Posted by Paul on 8th, 2010
Forex Currency Trading
You can develop into a better and more profitable trader by applying some of the more imperative forex currency trading rules consistently with an appropriate amount of discipline. There are few principles that can help to perk up your chances of success if they are understood, practiced, and implemented in your trading on a regular basis and these rules have been learned in the trenches, mostly through testing and scrutinizing the common mistakes nearly every trader makes when starting out in the forex currency trading business. The first step is to set up and apply specific goals and objectives.
The majority of forex traders who often find themselves on the losing end of a trade make the same common and recurring mistakes. Most forex traders don’t have a clear direction, never take the time to develop a sound business plan and lack a formal written strategy for putting a well thought out plan in place. In forex currency trading, the primary goal is clearly to make money, but it’s important to have goals that are not strictly money related as well. Your personal objectives and ambitions should be very specific and measurable to you, but they should include the characteristics that are needed for the trading.
Having a clear-cut idea of what you want to accomplish in your trading and the precise time frame you want to achieve it, make your efforts more focused. In order to establish a track record of winning trades, you need to develop discipline and a personal forex currency trading system that makes sense for you. The spread generally referred to as the bid/ask spread is what brokers charge instead commission fees. Forex brokers are typically linked with large banks due to the large amount of capital that is required to operate in the forex market. Leverage is a ratio of total capital available to actual capital which is the amount of money a broker will lend you for trading. Finally you should select a trading account that fits your budget.
Basic Forex trading strategy begins with fundamental and technical analysis. Fundamental analysis is mainly used to anticipate and better understand long-term trends in the currency market. Technical analysis is widely used to examine the forex because it identifies and measures sustained trends. Successful traders use a combination to make more accurate predictions. Once you have the knowledge of how the forex currency trading works open a demo account and paper trade to practice until you have what it takes to make a consistent profit. It?s important to take the time to build, test and implement a sound trading plan before you put capital at risk.
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Posted by Paul on 3rd, 2010
Currency Trading: Finding Your Niche
Currency trading is quite similar to trading stocks on the market. While you may or may not have any familiarity with those options, you should know that trading in this form is quite popular and it keeps gaining in popularity. There are many reasons for that, but in most cases it is popular because it works and is quite straightforward which makes it very well worth your time.
Currency trading is a method of trading based on the value of currency. In most cases, the world?s economy is the judge of how much you can and will make. This is different than with stocks which rely heavily on the United State?s economy. In this case, you are dealing with world markets and world currency rates.
The basis is very simple. You simply will purchase currency at a time in which it is worth less. For example, the dollar is worth more. You purchase low and then as the economy strengthens in that country, you can sell to make a profit. Basically you turn in your money for dollars again.
But, that is quite a simplistic look at it. There are many things that influence currency trading. What makes it attractive to anyone, anywhere is that you can invest pennies or quite a bit of money. Obviously you can make more money, the more you invest, but you still make money either way. Currency trading is a market that many are looking to get into for that very reason.
There are many currency trading options available to you to help you as well. You will find that people often have a system in place to help them monitor and make sales. This software is able to be found throughout the web and can be quite beneficial if you want to do the trading yourself. If you do not, you can easily get the help of any of the currency trading advisors out there. It?s a great opportunity!
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Posted by Paul on 28th, 2010
Learn Forex Trading – How To Create An Income By Forex Trading Part Time From Home.
Can you really make a living trading forex as a business from the comfort of your own home? Can you really create a replacement income as a part time trader and then retire young?
Of course, the answer depends on how much is your current income or the desired amount of income you wish to obtain from forex trading before you wish to quit the rat race and be a professional trader, either part time or full time.
But there are many traders who are quietly making 5 figure incomes monthly trading from the comfort of their homes, and some of these are part time traders.
So before you embark into forex trading as a part time trader, here are some guidelines you ought to consider:
1. Your devotion of time – how much time are you going to devote to trading forex? Contrary to popular opinion, you do not need to be glued to your trading monitor to watch the prices of forex or currency pairs all the time. The larger part of your time is spent on finding those trading setups based on your trading system and the execution is fast, and you can also pre-set your stops and profits or give instructions to your broker.
