Thursday, October 29, 2009

Currency Broker Choices: What to Look For

There is a very wide choice of currency broker companies online and when you are starting out in forex trading it can be difficult to find the best. We tend to be attracted by advertising, assuming they are all working in the same way. In fact this is not true. Foreign exchange brokers have very different business models which affect the way that they operate. In some cases, you may be surprised to hear that they could be working against their clients instead of for them.

Of course traditionally a broker carries out his clients' instructions, placing orders for them in the market. Originally brokers worked with telephone orders and simply placed the order for the best price that they could get through their dealing desk. These days, everything is done online so that clients put in their orders for a certain price. However, you do still need a broker who will connect to the market through their software platform.

Many brokers still work in the old way, placing orders for clients as they are instructed. These are often the brokers who run standard forex accounts with minimum investment of $10,000 and upward. But the internet has opened up forex trading to people with much lower investment funds. More recently, companies have come on the scene to cater for these smaller investors and they do not necessarily follow the pattern of traditional brokers. To cut costs, they usually do not have their own dealing desks and they may operate in some very different ways. This can have important consequences for your funds and how they are managed.

So let's take a look at the types of business model that you may come across in your search for a currency broker.

No Dealing Desk (NDD) Currency Brokers

NDD brokers work in a similar way to brokers with dealing desks, but they use a range of liquidity providers to actually match their clients' orders in the market. Competition between liquidity providers keeps the spread low, even though the broker usually increases the spread to cover their own costs and make some money.

Electronic Communications Network (ECN)

Forex brokers who use the ECN can access an online network where trades are filled. Many market makers work this way, as well as some brokers, banks and other large currency traders. Spread is usually low but you may be charged a fee per trade.

Market Makers

Market makers are not brokers in the true sense because instead of placing your order in the market they will match it themselves and then cover themselves against any loss by taking a position in the ECN or market that offsets their commitment to you either partially or fully. Market makers set their own prices, although of course these will be related to market prices. They often do not like clients to use scalping strategies because the very short term nature of these trades makes it hard for them to offset their risk. Some traders are happy to use market makers but others consider that they have a conflict of interest which may work against you as a trader.

Bucket Shops

Forex bucket shops are like bet takers in that they simply match your trade without necessarily taking any position in the market. They may not even have any connection into the real currency market. They win if you lose, so if you are successful they will probably close your account and return your funds. There is really no point in getting involved with a bucket shop unless you just want experience at very low levels of investment, and plan to lose money. They are illegal in some jurisdictions, and do not deserve to be described as a currency broker.

Monday, October 19, 2009

Best Expert Advisors: Reviews

The best expert advisors can help you to make a lot of money with forex trading, while a bad EA can simply be a drain on your cash. So how do you tell them apart? Most people do this by looking at reviews.

However, online reviews can be a mixed blessing when it comes to something as important as an expert advisor. In case you do not know, an EA is a forex robot or automated currency trading system that runs on the popular platform known as Metatrader 4. Basically, you hook up the robot to your broker's software platform, set it to trade for you at the position size etc that you want, and go enjoy your day.

The problem of course comes if things go against you and it starts to lose your money instead of making it. This is always a danger with forex systems and even more when they are trading on autopilot so you may not be aware of what is happening. For that reason it is very important to run the EA on a demo account first until you have absolutely everything clear.

Reviews can certainly help you to narrow down your search when you are looking for a forex robot that will save you tons of time analyzing the market and placing your trades. However, there are two possible problems with reviews. One is that some reviews that you will find online are simply copied from the sales page for the EA itself and the person might not have used the robot at all. In this case you will usually see a very positive review with no indication of the possible downside. On the other hand a review from somebody who has actually used the software themselves can be very valuable because it will often give you hints and tips about how to get the most from it.

The other thing that you may come across is a strongly negative review from somebody who could not make the EA work for them. There may be all kinds of reasons for this which are not the fault of the EA itself. Often, either the person could not figure out how to set it up and became frustrated with it, or they set their risk too high. A common recommendation for risk is 2% per trade. The laws of statistics mean that setting your risk too high will always lead to a busted bank sooner or later, but people who do not realize this will often blame the system that they were using. This can lead to some very vitriolic comments and forum posts and of course it is never recognized that it is the fault of the trader. It must be the system's fault!

