Advancement in technology has benefited the retail investors immensely. In the past if you had to learn the basics of trading you had to go to the broker office and learn how the currency market works. Technology has revolutionized the way trading is done. With paper trading one can learn trading without much hassle and risking any money. If you want to be a good trader, you should first trade virtually. You will lose this game if you take the plunge directly with real money.

Benefits of Demo Trading

Demo trading helps you to know the trading platform better. Things like how to place order, how to put a stop loss, closing the trade etc can be learned without a penny. If you want to test a new trading strategy, you can do so with the demo account. Even experienced traders use demo account to test the new trading strategy first. You will save a lot of pain if you trade with demo account first.

Start with a Micro Account

Let’s assume that you have done demo trading for few months and want to go live. Before you fund your account, you should be aware of different phases of going live. It is necessary to demo trade first. But trading live is completely from demo trading. Emotions can come into play if you lose money on some trades. You can work on controlling the emotional decisions. Before opening a real account with the full amount, you can open a micro account with a very small amount say $ 200. Almost all the brokers allow you to trade with a small account. You can work on controlling your emotions with the help of micro account. This way you ensure that you don’t lose much if do wrong. But make sure that you don’t expect to turn $ 200 account into a million dollar account within a year.

Invest Only Half the Amount

After you have traded the micro account for a while, its time to jump in and make serious money. But invest only half of the amount you initially planned. The logic behind this is that you don’t lose lot of money if you take emotional decision. Remember you are still a novice trader. You are not in a position to make lot of money. If you do well in this phase of trading and also in previous phase of trading micro account, it will boost your confidence tremendously.

Trade with Full Amount

Invest the full amount only after you trade with half the money successfully for 3 months. If you lose 10% of the account, stop live trading and return to demo trading. This is difficult decision as most people can’t admit their failure. They end up blowing the account completely. You don’t want to do that mistake. Do you?

It is long process till you become a successful trader. Only those who are willing to stay in for a long haul win in this game. You will already be in the top 10% if you understand this fact. With meticulous effort of improving your skills as a trader will make your dream of making serious money come true.

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Greek is the burning issue of the past few days Markets from all around the world are closing watching the developments concerning the Greek deal. It will have repercussions on both the sides- up or down on the markets. Euro and USD have discounted the developments on Greek deal in their values periodically. As a trader you should know about the Greek crisis.

Recession in Greece

Greece has been in the recession for the past five years. In the past, Greece has accepted the bailout package and also had agreed to austerity measures. The European countries had asked Greece to bring the reforms. But Greece has failed to bring in the reforms as per the expectations of the creditors. This time European leaders are not willing to give bailout without a commitment from Greece.

Important Payment in March

The proposed bailout will consist of 130 billion Euros. The upcoming payment on debt of 14.5 billion Euros is in March. Without the bailout, Greece will be unable to honor the payments in March. It will have huge repercussions on the financial markets not just in Europe but also on those around the world. It will be a domino effect. Country defaulting on its debt is huge setback for the world economy. A default by Greece will be no different.

Obstacles in front of Greek Politicians

There are genuine concerns of people on both sides of the deal. Greece is going into the elections this April. The bailout will bring with it many difficult measures like tax increase, wage cuts, lay offs etc. With elections coming up shortly, it will be very difficult for the politicians in Greece to accede the demands of the creditors. Many unions in Greece are protesting hard against the austerity measures proposed by the European leaders.

Demand of the Creditors

On other side, leaders from European countries have asked for a stronger commitment by the Greek politicians. The polls in April have worried the creditors. The creditors demand that reforms should be the priority of any government which comes into the power.

Hope Lost with Delay

It is important that the deal is finalized as early as possible. Talks in the past few days have seen some positive developments. But nothing concrete has emerged from the talks. Greece will not be in a position to pay in March if bailout is not offered. Finance ministers from Europe will again meet in the next week when the deal has to be finalized. A political consensus will have to be reached. It is not just an issue limited to financial world.

The last week saw a seesaw of Euro between 1.3200 and 1.3000. Euro broke an important level of 1.3200 on the upside four times on the hope of Greek deal going through. But it was unable to break the resistance of 1.3230. If the deal goes through the single currency can touch the 1.3400 levels. But if the delay continues, the single currency could be seen at 1.2500-2600 levels.

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Trade with the trend is the most commonly told mantra by the experienced traders. But this difficult task makes trading a little tricky affair. First of all you will have to identify the trend early enough. If you have practiced enough to spot the trend early, the viability of the trend needs to be tested. You should make sure that it is not a fake trend by judging its strength. This is where momentum indicator comes into play. Many such tools are available to perform that task. Some of the prominent indicators are CCI, RSI, and Stochastic.

