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TUITION-FREE ONLINE PUBLIC SCHOOLS

Every child has the right to a high-quality education that provides the skills, knowledge, and confidence they’ll need to move forward in life. However, not every student succeeds in a traditional school setting. Some students move more quickly than their peers. Others need extra attention.

For these students, K12 offers the ability to attend public school at home.

 

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Can You Day Trade Gold?

There are various ways to trade gold, such as spot gold at your Forex broker, options trading, futures trading, and a whole host of other instruments. By far, the most commonly quoted version is the futures market, so that is the chart that I will show you. However, you should know that there are both Day Trade Goldadvantages and disadvantages to trading gold in the futures market.

Spot gold typically moves up to $10 a day. Depending on the size of your position, this can be significant, or it could be minor. However, when you look at the futures market, it is a standardized contract. You are trading 100 ounces per contract, so it has a standardized amount of value per tick. Each tick is based upon $0.10 and based upon the 100 ounces that means that each time this market moves it changes your contract value by $10.

Futures markets are also much more liquid and easier to trade than spot, which quite often will have an extraordinarily tight spread. In fact, it’s normally one tick. In the spot market, it can be quite large and therefore it automatically puts the trader at a disadvantage, although trading for longer-term moves allows them to overcome this issue, and of course you can always change the size of your trade to counterbalance that as well.

Another major advantage to trading futures can be seen on the chart. You can see the price ladder on the right, it tells you exactly how many orders are willing to buy and sell at specific prices. This can be a huge advantage, as spot markets don’t give you that benefit, much like Forex markets.

Gold Trading Advantage

No one-size-fits-all solution

There is no one-size-fits-all solution to trading, and as a result you will need to think your situation through before putting money to work. If you can trade larger positions, then the futures market makes quite a bit of sense. However, the spot metals market shouldn’t be overlooked if you have a smaller account, as the margin to open a position per contract is $3400 if using futures. In other words, it makes sense for smaller traders to stick with the spot market, even if the spread is something like $0.90, as you can simply take a small position out for a directional that. In the end, it’s possible.

In the end, you will find the gold tends to trade like anything else. It has fundamental issues that drive it, not the least of which will be the US dollar. Quite often, the US dollar falls in strength, it can send the gold market in the other direction. On the other hand, if the US dollar strengthens quite a bit, gold markets should fall. That’s not all the time, as they can both be thought of as a safety play in certain circumstances.

Central banks have been buying gold recently, at least in the time of this writing, and that of course can drive up the value of gold as well. Keep in mind that gold has been valuable for thousands of years, so it’s very unlikely that will change anytime soon.

Are You Overtrading?

Firstly, the markets do not care how much effort you put in or how hard you work, nor whether you get lucky or not. It is possible to make profits or losses over long periods of time just by having unusually good or bad luck. As humans we tend to feel we either deserve something or we do not.

How to Determine if You Are Overtrading

If my description of these negative feeling strikes a chord with you, you may be overtrading. If so, it is time for you to consider a few things in order to determine whether you are overtrading. Firstly, do you have a very strict criteria for entering a new trade? If so, do you follow it without exception? Good trade opportunities do not come along very often. In the Forex market, it is rare for there to be more then two or maybe three really good trade opportunities in a week (unless you are scalping, and even then you probably will not get more than the same number of overall setups to exploit, even if you are taking much more than two or three actual trades). If you are taking trades every day and looking for more than approximately 20 pips of profit, you are certainly overtrading.

The second thing to consider is the statistical basis of your entry strategy. For example, you may have opened an account with a Forex broker and read on their website to buy when the 10-period simple moving average crosses above the 50-period moving average on the 5-minute time frame. If you Are you overtrading?back test a strategy as simple as this on a short time frame like the 5-minute chart, you will quickly see that following such a strategy will cause you to lose your entire account very quickly. Some Forex brokers promote this kind of poor “overtrading” trading strategy because they make money when you lose, and they want you to lose money as quickly as possible so they can make money as quickly as possible! If you are using an entry strategy that is based on defined mathematical criteria, such as a moving average crossover, you should back test that strategy over several years and thousands of trades to check whether it is profitable. After all, you wouldn’t invest money in a business without learning something about it, so why would you invest your hard-earned trading deposit in a trading strategy whose performance you have not investigated? It is quite easy to make this kind of back test in Forex because you can easily get historical price data and create an excel spreadsheet to check it. Learning a little SQL and using that to make a back test is even easier and much quicker.

