Introduction to The Majors

In forex trading there are 4 major currency pairs. They are commonly referred to as "The Majors". The majors are the most liquid and commonly traded currency pairs in the market.

EUR/USD

The first and foremost of commonly traded currency pairs that are highly liquid is theEuro(EUR) vs. USD(USD) currency pair. Most traders learning the markets start with the EUR/USD pair. The average daily range in the EUR/USD is 100 pips.

GBP/USD

The British Pound(GBP) vs the US Dollar(USD). This is also a widely traded pair with decidedly more volatility on average. Beginning traders should not trade this pair until they have some experience under their belts. The average daily range on the GBP/USD is 150 pips.

USD/CHF

The US Dollar(USD) vs. the Swiss Franc(CHF) is another major pair. This is a good pair to use when visually gauging the strength of the USD. The average daily range is 100 pips.

USD/JPY

The US Dollar vs. the Japanese Yen(JPY). This trading pair has it's own personality. It will sometimes trend in the opposite direction as the other dollar pairs during risk aversion in the markets. An important note, this pair can become highly volatile during shifts in risk taking in the markets. The average daily range of this pair is 100 pips.

There are any number of currency pairs that you can trade when forex trading. It's a good idea to start with these pairs because they tend to have more predictable movements and ranges.

How to buy commodities

Commodities investing is volatile, promising big gains and capable of big losses. But this volatility can work in your favor in a broad investment portfolio, where a small amount of commodities can offset risks associated with stocks, bonds and cash.

Investors are generally advised to allocate about 5% of their portfolio to gold and commodities. Don't go higher than 10%.

Prudent investors will own both the physical commodity as well as shares of the resource producers. Many mutual funds and exchange-traded funds provide such direct exposure, which for most investors is a better option than trading commodities on their own. 

Beware these dangers when investing in commodities:

• Scam artists: All legitimate brokerages must be registered with the National Futures Association with a list of all complaints, sanctions and arbitrations.

• Poor money management: Don't risk too much of your money on a single trade. And set clear entry and exit points.

• Lack of knowledge: The volatility of commodities means you must stay up to date on new affecting the markets you are trading.

• Costs: Brokerage charges vary and can be high, so know what you'll pay ahead of time.

The Way To Profit In Forex

It has been said that the single most important factor in building equity in your trading account is the size of the position you take in your trades. In fact, position sizing will account for the quickest and most magnified returns that a trade can generate. Here we take a controversial look at risk and position sizing in the forex market and give you some tips on how to use it to your advantage.

The Undiversified Portfolio

In the book "The Zurich Axioms" (2005), author Max Gunther states that in order to break away from the "great un-rich," an investor must avoid the temptation of diversification. This is controversial advice, since most financial advice encourages investors to diversify their portfolios to ensure protection against calamity. Unfortunately, nobody gets rich from diversification. At best, diversification tends to balance winners with losers, thus providing a mediocre gain.

The author goes on to say that investors should "keep all [their] eggs in just one or two baskets" and then "look after those baskets very well". In other words, if you are to make real headway with your trading, you will need to "play for meaningful stakes" in those areas where you have sufficient information to make an investment decision.

To measure the relevance of this concept, one need only to look at two of the most successful investors in the world, Warren Buffet and George Soros. Both of these investors do play for meaningful stakes. In 1992, George Soros bet billions of dollars that the British pound would be devalued and thus sold pounds in significant amounts. This bet earned him more than $1 billion virtually overnight. Another example is Warren Buffet's purchase of Burlington Railroad for $26 billion - a significant stake to say the least. In fact, Warren Buffett has been known to scoff at the notion of diversification, saying that "it makes very little sense for those who know what they are doing."

High Stakes in Forex

The forex market, in particular, is a venue where large bets can be placed thanks to the ability to leverage positions and a 24-hour trading system that provides constant liquidity. In fact, leverage is one of the ways to "play for meaningful stakes". With just a relatively small initial investment, you can control a rather large position in the forex markets; 100:1 leverage being quite common. Plus, the market's liquidity in the major currencies ensures that a position can be entered into or liquidated at cyber speed. This speed of execution makes it essential that investors also know when to exit a trade. In other words, be sure to measure the potential risk of any trade and set stops that will take you out of the trade quickly and still leave you in a comfortable position to take the next trade. While entering large leveraged positions does provide possibility of generating large profits in short order, it also means exposure to more risk.

How Much Risk Is Enough?

So just how should a trader go about playing for meaningful stakes? First of all, all traders must assess their own appetites for risk. Traders should only play the markets with "risk money," meaning that if they did lose it all, they would not be destitute. Second, each trader must define - in money terms - just how much they are prepared to lose on any single trade. So for example, if a trader has $10,000 available for trading, he or she must decide what percentage of that $10,000 he or she is willing to risk on any one trade. Usually this percentage is about 2-3%. Depending on your resources, and your appetite for risk, you could increase that percentage to 5% or even 10%, but I would not recommend more than that.

