Category: Traders’ Secrets

Traders’ Secrets is something that everyone would like to know, right?
How is it possible that some traders are successful all the time while others fail to make a profit all the time?
That is exactly what Traders’ Secrets will show you.
Traders-Paradise’s team reveal all trading and investing secrets to you, our visitors.

What will you find here?

How to find, buy, trade stocks, currencies, cryptos. You’ll find here what are the best strategies you can use, all with full explanation and examples.
Traders-Paradise gives you, our readers, this unique chance to uncover and fully understand everything and anything about trading and investing. The material presented here is originated from the experience of many executed trades, many mistakes made by traders and investors but written on the way that teaches you how to avoid these mistakes.

Moreover, here you’ll find some rare techniques and strategies that are successful forever, for any market condition. Also, how to trade with a little money and gain consistent returns. By following these posts you’ll e able to trade with greater success. You’ll increase your profits and your wealth, of course.

The main secret of Traders’ Secrets is that there shouldn’t be any secret for traders and investors. Rise up your trade by reading these posts, articles, and analyses!

You’ll enjoy every word written here. Moreover, after all, your trading and investing knowledge will be more extensive and effective.

Traders’ Secrets will arm you with those skills, so you’ll never have a losing trade again.

How to recognize early warning signs to exit the trade

What can make or destroy the trade is the right exit point. Don’t hold on to trades in the hope of making just a few more dollars when the market is moving against you.

By Guy Avtalyon

As a trader, you’ll often consider possible profit when you have to decide about exits, but can you recognize early warning signs to exit the trade? Traders Paradise wrote many times about the importance of exit strategies in trading stocks, forex, or currency. And I have to repeat if you think about the level where you enter the trade without thinking about your exits, it’s more likely you’ll end up in losses.

Some early indicators can warn you it’s time to exit the trade.

I know it’s sexier to buy stocks. We all like it. The feeling is wonderful after you spent so much time examining stock, analyzing it to find the perfect one. How would you feel if your stock is not performing well? What about your attitudes? Do you feel like a loser? No one likes to watch the stock go down. Even if it is obvious that the stock is performing badly, most of us would hold it and wait for better times. What is behind this attitude? We want to avoid the feeling of loss, the experience of losing something. Contrary, when the stock price increases, most traders will sell the stock to lock-in profit and lose the possibility of further gains.

Anyway, it’s important to sell stock at a specific moment to prevent further losses, and you have to recognize early warning signs to exit the trade. But what they are and how to recognize them?

Recognize early warning signs to exit the trade

Getting out of the trade isn’t complicated, but it requires research of price action, finding and noticing signs that could predict a reversal or changes in trend.

You have to know that markets tend to trend between 15 and 20 percent of the time. Strong trends are helping in the consolidation of recent price changes. They are helping in taking profits, lower the volatility. But what if a trading range becomes bottom or top and exits in the opposite direction of the previous trend swing?

This could be one of the early warning signs to exit the trade. When you’re watching the price action and notice a failed breakout or breakdown, the best strategy is to exit the trade.

Failed breakouts or breakdowns are signs to exit the trade with profit or loss. You can re-enter the trade when the price surpasses the breakout high or low of the breakdown. That could be a logical move after recovery because the possibility of the underlying trend to resume is great. It’s also possible the price moves to the other side of the trading range and forms a strong trend in the opposite direction.

High-volume days as an early warning sign

Well, to notice these kinds of early warning signs to exit the trade, you’ll need to track the average daily volume. For example, observe the last 50 sessions. It’s easy to notice trading days with four times or higher volumes. That’s a good sign if it happens in the direction of the position you are holding but take it as a warning sign if it is opposite from your position. This is exceptionally valid if the opposing swing breaks an important support or resistance level.

High-volumes that oppose the direction of your position could ruin patterns. They are often a signal to exit the trade and to take the profit in an uptrend.

Also, pay attention to peak days that can stop trends. They could show four or five times average daily volume in price bars that reach new highs in an uptrend or new lows in a downtrend. The top bar shows up at the end of a price swing after RSI indicators scored uptrend or downtrend levels.

Moving average and trends can help to recognize early warning signs

Take a look at these three lines: 20-day EMA, 50-day, and 200-day EMA. It could be a difficult position if, for example, 20-day EMA descends through the 200-day EMA. Also, when 20-day EMA ascends through the 200-day EMA. The first example signals the danger for long positions, while the second is important for short sales.

Price actions are also early warning signs to exit the trade when the intermediate moving average is higher to sideways on long positions. The change from lower to sideways on short sales also is a warning. Don’t hold or wait for the moving average to change the slope. Exit the trade.

Be adaptable, not emotional.

The market isn’t always moving in your favor. So, never force your initial targets further away. This could lead you to loss or fewer profits than you awaited. But before you exit the trade, you have to understand whether your decision is a product of emotions or logic. If you move your target far away from your initial plan, you’re actually showing greed. Don’t do that. You must have a strategy and stick to it. Your strategy must be well pre-planned. If the market moves against your stop-losses, you have to exit the trade. Move your stop-losses only to reduce possible loss. If you exit the trade before the stop-loss target, you’ll probably miss the possibility of making a profit when the market shifts and starts to move in your favor.

When you enter the trade, make adjustments only if necessary. The most important is to keep the balance and reduce the risk.

Honestly, there is no best strategy to exit a trade. One strategy could work properly for some trades but lead to a great loss in others. But one thing is true, so many researches showed that you’d end up in losses more often if you fail to stick to your strategy.

Risk is an integral part of trading. You have to watch market movements and set proper risk management strategies. The exit strategy is an important part of them. Moreover, the exit strategy can decide your profitability in the market.

12th November 2020
Forex Trader Alert: The New Trading Scam To Avoid

Anyone that guarantees profits of 100 percent or more should be marked as a scammer. There are no guarantees in Forex trading.

By Guy Avtalyon

According to some research, the new trading scams are increasing, so that’s the reason behind this Forex trader alert. Nothing is unusual; Forex trading increases and becomes more attractive for scammers as the people seek quick ways to earn money. As a beginner in the Forex market, you have to pay attention to these dishonest practices and avoid becoming a victim to those who prey on newcomers. In this article, I’ll give you the Forex trader alert and explain how to identify Forex market scams. But more importantly, I’ll tell you how to avoid them.

