Know Forex Pips (Part I)

By Ahmad Hassam

How can you make many pips per each trade in forex trading? Forex trading revolves around making pips. Almost every trader wants to make as many pips as he/she can per trade. Pip is an extremely important concept in the foreign exchange trading. A forex pip is the smallest unit of price movement in the exchange rate of a currency pair. Pip stands for Percentage in Points or some refer to it as Price interest point.

Earned pips are the reward for a good trade. Traders trade foreign exchange in order to make as many pips as they can. And lost pips are the punishment for a bad trade. Pip is almost similar to the tick found in other financial markets like the futures market.

Forex pip refers to one point change in the fourth decimal place of the most major currencies. Why most? Because there is a currency that is expressed up to two decimal places relative to the other currencies. Japanese Yen!

So for most of the currency pairs the exchange rate would be expressed like x.xxxx where a change of 0.0001 would constitute one pip. A pip would be the equivalent of 1/100th of one percent or one basis point. You must be familiar with the concept of basis points used in calculating thee interest rate changes.

The exchange rate format would look like xxx.xx where a change of 000.01 would constitute one pip, for the handful of currency pairs featuring the Japanese Yen like GBP/JPY or USD/JPY.

Calculating the exact value of each pip for the currency pair and lot size traded is the job of the brokers trading platform which should include a pip calculator created especially for this purpose.

Here is a simple calculation: Pip= (Lot Size) (No of Lots) (Pip Size). It is better that you also know how the exact value of a pip for a currency pair is calculated. The result of this equation will be denominated in the quote currency.

The first currency in the pair is known as the quoted currency. However, the most popular name for the first currency in any currency pair is the base currency. Quote currency is the second currency in the pair. The second currency in the pair is also known as the counter currency. So in the currency pair, EUR/USD, EUR is the base or quoted currency. USD is the quote or counter currency.

If the quote currency is already in US Dollar, no conversion is needed for the US Dollar denominated trading accounts. For example no conversion is needed for the currency pairs, EUR/USD, GBP/USD, CHF/USD, JPY/USD etc.

When the US Dollar is the counter currency or the quote currency, it simplifies many things for the forex traders whose accounts are primarily in US Dollar. It helps to keep in mind that all currency pairs with the quote currency as US Dollar (ending in the US Dollar) will be $10/pip for a standard lot, $1/pip for a mini lot and $0.1 for a micro lot. This includes heavily traded pairs like EUR/USD, GBP/USD and AUD/USD. - 23223

About the Author:

Mr. Ahmad Hassam is a Harvard University Graduate. He is interested in day trading stocks and currencies. Try 1500 Pips a day Forex Signals. Discover a revolutionary Forex Robot Trading System!

Selecting Trading Window Frames (Part II)

By Ahmad Hassam

When you are planning for a trade, the first step is to identify the type of trade into which you will enter. Do you want day trading, swing trading or positions trading? It all depends on your trading strategies. What matters most to a trader or an investor is how to create a positive cash flow.

Is it a day trade? Is it a swing trade or is it a long term positions trade? Once we acknowledge what our goals and objective are than we can narrow our expectations.

Suppose I am a day trader. My expectations are for X amount of a given range. I will expect that if I miss 20% of the bottom and 20% of the top then I can expect to capture 60% of the average daily range. I will generally be able to identify what the average range for the day is.

So how do I start? First I will have to structure my computer and charts to a format that is conducive to day trading. How many pips you want to make in a specific time frame like eight to six bars from entry? 30 pips or 40 pips!

In day trading you should use two time frames; 5 minutes and 15 minutes time frames to look at the market! Use the 5 minute time frame to exit a position in day trading. Use the 5 minute time frame as a shorter time frame trigger to go with the 15 minute signal. Use the 15 minute time frame for the dominant trend if you trade Euro, Yen or Pound, then for day trading.

The key to remember is when the 15 minute time period is in sell mode, take the 5 minute sell signals. Similarly when the 15 minute time period is in the buy mode, take the 5 minute buy signals.

As a day trader you can watch the 60 minute time period, but if you are in a trade based on the 15 minute and the 5 minute time, these are the time frames you need to monitor for that specific trade.

Keeping an eye on the 60 minute time period will help you identify the current trend and a potential change in the trend if a moving average crossover occurs. Keep in mind your profit targets and where you are in range.

Suppose you are trading Euro/USD currency pair. The odds are that your profit potential is in the range of suppose 30 pips or less if the average true range (ATR) is 80 pips based on the past 14 trading days and if the Euro is already down 50 pips when a sell signal is triggered. How do you calculate these things?

Using good forex charting software will help you automatically calculate all the daily, weekly, monthly pivot points as well as the daily range, support and resistance, S-1, R-1 and other stuff.

