7 things

I AM A CONSISTENT WINNER BECAUSE:

1. I objectively identify my edges.
2. I predefine the risk of every trade.
3. I completely accept risk or I am willing to let go of the trade.
4. I act on my edges without reservation or hesitation.
5. I pay myself as the market makes money available to me.
6. I continually monitor my susceptibility for making errors.
7. I understand the absolute necessity of these principles of consistent success and, therefore, I
never violate them.

What are the most important figures that influence forex market ?

Interest rate

Traditionally, if a country raises its interest rates, its currency will strengthen because investors will shift their assets to that country to gain higher returns

Employment Situation

Decreases in the payroll employment are considered as signs of a weak economic activity that could eventually lead to lower interest rates, which has negative impact on the currency

Trade Balance, budget and treasury budget

A country that has a significant Trade Balance deficit will generally have a weak currency as there will be continuous commercial selling of its currency

Gross Domestic Product (GDP)

It's reported quarterly and is followed very closely as it is a primary indicator of the strength of economic activity. A high GDP figure is usually followed by expectations of higher interest rates, which is mostly positive for the currency.

Less powerfull economic indicator are

Retails sales - it's the first real indicator of the strength of consumer expenditure

Durable goods - Rising durable goods orders are normally associated with stronger economic activity and can therefore lead to higher short-term interest rates, which is usually supportive for a currency

What Actually A Pip Is ?

If you are a beginning forex trader you might be wondering what exactly a pip is. Everyone throws around the lingo but hardly anyone ever stops to give a good explanation that makes things clear for the aspiring trader.

Generally, a pip is explained as the least significant digit of a price quote.

So, if the US Dollar (USD) trades at 120.19 JPY (Japanese Yen) then each unit of change, such as a an increase increase in value of the USD to 120.20 JPY, involves a one pip change in price.

I'm going to step out on a limb and say that a PIP is a price increment point. However, the more confusing official terminology is apparently percentage in point. Which is less confusing?

Either way, it's a single point of change in the quote price between two currencies. Now, while this is very simple, it can be confusing at first when you find out that different currency pairs are quoted to a varying number of digits.

By way of example, here are some relatively current price quotes for various currency pairs:

AUD/JPY   093.29
AUD/USD   0.8574
EUR/USD   1.4668
EUR/JPY   159.62
GBP/JPY   198.05
GBP/USD   1.8204
NZD/USD   0.7001
USD/CAD   1.0635
USD/JPY   108.75
Unfortunately, it is possible that your trading platform will display partial pips! If so, I'd recommend turning that extra level of detail off when you are just getting started. Being clear on currency price and profit/loss calculations will be much more important to you as a beginner than worrying about price moves in the partial pip range.

Why such a feature is enabled by default is something that mystifies me. I guess people in the forex industry soon forget what it is like to be at the beginning of your trading experience -- things can be confusing at first.

Forex Reflections

Saturday is a good time to reflect on Forex activities.

What did the markets do? What did I do? How much cooperation was there between these actions as measured by achievement of my goals?

As time passes, and I actively trade, I'm starting to notice trends. The entry points that cause me the most stress, that I end up regretting or being put in a position where I'm forced to make decisions, are the ones that occur near the top of a movement.

If you are silly enough to ask why anyone would get in near the top, just be assured that it is incredibly difficult not to do. I do have rules and strategies that are designed to protect me from such things, but at the same time my goals push against these security blankets.

Anyway, I have to devise some new strategies.

I simply am not going to have the time to babysit the market all day long while I watch CNBC anymore. I'll be sitting at a desk all day gainfully employed instead. However, this little tryst between the markets and I is not something I'm willing to give up at this time.

The lure of earning decent money, or better, is keeping me in the game. I've been doing a passable job during these turbulent times. I can imagine how I would do if these were not turbulent times. As the saying goes, a rising tide floats all boats.

