Man working on his laptop as Day Trading is shown on screen

3 Effective Day Trading Strategies

Every trading day is always different. There’s not such a thing that two days in the market are exactly alike. However, there are still patterns that occur over and over as they’re hidden beneath the random daily price movements. This is where day trading strategies come in.

Day trading is the buying and selling of a financial security on the same day, or multiple times in a day. It involves in taking advantage of small price moves. Usually, all positions are closed before the market session ends.

Read more: Beginner’s Guide to Day Trading.

Traders who use day trading pick a trade at the beginning of the day. They would act on their bias, then finish the day with either a profit or a loss. In addition, they never hold their traders overnight.

A trader showing a fist as he's looking at his phone and a computer with charts on the background

Day Trading is suited for forex traders. If you have enough time throughout the day to analyze, execute, and monitor a trade, then day trading might be for you.

Read more: What is forex and you should know about it.

Here the three effective day trading strategies in forex.

Trend Trading

One of the most effective day trading strategies is trend trading. It involves looking at a longer time frame chart, and finding an overall trend.

When the overall trend is set up, you move to a smaller time frame chart. Then, look for trading opportunities in the direction of that trend.

Find out more about the Underlying Principles of Trend Trading.

Further, you can use indicators on the shorter time frame chart. This will give you an idea when to time your entries in positions.

Counter Trend Trading

Counter trend trading is also known us pull back trading, reverse trading, and fading. It’s one of the worst day trading strategies, especially for inexperienced traders.

This is similar to trend trading. However, once you find the overall trend, you look for trades in the opposite direction. The goal here is to determine the end of a trend, and jump in early as soon as the trend reverses. It’s among the day trading strategies that is a bit riskier, but can generate huge profits.

A reverse trader has to determine potential pullbacks with a high probability, and to be able to predict their strength. Further, this strategy requires a lot of market knowledge and practice.

On the other hand, you can consider the Daily Pivot strategy as a special case of reverse trading strategy. It specializes in trading the daily low and daily high pullbacks and reverse.

Breakout Trading

Breakout day trading is about looking at the range a pair has made during certain hours of the day. After that, place trades on either side, hoping to catch a breakout in either direction.

This is most effective when a currency pair has been in a tight range. This is an indication that the pair is about to make a big move.

In this day trading strategy, you determine a range where support and resistance have been holding strongly. After this, you can set entry points above and below your breakout levels.

The general rule here is that you want to get the same amount of pips that makes up your determined range.

Read more: The basics of support and resistance indicators.

Conclusion

This kind of trading is considered to be one of the most challenging styles of trading. This is why it’s important to jumpstart your career with day trading strategies.

Moreover, there are more day trading strategies out there you could try. While it’s not a secret that day trading is difficult to master, it still can provide huge rewards. If you have the time, skill, and discipline, you can significantly improve your chances of becoming a successful forex trader.

You can earn bigger profits and execute better trades here at Trade12 by reading the latest market updates. Striving to become the best forex broker for you, Trade12 reviews daily market events essential to your trading activities to help you improve your overall trading performance. Register an account now and enjoy a wonderful trading experience!

Disadvantages of Index Funds

4 Disadvantages of Index Funds Investing

Index funds are created to mirror the investment results of a specific market index. It can consist of either stocks or bonds in its portfolio, and these mutual funds differ in the strategies that they use to achieve returns parallel to their chosen index. Index funds oppose with non-index funds, which seek to improve on market returns instead of aligning with them.

There are advantages and disadvantages of using stock indexes and the index funds that trace them. An index fund is an imagined portfolio of securities signifying a specific portion of the wider market. It is typically made using the shares of leading companies in the economy or in a particular area of the economy. Today, this article will be tackling some of the disadvantages of index fund investing to help you widen your knowledge about this type of investing.

Index Funds on Keyboard

  1. Absence of Drawback Protection

The stock market has ascertained to be a great investment in the long run, but over the years, it has had its fair share of ups and downs. Investing in an index fund, such as one that traces the S&P 500, will give you the advantage when the market is performing well, but also makes you totally exposed to the drawbacks. You can decide to limit your exposure to the index through shorting the index, or buying a put, an option contract providing right to the owner to sell a specified amount of an underlying asset at a set price within a specified time, against the index.

