Can Currency Trading be Profitable

Types of Forex trading accounts

Screen-Shot-2016-03-28-at-15.33.29-300x265While a Forex trader is practising on a demo account, the question of which account type is better does not bother him much. But when switching to real money, it is very important to make the right choice..

A Forex broker offers each trading deposit option to the client as a separate project, which has specific technical, financial, bonus characteristics. A trader or investor often overlooks specific details that can reduce trading losses or simply make trading more comfortable.

Demo (training) account

It is a deposit to which the broker credits virtual funds so that the trader can simulate regular trading transactions. It works in a standard platform with the same trading conditions (assets, spreads/swaps/commissions) and quotes as a trading account with real money. Based on the results of trading, full statistics are kept, automatic trading is allowed, indicators, signals, news are present in the usual volume. The main thing is that the broker uses the same stream of quotes for the demo account, without gaps and adjustments. As a rule, demo versions are supported for all types of accounts that are available on a specific trading platform, some brokers may limit the validity period.

Everyone starts with a demo account; they learn to trade, check indicators, work out strategies and money management on it. Profits and losses are virtual, but the experience is real. In the future, such accounts are used in parallel with regular deposits.

Live trading account

To conduct transactions, the deposit must be replenished with cash. Trading conditions are determined by the type of account offered by the broker. Deals are executed at real quotes, the speed of processing requests is worse than on a demo account.

Switching to a real account (regardless of the amount) is possible only after a training course and a stable profit on a demo account.

Bonus account

Sometimes a broker for advertising purposes offers to open an account with a certain virtual amount, usually a small one, for example, as a bonus for replenishment of a deposit or to participate in a contest. For this amount, deals are opened, you can withdraw the profit earned with it, and sometimes you can withdraw the bonus itself if certain conditions are met, for example, on the trade turnover. An excellent chance for beginners to gain trading experience and a small real profit.

PAMM account

Such accounts allow the investor to profit from trading with the total capital in proportion to the amount of his investments. Trade statistics are public, you can connect or exit the project at any time. A fairly effective passive income option for those who do not trade on their own or do not have large capital to implement their trading experience.

Standard account

Without leverage, the size of a standard lot on Forex is $100,000 (or the equivalent in the selected currency). The balance of the deposit is reflected in dollars, the minimum lot is 0.01, the price movement by 1 point (in 5-digit quotes) costs $0.1 or 10 cents.

This is a full-fledged type of deposit for real trading, the margin amount depends on the leverage provided by the broker. It is used by experienced traders or confident beginners. You can open an account with $10-100, but in order to get tangible profits at normal risk, it is recommended to invest at least $200-500. Medium-term transactions of 1 day or more are assumed or non-aggressive intraday trading, and speculation requires either a more serious deposit or a trading account of the next category.

Cent account

Higher leverage allows the trader to use a trading account whose balance is displayed in cents, for example $50 would be displayed as 5000. The minimum lot is the same – 0.1, but 1 point of price movement will cost $0.01 – 1 cent. Such an account allows you to start working with almost one dollar: the process and trading conditions are the same as on a standard account, but the risk of actual losses is 10 times less. Profit, accordingly, also grows 10 times slower. The optimal choice for a sensible beginner – losses are not critical, and successful trading brings an incentive prize. Moreover, you can deposit a large amount on such an account, but work on the same scale.

Swap-free account

Today, most popular brokers offer deposits that do not charge a swap – a commission for moving an order to the next trading day. They are called “Islamic” because they were designed for clients who strictly adhere to Islam’s prohibitions on earning money from usury. The broker has the right to require confirmation of the client’s appropriate religious affiliation, but usually these rules are not very strict.

Swap-free accounts are preferred by experienced traders, at least in the medium term, who keep deals open for a week or longer. If you are ready to trade on standard real and the broker has Islamic accounts – try it, but find out how to change the type of deposit if you change your mind.

 

Standart (classic) account

Market execution assumes that the order is guaranteed to open at the “best” (from the market point of view, of course) price that is present in the stream of quotes at the moment the broker opens the order. During the time while the broker processes the application, the price changes and the result of the transaction may be worse than your expectations.

