Using a Forex Robot

By Frank Rivera

The forex market is notoriously volatile. Currency prices fluctuate rapidly and people can lose a lot of money if they're not careful about finding and creating a strategy to help minimize losses and find ways to increase profits. Most expert forex traders use proven systems that help them to know when to place trades for the maximum possible profits. These systems can generate trade indicators and signals based on historic data and hours worth of back-testing. These programs are usually called forex robots or automated trading systems.

They are automated trading systems that operate by using real-time forex data and by comparing it to historical data to identify any pricing trends. The software is then able to generate a trade signal to buy or sell, or you can integrate it into your trading account and allow it to place your trades for you automatically.

The technology and inclusions in each forex robot have expanded and grown so that there are now many copycat designs and programs available. No matter which forex site you visit, they're inundated with ads for various forex robots and software systems. They all claim to do the same things, so how do you choose which one is the right one for you?

How do forex robots work exactly? Before you can put an automated software system to work for you, you'll need to open a trading account with a forex broker. The MetaTrader 4 seems to be a very popular trading platform with many different brokers. It's user-friendly and easy to figure out quickly. Once you've logged into your account, open a chart window on MetaTrader 4 and then drag your robot software onto the chart. Depending on the type of robot you bought, you may need to reset some of the parameters to make it work the way you want.

Before you can get your forex robot working for you, you'll need to open a forex trading account with a forex broker. Most brokers tend to use MetaTrader 4 as their preferred trading platform, which is a very user-friendly interface. Log into your account and open a chart window on MetaTrader 4. You then drag your chosen forex robot onto the chart. The majority of software systems will begin analyzing data immediately, attempting to identify trends and trying to find a point at which to generate a trading signal for you.

As the currency pricing changes, your automated software determines when to buy. It has the capacity to place a trade through your account on your behalf. Because it's been set to watch every tiny movement in the market, it will recognize instantly when to close out your trade and consolidate your profit for you. It can also sell out any currency you're holding if it reaches a stop loss point to help minimize your losses for you too.

This method of trading is extremely easy to use. You really don't have to know a lot about the forex market in order to succeed with this strategy. It is truly a set and forget system. This makes it great for beginning traders who don't have a clue what they're doing.

Overall, expert advisors are usually a pretty good way to get started in the market. Before you decide which one to use, make sure and do your homework. There are several of them on the market that just don't work. Find a good one and stick with it for the long term and you'll be much better off than when you started. - 23223

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What is Kelly Ratio?

By Ahmad Hassam

In one of my articles, I talked about the criteria for developing a good mechanical trading system. There are many factors to consider while testing and evaluating a mechanical trading system. The important question is how to develop a trading system, evaluate it and then apply it with real money.

For each trading system that we test, we need to not only know that the trading system is profitable but also whether it is profitable with limited equity swings. We should know does the trading system have excessive drawdown periods?

Three of the most important elements of mechanical trading systems are: 1) Rules for exiting at profit targets. 2) Rules for exiting at loss targets or how much loss is permissible and 3) Clear cut rules for entry and exit for each trade.

Do losses exceed gains more than what is tolerable in the long run? Does the trading system experience periods of time that result in significant losses that give back those gains when a string of multiple winners and substantial profits accrue?

John Kelly while working at AT&T Bell Labs had developed the formula in 1956 now known by his name. A money management tool used by system traders is the Kelly Formula or Ratio. Most traders do not know when to correctly add on a trading position.

It soon became popular with the gamblers who realized its potential as an optimal betting system in horse racing. It enabled gamblers to maximize the size of their bets on consecutive races.

Gamblers would use the Kelly Formula to determine how much to parlay winnings into the next bet. Kelly Formula is used by many traders to determine how much money to place on the next trade taking into account the historical performance of the trading system.

Kelly Ratio is given by the formula: K=W-[(1-W)/R] where K is the Kelly Ratio in percentage. W is the winning probability and it is the probability that any given trade that you make will return a positive amount. R is the Win/Loss Ratio and it is the total positive trade amounts divided by the total negative trade amount.

