These days everyone is talking about a new profitable activity called Forex trading and the great opportunity this activity represents for people willing to brake free from the corporate world and start working from home or any where else without losing their current lifestyle and even improving it.
Most experienced traders consider that the best and most profitable of the capital markets is the Forex market. For many years Forex trading was the sole domain of major banks, large financial institutions and countries central banks; for example the U.S. Federal Reserve Bank. But these days, thanks to the internet the market has been opened to everyone willing to learn the best techniques in forex trading and with the intention of making substantial profits as the institutions mentioned above that annually and consistently make pretty high profits from trading in the Foreign Exchange market.
You have many advantages when trading the forex markets, for example; you don't have to worry about fees you may have to pay to your broker; there are also none of the usual fees to which futures and equity traders are accustomed to pay always; no exchange or clearing fees, no NFA or SEC fees.
The forex market has five major currencies: US Dollar, Japanese Yen, British Pound, Euro and the Swiss Franc. It is due to their great popularity in world's commerce transactions and its high activity that these five currencies account for over 70% of North American trading.
Of course there are other tradable currencies; they include the Canadian, Australian and New Zealand Dollars. These minor currencies account for 4% - 7% of the total market volume. Together, all this five majors and minors currencies constitute the backbone of the Forex market.
The concept of “Buying” in Forex refers to the acquisition of a particular currency pair to open a trade and “Selling short” refers to the selling of a particular currency to open a trade, i.e, just the opposite. When you Buy, you are expecting the price of the currency pair to increase with time, i.e., you buy cheap to sell high; which is easy to understand.
In the case of Selling short, it looks a bit more complicated. Here the way to make money is to initially sell a currency pair that you think will lose value in a given period of time and then, once it happened, you will buy it back at the new price but now you can sell it at the previous greater price the currency had when you opened the trade, so you earn the difference in prices.
It may seem kind of tricky when you are starting, but once you are in front of your trading station it will look much simpler.
Showing posts with label forex education. Show all posts
Showing posts with label forex education. Show all posts
Saturday, January 14, 2012
Thursday, January 12, 2012
A Profitable Forex Strategy
Making money in the forex market is not an easy task by any means. However, given a bit of education and knowledge of the market, it can become quite easy to profit in the forex market. Most traders end up learning that it’s the simply systems that create the wealth. Over analyzing and over thinking can sometimes affect your trading methods and strategy.
The trading method I am going to explain here is probably going to upset you a little and will most likely go against everything you have ever been taught about forex. However, you have to remember that this is my personal strategy and its how I make money. It may not work for the next person, but it has shown me a way to make a substantial amount of money in the forex market. Through your forex training you might have heard traders tell you to always trade with a stop-loss.
If you don’t know what a stop-loss is, it’s simply an order telling the broker when you would like to cut your losses. I don’t trade with a stop-loss period. How is this so? How can I make money without using a stop-loss? I tend to believe that the big players in the forex market like to drive this market in certain directions to take out other traders stop-loss positions.
In order for the banks to make money, they have to take other traders monies, therefore taking out stop-loss orders in the market. I don’t allow the banks to do this to me personally. Secondly, on each trade look to make only a few pips. In some cases this is known as scalping the market. On each trade I am only looking to get 3 to maybe 6 pips or as I like to say, get in and get out.
Your next question might be, “how do I know when to enter and exit the market?” I use a set of indicators combine with a detailed analysis of trend lines and channels. The indicators tell me when to get in and get out and the trend lines give me the overall direction of the market for the next month to few years. Having a good idea of where the market is heading over the course of a few years gives me a good idea whether I am in buy mode or sell mode on a daily basis.
How is it possible to survive without using a stop-loss? Very simply put, do not risk large amounts on each trade. I only risk one tenth of my account balance per trade. For example, I only trade $1 lots on a $10,000 account. What this enables me to do is use no stop-loss. If the market moves 200 points no problem. By the time the market moves 200 points, I’ve already made 100 other trades in profit all for 3 to 6 pips each. If the market continues to get away from me, I continue trading each day gaining which eventually compensates for the few losers and eventually overrides them. When the market comes back in my favor, those losing trades are making profit every step of the way.
The trading method I am going to explain here is probably going to upset you a little and will most likely go against everything you have ever been taught about forex. However, you have to remember that this is my personal strategy and its how I make money. It may not work for the next person, but it has shown me a way to make a substantial amount of money in the forex market. Through your forex training you might have heard traders tell you to always trade with a stop-loss.
