FX Trading Guide asked:


Managing Risk in Forex Trading

Forex trading is often regarded as risky. Is this perception true or false? How does this affect our decision to trade currencies? What can we do to reduce our risk and avoid one of the majority of traders who lose money from trading.

Before we make a decision on how risky forex trading is, let’s define what risk means. Risk is simply the variability of investment returns. If you graph the value of an investment portfolio over time, a low risk investment such government bond should have a smooth curve, while a riskier investment would have a more jagged curve.

The fact is that most beginning forex traders lose money. Is this a characteristic of the currency markets, or is it to do with the traders themselves?

To answer this question, we need to understand what factors contribute to risk. To an extent, risk depends on the market. If the market rapidly moves up and down, then that can contribute to variable returns. In this respect, forex markets are not more volatile than many other investments. Unlike stocks, it is impossible to manipulate currencies. The market risk of forex is comparable to other major markets.

One factor that magnifies risk in forex trading is the level of gearing, or leverage used. Typically professional traders use up to ten times gearing. That means for each dollar of their own money, they control a position of ten dollars. Many small traders using gearing of up to two hundred times, and this can rapidly magnify both gains and losses. It is best to have enough capital to be able to trade without using excessive gearing to avoid massive exposure to market risk.

One other risk is that of liquidity. This is the ability to get in or out of the market at a fair price. Recall the recent losses suffered by hedge funds trading mortgage securities – the markets suddenly became illiquid, and they could not sell their positions at a reasonable price. In contrast, the forex markets turn over more than $1 trillion per day and are the most liquid markets available. This is not to say that there are not sudden movements from time to time, but traders can always get into or out of the market. Forex liquidity risk is low.

However market volatility andliquidity are only part of the risk equation for forex trading. Most risk comes from the individual trader’s approach. These factors are controllable by the individual. This is why some traders consistently win, while others consistently lose. The trader chooses when to participate, the timeframe to trade over, which currency to trade, and how much the market should move before liquidating a position.

It is better for the trader to select their own risk parameters, based on careful testing of a trading system against the market. That way, you can know exactly when to enter or exit the market, how much you want to risk per trade and can select a risk level that you are comfortable with. This gives you a level of transparency that you don’t get when you hand your money over to “an expert” to invest, or buy a “sure fire winning system” advertised on the Internet.

You should test your parameters against the market over a period of time using paper trading before committing real money.

In conclusion, forex trading is not more inherently risky than other forms of investment, but the new trader must understand the impact of leverage, and clearly define entry and exit criteria, how long a position should be open, profit and loss targets (which should reflect the volatility of current market conditions).

For more information and free tutorials on forex trading, visit www.fxtradingguide.com



ARDIN Cicilia Hong

Todd Cuson asked:


As the old saying goes your home is your castle. Whether you are building, improving, or just maintaining your home, many tradesmen or women will be assisting you to that end. When such a valuable asset is being worked on by another, quality is one of your foremost concerns. This quality comes from knowledge and experience in ones field as well as a certain amount of self respect and pride in ones work. Unfortunately, previous generations regarded these jobs with more respect, which has precipitated a collapse in the size of our younger labor pool. “Over the past ten years construction workers in the 20-30 age group declined from 40.5 percent to 26.5 percent. The percentage of workers in the 41-50 age group increased from 18 to 26 percent”(1).

Labor drying up has made it so “contractors of all sizes are on their own, forced to recruit and train on an individual basis. This is an ineffective process and cost prohibitive” (1). In a time when fewer workers are entering the market the industry is poised for growth. This gives employers fewer choices, causes them to settle for lower standards in workers and service, and allows competitors to gain market share who are willing to compromise service standards even further. “If companies want to fill their vacant positions, they might have to loosen up their hiring standards, too, said Jim Mize, manager of employer outreach at Pima County One-Stop Career Center”(5). Does this seem unfair for the consumer with their castle and the honest hard working Americans that have pride in their work?