The forex market is the largest financial market nowadays. Its average daily trading volume is over $5 trillion. And it’s growing because more and more people are interested in earning by trading Forex. Today, it isn’t hard due to the advanced technologies implemented in trading platforms. Trading can be automated as much as you want, from partial to complete, so it’s more convenient for ordinary people without a great knowledge about trading currencies.

Forex trader alert: signal seller scams

I know that almost all beginners believe that a good signal seller is a MUST if they want to profit. But how will you know who is a good signal seller? How will you distinguish good signal providers from the scammers? Well, you have to look out for multiple characteristics, many different things.

One of them is unverified results. To be clear, if the signal sellers tell you they have an extremely high percentage of return, but they don’t have a track record to document, you can be sure they are scammers. Why? Simply, if they don’t have the track record, it is more likely they have never been trading based on these signals.

The second forex trader alert could be subscription fees. Some scammers may offer you marvelous profits without verification. But here is a catch: to get access to the trade, they will ask you to pay extremely high subscription fees – one thing you have to pay attention to. When you give them some of your banking or credit details, they could use them for some other purpose, so be very careful when doing so.

My main concern about these scammers is how do they expect anyone to believe them. For example, if they have such great trade signals, why should they sell them? Why don’t they keep them out of the public eyes and use them to profit big? Why are they selling them?

Also, as a beginner, pay attention to broker-tied signals. For example, a signal seller offers you this kind of service, but only if you sign up with a particular broker. They might receive the broker’s provisions, so they don’t really care whether your trade results in losses or profits.

Forex trader alert: How to avoid scammers

Scammers will promise you large profits with minimum or no risks. The logical question is how anybody can guarantee anything 100 percent? So, if someone gives you 100 percent guarantees, the alarm must be turned on because it’s more likely fairy tales. On the other hand, if someone has a 100 percent working strategy, why should they want to sell it? Instead, such could enjoy all benefits and profit in the market, right?

These scammers will ask you some small fees or no fees. But be cautious. There is no such thing as free lunch. Well, maybe in the mousetrap. Keep this in mind, especially if you’re a beginner in the Forex market.

But nothing is black and white as usual. Even with the knowledge that you can find many scammers out there, the Forex market is a great opportunity to profit. All you need to do is to follow some simple rules.

For example, if you find some platform or broker claiming that has confidential data or a secret method that will provide you large profits, ask for the free trial, demo account, or similar. Also, check if they are registered. Be especially cautious when they ask you to install any trading software. You have to check it, and sometimes that will require professional assistance. Fraudulent software can be hazardous for your computer, your personal data, and sensitive data on your computer.

For example, a valid broker will provide you a proof of its legitimacy. Anyway, pick the Forex broker from the list of regulated companies.

It would be best if you had a trusty and safe broker, not one that gives you false promises. Check Traders-Paradise’s Wall of Fame.

How to find a reliable Forex broker?

It’s not an easy task, so take your time and examine it. Don’t rush! You have to examine all pros and cons. Google it. Find as much info as you can. Read reviews, visit forums, ask people. It’s better to spend more time assessing the brokers than to have a bad experience with them and lose money.

Also, be very cautious whenever you see someone offering quick and easy money. Whoever tells you that you can make money with a gain of over 25% per month is lying to you. There is no easy money in the Forex market. You’ll need a lot of education, fast minded, and patience to be profitable here. You have to spend time and effort to learn how to trade. Otherwise, you’ll never earn even a small amount.

What can you do to protect yourself?

It is important to examine how the broker fits the regulatory authority regulations. You’ll find some information on brokers’ websites, so check them. Look if you can find some anomalies, something strange or unusual. Compare that with regulations.

Almost to forget, read all the small letters! Sometimes you’ll find important things there. Remember, scammers like small letters! They like to put their terms and conditions there, and you might have a problem when wanting to withdraw, for example, bonus funds.

What should you ask to avoid Forex trading scams?

You have all the right to ask questions to determine if you’re dealing with a trustworthy broker or scammers. Also, demand all the info in written form. No, you cannot give trust based on a phone call or verbal communication.

For example, ask the broker about the bid/ask spreads. If the broker says it is around 8-9 pips, don’t trust. The regular bid/ask spreads are 2 or 3 pips. This is a great forex trade alert. The spread is very important both for the trader to make a profit and broker.

Always use the service of a regulated broker. Such has good client reviews, and it’s authorized, transparent in fees and compliance policy.

The attraction of quick and easy money will always be around us and present in the market among the traders. That’s why you must understand what it takes to be successful at currency trading. Using a get-rich-quick scheme will put you at risk. Nothing good could come with it. Remember, never pick the broker with great but unrealistic promises and don’t trade randomly.

I’ll tell you more about the second in one of the next articles.

5th November 2020
Is “Buy and Hold” Investing Strategy A Good Choice?

Everyone would like to earn a lot, but everyone has a different way to do so. Why long-term investing is still the best chance?

By Gorica Gligorijevic

I’ve heard some people saying that the “buy and hold” investing strategy is dead. That was quite interesting because they said that in the context of coronavirus pandemic. This pandemic is changing the world and us personally for sure, but why are they so convinced that long-term investing is dead? I have to disagree. The strategy “buy and hold” will never die, and here is why.

But let’s have a more in-depth look at new investors’ psychology first. Who are they? They are under 40, worried for their capital, fearful of the future. The majority prefer short-term trading more than long-term investing because the current economic situation is so unpredictable. People are losing their jobs; unemployment is growing. On the other side of this is a great potential to profit from trading stocks. Their price fluctuates, changing every day, every hour, which is a great opportunity for profiting in trading.

For example, let’s go back to February this year. Stocks dropped by more than 30 percent of their value after February 19th and touched the bottom in March. That was the sharpest downturn ever seen before. But what did happen in September? The major indexes are closed to record levels. That was a great rebound. Someone would say it was an excellent opportunity for traders, and such would be right. But what about buy and hold investing? How is it still a profitable strategy? Let’s not listening to the naysayers and try not to underestimate the investing strategy that rolls the capital.