Constant spreads/commissions are offered, but delays in order execution in an unstable market are allowed. It is not always beneficial, but it simplifies technical analysis and money management. There are usually no restrictions on the types of orders, automatic trading and other parameters.

This type of deposit is suitable for non-aggressive technical trading; it is not recommended for scalpers and other risk lovers.

ECN accounts

The method of processing orders is assumed to be instant execution (exact execution): the order is triggered when the market price equals the price in the order, taking into account the slippage range (set either by a trader or a broker). If the asset is too volatile, then the order will not be processed at all, but if executed, the price will be the most accurate and profitable for the trader. Closing is also at the best price.

The processing speed is high even in the speculative market, the spreads and commissions are dynamic – lower than those fixed on a standard account, but they can be too high, it all depends on the liquidity of the asset. There are restrictions on working with pending orders and setting Stop-Loss/Take-Profit (only after opening an order).

But, as they say, “spread decides everything” – today these are the most popular and favorable conditions for all types of assets and trading methods, despite additional risks.

The bottom line

Should you open deposits with different brokers or keep all your capital on one platform? From the point of view of risk, it is quite logical to keep a small and large deposit with brokers with the most convenient trading conditions, if you are able to cope with constant control over all accounts. But it is clearly not profitable to dissipate capital on several fundamentally identical projects.

The broker has the right to establish special rules, for example, to restrict access to certain types of assets or to open separate deposits for cryptocurrencies and binary options. Sometimes VIP accounts with more comfortable spreads or bonuses are offered for large clients, but there may also be hidden dangerous “features”. In any case, the technical characteristics must comply with the general classification, so study all the conditions carefully.

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Commissions and additional costs when trading in the Forex market

stock-exchange-3556719_1280Every person comes to the financial markets with one single goal – to make a fortune. Traders want to benefit from active purchases and sales for which they develop strategies for technical analysis. Investors are looking for profitable deals in the medium and long term based on fundamental analysis. Analysts make money from forecasts that both groups of market players provide. Also, brokers in this case are no exception – they also carry out their activities to earn money by providing services to traders and investors.

Brokerage companies charge commissions and additional fees for their work, which is quite acceptable, but many of them significantly tighten the costs of their services. For the average trader, increased commission fees can serve as a significant obstacle to earnings, because the lion’s share of income will be taken by the broker as a commission, and losses in this case will increase significantly.

In order not to become a victim of such frauds, it is necessary to carefully select the brokerage company through which you will carry out its operations, and most importantly know in detail about all types of fees and take them into account when choosing a broker and in trading.

In this article, we will look at the following types of forex fees and related aspects:

Brokerage commissions

  • Commissions on deals
  • Commissions at ECN
  • Commissions for entry and withdrawal

Spreads

  • Fixed spread
  • Floating spread
  • Markup

Swaps

  • Types of swaps
  • Swap surcharges
  • Swap trading strategy

Brokerage commissions

A brokerage commission is a fixed fee for a transaction. As a rule, the commission for opening and closing a transaction is considered. This practice is the norm for stock, fixed-term and commodity markets – for each transaction the broker charges a certain fee. Also on the stock market in addition to brokerage there is an exchange commission – a similar fee for the purchase or sale of one asset.

Brokers in the foreign exchange market as an advertising move decided to exclude brokerage commissions – so in PR companies often sound shares “forex without commissions.” In fact, commissions are present, only in this case they were moved as spreads, swaps and additional fees.

Some forex companies have introduced additional commissions on ECN and large transactions, justifying this fee by bringing the transaction to real markets. However, the veracity of this operation is very doubtful and most of these fees still go directly to the brokerage company.

Some brokerage companies charge additional commissions on the entry and withdrawal of clients’ funds. When choosing a brokerage company to trade in the Forex market, it is best to avoid cooperation with brokers who charge their own fees for money transfers.

Spreads

A spread in trading is the difference between the bid and ask price. At one point in time it is impossible to buy and sell an asset at the same price – there is always a spread – the purchase price ask is always just above the current value displayed on the price chart, and the sale price of the bid is always lower by a few points. Consider as an example EUR/USD and the hypothetical price on the price chart of 1.1010, while in the quote glass we will see the purchase price of 1.1006 and the sale price of 1.1014. The difference between the purchase price and the sale price, in this case 8 points and is a spread.

