• There are three basic questions that every trader should answer
BEFORE entering a trade.
1. How much do I believe the market will move and where do
I want to take my profit?
Limit Orders allow traders to exit the market at profit targets.
If you are short (sold) the system will only allow you to place a
Limit Order below the current market price because this is the
profit zone. Similarly, if you are long (bought) the system will
only allow you to place a limit order above the current market
price. Limit orders help create a disciplined trading
methodology and enables traders to walk away from the
computer without constantly monitoring the market
2. How much am I willing to lose before I exit the position?
A Stop top/Loss /order allows traders to set an exit point for a
losing trade. If you are short a currency pair the stop loss ord order er
should be placed above the current market price. If you are
long in the currency pair pair, the stop loss order should be placed
below the current market price. Stop/Loss orders help traders
control risk by capping losses. Stop/Loss orders are counter counter-
intuitive because you do not want them to be hit; however,
you will be happy that you placed them! When logic dictates,
you can control greed
3. Where should I place my stop and limit orders?
As a general rule of thumb traders should set Stop Orders closer to the opening price than limit orders. If this rule is followed, a trader needs to be right less than 50% of the time
to be profitable. For example, a trader that uses a 30 pip Stop/Loss and 100 pip limit orders needs only to be right 1/3 of the time to make a profit. Where the trader places the stop
and limit it will depend on how risk risk-adverse he/she is. Stop/Loss orders should not be so tight that normal market volatility knocks the position out. Similarly, Limit Orders
should reflect realistic expectation of gains given the markets trading activity and the length of time one wants to hold the position.
Monday, August 24, 2009
Technical Analysis Forex
• What is good about technical analysis?
Once a trader masters technical analysis, it is easy to apply it to any currency
or time frame, and thus allowing a relatively short time to figu figure out where
re trends are going. Because of the short time, technicians can fol follow numerous
low currencies at the same time, whereas fundamentalists usually foc focus on one or
us two pairs of currencies, because there is so much information in the market to
analyze.
Traders using fundamental analysis can run into trouble because there are so
many different ways to analyze market information. This causes c controversy ontroversy
and can lead to misdirection, misunderstanding and ultimately, l loss of money.
oss On the other hand, technical analysis can be much more straightf straightforward. orward.
Many traders even consider it to be a self self-fulfilling prophecy, meaning that it
works well because so many traders use it. This is an important aspect of
technical analysis because if many traders are basing their deci decisions on
sions technical indicators, then the indicators must be watched since they reflect the
sentiment of the market and the majority of the traders.
• Why is the foreign exchange market the best market for technical analysis?
The foundation behind using technical analysis is to find trends when they first
develop, which allows the trader to ride the trend until it ends ends. The foreign exchange
. market is typically composed of trends and is, therefore, a plac place where technical
e analysis can be effective. Traders are able to speculate on both up and down trends in
the foreign exchange market because it is possible to Ask a curr currency and Bid against
ency another currency. This aspect of currency trading works well wit with technical analysis,
h because technical analysis helps determine where the trends are and which way they
are going, thus giving the trader a chance of profiting from the market, regardless of its
direction.
In comparison to the equities and futures markets, technical ana analysis is much more
lysis common and popular within the foreign exchange markets, which ca causes the traders to
uses pay attention. The market partly moves because of all the techni technical analysis performed.
cal For example, according to technical analysis, if a currency pair decrease, then the
majority of traders will Bid the pair, causing it to drop furthe further.
• Support and Resistance
At the core of all technical analysis theory are two very simple concepts: support and
resistance. Support can be defined as a “floor floor” through which the currency pair has
trouble falling below. There is no scientific formula for calcul calculating support; it is
ating something that is typically “eyeballed eyeballed” by traders, and hence involves somewhat of a
subjective element.
Resistance, on the other hand, is simply the opposite: it is the upper boundary through
which a currency pair has trouble breaking. Similar to support, resistance levels are
somewhat subjective. Generally, if the market reaches a certain number of times and
cannot sustain a break above that level; it can be identified as resistance.
The reason why price has trouble breaking these levels is the pr presence of actual orders
esence around these levels. A support level is simply a price area wher where Ask orders tend to be,
e and so it takes more than normal Biding pressure to break that l level. Similarly, a
evel. resistance level is a price area where Bid orders tend to be, an and so it takes more than
d normal Asking pressure to break that level.
• Support & Resistance in Range - Trading Markets
rading One simple way to use support and resistance in trading
is to simply trade the range: in other words, traders can
simply Ask at support level, and Bid at resistance level.
A key advantage of this is that the FX market is range range-
bound a majority of the time, making it an attractive
strategy for many market conditions.
• The two disadvantages of range - trading:
Trad Trading in a ing range generally does not result in
substantial gains on a per per-trade basis.
When the market breaks out of the range,
generally it will make big moves. As a result,
traders trading with range strategies can suffer
big losses when the market breaks out of the
range.
The chart below illustrates the concept of range range-
bound trading.
• Oscillators
Oscillators are a class of mechanical trading tools that offer i indications of when a
ndications currency pair is overbought or oversold. A popular oscillator is the Relative Strength
Index.
