Forex Margin Trading Make More Money With Less - trading forex on weekly charts

Forex Margin Trading Make More Money With Less ~ trading forex on weekly charts

Forex margin trading is a way of applying leverage to increase the purchasing power of your money. Leverage simply means using a small sum to control a much larger sum. This is possible because it is unlikely that the value of a currency will change by more than a certain percentage over a short time. So you can place a few hundred dollars in your brokerage account to trade on the margin - the amount that you think the price will fall. Your broker will in effect lend you the balance.

Trading on margins is also known in stock and futures trading, but because of the special nature of currencies, you can get a lot more leverage in the forex market. Depending on your brokers terms, you may be able to control 50, 100 or even 200 times your account balance.

This can lead to big profits if you are successful, but it can also mean big losses if not. In general, the more leverage you use, the more risky your trading is. 

We can understand leverage and margins if we consider an example.

Imagine that the current rate on the British pound to US dollar forex market is shown as GBP/USD 1.7100. So to buy one British pound you would need $1.71. If you expected the value of the dollar to rise against the pound you might decide to sell enough pounds to buy $100,000. If your broker used lots of $10,000 each, this would be 10 lots. Then you would sit back and wait for the price to go up. 

A few days later you might find that the price had moved to GBP/USD 1.6600. Sure enough, the dollar has risen and the pound is now worth only $1.66. If you sell your dollars now and buy back into pounds, you will have made a profit of 2.9% less the spread. 2.9% of $100,000 is $2,900, so that would be an excellent trade.

But most of us do not have $100,000 spare cash that we want to trade on the currency exchange market. So here is where the principle of forex margins comes into play. 

Since you are buying and selling different currencies at the same time, your own money only has to cover any loss that you might make if the dollar falls instead of rising. And you would put a stop loss into place to limit that loss, so $1,000 might be all you needed to have in your account to make this $100,000 purchase. Your broker guarantees the other $99,000.

In fact many brokers now operate limited risk amounts where the account will automatically close out the trade if whatever funds you have in your account are lost. This prevents margin calls which can be disastrous for a trader because they mean that you can lose more than you have. But with a forex limited risk account that is not a possibility. The brokers software that you use to control your account will not let you lose more than your account balance.

Using leverage in this way is so common in currency trading that you will soon do it without even thinking about it. Still it is important to keep in mind the risks. Lower leverage is always safer and you may never want to go to the maximum forex margin that your broker would allow.

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How to Earn Money in Sideways Market - forex trading on 1 hour charts

How to Earn Money in Sideways Market ~ forex trading on 1 hour charts

The fundamental detail for swing trading is determining a market that is trapped in a sideways trading range (also called a congestion area), or in an up-trending or down-trending channel on the chart (remember, channel!). While taking note by the chart, the trader must be capable to discern some clear support and resistance levels that are boundaries of the congestion field or channel. 

When a market price comes close to the support or resistance area boundary, the trader will set up a position: long if prices are actuating lower and close to the support boundary, and short if prices are actuating higher and toward the resistance boundary. It sounds uncomplicated, but remember, trading comprises numerous surprises. 

The price could break out the support or resistance boundary anytime, therefore skills to reply promptly, or effective money management strategies are always vital features of a veteran trader. Swing trading methods can be practiced in whatever chart time frame -- daily, weekly, monthly and intra-day charts. However, the most generally used timeframe for swing trading is the daily bar chart.

Note that the effectiveness of the support and resistance at the boundaries is commonly influenced by the number of times the market has pivoted at the boundaries. The rule is that the more times a market has reached a support or resistance boundary, and then reversed course, the more powerful is that boundary. It can also be said that the longer continues a channel, the more reliable is that channel. Therefore, a trader prefer to* determine a well-established channel or trading range for which to attempt to swing trade.

An exception to this is a market that has been in a trading range, but is bound by one or two potent spike moves, which also indicate a strong support or resistance boundary. That signifies some congestion areas that could offer a salutary swing-trade opportunity do not require numerous pivot points. As a matter of fact, those one or two spike levels would be determined to be a potentially good pivot area for a market.

The swing trader should still apply tight protective stops. As I remarked, a breakout can occur anytime, might due to bad political news etc…Good money management strategies will keep traders away of troubles. A good area to set a protective stop is exactly outside of a support or resistance boundary that constitutes the trading channel or congestion area. For example, if a market in a trading channel is nearing the upper boundary of that channel, the swing trader would establish a short position and would prefer to place his protective buy stop just above the resistance level that serves as the upper boundary of the trading channel. 

In direct contrast, if a market is coming near the lower boundary, the swing trader would establish a long position and place his protective sell stop just above the support level.

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