EURCAD Trading Signal - February 26th 2014

The EURCAD enjoyed a strong rally, but I think the move was a bit overdone and that profit taking could lead to a correction. Should the EURCAD breakdown below its current support level which I believe is a very likely event then I think we may see a much bigger correction. I recommend that you protect your profits and monitor the chart after we approach the most recent support level.

EURUSD Trading Signal - February 25th 2014

I took a short position at 1.3750 and expect a correction of roughly 150 pips which should take this forex pair back down to its support line which has been increasing and could suggest that after a correction we may have a strong rally which could lead to a breakout. For now I am short until after the correction.

USDCHF Trading Signal - February 24th 2014

I am taking a long position in the USDCHF as I think this currency pair will rally. I expect more weakness from US economic reports this week. I can see 100 pips from current levels until resistance will test the strength of this bullish move I expect.

Why I Trade

There are more and more new traders entering the forex market and while different traders have different motivations, I wanted to share with you guys why I decided to trade. I have been trading stocks for several years and earn enough money to pay my bills which was a great accomplishment. As I continue to grow my overall trading portfolio I decided it was time to diversify and not be 100% in stocks.

Forex was my choice of how to achieve diversification and I have been trading forex for over one year now. Forex trading is a bit different that trading stocks so I had to make some adjustments to my trading strategy and try a few new things which took my roughly six months to accomplish.

Now I have moved 50% of my trading portfolio to forex and keep 50% in stocks. I trade forex as it is a great way to diversify any trading portfolio and adds a nice boost to my monthly earnings. Right now I am working to becoming a full-time trader and quit my job. I think I am about 18 months away from that which is a nice target to strive for. Maybe by end of the summer in 2015 I will be trading for a living 100%.

I am glad I made the move into forex and am also planning to add commodities to my portfolio in order to diversify once again as my trading portfolio grows. I plan on moving 20% into commodities, and keep 40% in stocks and forex. 

Here are my three tips for all newbies:

Tip #1: Be very patient. It requires plenty of time and hard work to achieve consistent profits and it does not happen over night.  

Tip #2: Have enough trading capital. It does not matter if you trade forex, stocks or commodities; you need to have trading capital. I would recommend at least $5,000 in a mini account and over $25,000 in a standard account. Trust me, with $500 you are not really in a position to manage a portfolio properly. Build up your account over time which comes back to being patient.

Tip #3: Don't listen to others. Build your own trading strategy. This will take a lot more time and money, but in the end you will have something which works for you.

Forex Basics: Stop Loss Orders

You have most likely read plenty of information about stop loss orders and why many traders think they are the key to trading successfully and protecting your account. While it is true that a stop loss order is very important most ignore the fact that a stop loss order serves two purposes and not just as a risk management tool for account protection.

The most talked about use for a stop loss order is to close a losing trade at a price away from your entry and inline with your risk profile.

Here is an example:

You have a $1,000 trading account and trade 0.25 lots per trade with a risk profile of 3%. This means you can risk $30. Each 1 pip move against you in a standard account will equal $1 if you trade 1.0 lots. Since you trade 0.25 lots each pip will equal $0.25. In order to remain inside your risk profile you would set your stop loss order 120 pips away from your entry price in order to not lose more than $30 on this trade.

The other use of a stop loss order is often ignored and most are not aware of it. Professional traders use a stop loss order to exit a trading position for a profit.

Here is an example:

You enter your trade and are accumulating 80 pips in floating trading profits. You set your stop loss order 50 pips away from your entry in order to secure 50 pips in trading profits no matter what happens. This will allow you to ride your profitable positions out longer and you can adjust your stop loss order the more pips you will earn. Should you be connected to your trading terminal at all times you can set a floating stop loss which will adjust itself depending on the parameters you have set.

Why is Money Management Important?

One of the most ignored aspects of forex trading by new forex traders is money management or risk management. New forex traders often rush into trading without proper education and are driven by profits which can be exceptional if forex trading is understood. There is plenty of false and misleading advertising which promises new forex traders great returns with small deposits. This often leads to a new forex traders making a small deposit and taking advantage of a big deposit bonus in order to trade large lot sizes chasing returns.

What is money management?

It means that you manage your forex trading portfolio properly and understand how much of your money you will put in each trade. It also refers to how much of a loss you are willing to accept on each trade. This is one of the most important parts of trading as it will prevent you from losing all your funds on one trade or a few trades.

For most new traders it is best to risk only 1% or 2% of their capital. Once a strategy delivers consistent results this could be increased to 3%, 4% or even 5%. A much bigger increase is not recommended for any forex trader as you would like to have the ability to open more than one trading position at the same time and take advantage of more than one opportunity.