• Relative Strength Index
The relative strength index (RSI) is a momentum indicator that m measures a currency
easures pair's strength relative to its won recent past performance. As the indicator is front front-
weighted (more importance is given to the most recent data), it typically provides a
better velocity reading than other oscillators. RSI is less affe affected by sharp movements,
cted and filters out a lot of "noise" in the Forex market. Many trade traders also use this indicator
rs as a substitute for volume confirmation, since the over over-the the-counter structure of the FX
market does not allow for real real-time volume reporting.
RSI's levels are between 0 and 100. Most traders use 30 as an ovRSI's oversold condition and
ersold 70 and as overbought condition, although some traders may use 20 and 80. When
choosing the settings for RSI, traders should typically use the default time period of
14, since that is what the market as whole tends to look at.
Generally RSI is used in five different ways:
Top and Bottoms - Overbought and Oversold conditions are usually signaled
at 30 and 70.
Divergences - When a pair makes new highs (lows) but RSI does not, this
usually indicates that a reversal in price is coming.
Support and Resistance - RSI may show levels of support and resistance,
sometimes more clearly than the price chart itself.
Chart Formations - Patterns such as double tops and head and shoulder may
be more visible on RSI rather than on the price charts.
Failure Swings - When RSI breaks out (surpasses previous high or low), this
may indicate that a breakout in price is coming.
RSI was useful in detecting this USD/JPY short after a crossover of the 70
"overbought" level materialized on the daily. Following the clea clear Bid signals,
r the pair moved down 450 pips over the next 30 days
Once a trader masters technical analysis, it is easy to apply it to any currency
or time frame, and thus allowing a relatively short time to figu figure out where
re trends are going. Because of the short time, technicians can fol follow numerous
low currencies at the same time, whereas fundamentalists usually foc focus on one or
us two pairs of currencies, because there is so much information in the market to
analyze.
Traders using fundamental analysis can run into trouble because there are so
many different ways to analyze market information. This causes c controversy ontroversy
and can lead to misdirection, misunderstanding and ultimately, l loss of money.
oss On the other hand, technical analysis can be much more straightf straightforward. orward.
Many traders even consider it to be a self self-fulfilling prophecy, meaning that it
works well because so many traders use it. This is an important aspect of
technical analysis because if many traders are basing their deci decisions on
sions technical indicators, then the indicators must be watched since they reflect the
sentiment of the market and the majority of the traders.
• Why is the foreign exchange market the best market for technical analysis?
The foundation behind using technical analysis is to find trends when they first
develop, which allows the trader to ride the trend until it ends ends. The foreign exchange
. market is typically composed of trends and is, therefore, a plac place where technical
e analysis can be effective. Traders are able to speculate on both up and down trends in
the foreign exchange market because it is possible to Ask a curr currency and Bid against
ency another currency. This aspect of currency trading works well wit with technical analysis,
h because technical analysis helps determine where the trends are and which way they
are going, thus giving the trader a chance of profiting from the market, regardless of its
direction.
In comparison to the equities and futures markets, technical ana analysis is much more
lysis common and popular within the foreign exchange markets, which ca causes the traders to
uses pay attention. The market partly moves because of all the techni technical analysis performed.
cal For example, according to technical analysis, if a currency pair decrease, then the
majority of traders will Bid the pair, causing it to drop furthe further.
• Support and Resistance
At the core of all technical analysis theory are two very simple concepts: support and
resistance. Support can be defined as a “floor floor” through which the currency pair has
trouble falling below. There is no scientific formula for calcul calculating support; it is
ating something that is typically “eyeballed eyeballed” by traders, and hence involves somewhat of a
subjective element.
Resistance, on the other hand, is simply the opposite: it is the upper boundary through
which a currency pair has trouble breaking. Similar to support, resistance levels are
somewhat subjective. Generally, if the market reaches a certain number of times and
cannot sustain a break above that level; it can be identified as resistance.
The reason why price has trouble breaking these levels is the pr presence of actual orders
esence around these levels. A support level is simply a price area wher where Ask orders tend to be,
e and so it takes more than normal Biding pressure to break that l level. Similarly, a
evel. resistance level is a price area where Bid orders tend to be, an and so it takes more than
d normal Asking pressure to break that level.
• Support & Resistance in Range - Trading Markets
rading One simple way to use support and resistance in trading
is to simply trade the range: in other words, traders can
simply Ask at support level, and Bid at resistance level.
A key advantage of this is that the FX market is range range-
bound a majority of the time, making it an attractive
strategy for many market conditions.
• The two disadvantages of range - trading:
Trad Trading in a ing range generally does not result in
substantial gains on a per per-trade basis.
When the market breaks out of the range,
generally it will make big moves. As a result,
traders trading with range strategies can suffer
big losses when the market breaks out of the
range.
The chart below illustrates the concept of range range-
bound trading.
• OscillatorsOscillators are a class of mechanical trading tools that offer i indications of when a
ndications currency pair is overbought or oversold. A popular oscillator is the Relative Strength
Index.
• Relative Strength Index
The relative strength index (RSI) is a momentum indicator that m measures a currency
easures pair's strength relative to its won recent past performance. As the indicator is front front-
weighted (more importance is given to the most recent data), it typically provides a
better velocity reading than other oscillators. RSI is less affe affected by sharp movements,
cted and filters out a lot of "noise" in the Forex market. Many trade traders also use this indicator
rs as a substitute for volume confirmation, since the over over-the the-counter structure of the FX
market does not allow for real real-time volume reporting.
