Candlestick Trading Blog

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When opening a forex trading account, there are a few different types of accounts that you should know about and consider. First of all, forex trading is the buying and selling of world currencies on the forex exchange. Before investors begin to trade forex they must set up a trading account. In today's article we discuss the three different types of trading accounts that investors can set up to perform forex trading

The first forex account we will discuss is the standard trading account. This is the most common account among the experienced and well-funded investors. With this account forex investors have access to standard 'lots' of currency with each lot worth $100,000. This doesn't mean you have to put down $100,000 to open the account but instead only need $1,000 to be in the margin account for one standard lot to be traded. Many like this type of account due to more services and perks for the investor. Also, it has a higher type of gain when dealing with pips when one standard 'lot' is traded. Forex brokers however require a higher starting minimum balance of anywhere from $2,000, $5,000 to $10,000. Also, just as there is potential for higher gain there is also potential for greater loss with this type of trading account, which is why it is recommended for well-funded and experienced investors.

Another type of forex account is the mini-trading account. This is basically just a trading account that allows forex traders to make transactions using mini-lots. The idea behind this type of account is so that brokers can offer a way for new and perhaps hesitant investors to enter the forex markets. They offer a mini lot that is equal to $10,000 instead of the standard lot that is equal to $100,000. This is great way for inexperienced traders to familiarize themselves with the markets without risking too much money. Also, new traders can use this account to test new forex trading strategies. These accounts can be opened with anywhere from $250 to $500 and risk management is considered. Of course with smaller risk comes smaller reward so once forex traders are comfortable they really should move to the standard account to make more money.

The last type of forex account we will discuss is the managed trading account. This account is different than the standard and mini accounts because the capital is still yours however the trading decisions are made by someone else. An account manager will handle the decisions made with this account just as a stock broker would handle a managed stock account. There are different types of managed accounts including a pooled fund and individual accounts. Pooled funds are shared with other investors while an individual managed account is just that. Many like having a professional handling their trading decisions and it helps with portfolio diversification. Most managed accounts however require a minimum of $2,000 for pooled accounts and a minimum of $10,000 for individual accounts. Additionally, account managers will of course charge a commission for their services.

Continue to learn about the different types of forex accounts and figure out which one is the best option for you. Good luck!

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There are two types of forex analysis that investors can use when investing in the forex markets. These include forex technical analysis and forex fundamental analysis. The term forex, also known as FX, deals with the international exchange where currencies are bought and sold. This exchange is referred to as the foreign exchange and foreign currency market.

Forex analysis when dealing with technical analysis deals with the study of price and volume movements. Forex charts are the primary tools used to track the data representing these price and volume movements. FX technical analysts are not interested in the fundamentals of a particular stock. They instead believe that a stock's fundamentals are already represented in the price movements. Factors such as market sentiment, supply and demand, and political and economic factors do not concern those who trade forex using technical analysis. They are only interested in the price movements and not the reasons for these movements.

Forex technical analysts also believe that prices move in trends (trend analysis) and therefore can be predicted through identifying patterns. While these patterns are not 100% reliable, they do provide a high probability that they will produce the expected results. Forex analysis using technical analysis also relies on the assumption that history repeats itself. These analysts rely on identified chart patterns that have been in use and categorized for over 100 years because they have repeatedly led to the same conclusions. Due to this we can assume that human psychology changes very little over time. The psychology of investing as it relates to trading forex is another concept that technical analysts study as well.

Types of technical analysis tools used in forex analysis in addition to charts and trends include technical indicators, the Elliott Wave Theory, Fibonacci indictors, and gaps.

The other type of analysis is forex fundamental analysis. Fundamental analysts study and research the intrinsic value of financial instruments. They base their investment decisions on economic and political information and supply and demand. Many investors however do not trade forex using fundamental analysis because the markets often take time to recognize that exchange rate our out of line with value and the forex market tends to anticipate events and then discount them in the currency value in advance.

Hopefully this provides a good description of the two types of forex analysis at a very high level. Continue to research the foreign currency market and decide which method of analysis is the best option for you.

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There are a couple of important steps that every investor must take when buying shares. The stock market is a great place to make money however investors must be aware of the risks and have the knowledge to trade wisely. In today's article we explore two steps that every investor must take before investing in the stock market. 

The first step every investor must do is to select and sign up with an online broker. There are so many to choose from that it can be overwhelming but you must take the time to research. You can opt to go with a full-service broker, but most online stock traders opt to utilize the services of online broker or online discount broker. Online brokers and discount brokers simply execute your trades while full-service brokers provide trading advice in addition to executing trades for you. The idea when buying shares and when looking for an online broker, is to find one with cheaper rates including transactions fees and maintenance fees. You also must look for one that does not charge any account keeping fees and does not charge any inactivity fees if you don't trade frequently. In addition to researching brokerage firm fees, investors must also take advantage of free demos to get a feel for the user interface of the online brokerage site. Ensure that the look and feel complement your trading style.

