Earlier today I entered a buy(long) position on this pair at1.9480 base on reports that it may reach 1.9750 after a possible low of 1.9370. As the pair continued down. I took another long position at 1.93279. The pair subsequently continued to 1.9150 and as expected I racked up a substential lost. I cut my first position at 1.91852 and took a short (sell) position at 1.91801 to hedge my position. I am still positive on my target to 1.9800 and have a stop on the short position at 1.92800 as that would be showing a strong up trend onwards. If the targets are met, I should cover my loss and still make a small profit. I am wondering if I am doing the right moves and is there more I can do to cover myself in future? Thanks

Hi Frank,
I would first like to point out that coming up with your own analysis and keeping to your trading strategy is key for any trade, and that you may want to look for the price to move in your favor before taking on any additional positions. Also, what time frames are you using in your charts? Often investors try to make a quick buck by day trading and looking at intraday charts, but before doing so, you may want to look at long-term charts (such as daily, weekly, and monthly charts) in order to get a better feel of how the pair has been trading. The more you become familiar with looking at charts, the better your analysis will be. Hope this helps.

Thanks 4 yr advise. I'm not too good with charts and do rely a lot on the recommendations and writeups that you guys have. Just read the latest about the "dollar breakout" and it seems to have caught many unaware. But you are right, I was trying to make a quick buck by day trading and was looking more on intraday signals. Thanks again.

Hi!

I have a question about the Forex market in general. Let me give you a theoretic example:

On the one side we have a retail broker (broker A) which earns his profit trough the spread. His clients give him their money and the retail broker haves a fund of per example 100.000 $ of real money from his clients.

On the other side we have another broker (broker B) with the same conditions. He too haves a fund of 100.000 $.

Let us say that the clients of broker A are very good traders and make only profit. And so the amount of 100.000 $ increase to 120.000 $.

The clients of broker B are not so good. They lost money and their amount decrease to 80.000 $.

In this example we will forget that exist other brokers and clients.

How does broker A get the real money from broker B? The funds of the clients are only theoretical! Broker A only have 100.000 $ of real money whereas the fund of his clients now is 120.000 $!

Thanks a lot!

Hello Malvolio,

I may have misinterpreted your question (please correct me if I have), but I can answer that.

When two brokers place orders in the market on behalf of their clients, they are doing so with real money (perhaps electronic deposits, but real nonetheless). When trader B loses money from his account, that value immediately is deposited into A's standing account. Each trade must have real capital backing it or else the broker or bank would lose their privilege to trade on the intermarket.

When trader A makes a trade, the Broker puts up money on his/her behalf and when that trade is complete, the sum gained or lost will be added or deducted to the account. If there is a margin call while positions are still open, they will be liquidated to balance the trader's account.

Hope that clears it up.

Thank you very much for your answer!

I understand this rules. But my question was concerning the account of the broker.
The broker hedge the position of his client and earns his money through the spread. So theoretical the amount of money of the client, which has the broker, always will be the same. But if the client now gains and theoretical increase this amount, how is the broker able to pay him his gains? (The broker only gains through the spread.) I think it is only possible if the broker has another client which loses the same amount of money. Right?

Hello Malvolio,

It is possible that two clients from the same broker can take opposing positions and balance out without having to go enter the market.

However, I think you are using the wrong logic with the intermarket activity. First of all, it depends on whether there is no dealing desk or a dealing desk. If it is a dealing desk, then the broker will likely match an order with existing client orders and hedge the balance on the market. However, since they are hedged, if a trader sees their profit rise 500 points, the broker's counterparty position drops 500 points; but their hedge (the broker and another broker) will offset this loss by rising 500 points.

If we are talking about a no dealing desk broker, they most often won't take the other side of a clients trade. Instead the trade will be forwarded through the intermarket and it will be match with an order out in the market, so there is no risk for the broker and all profit and loss will be measured between the client and their counterparty.

Hello John,

thank you very much for your answer!

Hi everyone, i'm new to forex and i have a question; A friend recently told me to use stochastic slow oscillator to get used to trading and being disciplined and also, read about divergencies. I have not found any articles online about divergencies so i was wondering if anybody knew what they are and how they can help me with my ssd oscillator. The problem i have is when i buy for example usd/cad above resistance, the lines in the oscillator keep going up to about 60, but the price just stays flat and sometimes even go down, and i end up loosing a lot of money(on my practice account). I would appreciate if anybody can help me.

Thanks a lot!

Hi Boosted,
Welcome to the DailyFX forum!
A divergence is when the price action of a security diverges away (typically moves in the opposite direction) from the technical outlook. For a detailed definition of divergence, check out FXWords.com.

You can also look at Investopedia for articles related to divergence to better understand the tool.

Hope this helps.

Thanks for all your help.

Some traders have good skill for analysis.The market price has only three choices to go up, down or sideways.If your are right more times than you are wrong with good risk reward ratios you will make money otherwise you loose.Simple thinking.But a trader does all sorts analysis and reached a conclusion that market will go up today.This is analysis and prediction.The market goes its own way.
Hence you need more of trading skills to succeed in market.Trading skills have three components 1)Entry rules consisting of entry set-ups and entry triggers.2)Stop loss exit which has every thing to do with risk control and money management.Using a stop loss is risk control and how many pips is money management 3) Profit target exits. This is place where you combine all together, method,risk control ,money management and all the more your risk reward ratios. Think about it. Good trading to one and all. Muraleedharan

When price makes a new high or low and this is not confirmed by the indicator(Slow stochastic for example) it is called a divergence.Price made a higher high stochastic did not make a higher high.You call it a negative divergence.Price made a lower low indicator did not make a lower low you call it a positive divergence.In both cases the signal is price has a reduced momentum and if the indicator is in an overbought or oversold area ie 80 and 20 in case of stochastic there is a likelihood of a reversal.This is a set up.To get into the trade you should have the next price action.
Stand alone trading divergences is highly dangerous.You have to combine other signals to make a trading system before attempting to trade divergences.
Good trading.Muraleedharan

hi, i'm not to sure how the stop move works. i put a number smaller than the current prices just like it says but i went away for a few minutes and my position closed with 0.2 profit. i would appreciate if anybody can explain in to me.

also, i've noticed the GBP/CHF chart is a mirror image of EURO/GBP. So is EURO/USD and USD/CHF. Is there any connection between the two?

Hi
Currency trading is a life experience, it is not like any other business.As you become a better trader you become a better person.This is an evolution from an aspiring individual to an expert trader .An evolution takes time may be two years or four years or more.Many may fall aside in this journey.Currency trading is not a get rich quick scheme.This is the first understanding I have as a beginner trader.
There is no way you can copy somebody elses trade.You have to find your way which suits your personality and risk appetite.No Expert trader can clone you. But you can be a hybrid. In the evolution of becoming an expert trader you may pick up some of the quality and style of a good trader and combine your style and become a hybrid.However you have to find your own way of trading is my second understanding as a beginner trader.Learning, getting a demo, practicing what you have learnt, evaluating, and repeating the process till you succeed is the only way. Good trading.Muraleedharan