subject: The Pros And Cons Of Self-directed Forex Trading [print this page] It is crucial to keep an eye out for other players while trading in the forex market. By examining their roles, you may be able to improve your own trading approach. Think of it; if not professionals, who else in this world could get a better look at it?
Before there were desktop applications to help individual traders, the banks ruled the market. Each day, more than a trillion dollar exchange happens all across the globe through the means of banks. The money originates from international corporations and many governments. They have to trade on the forex market so as to make sure that their long term policies are ensured.
Once you get the whole picture involving the banks and the governments and the corporations spread over the globe, you will start to see from their behavior the rhythms of the forex market, as it is their finances that go in to the forex market in the end. Markets reply to this by staying within this spectrum. Resistance is seen once the price approaches near the limits set by the range. You can get a glance of the big picture only if you view the weekly price charts and seek out the currency pairs that are bound by a range limit.
The fund manager is also a crucial aspect that you have to consider. These entities gather significant pools of money in the millions of dollars and seek to provide a return to the investors in that pool. They have a trading operation so that they can realize their total returns objectives. The fund managers work for a fee and get profits that they then split up with their investors. The common tradition in the field is to share the profits based on a grid of performance.
What is it about trading that the fund managers can tutor you in? Before we answer that question we need to know how they operate. Fund managers in trading of forex usually have long range objectives. They are more prone to want uniformity in performance. Information and managing risks are their main concerns as this helps them to diminish equity drawdown.
The corporations that manage funds hold huge quantities of information regarding the forex market. Information and managing of risk are the most crucial factors for those money managers who seek long range productivity. What does this tell the traders?
To say the least, it is seen that risk controlling is very crucial. The team of traders in a forex fund will be more informed than a self-directed trader. It is vital then that a self-directed trader applies risk control using risk analysis to evaluate the risk targets before each trade. To have a risk plan is the main thing, even though a single trader has greater risk withstanding power than a fund managing company.
An additional difference between the individual trader and the fund manager is time itself. Fund managers can stay in for longer durations to recover positions in a drawdown but individual traders cannot. The fund manager can ride out a volatility wave and recover the previous position. This is an important measure of fund performance and is perhaps the greatest advantage of the forex fund manager's perspective.
Instead of trying to imitate the capacities of a fund managing team to hold back risks an individual trader has to focus on studying the indices that measure a fund's functioning in detail and then use the results in trading. With the help of specialized measures that fund manager's use such as percent positive months, maximum drawdown, and average monthly return individual traders can hope to obtain a view of their own shortcomings.
The fund manager is able to trade on a separate degree because of access to resources to handle information, large capital and the power to have long-term aims. The viewpoint of the individual trader is how to make a fast buck within the day or hour. To take forex to be an asset that has long range productivity means that you then put in a fraction of money in longer deals and use only a fraction in the daily trading. This is a little like having your cake and eating it too and might be the recipe that works.