In fact, it is the learning process that will take time. So budget sufficient time to learn how to trade, and that time allocation is actually required before you even place a live trade.
2. Your allocation of capital - again, if you trade the mini forex the amount of capital is not large. Contrary to popular opinion, you can start a mini forex account with around %500 and can start to trade. With a mini forex account you can leverage off the system and be profitable.
3. Your Risk Profile and Trading Discipline - you need to consider your risk profile. Are you aggressive in trading, so that you will prefer day trading the forex and thereby assume more risks? Or are you happy enough swing trading the forex over a few days? This will determine the methodology and trading system you will want to follow.
4. Advancing as a Forex Trader - to advance further as a forex trader, you will need to constantly improve your trading skills and see increase profits in your trading. Good traders always keep a trading log and review whatever trades they have executed and consider the outcomes. In this way, they learn from their errors and know whether they have obediently followed their trading strategies and had kept and maintain discipline in their trading.
In making the transition into a forex trader, the learning process is the most important. Many forex traders have muddled along the way by a self learning process without guidance, with the end result that while they may be profitable, they are not consistently profitable. Many of them are seeking ways to unlearn some of their bad trading habits. You can avoid such a situation by understanding your own risk profile, and seeking out a professional trader who can become your mentor and to pass on his trading skills to you.
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Posted by Paul on 22nd, 2010
A Guide To Forex Trading
Trading money in the global markets can be great way to make more of it, it can also be a lesson in how to lose money quickly. More than %1 trillion is traded every day on the foreign currency exchange (Forex), and yet no centralized headquarters or formal regulatory body exists for this form of trade. Foreign currency exchange is regulated through a patchwork of international agreements between countries, most of which have some type of regulatory agency that controls what goes on within their respective borders. Thus, the foreign currency exchange actually is a worldwide network of traders who are connected by telephone and computer screens.
Although more international policing of money trading has occurred in recent years, authorities have had some successes exposing scams and frauds that victimize traders, especially newer ones. So if you want to try this wild world of trading, you need to be wary and not depend entirely on experts. Sure, experts can help you in explaining the working of foreign exchange markets and how the language of the Forex and its risks are unique, but you need a lot more training before you even consider entering this extremely risky trading arena.
If you have ever traveled outside the United States, you have probably traded in a foreign currency. Every time you travel outside your home country, you have to exchange your country?s currency for the currency used in the country you are visiting. If you are a US citizen shopping in England and you see a sweater that you want for 100 pounds (the pound is the name of the basic unit of currency in Great Britain), you would need to know the exchange rate. And that?s the way foreign currency exchange is used by the average shopper, but foreign currency traders trade much larger sums of money thousands of times a day.
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Posted by Paul on 15th, 2010
?How To? Start Trading The Forex Market ? (Part 4 )
How Currencies are quoted and what moves individual currencies?
ONE of the best advantages in FOREX Trading is
The amount of money you need to place a trade (known as “margin”) is all that can be lost !
You have to know, that despite the super-high leverage offered by some Forex brokers up to (400:1); meaning if you put up % 1000 the broker will allow you to trade like you really have %400.000).
Forex trading is still less riskier than Stock or Futures Trading, where you can loose more than you have deposited in your account.
This type of LEVERAGE does NOT EXIST in the equities or futures market
In the Equities or Futures markets, very often, sudden and dramatic moves occur, against which you can?t protect yourself, even by having placed your protective stops.
Your position may be liquidated at a loss, and you?ll be liable for any resulting deficit in the account.
But because of the FX market?s deep liquidity and 24-hour, continuous trading, dangerous trading gaps and limit moves are almost eliminated.
Orders are executed quickly, without slippage or partial fills. And finally, there are no margin calls. For your protection, the broker will automatically close out some or all of your open positions if your account equity falls below the level required to hold the positions.
Think of this as a final, automatic stop, always working on your behalf to prevent a debit balance.
Currencies are traded in dollar amounts called ? LOTS?
In Forex trading, with most Brokers, you have the choice between 2 different lot sizes.
Standard Lots or Mini Lots.
