How to correctly install stop loss and take profit?

Each trader has his own trading strategy, which should regulate each action of the manager. I strongly recommend using the basic principles of creating a trading strategy to turn a chaotic approach into a system business.

The trading strategy, without fail, should consist of the following blocks:

1. Rules for determining the entry position point;

2. Rules for determining exit points from a transaction;

3. Risk and money management parameters.

In my blog, I have already written about the first and third point, so today we will analyze the second one.

It’s not a secret that there are only two exit points: with a loss or with a profit. In this issue, fix api trader experiences stop loss and take profitlevels. As I already wrote above, the trading strategy will help you understand exactly where to place these levels, which should be clearly state where to set these exit levels from the transaction. They are individual for each trader. I will help you determine the points of these zones exposure based on the key and basic rules. Thus, where they should be, in order to work correctly and safely.

Stop loss

This level allows you to limit losses in the context of a trade operation. Most traders have difficulties exactly with stop loss. I would not even say difficulties, but rather a refusal to place it in a trading operation. For some reason, many do not place stop loss in their system and over time simply lose their money and get disappointed from the fix api trading. Sometimes, you may not install take profit, but SL should present in each operation.

There are 3 types of correct stop loss placement:

  • Taking into account the risk in each transaction. With this type, the exit from the position will be implemented when the maximum percentage of loss is achieved. For example, if you have a transaction risk of 1% and a deposit of $10,000, then when the deal reaches $100, it will be closed. Thus, SL is set based on a round figure loss.
  • After triggering a turn signal or reaching the system indicator. If you have opened a position for sale but the quotes have entered the channel and all the signals have already changed, it is reasonable to close the position if the TS already points to the purchase (https://www.babypips.com/learn/forex/design-your-trading-system).
  • Behind the local highs or lows. When you have opened trading operations for sale, SL should chase a local maximum, the breakdown of which will be a signal for a trend reversal. The case is similar when there are purchases. This is a kind of analogue of the second point but it is more stable and is used by the fix api traders regardless of the system.

Take profit

As for this level, it acts in opposite proportion to the SL –it restricts profits in the context of one trade operation. I recommend to set TP for each trade operation. But there are exceptions, in which TP does not need to be put. Often, they are connected with the fact that the reason for closing position is a reverse signal or trailing stop of the opened positions.

There are also 3 Take Profit methods for setting the level:

  • As SL ratio. This is one of the most popular techniques. We know that the trader’s work is aimed at a positive mathematical expectation. If the SL to TP ratio in the working strategy is not less than 1/4, and better than 1/6 or 1/7, then the MO will be positive. So the trader opens deals with volume from risk, and the take is determined by simply multiplying by 5-6 from SL.
  • Installation under local support and resistance level. If a purchase transaction is opened, it makes sense to install the TP under the resistance level. If it is a sale, then above the support level.
  • At achievement of technical indicators or Fibo level. Everything is simple. The purpose is the level or values ​​of the technical element.

Placing these levels at opening of trading positions will allow you to save the capital. After all, the original purpose is safety of means, and only then their augmentation. If your system has a positive mathematical expectation, use these levels, and you are guaranteed to get a stable result.

Even algorithmic trading strategies for fix apiforex have the logic of exit from the market (http://forexzzz.com/product/zzz-latency-arbitrage-mt4-advisor/). Thus, those parameters in which the robot bury transactions “in plus” or “in minus.” This allows you to save funds and control risks. This is the main reason for the stability of robots. After all, they will not move these levels and “be greedy.” But the trader may do it. And if you learn to work by installing stop loss and take profit, this will allow you to reduce the psychological burden. You will have to take care only for the strategy and its principles of opening a deal and the parameters of capital management.

 

Trading performance monitoring websites. What’s their purpose?

What is the meaning of success in trading? Some people would say that the key success factor is the breakeven deal, other would tell about the minimum risk level, while some of traders will try to convince you that success depends on the enormous profitability ratio. Each and every FIX API trader wants to accomplish such purposes when creating and developing a trading strategy. As a result all the trading strategies and methods can be divided into aggressive, moderate and conservative ones.

