Shorting Or Short Trading

‘Shorting’ or short selling refers to the selling of a contract, a bond or stock or a commodity that is not directly owned by the seller. When practicing short selling, a seller is committed to purchase the stock or commodity previously sold.

Short selling stocks means to take the stock from a broker on loan and sell it off to an individual else. This is done so that the seller buys back the stock, when the price falls. The shares are returned to the broker from whom they had been initially borrowed. The shorting profit or the difference in price goes to the seller. Short selling of stocks is really a method employed by investors to capitalize on a probable decline in the stock price.

To realize this far better, let us consider a organization, say, ABC whose shares currently sell at $12 each. A short seller borrows 50 shares of ABC and then sells those shares to someone else at $12 per share, for a total of $600. Now, if in future the price of shares of ABC falls to $10 per share, this short seller would then acquire back those 50 shares at $500 ($10 multiplied by 50 shares), send back the shares to the original owner/broker and make a profit of $100.

Short selling is risky, if the price per share goes up instead of declining, as expected. Suppose the price per share of ABC goes up to $15 per share, then the short seller will need to cash inside the previously sold 50 shares at $750, return the shares to the original owner and incur a loss of $150.

Shorting is really a transaction accomplished on margin. Most brokers don’t agree to short selling stocks below $5. This enables the investors and short sellers to indulge inside the high-risk trading of stocks.

Some of the following marketplace situations may help to predict a fall in price of stocks: –

– Market indexes coming near the prior resistance levels.

– Market trend showing technically overbought levels.

– Restlessness just before the announcement of a state’s government.

– Market vulnerability throughout scandals.

Huge volume selling of stocks typically result in short-term high profits. However, you can find specific guidelines to be followed for effective short selling. They’re:

– All stocks are not ‘short’ able. Typically, brokers inform a seller regardless of whether a stock could be employed for short selling or not.

– Sellers need to open a margin account for short selling. This depends on the minimum balances and money reserves. Sellers are needed to sign a contract agreement with the brokers to open a margin account. This agreement clearly states that a seller will follow the rules and regulations stated by the broker.

-Target bad-performance, overpriced companies, since the probability of a fall in the share price involves lesser risk.

– Traders and short sellers ought to use stop orders to protect their capital from loss. Typically, brokers stop a seller from suffering loss that is higher than the principal. They might either compel the seller to quit the transaction or they could deposit funds to improve the seller’s capital.

The short selling of stocks involves a great deal of discipline. Sellers need to be proactive, alert and disciplined when shorting stocks.

Selecting Forex Trading System On The Internet

Have you ever thought about making a trade globally? Some people can be a bit hesitant to do anything like that, but the opportunity is just waiting for you out there. You do not really travel outside your country, if that is your concern. With the availability of the Internet, you can actually do forex trading on a global level, even in your own home, at work, wherever you are.

FX market seems complicated, especially for new players, and they think it’s pretty hard to walk around the trade. But nothing is impossible when you have learned the trade. It is worthwhile venture that you might want to consider even on a tight office schedule.

That when a company can not give you all the money you need for your daily life to finance. Making a little extra work is often recommended especially in today’s times when money is hard to find. Worry no more; FX market is not far from your reach.

Identify your goals upon arriving in the FX market. This is the primary step, so you will stay focused on your efforts. Once you have established a goal, you have to do everything it takes to achieve that goal, but it should in a reasonable manner.

In going through forex trading, you need an investment and a good one. Do not settle for anything less, because an effective way to succeed in forex trading is a good program.

The most rookies commit the biggest mistake of their lives by using fake programs. FX market is a huge industry, and the fact is that many frauds and con artists abound on the Internet, which actually gives worthless material for beginners. This often leads to frustration for beginners because they have already failed even before they get to start the trade.

Find a legitimate program for forex trading. Although it may require some looking around, as well as a bit of your time when you get what you’re looking for, you are having a good start.

Do not settle for expensive programs, or programs promising easy and quick profits with less risk. You should be aware that although the FX market offers plenty of opportunities, it is also surrounded with a lot of risks. To be like the pros, you need to learn forex trading system, and you must be serious in learning it.

A good program is dynamic. She provides daily advice, manuals, DVD materials, computer disks and other major forex trading resources for you to transform into a successful trader. Check to see if their past clients are satisfied with their services, and see if the company has built a solid reputation in the industry.