One Standard lot is equal to %100,000 in currency. The margin requirements, using a 400:1 Leverage, would be US% 250, in other word you control %100,000 worth of currency for only 250 US dollars.
You mean, depositing %250 with a broker, I could trade 100,000% worth of currency ???
NO, be aware, that your account size has to be more than the required margin of US 250. For example, if you place an order to buy 1 Standard lot ( @100,000) of USD/JPY and USD/JPY is quoted as 112.10/112.13, you buy USD/JPY at 112.13.
Your account balance would be %220, because you paid 3 pips or % 30 for this trade.
If you would close this trade immediately, you have to sell it at 112.10 (the bid price) , for a loss of % 30.
In fact you could not get executed on this trade, as the brokers trading platform would reject your order, for the reason of having insufficient funds in your account).
So, your account balance has to be minimum %280. %250 for margin and %30 for the trade.
BUT….IF, after you have initiated the trade to buy USD/JPY at 112.13, and the USD/JPY falls the next second 1 pip ( approx. %8), your position would be closed automatically, because of margin deficit.
I will explain later about having an adequate account size to trade the Forex Market.
Currencies are always traded in pairs in the FOREX. The pairs have a unique notation that expresses what currencies are being traded.
The symbol for a currency pair will always be in the form ABC/DEF. ABC/DEF is not a real currency pair, it is an example of a symbol for a currency pair. In this example ABC is the symbol for one countries currency and DEF is the symbol for another countries currency.
Some of the most common symbols used in Forex are:
USD – The US Dollar
EUR – The currency of the European Union “EURO”
GBP – The British Pound or cable
JPY – The Japanese Yen
CHF – The Swiss Franc
AUD – The Australian Dollar
CAD – The Canadian Dollar
There are symbols for other currencies as well, but these are the most commonly traded ones.
A currency can never be traded by itself. So you can not ever trade the USD by itself. You always need to BUY one currency and SELL another currency to make a trade possible.
Some of the most traded currency pairs are:
EUR/USD Euro against US Dollar
USD/JPY US Dollar against Japanese Yen
GBP/USD British Pound against US Dollar
USD/CAD US Dollar against Canadian Dollar
AUD/USD Australian Dollar against US Dollar
USD/CHF US Dollar against Swiss Franc
EUR/JPY Euro against Japanese Yen
The currency left of the / is called the base currency.
The currency right of the / is called the counter currency.
When you place an order to buy the EUR/USD, for instance, you are actually buying the EUR and selling the USD.
If you were to sell the pair, you would be selling the EUR and buying the USD. So if you buy or sell a currency PAIR, you are buying/selling the base currency.
The best way to remember is, by just thinking of the entire currency pair as one item.
If you buy it…you buy the first currency and sell the second currency. If you sell it…you sell the first currency and buy the second currency.
That means you would to be able to short-sell with no restrictions so you could make money when the market drops as well as when it rises.
The problem with traditional stock market or commodity trading is that the market has to go up for you to make money. With FOREX trading you can make money in all directions.
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Posted by Paul on 9th, 2010
FOREX Beats the Stock Market
Companies issue stocks to raise capital for expansion, equipment and other projects. Stocks have been a very popular form of investment for years. Each share of a stock a person owns represents a small ownership of the company.
Stock values fluctuate based on the fortunes of the company. When the company is doing well the stock price will increase, at this time the investor can sell their stock to capture the profit or they can continue to hold it in hopes of greater profits in the future. Some companies will pay dividends on stocks; dividends are a small share of the profit per each share of stock.
To buy and sell stocks you must use a broker and go through one of the stock exchanges. In the US there are two exchanges, the New York Stock Exchange (NYSE) and the National Association of Securities Dealers Automated Quotation System (NASDAQ). Some very large companies may have stocks on multiple exchanges but most companies will sell their stocks on one or the other.
Until recently the stock market was seen as a long-term investment strategy. Most portfolios would have a large number of “Blue Chip” stocks. These are stocks that have proven their value over a long period of time. With the addition of internet trading we are seeing what is typically known as day trading. Day traders attempt to take advantage of the daily fluctuations in the market by making multiple trades during the day. This is a fairly high-risk method of investment and is further hindered by the large number of commissions charged for each transaction.
