Profit from Trading on Stock and Currency Markets
Traders often argue over which way of trading is more profitable: on Forex or on stock market. There are widespread expressions: “It is better to trade on stock exchange because the currency market trading is more difficult” or vice versa: “I’d better work on currency exchange market ‘cause there one can earn faster”. There are a lot of people who adhere closely to these concepts.
What are the differences in trading on these markets? We are going to touch upon some specific features of both markets.
First of all, the size of the initial deposit needed for start varies. International currency exchange market requires only one US dollar to start with. At the same time, you need a substantial sum of money to trade stocks.
Secondly, Forex and stock markets differ in leverage. Stock trading provides leverage 1:2. In its turn, forex brokers enable clients to trade with the leverage equal up to 1:500.
Currency exchange market is ideal choice for those who want to cash their profit on the very day they have made it. Stock market is different; only traders, who are interested in long-term investments, can gain profit on stock exchange. It is an opportunity to earn in the long term.
A kind of advantage of working on Forex is its around the clock functioning. Stock market allows to trade only during certain hours. Moreover, stock market ropes on to the stock exchanges so a trading process can be halted due to some troubles on a stock exchange floor or according to the decision of a world’s giant, for example, the USA. It will never happen on Forex because trades are carried out by the participants who do not have any operating floor.
The only element which unites Forex and stock market is profit gaining by means of the Internet.
Study carefully the trading process on Forex and you will see a huge advantage of working on it. Forex will never collapse as a downturn of one currency leads to an upturn of another. Stock market is not protected from any kind of crises. It can also be exposed to the risk of swindlers, who can act in various aspects of stock market functioning. There is a method of taking a decision on sale and purchase – Inside. In the USA head of Enron Corporation was accused of falsifying accounting records in order to sell shares of his company at a high price as others were not aware of actual situation in the corporation. Insider information does not work on Forex so the market is fully protected against the fraudulence of such kind.
Please mind, that Forex volatility is much higher than the one of stock market. Gaps after the weekend are usual for stock exchange, but they rarely occur on Forex.
We can continue talking about distinctive features of currency exchange and stock markets, but iy is always a trader who makes a choice. A trader can earn on either Forex or stock market, the result depends on his/her goals, strategy and tasks.
Welcome to your new forex career! There are many techniques and strategies, made available daily, which can help you to enter the foreign exchange market with confidence. It is incredibly competitive and often seems overwhelming for newcomers. Use the following tips to help you get started. Study the financial news, and stay informed about anything happening in your currency markets. Speculation fuels the fluctuations in the currency market, and the news drives speculation. You’d be wise to set up text of email alerts for the markets you are trading, so that you can act fast when big news happens. For a successful Forex trading experience, listen to what other traders have to say, but make your decisions based on your own best judgment. While it can be helpful to reflect on the advice that others offer you, it is solely your responsibility to determine how to utilize your finances. You may think the solution is to use Forex robots, but experience shows this can have bad results. It makes money for the people that sell these things, but does nothing for your returns. Don’t use Forex robots or any other product that claims wild profits. Instead, rely on your brainpower and hard work. Don’t find yourself overextended because you’ve gotten involved in more markets than you can handle. This can result in frustration and confusion. Focusing on the most commonly traded currency pairs will help steer you in the direction of success and make you more confident in trading. If you make the system work for you, you may be tempted to depend on the software entirely. This could unfortunately lead to very significant losses for you. Creativity is as important as skill in Forex trading, particularly when you are trying to do stop losses. As a trader, remember to learn the correct balance, combining gut instinct with technical acumen. You basically have to learn through trial and error to truly learn the stop loss. Remember to take into consideration your expectations and your prior knowledge when deciding on an account package. Do accept your limitations, and be realistic. You should not expect to become a trading whiz overnight. Keeping your leverage low will help to protect you from the impact of wild swings in the market. If you are just starting, try out a practice account; there are usually no risks involved. Begin with small trades to help you gain experience and learn how to trade. If you’re an amateur Forex trader, the idea of trading numerous currencies may appeal to you. Learn the ropes first by sticking with one currency pair. You can avoid losing a lot if you expand as your knowledge of trading does. One good strategy to be successful in foreign exchange trading is to initially be a small trader by having a mini account for at least a year. This can help you easily see good versus bad trades. Good advice you might frequently hear from successful Forex traders is to keep a daily journal of trading and other pertinent information. Complete a diary where you outline successes and failures. This way, you will able to track your progress and see what works for you and what doesn’t work. Beginning traders should not trade against the forex market. Even experienced traders should be financially secure and also have plenty of patience if they do. Trading against the market is often unsuccessful, and even the most experienced traders should not try to do it. In the world of forex, there are many techniques that you have at your disposal to make better trades. The world of forex has a little something for everyone, but what works for one person may not for another. Hopefully, these tips have given you a starting point for your own strategy.