What you should be looking for when you search through reviews for the best expert advisors is a general consensus, a balance of views. Rather than simply going by a star system or whether the person liked the EA, check for specific points such as these:

- Is it easy to set up, and how much does that matter to you?

- Is it suitable for somebody at your level? Is it aimed at beginners or experienced traders? Do you need to be taking a certain position size or using a particular broker to use this system?

- Does it suit your trading style in terms of the amount of risk (stop loss settings) and number of trades?

You may need to read between the lines a little bit to work out some of these points. For example, most EAs will claim to work for people at all levels, but a system that only makes a couple of trades a week is not going to make you much money on a micro trading account unless you take huge risks, so that's why the number of trades can be important. However, many people who buy a new forex robot are also trading using other methods and then it does not matter so much if a robot only trades a couple of times a week.

So do check out reviews when you are looking for the best expert advisors, but follow your own agenda when it comes to how seriously you take them.

Friday, October 16, 2009

Free Expert Advisors: What to Look For

Free expert advisors for forex trading can be found online if you know where to look. However, before you go ahead and grab one, take a moment to think about what you should be looking for.

Expert advisors or EAs are automated forex trading systems or robots that work on the Metatrader 4 software platform. MT4 itself is free, and as with most software, there are some people who have developed free applications that you can download. They may hope for donations, they may hope for some kind of paid work to come from becoming known for this, or they may just do it for fun. But the question that you must always ask is: what is the system that they have automated?

If you think about it, it is pretty clear that anyone with a profitable forex trading system is not very likely to spend hours of his time creating robot software to run it automatically and then give it away as a free expert advisor. Nor is he going to pay a programmer to create the software and then give it away for free. No, either he will keep his robot for himself or he will hope to make a lot of money by selling it.

This means that the free expert advisors that are available on the internet are not necessarily the best automated forex systems. You might be lucky and find one that is great, but you could spend a lot of time trying out free expert advisors that never make money or do not even work.

Then you have a problem because support is likely to be minimal. How could somebody spend hours of their time helping you to fix any problems that you have, if they are never being paid anything for it? Most people have to earn a living. Maybe they had a few spare hours or days to create the robot in the first place, but that does not mean they have spare time to devote to you and your problems when you try to use it, which could be months or years after they developed it.

Besides this, there may not be much in the way of instructions for setting up. This may not sound like a problem until you try it. Forex robots are notoriously difficult for the non technically minded among us, and if you do not even have much of a manual and nobody to answer your emails, the outlook is bleak.

In fact, free forex robots could end up costing you a lot of time and perhaps also a lot of money, if you are unwise enough to let them loose on your real money account before you have fully tested them. Free expert advisors are not necessarily an unmixed blessing.

Wednesday, October 14, 2009

Forex Tutorial: A Necessity For Beginners

A good forex tutorial is essential for beginners. Despite the advertisements, you cannot expect to set out with no experience or training and start making money right away. If you have some knowledge of stock trading or other similar speculative markets you will have a much shorter learning curve but there are still a few things specific to currency trading that you will need to know.

However, do not lose heart. There are plenty of good forex trading training courses out there and with a little investigation you can find the right one for you. There are just a few things that you need to keep in mind when you are looking.

Cost

While a lot of forex training is available for free simply by reading websites or downloading free ebooks, you are not necessarily going to find the best trading information that way. Most traders do not give away their secrets for free.

So although you may be able to cover the basics from free information, you must expect to pay something if you want to learn from the pros. The cost then can range for a few dollars for an ebook describing a successful trading system, to thousands of dollars to sign up with a mentor for private coaching or attend a series of seminars.

All we will say here is that if you are a complete beginner, it could be a waste of money to pay for top level training even if it is good, because you are probably not ready for it. Cover the basics more cheaply first.

Type of forex tutorial

Many people start with books and ebooks. This can be a great way to educate yourself. There are some differences between the two that you should be aware of. Printed books tend to be more general and more informative about the background and history of currency trading, while ebooks are usually shorter and often cover one particular trading system. You need both background knowledge and a profitable if you are actually going to trade.

Of course, ebooks also have the advantage of being instantly downloadable. Sometimes they will come with a video forex tutorial which can be very valuable indeed. Instead of just reading about the author's trading system you can actually watch as he implements it on his computer. You see exactly where to click and everything is much easier to follow. So if you are considering buying a forex ebook, check to see whether videos are included.

