit per point 10 Profit 90 Price goes down 10p to p p Opening purchase value p Closing sale value p Points moved 11 points Loss per point 10 Loss 8.
The view that the price will rise, and the resultant instruction to buy, is described as long or going long. Going short or shorting is simply the flip side of going long. If you think the price will fall, your aim is to sell at a higher price than the price you buy it back for. Shorting is a way of potentially making money from a falling price as opposed to a rising price. The ability to go long or short is an important investment tool, since it allows you to trade in any market condition you will be able to take advantage of rising or falling prices.
The main problem investors have in understanding this concept is how you can sell something that you don t own. However, a Spread Bet simply takes a view on the direction in which the price moves, and you will not be expected to own the security in the first place. If you go you think that Opening deal Closing deal Long the price will rise Buy Sell Short the price will fall Sell Buy Let s take our previous example and assume you want to go short.
Remember the quote for Vodafone is p to sell and p to buy. This means that when you close the bet you will pay 10 for every point that the Vodafone price rises above the price you previously sold at; similarly you will receive 10 for every point that the price falls below. For the sake of simplicity we will assume the loan is interest free.
After a few years the value of the houses rise to , and both investors decide to sell. However, Investor B is even happier. He has only paid 50,, and borrowed , He pays off his loan of , from the sale proceeds, and is left with , in cash. Had the price of the property fallen to ,, both investors would be looking at a loss. This clearly demonstrates the high-risk nature of dealing on margin.
Dealing on margin, margin trading or gearing are all terms associated with Spread Betting. The initial amount you pay is known as the deposit or initial margin. Dealing on margin can significantly increase your profits, but can also significantly increase your losses; that is why Spread Betting is riskier than buying shares through your stockbroker. The principle is the same when comparing conventional share dealing with Spread Betting When buying shares from a stockbroker you will be asked to pay for them in full.
If you asked to buy 10, worth of Vodafone shares, you will be expected to pay the full 10, This means that you control the same size asset with Ongoing margin If your position starts to lose money and you do not have enough money in your account to cover the loss, you may also have to pay ongoing margin. Ongoing margin and margin calls Like dealing in ordinary shares, profits or losses from Spread Betting are only realised when you close the deal.
However, with a Spread Bet you must always ensure that you have enough money on your Spread Betting account to cover not only the initial cost of the trade, but also any running losses. A margin call will occur when the running losses on all your positions exceed the amount of money your broker requires you to have on account. But how do you know how much is needed? Different brokers will apply different rules and you should make sure you fully understand what your broker requires from you.
This is just one example of how it could work: Let s assume you ve put into your account. Using that money, you have opened up several positions with a total initial margin requirement of Look at the difference in these examples, depending on whether your positions make or lose money: As soon as your account has a negative balance, your broker could contact you and ask you to top up your account so that your total position remains in credit.
Most providers would recommend that you keep some extra cash on your account to cover any small price movements against you. This doesn t mean you are predicting what the price will be at a precise moment in the future; instead, you are simply selecting an expiry date when your bet will come to an end. You can close your bet and take any profit or loss at any time before that date.
When you look for a particular instrument, you will normally be given a choice of the available timeframes. This is because for bets with a longer expiry, the broker has to build in the additional costs involved in running that position for a longer period; therefore the spread will be slightly larger.
Bets with a stated expiry Bets which state a specific month will most likely expire towards the end of that month. The months are usually the last month of a calendar quarter i. March, June, September and December. Details of expiry dates can normally be found on the provider s website or dealing platform.
Daily bets will expire at the end of the trading day. Need more time? Roll it over! In some circumstances you might want to keep a bet open beyond its expiry date. This could be because it hasn t reached your target, or you are waiting for news which will hopefully move the price in your favour. Rollovers allow you to convert a bet which is near its expiry date into the next contract period.
This will involve the bet being briefly closed and then reopened. If you close a weekly or quarterly bet before it expires, or close out a Daily Bet the same day you open it, then additional financing will not be a consideration. If you roll over a long position you will have to pay more. Typically your bet will be closed and opened at a new price; the price difference reflects the cost of financing rolling forward. In principle it is equivalent to the interest that you would pay on your mortgage when you buy a house the longer the mortgage, the more the financing charges will affect you.
Automatic rollovers Many providers will offer you the facility to automatically roll your bets forward. This will typically be available via their dealing platform. The rollover cost is charged by widening the difference between the buy and sell price the spread.
