How Forex Money Management Can Protect a Currency Trader?
Implementing highly effective and successful money management techniques and using these in your trading decisions is a huge help in achieving success as a currency or forex trader. In general, there are 2 means of practicing successful money management. One of these is for you to execute frequent small stops and harvest profits from some of the best and the largest winning trades. The other one is to pick small and slow gains while taking infrequent yet large stops while aiming to let the small profits that you acquire to outweigh your huge losses.
The first money management technique which aims to protect your investment in currency trading often generates minor situations of psychological pain. Still, it is beneficial because it offers more moments of victory.
The second money management strategy associated with forex trading often produces plenty of minor instances of pleasure, but this is often experienced at the expense of encountering a few nasty psychological hits. It is necessary for you to pick between these strategies the one that perfectly suits your personality as a trader. You have to spend time discovering your trading style and the specific manner through which you manage each of your trades since this is useful in determining which among the money management strategies can really protect you against substantial losses.
The good thing about the forex market is that it is capable of equally accommodating different trading styles without requiring a trader to invest additional costs. Because of the spread-based nature of the forex market, it is safe to assume that the cost per trading transaction is actually the same irrespective of the size of the position given by traders.
If you are willing to do trades while also seriously contemplating about using an effective money management approach and properly allocating the right amount of capital in your account, then it is essential for you to consider a few stops. This is important in properly managing your money as a trader and in ensuring that you consistently receive profits.
One of these stops is the equity stop which is considered to be the simplest among the many stops available for traders. This requires a trader to only risk a fixed amount on his account in one trade. One of the most commonly used metrics in equity stop is to risk only two percent of a trader’s account on any offered trade. This is beneficial because it satisfies your internal risk controls.
You can also use the chart stop in proper money management. This actually involves using technical analysis in acquiring thousands of potential stops mainly driven by price actions of a given chart or by a variety of technical signals or indicators. Other stops that you can use to manage your forex money and protect your investment are margin stop and volatility stop.
One of the most remarkable features of the forex market is that it operates 24 hours a day. This allows investors to trade according to a time of their convenience. The market is divided into three manageable sessions: London, New York and Tokyo. Knowing about these sessions and how they work is an important part of most trading strategies, since they affect market liquidity in specific currency pairs. Certain currencies peak during certain intervals, while other suffers from poor liquidity. Knowing what and when to trade can help traders formulate a strategy accordingly. In this article, we take a look at the Asian FX session, popularly known as the Tokyo session. There are other regional exchanges operating during this time. But it is generally accepted that the Asian session begins when the major Tokyo banks open for the day, due to the enormous trade volumes they handle. Also, the Japanese Yen (JPY) accounts for more than 20% of all global forex transactions. Timings of the Asian Session Tokyo, the financial capital of Asia, starts the Asian forex session on Monday at 09:00 am JST, ending the session at 6:00 pm JST, in other words, the Asian session lasts from 12:00 am – 9:00 am UTC. In EST time, it operates between 4:00 pm and 5:00 am during spring and summer, and between 7:00 pm and 4:00 am during fall and winter. It is an important time for anyone trading Asian currency pairs. However, the European and American sessions are closed during this time, so liquidity is low compared to other sessions. This is the time when the market consolidates, and currency prices move along a narrow range. Some traders