When you buy an ebook you will also usually have a method of getting support from the author or his team. This does not come with a printed book and it is essential if there is something that you do not understand. This can also, occasionally, lead on to a mentoring or other relationship that could be very valuable to you in the future.

So do not be surprised that ebooks are usually more expensive than printed books. They contain a lot of hidden value. What you need when you are starting out with forex trading is a practical forex tutorial, and you are much more likely to get this from a forex ebook with videos than any printed book.

Tuesday, October 13, 2009

Forex Trading Platform: Finding the Best One for Your Purposes

Whether you are in the forex market as a broker, a professional trader or a complete beginner, you probably know the importance of having the right forex trading platform. Finding the best one for your purposes is not always easy. Here are some tips to follow.

Broker Forex Trading Platform

Brokers need a solution that is reliable and flexible so that they can adapt it to their particular business. Above all, they want it to be user friendly so that it is easy for their clients to use while providing all the information that clients want at their fingertips.

Most brokers either use custom built software or adapt something that is available out of the box. Custom platforms may seem like the ideal solution for a broker but they are expensive and take a long time. Even if you have delivery of your software, you can be waiting a long time for all of the bugs to be ironed out.

Pre designed forex trading platform packages have several advantages. First, you can be pretty sure they work so you are starting with a system instead of starting from scratch. A huge amount of time can be saved by your programmer, who will just have to change things around so that it does what you want.

Do not neglect the customization, however. It is important that broker trading software is branded to your own company and has a different feel for users than other companies' platforms that they may have used before.

Trader Forex Trading Platform

Traders will usually go with whatever interface their broker provides, but they will be looking for something that is easy to use and provides plenty of technical analysis. The software is often a very important factor in the choice of a broker.

Again, reliability is vital. You do not want to be linked up to a platform that makes errors or is frequently offline. Security is another factor. It is important that your funds are protected and your account cannot be accessed by hackers.

If you are using an automated forex system to trade for you on autopilot, it is essential to check that your selected broker's software will work seamlessly with your robot. If you buy a premade robot or forex expert advisor you will usually receive a list of compatible brokers.

Many successful traders now have someone automate their system so that they can switch over to autopilot trading without changing their trading style. The platform of choice for most robots is Metatrader 4. This is free software on which your programmer can build a trading system for you. It is the most popular forex trading platform for the expert advisors that are sold on the open market and it is compatible with many broker software platforms.

Sunday, October 11, 2009

Forex Analysis: Technical or Fundamental?

In any discussion of forex trading you will see discussion of the two main types of forex analysis. These are technical analysis, where trading is based on historical and mathematical factors such as price charts and indicators, and fundamental analysis, where traders pay more attention to economic factors such as financial and political news.

Which one of these will give you more successful forex trading signals? It is a difficult question and the answer is not agreed by all traders. If you look around the internet you will probably find more discussion of technical analysis but that is partly because there is more to get a grip on. Beginners are frequently advised to identify trends on price charts and then trade on the basis of those alone. This is one of the easiest ways to begin forex trading and it can be successful.

Fundamental analysis depends on knowledge and news of the constantly changing real world. This makes it more difficult to take into account if you are not in the habit of checking out the financial section of your newspaper. However, there is no doubt that ultimately it is the economic factors which cause major price movements. Advocates of fundamental analysis will argue that any evidence on charts is historical and not predictive. In other words, the charts tell you what happened 5 minutes ago but not what is coming next.

One thing is for certain. Major financial reports and other events of national or international importance can have a huge and sudden effect on currency prices. So even if you prefer the technical method of forex analysis, it is wise to keep an ear to the ground and avoid being trapped in a bad trade when the US government announces a change in interest rates and the dollar leaps or plummets by 50 pips or more.

It can be helpful to think of price movements in the forex market as having a kind of elasticity. They are constantly stretching out to certain limits and then moving back, not necessarily to their starting point but often less or more. The fundamental factors are what make the prices move but technical analysis can be used to predict how far they are likely to stretch and when they are likely to start to reverse.