Although the position is rolled over at the mid-price, the spread around the mid-price will generally be widened by 1 to 2 points. This is commonly the case when rolling a bet on an index and is calculated in a similar way for equities.
The actual rate varies and can be found everyday in the Financial Times newspaper. How much does it cost? We ve already mentioned that there is a very wide range of investments in which you can trade. Each type of investment has its own way of calculating how much money you need to pay when placing an opening bet this amount is often known as the initial margin payment.
We will look at the two most common forms of margin, on equities and indices: Equities The amount you pay up front is normally calculated as a percentage of the full value of the bet, which in turn is your stake multiplied by the price. Your broker will supply you with more information via the dealing platform, or you will be able to speak to a dealer to clarify how the margin is calculated for a specific instrument.
Indices Each index future has a fixed margin factor associated with it for example, a Daily index might have a margin factor of The initial margin payment is calculated by multiplying the margin factor by the amount of the stake. Let s put these together and look at a couple of examples so you can see how they work in practice.
In this example, you are going long i. You bet 10 a point that the value of the UK index will rise above by the time your bet expires; and that particular instrument has a margin factor of The initial margin payment, i. As soon as your account has a negative balance, your broker could contact you and ask you to top up your account so that your total position remains in credit. Available order types The variety of order types available to investors through Spread Betting is yet another reason for its popularity.
Of course this is in addition to the standard buy or sell market orders. You can place trade instructions to help manage your potential exposure to losses, to take profits at your chosen level, and set instructions to buy or sell at a price better than the current market level. Stop Loss order A Stop Loss is an order which closes your position at a specified price if the market moves against you.
You can place a Stop Loss when you open a trade and with most providers you will be able to adjust or cancel the Stop Loss as the market moves. But why? Professionals use Stop Losses to reduce their risk and to cut their losses they set parameters of what they are willing to lose and stick to it. Private investors still aren t fully harnessing the benefits of Stop Losses and all too many hold onto positions that are running away from them.
It s impossible to monitor your portfolio constantly, and unless you use a Stop Loss you could get a nasty shock when you next look at your account. Some providers will also allow you to have a trailing Stop Loss, so that you can protect your profit as the price moves. Stop Losses are frequently used by stockmarket If you go you will set your Stop Loss Long open your bet with a buy below current sell price Short open your bet with a sell above current buy price This can be fantastic news if your position is the right way, but a potential disaster if you re not.
An ordinary Stop Loss order will be triggered if the market trades at the price you set, or if the market price gaps past your level; in which case your position will be closed at the next available price. You pay a small premium - for example, just 2 points on a UK daily bet - to the provider, who in turn guarantees executing your trade at the Stop Loss price you set.
Limit Orders As well as using Guaranteed Stop Losses to control your risk and limit the downside of your investment, most providers will also give you the facility to set a Limit Order to buy or sell if the price moves to a more favourable price than the current level. Limit Orders can be used to open or close a bet. For example, you may have a long position in Vodafone at p. You might decide that should the price reach p you would like to take your profit and therefore set a Limit Sell order at p.
Alternatively, you might have a keen interest in Vodafone but think it is over-priced and decide to set a Limit Buy order to open a position should the price go down to p. A linked order allows you to place two orders against the same trade e. If one order is executed the other one will automatically be cancelled. Binary Bets Some providers will also offer Binary Bets on a number of markets.
For example, there might be a Binary quote on whether the UK index will settle up on the day. If the event occurs in this case, UK index settling at a higher price than the previous day s close the bet settles at ; if it These are the only two possible settlement prices.
Binaries give you a simple win-lose proposition, just like a traditional fixed-odds bet. Except that you can also close your bet out before the final settlement, to cut your losses or take your profit early. Instead of quoting odds, the quote is a continuous two-way price for every Binary Bet.
Providers offering Binary Bets will have information on responsible gambling on their website and will be licensed and regulated by the Gambling Commission. When Spread Betting, the risk and reward are always there in equal measure and the successful trader is one who knows how to minimise one and maximise the other.
Here are a few tips that might help: 3 Only trade with money you can afford to lose. Never open a position without setting a Stop Loss order to protect yourself price and invest at the right time. Most investors will enjoy more success from a handful of companies or markets that they watch closely.
Get to know the trading platform first by using a trading tutorial. Learn how to take profits using Limits and cut losses using Stop Losses. Greed is always a big factor when investing. Set yourself profit targets and stick to them. Think about how much you are willing to lose. Set your Stop Loss and keep to it, rather than moving your Stop Loss further away in the hope that the price will recover. This will vary from provide r to provider but will generally be around Q A How risky is Spread Betting?