Suppose K is 25% then you can risk 25% of your account on each trade. Kelly Ratio tells you what you should ideally be willing to risk on each trade to maximize your total returns in terms of the percent of your total account.

To be on the safe side you should half the ratio. Suppose K is 25%. You should half it to 12.5%. What it means is that you should not risk more than 12.5% of your account on a single trade. Many traders argue that the Kelly Formula gives too high a figure so half it to be on the safe side.

Kelly Formula can help you in comparing two trading systems. You can use it in deciding which one is better in the long run. You should look for a trading system that has the highest Kelly Ratio.

Back testing is used to evaluate a trading system and show the strength and weaknesses of each trading system. You can use the back testing results in the Kelly Formula.

So back testing combined with the Kelly Formula can help you achieve the highest trading profits with the lowest risks in most market conditions. - 23223

About the Author:

Mr. Ahmad Hassam has done Masters from Harvard University. He is interested in day trading stocks and forex. Know The Candlestick Patterns. Learn Forex Trading.

Penny Stocks Market

By Marco Davies

Penny stocks are ordinarily offered up by a concern that has been established for less than three years and has not greater than 5 million dollars in solid assets, or a business that has at the very least three years of operation, and has not more than two million dollars in tangible assets or a company has 6 million dollars tax revenue for three years. There's a fully fledged market place for the penny stocks, yet these stocks have very specific liquidity. This is just one of the reasons for the penny stock market's unpredictability, nevertheless these marketplaces stay very popular.

Penny stocks, are sometimes also referred to as as micro-cap, are low priced stocks and shares ordinarily bought and sold in the over the counter market. Almost all of the stocks or shares are for sale for a penny that is why these are referred to as penny stocks.

OTCBB: Over The Counter Bulletin Board furnishes complete information for more than three thousand stocks including as they happen, quotations display, last sale price and volumes. These stocks are ordinarily not dealt with in any of the national stock exchanges. The OTCBB digitally furnishes as it occurs quotations for home as well as international stocks and shares, plus it displays previous days dealing processes in DPPs. There are in excess of two hundred market makers are documented at the Over The Counter Bulletin Board with OTC bulletin boards preferred to pink sheets.

Pink Sheets: The Pink sheets is published and sustained by Pink Sheets LLC and it shows bid and requested quotation costs of different penny stocks. Concerns listed in pink sheets are the most risky as most of the businesses simply meet the minimal prerequisite for listing, although penny stocks at pink sheets are lightly bought and sold. A good many businesses pay dealers] for dealing these penny stocks and therefore some traders|agents] use deceptive activities to sell the stocks and obtain money from people.

In a number of the instances, just a couple of market makers are actively involved in a specified penny stocks and obtain and sell these specific securities only. Dealing with a market maker is preferable, as the market maker not only sells the specific stocks but it in addition buys the shares. Close to two hundred and thirty market makers are approved by the Over The Counter Bulletin Board and these market makers buy and trade stocks on a frequent basis. It is also preferable to observe that a larger number of market makers are accessible for specified stocks because the less market makers there are available, will often determine or control the particular stocks. In these instances the investment funds in the unique penny stock is risky as these few market makers can manipulate the costs of the shares and thus can maintain a wide spread between the sale and buying terms of the stock. Not too long ago a few of the market makers were found to be engaged in deceptive activities.

There is a seasoned market of penny stocks that are bought and sold at Over The Counter Bulletin Board and pink sheets. Over The Counter Bulletin Board is governed by the rules of the SEC of the U.S.. - 23223

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If You Learn Technical Analysis, You Need To Learn About The Hanging Man Pattern

By Chris Blanchet

In order to make quick money in the markets, traders need to assess opportunities that are created by volatility and fluctuations in security prices. To do this efficiently, all serious trades will learn technical analysis skills, which give them an indication as to when they should enter and exit a position with the least amount of risk to their capital. For short-term trades, investors will study short-term patterns.

As part of the ongoing Learn Technical Analysis Series, we will discuss a short-term pattern known as the Hanging Man. This pattern gives traders an outlook as to the short-term range of that security. And given its gloomy name, investors can immediately identify the Hanging Man as a bearish signal.

