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What Novice Traders Need to Know about Spot Gold Trading?

July 31st, 2012 | by | learn forex

Jul
31

The number one concern of almost all traders who want to invest their capital is whether their capital can weather the financial crisis or the market volatility safe and sound. Thus, diversification is their first choice to protect their investment portfolio against market volatility and inflation etc. Gold has historically been the favorite diversifier for traders due to its distinguishing advantages. Trading spot gold can not only protect traders’ investments but also harvest huge profit from it.

What traders need to know about spot gold?

Spot gold is the price of gold that is available for immediate physical delivery to the buyer. It is actively traded around the world on a number of different exchanges. The spot gold market allows traders to buy and sell gold against the U.S. dollar (USD) in order to speculate on the differences in the future prices. In other words, when you trade spot gold, you take a long or short position in gold at the same time that you take the opposite position in the U.S. dollar. Spot gold is quoted against the USD, represented as XAU/USD, and indicates how many U.S. dollars are required to buy or sell one unit of spot gold, which is equivalent to one troy ounce. Let’s make it simple with an example, if XAU/USD is quoted at USD1, 200, this means for every one ounce of gold a trader buys, he needs to pay USD1, 200. The quote can be different day in and day out due to the market volatility, if XAU/USD moves from USD1, 200 to USD1, 210, it means that the spot gold price has strengthened against the USD. Now for every one ounce of gold, the trader would have to pay USD1, 210, compared to the previous USD1, 200.

What are the advantages of doing spot gold trading?

Doing spot gold trading is quite popular among traders from all over the world. There are good reasons for that. To begin with, traders are able to trade in the spot gold market 24 hours a day from Monday to Friday, which is quite convenient for traders can choose the best trading time according to their own schedule without worrying about missing the chances of doing spot gold trading. Secondly, traders are able to get quite tight bid and ask spreads, which is beneficial for them to get the maximized profit. Thirdly, trading spot gold saves traders the trouble of finding storage place for physical gold and they do not need to worry about the security of the storage place etc. Furthermore, trading spot gold provides traders with potential of making good money. This is because the value of gold tends to appreciate due to its non-renewable features. Last but not least, trading spot gold is much simpler than trading forex. When trading forex, traders need to take too many factors that can influence various  currencies into consideration. Traders only need to consider the factors that can affect the value of USD and the gold price when doing spot gold trading.

 

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What Are the Major Benefits of Trading Forex with MT4?

July 31st, 2012 | by | learn forex

Jul
31

Forex trading is not easy, especially for novice traders. They need to take many factors into consideration such as what forex trading platform to use. Forex trading platform is quite important to successful forex trading. The best trading platform can provide traders with all the advantages that enable traders to trade with ease. Thus, in order to make right choices as to what trading platform to use, novice traders need guidance. Trading forex with MT4 is a top choice for most traders who want to use a best trading platform due to the distinguishing advantages of MT4 such as the cutting-edge technology and enhanced security.

What are the advantages of trading forex with MT4?

A great number of forex trading brokers and retail traders choose to trade forex with MT4. This is not coincidence. The reasons why so many of them choose to trade forex with MT4 are widely known among traders. The following is a list of advantages offered by trading forex with MT4.

1. Trading forex with MT4 provides traders with much convenience. MT4 is quite user-friendly; for example, traders can switch from one interface to another quickly. This enables traders to trade with ease and comfort in the fluctuating forex market.

2. Traders speak any language can enjoy the profit potential of trading in the forex market for there is no language barrier. Traders can choose from a great number of languages to trade forex with MT4.

3. The accessibility to various best forex trading tools when trading forex with MT4 is quite attractive to a great number of traders; for example, traders are able to download EA to MT4, which makes it possible for them to do automated forex trading.

4. Trading forex with MT4 makes it quite convenient for traders to communicate with their brokers. This is because MT4 platform incorporates advanced communication tools for brokers to post messages and communicate with their traders in real time. This of course prevents the need for long and complicated email threads and makes the trader’s experience much simpler.

5. Trading Forex with MT4 can help orders to be executed timely, which decrease the possibility of losing best trading chances due to slow and untimely execution speed.

6. MT4 forex trading platform also offers advanced charting capabilities. This is quite beneficial for technical traders for they can analyze the market trend with whatever analytical tools they want to use. Moreover, traders are able to trade and analyze the technical aspects of the market simultaneously.

7. How much money traders make or lose as well as the account balance is a main concern of most traders. Trading forex with MT4 provides traders the convenience to view their account information such as their account balance, trading history as well as password information etc. whenever they want to.

8. High security is another advantage that trading forex with MT4 can offer to traders. Traders do not need to worry about attacks and hacks on their account. MT4 is a highly secure platform that encrypts the data between trader and server with a 129-bit key. The trader’s IP address is also confidential.