Spread Betting is high risk as your trading on margin. Remember don t use all your money on just one trade start small and build up. Q How long should I hold a Spread Bet for? A Although bets have expiry dates but you can hold them open for as long as you like by rolling them over. However, they are generally seen as short term investments due to the risk and financing elements.
You will be able to close a bet at any point during the trading hours. Q How important are Stop Losses? A Stop Losses are an essential tool for successful traders. They are generally underused by private investors who do not take advantage of one of the most important investment tools available. We suggest that every Spread Bet you place has a Stop Loss. Q Because it s risky do I need to constantly watch the markets?
A Not if you place a Stop Loss. Although the margin element of Financial Spread Betting means that gains or losses can be achieved more quickly than conventional trading, you will have all the investment tools you need to be able to set your Limits and Stops, so that you can manage your losses and take your profits without having to sit in front of your computer 24 hours a day.
Q How do I find out about different margin requirements and trading? A Nearly all Spread Betting providers will provide you with details on their dealing platform, but you can always check the details of a specific instrument by calling a dealer.
A guide to CFDs Contracts for difference For more information please contact us on or visit our website www. How do CFDs work? A CFD Contract for Difference is an arrangement made in a futures contract whereby differences in settlement are made. You can move forwards and backwards. Here are three reasons why. Even if you ve never traded before, you probably know how the financial market works buy in and hope it goes up.
Additionally, there are a number of worked examples of how our. We look at some worked. We look at some. Module 3 Introduction Programme Leverage and margin This module explains leverage and gearing and compares spread bets with non-geared investments. Additionally, there are a number of worked examples of. Cornhill Capital Limited is a leading independent investment company. Remember that trading in forex is inherently risky, and you can lose money as well as make money.
Manage your. Introduction to CommSec CFDs Important Information This brochure has been prepared without taking account of the objectives, financial and taxation situation or needs of any particular individual. Structured products Precision tools. A guide for private investors. Structured products are listed securities available for trading on London Stock Exchange s regulated Main Market. Structured products. Trading Platform Guide V1. Only speculate with money you can afford to lose; you may lose more than your original stake or deposit.
Welcome to Spread Co. Trading the markets with Spread Co 1 1 Welcome to Spread Co I founded Spread Co in with the vision to bring a custom built, professional trading platform to financial traders. General Forex Glossary A ADR American Depository Receipt Arbitrage The simultaneous buying and selling of a security at two different prices in two different markets, with the aim of creating profits without.
Strategy 1 -Market SentimentThe forex market is heavily driven by market sentiment, and it is market sentiment that influences traders' decisions by triggering certain emotions and thoughts. Find out what defines the current market sentiment, and how you can incorporate market sentiment analysis into your trading. Strategy 2 -Trend RidingThere is so much more to riding trends than simply closing your eyes and buying at any point during an uptrend or short-selling at any point during a downtrend.
This chapter shows you how you can jump on a trend when the trend is the most robust, rather than when it is about to end. This way you can ride a trend with a higher chance of success. Strategy 3 -Breakout FadingMany false breakouts occur in forex price charts, and the occurrence of these fakeouts provides the perfect opportunity for fading breakouts, that is, trading against those breakouts.
In this chapter, I explain why most breakouts fail, and how you can identify high-probability fading opportunities. Strategy 4 -Breakout TradingWhen currency prices break out of certain price levels, a large sustained move in the direction of the breakout may occur, giving rise to a situation whereby big profits could potentially be captured in the least amount of time.
The main problem with trading breakouts is that many of these breakout attempts fail. In this chapter I walk you through several guidelines of how you can better identify potential breakout opportunities for this strategy. Strategy 5 -Decreased Volatility BreakoutThis strategy is conceptually similar to the strategy of breakout trading, because in both cases the trader will be hoping for a successful price breakout.
This particular strategy, however, requires that the forex market registers a period of relative calm and low volatility before the strategy is to be implemented. Strategy 6 -Carry TradeThis is a fundamental trading strategy that is highly favoured by institutional investors.
In this chapter, I explain how a carry trade works, and highlight some points which you should keep in mind when adopting this strategy in the forex market. Strategy 7 -News StraddlingThe forex market is extremely sensitive to economic and geopolitical news from around the world, especially those which relate to the industrialised countries. Find out how you can trade news releases with a higher probability of success. Risk disclosureTrading forex involves substantial risk, and there is always the potential for loss.