Professional traders consider currency trading as a science, some believe that it is an art, and to start an actual trade, they must undergo a lot of practice. After all, practice makes perfect business. Demo accounts are surefire ways to learn the various techniques used in the FX market. Once you’ve mastered it, you can proceed to a mini account. Here you can make an actual purchase, but the risk is minimal. If you think you are ready you can get a regular trading account. This is a very effective step-by-step process because you learn a lot of things while you exercise. Always maintain composure and act like the pros. You are about to make big money, one that you probably never imagined in your entire life.

Forex trading is performed on a margin. Margin trading allows you to control more money than what is actually in your hands. For you to act one million U.S. Dollars, you should have a bond worth $ 10,000. This is a typical example of the rate of 1%.

FX market spans the entire world, so you can trade twenty-four hours a day. If you choose to do margin trading, the proliferation rate is much lower compared to trading futures. Requirements are also quite low.

Are familiar with all the in and outs of forex trading. Trading supplies worldwide a lot of risk, you must learn all these risks to be overcome in order to earn big profits. Make a good forex trading program.

Forex Trading Systems – Best Indicators

If you’re designing a forex trading system and using technical analysis, there is a need for a number of indicators to help you execute your forex trading signals below, and we have six key indicators show that every entrepreneur should consider their forex charts.

1. Moving Averages

A great back-up indicator to trend lines to see the direction of the trend.

Moving averages should not be used on their own to enter trades but combined with other indicators.

Moving averages works best when used on longer time frames. They are the 200 day MA important and also use the 40, 26 days and 18, 13 days MA useful. Never use short term averages as an indicator. Trends need sufficient periods of data to be effective.

2. Bollinger Bands

If you want warnings of trends developing, or a tool that helps you to sell during high volatility to execute trading singnals for example: Open new positions or to lock in profits, then Bollinger bands are ideal.

Like moving averages, this indicator is just to show you the opportunity and you must time your entry with other tools.

3. Net Trader Positions

This is just one of the best tools available to catch the big contrary trades and is realized bi-weekly by the CFTC. Although it applies to futures markets, the data can be used for spot currency markets.

This tool will help you to spot all the major trend change in advance.

The reason for this is that it breaks the open interest in speculative and commercial positions.

We have not space to explain the full logic here – but in essence speculators are always heavily net long at important market turning points while the commercials (smart money) are short.

By looking at differences in speculative and commercial positions and looking for extremes, you can see the great turning points approaching.

To date we have looked at tools that can alert you to trading opportunities in your forex trading strategy – now it’s time to look at some indicators to time your entry on forex charts and we have picked out three of the best.

4. Stochastic

George Lane, who developed the indicator, concluded that in an uptrend, prices tend to close near their high, and in a declining market, prices tend to close near their low.

This may sound simple, but the stochastic is simply one of the best momentum indicators out there for entering trades and taking profits.

5; Relative Strength Index (RSI)

This indicator complements the above indicator in a perfect way and is another excellent indicator to have in your forex trading strategy.

The RSI, as its name implies measures the relative strength of price currently compared to the past and gives you an idea of how strong a market is trending.

This is one of the most popular momentum indicators in the world.

6. Average Directional Movement (ADX)

The ADX is a momentum indicator, which aims to measure the strength of the trend – and tries to determine whether the market is in a trend or not.

The ADX line is a great momentum indicator and will help you trade the strongest trends – and give you warning of changes in the dynamics of profit taking prior to or inconsistent.

So there you have the best technical indicators to incorporate in your forex trading system. There are of course other worthy of consideration, but these are the best ones You will them to be very effective in your forex trading systems and think you’re going to.

Take a look at them and see for yourself – Good trading

Pivot Point Trading- 7 Guidelines For Success

What do we mean by pivot point trading? It simply means that Forex traders take into account pivot points calculated from the previous day’s trading range and use them as reference points to identify support and resistance levels.

Taking the high, low, close and open values of the previous day’s price action, strategic levels can be identified which may or may not have an influence on price action. Pivot point trading puts emphasis on these levels, and uses them to guide entry and exit points for trades.

However, as with any technical indicator, there are limitations and pivot point trading, to be high probability, needs to stay within certain parameters. The following 7 guidelines can help pivot point trading be more profitable:

No. 1

Pivot points should not be used as a standalone indicator. Do not enter or exit trades purely on the basis of pivot points. Use them in conjunction with other indicators such as candle patterns, Fibonacci levels, MACD, and moving averages to identify and confirm key levels of support and resistance which may provide trading opportunities.