So the bottom line is that the best way to profit from forex trading is to make use of the technical tools such as charts and indicators but at the same time, be aware of the fundamental factors that are the real driving force behind any trends. The successful forex trader will be comfortable with both types of forex analysis.

Saturday, October 10, 2009

Candlestick Analysis: Most Popular Trading Chart

Candlestick analysis is one of the simplest and most effective methods of technical analysis for currency trading as well as stock trading. While there are other types of charts available including line and bar charts, the candle patterns are the most popular.

History Of Candlestick Charts

This type of price tracking chart was developed in Japan in the 18th century and that is why you will sometimes see them referred to as Japanese candlestick charts. It also explains why many of the common recognized patterns have Japanese names such as doji and marubozu.

The charts are believed to have been invented or at any rate used by the very successful Japanese commodity trader Mr. Homma who mainly profited from trading in the price of rice. Previously, simple line charts had been used to track commodity closing prices. Candlesticks gave traders a way of plotting more variables while staying within a two dimensional chart.

While bar charts can also plot the open, close, high and low, the advantage of candlesticks is their visual utility. Bullish and bearing periods are clearly visible at a glance.

Mr. Homma's phenomenal success as a trader led other Japanese commodity traders to adopt his analysis tool and in the early 20th century it was introduced to the American stock market by Charles Dow, the founder of the Wall Street Journal and co-founder of the Dow Jones company.

What Is A Candlestick

A typical candlestick has a block that is the body of the candle, plus vertical lines known as shadows or wicks which stick up and down from the body. The top of the upper shadow is the highest price reached during the trading period and the bottom of the lower shadow is the low.

The top and bottom of the candle block mark the opening and closing prices in either order. The candle was originally unshaded (white) for a rising market where the open was the bottom of the candle and the close was the top, or shaded (black or green) for a falling market where the open was the top of the block and the close the bottom. You may now see other colors used, e.g. green or blue for a rising market and red for a fall.

In a case where there is some coinciding of prices and the open, close, high and low are not all different, the candle may look slightly different. Here are some examples:

Doji - period with an equal opening and closing price, looks like a cross.

Marubozu - period when the opening price was the low and the closing price was the high (white marubozu) or vice versa (black marubozu). Has a candle body block only, with no shadow sticks top or bottom.

Candlestick Analysis In Real Time Trading

Candlesticks can record any measured time period. Typically traders will use 5 or 15 minute candles with the resulting chart showing several hours, but it is possible to set your chart for a longer term or shorter term view. Patterns can be identified that indicate emerging trends or possible forthcoming breakouts. You can then compare with indicators or other time periods to check the signals.

Trading decisions in the live market often need to be made very fast. The colored blocks of candlestick analysis help traders to see movements and reversals at a glance and avoid mistakes.

Thursday, October 8, 2009

Currency Trading Brokers: How to Choose.

Anybody involved in forex trading cannot avoid dealing with currency trading brokers. As an individual trader you cannot set up your own dealing desk, so brokers are your way in to the forex market.

As trading from home becomes more and more popular with private individuals who often have relatively low startup capital, new types of brokerage firms are springing up to cater for them. Most of these companies are completely legitimate but you do need to do your due diligence before committing your funds to them. Check which country they are registered in and whether they are regulated there.

What would happen to your funds if the company went out of business? In some cases you are protected by regulatory bodies but in other cases you are not. So this is a good question to ask before you invest.

Most forex traders work with 100 or 200 times leverage. This means that to control a position size of $10,000 you would have to commit only $100 or $50 of your own money. This gives you a lot of power because you can make a lot of money in a short time when things go your way. On the other hand of course it is also possible to lose a lot, if you do not have stops in place to prevent you. For this reason, when you are beginning it could be a good idea to sign up with a broker who will automatically close out your trades when the limit of your account is reached. This protects you from margin calls which can otherwise mean that you could end up owing the broker more than you have in your account.

Currency trading brokers provide many services to their clients these days. You will probably have access to a demo account where you can test out the brokerage software that allows to you trade in the market in real time. You can also use the demo account to test your trading systems before going live with real money.

They will also usually provide some kind of technical analysis in the form of charts and indicators. You can expect candlestick, bar and line charts, and indicators including the Stochastic, MACD and Bollinger bands. Try to look at the charting services provided by several different brokers through their demo accounts and consider ease of use and whether they give you the information that your trading system requires. Of course, many traders sign up with dedicated charting services once they become more successful, but when you start out, getting good technical analysis from your broker can save you that cost.