Five Chart Patterns you need to know…

So playing for meaningful stakes then takes on the meaning of managed speculation rather than wild gambling. If the risk to reward ratio of your potential trade is low enough, you can increase your stake. This of course leads to the question, "How much is my risk to reward on any particular trade?" Answering this question properly requires an understanding of your methodology or your system's "expectancy". Basically, expectancy is the measure of your system's reliability and, therefore, the level of confidence that you will have in placing your trades.

Setting Stops

To paraphrase George Soros, "It's not whether you are right or wrong that matters, but how much you make when you are right and how much you lose when you are wrong."

To determine how much you should put at stake in your trade, and to get the maximum bang for your buck, you should always calculate the number of pips you will lose if the market goes against you if your stop is hit. Using stops in forex markets is typically more critical than for equity investing because the small changes in currency relations can quickly result in massive losses.

Let's say that you have determined your entry point for a trade and you have also calculated where you will place your stop. Suppose this stop is 20 pips away from your entry point. Let's also assume you have $10,000 available in your trading account. If the value of a pip is $10, assuming you are trading a standard lot, then 20 pips is equal to $200. This is equal to a 2% risk of your funds. If you are prepared to lose up to 4% in any one trade, then you could double your position and trade two standard lots. A loss in this trade would of course be $400, which is 4% of your available funds.

The Bottom Line

You should always bet enough in any trade to take advantage of the largest position size that your own personal risk profile allows while ensuring that you can still capitalize and make a profit on favorable events. It means taking on a risk that you can withstand, but going for the maximum each time that your particular trading philosophy, risk profile and resources will accommodate such a move.

An experienced trader should stalk the high probability trades, be patient and disciplined while waiting for them to set up and then bet the maximum amount available within the constraints of his or her own personal risk profile.

How To Invest in GCM?

GCM has made it easy for you to sign up for a membership account and you can complete the process entirely online. It is also free of charge.

The sign-up process takes only a few minutes, and involves filling in an online application form. We will send you an email message to confirm the status of your application and you shall activate you account .

Does GCM Offer Consistent and Competitive Prices?

At GCM, we always offer you consistent and competitive prices.

How Much Should I Buy?

Gold and silver are excellent means to preserve your purchasing power but choosing how much gold and silver to buy should be your personal decision. It is a widely acknowledged investment principle that you should hold between 10-25% of your assets in precious metals. Research has shown that wealthy individuals keep around 10% of their wealth in precious metals as a diversifier and hedge against crisis events.

Isn't The Gold Price Too High To Buy?

Nobody can predict the future, but there is a strong case for the continued appreciation of the gold price (and other precious metals) in terms of US dollars, Euros and most of other major world currencies. Compared to historical records, the gold price still has room to increase further. Adjusting for inflation, the current gold price is far from breaking the record gold price of $2,079 per ounce in 1980.

However, the price is not the key aspect to consider when purchasing gold, as first and foremost gold investments are made to act as your insurance against financial uncertainties and currency debasement.

Is It Safe To Purchase Gold and Silver From GCM?

GCM is an online e-commerce platform that allows investors like you to purchase gold and silver in a secured environment. We have invested significant resources over the years to become the leading provider, with excellent customer service, in a convenient and conducive shopping environment.

GCM always offers its customers the most trusted and recognizable mint hallmarks in the industry with competitive prices.

Go to websites for more details : http://gcminternationalinc.com/

Probability And Investment!

If I want to be good as an investor, then I need to be good at arithmetic to analyze the odds of an investment. Also, I need to be able to read and write. There is where scholastic education plays an important role. Scholastic education teaches me how to read, write and do arithmetic. It is one of the three vital educations as highlighted by the Rich Dad's series by Robert Kiyosaki. The other two vital educations are professional education and financial education.

How does arithmetic play a part in investment? To answer this question, I need to explain a little on the probability using the example of a coin.
What happen when I throw a coin and let it lands onto the table? It is obvious that the coin is either going to show head or tail. What if I throw 2 times, what are the chances of the coin showing head?

I cannot really be sure what are the chances. I may get 2 heads in a row. I may get 1 head and 1 tail. I may get 2 tails.
What if I throw a 100 times? How many times is the coin showing head? I will find that the number will be somewhere near 50. In other words, I will find that there is a 50 percent chance of getting a head if the number of throws is large enough. The probability of getting a head is the chances of the coin showing head out of a large number of throws. That is the probability of getting a head is 0.5.

Similarly, if I have thrown a six-sided dice, the probability of getting a six in a 100 throws is about 1/6. But I can do something to increase my odds of getting a six. I can use a modified six-sided dice that has a higher probability of showing a six compared to a normal six-sided dice. In this way, the probability of getting a six is increased.