But what do investors have to do in such situation? I’m talking about choosing a trading strategy investment option. How can one choose an asset manager, if some investors want to achieve the maximum return, while others want to save the capital and have the minimum risk level? Here’s another example: how can one connect to a trading signal or buy a trading robot, if they have only description and nothing more? The answer is very simple! One simply can’t.

Nobody buys a car only after reading the user’s manual. It doesn’t work like that. We need to have a test drive and check the car in real driving conditions.

The field of FIX API trading has the very similar situation. One can’t simply make a decision about investments or purchasing of a trading robot by reading only stiff descriptions. One needs to use such tools as the yield curve and other important trading indicators, which can be found on various trading performance monitoring websites, which we are going to discuss below.

I think that some of you have already seen such websites, and understand the main principles of their work. Let’s look at the two of the most popular resources:

    1. MQL –https://www.mql5.com. The website of FIX API MT4trading platform developers offers a section that includes various information about trading signals. This page contains a lot of trading systems shown in the form of a signal. One can subscribe to such signals, receiving information about them right to their account. No doubt that the key factor of such system choosing is the possibility to analyze trading activities, and MQL offers a wide range of such tools. One can see the profit ability divided up by month, the drawdown curve, the balance curve, the funds curve, the main trading financial data (the number of winning and losing trades, their correlation, expected values, the Sharpe ratio etc.), as well as the total number of the followers and the capital size of the asset manager. Such information makes it possible to understand the amount of money invested by the FIX API trader themselves in trading operations.
    2. My fxbook – https://www.myfxbook.com. This is another resource that is pretty similar to MQL; however, it doesn’t allow traders to subscribe on the trading of the asset manager, giving only the possibility to analyze the system itself and it results. This website offers almost similar interface for the list of differentials and indicators, but in my opinion it offers much better visualization methods. The majority of companies and professional trades is using this platform to publish their statistics.

      There are several other websites for FIX API trading results monitoring, but each of them offer strictly individual approach. Such resources include PAMM platforms and special websites for trading robot performance monitoring, e.g. http://fxsocialnet.com/

      But what’s their purpose?

      Such resources can be used to get information about real trading results in order to analyze trading activities of the trader in real time. By using such websites, each and every FIX API trader can connect their trading account in order to analyze trading performance. Such resources can also be use to find the best FIX API trader for your estimated trading results. In other words, you can connect your account to such service and monitor the inter-temporal changes of the key indicators. I really recommend doing so, and monitor your trading activity every week. Choose any day of the weekend when all the main markets are closed, and perform thorough analysis of your trading operations. You will be able to see the influence of each of them on the final result of your trading. By doing so you are able to define all the key moments, which affect your trading in positive ways, as well as the negative ones. As a result, you will be able to use it as a reference point of your personal growth.

Technical and fundamental factors: what drives the market

We all know that the dynamics of supply and demand, the number of speculative positions, the monetary policy of the Central Bank, the achievement of historical highs or lows, and the opening of positions by market makers drives the fix apiforexmarket. To simplify this all, there are two global causes that have a direct impact on the market. The question is of fundamental and technical factors. It is these two bases that explain any movement in the foreign exchange market.

Thefundamentalfactorsinclude:

  • Political news (elections in the country, G8 or G20summit, etc.);
  • Meetings and formal meetings (decision on the interest rate of the Central Bank, OPEC meeting);
  • Publication of statistical indicators (macroeconomic data in the form of GDP, inflation, labor market or publication of companies’financial statements).

The following points often related to the technical factor:

  • Achievement of important historical highs or lows;
  • Reaching the level of support or resistance;
  • Triggering of technical patterns (reversal figures or trend continuation).

As you can see, there are many reasons that affect the market. Every fix api trader should know about them, and also to have an action plan in case of triggering at least one of the above factors. In the event that the manager has a system that regulates the process of actions in each of the situations, then it is possible to declare the professionalism of the trader. But! Some managers refer themselves to the first group (fundamental traders who trade on the basis of obtaining information from market data), and some refer themselves to the second group (technical traders who trade on the basis of obtaining information from technical elements).

