1 A Computer
This is an essential tool one needed for online trading. In order to trade online, one must have a computer. The computer must very fastalso have an operating system area.
2 The Internet
This is another essential thing needed in trading after a computer,your computer need to be connected in other for you to be able to trade.
Also, there should always be a back-up internet service available for stock trading
Just in case the computer isn't working and/or both internet servers are down, every day trader should make sure he/she has access to a telephone. That way if he/she needs to exit a trade and doesn't have internet access, he/she can call the brokerage firm to exit the trade.
3 Trading Brokerage
To trade online, everyone needs a brokerage that supports Day Trading. There are many different types of brokerage firms that charge many different fees and offer many different services.
Choose wisely with what you need and want in mind.
Also, look to choose a brokerage that offers good stock charting software and good trading software. You can purchase the software separately, and you may want to do so anyway, but having it all supplied by the brokerage firm is usually the most inexpensive way to go.
You also want to choose a brokerage that provides its clients with market data. Again, an online stock trader can get this information him/herself but its often easier and more cost effective to choose a brokerage that provides their clients with all the information.
With each of the essential tools for online stock trading there are many different options. A Day
Trader needs to decide what he/she needs and wants out of each tool. Then the tools should be used their full extent.
Stock trading online is growing more and more every single day. People are realizing it's the most convenient way to trade stocks. Anyone wishing to begin trading stocks online needs to get acquire 3 essential tools: a computer, the internet, and a trading brokerage
Thursday, October 9, 2008
Forex Glossary
Accrual - The apportionment of premiums and discounts on forward exchange transactions that relate directly to deposit swap (Interest Arbitrage) deals , over the period of each deal.
Actualize - The underlying assets or instruments which are traded in the cash market.
Adjustable Peg - Term for an exchange rate regime where a country's exchange rate is "pegged" (i.e. fixed) in relation to another currency , often the dollar or French Franc, but where the rate may be changed from time to time. This was the basis of the Bretton Woods system. See peg, and crawling peg.
Adjustment - Official action normally by either change in the internal economic policies to correct a payment imbalance or in the official currency rate or. Agent Bank -
(1) A bank acting for a foreign bank.
(2) In the Euro market - the agent bank is the one appointed by the other banks in the syndicate to handle the administration of the loan.
Aggregate Demand - Total demand for goods and services in the economy. It includes private and public sector demand for goods and services within the country and the demand of consumers and and firms in other countries for good and services.
Aggregate risk - Size of exposure of a bank to a single customer for both spot and forward contracts. Aggregate Supply - Total supply of goods and services in the economy from domestic sources (including imports) available to meet aggregate demand.
Agio - Difference in the value between currencies. Also used to describe percentage charges for conversion from paper money into cash, or from a weak into a strong currency. Appreciation - Describes a currency strengthening in response to market demand rather than by official action.
Arbitrage - The simultaneous purchase and sale on different markets, of the same or equivalent financial instruments to profit from price or currency differentials.
The exchange rate differential or Swap points. May be derived from Deposit Rate differentials.
Arbitrage channel - The range of prices within which there will be no possibility to arbitrage between the cash and futures market.
Around - Used in quoting forward "premium / discount". "Five-five around" would mean five point on either side of the present spot value.
Back Office - Settlement and related processes.
Backwardation - Term referring to the amount that the spot price exceeds the forward price.
Balance of Payments - A systematic record of the economic transactions during a given period for a country.
(1) The term is often used to mean either: (i) balance of payments on "current account"; or (ii) the current account plus certain long term capital movements.
(2) The combination of the trade balance, current balance, capital account and invisible balance, which together make up the balance of payments total. Prolonged balance of payment deficits tend to lead to restrictions in capital transfers, and or decline in currency values. Band - The range in which a currency is permitted to move. A system used in the ERM. Bank line - Line of credit granted by a bank to a customer, also known as a " line". Bank Rate - The rate at which a central bank is prepared to lend money to its domestic banking system. Base currency - United States Dollars.
The currency to which each transaction shall be converted at the close of each position.
Basis - The difference between the cash price and futures price. Basis point - For most currencies, denotes the fourth decimal place in exchange rate and represents 1/100 of one percent (.01%). For such currencies as the Japanese Yen, a basis point is the second decimal place when quoted in currency terms or the sixth and seventh decimal places, respectively, when quoted in reciprocal terms
. Basis trading - Taking opposite positions in the cash and futures market with the intention of profiting from favorable movements in the basis.
Basket - A group of currencies normally used to manage the exchange rate of a currency. Sometimes referred to as a unit of account.
Bear market - A prolonged period of generally falling prices. Bear - An investor who believes that prices are going to fall.