You will want assurance that the broker's software platform is not easily cracked by hackers. Remember this is your money and you do not want anybody to be able to access your account illegally. Ask the currency trading brokers what security measures they have in place, or check on forums.

Wednesday, October 7, 2009

Trend Trading Software: How Can it Help Your Trading?

Trend trading software is built to profit from forex and other types of trading trends in order to make money. In most cases the trading is automated, which means that the software acts as a robot that will go ahead and trade for you through your brokerage account, any time that you have it connected.

However, it is possible to develop a system that would simply analyze the markets and provide you with a signal when a trend was identified so that you could trade manually, if you prefer. Some companies providing forex signals have programs that work in this way, although they are not likely to reveal the details of exactly how their trend trading software operates.

A price movement is not usually called a trend if it is very short term. Usually you would expect a trend to continued over the medium to long term, that is, at least several days. Sometimes it might continue for many weeks. In currency trading, usually there would be strong economic reasons for a downward or upward trend, especially if it was long lasting. A major financial crisis could produce a downward movement spanning several months, followed by a slow recovery that could take place over a year or longer.

'The trend is your friend' is one of the best known catchphrases of financial trading. Identifying an emerging trend in the early stages is one of the best ways to profit from forex or stock trading. Most beginners are advised to try to identify trends using charts and indicators.

Candlestick charts are commonly used for this purpose. The slope of an upward trend is shown by plotting the low points of the candlestick shadows, and the slope of a downtrend is shown by drawing a line through the high points of the shadows.

Some traders also talk about 'sideways trends' when the prices are fluctuating between two points relatively steadily. In this case lines drawn through the high and low points of the shadows will be approximately horizontal, not converging or diverging. However, others consider that this type of pattern should not strictly be called a trend.

Looking back, it is easy to see the moment when a trend began. But looking ahead into the future it is harder to be sure when you have a trend and when you have a minor fluctuation. Two candlesticks do not make a trend! We all know this, but if you are plotting trend lines yourself manually, it is very tempting to think that you have a pattern before enough evidence is there.

This is where trend trading software can help you, by taking out the human element and producing signals only when all of the conditions are in place.

Tuesday, October 6, 2009

Forex Trader Currency Trading: Three Basic Tips

If you are a forex trader currency trading tips and hints are something that you should always be looking out for. Here are three basic tips that can help you increase your forex trading profits.

1. Avoid over trading

Many of the most profitable systems only produce a few trading signals. It can be frustrating waiting for the conditions to be right for your system. Many people give in to the temptation to open a few trades when the market is 'almost right'. People who enjoy financial trading are almost always comfortable with risk. However this haphazard risk taking strategy will almost certainly lead to losses in the long run.

Remember there is a reason why the rules of your system are as they are. The aim is to make money - but only by keeping within the set boundaries.

Remember that in forex trading, less is often more. There is no point opening ten trades a day if only one of them is going to be profitable.

If you simply cannot deal with the boredom of a system that produces a very low number of trading opportunities, then look for a second system that you can track at the same time.

2. Be realistic in your goals

One of the things that can ruin an otherwise sound trader is aiming for unrealistic goals. Often this is called greed, but that's too harsh a term for most situations. What actually happens in many cases is that the person starts daydreaming. They are constantly thinking about making a lot of money from a single trade.

Actions soon follow thoughts and they start using high risk strategies that seem to give them a chance of achieving the dream. Instead, they often end up wiping out their funds. Looking back, it was completely predictable, but they were pulled off course by persistent thoughts of riches.

So if you catch yourself daydreaming, cut off that thought right away. Focus on making a realistic profit figure - and no more. If you happen to make a lot more one time, put it aside and tell yourself that it's there to cover the losing spell that may soon follow. Do not start expecting to make that much on every trade!

3. Take a step back

As well as checking your trading signals on daily, hourly and/or minute charts, it can be very helpful to take a broader retrospective view. Look back over the last week's or month's charts regularly.

This will stop you becoming blinkered so that you can more clearly see what went right or wrong for you and why. It may give you ideas that will help you tweak your system or even find a new one. Most importantly, it will help you to refine and improve your forex trader currency trading strategies for success.