If I've been able to weather the stormy periods with plenty of ups and downs, I'll be able to do much better when the economic sunshine starts to grace us once again. So, the real game plan in the medium term is to play safe. When things start to get better, when the weather starts to warm, I plan to be in the game.

My goal, and I've been experimenting with it for a few days, is to trade off balancing high cost and low cost positions to end up with medium cost positions. I know that doesn't sound very insightful or precise, but remember that I trade the AUDJPY and it's a good carry pair. So, what I'm suggesting is that I'll slowly work to lower my average price over time.

Sure, I know, that's easy, right? Just buy into new positions when the price is lower than your current average! The problem with that is that with limited capital it simply is not safe to enter into more and more positions. Pretty soon too much of your NAV (net asset value) is sunk into the market. Pretty soon you are carrying way too much risk and eating Rolaids for breakfast.

No thanks.

Create a budget, pop in some new funds on regular basis, and sink them into the market at opportune entry points. Over time you'll develop some positions that represent high cost entry points and others that are low cost. Those pairs can be canceled out and used to retry at some new lower entry point.

Time is a powerful thing so put it to work for you instead of struggling against it. Heck, it's a force of nature. Enlist it to your cause and then stay out of it's way.

Exchange Rate Differ From Stocks

There is an important difference between Forex instruments and stocks or bonds. The nature of this difference requires that you adjust your thinking.

When you buy a stock, the presumption is that with inflation or growth that the stock will eventually always climb. That, at least, is the goal.

Trading on exchange rates is a different ballgame. The rate of exchange is a ratio representing the relative value of the two currencies. It simply is not possible to expect one currency to appreciate relative to another indefinitely. For example, if the exchange rate between two currencies widened a lot then trade opportunities would be created to adjust this imbalance.

Obviously, with a plethora of fundamental variables and widespread speculation it will be difficult to determine the range, but you can theoretically consider Forex instruments to be variable between some unknown high and low exchange rate. Personally, I would prefer to rotate my charts 90 degrees, label each side with the currency in question, and then have the line move from left to right as the relative exchange rate adjusts.

At the same time, I'd like it if instruments were mirror imaged. By this, I mean that we should not be limited to buying and selling EURUSD, for example, but instead that we should be able to buy and sell both EURUSD and USDEUR. Yes, I know all of this is semantics, and it would require work for the market makers to either support this or have the trading systems perform on the fly translations, but it would make things less susceptible to common misconceptions.

Or so I think today. With a bit of time I'm sure I'll buy into the current way things are done if for no other reason that it is the way it has always been done. Also, at that point, why should newcomers have it easier than I did?

A Winning Forex Trading Philosophy

I'm starting to believe that being successful trading Forex has more to do with your philosophy than anything else.

You cannot trade based on how much money you want to make. You cannot trade based on how much money you need to make. This means that you can't push money into the market, desperately searching for opportunity, risking a large portion of your net asset value in the process.

You must trade lightly.

When you trade lightly, you simply let the market give you the returns that it is willing to relinquish to you. Quite simply, it is not a process of taking.

If you can change your mindset it will give you a lot of peace compared to the level of stress that many generate. Dip your toes into the market, following your strategy, with a level of investment that simply cannot begin to raise your blood pressure.

A little bit of market wisdom, developed with experience, combined with an appropriate philosophy will generate profits. I know that this is difficult to consider or even believe in today's rational calculating world, but the only way to win is to not fight the market. It is way too big for you.

Stop trying to generate winning positions and simply let the market give them to you.

Forex Trading Review

So, I've been practicing my strategy using a micro-account for months, and it's time to up my game and start trading for real.

I capitalized my account on Thursday evening and have been playing the AUDJPY with a more serious dollar value for the last two days. Here is a summary of the mistakes I noticed myself making over this period:

Discipline breakdown. I broke discipline and acquired too many open short positions as I was predicting an eventual downturn. Actually, I was afraid of it and wanted to be protected from it, but the result is the same. Lesson -- stick to the plan.

Too impatient. For quite a while the market was moving very slowly. I tried to push capital into the market and forced some trading. This was a mistake. Lesson -- stick to the plan.