Most high school students have no idea what one can earn by learning a trade, “A journeyman generally earns between $28 and $32 an hour (up to $64,000 a year)–a pretty nice wage for a 23-year-old. Most states require a plumber to have 2 to 10 years of experience at the apprentice level to qualify as a journeyman. My neighbor attended a trade school. He is a tool and die maker. He learned the skill in night classes. After spending time as an apprentice, he opened his own shop. It is now a multi-million dollar business” (3,4). A competent person learning a skilled trade can easily achieve the American dream. We at 10 best Tucson are on a mission to find the best home service professionals in Tucson and share them with the community. By uniting community officials and business leaders under the common goal of higher quality trades in the labor pool, the ability for honest companies to grow without compromising their excellent service records will be achievable. Secretary of Labor Elaine Chao recently announced her “Skills to Build America’s Future” initiative. It “will reach out to a new generation of tradesmen and women and encourage them to use their skills and talents to find careers that will help to pave the way to a fulfilling career and bright financial future” (Doleta).

This message must be made clear to the future of our local labor market and to current workers who are considering changing careers. These skills that are currently cultivated by a unique few are ones to be proud of, and can be quite lucrative as well. Becoming a journeyman and with an entrepreneurial co-education or an enterprising spirit practically ensures an exalted status of financial wealth. These are pragmatic messages that must be presented to our youth. Our businesses can grow while maintaining their integrity and providing the absolute best possible service to home owners and customers. They deserve it. Keep a watchful eye on this topic. 10 best Tucson will be the catalyst for change.

-Todd Cuson

Article Source

Article Reource:

1. Louis J. Coletti, Workforce development needs for industry are great, Real Estate Weekly, Feb 23, 2005.

2. Ilana Mercer, U.S. Jobs: Reach for the Stars e or a Hammer, Insight on the News, May 11, 2004.

3. Billijo Saffold and Bobbi Aschwanden Thomas, Should high schools prepare all students for college?, NEA Today, November 2005.

4. Susan Sales Harkins, Plumb perfect: sure, drains and pipes can be messy-but plumbing has plenty of rewards, Career World, September 2005.

5. Shelley Shelton, Local companies find tight market for workers, Arizona Daily Star, September 02, 2007.



ARCHER

John Callingham asked:


Oftentimes false impressions and misapprehensions could lead you to unfavorable outcome. Just because you have dealt so much with what others tell you or with what you hear about, you provided a quick judgment until such time you found out that all these are just delusions and misinterpretations. This is how the forex market is perceived until the advent of forex mini trading surfaces.

From the name itself, you will most likely generate a single inkling that this is something that requires not so much from you and from your investment. A lot of people thought that forex trading comes with hefty and bigger assets, well if you think this is really true, you definitely are leading a wrong path. Big capitals and outlays is not the requisite of the forex market and the forex mini trading is the idyllic case in point.

Forex mini trading only requires lower capital, it never go beyond thousands of dollars since you only need to have cash at hand amounting to $300 dollars. Yes, this is the amount that you need to start of with your trade and most traders have come out of the market bearing greater profits with a small investment given a shorter duration of time. The next factor that provides advantages in getting into the mini trading is the concept that you can have greater leverage given a small fund as capital. This means to say that when you own a stock amounting to $2000 then your leverage can be in between $1500 to $1750 leverage. Therefore, if you give just a small scope or margin to your mini account then there are greater tendencies that your forex mini trading account can acquire a money-spinning and profitable one.

Pips are also another facet of the mini trading and a lot of traders choose to trade in pips. As the denomination they provided is small there will be greater probabilities where traders can open up opportunities and discover other lucrative facets in the world of trade. The trade of pips also provides assurance for traders that if the dealings become tougher, their losses will not be that big. Since 1 pip is equivalent to $1 dollar the possibilities of a floating loss will not be that difficult to bear.

Another advantage of going by forex mini trading is the concept of trading for small units. When you venture in a mini trading, the only required units are 10,000 weigh against the standard ones which will provide you with almost hundreds of thousands of units. This small trading size gives you lesser risk particularly for those beginner traders. Once you become accustomed with all the dealings it wouldn’t be hard for you to move towards 20,000 to 30,000 units and so on.

Forex mini trading is absolutely a good way for novice traders and others who have little investment and capital. There is also software available in creating your mini account that is comparable with the regular one. Mini trading only proves that no matter how small your assets are, when it comes to forex trading all these are profitable and productive.



Earl