And the following question arises: which of these factors and their analysis dominates on the market and is better/more reliable?

My subjective answer to this question is that the foundation is moving the market, but the price itself is in the technical channels.

In order to understand this idea, I propose to consider a particular example.

For example, now we see the strengthening of the euro to its basket of major currencies. The main drivers of this movement are simultaneously the rearrange ofECB monetary policy and at the same time, the weakness of the dollar due to the Trump policy (http://www.investopedia.com/terms/m/monetarypolicy.asp). In the first case, the head of the ECB, Mario Draghi, announced the possible curtailment of the quantitative easing program. Thus, the Central Bank intends to reduce the number of redemption bonds and thereby reduce the money supply in the market. If there is less money on the market, the currency value should be more expensive (the elementary rules of the economy fundamentals). At the same time, we see that Trump cannot agree on any of his plans with the Senate, therefore many investors question the very implementation of the plans of the new president, after the election of which the dollar was rapidly strengthened. Thus, we get a “divergence” between the euro and the dollar and, as a consequence, the growth of the currency pair. This all refers to the fundamental data.

As for the technical factors, at the moment of EURUSD’s growth, a side channel was broken and quotes were fixed above it. This is the first technical signal to buy. After the rollback, quotes also broke through and continued to grow, thereby forming the third upward wave and a rising channel. Thus, we obtain a synergy between the fundamental and technical factors.

This is my vision of these factors’work, which are complementary to each other and are two parts of the same whole. So, of course, you need to have a trading system, but what factors are included in it, this is already a second-order issue, because every fix api trader should be guided in any analysis. Even if you have a trading robot in your arms (http://forexzzz.com/product/zzz-2-leg-arbitrage/), it still needs to be adjusted for actual market conditions).

Lock and averaging: the key principles of work

With the development of financial markets, more and more different types of trading strategies appeared. Some part of them has reached our time, and some have been forgotten long ago because of the transformation of the market itself. The principles of trade were formed under the influence of market trends, market activity, its phase, as well as the general laws that Dow formed in his theory.

Today, these techniques have changed and transformed into some types of trading systems or have become non-standard ways of conducting fix api trading on the forex market. Speaking about the non-standard methods of trade, perhaps, each comes to two conflicting ways of risk reducing:

  • PositionsAveraging
  • PositionsLocking

 

These methods cannot be called standard trading methods, but they allow you to conduct trading in a loss-making position, and also contribute to minimizing and limiting the risks. Therefore, if you are looking for risk management tools, these two non-standard approaches allow you to solve this problem.

Positions Averaging

This method consists in the fact that all trading operations that a trader performs are opened in one direction. Thus, at the time of receiving a loss in one trading position, a similar transaction with the same volume and in the same direction (sell / buy) is opened, as it is unprofitable. Thus, when the quotes unfold and go in the right direction, you can fix a break with a rollback of 50% or a profit for one transaction and a zero result for the second. If you do trade operations using averaging methods but with a large volume, this will already be applied to the Martingale’s trading strategy.

In order to understand the principle of averaging operation, I suggest you to consider a specific example:

The trader opened a deal to buy a financial tool in the fix apiforex market from the level of support for the Fibonacci grid (http://www.investopedia.com/articles/active-trading/022415/placing-fibonacci-grids-key-your-trading-strategy.asp) in 50%. However, this level was broken and quotes continued their downward movement. In order to not fix the loss, fix api trader opens another position to buy, but this time from the level of 23.6%. After quotes rebounded from this level and grew, the trader can fix the result in the no-loss zone or profit from the second operation. Personally, I recommend limiting losses to the exit in the no-loss zone.

Positions Locking is also called “Lock”

This technique also consists in limiting the loss on positions. The essence of this principle consists in fixing a certain loss percentage in order to further reduce it. If we talk about practice, the trader should open the transaction in the opposite direction from the unprofitable one. The complexity of this algorithm of actions arises at the time of exit from the lock. To do this, you need to exit at a profitable position at the most appropriate time in the turn. Locking is suitable for making transactions by algorithmic trading (http://forexzzz.com/product/forex-zzz-lock-arbitrage/), because it is the robot that can exit the lock with the most profitable for the fix api trader.

