12 Essential Forex Trading Secrets (Foreign Exchange Tutorial)

12 Essential Forex Trading Secrets (Foreign Exchange Tutorial)

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Applicable advice for successful Foreign Exchange trading (semi-advanced and advanced Foreign Exchange traders).
Learn how to trade Forex currencies like a professional trader. The tutorial includes charting, technical analysis, trade setups, trading orders, and money management tips.

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Published 09 August 2018
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Language English
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12 Essential Forex Trading Secrets «ApplicableAdviceforSuccessfulForeign Exchange Trading» Semi-Advanced & Advanced  Foreign Exchange Traders
12EssentialForexTradingSecrets©July2018GeorgeM. Protonotarios©-AllrightsreservedForexExperts.netDistribution byQexpert.com
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12 ESSENTIAL FOREX TRADING SECRETS «ApplicableAdvice forSuccessfulForeignExchangeTrading»-TABLEOFCONTENTS-PREFACE
CHAPTER-1:Position in the MarketCHAPTER-2:Licensed & Competitive Brokers CHAPTER-3:Manual Trading JournalCHAPTER-4:Hard-Tested Trading PlanCHAPTER-5:Trading SetupsCHAPTER-6:COT ReportCHAPTER-7:Risk Event CalendarCHAPTER-8:Run Your Profits and Cut Your LossesCHAPTER-9:
Protect your Portfolio
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CHAPTER-10:
The Sweet Spot of Forex TradingCHAPTER-11:Major Central BanksCHAPTER-12:
Do Your Own Research
SUMMARY
REFERENCES &BIBLIOGRAPHY
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PREFACE:
Forex brokers advertise the Foreign Exchange market as an easy way to make
some extra money. Actually, Forex trading is a demanding and complicated
task that requires several intellectual and emotional skills. This eBook
presents 12 tips that are actually applicable in order to trade successfully the
global currency market.
Why most Forex Traders Fail?
Most Forex traders fail and there are many good reasons for that. This is a list
with common fatal mistakes:
1.Over-trade promising positions 2.Ignore trading cost 3.Use extreme capital leverage
4.Lack of an effective risk management system 5.Fast-entering trades (not using setups) 6.Lack of a proper trading plan
7.Lack of emotional control 8.Cut winning trades short, and widen stops on losing trades
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These are some interesting trading principles by Mark Andrew Ritchie
(veteran CBOT trader):
1.Do your own research 2.Keep each position size so small that it almost seems to be a waste of your time
3.Have the patience to stay with a winning position as long as that position is working
4.Recognize and control your greed 5.In order to ride winning positions to their maximum potential, it is necessary to endure periodic losses in open profits greater than the
risk level that would be advisable when a position is first implemented
If you are a retail trader, the most important trading principle is to realize that
you are a little fish in alargeocean of predators. Even if you pretend to be a
predator, you will still be a little fish. If you wish to stay alive in the
marketand grow, you need to be patient, flexible, and carefully avoid any
hazard.More about size and positioning on Chapter-1.
George M. Protonotarios, Athens
Financial Analyst -Msc inInt. Banking & FinanceSalford, UK Linkedin: »https://www.linkedin.com/in/qexpert/
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Chapter-1:The Importance of Understanding Your Position in the Market
A retail trader is just like a little penguin swimming in a pool of hungry
sharks"
There are lot of different predators in the financial markets targeting retail
traders, including the dealing-desks of banks, hedge funds, large investment
firms, and dealing-desk (DD) brokers.
Unfortunately, most retail traders think themselves as sharks because they
are as hungry and greed as a shark, but their size and potential in the market
is matching only a small penguin. A retail trader who thinks himself a shark
will lose all his funds in a matter of months, and then, he will blame everyone
else instead of blaming himself.
The Competitive Advantages & Disadvantages of Retail Trading
In order to understand your position in any market you need to start by
identifying your competitive advantages and disadvantages. The great
advantage of a retail trader is the flexibility to enter and exit the market at a 7 / 54
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glance. On the other hand, there are several disadvantages. These are the
major disadvantages of retail traders compared to institutional traders:
Higher trading spreads Higher overnight cost Lack of information Insufficient funding capabilities Being emotional while institutional traders are simply professional Trading naked (no hedging) while institutional traders implement
advanced hedging techniques
Trading only on spot while institutional traders can use also futures, options, swaps, and forwards
Institutional Traders
Institutional traders are large players managing great sums of trading capital.
Theycan manage their own funds but also their clients’ funds. Institutional
traders basically include:
Investment Banks
Hedge Funds
Mutual Funds
Investment Firms
Large Commercial Corporations
This is a tip from Bill Lipschutz (co-founder and Director of Portfolio
Management at Hathersage Capital Management):
“Size is a huge advantagein foreign exchange. If a big buyer comes in and
pushes the market 4 percent, that's an advantage. He still has to get out of
that position. Unless he's right about the market, it doesn't seem like large
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size would be an advantage. He doesn't have to get out of the position all at
once. Foreign exchange is a very psychological market. You're assuming that
the market is going to move back to equilibrium very quickly, more quickly
than he can cover his position. That's not necessarily the case. If you move
the market 4 percent, for example, you're probably going to change the
market psychology for the next fewdays.”
The Euromoney Survey can provide a good insight regarding the top
institutional players (banks) in the Forex market.
Table: Euromoney Fx Ranking (Based on Forex Market Volumes)
Notes:
The market share of the top-five (5) banks has diminished to 41.1% in 2017 compared to 61.5% in 2009. This clue indicates that new key
players are emerging in the market
Asia is becoming a more influential area of currency trading London remains the most important Forex center in the world
Comparing Institutional and Retail Traders
The following table highlights some of the key differences in the trading
behavior of institutional and retail traders.
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Trading Chart:
Table: Comparing Institutional and Retail Traders
Surviving in the Long-Term
to several months)
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Futures & Options Forwards Interest Rate Products
10:1 to 200:1
Demand/Supply Metrics
Financial Instruments:
M1 to H4
Average
Always Hedging
Intermarket Correlations
Typical Leverage:
Positioning in the Market:
Average
Retail Trader
2-3 Million USD,
1:1 to 10:1
Long-Term Macro Analysis
Fundamental Analysis
Hedging against all
o
Unwilling to trade ‘naked’
Multi-asset Diversification
---
to many Billions USD
Long-Term
Many Large Positions
No Specific Timeframe
(several weeks
Institutional Trader
systematic risks
Horizon:
----
Available Capital:
Analysis Framework:
Risk Management:
Few Small Positions
6,600 USD on average
(US average deposit)
Forex on spot
o
So how can a retail trader survive in the long-term?
Short-Term (several hours
1-2% Max Position
Hedging:
oo
Forex on spot CFDs CFDs on Futures
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Almost Never
Stop-Loss
to several days)
Technical Analysis
(1) The first step is to realize his small size and identify all his competitive
disadvantages (as explained before)
(2) The second step is to implement a trading strategy that minimizes the
effect of all these disadvantages:
Trading small account sizes in order to limit the emotional hazards
Selecting safe and competitive Forex brokers Executing low-risk trades (tight capital leverage)
Estimating the trading cost of any position (before open it) Not over-trading promising trades Entering swing and position trades
Using trade setups Using a tight money management system built on limited funding capabilities
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