“Contract for difference” or “contact for price difference” – this is how the term CFD trading stands for. It is an integral part of modern trading, so every potential participant in trading in financial markets has encountered this concept at least once. But what is CFD on Forex, and how to properly use this tool in everyday trading?
Thus, correlation helps determine whether asset prices are moving in the same direction (positive correlation) or in opposite directions (negative correlation). Understanding asset correlation is key to developing flexible and resilient trading strategies that can adapt to ever-changing market conditions. Read More
Brent Crude and WTI (West Texas Intermediate) are two of the most common crude oils used in global trade. When choosing between them, consider the following factors:
One of the reversal patterns on the chart is head and shoulders. This model has clear rules for construction and identification. However, there are some of its configurations that also indicate a trend reversal.
Reversal patterns of technical analysis
Before changing direction, the prevailing trend in the market will give a signal. This is what the founder of technical analysis, Charles Dow, said. Based on how the price behaves, we can draw a conclusion about what is happening with the balance of power in the market.
When a trend changes from upward to downward, one of three patterns can be seen on the chart: head and shoulders, double top and triple top. They are sometimes confused by calling double top and double head and shoulders.
To understand why a reversal occurs, you need to know what a head and shoulders pattern means. Price growth in an upward trend is due to the dominance of buyers. After the growth stage, some players take profits, provoking a downward correction. However, in an uptrend, each subsequent low and high are higher than the previous one.
The moment a head and shoulders, double top or triple top (a variation of the head and shoulders pattern) appears on the chart, it becomes clear that the price cannot overcome the previous high. This means that the strength of the bulls is weakening, and dominance is passing to sellers, foreshadowing a break in the trend.
How does the head and shoulders pattern work?
Regardless of whether a double head and shoulders, double or triple top pattern appears on the chart, these patterns trade approximately the same.
First, it is necessary to correctly define the model – it must be preceded by an upward trend. In a downward trend, these figures will be formed in a mirror image: triple and double bottoms, head and shoulders inverted (inverse) will be signals of a change from a downward trend to an upward one.
Secondly, using the lows of the figures formed at the top of the uptrend, it is necessary to draw a neckline. This is the border, upon the breakdown of which a bearish signal is formed.
A sell trade must be placed after the neck line is broken. Already on the next candle after the breakout, which has opened and is forming below the level, you can open a position.
To determine the target and take profit, it is necessary to measure the height of the figure’s head or the overall height of the pattern if we are talking about a double or triple top pattern. It must be moved down from the breakout line and a take profit should be set there.
Automated trading opens up opportunities to make money on the stock exchange, ahead of the human factor. In addition, now among large market participants more than 70% of all trading operations are carried out by robots. What automated Forex trading programs are available to private investors?
Features of automatic trading
Manual trading on the stock exchange or forex is available to all private investors. It will bring systematic profit if transactions are concluded not chaotically, but on the basis of one verified income strategy.
Some of these strategies, which do not involve the factor of human intuition when making decisions, can be automated by creating an algorithm that will independently analyze the market, read the trading signal, and open and close Forex trades.
A program for automatic trading on the stock exchange is called a robot or advisor. Their algorithms are built, as a rule, on the basis of mathematical indicators, technical analysis strategies, as well as candlestick patterns, which the program can easily read from the chart.
Robots constantly monitor the market to search for conditions specified in the robot’s algorithm. When these conditions are met, a trade is opened. You can also set parameters for stop loss and take profit, conditions for increasing the volume of positions, and criteria for risk management.
Where can I get a trading robot?
To earn money without manual trading, you need a program for automatic earnings on Forex – a robot or advisor. Where can I get it?
Automate your own strategy. If the trading system is simple and amenable to algorithmization, it can be turned into a robot. To do this, you need to either study programming in MQL yourself, or assign such a task to specialists. A program for automatic trading on Forex will be an excellent solution for those who have worked out the strategy well, are convinced of its profitability, and know how to set the parameters correctly. In addition, this will eliminate emotions and the influence of the human factor.
Download for free or buy a ready-made robot. In this case, scalpers or robots that trade on news are very good advisors. They allow you to overcome the limitation in the speed of placing orders. Multi-currency work, using several strategies to simultaneously analyze a number of currency pairs, would also be a good solution.
Automated trading: benefits and precautions?
Now anyone can trade Forex with the help of robots. But these ways of earning money, along with the benefits, also have pitfalls.
The automatic trading program saves time and removes the limitations of the human factor – the psychological component and limits in speed and reaction. Experienced traders who have automated their strategy continue to monitor its operation, tweak and improve the robot if necessary.
Beginners are often tempted to avoid the need for training and try to replace the ability to analyze the market with a robot. This often works against them, as advisors have their own pitfalls.
Often the algorithms of robots, especially high-yield ones, incorporate Martingale averaging methods or use order grids. This significantly increases the risks and, if the initial lot is set incorrectly or the deposit is small, it can lead to losses.
To prevent this from happening, it is important to understand the algorithm of the program that is used for automatic trading. Before you start working, you need to test the robot on a demo account or cent accounts to ensure profitability and understand the maximum drawdown size.
The word trading comes from the verb “trade” and means making transactions with securities, goods or currencies in order to make a profit.
Traders are called participants in exchange trading, earning on exchange rate differences.
Investors are those who are aimed at obtaining benefits in the future by investing (investing) financial resources.
A broker is a company that provides individuals and legal entities with access to stock exchanges.