If you don’t know what a stop-loss is, it’s simply an order telling the broker when you would like to cut your losses. I don’t trade with a stop-loss period. How is this so? How can I make money without using a stop-loss? I tend to believe that the big players in the forex market like to drive this market in certain directions to take out other traders stop-loss positions.
In order for the banks to make money, they have to take other traders monies, therefore taking out stop-loss orders in the market. I don’t allow the banks to do this to me personally. Secondly, on each trade look to make only a few pips. In some cases this is known as scalping the market. On each trade I am only looking to get 3 to maybe 6 pips or as I like to say, get in and get out.
Your next question might be, “how do I know when to enter and exit the market?” I use a set of indicators combine with a detailed analysis of trend lines and channels. The indicators tell me when to get in and get out and the trend lines give me the overall direction of the market for the next month to few years. Having a good idea of where the market is heading over the course of a few years gives me a good idea whether I am in buy mode or sell mode on a daily basis.
How is it possible to survive without using a stop-loss? Very simply put, do not risk large amounts on each trade. I only risk one tenth of my account balance per trade. For example, I only trade $1 lots on a $10,000 account. What this enables me to do is use no stop-loss. If the market moves 200 points no problem. By the time the market moves 200 points, I’ve already made 100 other trades in profit all for 3 to 6 pips each. If the market continues to get away from me, I continue trading each day gaining which eventually compensates for the few losers and eventually overrides them. When the market comes back in my favor, those losing trades are making profit every step of the way.
Thursday, November 3, 2011
Forex Currency Pairs
Forex Currency pairs in Forex trading have been standardized by the IMF. The pairs most commonly traded are:
• EUR/USD, the Euro and the U.S. dollar
• USD/CHF, the U.S. dollar and the Swiss franc (sometimes called “the Swissie”)
• GBP/USD, the pound sterling of Great Britain and the U.S. dollar (sometimes called “the cable”)
• USD/JPY, the U.S. dollar and the Japanese yen
• USD/CAD, the U.S. dollar and the Canadian dollar
• AUD/USD, the Australian dollar and the U.S. dollar
These pairs account for 80% of all trades in the Forex market. They all involve the U.S. dollar, because it’s still the biggest economy in the world and one of the most inviting to trade. But this is also a holdover from the Bretton Woods Accord of 1944, which pegged all currencies to the U.S. dollar as a benchmark. Although the Accord was abandoned in the early 1970s, some of its effects are still evident in the market.
The first currency in the pair is known as the base currency, and it’s the important one. Its value is always one in the exchange rate, and it controls the direction of the trade and the chart. The second currency is called the cross.
For example, in the GBP/USD, the British pound is the base currency and the U.S. dollar is the cross. If the price on this pair is 1.7609, that means that one pound is worth 1.7609 U.S. dollars. If the chart goes up, that means the pound is strengthening against the dollar; if it goes down, the dollar is strengthening against the pound.
Because a purchase automatically includes two currencies, one being traded against the other, it’s just as possible to make a profit in a bear market as a bull market. For the same reason, there’s no prohibition against selling short in Forex trading as there is in the stock market; it’s built into the system.
Prices are measured in pips, which is an acronym for Price Interest Point, and it’s the smallest digit in the price. This is an important point, because not all pips are created equally; they reflect the base currency of the pair. If the U.S. dollar is the base currency, then one pip equals one dollar in a mini account or ten dollars in a standard account. If you place a trade with one of these currencies and earn fifty pips, that would be a profit of $50 in a mini account or $500 in a standard one.
But if the base currency is not the U.S. dollar, then the value of one pip is equal to one unit of the base currency. In the GBP/USD, because the pound sterling is the base currency, one pip is equal to one pound; in the AUD/USD, one pip equals one Australian dollar. Therefore, when you take profits in these currencies, you’re taking them in the base currency, which then must be exchanged into the U.S. dollar at the current exchange rate.
If the exchange rate is one or more, then this works in favor of U.S. traders; but if the value is below one, it’s not such a good thing. For example, a gain of fifty pips in the GBP/USD equals not U.S. $50, but £50. If the exchange rate was still 1.7609, then the profit after conversion would be around U.S. $88.
But a gain of fifty pips in the AUD/USD equals AU $50, and the exchange rate is more likely to be around 0.7467. So the profit would be closer to U.S. $37.