You can find empirical proof that demonstrates the long-term advantage of the “buy and hold” investing over any other strategy.

But to appropriately benefit from this strategy, you’ll need to secure against main pitfalls that may appear.

“Buy and hold” investing strategy doesn’t mean “buy and forget.”

Traders-Paradise already wrote about the importance of maintaining the investment portfolio. As an investor, you MUST stay engaged with it. Long-term investing will not allow you to forget the improvements in your portfolio. For example, asset allocation is necessary from time to time.

It would be best if you stayed fully tuned into what’s happening in each of your holdings. By no means you cant allow to neglect it. You have to know what is going on with each of your holdings, and you must be ready to make all necessary adjustments according to current market conditions.

Don’t buy what you know.

It’s a stupid mantra and might lead you to significant losses. Many new investors load up on stocks from the companies whose products they use in everyday life. That’s completely wrong, especially if you keep them forever or at least several years despite the low earnings. I know that people are usually emotionally involved in their favorite products, but it doesn’t mean you have to buy their stocks if you like something to use. Just buy the favorite product and think twice about buying stocks. It would be best if you based your decision to buy stocks on the evaluation, a due diligence method that provides you a firm grasp of the company’s prospects. For example, what is the company’s competitive position? Do you know anything about that? What is the precise value of the company’s stock?

It is vital to avoid a blind spot when it comes to stocks that you think you know. I know you will ignore the negatives of the company because you fall in love with the stock. Nothing is wrong with love in your private life. It’s nice. But investing based on emotions is a dead-end path. It is more likely you’ll end up in losses.

Have a plan

Keep in mind, never buy stocks randomly to fill your portfolio. It would help if you built your investment portfolio based on an investment outlook. Always be ready to adjust your portfolio according to changes in the perspective. That means you’ll need a plan.

I am not proposing an elaborate and exact outlook for growth in the next quarter, but you definitely need to understand the market. In light of the current pandemic, we all can see companies suffering due to social-distancing policies – for example, hotels, airlines, etc. But what we have to take into consideration? Fiscal and monetary stimulus. That could provide the economy to bounce back. This downturn or pandemic will not last forever, or we will learn to live with it and find beneficial opportunities to invest in. If you’re worried about what the shape of the recovery will be, forget it. In long-term investment, it doesn’t matter.

What matters is the recovery will come and if you’re investing now, estimate the possibility for the company to withstand the next few months of this agony.

And you must be flexible enough to adapt your positions if your outlook changes. That’s all. Can you see how the buy and hold investing strategy is the safest choice?

The buy and hold investing strategy is the right choice forever. Please keep each of these in mind while creating your stock portfolio to boost your odds of profiting.

30th October 2020
How to predict movement in the Forex market?

It is possible to predict movement on the Forex market based on several factors.

By Guy Avtalyon

I know some of you will wonder if it is possible to predict movement in the forex market. We are all suspicious about any kind of predictions, so why wouldn’t we be when it comes to the forex? On the other hand, almost every successful forex trader will tell you that successful trading comes from the ability to predict the movement in the forex market. So they must know something or they have some secret ingredients or skills.

I want to tell you that the ability to predict movement in forex isn’t something you can be born with. Actually, it is something you are building all your trading life. To create that complicated construction, you must understand the factors that influence a currency’s exchange rate. Of course, if you want to profit from forex trading.

Well, why shouldn’t you?

Millions of traders want to trade Forex because they understand it is the best market to trade. The potential of the online trading market is excellent.

So I want to tell you more about the factors you should consider in trading forex. That could help you to predict movement in the Forex market in a way to have better chances for success.

Predict movement in the Forex market

One of these factors you have to pay attention to is economic growth. The central banks in a country with a strong economy will raise the interest rate to prevent inflation. Higher interest rates always drive the growth of the number of investors, which means the demand for domestic currency increases.

Another factor you should understand is geo-politics. You have to watch and notice any kind of disturbance in the political scene. I know you might think it’s too dull. Well, this is very important if you want to predict movement in the forex market because political changes can change the direction of the exchange rate. We saw this so many times in history. If you want to trade currencies successfully, you’ll need to follow political and economic news.

Speaking about interest rates, keep in mind that some currency’s value increases along with rising interest rates. This increased value is known as capital appreciation. That is exactly what gives you the opportunity to profit in trading forex. The currency rate is associated with interest rates. So pay attention to it. The data you gather could be a great help in predicting movements in the Forex market.

Arguably one of the most important factors is recognizing if the currency is conditioned on the country’s capital or trade flow. Capital flow represents the amount of investment some country receives from international capital reservoirs. Trade flow represents income produced from trade. So, you’ll notice that some countries depend on capital flow, while others are very dependent on trade flows.

The least important factors are mergers and acquisitions when we talk about predicting movements in the forex market. Still, mergers and acquisitions can show you near-term currency changes. Smart traders always pay a lot of attention to them.

Sure ways to predict movement in the Forex market

The power to predict movement in the forex market can differentiate a profitable trader from a loser. It’s essential to understand the factors that cause changes in the currency’s price value if you want to last in the forex market. Here is another set of factors that will help you predict any movement in the forex market and allow you to get an advantage in the trade.

The Consumer Price Index, or CPI, is one of the reliable methods. This measure indicates when the prices of consumer goods are rising or falling. When CPI is above 100, you can be sure the inflation is on the scene. On the other hand, we can be talking about deflation when it is under 100, as the prices are falling. You can calculate CPI per formula

CPI=(Ct/C0 )*100

where Ct is the cost of a market basket at the current time, and C0 is the cost of a market basket at some point in the past with which it is compared.

How does this influence forex trading?

It’s quite simple. If the inflation rate is steady, you’re sure you can trade a specific currency pair. On the other hand, if the inflation rate is high, stay away, or you’ll end up in losses.

Catastrophic natural disasters such as hurricanes, earthquakes, or floods ordinarily change a country’s currency and never in a favorable direction. The consequences of these events could cause a currency to depreciate.

Also, wars! They might have a calamitous result on the economy. I’m not talking about the damage to infrastructure. The currency value can be diminished, which is more important. It would help if you were updated on such an event to predict the movement in the Forex market. If you trade a currency pair that consists of the country’s currency in war, wait till the economy stabilizes.