RSI's levels are between 0 and 100. Most traders use 30 as an ovRSI's oversold condition and
ersold 70 and as overbought condition, although some traders may use 20 and 80. When
choosing the settings for RSI, traders should typically use the default time period of
14, since that is what the market as whole tends to look at.
Generally RSI is used in five different ways:
Top and Bottoms - Overbought and Oversold conditions are usually signaled
at 30 and 70.
Divergences - When a pair makes new highs (lows) but RSI does not, this
usually indicates that a reversal in price is coming.
Support and Resistance - RSI may show levels of support and resistance,
sometimes more clearly than the price chart itself.
Chart Formations - Patterns such as double tops and head and shoulder may
be more visible on RSI rather than on the price charts.
Failure Swings - When RSI breaks out (surpasses previous high or low), this
may indicate that a breakout in price is coming.
RSI was useful in detecting this USD/JPY short after a crossover of the 70
"overbought" level materialized on the daily. Following the clea clear Bid signals,
r the pair moved down 450 pips over the next 30 days
Fundamental Analysis
What influences prices in the forex market?
• Prices in the currencies market are affected by macroeconomic fa factors, such as
ctors, inflation, unemployment, and industrial production. Information on events such as
these is easy to find and are based on their analysis of economi economic data, which traders
c take positions on the market to make profit. There are three mai main macroeconomic
n factors a trader should focus on when analyzing foreign exchange rates:
• Interest Rates: Each currency has an overnight lending rate attached to which i is s
determined by that country country’s central bank. Lower interest rates usually lead to
s depreciation in the value of the country's currency.
This is largely due to traders who execute carry carry-trades. A carry carry-trade is a trade where a
currency with a low interest rate is sold and a currency with a high interest is bought.
This is based on the idea that currencies with higher interest r rates will generally rise in
ates value, and will rollover and allow trades to earn interest on a daily basis.
• Employment: The unemployment rate is a key indicator of its economic streng strength. If a
th. country has a high unemployment rate, it means its economy is no not strong enough to
t provide people with jobs, and thus, leads to a decline in the cu currency value.
rrency • Geopolitical Events: Key international political events that affect not only the for
• Prices in the currencies market are affected by macroeconomic fa factors, such as
ctors, inflation, unemployment, and industrial production. Information on events such as
these is easy to find and are based on their analysis of economi economic data, which traders
c take positions on the market to make profit. There are three mai main macroeconomic
n factors a trader should focus on when analyzing foreign exchange rates:
• Interest Rates: Each currency has an overnight lending rate attached to which i is s
determined by that country country’s central bank. Lower interest rates usually lead to
s depreciation in the value of the country's currency.
This is largely due to traders who execute carry carry-trades. A carry carry-trade is a trade where a
currency with a low interest rate is sold and a currency with a high interest is bought.
This is based on the idea that currencies with higher interest r rates will generally rise in
ates value, and will rollover and allow trades to earn interest on a daily basis.
• Employment: The unemployment rate is a key indicator of its economic streng strength. If a
th. country has a high unemployment rate, it means its economy is no not strong enough to
t provide people with jobs, and thus, leads to a decline in the cu currency value.
rrency • Geopolitical Events: Key international political events that affect not only the for
Trading Costs
How much does it cost for a trader to make a trade?
• Traders do not take positions on a currency pair at the exact ra rate at which the
te currencies are trading. Instead, there are two rates for the cur currency pair: the bid rate
rency and the ask rate.
• The bid rate is the price at which traders can Bid the pair.
• The ask rate is the price at which traders can Ask the pair.
• This is an example of a currency pair. The Ask rate is higher th than the Bid rate and the
an spread is 3 pips, meaning that if a trader Asks this pair, then the Bid rate of this pair
will have to go up 3 pips in order for the trader to break even.
• The ask rate will always be higher than the bid rate. The differ difference between the bid
ence rate and the ask rate is the spread. The spread is an automatic cost that the trader
incurs when making the trade. Because of this spread, traders wi will take a position they
ll started with a small loss and will need to gain some profit in o order to break even.
rder • For example, if a trader Asks into a position at the ask rate, a and then immediately
nd closes the position at the bid rate, the trader will incur a cos cost equal to the spread.
t These spreads are seen in every kind of market. However, because of the broker broker-based
system in the equities and futures market, it can sometimes be d difficult to identify
ifficult where and how much the spread cost is.
• Traders do not take positions on a currency pair at the exact ra rate at which the
te currencies are trading. Instead, there are two rates for the cur currency pair: the bid rate
rency and the ask rate.
• The bid rate is the price at which traders can Bid the pair.
• The ask rate is the price at which traders can Ask the pair.
• This is an example of a currency pair. The Ask rate is higher th than the Bid rate and the
an spread is 3 pips, meaning that if a trader Asks this pair, then the Bid rate of this pair
will have to go up 3 pips in order for the trader to break even.
• The ask rate will always be higher than the bid rate. The differ difference between the bid
ence rate and the ask rate is the spread. The spread is an automatic cost that the trader
incurs when making the trade. Because of this spread, traders wi will take a position they
ll started with a small loss and will need to gain some profit in o order to break even.
rder • For example, if a trader Asks into a position at the ask rate, a and then immediately
nd closes the position at the bid rate, the trader will incur a cos cost equal to the spread.
t These spreads are seen in every kind of market. However, because of the broker broker-based
system in the equities and futures market, it can sometimes be d difficult to identify
ifficult where and how much the spread cost is.
