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  1. #21
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    Why we make a simple Forex trading complicated?

    Forex trading has 50-50 chance of making profit if we trade at random. Since, the trend is either bullish or bearish. So, if you open buy position and the trend is bullish then we make profit if its turn bearish then we loss. So, it’s really a 50-50 chance. So, why many say 95% of traders loss in Forex trading?

    It’s because, we make simple things complicated. Instead of course on knowing if the trend is going to be bullish or bearish. Instead of doing analysis so that we can open a position in the right decision we are trying to finds ways that no matter where the decision of the trend is we are going to make profit.

    So instead of simple approach of finding the right trend to trade we want to find ways to trade both ways and make profits. This is where our mentality of finding a holy grail of trading strategy come in. We want to find a strategy that no matter what the direction of the market trend is we can make profit, which is not really possible to start with.

  2. #22
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    The trend being bullish or bearish is not enough thing that a trader needs to know before executing a trade, there are many other things that a trader needs to know and that the market is bearish does not mean that you gave seen a sell opportunity and you should enter the market that way. This approach and advice is wrong.

    What if you entered and then the trend changes? We need to know where the entry point should be that is the hard part when it comes to making money in Forex trading. Therefore, analysis explains all and since you see it this way that is the same way those 95 percent of traders that are losing are seeing it too. I guess you much be using a whole lot of indicators.

  3. #23
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    Quote Originally Posted by Andre Silva View Post
    The trend being bullish or bearish is not enough thing that a trader needs to know before executing a trade, there are many other things that a trader needs to know and that the market is bearish does not mean that you gave seen a sell opportunity and you should enter the market that way. This approach and advice is wrong. What if you entered and then the trend changes? We need to know where the entry point should be that is the hard part when it comes to making money in Forex trading. Therefore, analysis explains all and since you see it this way that is the same way those 95 percent of traders that are losing are seeing it too. I guess you much be using a whole lot of indicators.
    This is one of the main examples of simple things in Forex trading that we make complicated. If you know how to do analysis then you will know if the trend is bullish or bearish. The more fact that you are worried that the trend will chance is a clear sign that you don’t know if the trend is bullish or bearish. When you do analysis you need to know if the trend will be bearish for a week for a month and for six months and for a year.

    Now, if your analysis result say that a pair that you want to trade will be bearish for a week, for a month for six months and for a year will you still think its going to change trend? 2ndly when you do analysis do you know the daily volatility? And weekly volatility? Do you know the different between volatility and trend movements? Because, if we can satisfy this questions then we can trade confidently in our trade.

  4. #24
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    Hedging strategy.

    We all know the basic rules in hedging. It’s about having two opposite position opened. Like one buy and one sell of the same pairs. Correction hedging strategy is almost the same. But, instead of using one pair you are actually trading two different currencies.

    For example, AUD/USD and NZD/USD. The correlation of those pairs is around 95%. Meaning, if the price in AUD/USD goes up then we can expect the price of NZD/USD will also going for buy. So, instead of doing hedging using one pair you can actually use this two pairs to do hedging. So, if you open buy position in AUD/USD then you can open sell position in 2nd pair. You can also do same thing in pairs GBP/USD and EUR/USD.

    By the way, the good thing about doing correlation hedging strategy is that you can have double information as you can check and do fundamental analysis to both analysis to help you and guide you on how to properly do hedging strategy in this two Paris.

    On the other hand, if you are a new Forex trader then I will definitely advise you never try to do it on your live account directly, because you need to practice first in your demo, if you get good result in your demo only then you can use this advance way of trading in your live account unless not!

  5. #25
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    Well, if you have the knowledge of hedging, then surely you will understand this one very easily. It’s not like opening both buy and sell in same price. For Forex AUD/USD and NZD/USD, both will show similar patterns because their base currency is same ie. USD. Now, both the support as well as resistant level will also be similar in both the prices right?

