-
Hedging in forex
What is hedging? Hedging is a risk management strategy. It allows us to limit drawdown on losing trades as well to protect open positions in an event of rapid price fluctuations. Hedging a position can be nothing more than opening a second trade of the same value, on the same currency pair, but in the opposite direction (direct hedging). For example, if one wants to hedge a short position, opening a long position is required, and vice-versa. Once the opposite position is open, the losing trade stops generating losses, since the loss on one trade is offset by profit on the other one. This is the simplest hedging strategy forex…
-
Understanding currency cross pairs
Cross currency pairs – introduction There are 28 main currency pairs traded on the forex market. The major currency pairs or the majors are EURUSD, GBPUSD, AUDUSD, USDCAD, USDJPY, USDCHF, NZDUSD, and the minor currency pairs or the minors are EURGBP, EURCHF, EURCAD, EURJPY, EURAUD, EURNZD, GBPJPY, GBPCHF, GBPAUD, GBPNZD, GBPCAD, CADCHF, CADJPY, CHFJPY, AUDCAD, AUDCHF, AUDNZD, AUDJPY, NZDCAD, NZDCHF, NZDJPY. When we log onto a trading platform we see quotes available for any of them. What we don’t see is that for the minors, which don’t include the US dollar in their symbol, the exchange rate is actually calculated from two major pairs. Let’s take the CADJPY as an…
-
When not to trade – Situations which cause trading errors and mistakes
This article covers the situations which are not related to the market or the system, and yet affect trading. These are the potential contexts in which you shouldn’t really trade, because you will most likely make a trading error and lose money. It is part of my strategy series, for both new as well as more experienced traders. A strategy for trades and trading activities management in case of various situations that may occur in life should be a part of any trading plan. Or at least you should have a general protocol on what to do in different situations, to avoid trading under emotions and making mistakes. Some of…
-
System backtesting
Trading can be a complex and challenging endeavor, with all the variables and factors one has to consider when making trading decisions. Developing a system that can reliably generate profitable trades over time is the most crucial aspect of it. When working on a system, it is essential to engage in backtesting (testing a trading system using real market historical data) to evaluate its effectiveness and potential profitability. System backtesting is very important for various reasons. A day or two spent on backtesting can give preliminary knowledge of whether the system is profitable or not. It allows to check the effectiveness of a system without risking any real money. Backtesting…
-
How to change sounds in Meta Trader
This is a short instruction/tutorial on how to change alert sounds and sounds in general in Meta Trader. I will also show you how to turn them off completely. I made it for MT4 but will work also with MT5. 1. Getting new sound files – Metatrader Trader is using *.wav files for alert sounds, which is not so common these days anymore, so you need to convert your mp3 or any other format you have to wav. I use convertio.co for that. You just upload your file and choose wav as the output format and press convert. Select *.wav and press “convert”. Conversion may take up to a minute…
-
Trader’s health and safety basics
As traders we have many things to look after, so we rarely think about how trading can influence our health. Especially at the beginning of a career, a trader has to cope both with technical and fundamental aspects of the market, and a full scope of feelings and emotions. No wonder, when in such conditions, one would not even think about such stuff as the ergonomics of a workspace, and work and safety principles. When one works at a company, these things are being taken care of by a health and safety officer, so there are not many occasions where one can acquire a habit of thinking and taking care…
-
Doing the right things at the right time
If you give it a thought, trading is all about doing the right things at the right time. If this is what you do, you will definitely be successful. However, I already hear the voices saying: “Yeah, easier said than done…” If you’re one of these voices, hold on for a moment, and stay open-minded 🙂 . After some time spent on the market, your mind already knows what to do and when to do, because it has learned it by observation and repetition. So, you’ve got the skills and are capable of doing the right things at the right time. The only factors which stop you from actually performing…
-
Historical FX data
FXTop – Historical data for fx pairs and price charts heading back to the 1950’s. Mataf – various forex tools and data sets, eg. I use Forex historical Volatility data for various calculations and simulations. Historical data download for Forex (FX) pairs, commodities, stocks and indexes (CFD) for any analysis in Excel. Wide range of time frames selection from monthly to 1 tick! Download forex historical data to a CSV file for free. Requires opening a Dukascopy Community account (it’s not a trading account). How to download historical data for Forex, Commodities, Indices, Bonds, Stocks, ETFs, Crypto – step by step guide with pictures. Wondering where to get historical price…
-
CFTC data
Commodity Futures Trading Commission (CFTC) Commitments of Traders data plotted onto a chart. This chart includes large open positions (long and short) of institutional traders in the futures market. The data is collected by CFTC each Tuesday, but is published each Friday at 2:30 PM EST, so there is a certain lag. How to use CFTC data in forex trading Large positions that fall into CFTC data reporting requirements usually need some time to build and square. Despite a lag, this data is still valuable as an indicator of sentiment. Extremes and flips in positioning can indicate change of a trend and a growing number of contracts can suggest strength…
-
Interesting links
Links to interesting sites and services which I like visiting from time to time. If you have any suggestions regarding any links that could be added, please feel free to e-mail me. Current Market Valuation – an interesting score index for US stock market valuation – based on six valuation models ,the site is calculating whether the market is undervalued to overvalued. Updated daily. Longtermtrends – a website that compiles and compares various data, current as well as historical, and presents it in a form of charts (eg. M2 money supply vs inflation). The charts are available for six asset classes: Gold, Stocks, Bonds, Real Estate, Commodities, and Crypto. Worldometers…
Forex – Trading – Freedom :: blog of a forex trader