The Concept of Leverage
• What is leverage?
Leverage allows traders to borrow money and use that money to
invest in the foreign exchange market. Because of leverage,
clients without a large amount of capital are able to make large
investments, whereas in other markets such as the equities
market, clients would have to pay 50% of the full amount for
each share of stock they were investing in. Most market makers
allow positions to be leveraged up to 100:1. This means that if a
trader wanted to Ask a “lot lot” worth $100,000, with 100:1 leverage
the trader only has to put up $1,000.
Leverage is about risk. Increasing your leverage increases both
your opportunity to take bigger profits AND rack up bigger lost
• What is margin?
Margin is a performance bond, or good faith deposit, to ensure a against gainst
trading losses. The margin requirement allows traders to hold a position much
larger than the account value.
In the event that funds in the account fall below margin require requirements, your
ments, broker will close some or all open positions. This prevents clie clients' accounts
nts' from falling into a negative balance, even in a highly volatile, fast moving
market.
For example, let's say you have an account with $10,000. That me means you
ans have $10,000 of usable margin. If you use $7,000 to Ask 7 lots o of USD/JPY,
f you now have $3,000 of usable margin left, meaning that you are allowed to
lose $3,000 before you are under the margin requirement. The acc account equity
ount remains at $10,000 until you begin to make or lose money on the position.
Now, if the USD/JPY decreases to the point that you end up losin losing the
g $3,000 which is left in your account, then the broker will close all of your
positions to ensure that you do not lose more than you have in y your account.
Leverage allows traders to borrow money and use that money to
invest in the foreign exchange market. Because of leverage,
clients without a large amount of capital are able to make large
investments, whereas in other markets such as the equities
market, clients would have to pay 50% of the full amount for
each share of stock they were investing in. Most market makers
allow positions to be leveraged up to 100:1. This means that if a
trader wanted to Ask a “lot lot” worth $100,000, with 100:1 leverage
the trader only has to put up $1,000.
Leverage is about risk. Increasing your leverage increases both
your opportunity to take bigger profits AND rack up bigger lost
• What is margin?
Margin is a performance bond, or good faith deposit, to ensure a against gainst
trading losses. The margin requirement allows traders to hold a position much
larger than the account value.
In the event that funds in the account fall below margin require requirements, your
ments, broker will close some or all open positions. This prevents clie clients' accounts
nts' from falling into a negative balance, even in a highly volatile, fast moving
market.
For example, let's say you have an account with $10,000. That me means you
ans have $10,000 of usable margin. If you use $7,000 to Ask 7 lots o of USD/JPY,
f you now have $3,000 of usable margin left, meaning that you are allowed to
lose $3,000 before you are under the margin requirement. The acc account equity
ount remains at $10,000 until you begin to make or lose money on the position.
Now, if the USD/JPY decreases to the point that you end up losin losing the
g $3,000 which is left in your account, then the broker will close all of your
positions to ensure that you do not lose more than you have in y your account.
• How are leverage and margin related?Leverage and margin are related in the way
mentioned above – the amount of leverage a market maker gives to a client defines the
amount of margin that the client will have to commit in order to take a position in the market.
For example, when leverage is 100:1, the “1” in the leverage ratio signifies the amount of capital
the customer has invested of his own money, which is also known as the margin.
mentioned above – the amount of leverage a market maker gives to a client defines the
amount of margin that the client will have to commit in order to take a position in the market.
For example, when leverage is 100:1, the “1” in the leverage ratio signifies the amount of capital
the customer has invested of his own money, which is also known as the margin.
Currency Pairs & the significance of currency pairs?
• A currency pair represents the exchange rate between the two
currencies. For example, the rate at which the EUR/USD is
trading that represents the number of US Dollars one Euro can
purchase. The first currency is called the base currency and the
second currency is called the counter currency.
• An example of how currency pairs trade is if a trader believes t the he
Bank of Japan will intervene to cause a decrease in the Yen
against the US Dollar, then the trader would Ask USD/JPY (Ask
the US Dollar/Bid the Yen). However, if the trader believes that
Japanese investors are losing faith in the United States' econom economy y
and are pulling money out of the US into Japan, then the trader
would Bid USD/JPY (Bid the US Dollar/Ask the Yen).
••Below is an example of how currency pairs are listed on trading stations. The currency pairs are listed on the left side of the column. The Bid price is the level at which a trader can SellSellthe the currency pair and the Ask price is the level at which a trader ccurrency can an BuyBuythe currency pair.
currencies. For example, the rate at which the EUR/USD is
trading that represents the number of US Dollars one Euro can
purchase. The first currency is called the base currency and the
second currency is called the counter currency.
• An example of how currency pairs trade is if a trader believes t the he
Bank of Japan will intervene to cause a decrease in the Yen
against the US Dollar, then the trader would Ask USD/JPY (Ask
the US Dollar/Bid the Yen). However, if the trader believes that
Japanese investors are losing faith in the United States' econom economy y
and are pulling money out of the US into Japan, then the trader
would Bid USD/JPY (Bid the US Dollar/Ask the Yen).
••Below is an example of how currency pairs are listed on trading stations. The currency pairs are listed on the left side of the column. The Bid price is the level at which a trader can SellSellthe the currency pair and the Ask price is the level at which a trader ccurrency can an BuyBuythe currency pair.