Spread is the norm for any financial, currency, stock or commodity markets – the difference in the queue of applications should always be present, otherwise all market players instantly converged in price and transactions would no longer be carried out. Spread is always lower on liquid instruments, such as currency pairs – majors, as well as during active trading – during the European and American trading session. Accordingly, during periods of sedentary trading sessions, as well as on exotic illiquid instruments spreads will be higher. Spreads can also narrow during side savings and expand during peak activity, such as when important macroeconomic news is released.

In the Forex market, the spread is formed not only by market conditions, but also by the broker, as the spread surcharge is one of the subspecies of the hidden commission of the broker. Thus, the broker increases the market spread to compensate for the exclusion of an open brokerage commission. This type of commission – the spread allowance is called a mark.

There are two types of spread that forex brokers offer:

  • Fixed – always the same-set spread size at any time of market activity;
  • Floating is close to a real spread that has the ability to expand and narrow to the market state.

Fixed spread, despite the apparent simplicity and predictability, actually comes out significantly more expensive floating, especially if you plan to actively trade inside the day on several trades.

Some Forex brokers declare a complete absence of a commission on spreads or so-called “zero spread.” It should be understood that it is impossible to exclude the spread, as it is a natural market difference and if the broker declares that there is no spread in its tariffs, then in some other aspects it will obviously return its money. And it will be very deplorable if these aspects become – hand-drawn graphics, shooting stops and other adventures.

Swaps

A separate commission, which is called a swap, is also charged for the transfer of an open position to the next trading session. The calculation of the commission swap is individual at different times and depending on the chosen currency pair, as the size of the swap is based on the difference of the underlying assets of the two countries whose currencies are part of the currency pair. Swap commission is not a whim of a brokerage company, but a feature of the foreign exchange market as a whole. Central banks of different countries set their interest rate, which must be taken into account when making transfers to the next trading session. Technically, the transfer of the position from the broker looks like this – one currency from the pair broker puts into an escrow account, and the other currency takes on credit. That is why the interest rate, the cost of which falls on the trader, is taken into account. This means that for each day of holding the position will be recalculated swap commission, which can fundamentally increase the loss or significantly reduce the profit on the position.

But the swap can be not only negative, but also positive, because it all depends on what is the difference between the currency bought and sold. For example, if a trader has opened a deal with the USD/CNY currency pair and when the basic interest rates of the US bank 1% and the Bank of China 4% are calculated negative difference, in this case the position of the trader on the contrary will be accrued a positive premium.

Conclusions

In this review, we have looked at the main types of trading costs that the trader expects from a brokerage company. You should also take into account the fact that the broker can impose additional fees for the service news, subscriptions, mailings, etc. When choosing a brokerage company should give preference to the fact that openly cover all their tariffs and do not agitate with slogans – “forex without commissions,” “zero spreads” or the absence of swaps.

With a normal trading strategy and compliance with all the rules of risk management and mini-management, the presence of commissions will not affect the profitability of the trader and, accordingly, his income. The availability of commissions is a normal practice for all markets, however, one should be vigilant and not allow the broker to impose unnecessary costs and charge more.

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Why do Forex traders lose money?

photo-1504639725590-34d0984388bdAccording to various sources, up to 90% of traders have lost their deposit or part of it at least once during Forex trading. In this article we have collected the most popular reasons for losses in the foreign exchange market. Use it as a checklist to understand in which direction you should work, and in which area you are already at your best.

Have you ever lost money on trading? If so, it is very important to identify the cause and analyze your behavior as a trader. This will help to avoid losses in the future. So why do traders lose money?
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How to open a brokerage company?

chart-trading-forex-analysisForex trading is big business. The daily turnover on the Forex market is about $5.3 trillion, and it continues to attract more and more investors. With effective risk management, the profit is practically unlimited, therefore it is not surprising that new and new brokerage companies enter the market that want to take their market share.

Almost every month we hear about new brokerage company opening in different countries. The competition on the Forex market is enormous, therefore it is essential to have a company that can provide all of the services with a wide variety of choices. In this article we will offer a step-by-step guide of establishing a brokerage company.