Here is an example of how a 1% risk profile would affect your forex trading account:

1. You make a $500 deposit and take advantage of a first deposit bonus of 100%. Now you have a total of $1,000 to trade with and this is a solid start.


2. 1% risk means that you will not lose more than $10 per forex trade. 


3. A lot size of 0.50 lots means that each pip move in a standard forex trading account will equal $0.50.


4. Risking a total of $10 per trade this means you need to set your stop loss at 20 pips away from your entry price (take spread into consideration). 

Make sure you do not ignore money management as part of your trading so that you will be able to learn how to trade and become profitable over time.

Why is liquidity important?

Today I want to discuss with you guys why it is important to trade with a forex broker which is liquid. Just about every forex broker now advertises tight spreads, sometimes as low as 0.0 to 0.2 pips on the most traded currency pairs like the EURUSD. This is great from a marketing perspective, but when you are looking for a forex broker you need to be more informed than a number advertised on the internet.

What you will face in most cases, there are exceptions such as Paxforex, is that you will never be able to trade with those tight spreads. They are used for marketing purposes and in order to lure a deposit from you. When you start trading there you may never even see those spreads in your trading platform or you will see them and when you enter your trades you will see re-quotes after re-quotes.

This is because your forex broker is not liquid and does not have the ability to fill your orders or bring them to the market at those spreads. In the worst case your forex broker manipulates the rates you see which is a troubling sign. Re-quotes are one of the most annoying interference forex traders can face from their trading platform and a solid forex broker will have very limited to no re-quotes at all.

Another problem which arises from a forex broker who is not liquid is an increase in slippage which can lead to heavy and unexpected losses for the forex trader. Slippage occurs during an increase in volatility. A good forex broker will rarely show any slippage and when there is some it will be very marginal. The reason behind this is that a liquid forex broker has the ability to fill your orders and during high volatility more and more orders flood the computer systems. A liquid forex broker can fill your orders.

Why is liquidity important?

Liquidity is important because it ensures that your orders are filled at the price you enter and with the spreads you were advertised. It eliminates re-quotes and reduces slippage. As a combination your profits will be much higher with a liquid forex broker than with one who lacks liquidity. Check out Paxforex in order to trade with a liquid forex broker.

Why are tight spreads important?

You have most likely seen every forex broker advertise low spreads or tight spreads, but what does that even mean? The spread is the difference between the bid price and the ask price and is the source of revenues for forex brokers. The higher the spread the more your forex broker earns and the less you are earning.

When you enter a trade you are automatically at a loss due to the spread. For example if you enter a buy order for the EURUSD at 1.3500 and you forex broker has a 1 pip spread on this currency pair you are entering the trade at a loss of 1 pip. This also means that after this trade moves in your favor by 1 pip you are at a break-even point.

The lower the spread there better it is for you as a forex trader as it means yo are making more money per successful trade with your trading strategy. Assume you place 100 trades each at 1.0 lots and one forex broker charges you 3 pips. This means per 1.0 lot is equal to $30. On 100 trades per 1.0 lots your forex broker will earn $3,000; money which you are not earning.

You could now opt to trade with Paxforex where you can enjoy a spread of 0.8 pips. This means you only pay $8 per 1.0 lots and could be earning $22 more in revenues from your existing forex trading strategy. A total of $2,200 in earning based on 100 trades with 1.0 lots.

It is very important for a successful forex trader to select a forex broker who offers a very tight spread in order to increase earnings from your forex trading strategy. Paxforex offers some of the best spreads which is another reason why I decided to move my trading account there.

Why I trade at Paxforex?

I will start posting my daily forex trades here starting next week which may take you on a journey through my world of forex. I know one of the questions which I may be asked the most is where I trade and why I picked my current broker to operate my forex portfolio from.

Before I start posting my trades let's get the above question out of the way:

I trade over at Paxforex and I have moved there for several reasons.

Why I trade at Paxforex?

I am glad you wondered, here are the main factors which caused me to move my forex account over to Paxforex:

1. Paxforex offers some of the best spreads I have seen which allows me to earn more pips per trade with my forex strategy.


2. Paxforex is a very liquid broker which means I can actually trade with those tight spreads and my orders get filled. I am very annoyed by re-quotes and the inability by forex brokers to fill my orders so I am glad I eliminated this problem with Paxforex.


3. Paxforex allows me to withdraw my forex profits without a problem and handles requests the same day, no questions asked (should your request come in after hours or during holidays it will be handled the next business day).


4. Paxforex offers great customer service. In case you need support you will get it by their friendly and responsive support staff.

Check out Paxforex for yourself and see why it is my preferred forex broker.