Want To Know If Day Trading Is For You?

Day trading can be a very dangerous form of financial speculation, but it is going on from PC all over the United States and the world. The idea is to sell a futures contract to buy a currency, or a commodity, and then buy it back, even at a later date, at a lower price. Unlike position traders, who can hold onto a stock, bond or commodities position for a long time, day traders are the scavengers of the system. They have no interest or loyalty to any currency, commodity or stock in a company. They are simply trying to, as Adam Smith, granddaddy of the British System said, to “buy cheap, and sell dear”.

There is not just the buying and selling of stocks and bonds, but also trading in derivatives and futures. Derivatives values are determined by other indexes or numbers, such as interest rates and currency levels. If you are making a futures bet that a stock will go up, or to have an option to buy a stock at a certain level.

There are many courses on the market, some in person, and some through the Internet in written form, or audio or video. Basically, what one learns is a trading system. This system can involve commodities such as gold, silver or oil, or on the Forex (foreign exchange) market, the value of a currency. Since, the person plans on day trading, it makes little difference which one of these objects are chosen to trade, except that they are all values of high volatility where one can make a profit (or loss) quickly. If you do a Google search on these topics, you will see many alternatives. Some systems involve consulting news and financial reports at a certain time of day, and using this to make decisions what futures to buy in the morning and the sell in the afternoon.

Other systems can be more esoteric. A popular system uses the variations of currency values over different time periods, some of which can be a short as 5 or 10 minutes. The curve produced by these currency value fluctuations, say of the US Dollar/British Pound pair are then plotted out on a graph and compared to the Fibonacci number series, the golden mean relations, or other ideal numeric values, and this is used to estimate the right time to buy and sell currencies. Are you willing to risk your fortunes on such schemes? Some say it is a winning proposition if you master “the system”.

Why So Many People Fail At Forex Trading?

It's relatively easy to understand why most people lose money when they are trading Forex. When we see someone promoting this market, they always talk about the great advantages of the forex market but they never tell you that each one of these advantages can also get you in trouble. The fact that the Forex market is open 24 hours a day is an advantage because you can trade whenever you want but you don't have the volatility needed whenever you want; the Forex market has a high leverage (100, 200 or even 400x). If you have a mini account and use, for example, 100x margin, you can easily get your account ripped off with one single trade. Everyone says "Come trade Forex. There are a lot of free resources and it doesn't take you much time.". This is also a wrong idea about Forex.

If you want to succeed in the Forex market, you have to commit time, energy and money. Basically, you have to treat Forex trading like any other business. If you want to make some money in a coffee shop, you have to invest in a space, in the product you're selling, you'll have to see where you're going to open it, what money you need to ask the bank, and so on. Only after the opening of the coffee shop you can start taking your profits but never forget to keep investing to make it better than the competition. This basic example shows you exactly the mentality you need to have in order to be successful in the Forex market. First of all, you need to research about the market itself, read all that you can, invest some money in good resources, open a demo account with a broker and only then, if you're making money consistently, start trading a real account and make good profits. And, of course, always keep learning because things change all the time.

But why so many people fail at forex trading?

1 - Most people treat Forex as a get rich quick scheme.

2 - Most people expect to have great returns in a short period of time.

3 - Most people think it's easy to make money in Forex.

4 - Most forex traders believe they are better than other traders and the market.

5 - Most people think that is possible to make money in Forex with no work.

6 - Most people choose a bad broker.

Risks by the foreign exchange on Forex

The Forex is essentially risk-bearing. By the evaluation of the grade of a possible risk accounted should be the following kinds of it: exchange rate risk, interest rate risk, and credit risk, country risk.

Exchange rate risk. Exchange rate risk is the effect of the continuous shift in the worldwide market supply and demand balance on an outstanding foreign exchange position. For the period it is outstanding, the position will be subject to all the price changes. The most popular measures to cut losses short and ride profitable positions that losses should be kept within manageable limits are the position limit and the loss limit. By the position limitation a maximum amount of a certain currency a trader is allowed to carry at any single time during the regular trading hours is to be established. The loss limit is a measure designed to avoid unsustainable losses made by traders by means of stop-loss levels setting.