You must have information at your disposal to help you trade forex. No one is saying you should trade without risks involved, but you should calculate the risk. It is the key principle if you want to make a maximum profit. Forex traders are always updated on events that may change the currency pair’s rate. By knowing them, you’ll be able to strategize your trades better. You’ll have a clue when to enter or exit the position.

26th October 2020
Is trading stocks without margin a better choice?

Trading stocks with margin can help you increase profits, but it can also increase losses. You can end up losing even more than what you invested.

By Guy Avtalyon

Before we analyze why trading stocks without margin could be a better idea for you, let’s see how you can trade without margin. I think it’s a proper way and order.

Let me explain to you one important thing. Nothing is wrong with trading on margin, it can increase your profits, but you have to be a very disciplined and skilled trader if you want to do that. Margin trading can increase your losses if you misuse it or use it at the wrong time. For example, it’s completely wrong to trade on margin if you’re greed or desperate. Honestly, trading stocks without margin could be a better idea for you.

What are your options for trading stocks without margin?

Of course, if you’re a day trader or want to become that, margin trading might be the only choice. But even then, you can trade stocks without margin, and here are some tips on how to do that.

It is allowed to have four trades per week (three trades per five days is the PDT rule), and you can still avoid the brokerage firm to tag you as a day trader. For example, if you have sufficient cash, you don’t need a margin. Meaning you don’t need to borrow money from your broker. You need to open several accounts, for example, four with a balance of $6,000. That will give you a chance to place 16 trades per week.

For me, it’s absurd, but you might be able to maintain four accounts every day. In my opinion, it’s too many accounts to manage at the same time. But, who knows, maybe you’re capable of doing so. There are some other possibilities, but I wouldn’t waste your time on them as they are not working in reality.

What is essential in trading stocks without margin?

Keep in mind; you do not need to make it all in one day. Instead, think about trading stocks as a permanent and long-lasting job. Let me explain to you one idea. Let’s say you have a $25,000 account and want to use that cash for trading stocks? I can hear your question: Why should I trade $100,000 if I can use the full advantage of $400,000? How can I earn?

So, you may think it’s a stupid idea. Just read the rest of this post, and at the end of it, we’ll be on the same page.

I want you to honestly ask yourself the question: Why do I want to earn quickly? No, you don’t need to tell me. Just be honest with yourself. Why is it so hard for you to recognize time as an advantage? Can you trade slower? Of course, you can!

Trading with cash carries a lot of advantages.

For example, it gives you a chance to become a moneymaker, and I’ll show you how to do that. You’ll become one of 10% elite traders.

Without any doubt, trading stocks with a margin when the market is going against you is the most stressful situation. Let’s say you’re holding a long position on the stock with a 60% cash requirement. At the same time, you hold two more positions that also go against you.

What are you going to do? Get panicked? Are you confident with your stop-loss orders? Will you stick with them? Are you going to follow and respect your strategy?

If you’re trading for some time, you noticed the markets fall faster than they go higher. It’s fear. The fear can shift into a panic very fast. What could get you more pain in such circumstances is a margin. Your hard-earned profit could quickly vanish in minutes. Instead of holding a position, it’s much better to sell winning stocks and exit with profit.

Also, brokerages will never give you money for free; they will charge you interest. They are profiting from lending you cash. So, that’s the reason why they will always offer you to trade stocks with margin. What is best for you to do is to decline such an offer. If you’re honest enough, you will never find a reason to put yourself in a situation to pay interest and have more losses.

You’ll end up in debt. Instead, put some more effort into earning cash and trade stocks without margin.

Can you trade stocks without margin?

You can trade stocks without margin only if you have enough capital to open trades. In other words, you must have a sufficient deposit on your trading account.

Trading with margin can be dangerous for beginners. But the fact is that the PDT rule isn’t implemented in cash accounts. That’s the point. If you use your cash account, you can make as many trades as you want, but the catch is that it has to be settled cash. But it isn’t a problem necessarily. If you treat trading stocks as a long-term job and not a quick profit scheme, your cash account provides you a straightforward way to make money from your trades. Also, one of the advantages is that you don’t need to worry about PDT. Sounds fair enough.

Trading tricks

If you don’t have $25,000 to trade stocks, you still have alternative trading strategies. I’ll be honest with you, and they are far from perfect. One is to have four trades per week instead of three trades in five days. Also, you can trade stock on the foreign markets. After you do some in-depth research, I’m sure you’ll find the differences and benefits. You’ll find the market that fits your trading needs.

You might also choose swing trading to enter trades that you can hold for longer than one day. This way isn’t a classic trick, it’s more strategy, but it’s a good opportunity for the traders who can’t meet the $25,000 requirement.

Also, you can open more than one account with different brokers. You’ll trade small and produce smaller income, but you’ll have more trades and the possibility to earn practically more.

Frankly, all these tricks are far better than the trading stock with margin.

Let’s say you have $15,000 in your margin account, and you want to buy a stock that costs twice more than you currently have. Your broker is willing to give you a margin. After you buy stocks worth $30,000, you’ll own them, but also, you’ll owe your broker $15,000. You’ll make a profit if the stock price increases. Your profit would be bigger than if you bought stock with your money, that’s true. But if the price decreases, your loss would be more significant with margin trading than if you purchased stock with cash.

Anyway, borrowing from brokers isn’t always straightforward; borrowing from brokers is as binding as banks.

Can you see why trading stocks without margin is a better choice?

15th October 2020
How to improve risk management in trading?

Improving risk management in trading could be a life-changing factor.

By Guy Avtalyon

I’ll start straight to the point on how to improve risk management in trading. Risk management in trading very often stands very low on the priority list for many traders. The main concern is the entry signal or other indicators. I have to tell you this isn’t the right way. Nothing is wrong with waiting for the proper indicator, but if you don’t have decent knowledge about risk management in trading, you will not have profitable trades. The point is to know how to manage your risk, size your position for each trade, and set your orders accurately if you want to make a profit in trading.