No. 2

While some traders living in various parts of the world may calculate their pivot points according to the time zone in which they live, a fairly safe standard for calculating the levels of pivot point trading is to use GMT (Greenwich Meantime).

Midnight GMT is a very quiet time in the market with very little volatility and provides a good opportunity to calculate more accurate pivot levels going from midnight GMT to midnight GMT the following day.

No. 3

It is good to understand what is going on behind the scenes when it comes to pivot point trading. Rather than just staring at candles on a chart, understand what they actually represent.

Thousands of traders around the world, some working for large institutions and handling millions or even billions of dollars worth of currency, are taking positions according to previously established highs and lows in the market.

Pivot points draw attention to these key levels which will often be strongly defended by traders who have a lot at stake. This is the reason pivot point trading can be so successful, once a trader understands underlying reasons for price action.

No. 4

It is good to calculate mid levels in addition to the S1, S2, R1, and R2 pivot levels. Sometimes there is a significant gap between these levels and calculating a mid point gives another point of reference. Price will often be seen respecting M1, M2, M3, or M4.

To calculate mid levels, simply subtract the level below from the level above and divide by 2. (see the resource box for a free pivot point calculator)

No. 5

Pivot point trading can be a useful strategy for entering and exiting trades at the right time. A pivot point can provide a key level of support or resistance where price is likely to bounce for a 10-20 pip profit.

Or in the case of a trend, price may retrace to a pivot level before continuing its run. The retracement point at the pivot level would be a good place to put an entry order to be taken in when price comes back to retest at the pivot level.

No. 6

The Euro – US dollar pair often puts in a daily average of between 75 and 100 pips. Watch for specific behavior around the time of the London market open. Price will often come back to test a level which is a pivot point and form a distinctive candle pattern such as tweezers, or a hanging man, and then reverse and go on its 75-100 pip run for the day.

If price comes back to the M1 level check your other indicators to see if they confirm this would be a good level to go long. Likewise, if price, just around London open, tests the M4 level, check your other indicators to see if this would be a good place to go short. You may be able to get a slice of the 75-100 pip run for the day.

No. 7

Pivot point trading helps mentally in establishing the buy zone and the sell zone. Traditionally, anything above the Central Pivot Point is a Sell area, and everything below the Central Pivot Point is a Buy area.

If you go contrary to that, make sure you double check your analysis and have very good reasons for doing otherwise.

Pivot point trading is just one of an arsenal of weapons available to Forex market participants. However, it must be stated that many successful traders use just a handful of tools that become their favorites. After all, too many indicators can lead to decision paralysis.

For many traders, pivot points are a key element in their overall trading strategy. Use the 7 guidelines above to use them safely and responsibly.

Forex Trading Systems – Four Main Types of Orders

There are numerous types of orders which traders can place to transact in Forex trading systems, for making profit out of it.

• Market Order

The market order is the most basic and common kind of order. Here, the trader buys and sells the currency on the rate prevailing in the market in the time of placing the order. As a consequence of the massive size of the forex market and the high volatility, trends can reverse any instant, so people prefer putting orders at the market selling price to guard themselves against any adverse trend.

• Limit order

In this situation, the trader specifies a value at which he may well wish to buy or sell the currency. Suppose a trader has bought GBP against the USD at 1.9710, then he can place a a sell order at 1.9725, when the exchange executes the buy order, he will profit from it. The order will get cancelled if the target price isn’t achieved during the day.

• Stop loss order

As a result of the volatility, end losses are important. They determine the maximum loss a trader is willing to suffer. Suppose within the above instance, the risk-taking ability from the trader is low, then he may possibly place a stop loss at 1.9705, at which level the exchange will book losses for him, and he won’t be affected by any fall below 1.9705.

• Entry order

Such an order is filled only when specific conditions are met inside the market, which the order specifies. The entry order might be a limit entry order or even a stop entry purchase.

– Limit entry order

As an example, let’s assume that the current market price for GBP/USD is 1.9705-10. This implies that the trader can transact at these ranges. Here, a investor can put a limit entry order to offer his holdings at a selling price a lot more than the market selling price, say, 1.9715. His buy would be executed only if that price is reached. In a comparable manner, he can place a buy for purchasing at a level of, say 1.9700, and his ‘buy’ would remain pending till the cost falls to that level.