Bid - The price at which a buyer has offered to purchase the currency or instrument. Book - The summary of currency positions held by a dealer, desk, or room. A total of the assets and liabilities.
If the average maturity of the book is less than that of the assets, the bank is said to be running a short and open book.
Passing the Book refers normally to transferring the trading of the Banks positions to another office at the close of the day, e.g. from London to New York. Bretton Woods - The site of the conference which in 1944 led to the establishment of the post war foreign exchange system that remained intact until the early 1970s.
The conference resulted in the formation of the IMF. The system fixed currencies in a fixed exchange rate system with 1% fluctuations of the currency to gold or the dollar.
Broker - Brings buyers and sellers together for a commission paid by the initiator of the transaction. Brokers do not take market positions.
Bull market - A prolonged period of generally rising prices.
Bull - An investor who believes that prices are going to rise. Bundesbank - Central Bank of Germany.
Buying Rate - Rate at which the market and a market maker in particular is willing to buy the currency. Sometimes called bid rate.
Asset Allocation - Dividing instrument funds among markets to achieve diversification or maximum return.
Ask - The price at which the currency or instrument is offered.
Asset - In the context of foreign exchange is the right to receive from a counterparty an amount of currency either in respect of a balance sheet asset (e.g. a loan) or at a specified future date in respect of an unmatched forward Forward or spot deal.
At best - An instruction given to a dealer to buy or sell at the best rate that can be obtained.
At or Better - An order to deal at a specific rate or better. Authorized Dealer - A financial institution or bank authorized to deal in foreign exchange.
Actualize - The underlying assets or instruments which are traded in the cash market.
Adjustable Peg - Term for an exchange rate regime where a country's exchange rate is "pegged" (i.e. fixed) in relation to another currency , often the dollar or French Franc, but where the rate may be changed from time to time. This was the basis of the Bretton Woods system. See peg, and crawling peg.
Adjustment - Official action normally by either change in the internal economic policies to correct a payment imbalance or in the official currency rate or. Agent Bank -
(1) A bank acting for a foreign bank.
(2) In the Euro market - the agent bank is the one appointed by the other banks in the syndicate to handle the administration of the loan.
Aggregate Demand - Total demand for goods and services in the economy. It includes private and public sector demand for goods and services within the country and the demand of consumers and and firms in other countries for good and services.
Aggregate risk - Size of exposure of a bank to a single customer for both spot and forward contracts. Aggregate Supply - Total supply of goods and services in the economy from domestic sources (including imports) available to meet aggregate demand.
Agio - Difference in the value between currencies. Also used to describe percentage charges for conversion from paper money into cash, or from a weak into a strong currency. Appreciation - Describes a currency strengthening in response to market demand rather than by official action.
Arbitrage - The simultaneous purchase and sale on different markets, of the same or equivalent financial instruments to profit from price or currency differentials.
The exchange rate differential or Swap points. May be derived from Deposit Rate differentials.
Arbitrage channel - The range of prices within which there will be no possibility to arbitrage between the cash and futures market.
Around - Used in quoting forward "premium / discount". "Five-five around" would mean five point on either side of the present spot value.
Back Office - Settlement and related processes.
Backwardation - Term referring to the amount that the spot price exceeds the forward price.
Balance of Payments - A systematic record of the economic transactions during a given period for a country.
(1) The term is often used to mean either: (i) balance of payments on "current account"; or (ii) the current account plus certain long term capital movements.
(2) The combination of the trade balance, current balance, capital account and invisible balance, which together make up the balance of payments total. Prolonged balance of payment deficits tend to lead to restrictions in capital transfers, and or decline in currency values. Band - The range in which a currency is permitted to move. A system used in the ERM. Bank line - Line of credit granted by a bank to a customer, also known as a " line". Bank Rate - The rate at which a central bank is prepared to lend money to its domestic banking system. Base currency - United States Dollars.
The currency to which each transaction shall be converted at the close of each position.
Basis - The difference between the cash price and futures price. Basis point - For most currencies, denotes the fourth decimal place in exchange rate and represents 1/100 of one percent (.01%). For such currencies as the Japanese Yen, a basis point is the second decimal place when quoted in currency terms or the sixth and seventh decimal places, respectively, when quoted in reciprocal terms
. Basis trading - Taking opposite positions in the cash and futures market with the intention of profiting from favorable movements in the basis.
Basket - A group of currencies normally used to manage the exchange rate of a currency. Sometimes referred to as a unit of account.
Bear market - A prolonged period of generally falling prices. Bear - An investor who believes that prices are going to fall.
Bid - The price at which a buyer has offered to purchase the currency or instrument. Book - The summary of currency positions held by a dealer, desk, or room. A total of the assets and liabilities.