seek trading opportunities under these conditions, by preparing to trade the upcoming price breakouts. This usually coincides with the time when the Tokyo session gradually shifts to the London session, resulting in increased trade volumes. Japan is not the only nation that trades during this session. Other major countries include Hong Kong, Malaysia, Singapore, Australia (Sydney) and Russia. The Sydney session is closer to this time zone, which is why the Australian and Asian sessions overlap. The Sydney session takes place between 5:00 pm and 2:00 am EST. So, technically the Asian session doesn’t end with the closing of the Japanese market, considering that these markets are so scattered. Characteristics of the Asian FX Session After the weekend, when liquidity returns to the FX market, the Asian markets are the first to experience the impact. Forex trading hours actually start with the Asian session. Many European and American traders look at the session’s outcome to create strategies or modify them for the rest of the day. Here are a few things you should know about the Asian session: 1. Lower Liquidity in Major Pairs It’s not uncommon for some sessions to generate more trading opportunities than others. For instance, the overlap of the London and New York sessions is considered the most liquid period, since maximum traders trade the US Dollar and Euro based currency pairs during this time. But, these liquid pairs, like the EUR/USD or EUR/GBP, do not make large moves in the Asian session. So, traders tend to find this session less liquid. 2. Lower Volatility Lower liquidity means lower volatility in the major currency pairs, like the EUR/USD or GBP/USD. However, there are some currencies that perform better during this session. 3. Currencies to Watch in Asian Session Major FX pairs traded during the Asian session include JPY crosses, such as the AUD/JPY and GBP/JPY, USD/JPY, AUD/USD and NZD/USD. Some other FX pairs traded during this period include the EUR/CHF, AUD/CHF and NZD/JPY. Some exotic pairs, including the Thai Baht, Hong Kong Dollar, Singaporean Dollar and Philippine Peso, are traded at this time too, although liquidity is lower in these emerging market currencies. The choice of currencies, based on the forex session, is important for day traders, who look to leverage small currency movements in either direction. Sufficient liquidity in these pairs are required in order to capture volatility. 4. Reports Closely Watched for During the Asian Session Monetary policy announcements by the Bank of Japan (BoJ) and People’s Bank of China (PBoC) impact the market. In recent years, the influence of China in this region’s trade flow and supply chains has grown tremendously. It is the largest economy in the region. So, the daily fixing rate of the Chinese Yuan by the PBoC has an impact on the trading session. Any devaluation could lead to negative impacts for emerging currencies. Apart from this, important reports by the US Federal Reserve and other US bodies tend to cause volatility in Yen trading. The Japanese Yen is a popular safe haven asset. So, when the developed markets seem to falter, investor money tends to flow into the Yen. Japan’s economic strength is based on its export strength, so balance of trade reports are critical. Hong Kong is a prominent global financial hub. Thus, traders find that the major players in this session include large commercial banks, investment banks, export companies and central banks. Macroeconomic reports coming out of Australia are also important. The most active part of this session is during the morning, when major data releases take place. 5. Clear Trade Levels and Risk Management The relatively quieter nature of the Asian session can provide clear entry and exit levels. Many traders could find that they are able to manage risk effectively too. Traders can also spot key support and resistance levels easily, since they coincide with trading ranges and are usually well-defined. This is a useful feature for breakout strategies. When the Tokyo session ends, the London session begins. More liquidity can lead to sudden price breakouts from the established price ranges. The choice of session is critical for every trading strategy to meet long term goals. Knowing the characteristics of different sessions can also help traders address and spread risk accordingly. The Tokyo session sets the tone of the FX market for the rest of the day. So, it is an important one to determine stop losses and take-profit levels.