Once you have chosen an online broker now you must learn how to execute your trades! When placing trades you will be asked specific information each time. You will be asked of course for the stock symbol and the quantity of the number of shares that you want to buy. You will also be asked for the order type which is either a 'market order' or an 'at limit order'. When trading shares, a 'market order' means that you are buying shares at the current market price. An 'at limit order' means that you set a limit for the price at which you will buy the share. This is used in order to reduce exposure to large swings in the stock market. The last piece of information you should be asked for is the expiration. The expiration is the date that you want the trade to expire. Make sure that you don't leave the expiration for too long because you may forget about the trade and accidentally buy the shares!

There is so much more that is important to learn about when buying stocks and shares. Continue to learn how the stock market works and don't start trading until you are ready. Practice online paper trading as well so that you have an understanding of what you are doing before you begin to trade with real money.

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For those investors interested in getting into stock option trading, there is a lot to learn however the options market is popular because you can make money trading options no matter the market conditions. When the market is down you can make money, when it is up you can make money, and even when the market is sideways you can make money.

When a company grants stock options to its employees it provides three important pieces of information. First it provides the number of shares, then the grant price, and then the vesting date. The number of shares is important because this tells the employees how many shares of the company's stock they will be entitled to purchase under the options grant. The grant price is the price at which the employees are able to purchase the stock. Options are typically given the price that is quoted in the stock market on the day they are granted to employees. The last piece of information that is provided is the vesting date and this is the first date that the options may be exercised. When stock option trading, it is important to know that options must be exercised before their expiration date.

Stock option trading means that investors can do three possible things. They can either exercise the option and buy or sell the underlying security. Investors can choose to trade options, or investors can opt to use options as a hedge against a loss (hedging). If the investor chooses to exercise the option that means that they can take possession of or sell the stock at a fixed price regardless of the current market price of the stock. You must exercise the option on or before the expiration date however when stock option trading. An options trader can also simply trade options with no intent of ever taking possession of the underlying security, or the investor can use options as insurance against losses. This is hedging and hedging allows you to buy a put option at or just below the market price if you felt a stock might drop and you didn't want to sell.

Stock option trading is a great way to make money if you know what you are doing. Investors should however proceed with caution if they are just beginning as stock options are extremely complex and you can lose your money very quickly. Continue your stock options education to find out if stock options trading is right for you.

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Factors Affecting Stock Market Prices

There are many factors to that affect stock prices. In today's article we discuss only a handful of these factors as there are so many to take into consideration.

News – The news is one major factor when it comes to prices on the stock market. When there is good news about a company, this obviously positively affects its stock price. Conversely, when the news is bad it can ruin the value of stock very quickly. Obviously the overall performance of a company is more important than daily news, or wall street news, however it is important to note that news does affect what happens to stock market prices for a particular company.

Earnings Per Share – Quarterly reports are published by public companies and the information in these reports includes the company's earnings per share, among other information. The earnings per share is one of the most important stock price factors since it directly influences the buying tendency of the market. These reports are mandatory and every investor should make it a habit to read these reports if looking to practice long term investing. 

Price to Earnings Ratio (P/E ratio) – The price to earnings ratio provides an idea of how each company's share price compares it is earnings. Basically, if the price of the share is a lot higher than the actual earnings of a company, then the stock is considered to be overvalued and the price can fall at any time. Conversely, if the price of the share is a lot lower than the actual earnings of a company, then the stock is considered to be undervalued which means that it has great potential to rise in the very near future.

Supply and Demand – This is a more obvious factor affecting stock market prices and it is a very important factor. The price of stock is directly affected by trends in the stock market meaning that when more people buy stock, the price of that particular stock increases. Conversely, when more people sell stock, then the price of that stock will fall. The idea when stock trading is to be able to predict the trends. There are many trading strategies available to investors who are interested. The trick is finding one that works for you.

Market Capitalization – Investors must multiply the stock price with the total number of outstanding stocks in the market to determine the market cap of a particular company. Market cap tells investors the worth of a particular company rather than the price of its stock.

There are many more factors affecting stock market prices. Short term traders versus long term traders all use this information however it is applied a bit differently depending on the investing strategy used. Continue to research other factors affecting stock prices as well so that you have an overall education in the stock market.

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While there are many options strategies available to traders in today's article we discuss five. Please read the options trading strategies listed below.

Covered Calls
Covered calls mean the writer of the of the call takes on the obligation to potentially provide a futures contract at a specific price. The writer then tries to mitigate their risk by buying futures. Basically a covered call is a call sold against a long futures position. In order to succeed the futures bought must be generally stable in order to retain the options premium. The passage of time along with lower volatility make it unlikely that the options contract with be exercised. Losses using this strategy can be unlimited and as prices decline, the premium received from the sale of the call acts as a partial hedge against the futures position.