Is Forex Trading a Scam?

After the financial crisis slightly more than a decade ago, there have been a lot of questions as to whether or not any type of investing or trading is truly profitable. Beyond that, if you try to explain to people that you “trade money”, then they are even more skeptical, because quite often it’s something that they had no idea the general public can do, let alone that money was traded against each other.

The main culprit

The main culprit of course is that any time there is a lot of money involved, there are a lot of scammers. All one has to do is type in ”Forex trading” into a search engine, then there will invariably be a lot of websites offering all kinds of outrageous returns. For example, you will see things such as “this trader made 200% returns in just one month”, typically attach to some type of trading methodology. However, what they don’t tell you is that the trader will eventually blow up. If you don’t believe me, take a look at the leaderboard of some type of trade following forum, and notice how people come and go from the top. They will have outrageous turns for a moment, and then suddenly disappear. This is because they blew up.

The Difference Between ECN & Standard Account

The main reason why using an ECN can help you is that it offers liquidity through a network. In other words, there are various bids and offers out there that are available for trading, meaning that the spread between ask/bid can be quite tight. For example, you may see spreads as tight as breakeven. You can buy or sell at the same price, but usually there is some type of commission involved.

ECN Broker & Standard AccountIt is because of this that you must pay attention to commissions, because they can be a bit expensive if you aren’t paying attention. In general, the commission works out to be about one half of a PIP. Ultimately, that is cheaper if you are a more short-term trader and have a several in and out positions. However, you may be thinking that even a longer-term trader can take advantage of this, and while that’s true to a point, the reality is that it isn’t as advantageous for a longer-term trader as it is a short-term trader. This is because a longer-term trader doesn’t have to worry about the cost of transactions so much.

Trading with Keltner Channels

The Keltner Channel is a lesser-known indicator but deserves a wider appreciation than it gets. It can be used to effectively identify either trending or ranging market conditions as well as good points for trade entries. In this article, you will see how the Keltner Channel indicator works and how it can best be used by traders.

What are Keltner Channels?

A Keltner Channel is a technical indicator that can be applied to a Forex price chart or any other kind of price chart. A Keltner Channel is extremely similar to a Bollinger Band, so if you understand what Bollinger Bands are and how they are calculated, it shouldn’t be difficult for you to get to understand the Keltner Channel. If you aren’t intimately aware of the Bollinger Band indicator, what you need to know is that a Keltner Channel is calculated as an envelope of volatility around an exponential moving average (EMA). Typically, the 20-period EMA is used. When drawing a Keltner Channel, the center line of the channel is a moving average, and the upper and lower bands which are drawn equidistant from the moving average both above and below it are simply based upon a multiple of the measurement of the volatility of the price, based upon the Average True Range (ATR) indicator, traditionally set over ten periods.

The only two differences between the Keltner Channel and the Bollinger Band are that the Bollinger Band’s upper and lower bands are drawn by a measurement of standard deviation from the central moving average as opposed to the Keltner Channel’s ATR, and that the central line of the Bollinger Band uses a simple moving average (SMA) while the central line of the Keltner Channel uses an exponential moving average (EMA). Standard volatility tends to fluctuate much more dramatically than average true range, so a Keltner Channel tends to be smoother over time than a Bollinger Band. To give you an idea of what a Keltner Channel looks like and how it compares to a Bollinger Band, the chart below shows both indicators applied to the same price series, with the Bollinger Bands in red and the Keltner Channel in blue. The width of the Keltner Channel is twice the 20-day ATR while the width of the Bollinger Band is twice two standard deviations.

USDSEK

It is immediately obvious from looking at the above chart that there is only a relatively small difference between Bollinger Bands and Keltner Channels, so arguably, it makes little practical difference which of the two indicators are used.

