CFD Trading: Goals

I have been studying the tropic positive psychology a bit deeper the last couple of months.

One of the interesting part is that well-being is valued higher when a person can explain why he or she is at certain points in life but also can explain how to come to the next level.

Another interesting part is that well-being is connected to grow and our well-being is increasing as we grow but only if we have an influence on the progress. Well-being can also be life stages where the goals are reached and where the feeling complacency and tranquility is present.

Well-being in connection to CFD

Well-being is also important in trading CFD as we have to set goals for our trading; the purpose is to measure if we reached our goals. An example of a goal could be a surplus of 20 pips each trading day.

A trading plan is also important as it explains why you are acting as you are; it explains also your goals and if you have reached them; in connection to positive psychology should it have influences on your well-being as you know why you are entering a trade and why you are closing a trade.

Writing your goals

Writing a trading plan makes you more conscious about the goals you want to achieve and how to achieve them. Your conscious about your goals makes it also easier to reach them.

More about psychology trading

In the articles;

·    Forex Online Trading? How to ImproveYour Forex Trading With Visualization Techniques 

·    Forex Online Trading? HowVisualization Techniques Can Improve Skills To Enter A Trade 

are written about visualization techniques that might be helpful in growing your well-being in trading CFD.

CFD Trading: The Risk and the Reward Fraction

CFD trading has large potential rewards and potential risks. In this post is the purpose to write about the risk and the reward in a trade.

Risk and reward

A risk in a trade is the possibility to lose money on a trade. A reward is the possibility to earn a profit in a trade.

The fraction between the risk and the reward should be 1:3 or more for new traders. If the risk is 25 dollars is the expected reward 75 dollars. The 25 dollars is the stop loss level and the 75 dollars are the profit takes level.

The fraction for experienced traders could be set to 1:2.

How to use the risk and the reward fraction?

The risk and reward fraction is an overall fraction in a trading plan; if the fraction is set to 1:3 in each trade during a trading day is the overall fraction also 1:3.

Example: The trades

The trading day consists of 6 trades; the profit takes are set to 60 dollars; as the risk and the reward fraction is set to 1:3 is the stop Loss level set to 20 dollars.

Three of the trades are closed due to the profit takes and two of them are closed due to the stop loss level.

The profit is 120 dollars; 3 times 60 dollars minus 3 times 20 dollars.

Example: A trade is added to the trading day

The trader adds a trade in his trading plan but the trade is closed due to the stop loss level.

The profit is 100 dollars; 3 times 60 dollars minus 4 times 20 dollars.

Example: Conclusion

In the example are the risk and the reward fraction as planned but shrink as the trader adds a trade.

The trader’s planned fraction is lower than expected as he added an extra trade in his trading plan; but he still has a surplus.

Stop Loss

It is difficult for both new traders and more experienced traders to set a stop loss level.

Examples of how to set a stop loss level is in the article “Trading Forex Online? How to Define an Exit Point, AlsoCalled a Stop/Loss?” .

CFD Trading: Correlation between USDCAD and GBPUSD

In the last post was the correlation between the EURUSD and USDCHF illustrated.

In this post is the correlation between the USDCAD and the GBPUSD illustrated. The purpose is only illustrative and inspirational in trading the USDCAD and GBPUSD.

Correlation between USDCAD and GBPUSD

I was watching the USDCAD and the GBPUSD on the charts and the visual correlation is that if the USDCAD is going sideways is the GBPUSD often in and uptrend or in a downtrend.

The trend of the GBPUSD should not affect the USDCAD if it is going sideways.

An Example

The charts are the USDCAD and the GBPUSD; the USDCAD is going sideways and the GBPUSD is in an uptrend; the GBPUSD trend does not affect the currency rate on the USDCAD as it is going sideways.

Another example

The first example was over a longer time period; this example is over a shorter time period.

The currency pair is the USDCAD and the GPBUSD: the USDCAD is going sideways and the GBPUSD is in an uptrend; the GBPUSD trend does not affect the currency rate on the USDCAD as it is going sideways.

Comment

Please leave a comment if you have some interesting correlation between currency pairs. 

CFD Trading: Correlation between Currency Pairs Part 2

In the post CFD Trading: Correlation between Currency Pairs is written about the correlation between the currency pairs.

In this post is illustrated the correlation between the EURUSD and the USDCHF; the correlation between the EURUSD and the USDJYP is also illustrated.

Correlation between EUR/USD and USD/CHF

The chart illustrates the EURUSD and the USDCHF; the EURUSD starts to fall around 3 o’clock and the USDCHF starts to rise around 3 o’clock; the 4, 9 and 18 period moving averages are also crossing each other around 3 o’clock; they are reverse; at the EURUSD chart are the 18 period line above the 4 and 9 period lines; at the USDCHF chart are the 18 period line below the 4 and 9 period lines.