Advantages of trading the Forex Market
• High Leverage (low margin): Generally forex brokerage service providers offer a
leverage of 100:1. This means for every $1,000 you place in your account you have
access to trade with $100,000 worth of contracts.
The traders can utilize a small amount of funds in order to take a large position. If you
should happen to incur a loss, your broker will close your posit position when the loss
ion equals the balance in your account.
• Liquidity: The forex market trades between $1.5 and $2 trillion daily. The market
orders are almost filled instantaneously and the market is too l large for any one to
arge control.
• 24 Hour trading: The forex market operates 24 hours a day from Monday morning
Sydney – Australia time to Friday evening New York (EST) time. Therefore traders
have immediate access to information, their accounts and transac transaction ability without
tion after hours price fluctuation vulnerability.
• Trade both sides of the market: You can profit from price movements in either
direction, whether prices are going up or down. You can profit i in a bear or a bull
n market and the economy of any country is irrelevant to make prof profits. its.
• Low trading costs: Forex brokers will only charge you for the difference of a buy a and nd
sell price quote. There are no commissions or other charges pay payable buy the trader
leverage of 100:1. This means for every $1,000 you place in your account you have
access to trade with $100,000 worth of contracts.
The traders can utilize a small amount of funds in order to take a large position. If you
should happen to incur a loss, your broker will close your posit position when the loss
ion equals the balance in your account.
• Liquidity: The forex market trades between $1.5 and $2 trillion daily. The market
orders are almost filled instantaneously and the market is too l large for any one to
arge control.
• 24 Hour trading: The forex market operates 24 hours a day from Monday morning
Sydney – Australia time to Friday evening New York (EST) time. Therefore traders
have immediate access to information, their accounts and transac transaction ability without
tion after hours price fluctuation vulnerability.
• Trade both sides of the market: You can profit from price movements in either
direction, whether prices are going up or down. You can profit i in a bear or a bull
n market and the economy of any country is irrelevant to make prof profits. its.
• Low trading costs: Forex brokers will only charge you for the difference of a buy a and nd
sell price quote. There are no commissions or other charges pay payable buy the trader
What is forex & how is it traded?
• Forex is the buying of one currency and selling of another concu concurrently. rrently.
Currencies are quoted in pairs such as EUR/USD. The major curren currencies are
es EUR (Euro), GBP (British Pound), JPY (Japanese Yen) and the CHF (Swiss
Franc) – and they are traded against the USD.
• The first listed currency is known as the base currency, while t the second
he currency is called the counter or quote currency. The base currecurrency currency is the
ncy "basis" for the Bid price (the cost of selling the base currency currency) or the Ask
) price (the cost of buying the currency). For example, if you Ask EUR/USD
you have bought Euros (and simultaneously sold dollars). You wou would do so in
ld expectation that the Euro will appreciate in value relative to t the US dollar. FX
he is traded in lots, which represent 100,000 units of the base cur currency. If the
rency. EUR/USD is quoted at 1.2253, that means that one Euro is current currently worth
ly just over $1.22. If the market moves from 1.2253 up to 1.2254 th that represents
at a move of one pip. A pip is the smallest increment a currency pa pair can move
ir and in the case of the EUR/USD currency pair a pip is worth $10 in a 100K
account and is $1 in a mini account.
Currencies are quoted in pairs such as EUR/USD. The major curren currencies are
es EUR (Euro), GBP (British Pound), JPY (Japanese Yen) and the CHF (Swiss
Franc) – and they are traded against the USD.
• The first listed currency is known as the base currency, while t the second
he currency is called the counter or quote currency. The base currecurrency currency is the
ncy "basis" for the Bid price (the cost of selling the base currency currency) or the Ask
) price (the cost of buying the currency). For example, if you Ask EUR/USD
you have bought Euros (and simultaneously sold dollars). You wou would do so in
ld expectation that the Euro will appreciate in value relative to t the US dollar. FX
he is traded in lots, which represent 100,000 units of the base cur currency. If the
rency. EUR/USD is quoted at 1.2253, that means that one Euro is current currently worth
ly just over $1.22. If the market moves from 1.2253 up to 1.2254 th that represents
at a move of one pip. A pip is the smallest increment a currency pa pair can move
ir and in the case of the EUR/USD currency pair a pip is worth $10 in a 100K
account and is $1 in a mini account.
Sunday, August 23, 2009
How To Write Ads That Work
Sometime we must make a advertising for our blog or website to increase performance and traffic but as beginner we found some problem to make our ads like better, how to write ads that work, read the below article from my milist (mailing list ) forum,
This is as close to a magic formula as you can get. There's a lot more to writing ads than following a formula, of course, but having this framework should get you well on the way to writing a competent, if not great, marketing piece.
If you've been digging around at the library and gotten into the archives of the masters you've almost certainly discovered the formula of AIDA = Attention, Interest, Desire and Action. that's a good start, but this is how it's really done.
As you write your piece, try to get into the head of your client or prospect. What exactly are they looking for and how would they benefit from using your product or service? Furthermore, how would they benefit by buying from you rather than a competitor. So.. give it a shot.
Just one thing.. make sure you budget a whole bunch of time - even a short piece can take a non-writer as long as 10 to 20 hours to get right.
Here you go:
1. Headline (the "Attention" part)
This is, by far, the most important element - this has to be a big, bold promise of some kind. Give them a reason to read the next line.