Now that you understand how a Keltner Channel is calculated, it is time to look at a few easy rules you can use to interpret a Keltner Channel indicator drawn on a price chart.

Interpreting a Keltner Channel

Here are a few hard and fast rules of thumb you can use to interpret a Keltner Channel on a price chart:

  1. If the bands are relatively narrow, volatility is relatively low.
  2. If the bands are relatively wide, volatility is relatively high.
  3. If the channel is sloping up, there is an upwards trend over the period which the EMA at the center of the channel is set to.
  4. If the channel is slowing down, there is a downwards trend over the period which the EMA at the center of the channel is set to.
  5. If the price is above the upper edge of the channel or very close to it, and the channel is sloping upwards, then the upwards trend is active and aggressive.
  6. If the price is below the lower edge of the channel or very close to it, and the channel is sloping downwards, then the downwards trend is active and aggressive.

Now let’s look at how these rules can be applied in more detail to the use of this trading tool. All trading is made on the basis of at least one of two concepts: either that the price is trending / moving with momentum and likely to continue in the same direction, or that the price is about to reverse and go back to where it recently came from, i.e. revert to its mean (average). In both cases, traders want to enter trades in places where the trade is more likely to go further in one direction than the other. Let’s look first at how a Keltner Channel can be used to trade with the trend.

Trend Trading with a Keltner Channel

In trend trading with a Keltner Channel, the first step is to use the indicator to determine whether a trend currently exists, and in which direction. This can be ascertained easily: is the channel sloping up, sloping down, or neither. If there is a slope, it indicates the existence of a trend, and the trend’s direction. The longer period the indicator has been sloping in the same direction for, the more persistent the trend, and the steeper the slope, the stronger the trend.

Now we have identified the trend as an entry filter, what about the entry? There are three common approaches:

  1. Enter in the direction of the trend when the price is beyond the outer limit of the channel.
  2. Enter in the direction of the trend when the price is between the center line and the upper limit of the channel.
  3. Enter in the direction of the trend when the price is touching the center line of the channel.

We can test the efficacy of these approached by back testing each method against historical data. In this case we’ll use daily data between 2001 and 2019 for the two most common Forex currency pairs, EUR/USD and USD/JPY, and apply a 20-period Keltner Channel at the standard settings. Our back test assumed a spread on every trade of 1 pip and were normalized for volatility by the 15-day average true range. The results for trades where the price closed completely beyond the Keltner Channel’s outer edge were as follows:

Currency Pair Number of Trades Edge Ratio Close Ratio Win %
EUR/USD 2268 2.51% 0.84% 47.31%
USD/JPY 2220 4.11% 0.39% 44.49%

 

The result for trades where the price closed within the Keltner Channel but with direction determined by the position of the center line were as follows:

Currency Pair Number of Trades Edge Ratio Close Ratio Win %
EUR/USD 2475 2.75% -0.01% 47.88%
USD/JPY 2523 2.85% 1.27% 49.70%

These results tell us that there was a small but meaningful positive trading edge, although a narrow majority of most trades were losers. On average, the next day’s candle went in the direction of the trend by between 2.51% and 4.11% more than it did against it, and a time-based exit at the next day’s close was also profitable. The edges grow if the trades are left to run for a longer period.

Mean Reversion Trading with a Keltner Channel

In mean reversion trading with a Keltner Channel, we identify that a flat, trendless channel condition exists. This is best achieved by using two Keltner Channels with the same settings, but with one applied to a shorter time frame and the other applied to a longer time frame. The shorter time frame should show a trend in the opposite direction to the trend on the longer-term time frame. The most common approach as an entry method is to enter towards the direction of the center line when the price is beyond an outer limit of the shorter-term channel, while the longer-term channel is sloping in the opposite direction.

Conclusion

The Keltner Channel is a useful tool for illustrating prevailing conditions of trend and volatility on a price chart and can be used as a standalone indicator to facilitate profitable trading. Like many indicators, it is most powerful when applied at the same settings to multiple time frame charts for the same instrument.