Your trading results may vary. No representation is made that any information in this book will guarantee profits or prevent losses from trading forex. You should be aware that no trading strategy can guarantee profits. IntroductionThere are many different ways of trading forex, such as spot forex, futures, options or spread-betting. This book, however, shall focus on the trading of spot forex. The most significant difference between spot forex and futures is that spot forex contracts are traded over-the-counter at no central location, while forex futures are traded on an exchange.
This gives rise to another unique aspect of spot forex -the hour non-stop action; this is one major reason why I enjoy trading spot forex. With round-the-clock trading a person in any time-zone can trade spot forex at any time -whether during the day or night.
When I started in forex, I could only find one book on forex trading. Forex was not as popular as stocks or options trading, so there were very few articles in magazines that focused on this field. I spent the first one and a half years learning how to trade forex and honing my skills on a demo account, before progressing to a real account, when I became consistently profitable.
The breakthrough came when I incorporated fundamental and sentiment analysis into my predominantly technical-based analysis. Even though I was able to dedicate myself to full-time trading, I found the initial learning curve to be extremely steep, as I had no mentor and had to learn all the ways of losing in the market before I learnt how to profit from it. I hope that through this book, aspiring and current traders are able to fast-track their learning, and greatly improve their trading performance.
The forex markets have the promise of fast action and huge profits, but the risks are also great. The good news is that most of these losses can be prevented by taking the time to learn how to trade the forex markets and by implementing careful money management. The forex market consists of a worldwide wired network of buyers and sellers of currencies, with trading all done over-the-counter OTC , which means that there is no central exchange and clearinghouse where orders are matched.
If you are looking for hour action, you can find it in this global trading system, where no physical barriers exist and activity moves seamlessly from one major financial centre to another. A reason why there is a veil of mystery over forex is that the market was once the exclusive playground of banks, hedge funds, corporations and financial institutions, where money changed hands for commercial and speculative purposes. However, forex has now expanded and is easily accessible to all traders with the rapid emergence of online currency trading platforms.
Many of these platforms are wellequipped with free charting software, real-time news-feeds and easy-to-use order placing systems. The wide availability of sophisticated technology has spawned a whole new level of foreign exchange, where self-directed so-called "retail" traders can easily buy and sell currencies through an internet connection with a click of the mouse, dealing with invisible counter-parties on the other side of the transaction.
This group of people also known as speculative traders engage in trading forex for the sole purpose of making profits. Welcome to the new world of online forex trading. The rapid fluctuations of currency exchange rates are what attract speculators to the forex market as currencies are highly sensitive, and thus react very fast to changing economic conditions of countries or regions, changing interest rates and political happenings around the world. Sometimes central banks of countries attempt to intervene in the forex market if the policy-makers feel that their country's currency is too strong or too weak for their own good.
All these factors lead to high volatility of currency prices, which can be taken advantage of by traders who speculate on the direction and magnitude of the current and future price move. For a rough guide of currency pairs and their relative volatility, refer to Figure 1. Forex has increasingly become an extremely attractive alternative asset group for speculators to trade, in addition to the usual staple of stocks and futures. Anyone can trade forex, but not every one can be profitable.
That's the rule of any game -not every one can win. Unique Characteristics of the Forex MarketThere are many opportunities for you to profit from the forex market. But if you think that the Euro will weaken against the US dollar i. When you hear someone talking about the "forex market", the chances are that he or she is referring to the spot forex market.
The spot forex market is where a trader buys or sells a currency at the current price on the date of the contract for delivery within two business days. Of course, for most speculators, there is no real delivery of actual cash, and the way this is done is through rolling over of positions [more of this will be explained under "Warming Up" later in this chapter].
This and many other peculiarities give the spot forex market its own unique characteristics which make it an interesting market to trade. I explain below some of the main characteristics of the spot forex market. A global hour marketThe forex market operates worldwide and non-stop for five and a half days a week. This gives me ample time to digest the news of the night before and the morning itself, which allows me to anticipate the movements of currency pairs later on in the day.
Unparalleled liquidityThe forex market is the planet's most liquid market. This is especially the case when they are paired up with the US dollar -at least 80 percent of foreign exchange transactions have a dollar leg. The London market accounts for almost one-third of the global total daily forex turnover, and thus tends to be the most volatile session of the day, with the majority of forex transactions completed during the London hours due to the market's liquidity and efficiency.