If the average maturity of the book is less than that of the assets, the bank is said to be running a short and open book.
Passing the Book refers normally to transferring the trading of the Banks positions to another office at the close of the day, e.g. from London to New York. Bretton Woods - The site of the conference which in 1944 led to the establishment of the post war foreign exchange system that remained intact until the early 1970s.
The conference resulted in the formation of the IMF. The system fixed currencies in a fixed exchange rate system with 1% fluctuations of the currency to gold or the dollar.
Broker - Brings buyers and sellers together for a commission paid by the initiator of the transaction. Brokers do not take market positions.
Bull market - A prolonged period of generally rising prices.
Bull - An investor who believes that prices are going to rise. Bundesbank - Central Bank of Germany.
Buying Rate - Rate at which the market and a market maker in particular is willing to buy the currency. Sometimes called bid rate.
Asset Allocation - Dividing instrument funds among markets to achieve diversification or maximum return.
Ask - The price at which the currency or instrument is offered.
Asset - In the context of foreign exchange is the right to receive from a counterparty an amount of currency either in respect of a balance sheet asset (e.g. a loan) or at a specified future date in respect of an unmatched forward Forward or spot deal.
At best - An instruction given to a dealer to buy or sell at the best rate that can be obtained.
At or Better - An order to deal at a specific rate or better. Authorized Dealer - A financial institution or bank authorized to deal in foreign exchange.
Friday, October 3, 2008
Essential Elements of a Successful Trader
Courage Under Stressful Conditions When the Outcome is Uncertain
All the foreign exchange trading knowledge in the world is not going to help, unless you have the nerve to buy and sell currencies and put your money at risk. As with the lottery “You gotta be in it to win it”. Trust me when I say that the simple task of hitting the buy or sell key is extremely difficult to do when your own real money is put at risk.
You will feel anxiety, even fear. Here lies the moment of truth. Do you have the courage to be afraid and act anyway? When a fireman runs into a burning building I assume he is afraid but he does it anyway and achieves the desired result. Unless you can overcome or accept your fear and do it anyway, you will not be a successful trader.
However, once you learn to control your fear, it gets easier and easier and in time there is no fear. The opposite reaction can become an issue – you’re overconfident and not focused enough on the risk you're taking.
Both the inability to initiate a trade, or close a losing trade can create serious psychological issues for a trader going forward. By calling attention to these potential stumbling blocks beforehand, you can properly prepare prior to your first real trade and develop good trading habits from day one.
Start by analyzing yourself. Are you the type of person that can control their emotions and flawlessly execute trades, oftentimes under extremely stressful conditions? Are you the type of person who’s overconfident and prone to take more risk than they should? Before your first real trade you need to look inside yourself and get the answers. We can correct any deficiencies before they result in paralysis (not pulling the trigger) or a huge loss (overconfidence). A huge loss can prematurely end your trading career, or prolong your success until you can raise additional capital.
The difficulty doesn’t end with “pulling the trigger”. In fact what comes next is equally or perhaps more difficult. Once you are in the trade the next hurdle is staying in the trade. When trading foreign exchange you exit the trade as soon as possible after entry when it is not working. Most people who have been successful in non-trading ventures find this concept difficult to implement.
For example, real estate tycoons make their fortune riding out the bad times and selling during the boom periods. The problem with trying to adapt a 'hold on until it comes back' strategy in foreign exchange is that most of the time the currencies are in long-term persistent, directional trends and your equity will be wiped out before the currency comes back.
The other side of the coin is staying in a trade that is working. The most common pitfall is closing out a winning position without a valid reason. Once again, fear is the culprit. Your subconscious demons will be scaring you non-stop with questions like “what if news comes out and you wind up with a loss”. The reality is if news comes out in a currency that is going up, the news has a higher probability of being positive than negative (more on why that is so in a later article).
So your fear is just a baseless annoyance. Don’t try and fight the fear. Accept it. Have a laugh about it and then move on to the task at hand, which is determining an exit strategy based on actual price movement. As Garth says in Waynesworld “Live in the now man”. Worrying about what could be is irrational. Studying your chart and determining an objective exit point is reality based and rational.
Another common pitfall is closing a winning position because you are bored with it; its not moving. In Football, after a star running back breaks free for a 50-yard gain, he comes out of the game temporarily for a breather. When he reenters the game he is a serious threat to gain more yards – this is indisputable. So when your position takes a breather after a winning move, the next likely event is further gains – so why close it?
If you can be courageous under fire and strategically patient, foreign exchange trading may be for you. If you’re a natural gunslinger and reckless you will need to tone your act down a notch or two and we can help you make the necessary adjustments. If putting your money at risk makes you a nervous wreck its because you lack the knowledge base to be confident in your decision making.