  1. No Huge Gains

An index fund doesn’t have the ability to outdo the market the way managed funds do. This means that if you invest in an index fund you are disregarding the possibility of a huge gain. The top-performing non-index funds in a given year work better than an index fund in a year. However, the top-performing non-index funds may differ from year to year, so that under-performing years can stop the over-performing ones, while index fund’s performance remains more stable.

  1. No Control Over Holdings

Indexes are set portfolios. If an investor purchase an index fund, he or she has no control over every holding in the portfolio. You may have certain companies that you want to own, such as a favorite bank or food company that you have found on the net and want to purchase. Likewise, in daily life, you may have events in your life that lead you to believe that one company is notably better than the other, maybe it has the best brands, management or customer service. As a result, you may want to invest particularly in that company and not in its rivals.

  1. Reduced Personal Satisfaction

Investing can be distressing and nerve-wracking, especially during times of disorder. Choosing a certain stock may leave you constantly looking after quoted price, and can keep you awake at night, but these situations will not be prevented by investing in an index. You can still find yourself constantly checking on how the market is performing and being worried sick about the economic landscape. Above all these, you will lose the satisfaction and excitement of creating good investments and being profitable with your journey.

 

You can earn bigger profits and execute better trades here at Trade12 by reading the latest market updates. Striving to become the best forex broker for you, Trade12 reviews daily market events essential to your trading activities to help you improve your overall trading performance. Register an account now and enjoy a wonderful trading experience!

Consumer Confidence and Its Importance

Consumer Confidence and Its Importance

Economic indicators are sources of data used in a macroeconomic scale to be able to interpret present and future investment potentials or to be able to evaluate and grasp the overall health of a particular economy and an individual’s financial state. One type of an economic indicator is consumer confidence, which is also the same as consumer sentiment. This post will talk about this in details and why is it important.

What is consumer confidence?

Consumer confidence refers to the amount or level of spending consumers takes part in. This is a statistical measurement influenced by opinions of the consumers. It simply means that it is the feeling of an individual relative to his or her own present financial situation along with the general health of the economy and the potential for an economic growth.

When does IT affect the markets?

Consumer confidence affects the market as there are investors who depend on a dynamic consumer spending conditions. When making investment decisions, one of the many indicators needed to look at is this particular concept.

Where did IT originate?

It was during the mid-20th century when consumer sentiment or confidence was established as an economic concept. It has become as an indicator that can greatly influence both economic and public policy and the stock markets in a broad-spectrum.

At that time, when consumer sentiment was regarded to be less positive, the markets react by becoming bearish and vice versa.

A Woman with Shopping Bags

How do you translate consumer confidence?

Just like in the olden times, a high level of consumer confidence can indicate that consumers, generally, feel good about their financial status and their ability to acquire and maintain their jobs. If their confidence is high, then consumers are more likely to spend the amount of money they have and such tend to increase proportional to their thinking. On the other note, if their confidence is low, then consumers are less likely to spend their money.

Why is it important?

As mentioned before, consumer confidence measures the level of confidence consumers have towards the general health of the economy. It also reveals how confident the public is towards the stability of their employment as well as their income. It then dictates a person’s economic decisions such as spending.

This in turn affects the economy. As the confidence increases, the economy expands. When the opposite happens, such as when the economy contracts, it can mean that consumer confidence decreases.

Conclusion

Consumer confidence and / or sentiment data is important since it can be utilized by a number of individuals such as investors, retailers, banks, manufacturers and even various government agencies to be able to assess their actions and to better strategize. Moreover, consumer confidence (or sentiment) is also helpful to help people push forward even such as the concept of a self-fulfilling prophecy. However people must still be careful because if the contrary happens, it can greatly affect a person’s financial position.

 

You can earn bigger profits and execute better trades here at Trade12 by reading the latest market updates. Striving to become the best forex broker for you, Trade12 reviews daily market events essential to your trading activities to help you improve your overall trading performance. Register an account now and enjoy a wonderful trading experience!

Why Portfolio Diversification Matters

Why Portfolio Diversification Matters?

You probably have heard about the saying “do not put all of your eggs in one basket” because if you do, you would not have anything left when the basket falls. The concept of portfolio diversification has been a long topic in the field of financial investing. By now, you may already know the basic meaning of diversification and it is making a wise distribution of your investments over the different sectors of the market.

In this article, you are going to learn the utmost importance of portfolio diversification and why you should do it immediately.