Too protective. I was overprotective of my open long positions. Stop losses were placed too early or too close to market prices. This accumulated with my strategy of acquiring in-profit positions. Lesson -- adjust the plan.

Confused. With a long position trading sub-account and a long position carry sub-account, I need to use different strategies for each. I got confused and used my grid strategy in the carry account as well. Needless to say this was not conducive to accumulating profitable carry positions. Lesson -- stay focused.

Buying tops. With gridding strategies it is easy to buy at the top of price spikes. It is necessary to factor this in when setting stops (see point 3). Lesson -- adjust the plan.
In summary, trading with some real money for a period of almost two days has me up $1. While pitiful, I'm happy to not be negative while trading in such a sloppy manner. Fixing these errors, with the size of positions being used, would have me up $20-$40 over this period. Lesson -- do it right and make some useful money!

I don't know if what I'm describing will be helpful to anyone, but I'm putting this out here for my own benefit. Of course, if you can learn from my mistakes, that would be great.

5 Golden Forex Trading Rules.

As a trader in the forex market, I have come to understand the truth about trading and it mostly has to do with myself and my personality. Taking the time to learn the FX market and developing an awareness of yourself as a trader will aid you tremendously on your very own forex journey. To aid you along the way, I have developed my 5 golden forex trading rules.


1. Having an understanding the currency pairs, including which pairs has the most liquidity and volatility in order to decide when and when not to trade them. I want to know the pairs as well as my brother and that is why I trade just a few pairs.

2. Employing technical analysis to determine past price action to set future targets. I was raised a technician and will let technical analysis be my primary mechanism for trade management.

3. Understanding the market’s psychology and my own, and then incorporating this information as part of my forex trading strategy. Understanding the drivers of the market and my own nuances allows me to sleep in when I am too tired to trade the London session and plan my trading activity, including my daily forex education session, at the times of the day when my mental focus is at its sharpest.

4. Awareness of the fundamentals that will cause a currency pair price action. Knowing current events and anticipated news allows me to trade when the market conditions fit my trading style. This is one of the things I absolutely love about the forex market … you never have to wait long for an opportunity!

5. Risk management and trade execution to ensure my trades can achieve the maximum profit. I don’t want to be greedy and I don’t like to leave money on the table either. I will be trying to master this skill for the rest of my life!

Getting your forex education, practicing in a demo account, becoming aware of your own psychology and being persistent will allow you to succeed in the forex market as well.

How To Become A Forex Trader

If you are anything like me, you probably imagine that it is difficult to become a foreign currency trader. Perhaps there are rules, regulations and other hoops that have to be jumped through. Maybe you need large amounts of cash in order to get started.

No.

Becoming a Forex currency trader is incredibly simple!

Get A Demo Account
As I beginner I'd suggest you sign up with Oanda. Not only do they have a good reputation but they offer other advantages for a beginning trader as well:
You can sign up for a live account with very little initial capital.

You can execute trades of just about any arbitrary (small) size.
Of course, you can start with a free demo account before getting a live account. Just about everyone will recommend you do so, including me. However, at some point you need to trade with real money to learn about the psychological aspects of trading.

So, that's what I did. I started with $100 in my account and was off to the markets. Sweet, I'm a forex trader!

Learning To Trade Foreign Exchange
If you have a demo account, enter some trades. See what happens. Then, after the results come in, search for information about what happened. You'll find some helpful advice in blogs, such as mine, as well as various tutorial and forum sites. I would suggest that you buy a book or two on forex trading, technical analysis and perhaps something concerning the attributes of successful traders. I've listed some books that I found helpful on this blog post about getting a forex education.

Trading With Real Money
Don't rush to trade with real money. One of the most important things to realize is that there is always another opportunity -- there is no need to let the fear of missing out intrude on your good sense. In fact, the issue of psychology is immensely important in trading and once you move to real money trading you'll realize this very quickly.