Cryptocurrency and commodity market are two terms when they strike in mind one thing that pops up is lots of money. And it is natural because of the association with a quick movement, and fast result. Their assets are equally highly-priced and volatile. But several differences remain for an investor to see. The impact both hold in the financial markets is impeccable, and the global economy looks at both with wanting eyes. Let us know and discuss the cryptocurrency and commodity importance, charisma despite differences in methods of business. The date of origination From their origins, one can differentiate them and know what makes them so distinct from each other. The gaps in generations showcase the points of deceptions and bring out the reality. Also, it exhibits the difference of opinion can have on people. As per learned historians, the trade of the commodity market dates back to 4500-4000 Before Christ (BC). The origination happened in Sumer (Mesopotamia), which is now in the Southern region of Iraq. But talking about cryptocurrency and in comparison to the commodity trade, it stands no chance in history. The technology was born in 2008, which is more than a decade back. Hence, it will be right to say that the crypto market is evolving. Also, it has a lot to give to marketers and investors. On the other hand, the commodity market has a mammoth experience that is unbelievable in command and rank. So, cryptocurrency has a lot to travel before one can make a cumulative analysis of its historical significance. Aspects of physicality and hoarding Cryptocurrency has its existence through virtuality. No one can touch it, and there is no physical substance that one can keep near and sell afterwards. Whatever goes on the internet is the value a trader holds in a cryptocurrency. But in the commodity market, anything that is essential to living is available to people in physical form as well. They include oil, gas, gold, silver, wheat, barley, livestock, maize, copper, zinc, platinum, sugar, cocoa, products made of milk, fruits and more. If the indexes are spiralling downwards, then, in that case, one can hoard them and sell later on. Hence, it is a pleasant way of dealing the inflation and tough time. However, such pleasantries are not there in the digital medium like cryptocurrency. And there is no other option but for the market to do some wonders during adversity. In this way, when money gets stuck, a trader will have to rely on the market to bounce back. There are no properties, products or assets to look forward and lock. And this drawback sends chills to many people across the globe. Following the reason, the market of cryptocurrency saw a downfall in the year 2017, 2018 and 2019. It all happened after the balloon of inflation in the digital currency. And people began to question it. Takers in the physical world Psychologically, people get attracted to a thing more to which they can touch or feel. A visual appeal coupled with a gentle touch has more value than anything that one cannot reckon through senses. And this is a deep as a crater difference between the commodity and crypto market. There is nothing like that a trader can’t sense through the bodily senses. But on the other side, it is impossible to achieve the feat. Because cryptocurrencies are a product of sharp computer coding, which is not for everyone to see. Network of computers Both cryptocurrency and commodities are undeniably on different paths. However, the network of computers is present in both but in a discontiguous way. The existence of cryptocurrency depends on digital mining and coding. There are blockchains through which its value appreciate or depreciate. Of course, the valuation is a game of volumes of the number of buyers and sellers. But that comes afterwards. Firstly, the creation of digital currency is the main focus and talking point. Due to the free source that cryptocurrencies, anybody can take a chance and make their currency. Although, that is a different matter that it may work or not. It is not in the hands of the creators. They can make efforts in promoting them. Just like someone did with Bitcoin, and it is one of the most common digital currencies in the present scenario. Investors show interest in it, and many have become millionaires over time. When bitcoin rallies, there is no other arrangement in the financial market that can beat it. This and all when there is no property attached to it. A network of computers makes it work. They are present in many countries and in different capacity. Though, commodity market also works primarily on computer networks. But there are regulatory bodies that look after the technicalities and make sure everything goes smoothly. With the advent of the online bazaar, most of the significant transactions take place on platforms of websites. The storage of data also happens on clouds that are a set of computers only in the web space. It is an undeniably reliable source that keeps all brokers, investors and buyers at a single position. But the assets that get traded are present in physical forms as discussed earlier, while crypto lacks that. Transparency and authenticity Everyone wants unbiased work that allows people to trust the system. Cryptocurrency excels in it because of the technology. For every activity, logs get created on it, which is for everyone to see. Also, as there is no owner, no one can hack them. Several hackers tried in the past to fail. The blockchain is gaining momentum after the successful testimonial. Now, the conglomerate is trying to impersonate it due to the resourcefulness and assurance. However, in cryptocurrencies, there are no owners. They are open for all, and no one can display supremacy on the technology. From a rich, weak to a middle man, everyone gets treated equally, and indifference gets meted out to all. Whereas, a centralised body in respective countries look after the regulation and monitoring. Although chances of cheating and hacking remain there. There is news now and then that