 Investment Eggs in a Basket

Diversify to Soften Drawbacks

As you diversify your portfolio, you lessen your market risk especially when a particular sector is under-performing.  Asset allocation is a wise way to adapt to a changing market environment.

Since nobody can precisely predict the outcome of the market, portfolio diversification can be of help a lot to the investors and be able to survive even the most harsh market conditions. When the inevitable happens, your other investments can offset the losses.

Diversify to Maximize Returns

Aside from protecting the health of your portfolio, diversification also gives you the opportunity to maximize returns by investing in different areas that would have a different reaction to the current situation of the market. By allocating your investments among several different financial instruments, businesses and even categories, you are somewhat guaranteed against losses.

Diversify to Target Across the Board

This setup can be regarded as superior portfolio diversification. That is, diversifying your portfolio across the board. Normally, when investors diversify, they do it with several companies. But when you do across the board diversification, you target different types of industries.

The more your stocks become unconnected or unrelated with each other, the better and more advantageous it is for your portfolio.

Another across the board technique is diversifying among different asset classes (i.e. bonds and stocks, equity markets, etc.). When adverse events happen, such types of assets would react differently since you have a combination of asset classes. Just like what is expected, unpleasant movements in one class will be counterbalanced by the upbeat results from the others.

Diversify to Own More than Owning Just One

Another obvious reason why you should diversify is because it is better to own more stocks than just having one. Market experts suggest that optimal diversification is achieved when an investor owns at least 15 to 20 stocks expanded across several industries.

However, it is still important to apply proper risk tolerance to determine the right assortment of your own choice of assets.

Conclusion

Generally, market downturns and risks affect nearly every stock.  Diversification may not completely protect your portfolio from risks or even guarantee elimination of chances of a loss, but it can help an investor manage the risks and reduce the impact of market volatility.

 

You can earn bigger profits and execute better trades here at Trade12 by reading the latest market updates. Striving to become the best forex broker for you, Trade12 reviews daily market events essential to your trading activities to help you improve your overall trading performance. Register an account now and enjoy a wonderful trading experience!

Trading Essentials Knowing Your Trading Environment

Knowing Your Trading Environment

Generally, there are three types of market condition – the downtrend, uptrend, or ranging. Knowing the type of trading environment you are into is advantageous on your part, especially if you know the various tools and trading strategies you need to employ.

In this article, you are going to learn more about trading environments.

 Why is it necessary to know trading environments?

There are a number of reasons why knowing the trading environments matters. Here are a few of the known reasons:

  • It is vital to know the type of trading environment an investor is in since the technical analysis tools, systems and strategies that he or she would employ will greatly depend on the market environment. The different types of market require different techniques and the method you have used in one instance would not necessarily hold effective to another market.
  • If you are also trying to redeem yourself from a bad performance, it is advisable that you detach yourself first from trading and observe the market from afar. This one can help you focus on determining the kind of market environment and find out the right momentum for you to trade accordingly.

Trading Floor

What are the indications that a trader considers the trading environment before making a move?

Trading is like going to war. The foolish trader always rushes without having a concrete trading plan. On the contrary, a wise trader would get adequate information about the present surroundings and the conditions and then creates strategies on how to do the attacks in order to win the battle.

If you are able to do this, you may expect of the following results:

  • Be able to maximize the power of your system and take advantage of its profitability.
  • Be able to choose a trend-based strategy to be victorious in your trading goals.
  • Be able to trade without being fearful. It does not mean that you are overconfident, but it is more like being able to execute a trade since you are certain of your move and the kind of market you would like to conquer.
  • Be able to determine a number of opportunities since you know which techniques are appropriate to use and be able to figure out the precise indicators as needed by the situation.

See also: How to conquer your investment fear

Conclusion

Experts are saying that the most common mistake a trader would commit is that they are not aware of the type of environment they are trading in. For a trader to be successful in his or her trading endeavor, he or she must be able to identify this area to be able to take full advantage of the opportunities the market holds. A trader can spot these chances if he or she is able to determine the type of environment existing in that particular period.

 

You can earn bigger profits and execute better trades here at Trade12 by reading the latest market updates. Striving to become the best forex broker for you, Trade12 reviews daily market events essential to your trading activities to help you improve your overall trading performance. Register an account now and enjoy a wonderful trading experience!