When trying to identify a Hanging Man pattern, investors need to pull up the candlestick chart for the security in question. Rookie investors who have just begun to learn technical analysis will identify this type of chart type by a day's "Real Body" which is a box made up of one horizontal line for the security's open and another horizontal line for the close, and two vertical lines that join them (or box them in). The "Shadow" is the range in which the security trades over and below the Real Body.

When it comes to the Real Body of a Hanging Man, it will need to be a "Black Body" meaning the security closed lower than it opened. The Shadow will look like a tail with preferrably no Shadow above the Real Body. The tail should also be rather long, ideally twice as long as the box of the Real Body. For investors who are just starting to learn technical analysis, the Hanging Man might look more like a square tadpole than a hanging man.

As noted in previous parts of this series, any technical pattern or indicator, including the Hanging Man, should never be used in isolation. Investors who properly learn technical analysis should always confirm the signals they discover.

On the open of the day following the Hanging Man pattern, investors should seek a gap down from the Real Body of the pattern. The wider the gap (the farther down it opens from the Real Body) the better. Additional confirmation can be obtained if the Real Body of the day that follows the pattern is entirely below the Real Body of the Hanging Man pattern. Since most traders who learn technical analysis will not wait two days to execute a trade based on a Hanging Man, other technical and fundamental indicators should be used to confirm or refute the pattern early.

When the overall market sentiment is overly bullish, Hanging Man patterns are often falsely created. For this reasons, investors should sit tight until the following day. If the open is higher than the Real Body of the Hanging Man, it is likely a false signal. Also, investors should never forget to take the Hanging Man's Real Body's color into account -- "green and white are a bear trap's delight!" Remember that a red or black Real Body creates a more reliable pattern.

Even after people learn technical analysis, they will never rely on a single pattern to make a decision on a security. In most cases, they will use the pattern as a starting point and refer to other patterns and indicators to confirm or refute that indication. The more confirmation they have, the smarter their trades and consequently the higher their success. - 23223

About the Author:

Chris Blanchet has more than 16 years of experience as a Financial Advisor at one of the world's largest banks by market capitalization. To learn technical analysis free visit Online Trader Today.com where Chris writes about Technical Analysis and Options trading. Chris also maintains a debt-free blog at How To Repay Debt.com

Which Mutual Fund?

By Bob Jones

For the person who is interested in investing in the stock market, there are various mutual funds that are be worth looking into. When you are doing this sort of research, it is best to short-list a few different mutual funds. To compare mutual funds you will have to keep various benchmarks in sight. The first one is the performance of the various companies that you have selected.

This means looking to see how the company has weathered the ups and downs of the stock market over a number of years. While this is not an indication of future success, it will let you know if the mutual funds company is capable of performing well, even if there is no clear indication of the prices of stocks changing. You can find this information in several financial guides.

You will get an impression of how the stock market affects different forms of mutual funds from these various data sources and, once you have understood these changes and the way your prospective portfolio is affected by them, you will know which funds are best avoided and which ones are worth to study further. However, it takes much more than merely looking through financial reviews to compare mutual funds in any meaningful way

You will also need to check what kinds of costs are listed by the different mutual funds on your list. These expenses will include administrative costs, advertising costs, buying and selling of stocks and bonds charges and also the kinds of load costs. As most of these expenses need to be borne by the customer, it is best for you to research this information thoroughly.

You can find these details in newspapers and on financial Internet sites. However, ensure that you fully understand all of the information that you read, as this makes investing in a mutual fund less risky. Further to these ideas on how to compare mutual funds, you will also come across lots of comprehensive articles.

These articles will explain the various terms used in some of the mutual fund articles. You will also be provided with information about the sorts of mutual funds that are currently available on the market.

By examining all of this information, you can make a well-informed decision as to which mutual funds are worthwhile investing with. Ensure that you examine all of these facts when you are ready to begin investing. The details gleaned from comparing the mutual funds will give you the best chance for investing wisely in the risky world of mutual funds. - 23223

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If you are interested in Investing in Mutual Funds or investing in general, please go along to our website entitled Investing in Mutual Funds