Let’s also look at an example to learn more about the principle of this technique.

The trader opens a deal for financial tool purchase in the breakdown of an important resistance level. However, the breakdown was false and quotes rushed down. Realizing this, the trader opens a deal in accordance with the trend (for sale) and thereby fixes a certain percentage of the loss (the difference between open trades). Let this difference amount to 20 points. This fixation occurs only on the chart, and not on the deposit balance. The trader holds two positions and at the moment of maximum reduction fixes his sale (profitable deal) expecting the price rollback. When prices roll back by 20 points, the trader will be able to close the loss on the first position, but the trading result will be 0. This allows you to nor permit deep drawdowns of the deposit and loss of investment capital.

Personally, I do not use these methods in my fix api trading because my strategy foresees an immediate exit from the bottle positions. But some traders successfully apply them in their trading strategies as a combination of money management.

Should I use the oscillator indicators in trading?

Perhaps the most common way of analysis and prediction the future value of a financial asset is to use technical elements, primarily indicators. What could be simpler than an automatic process, when it is enough for the fix api trader to look at the chart with the indicators and say what further movement is to be expected. The mathematical justification for forecasting quotations has been applied for several years, not even for the first ten years, because all the key technical indicators were created back in the 70-80’s.

The simplicity and efficiency of these technical elements caused an increased interest in the application of these analysis techniques in their fix api trading. In view of this, many technical indicators have been created, and the key ones can be divided into three groups:

    1. Trend Indicators
    2. Volume indicators
    3. Oscillators

We’ll consider today the last ones.

Oscillators are a group of technical indicators, which in their mathematical basis determine the rate of price movement over time. The main goal of these indicators is that they reflect zones of the so-called “overbought” and “oversold” areas.

The overbought zone signals that quotes at this point of time have drastically deviated from their values ​​and have gone to a range that they have not been for a long time. Thus, if the growth of quotations outstrips the technical indicator growth from the group of oscillators (RSI, AO, CCI, etc.), this indicates that the current value of the asset in the fix apiforex market has grown significantly, reaching its maximum in this zone, and you should expect a rollback.

The oversold zone operates exactly the opposite way. If the quotes decrease faster than the indicator’s decrease, then when the technical element’s boundary is reached, it is worth waiting for the damping of the pulse and the beginning of the corrective wave.

These zones are inherently the trade signals used by the trader. However, I would single out one more trading signal, which appears together with the oscillators movement. It’s about divergence.

Divergence is a technical element of analysis that indicates the end of the formed movement and the immediate transition to a new phase of the market. To put it simply, when the quotes decrease, and the indicator’svalue grows vice versa, one should expect the principle of quotes divergence to work and he should open a deal for purchase. But you need other analysis elements to help you find the entry point, because the divergence itself only gives a signal for a turn, and not a specific entry point. The oscillator from Bill Williams – Awesome Oscillator is the best way to determine the divergence, about which you can read more here – https://www.oanda.com/forex-trading/learn/forex-indicators/awesome-oscillator.

Waysofusingoscillators:

  • When the trend is attenuated. Oscillators indicate a possible end of the movement and thus contribute to go out before the turn. Thus, the application of this tool allows you to exit the transaction with the greatest benefit;
  • When the market is flown. If the market formed a lateral movement, then due to overbought and oversold zones, you can determine the entry points. However, one should take into account that the signal will be stronger if overbought and oversold will be at the border of the channel, and not in the middle. This will be an additional filter, which will help fix api trader to enter the position more profitably.

As you can see, the indicator data group allows both to find the entry and exit point. I do not emphasize that oscillators are a “magic wand” for a trader, but this is an excellent tool that allows you to increase your trading result. Personally, I use a technical indicator AO in my trade to determine the divergence, as well as to look for Elliott Wave Markup. Given all the simplicity and efficiency of the oscillators, these elements can be implemented in an algorithmic approach (http://forexzzz.com/product/forex-zzz-lock-arbitrage/), to automate the result.