You should learn how to calculate pivot points. Using pivot points in day trading can give you an edge. For day trading use the 60 minute time period for calculating the monthly pivot points, 15 minutes time frame for calculating the weekly pivot points and the 5 minute time frame for calculating the daily pivot points. - 23223

About the Author:

Mr. Ahmad Hassam is a Harvard University Graduate. He is interested in day trading stocks and currencies. Try Strignano's Forex Signals free. Discover a revolutionary Forex Robot Trading System!

If You're Dedicated, You Can Trade Stocks, Too

By Chad Reynolds

Have you always wanted to learn about stock and finally get some stock education? Well, just remember that you're not alone. There are lots of people out there who have always thought it may be too hard, too time consuming or too expensive to learn how to trade their own stocks.

Here are exactly the tools you need to become a real stock trader: hard work, dedication, focus and a great stock trading training program. Believe it or not, your ability to trade stocks on your own and eventually become a professional profit trader rests in your own hands. Many people want to know if "Trading Stock for Dummies" actually exists?

Many people don't succeed in stock trading simply because they are too distracted by everyday life events to fully dedicate themselves to learning the material. So the focus, hard work and dedication part is on you. But another problem is that sometimes people subscribe to a stock trading program that is over their heads. When they don't understand the terms being used, they get frustrated and then they easily give up.

To make you a success story in the long run, it is extremely important to choose a profit trading training program that fits your needs and learning curve. You should pick a training program that genuinely cares about your success and will be there for you when you have questions or if you feel frustrated.

Look for a training program that can offer extra features besides the basic training courses. An excellent feature to look for is the option to join a Master Mind Training group. This will give you an opportunity to discuss trading techniques, issues and questions with other traders in your field. The group's goal is to hold everyone else in the group accountable for their stock trading goals, which will help keep you focused and motivated.

Another great feature to look for is access to the training center's resource library. This is where they keep eBooks, special reports, past recorded seminars and webinars and much more resources that can help you on your way. If the training center of your choice is up-to-date and current with today's stock trading industry, then they can also offer you the option of podcasts, so you can study on the go, in the car, on the train or while you're between meetings or phone calls.

The name of the game is to make contacts and network. If the trading center is beneficial to experienced traders and those traders join the membership, then that gives you an excellent opportunity to converse with professionals who are already in the field. While you're choosing the best training center for you, also keep in mind that it is best to choose a center that offers materials and services for the beginner traders, as well as the experienced trader.

All it takes is hard work, dedication and focus. All of this can be accomplished with a great stock trading training center and you'll be trading stocks before you know it. Once you've done some research, you will see that becoming a profit trader is not out of your reach. - 23223

About the Author:

Eager to find out more about stock for dummies, then read more from Chad Reynolds' blogs. He will teach you on how to choose the best stocks and give you a real stock education.

What Is Fibonacci Trading? (Part II)

By Ahmad Hassam

Fibonacci Price Retracements: How do you identify a possible support level once the market pulls back from a high? Fibonacci price retracements are run from a prior low to high swing using the ratios 0.382, 0.50, 0.618 and 0.786 to identify possible support levels as the market pulls back from a high.

Retracements are also run from a prior high to low swing using these same ratios looking resistance as the market bounces from a low. Most basic technical analysis software will run the Fibonacci retracement levels for you when you choose the swing you want to run them from.

Multiply the length of the swing (from low to high or high to low) by the retracement ratios and then subtract the result from the high if you are running low to high swings or add the results to the low if you are running high to low swings in case you want to understand how to calculate the Fibonacci price retracements yourself.

Fibonacci Price Extensions: Fibonacci price extensions are almost similar to the Fibonacci Price retracements in that they are run from the prior lows to highs or from prior highs to lows using only two data points to run the price relationship.

The difference between the Fibonacci price extensions and the Fibonacci price retracements is that we are running the relationship of a prior swing that are less than 100% or retracing the price move whereas with the extensions we are running the relationships of a prior swing that are extending beyond 100% of it.

Fibonacci Price extensions are run from prior low to high swings using the ratios 1.272 and 1.618 for potential support. They are run from prior high to low swings using the ratios 1.272 and 1.618 for potential resistance. These two techniques are named differently to indicate whether the price relationship is occurring within the prior swing or extending beyond it.

Fibonacci Price Projections: When you are setting your Fibonacci projection levels, you base your levels on the previous retracement. We use 1.00 and 1.618 ratios to run the projections. Fibonacci price projections are run from three data points and are comparing swings in the same direction. They are run from a prior low to high swing and then projected from another low for possible resistance or they are run from prior high to low swing and projected from another high for possible support. Seeing how the price reacts with each of these Fibonacci price projection and retracement levels should also give you a lot of confidence as an investor because you can see that you have multiple price points at which you can enter a trade. You dont always have to get in right at the beginning of a movement.