And you might think it is unnecessary, and it isn’t so important. If that is your case, feel free to not continue with reading this post. But I have to warn you that if you never improve risk management in trading, you’re at risk of becoming a steady loser.

And why should you be that if there are some tips to avoid the most common problems?

Tips to improve risk management in trading

If you adopt some of these tips or approaches, you’ll stop losing your hard-earned money.

First, you must realize how you let the trade get out of your hands. Yes, it’s kind of looking back but never think about this as wasting your time. If you make a scrutinizing evaluation of your past trades that ended in losses, you’ll find the reasons behind them, and you’ll find the pattern. The main benefit of this introspection is to avoid similar behavior in the future. Knowing how and why you made mistakes, you’ll be prepared and will never repeat the same trading mistake in the future.

Setting orders and the risk/reward ratio

When you identify an entry signal, do you know where to set your stop-loss and take profit orders? You have to know that even before you enter the trade. How to do that? Let’s assume you know where to set the stop loss and take profit orders after determining the appropriate price levels. The next step should be to measure the risk/reward ratio.

If you find out the risk is bigger than the reward, just skip the trade. The worst thing you can do is stretch the take profit order or squeeze your stop loss to reach a higher risk/reward ratio.

Keep in mind; trading is mostly unpredictable, so the reward isn’t assured. The only thing you can control is the risk involved in your trades. You shouldn’t neglect that and act unreasonably. I’m a hundred percent certain that most of you determine the risk/reward ratio randomly and adjust your stops and profit orders to reach that ratio. Guys, it’s an entirely wrong way.

Compare win rate and risk/reward ratio together

Many traders insist that figuring out the win rate is pointless. But they miss out on a crucial point. Watching the win rate alone has no value, but if you observe win rate and risk/reward ratio together, you’ll be closer to winning trades. Having winning trades is every trader’s dream.

I want to be clear with this, you shouldn’t necessitate an excessively high win rate. For instance, a trading strategy with a win rate of 40 percent requires a risk/reward ratio below 0.6 to be profitable.

A win rate of 40 percent is average for the most profitable traders. Why should you want an insanely high win rate? That’s wrong and could lead you to significant losses.

Balance win rate and risk/reward ratio

You must find a balance between the win rate and the risk/reward ratio. For example, the high win rate could mean that the risk/reward ratio also is high.

Suppose you found a stock that is trading at $20, down from a recent high of $25. And you bought 50 shares because you had $1,000 for that purpose.

If the stock price went up to $25, you can make $5 for each of your 50 shares, and in total it is $250. You paid $1,000 so you have to divide 250 by 1,000 and the result is 0.25.

That means that your risk/reward is 0.25:1. It is a very low risk/reward ratio.

Assume that you have made 15 trades, of which 6 were winners and 9 were losers. So, the win/loss ratio is 6/9, or 2:3. In percentages, the win/loss rate is 6/9 = 0.66. This means you are losing just over 66 percent of the time. Using your total number of trades which is 15, your win-rate would be 6/15 = 0,4×100 = 40%.

You can be profitable with a 40 percent win rate if risk/reward is below 0.6. As can be seen from the formula for calculating the needed win rate for profitability based on the risk/reward ratio, 1/(1+ risk/reward ratio).

The risk/reward decreases when the win rate decreases. In other words, if you have more losses, your winners must be bigger to be profitable.

Size your position

I’ve met many traders that size their positions randomly picking some levels of 2 percent, 4 percent, and never change that. It’s totally insane. You have to estimate the chances to win because trading is all about possibilities. It’s normal to change position sizing for every trade if it is necessary, and mostly it is. Why should you hold the same position size when you see virtually no chances of winning?

In trading, every strategy has a different win rate. So, the risk/reward ratio for each of your trades will vary. This is especially important if you trade using many strategies or setups.

The point is to reduce the trades’ position size with low win rates and increase it for the trades with higher win rates.

If you want to improve risk management in trading, you should never overlook the risk/reward ratio and money management. Otherwise, you’ll blow your account. If you take too much risk to make a quick profit, you’ll likely end up in losses.

You’ll go bankrupt because of a lack of knowledge about risk management. Now onwards, you have to rigorously adhere to position sizing and risk management if you want to be a profitable trader.

Pay attention and improve risk management in trading

You might love your trading style or some strategy, particularly, but you should consider improving it to achieve more profitable trades. After some time, everyone should jump to the next level. I know you could be impressed by indicators, waiting for the right signals to show you the right time to enter the trade. It’s so exciting and sexy, right?

Well, it’s also risky if you never improve your risk management. It isn’t so exciting as watching the charts, candles, following the news, and waiting for the indicators, but it is essential for your future trades and your profits. Blinking indicators and trading strategies will benefit you for some time, but the real difference comes with improved risk management.

Don’t be worried. A small number of traders really pay attention to this matter unless they have a series of losing trades. Then and only then. they will start thinking about how to improve risk management in trading. But you have a chance to shortcut this path. Why suffer losses if you can trade with more attention to the risk management from the beginning instead.

It doesn’t take too much.

Did I miss something? Share your opinion with me, leave a comment, ask me what else you would like to know. I’m here for you, guys.

8th October 2020
Trading Forex without a stop loss

Some professional traders don’t use a stop loss. So, why is it advised to traders: “never trade without a stop-loss”?

By Guy Avtalyon

There are numerous opposing data on the web when it comes to trading forex without a stop loss. A few years ago, I read an interesting article about professional forex traders who never used a stop loss. It was utterly conflicting with my opinion. Well, I think that using a stop loss can protect your trades from more significant losses. But I found that these traders don’t want the algorithm to catch them. They don’t wish to algorithms to know where their orders are settled.

Do I need to explain how big nonsense that is? You need stop-loss orders to protect your trades from huge losses. But they don’t use them.

And there is why they never do that.

Some of the professional forex traders are negligent and significantly rarely pay attention to risk management. Sometimes they are so sure in their ideas and things that they don’t need a stop loss.

I’m sure you had a chance to read about or watch forex traders trying to get out of their losing positions like mad just to provide modest profit or just break-even.

Some pro traders are unreasonable and unwilling to take a small loss if they are positive, they are right. In my opinion, this is irresponsible, and you cannot find many such traders staying in business for a long time. Usually, they end up burned.