Patience to Gain Knowledge through Study and Focus
Many new traders believe all you need to profitably trade foreign currencies are charts, technical indicators and a small bankroll. Most of them blow up (lose all their money) within a few weeks or months; some are initially successful and it takes as long as a year before they blow up. A tiny minority with good money management skills, patience, and a market niche go on to be successful traders. Armed with charts, technical indicators, and a small bankroll, the chance of succeeding is probably 500 to 1.
To increase your chances of success to near certainty requires knowledge; acquiring knowledge takes hard work, study, dedication and focus. Compile your knowledge base without taking any shortcuts, thereby assuring a solid foundation to build upon.
Source:http://www.goforex.net/essential-elements.htm
All the foreign exchange trading knowledge in the world is not going to help, unless you have the nerve to buy and sell currencies and put your money at risk. As with the lottery “You gotta be in it to win it”. Trust me when I say that the simple task of hitting the buy or sell key is extremely difficult to do when your own real money is put at risk.
You will feel anxiety, even fear. Here lies the moment of truth. Do you have the courage to be afraid and act anyway? When a fireman runs into a burning building I assume he is afraid but he does it anyway and achieves the desired result. Unless you can overcome or accept your fear and do it anyway, you will not be a successful trader.
However, once you learn to control your fear, it gets easier and easier and in time there is no fear. The opposite reaction can become an issue – you’re overconfident and not focused enough on the risk you're taking.
Both the inability to initiate a trade, or close a losing trade can create serious psychological issues for a trader going forward. By calling attention to these potential stumbling blocks beforehand, you can properly prepare prior to your first real trade and develop good trading habits from day one.
Start by analyzing yourself. Are you the type of person that can control their emotions and flawlessly execute trades, oftentimes under extremely stressful conditions? Are you the type of person who’s overconfident and prone to take more risk than they should? Before your first real trade you need to look inside yourself and get the answers. We can correct any deficiencies before they result in paralysis (not pulling the trigger) or a huge loss (overconfidence). A huge loss can prematurely end your trading career, or prolong your success until you can raise additional capital.
The difficulty doesn’t end with “pulling the trigger”. In fact what comes next is equally or perhaps more difficult. Once you are in the trade the next hurdle is staying in the trade. When trading foreign exchange you exit the trade as soon as possible after entry when it is not working. Most people who have been successful in non-trading ventures find this concept difficult to implement.
For example, real estate tycoons make their fortune riding out the bad times and selling during the boom periods. The problem with trying to adapt a 'hold on until it comes back' strategy in foreign exchange is that most of the time the currencies are in long-term persistent, directional trends and your equity will be wiped out before the currency comes back.
The other side of the coin is staying in a trade that is working. The most common pitfall is closing out a winning position without a valid reason. Once again, fear is the culprit. Your subconscious demons will be scaring you non-stop with questions like “what if news comes out and you wind up with a loss”. The reality is if news comes out in a currency that is going up, the news has a higher probability of being positive than negative (more on why that is so in a later article).
So your fear is just a baseless annoyance. Don’t try and fight the fear. Accept it. Have a laugh about it and then move on to the task at hand, which is determining an exit strategy based on actual price movement. As Garth says in Waynesworld “Live in the now man”. Worrying about what could be is irrational. Studying your chart and determining an objective exit point is reality based and rational.
Another common pitfall is closing a winning position because you are bored with it; its not moving. In Football, after a star running back breaks free for a 50-yard gain, he comes out of the game temporarily for a breather. When he reenters the game he is a serious threat to gain more yards – this is indisputable. So when your position takes a breather after a winning move, the next likely event is further gains – so why close it?
If you can be courageous under fire and strategically patient, foreign exchange trading may be for you. If you’re a natural gunslinger and reckless you will need to tone your act down a notch or two and we can help you make the necessary adjustments. If putting your money at risk makes you a nervous wreck its because you lack the knowledge base to be confident in your decision making.
Patience to Gain Knowledge through Study and Focus
Many new traders believe all you need to profitably trade foreign currencies are charts, technical indicators and a small bankroll. Most of them blow up (lose all their money) within a few weeks or months; some are initially successful and it takes as long as a year before they blow up. A tiny minority with good money management skills, patience, and a market niche go on to be successful traders. Armed with charts, technical indicators, and a small bankroll, the chance of succeeding is probably 500 to 1.
To increase your chances of success to near certainty requires knowledge; acquiring knowledge takes hard work, study, dedication and focus. Compile your knowledge base without taking any shortcuts, thereby assuring a solid foundation to build upon.
Source:http://www.goforex.net/essential-elements.htm
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