Monday, October 5, 2009

Trade Foreign Currency: The Best Time To Trade

If you are serious about making money with forex trading, you will need to know the best time to trade foreign currency. And by the way if you are not serious about it, you probably should not be getting involved! Forex trading is not risk free and there are plenty of things that you need to know before you start trading for real.

Generally the best plan for a beginner is to get into the habit of trading during some of the busiest times. Do not look for quiet periods hoping to make a big break when nobody else is around. It just does not happen that way and you could be caught out. Better to go with the crowd at a time when you can be more sure of being matched at a good price for both your opening and closing deals.

So when are the busiest forex trading times? The answer is the overlap between the London and New York forex trading hours. London is actually the busiest currency trading floor, with New York second. London business hours are good for trading on the euro, British pound and Swiss franc, since most of the major countries using these currencies are within one hour time difference from Britain. New York of course is the home of the US dollar, the most traded currency, and the time zone also covers Canada.

Expressed in British time (the same as UTC in winter), trading starts in London at 8.00 am and finishes at 4 pm, while trading in New York starts at 1 pm UTC and finishes at 9 pm. Therefore the overlap is from 1 pm to 4 pm British time. Expressed in New York time (EST), the overlap is from 8 am to 11 am. That is when the forex market is busiest on practically every day.

Of course those hours may not be ideal for everybody. If you live in one of those time zones and want to trade foreign currency outside of normal business hours when you may be working another job, you will certainly have the opportunity. If you live in Europe you can trade in the evening when the New York market is still open, and if you live in the EST time zone you can trade in the early market when the London floor is already very active.

Also, if you trade cross pairs that do not involve the US dollar, you may find a busy time for that pair based on the business hours of their two countries. For example the AUD/JPY pair can be reasonably busy during the Asian session when Australian and Japanese business hours overlap. However, even on these pairs there is usually more activity if you can also overlap with US or British trading times.

Long term traders who may leave a trade open for several days or weeks will be less constrained by the peak trading times. For day traders, however, it is important to be able to slip in and out of a very busy market if you want to profit from forex scapling strategies. So it is also important to take into account how you plan to trade foreign currency.

Sunday, October 4, 2009

Online Currency Trading Explained

What is online currency trading? Put simply, it is a way of making money from the daily changes in currency prices by trading in currency on the internet. It is often called forex or FX trading, which are just short names for 'foreign exchange'. It is a speculative form of investment, so it is risky. At the same time, it allows many people to make money from their home computers by working just a few hours each day.

One of the benefits of forex trading over stock trading is that it is a 24 hour market so you can trade in the evenings. Currency trading can be done in any part of the world, you are not limited to your own country's currency. So you can take advantage of the different time zones which mean that the market is constantly open from Sunday night to Friday night.

In other respects you may think of it as being a lot like stock trading. You are dealing in rising and falling prices, submitting buy orders for currencies that you think will rise and sell orders for currencies that you think will fall in value. You can make these trading decisions on the basis of world economic events or more simply, you can look at charts which show patterns and indicators that many traders follow to make successful trades.

Currency is always traded in pairs because it has to be an exchange: in order to buy one currency you always have to sell another. A common pair for beginners to use is EUR/USD, or the euro and US dollar. These are the most heavily traded pairs so costs are usually low and a lot of information is available, making it one of the easier and cheaper pairs to trade.

When you are trading this pair you are always either buying or selling euros, with the dollar as the quote currency. If you want to buy dollars when trading this pair, you have to place a sell order for euros, and that will automatically mean that you are investing in dollars. This is called 'going short' on EUR/USD. If you want to buy euros, that is called 'going long'.

The aim, of course, is to place a closing order on the trade after the price has moved the right way so that you are in profit. Of course if it goes against you, you can lose, so you need to place stop orders. A stop order cancels out your trade at a certain level of loss so that you are protected from large losses.

Many brokers will accept a very small minimum investment to attract new traders. At the same time, the use of leverage and margins means that you can control large position sizes with a small account balance. You may only have to supply 1% of your trade amount in order to open a trade. The broker guarantees the rest, protecting their position with automatic stops. All of this means that online currency trading does not require a large investment to get started.