Frankly, though I counsel otherwise, I wasn't be able to trade realistically while not actually risking my own money, so I started trading with a tiny account, funded with $100, almost immediately. Personally, with a few dollars on the table, I found that my interest level, formality and trading style were all upped a notch.

Trading Sessions
Except for weekends the markets are open all the time. However, different periods of time often have different characteristics. This is because trading in currencies generally follows the business day around the world from timezone to timezone.

Account Safety
Oh, I should mention, these days Forex trading with a reputable company (such as Oanda) is quite safe. While there are large risks and large rewards, my risks are essentially limited to the capital that I have put into my account. With wise strategies I can limit risks further, but as a beginner it is comforting to know that I can't lose more than I let sit in my account no matter how foolish a beginner mistake I might make.

I should stress that you could lose all the capital you put in your account, so do not start out with a large account with the idea that you will only conduct small trades. At the very least, create some sub-accounts and keep the majority of your capital out of harms way until you have blown up your play money account, learned a few lessons, and know how to protect your capital.

What You'll Learn
Above and beyond the simple mechanics of opening an account and executing trades there are tons of things you'll need to study to become a successful trader. These include:
Reading candlestick charts.
Interpreting indicators.
Support and resistance levels.
Fundamental economic analysis.
National economic news events.
Each of these issues can span multiple chapters or perhaps an entire text depending on the depth of information being presented.

I also invite you to read my blog. I started out from scratch and can address issues in a way that can be helpful for a beginner. Please feel free to ask questions and I'll do my best to point you to useful information if I can't give you a good answer myself.

Trading Forex From Your Analysis

Let’s do a quick analysis of the Euro and see what we come up with. It’s obvious the Euro has been trending down ever since the overall high of 1.6038 making an incredible drop to 1.2329, that’s a 23% devaluation in roughly 4 months.

Using Fibonacci and measuring this incredible drop in price we get our retracement points to this move. Looking at how price has reacted to these levels we can see defined support and resistance created at or around these levels. In the example below (Figure 1) we have the Euro weekly and the downtrend measured. Highlighted you’ll see the points that the market has retraced to and each time was successively lower each time, most lately retesting the 38.2 Level or the (Short) level. I say the short level but the market can retrace to the 61.8 level and still remain a short market, its just if price can be maintained below these levels it remains in a short condition. In order for the downside pressure to be relived the market will have to break the 61.8% level and be maintained above that and well see a Long market once again.

Now if we take this one step further and we measure the amount of price that has retraced into this downtrend, we will get the support points. If these support points (from the amount of retracement we get) show support and price bounces from them, we know that price will make another attempt to break the downward momentum and try to break that Downtrend Long level. In (Figure 2) we now measure the retracement to find out if an attempt to break Long will be underway what we find is support fails and the downtrend will continue. This is telling us the Downtrend is still prevailing.

Doji

The 2 Doji candlestick forex breakout strategy can be used on any currency pair and timeframe above the 1 hour. The strategy uses two consecutive doji candlesticks to spot new buy and sell trading setups in the market. If you have no idea what a doji is, click here to learn more.

Forex Chart Setup

Preferred Time Frame's: 4 hour and daily
Candlestick Pattern: Doji
Recommended Trading Sessions: All
Currency Pairs: Any

How the strategy works

1) Spot two consecutive doij candlesticks on your forex charts.
2) Mark the upper and lower doji borders.
3) Wait for the third candle to close above the upper border OR below the lower border.
4) Buy if the third candle's closing price is above the upper border. Sell if the third candle's closing price is below the lower border.
5) Stop loss

Stop loss for buy positions is placed 2 pips below the breakout candle.
Stop loss for sell positions is placed 2 pips above the breakout candle.
6) Profit Target: risk-to-reward ratio 1.5 (or use any profit method you like)

Two consecutive doji candlesticks are spotted on the Euro/Dollar daily chart. I mark the upper and lower doji borders and wait for a breakout either to the upside or downside.The third candlestick broke out to the upside. I bought the currency pair @ 1.3078 with stop loss 2 pips below the candlestick @ 1.2975. 

