Posts Tagged ‘Means’

In option trading strategy, what does “Setup” and “Confirmation” means?

Question by PH: In option trading strategy, what does “Setup” and “Confirmation” means?

Best answer:

Answer by Alex
“Setup” and “confirmation” are not specific to options, they are used in trading any instrument. A “setup” refers to something that a trader looks for when he/she wishes to make a trade. For example, if one uses technical patterns to make trades then a “setup” may be a double-top pattern, and the “confirmation” is some signal that confirms the “setup” as valid. Again, going back to a double-top formation, a break below the support of the double-top is a confirmation of the pattern.

Know better? Leave your own answer in the comments!

Forex Market Success — Patience and Experience Means Higher Profits

Toronto, Canada (PRWEB) November 20, 2009

InvestTechFX leading 1 pip Forex corp. representative notes that many beginners are entering the Forex market every day hoping to make a quick buck on the highly liquid, extremely volatile market. These traders can often be overwhelmed by the complexity of the market, and frequently face large, account crippling loses early on in their trading careers. While this can be discouraging to many traders, it is a common occurrence for most Forex beginners. What separates Forex drop outs from professional full time traders is the willingness to take the time to learn from mistakes, analyze the markets, learn from experienced traders, and over time begin developing a consistently successful trading system of their own. No trader is right 100% of the time, but with careful analysis of the market, strict money management, and the time and patience to develop and follow a trading system, the volatility and liquidity offered in the Forex market by brokers such as InvestTechFX may result in great profits for traders.

InvestTechFX 1 pip fixed spread Forex corp allowing scalping and hedging notes that there are many things a trader must take into account when developing their trading system. What time frame one will be trading on, which sessions they will be able to trade, whether they will be scalpers, day traders, swing or position traders, and how much risk they can afford/ are willing to take on with each trade are all important questions which traders must answer before beginning to develop their system. Scalpers are very short term traders that need to be able to identify trends on a minute by minute chart, often their trades will last no longer than a minute or two. They aim to take lots of small profits over the course of a day, which adds up to large gains with high leverage. As a result their trading systems revolve around their ability to identify a trend almost instantly, even if it is just a false trend, or a whip saw, they aren’t planning to stick in the trade past a few pips anyway, so they focus mostly on early identification trends such as moving averages and stochastic oscillators.

InvestTechFX worldwide 1 pip Forex corp. trading 24 hours a day observes that day traders stick with their trades for longer periods of time than scalpers, often holding trades for several hours in the day. A day trader will often trade throughout peak hours in the market, identifying trends early and sticking with them until their conclusion. A day trader usually will work on charts from anywhere from 10 minutes to a couple of hours. Being involved in trades of this length means mostly relying on chart analysis, just like scalping. However, because of the length of the trade the traders must be more aware of false indicators. As a result, a day trader will often jump on a trend later than a scalper would, however they are the victims of far less false trends, and they usually manage to take in large gains over the course of their trading session. Some favorite tools at the disposal of a day trader are the analysis of moving averages and oscillators for confirming trends, as well as analysis of trend lines and support and resistance levels.

InvestTechFX leading international Forex corp representative states that swing traders hold onto their trades for several days, sometimes even several weeks, before taking large profits at the end of a trend. A swing trader requires more margin, as sometimes over a short amount of time a trade will appear to be going in the opposite direction before reversing and continuing in the direction predicted by the trader. A swing trader must be willing to set their stop losses at far greater risk levels then Scalpers and Day traders in the hope that in the end they can take far greater profits. Swing traders look for broader market trends, still making use of chart analysis, they tend to analyze charts further out than the other traders, ranging from hourly charts to daily charts. They also spend more time reviewing news reports in the hopes of finding the news which will direct the market in a direction which they can predict.

According to InvestTechFX Worldwide Forex corp. welcoming White Labels and IBs representatives, a position trader is a trader that will hold a trade for several months to a year, they need to have a much greater trading capitol in order to compensate for some of the wilder swings of the market, however a shrewd position trader can take huge amounts of pips on a single trade over the course of several months. Such traders need a broader understanding of the nature of world economies and the effects of events on the prices of currencies.

InvestTechFX 1 pip forex corp. offering 1 pip fixed spreads over six majors believes that no matter what trading style a trader decides to use or perhaps they choose to use a combination of two or more styles, the importance of finding a trading system that works for them is of the utmost importance to success in Forex. While a trader without a system may get lucky on a few trades, the odds are not in their favor for continued success. As for what system works best, there is no definite answer, as each one relies heavily on the independent style of the trader in question, as well as their ability to correctly identify the trends they see on their charts. Once a system has been developed, it should be thoroughly tested on demo accounts such as InvestTechFX’s free demo accounts offering 1 pip spreads on the real market, allowing traders to effectively test how successful their system is. More important still is the ability to trust in the fact that your system works. A system cannot possibly work if a trader is not willing to follow it, therefore once your system has been developed it is essential that you trust in it, rather than second guessing yourself. www.investtechfx.com

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Related Forex Scalping System Press Releases

Market Technical Analysis – Light Volume Means Markets Can Float Higher…Key Levels To Watch