2. Sub-Headline.
Just as the purpose of the headline is to get you to read this line, the purpose of this line is to get them to read the next line. Plus, backing up the promise is really important.
3. Benefits (sort of today's version of "Interest.")
Use the benefits of your product (as opposed to features) to put your prospect smack in the middle of the picture. How should your customers feel when they're using it? How would they feel if they missed out?
4. More Benefits.
Skepticism is high these days; it takes a lot to convince people.
5. Proof.
Testimonials work. Amazing facts are always good. Easy-to-understand statistics help, too. That sort of thing. Prove that your product does what you say it will do.
6. Risk Reversal.
How about a money-back guarantee? There can be no risk whatsoever.
7. Photo.
This isn't required, but it will definitely increase your response rate. Show someone enjoying the product. Illustrate the benefits. Even a photo of you, which personalizes the piece and makes it seem real, helps a lot.
8. Offer. (Just one, though)
You have to offer something. It's amazing how many ads are produced without an offer. "It's important to get your out name out there," is the reason heard most often. Sorry - without an offer, your ad is dead. Nothing happens.
9. Call to Action.
You must ask your prospect to do something. Really! If the rest of the ad is reasonably well-structured, people will act - they'll take advantage of your offer and do exactly what you ask them to do. This is where your ad can become your best salesperson.
10. Reducing the Resistance to Accepting Your Offer.
It's that guarantee again. And it's OK to mention it more than once - reducing your customer's risk to zero is really important.
Now.. if you really want to kick it up a notch:
11. Create a Sense of Urgency.
Use language like: "Just five days left..," "Only 12 lucky golfers will..," "Take advantage today and you'll also get.." You know what I'm talking about, right?
So there you have it. Try writing a couple different versions and split up your mailing or post two different web pages to see which one draws responses. That's how it's done..
http://seo.rulyabdillah.com/
This is as close to a magic formula as you can get. There's a lot more to writing ads than following a formula, of course, but having this framework should get you well on the way to writing a competent, if not great, marketing piece.
If you've been digging around at the library and gotten into the archives of the masters you've almost certainly discovered the formula of AIDA = Attention, Interest, Desire and Action. that's a good start, but this is how it's really done.
As you write your piece, try to get into the head of your client or prospect. What exactly are they looking for and how would they benefit from using your product or service? Furthermore, how would they benefit by buying from you rather than a competitor. So.. give it a shot.
Just one thing.. make sure you budget a whole bunch of time - even a short piece can take a non-writer as long as 10 to 20 hours to get right.
Here you go:
1. Headline (the "Attention" part)
This is, by far, the most important element - this has to be a big, bold promise of some kind. Give them a reason to read the next line.
2. Sub-Headline.
Just as the purpose of the headline is to get you to read this line, the purpose of this line is to get them to read the next line. Plus, backing up the promise is really important.
3. Benefits (sort of today's version of "Interest.")
Use the benefits of your product (as opposed to features) to put your prospect smack in the middle of the picture. How should your customers feel when they're using it? How would they feel if they missed out?
4. More Benefits.
Skepticism is high these days; it takes a lot to convince people.
5. Proof.
Testimonials work. Amazing facts are always good. Easy-to-understand statistics help, too. That sort of thing. Prove that your product does what you say it will do.
6. Risk Reversal.
How about a money-back guarantee? There can be no risk whatsoever.
7. Photo.
This isn't required, but it will definitely increase your response rate. Show someone enjoying the product. Illustrate the benefits. Even a photo of you, which personalizes the piece and makes it seem real, helps a lot.
8. Offer. (Just one, though)
You have to offer something. It's amazing how many ads are produced without an offer. "It's important to get your out name out there," is the reason heard most often. Sorry - without an offer, your ad is dead. Nothing happens.
9. Call to Action.
You must ask your prospect to do something. Really! If the rest of the ad is reasonably well-structured, people will act - they'll take advantage of your offer and do exactly what you ask them to do. This is where your ad can become your best salesperson.
10. Reducing the Resistance to Accepting Your Offer.
It's that guarantee again. And it's OK to mention it more than once - reducing your customer's risk to zero is really important.
Now.. if you really want to kick it up a notch:
11. Create a Sense of Urgency.
Use language like: "Just five days left..," "Only 12 lucky golfers will..," "Take advantage today and you'll also get.." You know what I'm talking about, right?
So there you have it. Try writing a couple different versions and split up your mailing or post two different web pages to see which one draws responses. That's how it's done..
http://seo.rulyabdillah.com/
How Can I Monitize My Yahoo Group?