Calculating the profit target: Total risk x 1.5 

Total Risk: 1.3078 - 1.2975 = 103 pips

Price Objective: 103 pips x 1.5 = 155 pips @ 1.3233

Double Top and double Bottom

No chart pattern is more common in trading than the double bottom or double top. In fact this pattern appears so often that it alone may serve as proof positive that price action is not as wildly random as many academics claim. Price charts simply express trader sentiment and double tops and double bottoms represent a re-testing of temporary extremes. If prices were truly random, why do they pause so frequently at just those points? To traders the answer is that many participants are making their stand at those clearly demarcated levels.

If these levels undergo and repel attacks, they instill even more confidence in the traders who've defended the barrier and, as such, are likely to generate strong profitable countermoves. Here we look at the difficult task of spotting the important double bottom and double tops, and we demonstrate how Bollinger Bands can help you set appropriate stops when you're trading these patterns.

Convergence and Divergence

The concept of convergence and divergence is very sensible as we look
for subtle indications of changes in the trend. Another way of ap-
proaching this issue is to ask, “Is this trend running out of steam?”
When the highs are getting higher, or lows are getting lower, we are en-
couraged to look for reasons to enter the market in that direction. But,
when the highs are not getting higher, then sometimes it is an indication
that a reversal is about to begin.
But, the Forex is so very dynamic that these convergence/divergence
rules become very complicated. For example, I was studying a website on
this topic where the examples that were used had three sets of oscillators
at the bottom of the chart. There were two separate Slow Stochastics and
oneMACD oscillator. Not only that, but there was a total of 16 lines in those
oscillators. How amI ever going to understand and learn how to trade using
16 lines?
Even if I learn how to use 16 lines, I will then need to learn the differ-
ences between “regular divergence” and “hidden divergence,” and the rules
for trading just exceeded my ability.
My approach to divergence is very simple: If the oscillator is moving
in the opposite direction of the chart candles or bars, then I have
divergence. Period. In Figure 3.1, I have drawn three arrows to indicate
the divergence where the 5-period and 20-period moving average lines are
following themarket and aremoving in one direction while theMACD lines
at the bottom of the chart are going in the opposite direction. If the trader
waits for indicators to be convergent, some bad decisions can be avoided
as the trend is followed in a precise manner.

Forex Tips For Beginners

Stepping on the stage of the currency for the first time may feel a little intimidating, but do not forget these forex trading tips and you will be soon a good trader.

Study/Self-Study - The very first step before entering currency trading.

Practice means perfect - Most of new traders lose their account at first in two or three months, so do yourself a favor and keep your trading education of the costs as low as possible. Practice with one or more different demo accounts. Be good at analyzing the actual trading before throwing your money. Then when you feel ready, begin to negotiate a very small amount of real money.

Patience - Not all Forex traders trade because they want to make money. Most of the traders trade because they want the action. Do not expect to make money in all trades. Forex markets do the unexpected and sometimes you lose more than you expected, but if you resolutely avoid these mistakes, you must make money.

Self-Discipline - It has been an experience to all traders in Forex trading that the greatest cause of losses in trading is the absence of self-discipline. You need self-discipline to follow your plan to trade, be patient, take the loss and benefits.

Mistakes That Forex Traders Make

1. Using Too Much Leverage
One of the biggest advantages of forex trading is the ability to use leverage or trading on margin. One of the most common mistakes that forex traders make is using too much leverage. Using too much leverage is when you have a small account balance, but make a big trade. If the market moves against your position by just a small amount, it can result in large losses. Commonly, the beginning forex trader will get emotional and nervous and close the trade for a sizable loss.


2. Over Trading

Over Trading occurs when traders try to look for trading opportunities 

that are not really there. It happens to new traders very often, 

because they just want to trade. The result is usually a poorly 

executed trade that results in an eventual loss. Over trading can also 

result in traders making too many trades at once and using too much 

margin.