Why trading forex without a stop loss?

Let me explain something. If you use a stop loss, you’re able to cut your losses quickly. When you place a stop-loss order, the trading platform will immediately close the trade when it hits that unfavourable level. On the other hand, a take-profit order is the highest level where you want to have profits. As you need to set a stop-loss order, you need to place a take-profit order no matter how strange it could sound. If you have a take-profit order in place, your trade is protected from price changes that can go against you.

But you want to know if there is genuine proof that trading Forex without a stop loss is possible. Also, you might want to know a precise strategy that entirely eliminates setting a stop-loss order.

And I’ll explain that particular strategy.

Trading Forex without a stop-loss strategy

Professional traders that never use a stop loss usually place a hedge on their initial position. You can find many methods to build a hedge and avoid setting a stop loss.

One of the most popular ways is to place a sell order at the level of stop loss. Let’s assume you enter the trade with a buy order, but it moves against your favour. So, instead of setting a stop loss, you can place a sell order at the same level.

It isn’t always a good move; very often, it can lead to a losing position. For example, if some unexpected but massive change in the market happens, you’ll lose a lot. Several years ago, it occurred to the Swiss franc. It increased in price enormously after it was unpegged of the Euro. Traders that didn’t place a stop loss for their trades that included sell orders for the franc had huge losses. That was a dramatic situation. So, you can avoid setting stop loss in trading forex, but you could face a lot of problems and huge losses.

Traders that used this hedging strategy and bought the EUR/CHF with a pending sell order, but without stop-loss, didn’t make money. But, whoever placed the stop loss instead of the hedge, had a fantastic trading day. Remember, on that day; the franc beat the Euro by over 40%. It was in 2015.

The arguments behind trading forex without a stop loss

Some of these traders believe that using a stop loss means accepting losses before the price finally moves to your direction. In my opinion, if you think the same, maybe it’s time to analyse the stop loss placement. I’m sure you’ll find where the problem is. Possibly you’re placing stop-loss point too close to your entry point. Keep in mind, a stop loss’s purpose is to limit your risk in each trade. So, try not to misuse it.

Some traders believe the excellent trading system is to hold a losing position until the price hit entry point and finally converts to a winner. Basically, this kind of traders avoids taking a loss. But will the price always come back to entry-level? I’m not so convinced.

Who can know will the price go up or down? No one is able to predict the exact movement of the price.

What I know for sure is the price will change for thousands of pips from the current price. That’s reality, and I’m not speculating. Do you really want to bet against this fact? Are you sure you can oppose it? Can you have a winning trades without a stop loss? I would never bet on it.

Some traders could tell you the stop loss can be triggered by “stop hunting” managed by the big financial organizations and they don’t want their stop loss levels to be triggered accidentally. But we have to be honest with this because financial organizations are trading when important news appears. Such a situation could force the volatility in the market, it’s true. But you can place your stop loss far away enough to avoid the influence of the event. Anyway, if you’re a beginner in forex trading it’s better to miss trade during such a period.

Professional traders trade without a stop loss is a legend

You should ignore this. The truth is there always will be the wild traders in the market. Many would like to try their hands by taking too many risks.

Trading forex without a stop loss could expose you to huge losses, and your profits could be unprotected. I know, getting stopped out isn’t the most pleasant, also it could be painful. But, don’t you think it is better to exit the position than to have losses? What you really have to do is to size your position small enough. In this way, your stop loss level will be hit on extraordinary circumstances.

1st October 2020
How to trade stocks during the recession?

Generally, trading is unquestionably one of the most difficult things but it is maybe the best opportunity to make money.

By Gorica Gligorijevic

I’ve been examining for some time now how to trade stocks during recession. Don’t doubt we are in a recession now because we are. Well, this recession isn’t like we know from our previous experiences. The one we are talking about is caused by a pandemic.

I know that many experts will argue that the recession would come anyway. That might be true but this one came due to the coronavirus pandemic and thus, it’s somehow different but speaking about how to trade stocks, the principle could be the same. That’s my opinion.

First of all, let’s make clear one important thing. We all know that the most important market gains occur during short periods of time. What does it mean? It means the market profits aren’t equally spread throughout time.

How should traders trade stocks during recession?

Stock trading in a recession could be very different since there are several opposing schools of thought. Some experts would suggest traders should go short. That is true due to the fact that some companies’ profits could be hurt and lower share prices.

Yet, there is another group that deems the recession is a “lagging indicator” thus their opinion is contrarian.

The first school advises traders to be cautious in these circumstances. This means traders should take little or no trading activities. In general, they suggest traders stay away until the end of the recession.

Is a recession time to buy?

Yes, I know that many people have lost a lot but, on the other hand, many profited. So, I concluded that loss and profits during the recession depend on the strategy you use and the assets you trade.

Take the risk and go short

This could be a possible best way to earn a lot of money during the recession when the market downturns. Well, if a downturn never comes you’ll not make money.

In a recession, traders usually go short. They short their stocks, some will sell their call options or buy puts.

These trading activities show that traders expect the price will go down. If that happens traders will increase their gains. The most important for every trader is to set a stop-loss level and take profit level. That will trigger your risk management rules if the price changes direction and goes against your position. These settings will provide you to close the position in small losses.

In fact, gains from short positions happen faster.

Short your stocks if you feel you have an advantage and if you want more direct exposure. Stocks with high beta could be the worst players during recession. These companies have weak balance sheets and the lowest earnings. Such companies could easily be from the tech or biotech sector, but always they are small-caps.

They are dropping faster due to traders’ expectations they will no longer exist.

What else can you do?

You can go long volatility if you buy a volatility ETF such as VXX. It showed great results in 2018 and in 2019 with sell-offs. If you chose this strategy to trade stocks during recession, keep in mind that you shouldn’t go long volatility for a long time. That could lead you to “decay”.

Go long volatility for a short time, for example, it could be a month or two but no longer.

Also, go long gold because it has tendencies to perform very well during recession. Well, gold cannot give you dividends or generate earning but it is a tradable commodity. In the dire economic circumstances, this asset always becomes more valuable. With some gold ETF, you could earn a lot.

