Candlestick Trading Blog

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When conducting online forex currency trading there is a lot of information that investors must know. One of the most important pieces of information for new forex investor is to research and to decide on a forex broker. In today's article we will discuss various characteristics and things that every investor must find out about a brokerage firm before selecting one.

Trading Platform
Forex brokers offer many different types of forex trading platforms to investors that have great tools and resources. Before you commit to broker, you should request a free trial first to ensure their platform is what you are looking for. You should also check out specific features such as the technical analysis tools offered, the news and the data, the charts, and of course their level of support for their trading system.

Spread
When online forex currency trading it is important that every investor finds out how to calculate the spread. The spread is the difference between the price a currency can be purchased at, and the price that is can be sold. The spread is calculated in pips, and the reason it is important is because forex brokers make their money on the spread, instead of on commissions, like stock brokers. You should be looking for a broker that has a low spread.

Qualifications
Ensure that your broker, or the firms of interest, are registered with the Futures Commission Merchant (FCM) and that they are regulated by the Commodity Futures Trading Commission (CFTC). This is of course for your protection so that you know you are dealing with a reliable and qualified firm. The majority of forex brokers are attached to lending institutions or large banks due to the large amounts of leverage that they need to provide to their clients. The brokerage firm's qualifications should be listed on its website.

Lots of Leverage
Leverage is the ratio between total capital available to the investor and the actual capital. This leverage is the amount of money your broker will lend to you when you trade forex. When online forex currency trading, leverage is important because the source of profit are fractions of a cent. Please note that the lower the leverage, the lower the profit, but the margin call risk is also lower. Conversely, the higher the leverage, the higher the profit, but the margin call risk is higher.

The last important thing to consider when choosing a forex broker is the type of account that you choose to set up. There are mini accounts with a lower minimum trading amount, and there are standard accounts that have a higher minimum amount. The amount of leverage you receive, when forex trading with your account, will change depending on the type of account that you choose to set up, so be sure to research that piece at as well.

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The futures market consists of hedgers and speculators and they both practice different methods for trading futures. Hedgers aim to increase the value of their assets while limiting any potential loss in value. They use the commodities markets to take a position in order to reduce the risk of loss in their assets due to changes in price. Hedging involves securing a price now to protect against a future declining price, also known as shorting. Conversely, they also aim to secure a price now to protect against future rising prices, also known as going long. In summary, hedgers can be farmers, importers and exporters, as well as manufacturers, and they buy or sell in the futures market in order to secure a future price of a commodity that is intended to be sold at a later date in the cash market.

Speculators, on the other hand, aim to profit from changes in the price of the futures or options contract. They aim to secure a price now in anticipation of declining prices, also known as shorting. Conversely, they also aim to secure a price now in anticipation of rising prices, also known as going long. Instead of aiming to minimize risk, like hedgers, they aim to benefit from the risky nature of this type of market. Speculators, actually increase their risk in order to maximize their return on investment. To summarize, a speculator who buys a contract low so that he or she call sell it high in the future most likely buys that contract from a hedger who is selling a contract low anticipating that the prices will decline in the future. May the best man win!

What is a Futures Contact?
Futures contracts are agreements made between investors to buy or sell a specific quantity of a commodity in the future at a specific price. In the futures market, however there is rarely actual delivery of the commodity in order to fill the contract and most contracts are liquidated before the delivery date. An option on a commodity futures contract gives the buyer of the option the right to convert the option into a futures contract.

In the past 20 years, futures trading has expanded quickly from agricultural commodities to energy commodities, as well as to financial instruments. The CFTC reviews the terms and conditions of proposed futures and option contracts and conducts daily market surveillance. It can take action if there are any issues in any contracts that are being traded.

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SSF – Single Stock Future

1. There is a range of trading strategies that are used with single stock futures. They can be applied to a variety of portfolio management needs and are in fact transferable from the stock market.
2. There is improved financing of equity positions by participating at competitive benchmark rates.
3. Electronic trading is available and if fully automated on the OneChicago single stock futures exchange.
4. SSF acts as a synthetic stock lending vehicle therefore replacing the process of locating stock when selling short.
5. Many investors are able to trade OneChicago products on their computers through their existing securities or futures brokerage accounts. This is because they can be traded in either securities accounts or futures accounts due to their narrow based indexes. 
6. All trade are cleared through the OCC which is a triple A rated credit facility or CME clearing house division.

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Online Forex Market

1. There are investors taking a percentage of the investment or the profit. Each investor deals directly with the pricing market agent when trading online forex.
2. There are no commissions! The forex market is the only trading market where there are no brokerage commission fees, exchange fees, government fess and other miscellaneous fees. Additionally, there are low transaction costs between the bid and the ask price.
3. There is high liquidity in the forex market as well. Investors can buy and sell their currency at any time no matter the position of the currency. The trade is also done almost immediately.
4. Forex trading is also very dynamic. You can have mini lots worth dollars to huge lots worth thousands. It is up to you.
5. Online forex trading also allows you trade 24 hours a day. Due to many times zones and the fact that it is worldwide means that you can trade anytime 24 hours a day.
6. The last advantage discussed is the fact that there are margin investments that increase the investor's chance for higher profits. Margin trading can potentially increase your money's worth.

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Trading psychology is a concept that is now more common among stock traders and investors. In fact, truly great investors have a complete understanding of the psychology of investing and they appreciate how it greatly affects ones success in the markets. In today's article we discuss three concepts associated with trading psychology and how to incorporate these concepts into your every day online investing.