How to optimize the trading algorithm?

Trade in financial markets requires the maximum return on the part of market players. Fix api trader should regularly monitor the market’s dynamics and knows the current market data, learn the opinion of other players and of course to form his own vision. The manager should be aware of the risks and act clearly on his working algorithm. In view of the fact that the market is not constant and has a property for regular changes, the trading algorithms should also be adjusted for these events. That is why there is a need for constant optimization of the fixapi trading process.

Optimization of trading algorithms should consist in the direct analysis of trading strategies with the purpose of revealing more favorable parameters of work. It should not be confused that optimization should not completely change the principle of trading systems, but only improve weaknesses. To put it simply, polish all the errors of the algorithm.

The key steps in the trading algorithm optimization are:

  1. Analysis of current activities. Before you begin to optimize, you should know what it is worth to optimize. This stage consists in a certain “disassembly” of the system into separate blocks. Imagine car repair: in order to fix it, you should first disassemble and find out the reason. The analysis of current activities will help the results of trading in the past period and those trading signals that form the strategy.
  2. Analysis of individual filters of the trading strategy. By strategy filters, I mean those elements that are used to analyze: technical indicators, fundamental data, candle combinations, and so on. For example, if you trade using the combination of MA and MACD indicators (http://www.investopedia.com/terms/m/macd.asp), you can test the performance of separate indicators with different parameters and choose the most optimal condition that makes forecast and signal more accurate.
  3. Combination of all filters in one system. Once the separate elements have been disassembled, you should combine them back into the system and analyze the result of the group action. Returning to our example of a car, to check whether it rides, it should be reassembled.
  4. Tracking the adherence to a given work logic. At the same time, after the assembly, it should be analyzed how much the new parameters adhere to the main idea of ​​the trading strategy. The new parameters can disrupt the combination of different filters in the strategy, which means that trade signals can be skipped or operations can be opened, where they should not be. If the logic of the work is not correct, then it is necessary to repeat all the steps from the beginning. Certainly, there are algorithms whose logic of work is difficult to trace, for example, fix api arbitration strategies (http://www.forexzzz.com/product/forex-zzz-lock-arbitrage/), but it is necessary to do this.
  5. Optimization of money management parameters. If everything works as it should be, you should set those parameters that will directly affect the curve of the funds and balance, namely risk and money management. It is necessary to combine various conditions for fix api trading with different parameters. Reducing the risk will not guarantee a stable return. For each strategy, these parameters must be unique. Personally, I recommend to determine the volume of investment in transactions and risk, based on those situations and filters that are now on the market. For example, triggering 5 filters out of 5, we increase the volume, and when 5 filters are given a signal of only 3, we reduce the risk.
  6. Testing on historical data. Once all the parameters have been formed and tested, a global test should be done on accurate quotes over a long period of time (I recommend selecting at least 5 years), as well as on different timeframes to understand how accurate and working the trading strategy has become.

As we have already understood, optimization should be based entirely on repeated testing. It is the test results that allow us to find weaknesses and those that can be improved.

I encourage everyone to optimize their trading approximately once a quarter. It is possible that the optimization may not give the results of those factors that need improvement, but you will be sure of your method action relevance in the foreign exchange fix apiforex market.

 

What if the broker prohibits arbitrage trading?

Throughout the history of financial markets development, exchange speculators were looking for an ideal approach and ways of analyzing financial assets, as well as methods for completing trading operations. Some trading strategies have been replaced by others, and some have improved and work up to this day. But some fix api tradingtechniques have gained such popularity and reliability that forced regulators to limit their trading. Such a technique was arbitrage trading.

Arbitrage consists in analyzing the cost of the same currency pair of the fix apiforex market, but on different stock exchanges. Yes, we know that the forex market is open and everyone can join it. In fact, this is a big exchange. But under the term of “stock market” I mean brokerage companies. With the help of the algorithmic approach, this allows you to conduct an asset analysis by tuning in to find meaningful discrepancies and perform arbitrage trading operations.

