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Investment amount: € 5,000
Strategy:
AI Robo X1
AI Robo X2
Martingales
Profitability: # 3492748
83.56%
Extended version
Your profitability for 12 months:
+ 4178, - €
Forex trading as an investment strategy
For many decades, banks, funds and, in some cases, large companies have been trading foreign exchange. The foreign exchange market has been the largest financial market in the world for years, which is partly due to its global network, but also due to the high volumes traded. In contrast to the stock market, which is also available “physically” in the form of floor exchanges, the foreign exchange market exists exclusively online, i.e. in the area of computer trading. Meanwhile, the foreign exchange market is accessible to virtually every interested investor via the so-called forex broker. The basis of the foreign exchange market, and thus of course also foreign exchange trading, is that the value of two currencies is measured against one another and expressed in the exchange rate (foreign exchange rate). The prerequisite for a currency to be traded in forex trading is that the relationship to another currency is not determined or restricted by the state.
What is noteworthy in forex trading - a brief overview
Trading forex should never be started without a certain amount of preparation, as this is a very speculative and therefore risky investment. You should therefore inform yourself extensively before you start forex trading and this includes, for example, knowing all the terms around the topic and learning their meaning. A very good opportunity to prepare is to use a demo account, which every Forex broker offers free of charge today. Here you not only get to know the characteristics and peculiarities of the chosen broker but can also learn different forex strategies and test trading in detail without risk. About foreign exchange trading as such, you should also know that you can achieve high profits in a short time, but on the other hand you can also lose all invested capital in just as short a time (total loss).
How does Forex trading work?
As already briefly mentioned, the relationship between two currencies is the basis of foreign exchange trading. This value ratio is primarily determined by the supply and demand of the "participating" currencies. Secondly, economic, political and sometimes also technical factors play a role, through which the supply and demand are “steered” in a certain direction. One currency can steadily gain or lose value compared to a second currency, which then leads to a change in the exchange rate. This change is then at the same time the basis for the actual forex trading, because the investor has to decide whether he is of the opinion that currency X will rise or fall against currency Y in the future. Accordingly, the currency X is then bought or sold or the currency Y is sold or bought.
Forex strategies
Forex trading strategies usually aim to take advantage of short-term market movements. Breakout and trend following strategies as well as swing trading, whose signals are used for forex trading, are predominantly widespread.
Breakout Strategies for FX Trading
These strategies are based on technical chart situations with a comparatively high forecast value. Breakouts often occur when the following chart patterns are present:
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Resistance and support
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Trend channels
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Multiple tops
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Chart formations SKS (shoulder-head-shoulder) and their inversion
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Wedges and triangles
If you want to trade an outbreak, you have to know the respective chart pattern and, above all, have made yourself familiar with how high its forecast value is. If resistance is exceeded or supports are undershot, a breakout is likely, but very often there is a setback towards the breakout point. The price can break out of symmetrical triangles up and down, but the breakout in the direction of the previous trend is more likely. The upper shoulder-head-shoulder formation is a beautiful formation, like the inverse SKS, but has been considered unreliable since the early 2000s. Breakouts from tight consolidations are most likely to be expected. The breakout itself is not yet the concrete trading signal. The breakout strategies are likely to be successful if their hit rate is high, which is doubted, for example, with the SKS in 2017. Traders always have to expect false signals, against which they hedge with a stop loss. Professionals use additional criteria before acting on an outbreak. These include increasing volatility and exceeding / falling below important chart signals of the previous days. Any breakout strategy is based in large part on the trader's visual chart analysis, which is supported by pattern recognition tools.
Learn Forex Trading: Trend Following Strategies
Any trend following strategy assumes that an existing trend will rather continue than break immediately. It has to be recognized, of course. Traders look for upward or downward trends with the greatest possible significance. There are trend lines to help, the tracking of higher highs / lows or lower lows / highs, and trend following indicators. A trend line becomes more meaningful by testing it with previous movements. That means: older trends are more significant than younger ones. This creates the trade-off between achieving a high hit rate and getting started early. The same phenomenon applies when trend following indicators are used to define the trend. Nevertheless, there are significant forex signals . One of them is to break out of a consolidation towards the previous trend.