people getting siphoned off despite precautionary measures in the commodity market. The cases are shifting the focus of regular buyers to other platforms that include cryptocurrencies. The best asset to trade in cryptocurrency and commodity. In several circumstances, it is tough to figure out for adjudging the best out of a lot of many greats. But the scenario in both these markets is slightly different and better than others. There is one clear champion in each camp. Bitcoin and gold are two valuable assets that have elements of excellence and pride of performance attached to them. The glory of the past speaks volumes. Lets us know briefly:- Bitcoin The digital currency is one of the newest currency in the world stage. It came into existence on 3rd January 2009. Following the concept of cryptocurrency, it does not have any authority ruling it. There is no central bank or an administrator that makes rules for it. Bitcoins top the chart of crypto trading because it was the first of a kind and it got the deserving success. However, there is a bar on its extraction and mining, aka supply limit. It is 21,000,000. So, lesser the number of people hold it; more are the chances it scales height in terms of its valuation. In the past, there are references to bitcoin running errands. It created a plethora of millionaires in a short period, which is there for the world to analyse. Similarly, in greed, many people lost their capital. Bitcoins have a universal appeal and acceptance that is why in many nations, citizens are using it as a secondary currency. It sounds surprising, but the immense popularity has led to the proportions. And due to this, other cryptocurrencies are also finding their acceptance among people. Gold The metal is a precious entity, and international trade happens, keeping in mind its value. Also, in some countries, buying it is auspicious. Hence, people purchase it. There are jewellery and wearable items that get sold the world over. And the demand is high always. The consumption of gold speaks about its importance. Every year tonnes of products made of the metal go into purchasing. That is why commodity traders never miss a chance of betting their prospects on it. Hence, investors of commodity market look forward to investing in gold. Even during inflation, it does well than its contemporaries. On a longer run, the returns here outperform many other financial capital markets. That is the beauty of the metal is it never disappoints when people rely their faith on it. Gold holds the nature currency because its conversion is easy into money. It is one amongst consumer goods, while there is no currency in the crypto domain that holds the title. How to open an account in Cryptocurrency and commodity markets? Open a cryptocurrency account with the help of following steps:- - Register on a crypto trading platform. - Fill up the details on it like name, telephone number, address proof, bank account detail. - After filling up all the information, wait for the system to process - In a few days, all the details will get verified. - After logging in, the user should read all the guidelines, terms & conditions carefully and abide by the rules. - And if the trader is a beginner, then lots of other things need consideration. Newbies should first check their range, account balance and then decide things. Unlike the commodity market, they do not have the facility of brokers. Registration on a commodity platform - Before starting to register, one may need a Demat account. - The requirement of broker seems inevitable here because some traders want the physical delivery of assets. - The process of buying-selling and planning are different compared to cryptocurrencies. - Things like stop-loss, derivatives trading like futures can accelerate here, which is not a possibility with cryptocurrency. Which are the best platforms for commodity and crypto bazaars? Before knowing about the best platforms, one should know about the vital difference. One can sell the commodity items in an open market, through a shop or showroom, but there is no such option for cryptocurrency. The digital form of the currency depends on the internet, electricity, systems (mobile, computer and laptop). But to buy natural gas, crude oil or edible items, one does not need to rely on the technologies mentioned above. These are available in shops and places. It is one of the remarkable distinctions. Best platforms to trade cryptocurrencies Etoro- One can find a plethora of digital currencies to choose from on the platform. It is one of the biggest cryptocurrency brokers and holds high regards in the minds of traders. It functions for twenty-four hours a day. Easy Markets- It precisely trades in three main currencies that are Ripple, Bitcoin and Ethereum. There are no charges from the platform on them. Avatrade- The platform supports as much as fourteen languages and charges no hidden fees. FXTM– It can trade in Litecoin, Ethereum, Ripple and Bitcoin. Like all other platforms, it also has the facility of trading twenty fours hours. OctaFX- One can trade for the entire day on this platform harbouring Bitcoin, Ethereum and Litecoin for trading. Best platforms to trade in commodity markets. Investous – One can receive daily updates and news about the market happenings and routines. For gaining more knowledge, there are webinars. ETFinance- Regulation of CYSEC takes place here. There is no commission charged, and there is a negative balance protection condition. Plus 500- There is a service of demo-account and has zero commission charges. The minimum deposit here is Euro 100. Conclusion Finding the distinction between cryptocurrency and commodity is a complex matter. They are traditionally different from each other and have fundamentals that do not match. If a trader wants to deal in both, then lessons for each are remote from each other. The only similarity both share is they are parts of the wide financial market. The domains may require expert advice, especially the commodity market.