3. Picking Tops and Bottoms

Many new traders attempt to try to pinpoint where a currency pair will 

turn around and start moving the opposite direction. This is something 

that is difficult even for professional traders.

The Bottom Line

My bottom line advice is that you need to take time learning forex. It's a very exciting and fast paced industry, but it requires some understanding of how the markets work, and a bit of understanding of your own thought process. If you take the time to slow down and actually learn forex and what it's about, you will be a more successful trader. Being patient is not always an easy task, but things that are worth doing right are not always easy.

A Trader's Tool

A mechanic has many tools. Each tools with its own usage and purpose. It is only down to intelligence and creativity that separates a good mechanic and a bad one.

Like a mechanic, a trader has many tools as well. Each indicator is a tool for the trader and a combination set of tools with rules is a trading system. A good trader has not 1 but many system. Each system has different purpose. It is down to knowledge and creativity that separates a good trader and a bad one apart from portfolio.

The best time frame to trade is the lower time frame but due to noise and spikes it is difficult to trade using lower timeframe. It is the reason why most trades fail in short time frame.

EurUsd has been ranging for the past few days and due to it, has hit my stop loss twice. Being a trend trader myself, I just cannot trade during these ranging period. So I stopped trading and try to make a new trading system using lower time frame to catch these ranging market.

It seems with a new set of tools (not new actually, had not used them for a while), I have manage to create an almost perfect trading system for all time frame but with the target of 15m chart. The only thing that this new system doesnt show is when not to trade which i made up with a new set of rules.

If any of you would like to try the new trading system please leave your email. I will try to get back to you ASAP.

Understanding Forex Trading

In the foreign exchange market, you buy or sell currencies. Placing a trade in the foreign exchange market is simple: the mechanics of a trade are very similar to those found in other markets (like the stock market), so if you have any experience in trading, you should be able to pick it up pretty quickly.
The object of forex trading is to exchange one currency for another in the expectation that the price will change so that the currency you bought will increase in value compared to the one you sold.

How to Read Forex Quote

Currencies are always quoted in pairs, such as EUR/USD or USD/CHF. The reason they are quoted in pairs is because in every foreign exchange transaction you are simultanesouly buying one currency and selling another. Here is an example of a foreign exchange rate of the British pound versus the U.S. dollar:
GBP/USD = 1.7500
The currency to the left of the slash ("/") is called the base currency(in this example, the British pound) and the one on the right is called the quote currency or counter currency (in this example, the U.S. dollar).
When buying, the exchange rate tells you how much you have to pay in units of the quote currency to buy one unit of the base currency. In the example above, you have to pay 1.7500 U.S. dollar to buy 1 British pound.
When selling, the exchange rate tells you how many units of the quote currency you get for selling one of the basis currency. In the example above, you will receive 1.7500 U.S. dollar when you sell 1 British pound.
The base currency is the “basis” for the buy or the sell. If you buy EUR/USD this simply means that you are buying the base currency and simultaneously selling the quote currency.
You would buy the pair if you belive the base currency will appreciate relative to the quote currency. You would sell the pair if you think the base currency will depreciate relative to the count currency.

Long/Short

First, you should determine whether you want to buy or sell.
If you want to buy (which actually means buy the base currency and sell the quote currency), you want the base currency to rise in value and then you would sell it back at a higher price. In trader's talk, this is called "going long" or taking a "long position". Just remember: long = buy.
If you want to sell (which actually means sell the base currency and buy the quote currency), you want the base currency to fall in value and then you would buy it back at a lower price. This is called "going short" or taking a "short position". Short = sell.