9. Traders are also able to get access to other markets to trade precious metals, futures, commodities etc.

10. Besides all the above advantages, the MT4 supports full customization features, which enables traders to tailor the platform so as to meet their trading needs; for example, they can develop technical indicators by using the MT4′s advanced proprietary MQL programming language.

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What is Forex Hedging and How to Apply It Properly in Currency Trading?

July 31st, 2012 | by | learn forex

Jul
31

Traders’ investments are possible to be exposed to risks at any time due to the market volatility. Thus, in order to provide a safe haven for their capital, traders use forex hedging. Forex hedging can help traders to avoid potential risks brought by the market fluctuations; traders need to know what is forex hedging and how to apply it in trading.

What is forex hedging?

When a forex trader enters into a trade in the hope of preventing an existing or anticipated position from an unfavorable move in the forex market, they can be said to have entered into a forex hedging. Forex hedging is quite helpful in trading forex; by utilizing a forex hedging properly, a trader that goes long a currency pair can protect themselves from downside risk; while the trader that goes short a currency pair can protect against upside risk. Thus, traders who want to keep their risk of trading forex under control need to know what forex hedging is and how to properly use forex hedging in trading currency.

How to use forex hedging?

What is forex hedging can be easy to understand but how to use it is not that easy to know. First, traders need to know the primary methods that can be used to hedge against potential risk and make profits in currency trading?

Forex options trading are one of the most popular methods that can be used to hedge against potential risks. A forex option is an agreement to conduct an exchange at a specified price in a certain future date. For example, if a trader places a long trade on EUR/USD at 1.30. To protect that position, he places a forex strike option at 1.29. This means that if the EUR/USD falls to 1.29 within the time specified for the option, he gets paid out on that option. How much can he gets paid depends on market conditions when he buys the option and the size of the option. Then what if the EUR/USD does not reach that price in the specified time, he loses only the purchase price of the option.

Forex futures are another way to hedge against potential risks brought by the volatility in the forex market. They are traded by making futures contract to exchange a certain amount of one currency for another at a specified time and a fixed forex rate in the future. Forex futures is an effective forex strategy in offsetting risks brought by market fluctuation in forex trade, this is mainly because exchange rates are predetermined in the contract.

Why forex hedging is important?

Trading in the forex market is never risk free. Thus, forex hedging is a good way-out for traders who want to avoid such risks. It allows traders to trade the opposite direction of their initial trade without having to close that initial trade. The advantage of using forex hedging is that traders can keep their trade on the market and make money with a second trade that makes profit as the price moves against their first position. When a trader suspects that the price is going to reverse and go back in initial trades’ favor, then traders can set a stop loss order on the hedging trade or just close it.

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Compare Forex Trading System and Choose the Most Profitable one in Forex Trading

July 31st, 2012 | by | forex trading

Jul
31

If you Google for the best forex trading system, you will find many results out there that claim to be the most profitable or the “Holy Grail” system. But some traders purchase such a trading system only to find that it fails to help them make profits. Then what forex trading system is the best and most profitable for traders? Here I am going to compare forex trading system of different kinds in order to help traders figure out what the most profitable and suitable system is.

1. Mechanical trading system

In order to compare forex trading system and find the best one, traders need to know common types of trading system. Mechanical trading system is one of the most popular systems. Mechanical forex trading systems are systems that can generate trade signals for a trader to use. The reason why they are called mechanical is that a trader will take the trade regardless what is going on out there in the forex market. Mechanical forex trading system can help eliminate all biases and emotions in forex trading for traders tend to stick to the rules of the system strictly no matter what the present market condition is. Compared with other systems, this kind of trading system can be automated efficiently; it follows rigid rules and traders are less susceptible to negative emotions in trading.

2. Discretionary systems

Comparing forex trading system can help traders get the best system among many choices. Discretionary system is a popular system among traders. The discretionary approach performs analysis and creates forex trading strategies according to specific market conditions and opens positions only when preset circumstances come into truth. In this case, the size, timing, and risk controls in each trade are managed separately by the trader. Discretionary system has its own advantages; it can easily adapt to the latest market conditions. The decisions for trading are made out of experiences. Thus, the traders of this system need to be experienced in order to find out which signals have a higher chance for success. Since this system incorporates fundamentals into trading, a discretionary trader may already have a deeper insight into the market movements.

Compare the forex system and figure out the most suitable one to use

With the above comparison of forex trading systems, traders might have a better understanding of which one is suitable for them. For example, if you are a trader who finds it difficult to follow forex trading signals due to their personality etc., you had better use a mechanical forex trading system. This is because this kind of system only takes the trades that the system generates. Conversely, if you are a disciplined trader who cannot be influenced by emotions easily, you can choose to use a discretionary system for it adapts to the market conditions quickly. Traders can change their trading according to the fluctuations of the forex market any time.

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