Creating a Forex company is an amazing business opportunity, but, like in any other business, it makes sense to first find out (learn the whole background) how to become a Forex broker, and then draw up a business plan that will include such important aspects as: registration of a brokerage company and selection of a list of tools that you will offer to traders.

You also need to think about whether you want to create a zero brokerage company or want to choose a White Label solution.
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MetaTrader 4 vs MetaTrader 5: which one is better?

Why_use_MetaTrader_4_software_in_India_for_share_trading_Trading platforms developed by MetaQuotes Software Corp. have long gained popularity among traders from around the world. The most famous products are MetaTrader 4 and MetaTrader 5. Many mistakenly believe that MetaTrader 5 is an updated version of the previous platform, but there is a significant difference in the terminals: MT4 is designed for trading in the foreign exchange market, MT5 is a universal product that works with both currency and and with the stock exchange. Different possibilities of use entail other differences between MetaTrader 5 and MetaTrader 4.

Development language

The first difference between the two programs is the programming language in which they are written. For MT4, MQL4 was used, for MT5 – MQL5, incompatible with each other. MetaTrader 5 has enhanced object-oriented logic and an advanced test system for checking the advisors’ performance on historical data, as well as advanced analytical tools.
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RAMM account – features, characteristics and recommendations

analysis-515243_960_720Brokers working in the modern Forex market relatively recently began to offer a new type of trust management, whose name is RAMM-investment. This hybrid system is systematically gaining wide popularity, although RAMM accounts are still available with a small number of Forex brokers.

This online investment technique is a progressive investment option that combines the advantages of transaction copy services, PAMM accounts and their LAMM counterparts. It is characterized by many interesting features that are necessary for investors who prefer to regulate risks, actively manage their own capital and want to ensure their investments from quick, large losses.

Let us consider in detail the most key nuances of RAMM accounts, the criteria for their selection, as well as the similarities/discrepancies with PAMM systems. The material will definitely be useful to people seeking to make money on Forex in various ways.

RAMM accounts – what is it?

The foreign exchange market, being a dynamic structure, continues to gain popularity among a progressive audience of modern Internet users. Brokers whose income growth is due to the influx of new customers regularly offer new varieties of potentially profitable Forex trading. The option of trust management of funds referred to as such innovations is called RAMM investing.

RAMM accounts are a curious branch of an expanding network of projects where people can earn good money by temporarily giving money to practising traders on certain conditions.

RAMM Features

Functionally, the RAMM system has two basic features:

  • strict adherence to the norms of modern risk management;
  • optimized scheme for sharing the total profit among investors and managers.

To better understand the nuances, you should consider a comparative analysis of the classical form of trust capital management and the investment option under consideration.

Similarities between PAMM and RAMM Accounts

The Risk Allocation management form has the whole range of advantages of the Percent Allocation model and services that allow you to copy trading solutions of successful traders. Therefore, many of the shortcomings of these early systems in current RAMM accounts have been fixed.

So, the unifying factors are as follows:

the provision of funds by investors to working traders who fully engage them in an individual income-generating trading strategy. The effectiveness of any manager RAMM or PAMM account can be viewed in special sections on the website of the Forex broker. 

There are no delays at the time of transactions. The principle of trust capital management implies the return of funds to an efficiently working trader (or group of speculators) for their involvement in a profitable trading strategy. That is, the money invested by the client is used by the managers as personal, which leads to great responsibility for other people’s funds. In RAMM and PAMM, it is technically impossible to delay signals, improper execution, committing errors and other similar events that are characteristic of the method of copying transactions;

Manager’s earnings are determined by the success of his actions on Forex. Here, the trader managing the invested money receives income only from transactions that ended in profit, so there is a motivation for competent trading. By the way, the same traders who allow you to copy their transactions receive in any case the due monthly fee.

Differences between RAMM accounts and PAMM

Given the sequence in the development chain of trust accounts, it is logical to expect the presence of RAMM accounts features that distinguish them from PAMM systems. Three differences are evident here.