    Now, when the pair will be touching the support, you will go for long because there is more chance the price will bounce back. In addition, just when the other pair will touch the resistant level, then you should go for short. That is the basic idea of hedging, just the change in this trading strategy. Hope, you understand how work it. Besides, I am agreeing with you that new traders must test first in their practice account.

  6. #26
    Kevin Pietersen
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    Hedging correlation can double profit but it can double loss also, although it’s not always like that because 2 pairs which has correlation won’t always move it’s rule. For example, I am using EUR/USD and USD/CHF as classic correlation which you said. Normally, EUR/USD and USD/CHF has negative correlation so when EUR/USD moved up then USD/CHF moved down (like mirror) or vice versa. It can both move up or down.

    Personally, I am still confused to find out the right timing to open position with hedging correlation strategy. Usually, the analysis is coming from one pair as main pair example EUR/USD as main pair so I will make analysis on movement in this pair.

  7. #27
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    Correlation between two currency pairs can be used to either hedge or even double our profit. In case a trader wish to hedge his position then all he needs to do it take a long or short position and watch out for the trend. If the trend is against the trader but expected to reverse sooner, then for the short time the trader can take an opposite position in the currency pair which has direct correlation. This is way, the profit in one pair negates the loss in other, when the first currency pair starts revering, the profit can be booked in the 2nd position.

    By the way, EUR/USD and USD/CHF is a classic example of currency pair with inverse correlation. This can be made use of either to hedge or double the profit. In case the trader wishes to hedge his position against a long position in EUR/USD, then he can wait for the trend and then take a long or short position in USD/CHF pair that will negate any negative effects in the EUR/USD position. In case EUR/USD trend goes in favor of the trader, a reverse position in USD/CHF can be taken as well to double the profit.

  8. #28
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    Well, hedging means opening an opposite trade of the same volume of a currency pair. Hedging actually fixes our status in the Forex market and the future price movement in the currency pair does not have any impact on our equity or balance. Correlation hedging is buying and selling of the same volume of different currency pairs. For example, buying a lot of EUR/USD and selling a lot of EUR/JPY. By the way, I think correlation trading is not an effective risk control technique.

    Both hedging and correlation hedging are great tools but in my opinion hedging is a more effective risk control technique. Correlation hedging does not work when there are major economic news to be released in the market. Hedging and scalping when used together can bring great results in Forex trading.

  9. #29
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    Hedging is one of the effective way to manage the risks involved in trading in the financial market and it’s effectiveness can only visualized by the zeal with which the banks and top financial institutions embrace the technique. It is however a wonder that the hedging strategy is little known to the average trader and that can be excused on the ground that it takes some knowing to getting used to how the strategy really works.

    One thing, a lot of traders do not understand about the hedging strategy is the fact there are multifarious ways to put the technique to work and the conception that hedging is all about the buying and selling of the same instruments is half true. As a matter of fact, correlation is the concept that makes it possible to hedge one instrument in one market with another instrument in other market.

  10. #30
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    Market trend and volatility.

    I know many traders who check market charts and do analysis sometimes mistaken market volatility to market trend. For example, a EUR/JPY loss 50 pips in just a matter of few hours. Does is mean it’s turning bearish already? Or is the trend reversing already? Just base on the chart that the price drop from 135.00 to 135.50 even to 136.00?

    The answer is that we still can’t automatically say the trend is reversing. We must first ask the reason why the price drop. We must check first the pair’s daily volatility. If EUR/JPY has 180 pips daily volatility that means it’s only normal that it’s can drop 100 pips and jump up again.

    Some don’t understand the different between market trend and market volatility that when the price drop they think it’s a reversal and if the price rise again they will say they got a false signal and so on. Actually, they just don’t understand what actually just happen and when happen is actually it’s just market volatility that is the driving force and not that the trend has change. So, when we check trends and patterns. Always ask this question. Is this price movement is just volatility? Or is the really has a new trend ?

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