Risk Warning

Forex Trading on margin carries a high level of risk, and may not be suitable for all traders. The high degree of leverage can work against you as well as for you. Before deciding to trade forex you should carefully consider your trading objectives, level of experience, and risk appetite. It is possible that you could lose some or all of your initial capital and therefore you should not trade money that you cannot afford to lose. You should be aware of all the risks associated with forex trading, and seek advice from an independent financial advisor if you have any doubts. Having said that, anyone with a sound mind can trade Forex but he must be aware of the risks involved as highlighted above.

Saturday, March 28, 2009

Metatrader 4 for Forex Trading

As I have mentioned in my earlier post, I have just launch my new Blog on Metatrader 4 simply called Metatrader 4 for Forex Trading. Hope it will help in getting more out of this trading platform. Happy trading.

Ronald Kwok

Monday, March 23, 2009

Timeframes and trading styles

Beginners may be overwhelmed by having so many charts of different timeframes to look at. For Metatrader 4, there are charts for 1 minute (M1), 5 minutes (M5), 15 minutes (M15), 30 minutes (M30), 1 hour (H1), 4 hours (H4), 1 day (D1), 1 week (W1) and 1 month (MN). Which are the ones that the trader should be looking at? It all depends on what type of trader you are.

Roughly, traders can be divided into three main categories. First the short-term, high frequency scalpers who would not hold a position for more than a few minutes. Next is the medium term, directional day trader who may hold a position from a few minutes to a few hours but never overnight, hence the term day trader. They are also called swing traders since they trade on the swing from one direction to another direction. Then there are the long term traders who may hold a position for days or even weeks and they are also called position traders since they hold on to their position until there is a major change in direction.

Each type of trader will usually refer to charts of three different timeframe to make their trade. There is no hard and fast rule but it may be something like these.

Scalpers: 1 minute, 5 minutes, 15 minutes
Day trader: 5 minutes, 1 hour, 4 hours
Position traders: 1 hour, daily, weekly

The middle range charts are for monitoring the market during the trading session. The lower range is used for timing entry and exit and the higher range is used for knowing the longer term trend. After awhile, you may find certain timeframes may suit you better than those mentioned above. Anyway, it is always good to look at the hourly and daily chart to see where the market is heading.

Sometimes it can be confusing when you look at the charts at different timeframe since the market seems to be moving up at one time frame while it appears to be moving down in another timeframe. This is the case because the market does not move in a straight line but in waves and any single movement can be broken down into smaller and smaller movements with its ups and downs. During periods when all the time frames are in one direction, the market is trending but this this can change quickly depending how how strong the trend is. Most of the time the market moves within a range in a sideway manner but also with its own ups and downs.

Which trading style is best for a beginner? It all depends on the individual preference and also his tolerance of risk and loses, the capital that is available and the time that he has. As a general rule, the smaller the time frame, the smaller the potential loss (in terms of pips) when setting stop loss and also smaller potential profit (again in terms of pips) when setting the target profit. The converse is also true i.e. the larger the time frame, the higher the potential loss and the potential gain. This is because of the volatility or fluctuation that increases with the timeframe. For scalping, this may be just a few pips to 10, 20 pips; for day trader, 20 pips to 100 or 200 pips while for position trader this will be in the range of hundreds of pips.

Which style is easier to make the pips? To make say 200 pips, you may need to make just 1 trade as a position trader, 4 trades as a day trader or 20 trades as a scalper. One can argue that there are many more opportunities to trade as a scalper within a day but one must remember that every time you enter a market, there is risk involved and for every trade you make, you are giving away pips in terms of the spread. So there is no one best style and whichever style you choose you still have to follow the rules and be disciplined at all times.

It does not mean that trading the longer time frame has the higher risk (in terms of your capital) even though a bigger number of pips are involved since you can adjust the risk by reducing the number of lots as compared to a shorter time frame. There's nothing like trying it out and you can do it for free absolutely by opening a demo account. Most Forex brokers will allow you to open a demo account and that's the best way to get started before you put in your real money. There are also many trading platforms but the most popular seems to be Metatrader 4 and this is the one that I'll be using in all my posts.

So open a demo account and start trading.

Ronald Kwok

Saturday, March 14, 2009

Pips Conqueror, first impression

I'm back from my Advance Class by Forex Investology and the new software, Pips Conqueror by Sam Se looks to be the best yet so far. It has so much functions built into it that it will take some time to fully digest and put it to good use. You can just simply drag and drop to place your order (if the market conditions meet the criteria) but unless you do a correct trade set-up, you may not end up winning. So it is very easy to use but to use it well, it will take some effort. In any case, the Money Manager portion will do all the calculations for you, prevents the really silly trades and reduces over-trading.

In fact I was reading the Pips Conqueror user manual to understand it better while sitting on my throne this morning when it suddenly occurred to me that there is a need to start a separate Blog on using the trading platform Metatrader 4 since many beginners will find some difficulties in using all its functions. Writing about it will also make me understand it better so watch this space for the launch.

Sometimes great idea flows while other things are flowing. But for now it is practice, practice and more practice on the Pips Conqueror. Sorry for the digression but in my next post, I will be back to Forex Trading basics.

Ronald Kwok

Saturday, March 7, 2009

Daylight Saving Time, again

It's Daylight Saving Time again for this year and it will start this Sunday, 8 March for the US. Though the NFP report is always released at 8.30am EST, the last NFP on 6 March was released at 9.30pm MYT and the next NFP report on 3 April will be released at 8.30pm MYT because of the Daylight Saving Time. (MYT is local Malaysian Time.)

The IBFX trading always closes at 4.00pm EST Fridays and opens at 6.00pm EST Sunday. So with Daylight Saving Time, it will be 4.00am MYT Saturdays and 6.00am MYT Mondays while it was 5.00am MYT Saturdays and 7.00am MYT Mondays previously. Confusing? You bet.

So to get all the release times of the various economic reports in the correct local time, make sure you synchronise the time in the calendar of your favourite Forex web-site to match your local computer time. In this way you will get the local time right and ensure that you are not caught unexpectedly by sudden market changes immediately after the release of such economic reports.

This will be a short post since I am currently attending the 4-day Forex Investology Advance Class where Sam Se will release his latest Forex trading software, Pips Conqueror that will simplify and improve the chances of making money in the Forex market. This looks very promising but the real test will be whether it will bring in the dollars. Isn't this what we are in the market for? So watch out for my review once it is put to the test.

Ronald Kwok