1. The RAMM contributor is allowed to withdraw funds at any time, while the conditions of PAMM investing prohibit such actions. If a client who has funds in Risk Allocation needed to receive funds, then after a special request, his active positions are automatically closed. When profit is fixed on prematurely closed orders of a RAMM account, it is distributed according to a pre-arranged agreement.

2. The manager’s trading strategy is always accompanied by an integrated risk controller. For example, conditions in a larger number of PAMM accounts require that the client sets the maximum drawdown. Reaching the price level of the traded asset of this border triggers the forced closure of the position.

This is an unprofitable nuance in the PAMM system since the investor cannot analyze in advance the details of the manager’s trading system and establish the permissible value of the current drawdown. It turns out that each random extreme of the price knocks the investor’s deal out of a potentially profitable process, giving some kind of loss. Such situations are impossible in RAMM accounts due to a special algorithm that controls risks.

Advantages of RAMM Accounts

In addition to features attractive to investors, the Risk Allocation management form has the following advantages:

  • funds invested by users are stored in absolutely secure accounts. Outsiders can not interfere in the distribution of funds and transaction management;
  • money on a RAMM account is managed differently by a trader – investing in trust or independent trading on Forex;
  • it is permissible to make changes in the trading process – prematurely close orders, adjust risks, withdraw part of funds, increase the amount of investments;
  • it is possible to make several contributions with different settings in one strategy;
  • thanks to the available monitoring of the manager’s actions, the investor timely assesses risks and profitability.

Disadvantages of RAMM accounts

  • Duration of existence – It is reasonable to focus on managers successfully trading for a long time. This feature demonstrates the stable effectiveness of the trading tactics used, which can give profit in virtually any market conditions – flat, trend reversals, volatility, sharp recessions, gaps, etc .;
  • You can’t trust funds to managers whose RAMM accounts are full of significant drawdowns, sections with a sawtooth structure, spiers and dips.

Conclusion

Due to the growing popularity of Forex earnings, brokers are trying to lure customers with new services and opportunities. These innovations include the RAMM trust management form. It contains the best qualities of earlier PAMM, LAMM and MAM systems.

For investors who prefer to manage their own investments, actively control risks and reliably insure themselves against sudden drawdowns or sudden losses, the use of a RAMM account is optimal.

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Pros and cons of Forex trading robots

Nao_Robot_(Robocup_2016)Recently, many traders use mechanical trading systems in their trading, and those who do not use would like to know more about them. Let’s find out what it is and why these systems are needed? What good can they give the trader, and what disadvantages do they have?

A mechanical trading system (MTS) is a program (or device, as the term “mechanical” implies) that automatically submits and withdraws orders using the logic laid down in it under the trading strategy. It is also possible that the program can perform additional functions at the discretion of the author of the system – control of submitted applications, monitoring of transactions, analysis of trade, with the provision of charts and reports, etc. 

Pros of trading robots

  • Speed. A trading robot can track dozens, hundreds of stock quotes, make complex calculations instantly, make decisions and immediately place orders. A person will never be able to analyze so much information so quickly. Traders who use large volumes of complex calculations in their trading system and entrusted trading to the robot gain an advantage over colleagues who trade in the old fashioned way. Traders who do not use robots are forced to reduce the number of traded instruments, increase the used time intervals and abandon promising, but complex trading systems.
  • Accuracy. The trading robot does not make mistakes – all input and output data can be calculated with an accuracy of several decimal places, if necessary. By applying, the robot does not accidentally dial an extra zero and does not put a comma in the wrong place. Manual traders can sometimes make mistakes both in calculations and when placing orders. A well-designed trading terminal can protect against some of these errors, but the chance of an error remains.
  • The trading robot is not subject to emotions. A lot of traders, especially beginners, having undergone an emotional impulse, make transactions that contradict the logic of the trading system. In most cases, such transactions turn out to be unprofitable. A trading robot always strictly adheres to its logic. 
  • The trading robot does not get tired, and it is ready to work 24 hours a day. You can go about your business, work, sleep, relax, and your robot will trade. If you trade manually, you will not be able to spend 100% of the time at the computer, even if the trading session on the exchange is only 8 hours. Separating from the computer, the trader may miss an important signal to enter or exit, and this can cause losses.
  • Scalability. If you want to add functionality to your trading system, you only need to add the code. For example, you can receive beautiful reports and graphs at any time, you can set up alerts from the robot via SMS, you can infinitely complicate a trading strategy. By trading manually, you have to spend more of your time if you want to expand your trading capabilities, or even hire additional assistants or refuse to expand your activity.
  • As you can see, trading robots give traders great advantages, why aren’t everyone still using them in their trading? Do mechanical trading systems have no minuses? Yes, and very significant.

