Through this article, we will try to understand the concept of the moving average and its implication while trading. Moving averages are the most common and sought after form of technical analysis tools used while trading. These indicators are said to be lagging indicators, as is it is constructed with the help of the data presented as the end of day prices. In order to understand this concept easily, let us take another example. Consider the following closing prices for the shares of Reliance Industries limited:.

Now, a simple moving average SMA is a calculation that considers the average or arithmetic mean of a given set of prices over a specific time period. Now, if the calculate the moving average again for the last five days, its value will change as the average price changes after accounting for new data. In other words, the average price changes as and when the value of underlying asset changes on day to day basis.

Further, the moving averages can be calculated for any time frame. It could be 5 minutes, 15 minutes, hours, days, weeks, and so on. If we are using 5 observations within the selected time frame, it is called 5 SMA, and if we are using 9 observations within the selected time frame, it is called 9 SMA and so on.

Now, the chart below is the daily chart of Airtel Limited. And we have plotted 50 Day Simple Moving Average on it. Now, if you carefully analyze, the 50 SMA clearly bifurcates the chart in two halves. When the market is trading over 50 SMA, we see continuous buying momentum in the market and the bulls are having a tight grip on the market.

And as and when the market comes below 50 SMA, we see selling pressure in the market and the bears are having higher say in the market. Overall, in simple words, it can be said that prices above SMA are considered to be bullish and below it are bearish.

Exponential Moving Average EMA are slightly advanced and more trusted form of moving average. The main difference between EMA and SMA is the weightage given to each and every value under consideration. Under EMA, the more recent values are given higher weightage, but in SMA, all the values are given equal weightage. For this simple reason, EMA is sometimes said to be a better parameter for trading than SMA. We will not be going to explain the calculation methodology of EMA in this article.

You cannot expect to make considerable profits from trading something that you do not know. You need to educate yourself about what the Forex market is, what factors affect the currencies' fluctuations, the average Forex trading ROI and expected returns from each currency pair.

See our investing for dummies guide for more info. Whether you are starting small or starting with big trading capital, you need to set your expectations low in order not to get frustrated when the market goes in an unfavorable direction, and so you will not lose most or all of your capital.

Successful traders always keep track of their investments, as this is the best way to avoid surprises and be fully aware of what is happening with your money. If someone trades in the Forex market once every now and then, the trader is probably going to feel like they are missing out on a lot of money-making trades and is more likely to spend a lot of money in one market position, which is risky since they are placing all their eggs in one basket.

Any trader can be easily driven to the Forex market because of the volatility, the volatility of its assets, the most volatile currency pairs , and many traders can rush into making decisions that are not rationally based. If you want to achieve a sustainable income from Forex trading, then there are things you should avoid doing. When a trader sees that their market position is losing, they get upset and decide to make a revenge trade to cover their losses.

The Forex success rates are high when a decision is based on rationality and logic, but emotional trading is more likely to pull success rates down the drain. Every trader has their own strategy, their own capital, different average Forex returns, and what works for others might not work for you. You should not compare your investment outcomes to the rich Forex traders who use hundreds of thousands of dollars to invest. People sometimes follow trendy market opportunities, Bitcoin, Dogecoin, and other trends where almost every trader invested to increase their average returns without proper planning and analysis.

It might not be the best strategy to invest just because it looks good, or because every other trader is investing in the same asset or market. Our partner, XM , lets you access to a free demo account to apply your knowledge. At investfox we are always happy to tap into someone's brain to produce great content. Wanna help us out? We will be glad to host an interview or collaborate on an exciting piece! Some prefer scalping, day trading, or swing trading, so any strategy works as long as it brings a positive return on investment.

Yes, but only in the long-term, after several years of Forex trading and once your Forex annual return offsets your full-time job income, you can consider Forex trading your main income. Language English Indonesian. Home Education Beginner Trading Guides What sort of Forex trading returns you should expect?

Back to Beginner Trading Guides. What sort of Forex trading returns you should expect? What is the Average Return on Forex Trading? What Does It Take to Become a Successful Forex Trader?

The Don'ts of Forex. Armand van Aswegen. Do your research Set your expectations Experiment with strategies yourself Do your homework You cannot expect to make considerable profits from trading something that you do not know. Set your expectations low Whether you are starting small or starting with big trading capital, you need to set your expectations low in order not to get frustrated when the market goes in an unfavorable direction, and so you will not lose most or all of your capital.