How to make money during recession?

You couldn’t be more wrong if you think it’s impossible. Pay attention to how long you’re shorting the market. Bear in mind, when you’re buying volatility in the market it can last just one week. On the other hand, if you’re shorting index funds such as the S&P 500, you can do that for up to two years.

The point is to have discipline and short for a short time. Otherwise, you’re more likely to lose your money due to your faulty timing. To be honest, the simplest way to make money during a recession is to go long cash or cash equivalents. For example, some low-risk investments could be the right choice.

Interest rates are currently ultra-low right. You can invest in treasury notes, treasury bills, bonds, money market mutual funds, fixed annuities, preferred stocks, common stocks that pay dividends, or index funds.

Always have cash reserves. Remember, the latest mentioned are investing opportunities. If you want your money to earn a higher return on, you do have different options. Don’t be afraid to day trade, it can generate a lot of money right now.

What’s the best strategy to trade stocks during a recession?

Learning to trade is unquestionably one of the most difficult things. It can be terrifying and frustrating in the beginning. I want to say to new traders that attempt to enter this field, never try to figure out everything at once. You’ll be overwhelmed by the information and that can only confuse you. Make small progress every day, trade a little each day, and learn.

Remember, it is 100 percent sure that it is possible to make a lot of money during recession. The thing needed for trading is here – the price fluctuation. So, it is almost the same when there are no recessions or downturns. For stock trading price fluctuation is essential.

You must have a strong risk management strategy, and not more than two trading strategies. Never be impatient, just wait for A+ setups. You must have a trading plan, it’s impossible to just jump in a trade.

Trade smart!

25th September 2020
Is trading stocks better than forex?

Trading stocks has more options, while forex trading will never confuse you with the number of options

By Guy Avtalyon

Trading stocks have become easy. Some would say that we never had a better time for trade stocks. But how is it possible that almost everyone who wants to start trading, first enters the Forex market?

Yes, I know it is the most traded market. But I think it is interesting due to aggressive propaganda also. We’re in a permanent barrage by forex ads. People, I don’t have anything against forex trading, it’s my favorite too but can we stop for a while and consider the other opportunities?

The main question is should we actually trade forex instead of trading stocks? This dilemma comes naturally after I saw how much my readers are interested in forex. Much more than in trading stocks. It’s unnecessary to say how surprised I was. People just jump into the forex market without actually knowing what it is.

And I was trying to find why that is. I’ll share with you what I find:

Firstly, you don’t need a lot of money to enter the forex market. You can trade even if you have just a little money as, for example, $10.

If you want to trade stock, you’ll need a bit more. Actually, you’ll need much more.

Is trading stocks is better than forex?

Before I answer this question, let me point out some similarities and differences between these two.

Similarities between trading stocks and trading forex

There are some basic similarities. For example, brokers. It’s never been easier to create an online brokerage account. You’ll need just a few steps, several minutes, and voila! You have the trading account. The next step is to fund it, of course.

There is one thing you must keep in mind before choosing a brokerage if you want to trade both stocks and forex. Not all brokerages will allow you access to both markets. Some brokerages don’t service forex trading. Keep that in mind when choosing your broker.

No matter if someone is a stock or forex trader, such heavily rely on short-term strategies. For example, a stock trader will almost never hold stock for several years or so. Trading stocks means to have short-term goals. Otherwise, it’s investing. The similarity comes to trading forex. Trading forex means to hold currency until its changes show you can profit from your base currency. So, you’ll trade it in such a case.

Technical analysis is almost the same

Also, in technical analysis, you’ll use patterns and indicators in both markets traded. If you use technical analysis for your trading strategy (it’s smart to use it, believe me) you will not have a lot of time to analyze news, or to research the company’s outlook. Instead, you’ll look at charts trying to notice indicators that will tell you if your stock is going to rise or drop.

You’ll need to know if the price change will happen soon. The same is when trading currencies. Technical analysis is important for both types of trading since you need to know should you buy or sell.

Differences between trading stocks and trading forex

Let’s take a look at some of them.

For example, leverage. While leverage is somewhat rare in trading stocks it is broadly used in forex trading. Actually, it is crucial for forex trading. Let’s say you have $10 on your account but your broker can offer you the 100:1 leverage. Instead of having the struggle to trade with such a small amount you can suddenly place a trade with $1.000. That’s the power of leverage.

But I have to warn you. Leverage is risky. On the other hand, it can provide you to profit a lot and without really having thousands of dollars to enter the trade.

So where is the risk?

If you miss making a smart trade, leverage can destroy your deposit, your funds, everything you have.

In trading stocks, the best you can have regarding the leverage is 2:1. Don’t be disappointed. Stocks’ prices are changing dramatically. To be honest, you’ll need to put less money to gain more profit in trading stocks.

Trading Hours are not the same

The forex is around-the-clock. How is this possible? Well, the forex market isn’t focused on a single time zone. Each of them has set their own working hours but when one is closed, the other starts to work.

For example, New York starts at 8 AM and closes at 5 PM EST. Oh, it’s time for Sidney to open! Sidney starts at 5 PM EST and closes at 2 AM. Pretty nice, isn’t it?

Stocks markets operate slightly differently. For example, the largest exchange is NYSE, and it starts at 9:30 AM EST to 4 PM Monday through Friday and doesn’t work during the weekend.

Also, the market size is different. The stock market is smaller than the forex market. Every single day, the forex market has above $5 trillion worth trade, while the stock market can count on around $170 million per day trades.

Advantages of trading stocks

It’s easier to get started because almost all brokerages provide this opportunity. So, you have more choices. Also, there is plenty of stocks to trade, more than 2.000 stocks you can trade only on the NYSE, plus over 3.000 on the NASDAQ, not to mention the other exchanges all over the world. The point is that you have more options in trading stocks.

Also, stocks have higher volatility. Higher than currencies. That gives you a chance to earn more.

On the other hand, currency can rise or drop in the fractions.

Advantages of trading forex

First of all, you’ll never be confused with the number of trading options. The number of currency pairs is limited. Further, there is no minimum amount needed to start. You can enter the trade with $10. And, at last but not least, the forex market has more liquidity.
So, you can see that for trading stocks or forex trading you’ll need a strong TA background. Both rely on short-term price changes. Thus, maybe the most important in trading is to get some free up-to-the-minute charting software. It is an absolute MUST.