The unparalleled liquidity of forex translates into very little or almost no slippage when you trade during normal market conditions not during news ; there is rarely any discrepancy between the displayed price and the execution price. Ability to go long or short anytimeSince currencies are always traded in pairs, when you are bullish on one currency, you are bearish on the other -and vice versa.
You can short a currency pair anytime you want, without any restrictions. This is different from some stock markets whereby short-selling is only allowed on an uptick, so it can be quite tedious and time-consuming for stock traders to have to wait and see the stocks going down while looking out for an uptick before they can short. Being able to go long or short on currency pairs anytime is a tremendous advantage as forex traders are able to profit from both up and down trends anytime, and this translates to a more efficient and instant order execution.
This is especially valuable in the financial markets where time equals money, and even a second's delay could cost you money. Choice of high leverageWho doesn't like trading on other people's money? With possible leverage of up to times, the forex market indisputably offers the highest amount of leverage compared to other markets. This high end of leverage is usually offered to mini trading accounts, due to the smaller lot sizes and lower minimum account deposit requirements.
It is important to note that while a high degree of leverage allows traders to maximise their profit potential, especially on a small price move, the potential for loss is equally large. Many people mistakenly shy away from trading forex after hearing that it is a highly leveraged trading instrument, but these people do not realise that leverage is and can be customised to the individual trader's own preference.
If you tend to be more conservative with risk-taking, you may choose to use no more than 10 times leverage, or none at all. For those of you with more aggressive risk appetite, you can choose a higher amount of leverage in your trades. The choice of leverage lies with you. Lower costsSince forex transactions are done the OTC way, with traders dealing directly with the market maker or other parties, exchange and clearing fees are not applicable to forex trading.
Market makers typically do not charge commissions on trades that are executed through them, while Electronic Network Communications ECN do charge a small commission on top of the bid-and-ask spread. Due to the high level of liquidity in the market, currency pairs usually have very tight spreads especially during normal market conditions when no news is scheduled for release.
Investing vs TradingThere are some important differences between investing and trading, even though some people may use these terms interchangeably without giving it much thought of what each entails. Advantages can be found in both ways of growing your money, neither is better than the other -they have different roles. But when it comes to growing your wealth in the forex market, trading is usually the way to go due to the unique aspects of this market.
Value ownershipInvestors are concerned with acquiring the ownership of the financial instrument; they have the confidence that the instrument will continue to rise in value. They tend to "buy low and sell high". For example, when they see that the stock price is going down, they may see it as a good opportunity to buy and own the stock 'cheaply' so that they may profit when the stock goes back higher in the future. Traders, on the other hand, do not have much concern with the buying and owning of the instrument.
They exhibit the same ease with either longing buying or shortselling the instrument. Unlike investors, traders are more willing to buy 'high' in the hope of being able to sell even 'higher', or short-sell 'low' in the hope of being able to buy back later at an even 'lower' price. Time frameInvesting usually entails the "buy and hold" concept, whereby an investor's goal is to acquire a financial instrument and to hold it for medium to long term, in the hope that the instrument will rise in significant value after a certain period of time.
Trading couldn't be any more different. In trading, a trader's main goal is to profit whichever way the market goes, whether upward or downward, within a shorter time frame. While there is short and long term trading, the holding period rarely extends beyond more than a few months, or longer than a year.
Getting inSerious investors tend to buy an instrument based on the underlying fundamental reasons. For instance, savvy stock investors will analyze the background of a company, pour over its quarterly earnings report, assess the company's reputation and strength in the particular industry sector, and assess the potential of its products and the track record of the management team. Traders, however, tend to look for high-probability trade setups using technical analysis as their favourite tool, and many of them also incorporate market sentiment into their trading decisions.
Short-term traders are quick to recognise changing market trends, and take advantage of price swings in the market, whether in range-bound or trending environments. Getting outThe "buy and hold" mentality of investors tends not to deviate far from "buy and forget", as many investors almost have zilch idea of when to get out of their investment when things do not go well. Many stock investors are left with worthless stocks as they do not have stop-loss boundaries or know when to cut their losses.
While there are also many traders out there who do not have risk management rules in place, traders overall are generally more aware of proper risk management than most investors. Whether or not they translate these rules into practice is another thing altogether. Trading Time FramesBefore you enter into a position, you need to know -beforehand -when you are going to exit the market.