Long Strangle
This is one of many options strategies requiring larger price moves to be profitable. It is costly to execute because the options are out of money and losses are limited to the total premium paid. It has lower execution costs and as a result is used during very volatile price movements when trading options. In theory profits using this strategy are unlimited.

Short Strangle
This position profits in stable markets and is less costly to execute. It is also less risky because the strike prices are out-of-the-money. The short strangle takes advantage of premium income and they must be monitored very closely due to high potential for market movement in highly volatile markets. Profits using this trading strategy are limited to the premium received and the risks are unlimited.

Short Covered Put
This is a put option that is sold against a short futures position. This position is bearish (vs. bullish) and premium income can be earned if futures prices are stable to lower. If the options contract is exercised, it will be offset by the short futures position. The premium of the put increases income for hedgers and it simultaneously offsets the price level of the physical product. Losses are unlimited as the prices rally using this position, and the profits are limited on the downside.

Fence
This is one of many options strategies where the upside profit potential is limited but the net cost is low. This position requires the buying of a futures contract and hedging it with the purchase of an out-of-money put and the sale of an out-of-money call. Then the premium that is received for the call sale is used to subsidize the purchase of the put. A fence offers hedgers unlimited downside protection. The profit to loss profile is the same as the bull call spread strategy.

There are many more strategies available to investors who perform options trading. Continue to research different strategies to determine which trading strategies work best for you.

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Those investors new to trading should practice paper trading. Paper trading means that you don't actually trade using real money, but instead you trade on paper. It is one of many great stock market trading tools and no capital is invested. This allows you to make mistakes and learn from them as if you are really trading, but without losing any money on those mistakes. You are actually able to practice trading as if you are really doing it.

Investors have so much to gain especially when online paper trading. They are able to develop a trading plan and a discipline, they can test their trading strategies, and they can build confidence. They can decide if they want to test out new markets in order to make important trading career decisions. This is especially important for those new investors looking to find their trading niche. It is very important to practice first and then apply those skills later once you are ready.

In addition to online paper trading, a new investor can also conduct self-guided paper trading. This is old-fashioned paper trading where you do everything by hand.  There is also broker assisted paper trading that is basically just what it sounds like. You can enlist the help of a broker to assist you with fictitious trades while you are practice trading. Online paper trading, however, seems to be the most popular method for investors who want to practice stock trading, without risking actual money.

While paper trading, traders only really have concept that they cannot be fully prepared for. This is a concept that all traders will eventually come across if they don't immediately. Greed and Fear. Greed and fear can negatively affect a trader's performance and must be addressed with every stock trader. Unfortunately when paper trading, anxiety and emotions that come with the idea of losing money, are absent. ou don't have the fear of losing money because you aren't actually at risk yet. These feelings can greatly alter your trading when you actually trade using real money. Due to this, traders must follow the trading plan they implemented and trust themselves. This is vital to successful stock trading.

While it is important to keep the concepts of fear and greed in the stock market in mind, it is still very important that traders practice trading through paper trading. The benefits outweigh the risks and now that you are aware of the concepts associated with trading emotions and anxiety, you can address them as you trade using real money.

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

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Those investors who plan to begin to day trade have a lot of research to do in order to get going. Stock exchanges are now run by computers, and are accessible via the internet making day trading very popular. Day traders can trade from almost anywhere around the world as long as they have an internet connection and a computer. In today's article we will discuss some items that traders should look into before they begin to trade.

Services
Fast and reliable internet access is crucial when trading online. In addition to having a fast and reliable internet, many investors opt to also have a back-up internet in the event their primary access is disturbed. Investors will use either a dial-up but most prefer to use a mobile phone that provides internet access.

Brokerage
When deciding on a brokerage firm, traders must look at the commissions and fees in relation to their experience level and the type of market they choose to trade. There are so many firms to choose from that it can be overwhelming and each one offers something different from the next. Just be sure that whichever firm you choose to day trade with, fits your trading style, is good for the market you choose to trade, and has good customer service.

Computer
Basically the more powerful your computer is the more stock charts and markets it will be able to display and handle. Look at things such as the memory, the CPU speed, the screen resolution, and the screen size. Get the best to have the best trading experience!

Trading Software
|Most brokerage firms offer their own trading software, but traders can typically use any trading software that is compatible. It is important to choose a firm that offers trading software that you can demo first. Demonstration software is typically offered so that traders can become familiar with the software and determine if it is the trading software that they would like to use when they day trade. Be sure that the brokerage firm that you choose has demonstration software before you commit to anything.

Charting Software
Like trading software, investors can also demo charting software before committing to software. Some features of charting software include ease of use, flexibility, basic charts and a few technical indicators, but traders should also find out if the software offers the basic charting features or if there are additional features included. Additional features could be custom indicators and replaying charts.

There are other factors to take into consideration when trading but hopefully this article gets you headed in the right direction. Good luck!

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