A personal advisor is often an employee of a broker or other financial institution. He does analytical work for the client and can give investment advice or develop a complete investment strategy.
Depending on the strategy used and the duration of transactions, trading is conditionally divided into several types.
High frequency. All operations are performed by a computational algorithm. In accordance with a given program, he places a lot of orders – orders for buying and selling (from the English high-frequency trading, HFT). All transactions are carried out in seconds or even faster. It follows that a high-frequency trader must have knowledge of trading algorithms and programming skills. In addition, such a strategy is very risky. It requires high material costs for appropriate equipment and provision of dedicated Internet access. A good communication channel is a prerequisite to avoid any time delays during the trading session. This trading strategy is not suitable for beginners.
scalping. Transactions, as in high-frequency trading, are carried out for short periods of time, but last longer – from several seconds to several minutes. Scalping is also based on a certain strategy, according to which a trader filters out securities with the required volatility (trading volume) and other specified parameters. The purpose of transactions is to withdraw a small profit in each trade.
Day trading. As the name implies, the trading period in this case is a day. The trader conducts transactions manually. Current positions require constant monitoring, since they should all be closed before the evening. This requirement is also related to the peculiarity of trading – the use of a broker’s leverage. The discount not only allows you to increase profitability, but also significantly raises the risks. Therefore, the commissions of brokers for the use of borrowed funds overnight (until the next day) are quite high and can reduce the expected profit from the transaction to nothing. Methods for conducting day trading on the Moscow Exchange differ depending on the type of instruments used. The strategy can be based on indicators and technical analysis signals, as well as price fluctuations due to the influence of the news background.
Swing trading. For this type of exchange trading, the period for concluding a transaction can last several days. Swing trading relies on technical analysis of charts, recognizing price fluctuation cycles and making the most of those movements. It requires deep knowledge, strict discipline and a clear strategy for making decisions on opening / closing a position and intermediate profit taking. As part of this strategy, the trader tries to minimize possible losses by constantly adjusting stop orders (orders that will be executed if the price starts moving in the opposite direction to the open position).
Medium term trading. Designed to capture significant price fluctuations and earnings on trends (long-term unidirectional movements). Here, a trader cannot do without both technical and fundamental analysis. The decision to open a position is made on the basis of data on macroeconomic factors, information on the state of the economy of the country, industry, reports on the activities of the company and its competitors. This type of trading is similar to long-term investing, but differs in duration.
You can start your acquaintance with trading by learning scalping and day trading. These types are most popular with beginners, as they do not require large investments and complex special knowledge. As experience accumulates, a trader determines what is more interesting to him and delves into a specific area.
In trading, a trading terminal acts as a tool for accessing the exchange. To make a trade quickly and accurately, a trader must be aware of all order types available in his program. It is worth exploring the possibilities of using hotkeys to quickly open the desired windows and tabs. This will save you a lot of time and make your job easier. You also need to pre-configure the interface for your purposes.
In our country, the two most common terminals are QUIK and MetaTrader. Separate training video courses are devoted to each of them, and regular free seminars on configuration and usage features are held.
However, studying the theoretical part is not enough. Only practice will help you understand what functionality you need and how best to place it on the terminal. For these purposes, some brokers provide access to a demo account. Here, trading with virtual funds, you can both test the strategy and test the trading platform.
To become a successful trader, desire alone is not enough. People come to the stock exchange with burning eyes and a great desire to earn money, but many leave with nothing. Why is it so? Psychology plays an important role in successful trading. Knowledge about the technical side of trading does not insure against errors and distortions in the perception of reality when opening a position. Therefore, let’s see what skills a beginner needs to develop in himself in order to become successful in this business.
Discipline. The job of a trader is hard work. Before the opening of the next day of trading on the stock exchange, a beginner should have time to do a lot: to analyze completed transactions, if necessary, adjust the strategy for the next day, study additional information, choose an assumption to check. In order to have enough time for all this, it is important to observe strict time management. During the day, you need to stay focused and not lose focus.
Stress resistance. It is impossible to make only profitable trades. Everyone who wants to learn trading should come to terms with this thought. And since human psychology has a tendency to perceive the loss of a certain amount as twice as hard as gaining it, it is not surprising that most people quickly quit trading on the stock exchange without having achieved success. Understanding that every mistake is an experience is given to many with great difficulty. The good news is that resilience can be trained.
Rationalism. There is no place in trading for such words as “I think” or “I believe”. A good trader can always explain why he opened a position and why he exited it. For this, he must have an absolutely unemotional logical reason, based on knowledge, strategy, and not on faith or intuition. Careful selection of ideas and critical perception are essential skills for a trader.
Ability to make decisions quickly. This is a useful quality that is worth training. Of course, the success of the decision will largely depend on preliminary preparation. But during trading, speed is no less important for a trader. Seeing lost opportunities is no less difficult than bearing losses.
Trading for a beginner is a real full-time job. A certain time must pass until the necessary experience is accumulated to create your own strategy. Further, more free time will appear and trading will enter a stable rhythm. But a trader should never forget that the market is constantly changing: what worked today may stop generating income tomorrow. Therefore, those who have made trading their profession are constantly looking for new options and strategies.
Anyone can become a trader. This job has many benefits:
But there are also disadvantages:
In the minds of many, the typical trader is like a millionaire in a movie who does nothing but spend his huge fortune and work a couple of hours a day. Yes, this is possible, but not immediately. Heights are reached only by the most stubborn and persistent, ready to put a lot of effort and energy into the cause. In principle, this is the secret of success in any business.