• EUR/USD, the Euro and the U.S. dollar
• USD/CHF, the U.S. dollar and the Swiss franc (sometimes called “the Swissie”)
• GBP/USD, the pound sterling of Great Britain and the U.S. dollar (sometimes called “the cable”)
• USD/JPY, the U.S. dollar and the Japanese yen
• USD/CAD, the U.S. dollar and the Canadian dollar
• AUD/USD, the Australian dollar and the U.S. dollar
These pairs account for 80% of all trades in the Forex market. They all involve the U.S. dollar, because it’s still the biggest economy in the world and one of the most inviting to trade. But this is also a holdover from the Bretton Woods Accord of 1944, which pegged all currencies to the U.S. dollar as a benchmark. Although the Accord was abandoned in the early 1970s, some of its effects are still evident in the market.
The first currency in the pair is known as the base currency, and it’s the important one. Its value is always one in the exchange rate, and it controls the direction of the trade and the chart. The second currency is called the cross.
For example, in the GBP/USD, the British pound is the base currency and the U.S. dollar is the cross. If the price on this pair is 1.7609, that means that one pound is worth 1.7609 U.S. dollars. If the chart goes up, that means the pound is strengthening against the dollar; if it goes down, the dollar is strengthening against the pound.
Because a purchase automatically includes two currencies, one being traded against the other, it’s just as possible to make a profit in a bear market as a bull market. For the same reason, there’s no prohibition against selling short in Forex trading as there is in the stock market; it’s built into the system.
Prices are measured in pips, which is an acronym for Price Interest Point, and it’s the smallest digit in the price. This is an important point, because not all pips are created equally; they reflect the base currency of the pair. If the U.S. dollar is the base currency, then one pip equals one dollar in a mini account or ten dollars in a standard account. If you place a trade with one of these currencies and earn fifty pips, that would be a profit of $50 in a mini account or $500 in a standard one.
But if the base currency is not the U.S. dollar, then the value of one pip is equal to one unit of the base currency. In the GBP/USD, because the pound sterling is the base currency, one pip is equal to one pound; in the AUD/USD, one pip equals one Australian dollar. Therefore, when you take profits in these currencies, you’re taking them in the base currency, which then must be exchanged into the U.S. dollar at the current exchange rate.
If the exchange rate is one or more, then this works in favor of U.S. traders; but if the value is below one, it’s not such a good thing. For example, a gain of fifty pips in the GBP/USD equals not U.S. $50, but £50. If the exchange rate was still 1.7609, then the profit after conversion would be around U.S. $88.
But a gain of fifty pips in the AUD/USD equals AU $50, and the exchange rate is more likely to be around 0.7467. So the profit would be closer to U.S. $37.
Wednesday, November 2, 2011
Forex Trading - Finding The Best Time To Trade
Trading in the worlds largest and the most liquid financial market is one of the best ways to earn money. Here, if you know how, when, and what to trade, you can be sure that you can earn huge amounts of profit. It is a fact that a lot of people who traded in this financial market became successful and became very rich almost overnight.
As a trader, you would want to grab the opportunity to earn lots of money and of course, start a trading career in Forex. The Forex market, as mentioned before, is the largest and the most liquid financial market in the world. Unlike the stock market and other financial market, Forex has no centralized location as it operates 24 hours a day at different locations around the world. Trades in this financial market are done through an electronic network.
In the past, because of the high financial requirements, Forex was only limited to large multinational corporations and financial institutions, such as banks. However, because of the advancement of the communications technology and also the existence of high speed internet, Forex in the late 90s is now available for everyone who is interested in trading in the Forex market.
Forex trading, for a beginner trader, is simply the buying and selling of different currencies of the world. This may seem simple enough for everyone, but you should also consider that a lot of inexperienced traders and some experienced traders have suffered huge financial losses in Forex.
You should always keep in mind that aside from the fact that Forex can give you a great money-making potential, Forex also has equal risks. Therefore, before you enter this market and trade, you should first consider a few things in order for you be successful in this money making venture.
First of all, you have to know how to trade currencies. In Forex trading, all you need is a personal computer with an active internet connection, a funded Forex account and a Forex trading system. There are numerous websites that offer Forex trading. In order to start trading, you have to open and fund an account first with your chosen website. After that, you can now start trading in the most liquid market in the world.