Interest rate risk. Interest rate risk refers to the profit and loss generated by fluctuations in the forward spreads, along with forward amount mismatches and maturity gaps among transactions in the foreign exchange book. This risk is pertinent to currency swaps, forward outright, futures, and options (See below). To minimize interest rate risk, one sets limits on the total size of mismatches. A common approach is to separate the mismatches, based on their maturity dates, into up to six months and past six months. All the transactions are entered in computerized systems in order to calculate the positions for all the dates of the delivery, gains and losses. Continuous analysis of the interest rate environment is necessary to forecast any changes that may impact on the outstanding gaps.



Credit risk. Credit risk refers to the possibility that an outstanding currency position may not be repaid as agreed, due to a voluntary or involuntary action by a counter party. In these cases, trading occurs on regulated exchanges, such as the clearinghouse of Chicago. The following forms of credit risk are known:

1. Replacement risk occurs when counterparties of the failed bank find their books are subjected to the danger not to get refunds from the bank, where appropriate accounts became unbalanced.

2. Settlement risk occurs because of the time zones on different continents. Consequently, currencies may be traded at the different price at different times during the trading day. Australian and New Zealand dollars are credited first, then Japanese yen, followed by the European currencies and ending with the U.S. dollar. Therefore, payment may be made to a party that will declare insolvency (or be declared insolvent) immediately after, but prior to executing its own payments.

Therefore in assessing the credit risk, end users must consider not only the market value of their currency portfolios, but also the potential exposure of these portfolios. The potential exposure may be determined through probability analysis over the time to maturity of the outstanding position. The computerized systems currently available are very useful in implementing credit risk policies. Credit lines are easily monitored. In addition, the matching systems introduced in foreign exchange since April 1993 are used by traders for credit policy implementation as well. Traders input the total line of credit for a specific counterparty. During the trading session, the line of credit is automatically adjusted. If the line is fully used, the system will prevent the trader from further dealing with that counterparty. After maturity, the credit line reverts to its original level.

The Perfect timing to sell your stocks

While quite a bit of time and research goes into selecting stocks, it is often hard to know when to pull out – especially for first time investors. The good news is that if you have chosen your stocks carefully, you won’t need to pull out for a very long time, such as when you are ready to retire. But there are specific instances when you will need to sell your stocks before you have reached your financial goals.

You may think that the time to sell is when the stock value is about to drop – and you may even be advised by your broker to do this. But this isn’t necessarily the right course of action.

Stocks go up and down all the time, depending on the economy…and of course the economy depends on the stock market as well. This is why it is so hard to determine whether you should sell your stock or not. Stocks go down, but they also tend to go back up.

You have to do more research, and you have to keep up with the stability of the companies that you invest in. Changes in corporations have a profound impact on the value of the stock. For instance, a new CEO can affect the value of stock. A plummet in the industry can affect a stock. Many things – all combined – affect the value of stock. But there are really only three good reasons to sell a stock.

The first reason is having reached your financial goals. Once you’ve reached retirement, you may wish to sell your stocks and put your money in safer financial vehicles, such as a savings account.

This is a common practice for those who have invested for the purpose of financing their retirement. The second reason to sell a stock is if there are major changes in the business you are investing in that cause, or will cause, the value of the stock to drop, with little or no possibility of the value rising again. Ideally, you would sell your stock in this situation before the value starts to drop.

If the value of the stock spikes, this is the third reason you may want to sell. If your stock is valued at $100 per share today, but drastically rises to $200 per share next week, it is a great time to sell – especially if the outlook is that the value will drop back down to $100 per share soon. You would sell when the stock was worth $200 per share.

As a beginner, you definitely want to consult with a broker or a financial advisor before buying or selling stocks. They will work with you to help you make the right decisions to reach your financial goals.