– Stop entry order

Such an order is usually used when the trader has sufficient grounds to feel that the currency market is trading in a fixed range and believes that it is on the verge of a breakout from that range. He might want to invest in at a value higher than the marketplace price or sell at a lower selling price than the market selling price. Within the same example, the trader might go ahead and buy at 1.9720 or sell at 1.9690, where he believes that once these levels are attained, the forex will only go up or fall further, as the situation may be. A trader exercises the stop entry order only when he has reasonable grounds to feel that there will probably be sharp movements within the currency rates in the Forex current market.

Avoiding Forex Trading System Headaches

If you are a trader and you have tried to find a forex trading system that might work for you and have curiously looked up the words “forex trading system” in Google, haven’t you been surprised and annoyed at the amount of rubbish and useless material on this subject out there?

Your first job is to ignore the typically glowing testimonials telling you how great a certain forex trading system is…

Guess what? They all say great things!

Anyone who is serious about trading needs to have a forex trading system that is tailored to them, but there is no reason to start constructing your forex trading system from scratch. Look for your most important criteria as it relates to your trading style for the trading system you are planning to buy, and if it fulfills them; then you are quite certainly making a good decision by planning to use it going forward in your trading career.

Any good online forex trading system will gives traders discipline, as good systems will run the big profitable trades and cut losers quickly to give great profit potential over the longer term. If you are just starting, you should look at longer term forex trading systems that milk the big trends for profit, and cuts losses quickly. Whatever you decide on for your forex currency trading system, however, you almost certainly can’t go wrong by subscribing to some of the forex newsletters. Even if you’ve gone through quality forex training, smart traders subscribe to newsletters written by professional currency traders that offer both fundamental and technical analysis on the markets. In other words, more knowledge and information is a good thing.

Once you know what sort of forex trading system will work best for you, look at the components that make it work. Both the desktop based and web based forex trading software have their own advantages, so use the version that you are most comfortable with. Don’t forget to take advantage of some of the generous free offers by various online forex brokerages that allow you to trade in real time with paper money so you can get the hang of how things work. Couple that with the guarantees that most of the marketers provide for you to try out their systems for 30, 60 or 90 days.

You also want to choose a forex trading system company that will put your money first, and that will listen to what you want to do, and how you want to do it. After all, it is your career they are looking after.

Forex is a great money making opportunity for those who know their way around, most newbies fall hard after flying high for a while. That’s because forex trading is not straightforward. You see, it is simple to enter a trade and let it run, but making yourself a profitable trader takes more than just willingness; it takes knowledge and experience.

And finally, we don’t have space here to go through the actual systems being currently marketed, but with a bit of research and testing you will see why a forex trading system built on the above principles, will work, and will continue to work.

How to Design a MetaStock Trading System – Part 2

In Part 1 of Designing a Trading System in MetaStock, I had discussed the major components you needed to be able to track to create a mechanical entry system. These were measures of price, liquidity, trend, and volatility. The question now is, how do we code this into MetaStock?

First, let me offer you the most valuable piece of knowledge I have acquired over the years about MetaStock formula writing. This one secret will turn you into a MetaStock master. Do you think I know all of MetaStock`s hundreds of pre-programmed formula and propriety indicators? Well, I`m good, but I`m not that good.

When coding in MetaStock, the key to getting it “right” is to write what it is you are trying to achieve “down in English”. Once you`ve done this, it is easy to convert it into a MetaStock formula.

Let`s look at an example. Our first entry condition is a measure of price. As mentioned in Part 1, you want to set a price minimum to remove speculative stocks. Please note that the values you select will depend on the exchange you are trading. Some markets tend to be more expensive than others. For this example, we are looking to design a long-term trend following system to trade on the Australian Stock Exchange.

In Australia anything under $1 could be classed as a speculative stock. So how do you stipulate that the stocks you want must be greater than $1? First, “write it in English”: You want stocks with a 21-day average closing price that is greater than $1. Now, you can convert this into a MetaStock formula.