Commodity Channel Index

Intended to use for commodities, now it is used with many financial instruments to spot the trend, its strength and a possible turnaround. It has many variations each with its own trading rules. The range is from +200 to -200. It is customary to buy when it goes above 100 as the up trend is confirmed. Opposite happens for -100. Zones beyond positive and negative 100 are considered overbought and oversold conditions. Extremely overbought and oversold zones sit beyond 200. When it enters in this territory, you are expected to close the trade. When this momentum indicator crosses the zero line, appropriate trades like long or short should be taken and should be carried till the extremely overbought or oversold zones.

Relative Strength Index

Created by Welles Wilder, this momentum indicator follows the close of candles for a certain period. A typical period is 14. Play with RSI is little different from CCI. Zones beyond 50 are considered as a confirmation of a trend up or down. Overbough and oversold levels are above 70 and below 30 respectively. Unlike CCI, you don’t buy or sell when a zone crosses above 70 or below 30. Once entered into these zones, price tends to stay there for a long time. So if you want to play with RSI, you sell when RSI comes below 70 from above and buy when it goes above 30 from below. A level of 50 is used by many traders. It is also used with trend lines. When this line follows the RSI, there is convergence. If it diverges from the RSI trend, it is a signal to a possible reversal. Understanding how to use RSI trend lines is a competitive advantage because you come to know about it much earlier than with just RSI.

Stochastic

Developed by George Lane, this momentum indicator assumes that the price closes looks to close near its high or low when in uptrend or downtrend respectively. It ranges from 1 to 100 and consists of fast and slow line. Zones below 20 and above 80 are critical. They are called overbought and oversold respectively. Crossing a zone is considered a reversal or just a correction. There are many ways you can use this indicator. The easiest is to sell or buy when the fast line crosses the slow line from above and below respectively. Next play is similar to RSI. Sell when the indicator comes below overbought zone and buy when it goes above oversold zone of 20. You can also use the momentum indicator to find a divergence between the currency price and the stochastic indicator. The divergence implies a correction so you can take appropriate trades.

Momentum indicator is a handy tool if used with some knowledge. You will have to spot the trend well before the masses so that you can make money with lesser risks. The weapons of indicators give you a competitive advantage over others.

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Forex is one of the fascinating financial assets to trade. It is a high risk game. But if you can handle the risk religiously; you can get stellar results because of the currencies. Technical analysis is one of the ways with which you can trade. There are some tools like indicators to help you make better decision. It is beneficial to you to know these technical indicators. Technical indicators help you unravel the hidden meaning of the currencies. One class of technical indicators is called moving average indicator. These indicators help you to determine the trend.

Elementary Form of Indicator

It is the basic moving average indicator which is simply an average of currency of specified period. It takes an input as periods which can be anything from minutes to weeks. 21 days moving average is most common. This is nothing but an average of the currency prices of last 21 days. For the next day, price of first day is excluded and yesterday’s price comes in. There are some variations of this indicator like exponential with some mathematical variations. With this indicator you can determine the trend with two methods. A simple look at the graph will tell you the trend. The other method is based on the location. Trend is up if the indicator is above the prices of currency and it is down if it the indicator is below the currency price.

Add Envelop to Indicator for More Data

Other moving average indicator is moving average envelop. It presents you more information than simple indicator. It consists of a band around the price of a currency which indicates the overbought and oversold conditions. Envelop is formed at equal percentage above and below the average. Currency you analyze and the timeframe will decide the percentage of envelop. Price above the indicator and closer to upper band confirms the up trend. If the price is below the indicator and close to the lower band, the trend can be confirmed as down. The price dillydallying near the indicator away from either of the bands confirms the consolidation phase. This indicator helps to determine the trend or the consolidation phase.

Advanced Version of the Indicator

An advanced version of this type of indicator is known as MACD. You are required to give inputs of exponential averages of three periods. This indicator has two lines. The default value of the inputs are 12, 26 and 9. The first line is the difference between the fastest and slowest averages. By default it will be the difference of 12 and 26. This line is known as the fast line. The second line is called signal line which is nothing but an exponential average of the third input. By default it is 9. When these two lines cut each other, it is considered to be a buy or sell signal. This indicator has a one other variation which is known as MACD line indicator.

The trend is confirmed when you use moving average indicator with the price of the currencies. It can not be used when the currency is not trending. You should first determine the trend and then use this indicator to confirm the buy or sell signal.

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