You need to have a fast internet connection in order to keep up with the updates and price movements and prevent slippages from happening. Another thing you have to consider is that as much as possible, you should register in a Forex website that offer dummy accounts so that you can practice your skills and strategies in Forex trading.
Now that you know how to trade in the Forex market, the next thing you need to know is what to trade. The Forex market involved different currencies from all over the world. It is also traded in forms of currency pairs. Here are the different currency pairs that you should consider trading in the Forex market:
• EUR/USD
• USD/JPY
• GBP/USD
• USD/CHF
• AUD/USD
• USD/CAD
• NZD/USD
• EUR/GBP
• EUR/JPY
• GBP/JPY
• CHF/JPY
• GBP/CHF
• EUR/AUD
These are the most commonly traded currency pairs in the Forex market. It is up to you to determine which currency pair you want to trade depending on market conditions. If you do it right, you can be sure that you can earn a substantial amount of income.
The next and last thing you should consider is when you have to trade in the Forex market. Since the Forex market is open 24 hours a day, you can trade whenever you like. And, since it is the most liquid, you can get out whenever you like. It is just a matter of knowing if the market condition is profitable or if it is falling.
Forex traders are mostly speculators who try to predict which currency is going to increase in value and which currency will decrease in value. Speculators use Forex charts to spot a trend and determine when a particular currency will increase or decrease in value.
Now that you know how to trade in the Forex market, you can now open a funded account and start trading currencies.
Always remember that in all trades done in the financial market, you should also expect to suffer from losses. You should be prepared to deal with it and accept it. This is why you need a substantial amount of money to trade in Forex.
As a trader, you would want to grab the opportunity to earn lots of money and of course, start a trading career in Forex. The Forex market, as mentioned before, is the largest and the most liquid financial market in the world. Unlike the stock market and other financial market, Forex has no centralized location as it operates 24 hours a day at different locations around the world. Trades in this financial market are done through an electronic network.
In the past, because of the high financial requirements, Forex was only limited to large multinational corporations and financial institutions, such as banks. However, because of the advancement of the communications technology and also the existence of high speed internet, Forex in the late 90s is now available for everyone who is interested in trading in the Forex market.
Forex trading, for a beginner trader, is simply the buying and selling of different currencies of the world. This may seem simple enough for everyone, but you should also consider that a lot of inexperienced traders and some experienced traders have suffered huge financial losses in Forex.
You should always keep in mind that aside from the fact that Forex can give you a great money-making potential, Forex also has equal risks. Therefore, before you enter this market and trade, you should first consider a few things in order for you be successful in this money making venture.
First of all, you have to know how to trade currencies. In Forex trading, all you need is a personal computer with an active internet connection, a funded Forex account and a Forex trading system. There are numerous websites that offer Forex trading. In order to start trading, you have to open and fund an account first with your chosen website. After that, you can now start trading in the most liquid market in the world.
You need to have a fast internet connection in order to keep up with the updates and price movements and prevent slippages from happening. Another thing you have to consider is that as much as possible, you should register in a Forex website that offer dummy accounts so that you can practice your skills and strategies in Forex trading.
Now that you know how to trade in the Forex market, the next thing you need to know is what to trade. The Forex market involved different currencies from all over the world. It is also traded in forms of currency pairs. Here are the different currency pairs that you should consider trading in the Forex market:
• EUR/USD
• USD/JPY
• GBP/USD
• USD/CHF
• AUD/USD
• USD/CAD
• NZD/USD
• EUR/GBP
• EUR/JPY
• GBP/JPY
• CHF/JPY
• GBP/CHF
• EUR/AUD
These are the most commonly traded currency pairs in the Forex market. It is up to you to determine which currency pair you want to trade depending on market conditions. If you do it right, you can be sure that you can earn a substantial amount of income.
The next and last thing you should consider is when you have to trade in the Forex market. Since the Forex market is open 24 hours a day, you can trade whenever you like. And, since it is the most liquid, you can get out whenever you like. It is just a matter of knowing if the market condition is profitable or if it is falling.
Forex traders are mostly speculators who try to predict which currency is going to increase in value and which currency will decrease in value. Speculators use Forex charts to spot a trend and determine when a particular currency will increase or decrease in value.
Now that you know how to trade in the Forex market, you can now open a funded account and start trading currencies.
Always remember that in all trades done in the financial market, you should also expect to suffer from losses. You should be prepared to deal with it and accept it. This is why you need a substantial amount of money to trade in Forex.
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