Bid/Ask Spread

All Forex quotes include a two-way price, the bid and ask. The bid is always lower than the ask price.
The bid is the price in which the dealer is willing to buy the base currency in exchange for the quote currency. This means the bid is the price in which you the trader will sell.
The ask is the price at which the dealer will sell the base currency in exchange for the quote currency. This means the ask is the price in which you the trader will buy.
The difference between the bid and the ask price is popularly know as the spread.
Let's take a look at an example taken from a trading software:

On this EUR/USD quote, the bid price is 1.2293 and the ask price is 1.2296. Look at how this broker makes it so easy for you to trade away your money. If you want to sell EUR, you click "Sell" and you will sell Euros at 1.2293. If you want to buy EUR, you click "Buy" and you will buy Euros at 1.2296.

In the following examples, I am going to use fundamental analysis to help us decide whether to buy or sell a specific currency pair. If you always fell asleep during your economics class or just flat out skipped economics class, don’t worry, we will cover fundamental analysis in a later lesson. For right now, try to pretend you know what’s going on.
EUR/USD
In this example euro is the base currency and thus the “basis” for the buy/sell.

If you believe that the US economy will continue to weaken, which is bad for the US dollar, you would execute a BUYEUR/USD order. By doing so you have bought euros in the expectation that they will rise versus the US dollar. If you believe that the US economy is strong and the euro will weaken against the US dollar you would execute a SELLEUR/USD order. By doing so you have sold euros in the expectation that they will fall versus the US dollar.

USD/JPY
In this example the US dollar is the base currency and thus the “basis” for the buy/sell.

If you think that the Japanese government is going to weaken the Yen in order to help its export industry, you would execute a BUY USD/JPY order. By doing so you have bought U.S dollars in the expectation that they will rise versus the Japanese yen. If you believe that Japanese investors are pulling money out of U.S. financial markets and coverting all their U.S. dollars back to Yen, and this will hurt the US dollar, you would execute aSELL USD/JPY order. By doing so you have sold U.S dollars in the expectation that they will depreciate against the Japanese yen.

GBP/USD
In this example the GBP is the base currency and thus the “basis” for the buy/sell.

If you think the British economy will continue to do better than the United States in terms of growth, you would execute aBUY GBP/USD order. By doing so you have bought pounds in the expectation that they will rise versus the US dollar. If you believe the British's economy is slowing while the United State's economy remains vibrant, you would execute a SELLGBP/USD order. By doing so you have sold pounds in the expectation that they will depreciate against the US dollar.

USD/CHF
In this example the USD is the base currency and thus the “basis” for the buy/sell.

If you think the Swiss franc is overvalued, you would execute aBUY USD/CHF order. By doing so you have bought US dollars in the expectation that they will appreciate versus the Swiss Franc. If you believe that due to instability in Iraq and in U.S. financial markets the dollar will continue to weaken, you would execute a SELL USD/CHF order. By doing so you have sold US dollars in the expectation that they will depreciate against the Swiss franc.

I don't have enough money to buy $10,000 EUR. Can I still trade?

You can with margin trading! Margin trading is simply the term used for trading with borrowed capital. This is how you're able to open $10,000 or $100,000 positions with $50 or $1,000. You can conduct relatively large transactions, very quickly and cheaply, with a small amount of initial capital.
Margin trading in the foreign exchange market is quantified in lots. We will be discussing "lots' more in-depth on our next lesson. For now, just think of the term "lot" as the minimun amount of currencies you have to buy. When you go to the grocery store and want to buy an egg, you can't just buy a single egg, they come in dozens or "lots" of 12. In Forex, it'd be foolish to buy or sell $1 EUR, they usually come in "lots" of $10,000 or $100,000 depending on the type of account you have.

For Example:
You believe that signals in the market are indicating that the British Pound will go up against the US Dollar. You open 1 lot ($100,000) for buying the Pound with a 1% margin at the price of 1.5000 and wait for the exchange rate to climb. This means you now control $100,000 worth of British Pound with $1,000. Your predictions come true and you decide to sell. You close the position at 1.5050. You earn 50 pips or about $500. (A pip is the smallest price movement available in a currency). So for an initial capital investment of $1,000, you have made 50% return. Return equals your $500 profit divided by your $1,000 you risked to trade.