| Written by Terry Brazil | |
| Monday, 18 September 2006 | |
| Many people overlook the power of running your own Yahoo, MSN, and Google group. These groups are very niche oriented and can often times yield thousands of members. It is very easy to start up your own group for free that you can promote affiliate and resale rights products to. The first thing you need to do is select a popular and active niche topic. To make this easy you should write down a list of at least ten things that you are interested in or have experience in. This will make posting to your group very easy to do. Now that you have your list of topics made it is time to choose a winner. To do this we will turn to a tool called Niche Bot. Simply go to nichebot dot com and type your first topic in the space provided and hit search. You will now be shown the top ten related search terms. We are not really worried about how easy it will be to get ranked in the search engines since this will not be our focus. Most of our traffic will come from other groups as well searches done on the group hosts (Yahoo, MSN, ect..) main page. In this case we want to find a topic that has lots of searches done on it to make sure our group topic is popular. Now you should have a smaller list of wining topics. But we want to do one more thing before starting your group. What you need to do now is search for your main topic on Google. On the right hand side of your search results you should see the paid ads. Look through them and make sure that people are selling digital products. This will ensure that your target audience is willing to buy online. For now just choose one of the ones that are left over to start your first group with. You by no means want to get overwhelmed when starting out so start with only one topic. You can start your group on any site that has such an option. The most popular sites that have groups are Yahoo, MSN, and Google. I suggest starting a group on all of these sites. We will not go into any detail here since it is pretty self explanatory and each site differs. Once you have your groups setup you will want to make your first post. Once you post to one of the groups you can also put the same post on the others. This way you should have three mirror groups. Your posts can be almost anything. Some of the easiest things to post will be articles and excerpts from other sites with your opinion mixed in. Your group will be very much like an exclusive blog. Your members can post messages to the group to hold a conversation as well as ask questions and make comments. You will find yourself getting new members all of the time. As long as your topic is popular members of the site will find your group via searches as well as word of mouth. It may take a little while to build a good fan base this way but there is a couple of tricks you can pull out of your sleeve. The first and most effective one is to JV with other group owners. You will most likely find that someone else has created a similar group who's topic is related to yours. The easiest way to JV with another group is to simply join it. Once you have joined you should make an informative post or two to get known as a reliable source. Now that you have made yourself seen look for the group owners email. Write them a simple e-mail explaining what you would like to do. In this case you would like to promote their group to yours and have them do the same. This will equally benefit both groups. You could also try offering things like niche products with resale rights to get them to promote your group to theirs. The next easiest thing to do is write some articles. These can be used for content on your group as well as get submitted to article directories with a link back to your group's in the author BIO so people can join them. This option will get the word out allot better than doing a JV. However when using a cross promotion JV the people your group is being advertised to are more likely to join since they are already part of the community. The third thing you can do to promote your group is post on forums. To do this simply put links to your groups in your forum signature. Once you have done this start making informative posts as well as answer other forum members questions. This will give you credibility and you will soon start seeing new members sign up for your group from the forums. By using all of the above techniques you should be able to build up a few thousand members in no time if your topic is popular. Once you get your members make sure to keep them by posting new information frequently. If you do not make it worth while for your members to stay they will leave your group. The next thing you want to do is start selling to this group of hungry members. There are two option you have to make money from your group. The first way to make money from your group is to promote affiliate products. You can do this by writing articles that relate to the topic as well as post reviews on products. When you write a review make sure that you have actually seen or used the product or service. When your members go to buy the product they will know if you have actually seen or used it. Lying or falsifying information will simply hurt you in the end so try not to B. S. your members. This is the quickest way to loose their trust and chase them away from your group. The second thing you can do is sell products that are related to your niche that have resale rights. This means that you can sell the product for any price and keep 100% of the profits. The best way to sell resale rights products to your group is to have a site to upload them to and a simple order page with a Pay Pal order button on. You can always simply have your members send the money to your Pay Pal account and just email them the product but this will be very time consuming. If at all possible you will want to automate this in one way or another. This will give you more time to create content for your groups and find products to promote. Setting up your very own group is not hard at all. In fact anybody with a computer and an Internet connection has the ability to do it. Many people overlook the possibilities of starting their own groups and for this reason it is not a very crowded market. If you are looking to make money online without having to invest any money this is a great place to start. http://www.guruofinfo.com/affiliate/how-can-i-monitize-my-yahoo-group.html |
How to monitize (make money) from your blog with affiliate links
Ad affiliate links and banners to your blog to generate income. If you have a high traffic blog, you will be missing a lot. These are links to products and services around the net. If someone clicks and buys, you get a commission.
Instructions
Difficulty: Moderate
1.Go to the merchant you are interested to be an affiliate. For example go to Amazon.com and look for an “affiliates” or “associates” link.
2.Sign up and choose a password and user name.
3.Each merchant will have an arsenal of graphics and banners for you to use and place in your website or blog scripted and ready with your affiliate ID.
4.If they don’t, don’t worry. They will at least give you a unique link that you can connect to any graphics you can make yourself.
5.Use the tools there to make custom graphics with custom dimensions and looks.
6.After you are done customizing, copy the script and paste it in the desired place in your blog.
7.You can also place affiliate links in your website.
Items needed
- 1- Computer.
- 2- Internet connection.
- 3- Set up blog.
- 4- Account with any affiliate.
Overall tips
- Make sure to use the appropiate affiliate code. If you change it or missed part of it, you will not get a commission.
Overall warnings
- Beware of hackers who steal affiliate codes.
External resources
Make Money With Text Links on Your Web Site
It is always the big question; "How do I make money on the Internet with my website?" This being the first thing on most web owners minds. While getting your site, or sites, listed in the search engines is a first priority, once you have some traffic you must figure out what to do with it to convert it into commercial viability with better search engine visibility.
One of the best ways to earn from your content is to use someone like LinkWorth where you allow other website owners to buy a one way link to you.
Why should you or anyone care about a one-way link? Because that is the very best determining factor for a sites "authority" in rank and placement in search engine returns. You have a product, idea, or service you want people to be aware of and this is the fastest and best way to get people there.