You would agree that we often have seen a small exchange rate difference in the quotes of various fix apiforex brokerage companies. And it is on this exchange rate difference that you can earn. Arbitration concludes in determining the maximum exchange rate difference and the opening of transaction on the side of a slower broker (if you conduct arbitrage trading using the fix api Latency Arbitrage technique) or simultaneously on two platforms in the direction of the formed “spread” (if arbitrage trading is conducted using the 2-leg Latency Arbitrage). You can read about the arbitration strategies on the following link:

http://www.investopedia.com/terms/a/arbitrage.asp

However, the most brokerage companies oppose such an approach. And this is understandable. In our market, most companies earn from the losses of their customers. By trading in reliable brokerage houses, which give access to fix api, thereby they encourage algorithmic trading and arbitrage trading, in particular.

Two key reasons why companies prohibit arbitrage trading:

  • Arbitration conducts a lot of trading operations with a short profit taking. Some companies do not give the opportunity to enter their funds until a certain volume is traded;
  • Arbitration conducts risk-free trading. The absence of risks means regular earnings for clients, which in turn means a loss of a substandard company.

Given these bans, the traders began to look for an opportunity to make arbitrage transactions even where it is prohibited. Today, I will talk about the techniques that will allow you to conduct fix api arbitrage trading, taking into account brokerage bans.

  1. Change your trading principle to fix api 2-leg arbitrage. In case of Latency Arbitrage, such an algorithm is very simple to define and there are even special programs that allow to “catch” traders with this approach. As for the 2-leg arbitrage, such an algorithm is difficult to determine. Transactions open with a long period of withholding and may resemble speculative, not arbitrage trading;
  2. Trade through fix api.The very use of this protocol will indicate trouble-free trading, because all transactions will be delivered directly to the market, and thus, the broker will not lose money, but on the contrary, will earn from your commission.
  3. Use secondary software. There are already programs on the market that mask all transactions made by the robot. These programs will circumvent the bans of the brokerage companies and arbitrage trading. The program will mask the operations and will present them to the broker under the guise of transactions opened in a “manual mode.” An example of such a program can be viewed on this link: http://forexzzz.com/product/manual-trading-add-on/

These tools allow you to circumvent the bans of the brokerage company. Each of them will facilitate fix api arbitrage trading and will adjust the process in the right direction. If none of them doesn’t fit to you, you can always use the simplest way – change the broker company.

 

Working patterns in the forex market

Exchange speculators conducted their trading activities more than 100 years ago and devoted themselves to studying market trends. Everyone who came to the market watched its movement and repeatedly analyzed it. These observations, as well as the experiences of the fix api trader participants allowed them to form a number of laws that are commonly called “patterns”.

The pattern, as I wrote above, is a definite market regularity, which has the property to regularly update and repeat itself. Patterns are the key tools in the technical analysis of the fix api trader. Today, the automation of the trade strategies has allowed creation of trading robots that operate on the basis of technical signals formation from patterns.

There are many trading patterns to work on the fix apiforex market, however I suggest you to consider the key ones of them.

Reversaltrendpatterns:

  • Reversal bar. This figure indicates the end of the trend (both ascending and descending). Also this formation is called a “hammer” or “shooting star”. However, whatever they call it, the signal does not change. A key feature of the reversal bar is the long shadow of the candle in relation to the opening and closing of the bar. Thus, the signal can be filtered using the candle’s body to its shadow ratio. Standard value should be at least 1/4. Reversalbar signals that the market setting has already changed and it is best suited to opening positions in the opposite direction from the trend movement. I would also note that the dodge can also be attributed to the reversal bars.

 

  • The jogging figure has the same principles of work as the reversal bar, but it has other filters in its definition. Here, the ratio of the body to the shadow of the candle is not less than 1/4. But besides this, you need to consider the combination of candles. For the upward reversal by the exhibition filter, the formation of the two previous candles where the closing price is lower than the previous ones. After these candles, a reversal bar should be formed. And after it, one bar is confirmed by movement, that is, a bullish one. Thus, the transaction for the purchase is opened after the ports on the bullish candle. The signal to the sales is formed exactly on the opposite.