Using the formula reference section in the MetaStock Programming Study Guide, you can check the syntax of a moving average. Once you have this information, it`s simply a matter of plugging in the correct numbers. Then, by using the “greater than” symbol, you can stipulate the price to be greater than $1. The MetaStock code will look like this:

Mov(c,21,s) > 1

Let`s move onto the next component, liquidity. This is a measure of how much money a stock trades. It is important to identify stocks that have enough money moving through them so that you`re never caught with a stock you can`t get out of. For this example, let`s say we require the 21-day average of volume multiplied by the closing price to be greater than $200,000. In MetaStock language this would be:

Mov(v,21,s)*C > 200000

In the next article I`ll go through the last two components needed to design a mechanical entry system in MetaStock. With this information, you will be well on your way to starting an effective, and profitable, trading system in MetaStock.

How to Design a MetaStock Trading System- Part 1

Before designing and developing a successful trading system, traders must understand the base theory of Efficient Market Hypothesis (EMH). The current market price of traded assets (e.g., stocks, bonds, or property) already reflect all fundamental and economic influences and known information.

Therefore, the price action is taken into consideration. Most of trading systems are based on this understanding of the market. The rule of trading system here is built corresponding to price action as well.

Developing a trading system involves the following components.

Entry Rules (when traders should open a position)

Exit Rules (when traders should close a open position)

Money Management Rules (how much money should traders put in a trade?)

Back-Testing (test the trading system by using historical data)

Before going further, there is an important thing to be remember:

There is no Holy Grail of trading systems.

There is no MetaStock Formula that makes traders win markets 100%.

Only one component, Entry Rules, from four components is taken into consideration to build an example trading system. The following factors are picked to be used in identifying possible entry points.

1.Liquidity: how much money the stock trades at. Avoid stocks that don’t trade enough whether traders can risk being trapped in stocks where the market is moving against them if the stocks have low liquidity. For example here, the 21-day average of volume multiplied by the closing price of liquid stock must greater than $200,000. This can be written in the MetaStock Formula format as follow. Mov(v, 21, e)*C > 200000

2.Trigger: the signal that will indicate it is time to enter a trade. The trigger condition doesn’t hold “true” over extended periods of time but occurs only at one point in time, such as moving average cross over. For example, the first day the when a faster moving average (a shorter period Moving Average) crosses above a slower Moving Average (a longer period moving average) which is considered a bullish crossover as follow. Mov(C, 5, e) > Mov(C, 10, e)*C

Simply put all formulas together, A simple entry system looks like:

Mov(v, 21, e)*C > 200000

Mov(C, 5, e) > Mov(C, 10, e)*C

That is the basic of designing a MetaStock Trading System

Evaluating Forex Trading Systems – Essential Statistical Information

If you are looking for a forex trading system, you will find myriads of forex trading programs being offered on the market nowadays, and your choice of which one to purchase for help in your fx trading can have an impact on your trading performance greatly. In the event you wish to succeed using a forex trading tool, you need to evaluate forex trading techniques as carefully as you’ll be able to prior to making a decision. You will find the following essential statistical information you need to consider when evaluating forex systems.

Equity Curve. The equity curve is one from the couple of things you need to look at first in evaluating currency systems. The equity curve determines the value of a particular trading account over a particular period. Numerous traders rely on this to measure the reserves above margin requirements that you need to trade applying a particular strategy. In evaluating the equity curve, a linear curve, the proper equity curve will indicate profits increasing from left to right is the most ideal type.

Maximum Drawdown. You must also look at the maximum drawdown. In trading terms, the maximum drawdown refers to the level of chance you face with your specific investment program. The optimum drawdown is generally expressed in percentage form and can directly have an impact on the size of one’s buying and selling portfolio. This will also help you evaluate the amount of funds you risk losing at any point in time during your investment procedure. When the maximum drawdown is great, it means the trades veer towards the red prior to closing.

Trade History. The next thing to look at is trade background. Keep a lookout for large negative drawdown and substantial losing trades. These are signs that the buying and selling forex trading devices are exceptionally risky, so this can already influence your decisions. Substantial risk currency systems also come with large potential gains, but you you have to think twice before you add a system of great risk into your portfolio.

Wins Percentage. Fx devices with great wins percentage indicates open trades that are left open for as lengthy as they’re still profitable. These systems generally sustain substantial drawdown as they go along.

Trading Background. You also ought to take into account the background in the certain forex system. How extended has the program been in play? Foreign currency programs which have been going on for months and years are surely far more advantageous than systems that have been operating for only a few weeks.

These are the five most critical statistics you could have to consider when you evaluate various fx methods. By employing these factors evaluation criteria, you may be certain of your selected forex trading system and also of the overall portfolio.