Price clusters identify key support and resistance zones that can be considered to be trade setups. A price cluster is the coincidence of at least three Fibonacci relationships that come together within a relatively tight range.

Three is just the minimum number required to meet the definition. A price cluster can also develop with a coincidence of more than three price relationships. You may see five to ten price relationships come together in a relatively tight range. There are times when you see these large clusters develop not too far from the current market activity and they tend to act like a magnet for price. Now Fibonacci price analysis will become very easy for you with a little bit of practice on a good technical trading software. - 23223

About the Author:

Mr. Ahmad Hassam is a Harvard University Graduate. He is interested in day trading stocks and currencies. Try These 1500 Pips A Day Forex Signals From Heaven. Know Forex Rebellion!

Play With The House's Money With Covered Calls

By Maclin Vestor

Great Gamblers actually have a lot in common with great investors. They know excellent money management is the key to success. Their view is that as long as their money is on the table, it belongs to the game. Their Goal is often to get their own money off the table quickly, so they can play with the house's money. In the investment world, a Covered call trading strategy is a good way to play with the house's money. However, there are many different viewpoints. One is that you just find a good stock, and then if it trades options to just sell calls against it until the stock pays for itself. However this is a very limited viewpoint that doesn't explain what a "good stock" is.

If you are typically a growth and momentum investor, you are generally relying on accelerating earnings and sales growth and price momentum and buying momentum to take over as the stock is bid higher. If you identify a good buy point this will NOT make a good covered call strategy.

The reason is, the premium on the option is generally based on recent volatility, and stocks that set up for a buy point typically consolidate as buyers take profit, sellers try to battle this stock back and buyers and sellers reach a stand still, then buyers gain momentum, and soon right near the buy point the buyers begin to take control. Sometimes the sellers will give-up, and cover their shorts, and the buyers will come in full force. This means that right before the buy point the stock's premium is fairly low, and it's not until after the stock breaks out that the price of the premium will be reflected based upon this volatility. In addition, this strategy is generally based on price appreciation. If you sell options on these stocks, you will limit your gain, and you will most likely not increase your potential very much. Generally the best strategy would be to sell out of the money options at your price target. However, generally this will net you a very small amount unless you are buying a lot of shares, and your fees per trade and per contract are very low. Even then, this is just adding a very small premium onto your shares, and usually isnt worth it as much. Instead, you may be better off learning to BUY options if this is your strategy.

On the other hand, If someone is not a momentum trader, and is going to buy stock s perhaps that just received upwards earning guidance, or if they have a strategy where they expect mild price appreciation, or if theyre just index investors, then perhaps a covered call strategy would work well. If you expect a mild price appreciation, you can sell out of the money options, and still gain from price appreciation up to the strike price, while also collecting a premium. Say you Identify a stock that is starting an upward or sideways channel, You are following a trend, you would want to identify the peak of that trend at expiration, and sell a call option near that strike price. This will allow you to adjust price targets, receive the capital appreciation gains, and also collect a premium.

Now generally covered call strategies are better for value investors, or even contrarian investors. You want a stock that you can own for a very long time, but is one that you dont anticipate any short term price appreciation. You can just collect premiums by selling at the money call options, or if you expect the stock to actually decline slightly at the moment, you can sell in the money options, hoping that the stock declines out of the money, and that you dont have to be assigned on your call. This way you can own the call and write another call option month to month, collecting income.

There are other strategies such as just collecting the maximum premiums that are available. This may be a bit dangerous since these are stocks that people expect to make big moves, and those moves arent always up. The price of a call and put are directly correlated, so just because a covered call will yield you a high percentage yield, doesnt mean it is worth it. It is generally associated with higher risks, and most likely, if the stock does go up, it will be a big move, you will be limited in only being able to collect the premium, and you could potentially lose everything if the stock tanks to zero. However, if you do enough research, seeking some of the top yielding covered call options is a good strategy, that can sometimes have you yielding around 10% a month. In addition, you may decide to use this to find stocks that are ready to move, and just buy the stock outright, avoiding additional costs associated with the option (such as the time premium and extra brokerage fees), and still allowing you to profit from the gains. Or perhaps you want to identify the stock and just buy out of the money calls.

Ultimately its up to you to pick a strategy you understand, and learn as much as you can, taking whatever courses you need to and educating yourself so that you are prepared to make money in a way that works for you. - 23223

About the Author:

Maclin Vestor teaches about a few examples of an online trading system and teaches you to find an options trading system that works for you.