Saturday, October 3, 2009

Metatrader EA: What You Need To Know About Expert Advisors

The Metatrader EA or expert advisor is a whole family of forex robots that work on the free downloadable software platform called Metatrader 4. MT4 basically acts as a platform or framework that trading robots can be built on. That's why, when you buy a trading robot, you usually have to download Metatrader 4 and install it on your computer before you can set up the robot or expert advisor itself.

Automated trading systems such as expert advisors will act for you in the market, making trades according to their own system with regard to the settings that you put in. This has a lot of advantages if the system is profitable. Your Metatrader EA will not need to sleep, eat, visit the bathroom or have a social life. Provided you can make sure it is always online, it will watch the markets 24 hours and should never miss the right moment for opening or closing a trade.

Robots also have perfect discipline and never feel any emotion. This means that they will not be tempted to make trades that are outside the rules of your trading plan because of fear, greed or over optimism. They do not have hunches that tell them to buck the trend in some disastrous way.

It is easy to set trailing stops in MT4 and this can help to maximize your profits. The trailing stop will automatically move to follow the price when things are going your way, and stop if the market turns. This means that on a successful trade you can play it out to the maximum while guaranteeing profits at a certain level. If things go against you from the outset, of course the stop does not move but is triggered to minimize your loss.

Of course this relies on the Metatrader EA being constantly in touch with the market, like other aspects of the robot's trading. It runs on your own computer and connects with your broker's software platform over the internet. So this means your computer needs to be on 24 hours, except at the weekend when the market is closed, unless you exit all of your trades before the end of your working day.

Many computers automatically shut down when they are left idle for an hour or more, so you will need to make sure that you can alter that setting. In Windows Vista you can change the plan settings in Power Options in the Control Panel. You also have to think about whether anybody else who uses the computer is likely to shut it down after they finish using it. Most traders prefer to have a dedicated computer that nobody else will use, but this is not always possible.

A better option to make the most of your trading robot is to have it hosted remotely. Sometimes the developer of the robot will offer you this option and it is often worth taking. They will then set it up on a server so that it does not run on your computer. This also has the advantage that you can access your Metatrader EA from any computer if you need to go in and change settings.

Thursday, October 1, 2009

Currency Trading Australia: A Commodity (Gold) Currency

If you are interested in currency trading Australia you need to know about some of the special factors that affect the price of the Australian dollar. It does not matter whether or not you live in Oz, you still may want to trade this currency from time to time. It can have benefits because the Australian dollar sometimes stays more stable when other major currencies are very volatile. This is partly because of its position as a commodity currency.

Commodity currencies are the currencies of countries whose main exports are in raw materials rather than manufactured goods or services. Raw materials can include food and other agricultural products, iron and other metals, gem stones, oil, etc. In Australia, the main commodity export is gold.

When the average consumer thinks of gold they usually equate it with jewelry. However, in the world of investments, gold is bought and sold more for its commodity value than for use. Gold is something that often preserves its value in times of economic crisis. For example if there is rampant inflation or a major stock market crash, the average person's savings will often become almost worthless but an investment held in gold will maintain or more likely increase its value.

Australia is one of the world's largest sources of mined gold. Production levels have fluctuated a little due to the effect of internal taxation but broadly speaking, Australian gold production has risen from just 20 tonnes a year in the late 1970s to around 300 tonnes a year today.

Because of this, there is a close correlation between the price of gold and the value of the Australian dollar. Interestingly, even though the USA is another major source of gold, even producing slightly more than Australia, the price of the AUD/USD currency pair is also closely correlated with the price of gold, other things being equal. This is because gold is not such an important factor in the huge American economy as it is in Australia.

So when gold prices rise, the price of AUD/USD will often also rise, and when gold falls AUD/USD is likely to fall. Often there is a little delay before the currency price reacts so a foreign exchange trader involved in AUD/USD has the opportunity to use this to his advantage.

You can also expect that commodity prices in general and gold in particular will go up when there is any major economic crisis in the world. Provided that Australia is not too closely involved in a crash, that is often another early indication of an upcoming rise in the price of AUD/USD.

Of course, gold is not the only factor here and if you want to trade AUD/USD you will need to stay informed about anything else that might affect the price. You can never completely remove the risk involved in forex trading. However, understanding the influence of gold prices on the Australian dollar will be of benefit to you if you want to make money from currency trading Australia.