Enjoy Trading First
You must enjoy what you are doing in order to be truly successful at it. If you dread trading stocks everyday, and you know what you are doing, then trading stocks probably isn't for you. That doesn't mean you can't invest however it just means that maybe you need to look for other ways of investing money that are more in synch with your personality. You can explore foreign currencies, commodities, or even exchange traded funds. Don't give up until you have explored all of your investment options and you find something that you truly enjoy.

Have Confidence in Yourself
Another very important part of understanding trading psychology is to understand that you must have confidence in yourself. Of course you need not only confidence, but once you have found a method of investing that you enjoy, you have done your homework, and you have a proven method of investing, have confidence in yourself. If you are finding it hard to launch, you should practice paper trading first so that you can see your results on paper before trading with real money. In fact most investors new to trading should practice online paper trading until they have proven methods and success. Lacking confidence can prevent your from entering trades and can make you pull out of trades too quickly so that you lose out of bigger profits. Enjoy yourself, have confidence in yourself, and understand that you will most certainly not win every trade and you will lose from time to time. As long as you are winning overall, then you are in great shape.

Have a Trading Plan
The most important part of understanding trading psychology is not only to have a trading plan but to follow that trading plan. If you don't have a trading plan outlined that you have implemented into your daily routine then stop trading now! You must develop a trading plan that includes your set-ups, your exit strategies, stop-loss strategies, etc. Without a stock trading plan you have no business trading! Stop, create a plan, and more importantly, stick to that plan. If you need to make adjustments that is fine too, just as long as they are absolutely necessary and infrequent. This cannot be stressed enough.

There is so much more to learn about trading psychology that every investor must apply to their investment strategies. This article only begins to touch on how much our minds can influence our trading without our even knowing it.

Please learn more about Eliminating Emotions; The most profitable skill that can't be taught!

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Basics of the Stockmarket

In today's article we discuss three important parts of the stock market. This will help those new to investing in stocks to understand the basic functions that stock exchanges provide to investors and corporations.

Stock Exchange
Stocks are publicly traded on stock exchanges throughout the world. The main stock exchanges in the United States include the NASDAQ, the NYSE, and the American Stock Exchange. All buying and selling is done in one place which allows the price of stock to be public knowledge at a moment's notice. As a result, investors are able to watch how a stock price is affected as a result of news, the economy, and other factors. They can then buy stock or sell stock based on these fluctuations.

Corporations
A corporation is a company that goes public and can then sell shares of stock in the company to investors. This is actually called incorporating and it serves many purposes for the newly incorporated company. For instance, the corporation is then able to raise money through the selling of its shares so it can invest back into the company. This money that is raised this way is known as investment capital. Additionally, the company can buy property and it can sue people. This is especially important because corporations help to limit the liability of the owners so there is less of a personal investment risk. If a corporation is sued, it can go out of business, but if a person who owns a company that is not incorporated is sued, then that person can potentially be personally liable and lose everything they have. In order to be traded on a major stock exchange the corporation must register with the government and it must be issued a federal tax ID number. The owners of the corporation also hold shares of stock in the corporation to represent their ownership. 

Shareholders
Shareholders are a group of owners in a corporation. Anyone can hold stock in a publicly traded company as long as they are able to buy it. Thousands of shareholders trade their shares on a public stock exchange everyday for one corporation. Additionally, there is a board of directors that is elected by the owners of the corporation. The board of directors make the major decisions and they decide how many total shares there will be. The hope of shareholders is that the money the corporation makes from selling its stock will be wisely invested back in to the corporation. As a result, the corporation then makes more profit and increases the value of the stock on the stockmarket. The investment opportunities are mutually beneficial between the corporation and the shareholders. Shareholders must be sure that they do sufficient research on the companies they are investing in. For short term traders, the key is to find a successful method for evaluating and predicting the short term price movements of stock, and then creating a successful trading plan that allows you to make a return on investment. 

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They are often referred to as stock of a corporation but they can also represent ownership of other financial asset classes such as mutual funds. They represent ownership bought in units and shareholders are entitled to an equal distribution of profits. The profits are paid out in the form of dividends.

Common Shares / Stocks
When you buy common stock in a company you become part owner of the company and will see the value of your investments rise as long as the business performs well and makes a profit. As a shareholder you have a right to the company's profits and the more money the company has left over after it has paid all of its debts, the more your share of the company is worth. Investing in stock is generally risky because if the company that you invest in fails, then you could potentially lose all of your investment. Look for bigger companies that have a proven track record and are more established to reduce your risk. You can also look into technical analysis as a method of analyzing and tracking stock price movements. The benefit of investing in the stocks is that overall stocks give investors the highest returns than most other types of investments.

Preferred Shares / Stocks
Preferred stock is a type of stock that regularly pays out a set amount of money out of the company's profits in the form of dividends. They are called "preferred" because you get preferential claim to the profits ahead of the common shareholders. They come with many features that are similar to bonds. There are convertible preferreds and retractable preferreds. Convertible preferreds let the investor exchange their preferreds for the company's common stock. Retractable preferreds allow the investor to turn in the stock to the company at a specific price during specified times. These are risky because they react to changes in the interest rate. If the interest rates rise you have to sell and could get less than what you paid for in order to sell competitively. However, you are in line before shareholders to collect profits if the company performs poorly. Additionally, the yields are higher than those of other fixed income investments like bonds.

Continue to research investment fundamentals to find methods of analysis that work for you. Some investors opt to practice fundamental analysis while more active traders utilize methods taken from technical analysis. Research both and determine what methods are inline with your risk tolerance and investment philosophy.

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