19th September 2020
Is Day Trading Like Gambling?

If you have poor risk management, if you size your trades higher the more you lose, you are gambling. That is how casino-players lose money.

By Guy Avtalyon

I know some of you are asking themselves is day trading like gambling. Also, some would say yes, it is gambling but not me. Let me ask you something. Would you like to have enough money for everything you need? Even more, for everything you would like to buy, to travel everywhere you want, to have a super designed home, luxury items. Honestly, it’s possible. Imagine that kind of life. No money problems, no anxiety, no stress caused by money issues. Really, that could be a wonderful life. Everyone would like it. The truth is that only a few know how to achieve that.

Having a life without financial stress and suffering is everyone’s goal.

As the days rush by and the nights draw in, it’s well worth resting for a moment to catch up on what’s going on in the world. That’s why I’ve selected this topic to help you do just that. Let’s break this myth! The money belongs to all of us. We all can have it enough to have a dreaming life. In fact, we have all the right to enjoy, to be happy, we are born for happiness.

This isn’t some life coaching mumbo jumbo or MLM trick, this is a real-life story. It’s a business. Day trading is a business so how can anyone talk about it like gambling? Is day trading like gambling? Of course not.

I’ll point out several differences.

Day trading means prompt actions in the markets. Day traders don’t have the luxury of a long-term study of all the circumstances that can make a trade. It is all about odds in your favor.

The main characteristics of day trading

It works very fast. Day traders have to react quickly to any market change because trading means buying and selling securities at the right time with a profit. Short-term changes in the price changes are favorable for day traders. They can think quickly, act promptly, and profit. Day trading doesn’t necessarily mean taking a lot of risks per trade. It’s quite opposite. Traders don’t take a risk on every trade. They are trained to recognize any change in the market, even more, thanks to their knowledge and experience, they know what markets are telling them. So, they can act based on that info. In essence, they are responding to the market’s movements.

Are all of their trades successful? No! Many of their trades are failures. But if more than half of trades are winning everything is okay. Day traders don’t have time for long and in-deep estimations. They can recognize profit opportunities based on price and volume patterns.

Is day trading stressful? It can be. They have to react here and now if they want a quick profit.

How is day trading different from gambling?

In gambling, you put up your money with the belief that some fortunate events will occur. But what about the odds? Are they in your or house’s favor? Behind gambling lies unsupported and unrealistic hope. Do you have any chance to hit lucky? Actually, there is more chance for the airplane to hit you.

On the other hand, hitting losses is more possible. Gambling is exciting for people with the wrong view of money-making.

Day trading is completely different. It is based on knowledge, research, training, experience. You can find only a few traders that enter a trade randomly. Basically, they are amateurs and it is very smart not to take them as the right example. You might think if they don’t take a lot of risks how could they expect big returns? Actually, they don’t expect such a thing. Their returns aren’t big but they are frequent. That’s a big number game. Profit a little but frequently. Of course, some trades will bring you a lot of money, some will end up in losses. The point is to have more winning trades than losing ones. Simple!

Are you ready for trading?

Many of you aren’t ready yet. You might be angry at me but it is true. As the Sun is in the sky and the Earth is a globe. I know you can easily fall into beginners’ mistakes. I saw so many people doing the same. Honestly, I was like you. I know what you mean exactly. You think that day trading is just a process where you can easily find the securities’ price past action, find the current price, and know how it will act in the future. You couldn’t be more wrong.

The truth is that all traders must have a good education about trading, markets, price movements, financial circumstances, securities they are trading. Their decisions are based on knowledge. Are you one of them? Are you able to make money every single day, every month? Do you know that even the best traders have losing years?

Do you understand why are you wrong? You treat day trading as gambling. So, to the question: Is day trading gambling you have only the wrong answer.

How to prepare for day trading?

If you are able to put your emotions away from your trades, you’re close but not ready yet. Why is that? First of all, if you want to be a day trader you’ll need to be indifferent about profit and loss sums. What you need is a workable trading strategy. Are you concerned about losses? If yes, it’s more likely you don’t have a viable strategy, so you’re not able to identify or take a reward to risk trades.

Let me ask you. What if you have a losing trade, what if the trade goes against you? That’s how odds work. You’ll have losing trades from time to time, don’t be afraid to lose money. If you never learn why you have losing trades, you’ll never learn how to have the winning ones. Losing trades are not the end of the world, they are just a phase. That shouldn’t affect you. Bear in mind, as long as you are able to learn and find where you make mistakes, you’ll be on the right track. You must understand that trade will go against you occasionally. Losses are run by possibilities. The point is that the possibilities are changing. Don’t let your losses influence your approach to the markets in the future.

Take the trades that give you the highest reward relative to the risk you take. Size your position properly and never let any trade dominate your profit and loss amounts. Spread your trades. If you do so you will have good results in their cumulative performances. It’s a point of diversification. You should diversify your trades but never over-diverse. Do it to reduce the volatility in securities performances not to tell to friends how many different securities you’re trading.

So, is day trading like gambling? No, not even close.

How to track your profits?

Let’s say you have a viable day trading strategy. That means you are confident. But your job here isn’t finished. You have to track your day trading profits and losses. You may have the best strategy ever but if you don’t have a track record, you’ll be lost. You’ll not know what’s happening. Don’t get careless. That never drives you to success. Keep in mind, you’re not playing a game, you’re doing a job. If you have an accurate track record you’ll be able not only to know how good your strategy is but also you’ll be able to adjust it if it is not working for you.

I’m suggesting you set up a spreadsheet. Add columns for the securities you bought, the exact time you made a trade, the third column should be at which price you bought it, in the fourth column you should add how many assets you bought, and the last column is for the commissions.

Also, set up the columns for closed positions so you’ll know how your trades ended up. Then, calculate how good you are, what is the return in percentages for each of your trades. You can calculate it in currency, of course.

So, at the end of this post, let me ask you, is day trading like gambling?

Waiting for your answer. Happy trading! Do it smart!

10th September 2020