The United States nonfarm payrolls report is probably one of the most important economic releases every month. The nonfarm payrolls or NFP for short has a strong influence on the markets, even if it's just short-term. Released every month on the first Friday at 0830 EST, the nonfarm payrolls report that accounts for the number of jobs. In particular, the NFP accounts for jobs in the goods, services, construction and manufacturing sectors.Farming jobs and not for profit organizations are exempt from the report.The Nonfarm payroll report is released the US Bureau of Labor Statistics (BLS). The report helps statisticians, economists and monetary policy makers to determine the state of the economy. The data is also used to predict the future levels of the economy.Did you know? The Bureau of Labor Statistics was created by the US Congress with the Bureau of Labor Act, in 1884.If you want to learn more about the Bureau of Labor Statistics, read here.The BLS is also responsible for collecting other key statistics including the Consumer price index (CPI), Producer price index (PPI), and so on.The nonfarm payrolls report shows the sectors that are creating employment and the sectors that are losing jobs.What are the components of the nonfarm payrolls?The official name of the jobs report is called the Employment Situation.The primary components of the nonfarm payrolls report are:* The number of jobs created during the month* The monthly unemployment rate* The average hours worked during the week* The average wages earned per hour* The labor force participation rateWhile the number of subpoints in the Employment Situation report might seem a bit too overwhelming, there are only two key data points of interest. The markets mostly react to the headline numbers, which is the number of jobs created and the prevailing unemployment rate.The BLS also revises the numbers for the past payrolls as well, and this also tends to influence the markets.Below is a sample of how the official release of the Employment Situation looks like. The Employment Situation report. Source: U.S. Bureau of Labor StatisticsThe rather lengthy report covers all aspects of the labor market. It also goes into much deeper details such as the major worker groups, long-term unemployed and so on.In the main jobs report, however, there are only three categories.* Employed (People who are working)* Unemployed (People who were laid off or looking for a job)* Not in labor force (people who are not looking for a job)How is the Nonfarm payrolls report used by traders?The nonfarm payrolls report can begin to get more complex when you dig deeper. However, for the markets, the main headline numbers are the ones that matter.That said, traders should also bear in mind on what the Fed officials are concerned about. For example, despite a strong jobs numbers, if wage growth stagnation is a risk flagged by officials, then that data point matters to the markets.Therefore, at times you will see that despite a blockbuster report, the markets fall.For traders, the nonfarm payrolls report is important because it brings a lot of volatility and trading opportunities.There are many high-frequency trading algorithms dedicated to tracking the NFP release. While this may be frowned upon by some, it brings more liquidity to the markets. Nonfarm payrolls report - Something for everyone!What's interesting to note is that the NFP report influences all types of traders.From the retail forex day traders to stock traders as well. There is always something for everyone watching the NFP report.For example, a forex day trader will probably look at the NFP report to trade currency pairs such as the EURUSD, USDJPY or GBPUSD. A futures day trader, on the other hand, would be able to trade futures contracts such as the dollar futures, or even interest rate futures.Stock traders also look to the payrolls report to see which sectors in the stock market are performing the most, by looking at the job creation data.Finally, bonds traders can assess the economic situation based on the payrolls report and can trade the 10-year, or the Fed funds rate futures accordingly.To conclude this brief of what is the nonfarm payrolls report; it is one of the monthly occurring events that is important for the markets across all assets. The nonfarm payrolls report released by the US Bureau of Labor statistics shows the number of jobs created during the month as well as the unemployment rate and wage statistics.The nonfarm payrolls report is important to all, from the retail trader to central bank policymakers.
Why is psychology such an important aspect in trading? Well, if you're incapable of controlling your mind/thoughts whilst operating in the market, you stand very little chance of reaching consistency. Generally, traders, especially those new to the business, focus primarily on learning all they can about the technical side of trading. While we do agree that this is a necessary step for individuals wishing to function successfully by means of technical analysis, one MUST also place an equal amount of emphasis on mastering the psychological side of trading, as well. Unfortunately, the latter is often overlooked by so many!During the course of this article, we aim to walk you through a number of different aspects relating to trading psychology, which we feel truly separates the winners from the losers.Having a well-defined trading plan in placeAssuming that one has the discipline to FOLLOW their trading plan, it should help curb emotionally-driven mistakes. We personally think of a trading plan as a road map, guiding us through the market place. Without it, as far as we're concerned, you're essentially driving blind!Below is a brief outline of what we believe should be covered in a trading plan:Risk parameters. This is where you will determine how much risk is to be allocated to each trade. Realistically, it should be an amount that you're comfortable losing without causing panic, which ultimately can result in 'revenge' trading. Revenge trading, for those who do not know, is the act of not observing risk management principles or executing trades beyond the scope of one's trading plan, in the hope of winning back a previous loss (or losses).Money management. Remember trading is a business, and should ALWAYS be treated as such. How one handles their account funds is crucial. This section should include, but is certainly not limited to, preparing for the worse-case scenario (how much of your account you're willing to lose before trading is to seize), planning for the long term and setting realistic financial goals.Timeframes. Filtering between different timeframes can be overwhelming for some and eventually lead to a poor trading decision. Therefore, it's imperative to have this outlined beforehand.Targets/Goals. Some traders set financial goals to