A trader is not going to hold onto a position indefinitely, that's for sure. Knowing the time frame of how long you wish to hold onto your open position will determine your exit points and prices. If you choose to hold a position for, say, a week, your profit objective would naturally be higher than if you were to hold it for a few hours because you would expect the price to move further, given the longer period of time.
This is a personal decision which has to be made by the trader, depending on his or her risk tolerance level, lifestyle desired, and the amount of time to be dedicated to analyzing the market. There are mainly four different types of trading time frames: These are explained below. ScalpingThis is the shortest time frame in trading; it exploits small changes in currency prices. It describes the ultra-rapid action of opening and closing of a position within a few seconds or minutes, with the aim of stealing a few pips from each trade.
The profit of the winning trade is small, while the number of such winning trades should be big enough so that these small profits can add up to a decent amount. Scalpers usually need to have access to the tightest spreads and fastest connection speeds possible, in order to carry out this bullet-speed trading with the tiny profits. They tend to do this many times a day so as to accumulate the little profits that are harvested.
Losses must be limited such that one large loss does not wipe out the profits gained from many winning trades. Many forex market makers discourage this type of trading as they find it difficult to cover the opposite side of the transactions, given the fast speed and numerous orders entered into their systems. Day tradingDay trading is one of the more popular types of trading, whereby traders open and close positions within a day.
They also do not hold their positions overnight because of the added risk of not knowing if prices would change dramatically while they sleep. The holding period of their trades may range from minutes to hours. Day trading relies heavily on intraday momentum to bring the current price to the desired price level in one direction. Day traders are looking out for signs that a currency pair has a high probability of moving in a particular direction, going from point X to point Y, within a day regardless of whether the price is moving in a trend or range.
Day traders tend to wait for good trading opportunities, instead of trading frantically like scalpers tend to do. This style of trading involves intense concentration from the trader as positions must be closely monitored on the price charts. Swing tradingSwing traders hold their positions for a few days, but seldom more than a week.
Identifying and riding on trends early is the central objective of this trading style, and the profit objective tends to be set higher than that of day trading since the swing trader is expecting that by holding out for a few days, there is a better chance of capturing a larger price move. Unlike the day trader, the swing trader has to endure overnight risk.
As swing trading requires much less minute-to-minute monitoring of the market, this type of trading is generally preferred by people who hold day jobs. My opinion is that swing traders must still keep up-to-date with the latest fundamental and technical changes in the market, even when they are not monitoring the market all the time.
Position tradingPosition trading spans the longest period of time, and refers to traders holding their position for weeks or even months. Position traders seek to identify and trade currency pairs that signal that a medium to long term trend is playing out -but will take more than a few days to play out. Their positions are usually closed before the trend runs out of power. This trading time frame is the least time-consuming one among all the different ones, as there is not much need for intensive monitoring.
Many position traders place a trailing stop which automatically closes their position if the price retraces past a particular point. Choosing a time-frameAs a general rule of thumb: the smaller the time frame you trade then the more time is needed to be devoted to monitoring the markets. Someone who day trades tends to be more in touch with the price swings and goings-on of the market as positions are opened and closed during the same day.
Whereas at the end of the spectrum, a position trader does not have to monitor the market so intensively. Risk-wise, I would say that the longer the time frame used in trading, the more risk has to be assumed by the trader. This is simply because the market has more time to move against them, and can move much further against them than it can in a smaller time frame. Many of the strategies mentioned in this book are meant for short-term trading. However, you may decide on the length of your holding period to suit your personal preference by adjusting the profit target and stop-loss accordingly.
Of course, the size of profit objective and stop-loss will be proportional to the length of your holding period -the shorter your time frame, the smaller your profit target and stop-loss should be; the longer the trading time frame, the wider your profit target and stop-loss can be. Warming UpOpening an account How do I set up an account? Before you set up a trading account to trade forex, you first need to choose which forex broker best suits your needs and trading style.
Market-Maker [These will be explained further in Chapter 2. Experiment first with virtual moneyThe best way to learn how to trade forex and to see if it is suitable for you is to trade it real-time, but with a demo account initially. Demo accounts can be opened for free with certain brokers; no real money is deposited in this type of account.
You can experiment real-time trading with different currency pairs using various trading strategies without losing any real money -it is a good way to build up some confidence. You can get a sense of how it feels to have a profit or a loss, even though the intensity of these emotions will be of a different level when trading with real money.
It is the best way for new traders to dip their toes in the water. How much money is needed to start? The amount of trading capital needed is relative. After getting a feel with a demo account, you can start with real money. However, don't expect to grow rich on such a small amount.
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