 

Figures of trend continuation:

    1. Flag. This technical figure indicates the moment when the ascending or descending movement continues after a certain impulse. You could watch it yourself after big fundamental data, when the quotes of the currency pair on the fix apiforex market showed a rapid rise/fall, after which there was a slight correction and lateral movement. Proceeding from this technical figure, it is necessary to open purchases after the breakdown of the upper limit of quotations.
    2. Double bottom (or double top). This pattern is formed on the basis of the wave cycle and indicates the continuation of the trend after the formation of the last wave. Thus, if the figure is formed, one can expect the breakdown of its boundaries with the subsequent movement of 100% of figure height.
    3. The head and shoulders. Similar to the previous pattern, it is formed on the basis of the wave cycle, but has a characteristic difference from one impulsive growth/decrease with smaller areas on both sides. Thus, when this figure is formed, it is necessary to expect its full lower bounds by the subsequent movement in 100% of the top of the pattern (head) to the bottom.

      The list of technical patterns consists of more than two dozen different figures, but the elements mentioned above are confirmed by the time and capital of the fix api traders. Of course, not every strategy is based on these elements or they are simply not needed, as it is in the case of scalping or fixing arbitrage strategy – http://forexzzz.com/product/zzz-2-leg-arbitrage/. However, this tool will optimize your trading process and improve the financial result.

Classic Technical Indicators

Ever since the beginning of the development of financial markets, each participant in the exchange trading has been developing his vision and understanding of the assets movement. Various combinations were created for forecasting the future assets value, fundamental factors that determined the course, as well as the first trading strategies. However, the market did not stand still, and its structure and specifics also changed, but the basic principles remained the same.

In the age of computer technology, it is difficult to imagine any process of activity without the use of automatic tools. The financial market is not an exception, too. During the 80’s and 90’s, most fix api traders developed their own mathematical models, as well as a number of auxiliary tools that could help in trading and which informed the managers about the current market situation. These tools were called technical indicators.

In its essence, technical indicators are a set of specific mathematical operators that analyze the price value and display the value of the indicator in the form of histograms, lines or other figures. Thanks to these values, the fix api trader can relatively navigate to the position of the financial instrument and predict the further movement. More details about the specifics of technical indicators can be read here –http://stockcharts.com/school/doku.php?id=chart_school:technical_indicators. And today, we will consider the most widely known classic indicators.

I highlight several key technical indicators:

    • Moving Average
    • MACD
    • Bollinger Bands
    • Stochastic
    • Awesome Oscillator

Today, we will not look at the indicator code or consider on the basis of which operators it is built. We will consider exactly how these indicators are interpreted by the market participants in their fix api trading.

Moving Average

This is a classical indicator, which displays the presence of a trend on the chart. If the quotes are above its values, it is a signal for an uptrend. If they are below–it is a signal for a descending trend. When the quotes cross the MA line, you should open the purchase/sale depending on the breakdown direction. It should be noted that all the market players use this or that MA combination with different parameters. However, this indicator, in my opinion, does not work well as a signal forpurchases/sales, because at the time of crossing, the price significantly goes away. I use this indicator as a filter to determine the trend’s strength.

MACD

This indicator also applies to the trend indicators group, but it is more advanced than MA. MACD displays simultaneously several trading signals: divergence, the presence of a trend, an overbought/oversold zone. The first signal indicates possible corrections within the trend based on the divergence of quotations with the value of indicator histograms. So, when the value of the asset grows, and the histograms are reduced – a divergence occurs, which signals about correction of quotations down. The signal for purchases (asset growth) operates exactly opposite. Similarly, when the histograms show significant growth or decline – this is a signal for the asset overbought/oversold. In turn, the signal for buying or selling the asset is crossing the signal line value MACD.