achieve a certain amount per week/month and year. We try to remain somewhat flexible here by only having an annual percentage goal. The reason for this is that we firmly believe in being open to accepting whatever the market is willing to give us. Furthermore, if one has weekly or monthly targets that are not met, this can place a trader under pressure. And trading under pressure is not something we'd encourage!Markets. Will you stick to just the major currency pairs, delve into the minors or even the exotics? Do equities, commodities or bonds interest you? All of this should be well documented in your trading plan.Trading times. Though the market is a 24-hour auction house that operates five days a week, scheduling times to trade can instil some consistency to one's trading day.Performance evaluation. Evaluating each trade is crucial to the development of a trader. Remember, we learn by our mistakes!Software. Will you purchase specialized charting software or a dedicated news feed?Strategy rules. This is the section where one shapes his/her rules of engagement. Don't hold back here! Detail every point needed to confirm an acceptable setup. By doing this, you will avoid emotional decisions.As you can see, without a trading plan you're likely going to be executing trades from a reactionary state. This is NOT a place you want to be. Compose a trading plan and refrain from trading blind!Be careful who you follow!Although there are a number of successful traders out there advertising trade setups for others to shadow, relying on these setups is not an approach that usually ends well for a number of reasons. For one, you have little knowledge of the method's nuances. Two, it's also impossible to know the psychological mindset of that particular trader from one day to the next. Above all else though, do you really want to spend your trading career relying on someone else's decisions? There is an exception to this, of course, and that is if you're using the trade calls to help solidify/complement your OWN trading setups.Blindly trading other traders' ideas typically pushes one into a vicious psychological cycle. An illustration of such a cycle can be seen on the basic diagram below: 1 At point one, you're full of optimism. The trader who provided the call to buy the EUR/USD (for example) has an outstanding record. So you naturally believe that this trade is highly likely to be a winner.The pair begins to move in favour and this carries you over into the excitement phase.2 At point three you're elated! The position has moved nearly double the position's risk and you feel on top of the world.3 It is at point four, though, where things begin to turn sour. Price starts consolidating and threatening bearish candles begin to emerge.4 At point five you've entered into a state of denial, as the market is now trading beyond your initial entry point.5 Taking into account that you have no plan in place to prepare for this situation, the next step is usually desperation. At this stage, you're essentially begging the market to get back to your entry level. However, even if price were to move in your favour and eventually lift itself back into the green again, would you, a trader with no plan for this, not just resort back to point one on the diagram above and begin the painful process all over again?As we mentioned above, using other traders' ideas to complement your own setups is, in our opinion, a viable approach. Trading advertised setups blindly, however, will likely cause you a great deal of unnecessary stress.Accept the riskA financial loss is painful for just about anyone. That, we're sure, we can all agree on!The majority of you reading this piece will genuinely believe that you already accept the risk on each trade you take. But do you really?We're pretty sure that we've all been there. We place a trade and honestly believe that we are willing to lose the money invested i.e. have accepted the risk. Why then do we find ourselves altering the stop to protect our capital if the market does not act as expected? This, unless it is firmly in your plan to do so, is NOT accepting the risk. A way to overcome this is to begin trading positions that you are at ease with. What we mean by this is if you are feeling disappointed or angry at losing a certain amount of money, you may want to crank your size down considerably and work your way back up from there.Accepting that your trades are randomWhat we want you to do now is visualize the perfect setup according to your rules. Now, picture the market steam rolling through your entry level like a knife through hot butter! This happens all the time and often leaves the trader in a state of confusion.One has to realize that their analysis is NOT the market. The only reason the market responds to a setup is because other traders, often with deep pockets, get involved. Should others believe that the market is better sold at 1.2550 and you're selling at 1.2500, the trade will very likely fail.Coming to realization that your trade outcomes are random is quite difficult for many. But until this happens, you will continue to have an emotional attachment to each trade you place.Thinking in probabilities helps a great deal with this. In a nutshell, however, the point of this is to simply highlight and REMIND you that one losing trade means VERY little in the wide scheme of things and you can, even just by winning four times out of ten, still come out ahead. That is, of course, as long as you calculate risk accordingly! Taking colossal losses is a sure-fire way to a depleted account, and all the planning in the world will be of little use to you.Having a can-do attitudeWe believe this goes for just about everything in life! Without a positive attitude, you will likely get discouraged and emotional in this business. Still, we must point out that you mustn't confuse positive thinking with arrogance, as arrogance has absolutely no place in trading, despite what Hollywood films may portray.In closing…Let's remember that the main goal of trading the markets is to make a PROFIT. Satisfying the desire to be correct instead of making money is NOT how professional traders operate. The realisation that you can be wrong several times and still accomplish your goals is a difficult concept to accept, but one that is an essential component to a healthy trading mindset.Typically, we only have our thoughts to work with when trading. Having the discipline to control these thoughts will, in our humble opinion, make or break you as a trader.Despite covering some important aspects in this article, we have barely scratched the surface. It's compelling to think of how much of an effect psychology actually has on us as traders, and how little it is covered in mainstream teachings. To that end, we hope to dive deeper into this subject in future articles…