Forex funds
On the one hand, many investors have a keen interest in using foreign exchange as a form of investment, but on the other hand, the risk of forex trading is simply too high for many investors. For these investors who do not want to speculate in currencies with a very high risk, so-called forex funds have been available for some time as an alternative to direct currency trading via a forex broker. These Forex funds are basically "normal" investment funds, as they have been known for decades in the form of equity funds, pension funds or open real estate funds and are used by millions of investors in this country. The forex funds differ from the aforementioned funds in principle only in the fact that investments are not made in stocks, bonds, money market papers or real estate, but in the form of business contracts in foreign currencies.
The advantages of forex funds
When it comes to the advantages and disadvantages of forex funds, you always have to compare them to direct forex trading in order to illustrate these advantages and disadvantages. Because it would make little sense to compare the forex funds with regard to the advantages and disadvantages, for example, with stocks or overnight money. An advantage of the forex funds compared to direct currency trading via the forex broker is that the risk for the investor of the forex funds is significantly lower that greater losses will be suffered. There is in principle no risk of total loss when investing in forex funds, for example. The reduced risk is mainly due to two facts. On the one hand, forex funds invest in different currencies and not just in one or very few currencies, as is common in direct trading (forex trading). As a result, a loss in one position is of course much less significant than if this position is the only one. One speaks here of the risk diversification known for open funds. On the other hand, the funds are managed by professional fund managers who are very knowledgeable about foreign exchange trading. So you don't have to have any knowledge when investing in forex funds, as is the case with direct forex trading, where you also have to constantly deal with the trade and news. The forex fund saves the investor a lot of time and effort.
The disadvantages of forex funds
There is hardly any type of investment that does not have disadvantages, at least for some investors, including forex funds. Again, the disadvantages relate only to the direct comparison between the forex funds and forex trading. A disadvantage of forex funds is certainly only for very speculative traders. These speculators want to achieve significantly higher profits than is possible due to the risk diversification with the forex funds. Another possible disadvantage goes in roughly the same direction, namely the significantly lower "fun" when investing in forex funds. The investor does not have to worry about the investment here, or follow news and prices. This is exactly what many traders find very exciting and "exciting" in forex trading. Under certain circumstances, you can follow the price charts there to see how you can achieve higher and higher profits in just a few minutes. In addition, you have to trust the forex funds that the fund manager is well versed, which is certainly not easy for every investor.
Expert Advisors
Expert Advisors are "trading robots" , ie automatically working programs for trading. They are used as standard in high frequency trading; at the beginning of 2017 they can perform around 10,000 operations per second. EAs are based on the indicators described and certain trading strategies of their programmers. In theory, the trader can run them without further intervention and even without market observation.
Expert Advisors for private traders
Private traders will not program an EA that performs 10,000 operations per second. Among other things, that would require a lot of capital. Basically, it is very complex to develop such a system because it requires a lot of know-how and good IT skills. The systems must be thoroughly tested and, ideally, managed by a team of experts who have the necessary stock market experience to be able to intervene properly in a crisis.
Expert Advisors as “money machines”?
It is difficult to achieve high profits with EAs over a longer period of time, but it is possible that, according to a study by the AITE Group, about a third of all securities trading in 2006 was controlled by automatic computer programs and algorithms. Investment banks, hedge funds and computer experts have been using these EAs for a long time, in some cases very successfully. However, it should be noted that there are only a few very good EAs that have excellent risk management. Since the systems always follow the instructions of the programmer, it is important to check these systems again and again and adjust them if necessary.
Alternatively, the programs could follow several algorithms, in a very small space - which then leads to the 10,000 operations per second described. The assumption that trading companies with the appropriate software and a lot of capital operate in exactly the same way is supported by the fact that since around 2008 - i.e. since the time EAs were established - volatilities have been falling in many values, especially in the indices. Even on the Forex market, the smallest pendulum movements in intraday events can be observed more and more frequently, where there were still strong trends ten years ago. If EAs “produce money” sustainably, the respective companies keep the results and the software for themselves in order not to encourage imitators.