Spend a decent amount of time on trading activities Successful traders always keep track of their investments, as this is the best way to avoid surprises and be fully aware of what is happening with your money If someone trades in the Forex market once every now and then, the trader is probably going to feel like they are missing out on a lot of money-making trades and is more likely to spend a lot of money in one market position, which is risky since they are placing all their eggs in one basket.

Do not trade emotionally When a trader sees that their market position is losing, they get upset and decide to make a revenge trade to cover their losses.

To use MetaTrader 4 Terminal For PC, iOS, Android, and MultiTerminal for PC, please connect with our trusted broker. Click Here to Register now. If you have any questions please contact Live Chat Or email us at [email protected]. How much capital can a professional currency trader build up per month?

This question is, perhaps, one of the most discussed topics on various Forex - forums and other resources of the corresponding subject matter. However, unfortunately, there is not so much really valuable information. And it is not surprising - experienced market participants are not in a hurry to share their secrets, let alone disclose the size of the sums made trading online.

Not as an example for beginners in currency trading, who are often willing to share their achievements, but the profit and loss ratio of such traders is not very attractive.

If we talk about the actual state of affairs, we agree that trading is a tool for making a quite decent Forex returns monthly. Constant training and application of basic rules of a trader allow making this process the main source of income. However, in most cases, inexperienced people lose the deposit made by them. The probability of such a development is quite high for a beginner trader because this method of earning contains many nuances and pitfalls that can lead a beginner to a complete collapse.

It is necessary to assimilate a simple truth: trading makes rather strict requirements to the traders from the point of view of both psychology and strategy search. It is usually not easy for a beginner to find complete information, allowing to achieve regular success.

The very process of trading can be compared with ordinary business. The essential difference is that while conducting his own business, a person is engaged in a specific, familiar to him sphere of activity. In the process of trading, one has to manipulate financial instruments, without deep knowledge of which it is impossible to get a stable profit.

The amount of income of different traders fluctuates and largely depends on the initial capital. For this reason, it makes no sense to consider the possible profit in absolute terms. A more correct value is the percentage of profit. An important factor affecting the income is the practical experience of the market participant, so they should be divided into several categories.

Most old-timers in financial markets are convinced that this category of players is only able to lose their funds, thus ensuring a harmless existence of brokers. Of course, it is impossible to vouch for the reliability of this information. At the same time, statistics is a stubborn thing, and it shows that the lion's share of traders remains at a loss during the first months. Many of them leave, but the rest of the people, who managed to finalize the chosen strategy during the year, still go to positive trading balance.

This category has already learned not only to get to break-even point but also to receive a certain income. The period of time it takes to rise to this level is months. These figures should not be confused with the time really spent on training.

The latter depends on the initial level of a beginner, the ability to learn and other circumstances. One of the determinants of success among amateurs is the trading strategy chosen for them and strict adherence to predetermined rules. However, some traders prefer to use a strategy, which is characterized by moderate or high risk.

Practice shows that higher risks usually have the opposite effect. There are many examples when seemingly successful traders completely lose their deposits in the next few years, having made only mistakes with high risk. But such a result requires a good starting capital, initial basic knowledge, and an experienced mentor. Only in this case, we can talk about a successful trader. He receives a solid income and has already appreciated all the advantages of this work.

This group of specialists uses trading not only their own capital. Unlike amateurs, investors trust them, giving their investments to management. They are approached by individuals whose financial knowledge is not sufficient for independent trading. Professional traders carefully choose financial instruments for their investments.

Their action must be clear to the professional. Only those assets, which practically did not cause any failures, are taken into account. Any risk can be accepted only if it is fully justified. A significant amount of absolute income is achieved due to large initial investments. These figures also include commissions from investors who have entrusted their funds to a professional. Trading fees are the sum of costs that a Forex trader has to bear during trading.

There are optional expenses for those things that a trader wants to buy: for example, news services, technical analysis services or a better connection - and obligatory expenses that everyone must pay. These expenses vary from broker to broker but usually constitute a relatively small amount. Most often, these are the only trading expenses that you bear. It may sound simple enough, but many traders do not attach importance to these expenses and thus underestimate the difficulty in making long-term profits.