Correlation between EUR/USD and USD/JYP

The chart illustrates the EURUSD and the USDJYP; the EURUSD starts to fall around 3 o’clock and the USDJYP starts to rise around 3 o’clock; the 4, 9 and 18 period moving averages are also crossing each other around 3 o’clock; they are reverse; at the EURUSD chart are the 18 period line above the 4 and 9 period lines; at the USDJYP chart are the 18 period line below the 4 and 9 period lines. 

The charts are illustrative but the print is from a real chart; the correlation between currency pairs is stronger or weaker over a time period. 

CFD Trading: Trading with the 4, 9 and 18 Period Simple Moving Average

The simple moving average is described in the post CFD Trading: The Simple Moving Average.

In this post is described how to trade with the 4, 9 and 18 period simple moving average and how to read the signals they provide.

The 4, 9 and 18 Period Simple Moving Average

The 4, 9 and 18 period moving average is a common used.

When the 4 and 9 period moving average crosses each other is the first signal given that a change is in the price development is started. The change is confirmed when the 4 and 9 moving average is above the 18 period moving average.

An example

In the image is the AUDUSD price chart; in the chart are the 3 simple moving averages; the 4 period is the blue line; the 9 period is the lime line and the 18 period is the red line.  

The example illustrates how the price line starts to change from and up going development to and down going development as the three simple moving averages is crossing each other as described in the beginning of this post.  

The same price line is in the image below illustrated with price bars.

Trading with the ADX/DMI, MACD/DMI, Bollinger Bands and Stochastic

In earlier posts is the ADX/DMI, MACD/DMI, Bollinger Bands and stochastic illustrated.

Purpose of this post

In this post is the purpose to analyzing the EUR/USD with the four indicators. The purpose is to illustrate the thought in using the indicators.

How to analysis with the ADX/DMI, MACD/DMI, Bollinger Bands and Stochastic?

The chart is the EUR/USD and illustrates the price chart in the morning: from 7:15 until 9:15 is the price falling; at 9:15 is the price starting to increase.

Bollinger Bands an the stochastic

Between 9:15 and 9:30 is an indication that the price is starting to move in an upper direction; the lower Bollinger band and the price line are crossing each other and the stochastic is indicating that the EUR/USD is oversold.

Between 10:30 and 10:45 is the upper band crossing the price line and the stochastic is indicating that the EUR/USD is overbought.

ADX/DMI: How strong is the trend?

Between 9:15 and 9:50 is the red line above the green line; it indicates that the trend is negative.

At 9:50 is the green line crossing the red line; it indicates that the trend is positive and the price is increasing.

MACD/DMI: How likely is the trend?

Between 9:15 and 9:50 is the blue line above the green line; it indicates that the trend is unlikely. The histogram confirms the indication.

At 9:50 is the green line crossing the blue line; it indicates that the trend is likely and the price is increasing. The histogram confirms the indication.

When to buy?

The Bollinger bands and the stochastic indicate that the buy signal is between 9:15 and 9:30 as the lower band cross the price line and the stochastic indicates that the EUR/USD is oversold.

The ADX/DMI and MACD/DMI indicates that the buy signal is at 9:50.

The entry in the market would be at 9:50 as the ADX/DMI and MACD/DMI indicate a likely trend.

At the same time period is the stochastic in an overbought zone; which would have been a signal that the price soon will start to fall. It would have been true if only the Bollinger Bands and the Stochastic was used as indicators.

In this analysis is also the ADX/DMI and MACD/DMI used; they confirm a likely up going trend.

When to sell?

At 10:00 are the upper band and the price line crossing each other; the price is still increasing and the trend is likely.

At 10:40 are the price line and the upper band again crossing each other and the trend is less likely. The stochastic is also indicating that the price is decreasing.

The analysis indicates that the sell signal is at 10:40.

Please note

Please note that this post is only illustrative and the purpose is to give insight into how to trade with indicators.  

CFD Trading: Correlation between Currency Pairs

One of the problems as a trader and as a new trader is to discover how the market works. In previous posts are illustrated some of the common chart patterns and some of the common indicators.

In this post is the mind on the currency pairs. The idea is to illustrate the correlation between the currency pairs. The posts are only illustrative and only the correlation between the currencies will be illustrated.

The idea is to get started as a trader or move forward in the thought as a trader. Please leave a comment about correlation between currency pairs if you want to share some of them.

Social investment network

Just before I write about the currency pairs I will place a link to the social trading platform called eToro Social Investment Network; it is a platform where traders socialize about trading CFD.