Cons of trading robots

  • The complexity of manufacturing a robot. You can develop an excellent trading strategy, but not be able to program it. Even if you are a programmer, you will need to learn a new language, and if you do not understand programming, then you will have to be even more difficult. You can order the writing of a robot, but you cannot be sure that the programmer will accurately describe the logic of your strategy in the program and will not make mistakes, and in the future you may have difficulty modifying the code or expanding the functionality if necessary. 
  • A trading robot can use only technical analysis. You do not teach to read its news and company reports. The robot, in accordance with the signal, can open a position at a time when the news reported about the beginning of the depreciation.
  • A trading robot cannot make decisions in unusual situations. It only fulfils the logic laid down in him, and in case of problems, it will not be able to change anything. Of course, in the program, you can put the robot’s reaction to some situations, but it is impossible to foresee everything. For example, if the connection to the Internet is lost, the robot will not be able to continue trading or at least close an open position. A manual trader would then call the broker and close the position, or restore the Internet. The computer may freeze, the program may close with an error, the broker may not accept the application or accept, but with a long delay. A trading robot will not be able to respond to all events, and this can lead to unplanned losses.
  • The lack of emotions, one of the advantages of a trading robot, is also a minus. A robot can, without any embarrassment, release all your capital in one day. Consider this when creating a robot, consider this possibility and do not allow it. For example, let the robot trade only part of your capital, or make the robot notify you and/or stop trading when a certain threshold is reached.
  • A trading robot does not have intuition and does not use it in its trading. Some trading strategies are based on intuition or use an intuitive approach. For example, many scalpers make decisions based on their instincts. They look at the quotes and make a decision. It is impossible to program such a strategy.

Mechanical trading systems provide traders with new trading opportunities, giving them advantages over manual traders. In stock markets, Forex or derivatives market, trading stocks, futures or currencies – a trading robot is always ready to execute the program laid down in it. But, using robots to automate trading, traders should not forget that robots are not perfect, they are not machines for making money, this is just another useful tool for a trader, and you need to use it wisely.

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What are exotic currency pairs on Forex?

5929579731_b77775a33c_bMost Forex tutorials advise beginners to trade classic currency pairs, such as the euro/dollar, but in this article we will look at another strategy that uses non-standard approaches to trading. With its help, you can use the capabilities of the Forex market.

To begin with, what are exotic Forex pairs and why they got such a name? In this case, we are talking about currencies that are not very popular due to limited use, local binding or unstable political situation in the country.

On the one hand, such assets may seem risky; on the other hand, they can bring in many times more margin than ordinary Forex crosses. Therefore, it is worth taking a closer look at these financial instruments.
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How to become a successful Forex trader?

money-banknotes-currency-forexTo become a successful trader is not an easy task, which will require a lot of strength, time, knowledge, skills, experience from you. A trader is the same profession as a physician, teacher, policeman, and many others, who need to give himself or herself entirely, only in this case you can count on success. 

So, someone who wants to connect his life path with the Forex exchange must have certain qualities. The most important and valuable personal quality for a trader is calmness, strong nerves and the ability to control yourself completely and thoroughly, as soon as you let your emotions take control of yourself, then everything is gone. In this article, we will talk about things you need to become a successful Forex trader.
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點金靈-MTM

Strategies for Forex traders

點金靈-MTMStrategies in Forex trading play in important role. What is the best Forex strategy – there is no single answer. Each trader chooses a strategy on his own, based on his free time and risk appetite. This means that you need to consider your personality and develop a strategy that suits you. What may work very well for one trader may be completely unacceptable for another. Conversely, a trading strategy that has been underestimated by others may be right for you.

However there are strategies the which proved to be effective for a long time. We are going to review them below.

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