And this is what a professional investor does to make money from an investment. He increases the probability of winning by identifying and managing the risks involved. He does not invest for the sake of investment. He has a plan for investment that includes risk management. Yes, investment is a plan based on what I have understood from the Rich Dad's series by Robert Kiyosaki.

A good example will be looking at how a professional trader makes use of probability to his advantage.
In a stock market, the price of a share can go up, go down or remain the same. That is the probability of the share price going up is 1/3. Remember, the probability only holds if there is a sufficient large amount of trades. Like in the case of throwing a coin, the probability of 0.5 is true only if there is a large number of throws.

Let imagine that I have an initial capital of $10,000 to invest in shares. If I invest $10,000 in a single trade, what is the probability of the share price going up? There is no way to predict or tell. This is like throwing a coin once and try to guess whether it will show head or tail upon landing.
If I invest $100 in each trade, then I can make at least 100 trades. That is the number of times that the share prices will go up in a 100 trades is near 33. This is like throwing a coin a hundred times and the number of times that I will get a head in a 100 throws is near to 50.

A professional trader understands the fact that probability is only true if there are a sufficient large number of trades. Thus, he only risks a small amount of this capital in each trade. 

Another way to apply this probability is to limit the loss of each trade to $100. That is, I can invest all my capital in the share of a single company. If the share price goes down and my loss hit $100, I will sell off my position and exit the stock market. Of course if the share price drops too suddenly, I will end up losing much more money than I am willing to loss. Thus, this approach is not that advisable.

In addition, the professional trader makes use of technical analysis to increase the odds of winning. He analyses the chart for indication of to buy and sell. Also, he uses a few other techniques to increase his chance of winning. All these are included as part of his investment plan.
The above description is based on my understanding by reading a book. I have gathered from the Rich Dad series by Robert Kiyosaki that investment plan is different for each individual. If I read more books, I will definitely find more approaches and methods for trading. Different professional traders have different investment plans and thus they will do things differently. 

Market volatility

What is market volatility?

Volatility is the measurement of how much an asset changes in value over a given period of time. If a trader buys an asset, they expect that asset to increase in value during the course of that trade. Conversely, if a trader sells an asset, they expect it to decrease in value during the course of the trade. The more its value changes, the higher its volatility. If the price of an asset has a high volatility, there is more risk associated with trading it, but greater potential for profits. If an asset has a low volatility, there is a lower risk trading it, but less profit potential. Market volatility can also be referred to as price volatility, or trading volatility

As a trader, you are always looking for ways to increase profit. Thus, you will seek out the most volatile assets which give higher potential for profit.

Measuring market volatility

In trading, volatility is measured using certain indicators including moving averages, Bollinger bands and average true range (ATR). Each of these indicators can be used slightly differently to measure the volatility of an asset and more importantly, interpret this data in a different format.

Moving averages

Moving averages are displayed on the actual price chart and the distance between the moving average and the price shows the volatility of the asset. The further away the price is from the moving average, the higher the volatility of the asset.

The image below shows the moving average line far away from the price above it, demonstrating that this asset has a high volatility.

The next image demonstrates an asset of low volatility; the moving average is close to the current price.

Bollinger bands

Another very common tool used to measure price volatility is the Bollinger bands indicator. Bollinger bands display the volatility in a slightly different way. Several lines are applied to the price action which squeeze together when volatility is low and expand when it increases. An asset with expanded bands is in a high volatility state.

The image below demonstrates what Bollinger bands look like on a price chart when volatility is high.

The image below demonstrates what the bands look like when a pair has low volatility.

Average true range (ATR)

Another common measurement of market volatility is the ATR indicator. This tool measures the volatility and gives an actual value. So rather than observing the price in relation to a tool, such as a moving average or Bollinger bands, the ATR gives a value – the higher the value, the higher the volatility.

The ATR also shows whether the volatility is increasing or decreasing, as well as what the volatility is at a given time.

The image below shows that the asset not only has a high range, but that the range has also been increasing over time, indicating increasing volatility.

High range

Range increasing over time

The image below shows an asset with a low range which is decreasing, indicating lower volatility.

Low range

Range decreasing over time

It is important to note that the ATR indicator does not give the direction of the trend, simply whether the volatility of that asset is increasing or decreasing. When the ATR line goes up, the volatility has gone up.

How to use volatility

If the volatility is low and decreasing, it is much safer to avoid placing any trades on that pair as the probability of a profitable move occurring is greatly reduced.

In contrast to this, when anticipating large moves, particularly breakouts, it is important to trade in times when volatility is increasing. When volatility is high, the probability of a large move occurring is higher and traders have a greater chance of making money.