When picking what Forex broker to trade with, many people try to identify the best by looking at what the organization offers. Some look at the currency pairs that are available, while others might look at withdrawal terms and trading hours, but most, if not all traders, will look at the offered leverage before making the final selection. This should not come as a surprise to anyone – leverage is a great tool in the hands of traders, one that would allow them to make some great revenue for themselves, if they manage to make the right trade. But, many forget, that it is also a rather dangerous tool, especially in the hands of new traders who are not entirely sure about what they are doing. Is that why the EU has decided to regulate leverage, no deposit bonus offers, and other Forex industry details? In no deposit bonus explained by ForexTradingBonus, we can see clear indications as to why the benefit could have been restricted. It garners too much confusion for the traders. Another answer lies in the risky nature of the concepts. So, let us dive in and discuss why leverage is just as dangerous as it is good. What is Leverage and how do the pros use it? The concept of leverage is simple – when you start trading, you may borrow some money from a lender and invest it. The money that you borrow and invest is leverage. Now, when you make a return on the investment, you will be able to pay off the debt and the interest that come with it (because yes, when you borrow there is an interest rate applied to the borrow funds), while also being able to make some handsome profit for yourself. Pretty simple, right? When you are looking at Brokers, you will often see Leverage opportunities referenced in ratios. A number like 1:100. This is the ratio of leverage and it means that you will be able to receive 100 dollars for every 1 dollar you invest. The number is different for most brokers, and the more the leverage ratio, the more money you can make off of it. In this manner, professional traders who have access to high leverage options (1:100, 1:200, 1:400) are able to multiply their revenues by a whole lot. When they make a trade that they are very confident of, a professional trader will take the leverage offer from the broker and invest 100 of their own dollars and 10 000 of the broker’s dollars. Once their order closes, they will have made 100 times the money they expected to have made when investing 100 USD. After they pay off the broker, the trader will have made way more money than they could have hoped for without the leverage. But with opportunity comes risk Once you place an order with a certain leverage option, you might make money or you might actually have miscalculated the changes in the market, and end up losing money. This is when things get dangerous. If you invested 100 dollars with a leverage of 1:100, that means you borrowed 10 000 from the broker. This money will need to be returned one way or another, with interest on top. The Broker you are trading with will do everything in their power to get this loan back. This means that just because of one bad order, you are now ten thousand US dollars in debt, instead of being 100 dollars poorer. This is where the double-edged nature of leverage comes in. A bad trade with high leverage means that you end up losing a lot of money and being in debt with the broker. The broker might provide you with some kind of repayment schedule, but the debt remains. This is why professional traders are very careful when they trade with leverage and only use it to its full potential when they are confident of their actions. This is also why beginner traders are advised to stay away from high leverage trades. Beginners and intermediate level traders are all more likely to make bad trades and lose money. When you add leveraged funds on top of that, beginners might end up losing a lot more money. Regulation to protect traders This is why the EU has introduced regulations that limit the amount of leverage that brokers can offer to traders who are not certified as being professional. The maximum leverage that a trader has access to with European brokers is 1:30. This way, the trader is protected from making trades that would result in their financial ruin. The regulation also includes limits on no deposit bonuses and who qualifies as a professional trader. These regulations are imposed by the EU to protect beginners from the dangers of the Forex industry. If the regulation does not apply to you, since you are not a resident of the EU, then you should learn to remain safe on your own. Educate yourself about the industry and learn why attractive things like Leverage may actually be dangerous. Watch out for complex Forex concepts that might seem beneficial, but bear big risks that could get in the way of your successful trading. Be smart about how you trade.