InTheMoneyStocks.com breaks out the key technical analysis techniques they have become famous for. They analyze the charts on the market to showcase their technical trend line analysis, price, pattern and time values. By utilizing these methods and not using the common technical tools which almost never work anymore, they are able to call every major and minor market move avoiding Wall Street hype. InTheMoneyStocks.com looks at major support and resistance levels on the charts telling their viewers where the market will rise and fall. They talk about major rules that must be learned. Enjoy and come get their premium daily, month, weekly and intra day expert guidance on the markets, gold, oil, us$ and stocks in their premium nightly videos, daily market reports, pro trader watch list, hidden gems and technical tactics. All included in the Research Center for just $49.99/month. Best value and guidance on Wall Street by those that avoid the Wall Street hype! RealTick graphics used with permission of Townsend Analytics, Ltd. ©1986-2009 Townsend Analytics, Ltd. All Rights Reserved. RealTick is a registered trademark of Townsend Analytics, Ltd.

The Real Truth About Pips vs Equity and Why Your Forex Signal Provider?s Pip-Count Means Jack Squat

Yes, I am a Forex Signal Provider.  Yes, I report my results in pips.  Yes, I do this because it’s what you want to see.  However, I’d like to propose something—something many of you might find a bit preposterous at first glance.  I propose you, as a potential client searching for an honest, profitable Forex signal provider, should start demanding these services report performance in equity.  Why, you ask?  Because a signal provider’s pip-count means jack squat to the equity growth of your own Forex account.

A pip is a pip is a pip.  Sorry, but this is just flat-out untrue.  Many of you use a standard rate of $1 per pip or $10 per pip.  It’s what we’ve all been taught to do by our brokerages.  This is utter BS and I’m going to show you why it is such a detriment to the growth of your Forex account—and to your mental state when it comes to trading.

When you vary the dollar amount of each trade’s pips based on the base equity in your account and the size of the trade’s stop loss, you will find that unbelievably, positive pip-counts can actually mean an equity loss in your account while other times, a negative pip-count can mean a growth in your account!

Now, I know you’re sitting there thinking, “This chic’s off her rocker.  She’s insane.  There’s no way I’d ever sign with her.”  I’m not.  I’m actually quite sane.  And, you will.  So let’s delve into it.

Let’s say, for ease of understanding, you’ve got a $2000 Forex account.  We’re going to look at three completely different signals here that you could easily receive from the same Forex signal provider.  The first alert has a 300-pip stop loss.  The second has a 100-pip stop and the third, a 15-pip stop loss.  Now it’s math time.

We’ve all been taught to risk 2% of our base equity per trade.  This is a fine start but I’m going to show you why this is just the beginning when it comes to money management in Forex trading.  I learned from the Forex money management Master and I’m going to share that with you.

Anyway, we’re risking 2% of our equity on this 300-pip stop loss trade.  2% of $2000 is $40.  Can we all agree on that?  That means you are willing to risk $40.  The stop loss is 300 pips, so $40 divided by 300 pips is $0.13.  Since we always, always, always round down, that means each pip is a dime or $0.10.  And, yes, you’ll need a broker that allows micro lots for proper and profitable money management.

The first trade stops out.  You’re now down 300 pips or $30.

The next trade carries a 100-pip stop loss and you once again risk 2% of your base equity.  Since you lost $30 on that last trade, your new equity is $1970.  That means you’re willing to risk $39.40 on this trade.  Figuring the dollar amount per pip, we find that $39.40 divided by 100 pips is $0.394 or $0.30 since we once again, always, always, always round down.

This trade also stops out.  You’re now down 400 whopping pips or $30 plus another $30 for both of your trades.  You’re down 60 bucks.

This last trade has a stop loss of 15 pips.  Whew, it’s nice to not have to worry about such a huge stop loss—or is it?  We’ll talk more about this later.  Ah, but I digress.  This trade has a 15-pip stop loss with a small 48-pip target.  Seemingly minor.  Seemingly almost not even worth it to take.  Luckily, you do.

It’s a good thing because this trade reaches the target and you gain 48 pips.  Now let’s do some calculations.

Your base equity after those two losses above is $1940.  But, since you lost two trades in a row, it seems the system you’re using, or the system your Forex signal provider is using, might not be cooperating properly with the current market so you want to lower your risk by 0.5%.  This trade is now worth only 1.5% of your base equity or $1940.  That’s $29.10.  $29.10 divided by the 15-pip stop loss is $1.94.  Rounding down always, each pip is now worth $1.90.  Remember, you won this one.

So now, at only 1.5% risk, you just won a measly, tiny, seemingly worthless 48-pip trade.  You made $91.20 on this dopey trade.  Let’s take a gander at your account now!

You’re down an outrageous 352 pips.  Oh my god, do you want to scream or what?  352 pips is a lot, no?  But wait, your Forex account equity is now $2031.20!  You started with $2000.  How can that possibly be?

It’s the power of the pip, my friend, and just the beginning of proper money management.  This works the same with huge pip gains.  You can be up in pips and down a truckload in equity.  So you see, pip is just a word.  It should mean something unique to each trader for every single trade taken instead of this outrageous show of might by some signal services who never share equity.  Think about it.  Look into it.  And always do the math.  Forex signal providers who only report performance in pips are not doing you justice and you should demand more from them before you even think about signing.  Pips without corresponding equity means jack squat to your account.