One-way links tell the search engine that the site that has the link finds the other site important enough to talk about without requiring the reciprocal link. Far superior to link exchange, which I will cover in another article. The search engines will interpret this as granting more authority to the outbound one-way link than the site granting it. In fact adding the originating sites rank and authority to the one-way link site! A bonanza to newer sites or sites who need to get higher in the more competitive search terms.
In the more than ten years plodding along on the Internet building out sites and working to get them searched and listed I have gone through many affiliate and link programs. I have tried them all it would seem. LinkWorth have proven themselves not only a leader in the field but perhaps the only one to actually earn for you as a website owner.
You can even buy and sell at the same time to move your sites up at the same time as giving others the same opportunity with your site!
They do this all with advanced state of the art software that allows the tracking and placement of links with little or no effort on either side. One piece of code is placed in a section you want the links to appear and that is it. You just have to grant the LinkWorth people authority to allow links for each client. You decide who gets to link and you decide the price!
That's right! You can set the price for a page, home page or the whole site! A variety of options to choose from allow both sides of the transaction to benefit. Tools are available to help you price your pages and the support is excellent and can help you place your code if you need.
LinkWorth text links are a great standalone and do not interfere with your ability to use Google or Yahoo! display advertising on your site. LinkWorth also offers you contextual links for your actual content too!
Make Money with your Web Site Monitize
Everyday the thought passes your mind; how can I make money on the Internet? Everyone is doing it!
The fact is everyone is trying and few actually make it big. It is just like the Hollywood myth. However the Internet offers a unique playing field where even ugly can make it big. Taste and name, like art, is in the eye of the beholder and image-makers at marketing.
So, once you have a domain and made that website you either have a product, service or message to market. If you have a product or service that pays for the site you still might want to supplement the web sites ability to get revenue on its own content. Most of the websites on the Internet are earning solely by selling various space for advertisers.
This section is set up to show you how to win your dot com’s keep using various channels to sell your content into. Inversely it allows you to look at how to place yourself into the content. Every space that is sold needs the buyer and if you are not both you are not doing business and will eventually suffer for it.
We always provide links to the affiliate and other programs and we are affiliates of these programs. The reason we write about these companies is that they work and earn money. That is why we write about them. There is no added cost to use our links and it supports us in the efforts to bring you that connection. There is no discount or gain to avoid using our links, so we hope you just dig in and enjoy.
How To Monitize Your Website With Adsense
Indeed, just about all webmasters know that Adsense generates a considerable source of additional advertising income. That is why most of them utilize it to go after high paying keywords. They possess with them the lists that tells what the keywords are and have already used every means possible to identify them. But then, after positioning these supposed to be high paying keywords into their web pages, the money they expected to roll in is not really coming in. What are they doing wrong? In fact, having these pages with the proper keywords is one thing, but driving visitors to those pages is another thing and often the main thing that is lacking.
The thing is, to get visitors to your high paying keyword pages, you need to optimize your sites navigation. Think about how visitors are using your website. After a visitor has landed on a certain page, they have the tendency to click on another page that sounds interesting. They get there because of the other links that show up on a page that they initially landed on. This is site navigation. Basically, it is all about enabling visitors to move about your site and this is just one way of maximizing your Adsense earnings. A typical website have menu links on each page. The wording on these links is what gets a visitors attention and gets them to click on one of the links that will take them to another page of that website. Links that have free or download have proven to be good attention grabbers.
For sure, this navigation idea can also be applied to driving traffic to your high paying pages. There are many websites that are getting a lot of traffic from search engines but have low earnings in terms of profits. The basic trick is to try and use some cleverly labeled links to get the visitors off that pages and navigate them to the higher earning ones. This is indeed, one big way of turning real cheap clicks to real dollars. But, before you begin testing if this same idea will work for you and your website, you will need to have two things. Something, probably a software to track and compare, and some high earning pages you want to channel your site traffic to. An option is to select a few of your frequently visited pages. This is ensuring fast result to come by.
However, the next thing to do is think of ways to get visitors viewing a particular page to try and click on the link that will take them to your high earning pages. Make sure to come up with a catchy and unique description for the link. Think of something that people do not get to see everyday. That will surely trigger their curiosity enough to try and see what that was all about. Also, you can use graphics to grab your readers attention. There is no limitation to what you can do so that your link can be seen. If you are after the success of your site, you will do everything necessary just to achieve that goal.
In case you do not know, as far as many Adsense advertisers are concerned, there are no written and unwritten laws to follow regarding what they write. Just as long as you do not overstep the guidelines of the search engines. Nevertheless, remember that it is all about location. Once the perfect attention grabbing description has been achieved, you have to identify the perfect spot on your page to position that descriptive link to your high paying pages. There is nothing wrong with visiting other websites to see how they are going about maximizing their site navigation. Hot pages or most read lists are very common and overly used already. Make sure you know the ones that many websites are using and do not try to imitate them.
Finally, another way of doing it is to try and use different texts on different pages. That way you will see the ones that work and what does not. Try to mix things around also. Put up links on top and sometimes on the bottom too. This is surely how you go about testing which ones get more clicks and which ones are being ignored. Let the testing begin. Keep testing and tracking until you find the site navigation style that works best for you site.
About the Author
Obinna Heche is an acknowledged expert in his field and resides in California USA. For more details visit his site at http://www.homeincomeportal.com/obhmy365
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