It is not always the case that Forex traders do not profit from bad strategies - sometimes bad management or undervaluation of expenses can lead to failure where the results of the trade itself should have led to success. A trader can better manage his money by learning about the major trading costs he will have to bear. The most common expenses in trading are spreads and commissions charged by the broker for each trade.

A trader must pay no matter how successful the trades are. Variable spreads. It should also be mentioned that the spreads you will encounter depend on market volatility and the currency pair you are going to trade. A change in spreads is common in markets with higher volatility. Some brokers also charge a commission for processing and executing orders. In such cases brokers increase spread only slightly or do not change it at all, as their main source of income is commission.

Fixed commission - in this case, the broker will charge the same amount regardless of the size and volume of a transaction. The relative commission is the most common type of commission calculation. In other words, the larger is the trade size, the higher is the commission for it. There are also hidden costs when dealing with some brokers. Among those that are worth paying attention to are: inactivity fees, monthly or quarterly minimums, margin costs and additional costs for telephone calls with the broker.

If a trade is made at night, the trader holding the position also has to pay a commission. These expenses are usually found only in the Forex market and are called night rollover.

As a night rollover, different interest rates are added for each currency you buy or sell. The difference between the interest rates of the two currencies that you trade is the cost of holding a position overnight. They are not determined by your broker, but by the agreement between the banks. In general, any trader with a serious attitude and enough time spent will be rewarded, no doubt.

The problem of many novice traders is that they underestimate the level of obligations. They are not ready to do all the work that it takes to become a real trader. Trading on the international currency market is a very promising and profitable business, and the fact that the number of Forex traders is growing rapidly almost every day successfully proves it. Many people certainly want to get a solid and sustainable profit under such comfortable working conditions, however, given the fact that only a relatively small percentage of market participants achieve significant success, some of those who are interested in trading as a profession, have repeatedly wondered whether it is really possible to get a stable income Forex trader, and how to do it?

The reason why there are not so many really successful Forex traders if you take into account the scale of the market is the elementary lack of proper level of preliminary training, and, of course, practice.

In order for trades to bring a stable and significant profit, the market participant must undergo a course of theoretical training, supported by practical exercises on a training demo version of the trading account, learn the principles of the market, get acquainted with trading rules and professional software, without which it is simply impossible to trade at Forex, as all trades are conducted remotely in the online mode.

One of the most important points is blocking emotions during the work period, as well as discipline. Carrying out impulse trading should be excluded, the market participant should act only according to a pre-determined plan, which is called a trading strategy.

The strategic model of conducting trades is chosen personally, effective strategic templates at Forex are enough, also it is necessary to assimilate some basic trading rules:. Do not open a position without preliminary analysis of the market and made a forecast of price behavior. Set a limit on the volume of positions. Calculate the income and expense balance. Do not deviate from the strategic plan under any circumstances.

Having mastered the basics, strictly following the rules and adhering to the strategy, having taken a preliminary theoretical course, a market participant will be much more confident in his abilities, will achieve the desired result faster and will minimize the risk level leading to losses.

As per seasoned traders, a key to successful trading is your seriousness and desire to progress. The main thing here, to getting a notable profit lies not just with monitoring charts and rates on the terminal but also with staying on top of what is going on the markets and the world itself. There's a lot of people like that, but we can't see the results.

In order to make a decent Forex return, it is not enough to be able to trade profitably. To do this, you need to invest an impressive amount of money in the deposit and no, even super skill does not guarantee their losses, because the risks in Forex are very high or find investors for this.

What does it mean? It means that trading on Forex is a serious business, where a good financial return requires a substantial investment. But, unfortunately, most traders are not interested in it at all. Everybody wants easy money - more and faster, and the rules of money management are remembered only when they lose the entire deposit.

But the stories about mega-profits on Forex forums and blogs simply cannot be recounted. Of course, you can make a profit which will be measured in thousands of percent. Such cases are based on minute luck and opportunity, but they have absolutely nothing to do with serious and, most importantly, profitable trading.

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Remember: you won't get anywhere near a return on your investment if you don't put sufficient efforts into educating yourself and learning how to utilise the different types of analytical and high quality trading tools that professional traders use. In other words, the larger is the trade size, the higher is the commission for it. Every trader has their own strategy, their own capital, different average Forex returns, and what works for others might not work for you. Of course, you can make a profit which will be measured in thousands of percent. What does it mean? Our partner, XM , lets you access to a free demo account to apply your knowledge.

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