Your Actions	GBP	USD	Your Money
You buy 100,000 pounds at the GBP/USD exchange rate of1.5000	+100,000	-150,000	$1,000
You blink for two seconds and the GBP/USD exchange rate rises to 1.5050 and you sell.	-100,000	+150,500**	$1,500
You have earned a profit of $500.	0	+500

When you decide to close a position, the deposit that you originally made is returned to you and a calculation of your profits or losses is done. This profit or loss is then credited to your account.
We will also be discussing margin more in-depth in the next lesson, but hopefully you're able to get a basic idea of how margin works.

Rollover

No, this is not the same as rollover minutes from your cell phone carrier. For positions open at 5pm EST, there is a daily rollover interest rate that a trader either pays or earns, depending on your established margin and position in the market. If you do not want to earn or pay interest on your positions, simply make sure it is closed at 5pm EST, the established end of the market day.
Since every currency trade involves borrowing one currency to buy another, interest rollover charges are an inherent part of FX trading. Interest is paid on the currency that is borrowed, and earned on the one that is purchased. If a client is buying a currency with a higher interest rate than the one he/she is borrowing, the net differential will be positive (i.e. USD/JPY) – and the client will earn funds as a result. Ask your broker about specific details regarding rollover.

Understanding Forex Rates and Trade

Forex rates simply refer to “foreign exchange rates”. These are used when one wishes to buy and sell different currencies on the foreign exchange market, so as to earn money. They can also be referred to as “currency exchange rates” because they are, obviously, the rate at which you can exchange one currency for another. They are mentioned in pairs. An example is EUR/USD which means the number of US dollars that are equivalent to one Euro.

How You Can Make Money From Forex Trade

People make money through the currency exchange through anticipation of the increase in value of a certain currency. Going back to the example of the US Dollar and Euro, you can buy Euros with your US dollars if you think that the Euro’s value, as compared to the US dollar, is bound to go up. If the exchange rate does go up, you can make a profit by selling your Euros. Although this entails a great amount of risk, this market is also very lucrative because it makes about 3.2 trillion US dollars daily, and the market operates 24 hours a day.

Advantages of the Forex Trade

In addition to what was previously stated, the Forex trade also has other benefits.

-You are allowed to trade on leverage.

-Compared to the stock market, the options are not overwhelming. All you have to do is select from a small number of currencies.

-It’s a very accessible market, even if you don’t have a lot of capital.

-All you have to pay for are the bid and ask spreads.

-It is upon your initiative to dictate how and when to trade.

Risks of the Forex Trade

Before you start trading forex rates, you have to realize that it involves high risk. Make sure you know your objectives and priorities before you enter it. Without a lot of experience, you might go through pitfalls such as losing your entire initial investment. You should only go through with it if you can afford to lose that much money. Ask for professional advice from a financial advisor if necessary.

If you intend to go into forex trade, here are a handful of tips:

1.Familiarize the lingo.

Familiarize yourself with Forex terms before you enter the trade. A lot of other traders may use technical jargon. You will end up feeling and looking stupid if you don’t understand what they are saying, and you might misunderstand and make wrong decisions based on ignorance.

2. Don’t go in unarmed.

You can’t just enter the trade without developing a strategy. Make one based on technical analysis, fundamental analysis, or other sensible tools and techniques.

3. Practice.

Before you hop in, familiarize yourself with the trading environment or go for free demos with various Forex companies. They will help you hone your analytic skills and prepare you for a real investment.

When you are finally ready to enter the world of forex rates, all there is left to do is to select a Forex company. Choose a broker wisely and ask all your questions at the beginning.

Most Visited Forex Trading WebSites

Forex on Top was updated today with the latest traffic rankings for what has now grown to 500 forex websites. Their is no doubt that Google is the best place to search for specific forex content but if you’re looking for websites that you can sink your teeth in, this is the place to find them. You can also browse the top 20 movers to find upcoming forex sites that might be worth exploring.


http://www.forexontop.com