EUR/USD and USD/CHF

The EUR/USD and the USD/CHF are often a mirror; the currency pairs move in the opposite direction. Is the EUR/USD bullish is the USD/CHF bearish and vice versa.

It is a rule which means that they can move in the same direction as well.

EUR/USD and EUR/GPB

The EUR/USD and EUR/GBP move most of the trading time in the same direction but could also move in reverse direction.

USD/CHF and USD/JPY

USD/CHF and USD/JYP are also currency pairs that often move in the same direction most of the trading time.    

It is a rule which means that they can move in the opposite direction as well.

An example:  How to use the information about the correlation between the currency pairs?

Watch the EUR/USD chart pattern; is the pattern bearish or bullish? Is the pattern bearish? Watch the USD/CHF chart or the USD/JPY chart for an entry in the market.

Please note

This post has illustrated some common correlation between currency pairs and is only inspiration to get started as a trader or move forward in the thought as a trader.

The correlation between the currency pairs can be stronger or weaker over time.

Trading CFD with the indicators ADX/DMI and MACD/OsMA

In an earlier post is the content about the ADX/DMI and the MACD/OsMA.

What are the MACD/OsMA and the ADX/DMI?

The MACD/OsMA and the ADX/DMI point out how the price trend behaves.  

The ADX/DMI analyzes the strengths of the trend; the MACD/OsMA analyzes how likely the trend is.  

In the post Trading Forex using the trading strategy123 trading signals is the two indicators described. 

How to analyze the price behavior using the MACD/OsMA and the ADX/DMI?

In the graph are the USD/CHF price line; the indicators ADX/DMI and the MACD/OsMA are at the button of the image.

ADX/DMI: How strong is the trend?

Between 8:15 and 9:00 is the DI+ and DI- line crossing each other; the DI+ starts to move higher than the ADX line; between 10:30 and 12:45 is the DI+ starting to get near the ADX line; in the same time period is the DI- moving closer to the ADX line.

MACD/DMI: How likely is the trend?

The MACD line crosses the signal line between 8:15 and 9:00 and the histogram starts to grow; between 10:30 and 11:15 starts the histogram to fall.

When to buy and when to sell?

A likely buy point would be between 8:15 and 9:00 as illustrated in the image with the indicators signal in mind; the sell point will be around 12:45 as the image illustrates with the indicator signals in mind.

Where to trade with the MACD/OsMA and the ADX/DMI?

PLUS500 offers the traders to trade with the MACD/OsMA and the ADX/DMI. The list of indicators is at the f(x) button on the trading platform.

If you would like to download the trading platform at PLUS500 and try it with the 25 euro welcome bonus click on this link for more information.

Please notice that your capital may be at risk trading CFD.

CFD Trading: The Simple Moving Average

The Simple Moving Average is an indicator that calculates the future price movement of the past.

Equation

Is the indicator based on a 10 period timeframe is the future price calculated from the past 10 prices. The equation is

(Price 1 + price 2 + price 3 + price 4 + price 5 + price 6 + price 7 + price 8 + price 9 + price 10) / 10 time period = Future price

Time period

The equation is simple which makes the simple moving average best in a trend-following market. The timeframe has also an impact on the calculated price; the longer the time period is the slower is the simple moving average to react on trend changes in the market.

Purpose

The simple moving average purpose is to find the trend changes in the market. The indicator is an indicator that should not stand alone in the decision to enter a trade.

The Simple Moving Average illustrated in a graph

In the graph is the simple moving average illustrated; the graph illustrates a blue line, red line and a green line; the blue line is the simple moving average based on a time period of 10; the red one is based on a time period of  20 and the green one is based on a time period of 50.

The green line responds later than the red and blue line.

The second indicator is the stochastic. The purpose is to verify the simple moving average.

When to enter a trade?

The green, red and blue line gives different indications on when to enter a trade as they are based on different time periods.

When the simple moving average is above the price line is the price bearish and bullish when the price line is below the price line.

The stochastic gave an indication at the time where the simple moving average crosses the price bar; around 7 o’clock the 10-10. The stochastic is also in a downtrend which indicates that the price is increasing as the price is moving away from the overbought zone. The indication is at the tops at the stochastic; they are getting lower and lower.     

Try the simple moving average

Which time period is best when a trader use the simple moving average is individualized; the trader have to try different time periods or place the simple moving average with different time periods at the same time as illustrated in the graph.

Where to trade with the simple moving average?

The CFD trading platform PLUS500 offers the traders the simple moving average as an indicator. The list of indicators is a the f(x) button on the trading platform.

Watch the review of PLUS500 or download the trading platform from their website from this link.

Please notice that your capital may be at risk trading CFD.