Bollinger Bands

This technical indicator is a calculation of the standard deviation based on quotations with a step of 20 bars. This allows you to determine when the trend begins, when the indicator blades begin to expand, and when they return to the regulatory zone, they indicate the end of the trend. Also, this indicator is used to work inside the BB channel: when the quotes of the currency pair on the fix apiforexmarket fend off the indicator’s border, it is worth to open a speculative position in the opposite direction.

Stochastic

This is one of the most popular indicators of oscillators, which demonstrates the zones in which quotes reach the maximum value and you can expect a corrective turn. This indicator acts as a filter for closing positions or trading on small turns. I will also note the fact that Stochastic demonstrates a buy signal when the values ​​of both lines are in the bottom of the indicator, and also the lines intersection is shown in this zone. For sale, the signal appears when the value of the indicator is in the upper area and also the lines intersect from top to bottom.

Awesome Oscillator

Indicator from the group of Bill Williams trading strategy. It is also an oscillator that indicates the signals we considered above: divergence, overbought and oversold, and the current market situation. Personally, I use this indicator to find the Elliott waves. The peak along the AO points to the third wave, and the fourth should always be brought down in the opposite direction.

Money Management Rules: Key Aspects for Saving Funds

As you know, each trader should have his own trading strategy to achieve profitable trading. Thus, he needs to have his own principles of analysis and forecasting the movement of the asset future price. And how accurate the forecast will be, is determined by the profitable trading. However, I do not fully agree with that. After all, you can constantly predict the right direction of the asset, earn on this and with just one transaction to cover all the profits or even to lose funds.

In order to avoid this, effective capital management rules should be applied.

Capital management includes rules of risk and money management, which regulate the entire process of trading on the part of cash flow control. Each of these types has its own function and a number of tasks that must be addressed by means of the risk management. To understand this, let’s look at each of them individually.

Risk management is a set of rules for limiting the fix api trading mode in order to minimize losses in the context of each transaction. Risk management allows the manager even before opening of the transaction to know how much he is willing to lose from this investment. This allows you to prepare the trade based on a certain loss percentage.

Thus, the risk can be set to the following trading parameters:

  • Transaction risk: limiting the possible loss in each transaction;
  • Daily risk: the maximum allowable amount of loss in a single day. In the event of its occurrence, the trading on that day is terminated;
  • Maximum number of loss-making trades: if this limit is reached, the trade also ceases;
  • Weekly risk: similarly, as for the day, you need to limit the possible losses in the context of a week or even a month;
  • Risk reduction when reaching the established limits: I also recommend that in the event of a regular occurrence of risks, you need to limit this parameter (transaction risk) until your trade returns to its previous revenue level.

These risk parameters allow you to monitor possible losses from different sides, which allows you to save your capital.

Certainly, the entire risk control depends on the type of trading strategy and the deposit amount. Some people accept a risk of 0,5%, while others cannot trade in this corridor because of the insufficient deposit amount. Of course, there are strategies, in which the risks themselves are at a minimum level or completely absent. As a rule, this group includes high-frequency algorithms that lead to fix api arbitrage trading- http://forexzzz.com/product/forex-zzz-lock-arbitrage/.

Money management is a control of all open positions. If the risk on the transaction is more in control of a particular transaction, then money management should determine the maximum losses in case of a decline in all transactions, because you can put the risk on the transaction at 0,5% and open 100 transactions, which in future will guarantee -50% of the capital. To avoid this, it is necessary to use money management and combine it with risk management in its fix api trading.

Thus, money management can be determined in the following parameters:

  • The maximum volume in one trade operation: the parameter will allow you to determine the volume based on the risk and further reduce it using money management;
  • Maximum use of margin funds: the amount of all open positions should not exceed the percentage of the capital you set;
  • Full deposit risk control: as I have already mentioned in the example above, money management should signal the trader about the maximum risks in case of triggering all stop loss levels (http://www.investopedia.com/terms/s/stop-lossorder.asp).

These key rules of risk and money management allow you to manage the capital and allocate correctly the investment funds. After all, the main task of the fix api trader is to just keep the capital in the financial market, and only after that to earn money.