In some cases stocks can be bought on margin. In the stock exchange your margin rates are usually about 50%PRCTG%, which means you need half the cost of the stock to be able to buy it.
FOREX
The FOREX exchange is significantly different than the stock exchange. On the FOREX exchange almost all trades are short-term trades, in fact a trader may only hold a currency for a few minutes before moving it again. Since there are no brokers fees in the FOREX exchange you can make numerous trades in one day without racking up large commission fees.
With over %1.5 trillion in trades every day the FOREX exchange is the largest financial market in the world. To put this in perspective all of the American stock markets combined only handle about %100 billion worth of trades a day. This huge volume causes the FOREX exchange to be the most fluid market in the world. Because so much of the world economy is dependent on moving currency from country to country there is always a buyer and a seller for every currency combination. The stock market on the other hand is not nearly as liquid, you may not always find a buyer for the stock you want to sell or a seller for the stock you want to buy.
The FOREX market is not located in a single place but is worldwide. Due to time zone changes the FOREX market is open 24 hours a day 5 days a week.
Stock exchanges are normally only open for 7 hours a day, you can not buy or sell a stock if the exchange that it is listed on is closed at the time.
FOREX is more predictable than the stock market as well. It follows well-defined patterns, you can also leverage better in FOREX than the stock market. Margin accounts in FOREX run as high as 100:1 which means you only need %1 to buy %100 worth of currency.
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Posted by Paul on 2nd, 2010
Forex: No psychological limitations
Back when I first started learning about investing, I decided to start from the beginning and read basic books on personal finance as well as ?guides? for understanding all of the investment world in a nut shell. Most of these authors were very knowledgeable and informative, but their investment advice was far too conservative for my taste. They would literally write chapter after chapter talking about the differences between conservative investing, which according to them generally yields somewhere around 5%PRCTG% PA, as opposed to ?risky? investing which usually meant a diversified stock/mutual fund portfolio yielding (in my mind) only slightly higher averages. What kind of returns can you expect in the stock market? Well they say the market has gone up an average of 10%PRCTG% a year since Adam and Eve. Popular indexes like the DOW and the now more popular S&P500 have always, like real estate, ?gone up over time.?
Now, these market averages are almost worshiped like golden calves. Repeatedly drilled into my brain was the concept that there were hundreds (if not thousands) of fund managers and other ?professionals? out there with Harvard degrees, decades of experience, millions of dollars under management, and they were all spending 15 hours a day consuming every single bit of market information in the hopes of beating these golden calves by a few points.
What chance did I have? If Dr. Fund Guru Jr. who eats, sleeps, breathes the markets and has more credentials than I have individual hairs on my body can?t consistently make 20%PRCTG% a year…well…forget it kid…your chances are slim to none. I guess I?ll buy some shares of XYZ fund and accept the scraps off the table from the stock gurus.
NOT!
The foreign exchange market offers many benefits that the stock market does not have. Most of these have been beaten to death on various forums, blogs, articles, e-books, etc. However, it?s always good to reiterate the positive (my own personal reason is last):
- Forex offers unprecedented liquidity. With over two trillion dollars transacted per day on the market, it makes filling any buy/sell order virtually instant. That equates to less slippage and more profitability. ?Paper trading? stocks vs actually trading stocks is very different, because orders may not be filled in a timely manner. The difference between trading a forex demo accout and an actual account is virtually nill.
- Forex is available 24 hours a day 5.5 days a week, as opposed to the daylight trading hours of the stock exchanges.
- Forex is uncontrollable by large entities. Large net worth individuals, banks and fund managers who throw their weight around in the stock market can often have huge effects on price action. Because of the immense volume of foreign currency traded per day, the market is unmoved by ?heavy hitters.? Not even central banks can control the Forex market.
- Forex offers up to 200:1 leverage as opposed to 2:1 stock leverage.
- Forex has no restrictions for selling short, as opposed to the stock market?s ?uptick? rule
- Forex can actually be traded INSIDE of an IRA or Roth IRA account.
- Forex gains are taxed at the preferred 60/40 rate, no matter what trading style you use (intra-day, swing, position) as opposed to the tax penalties for holding stocks for short periods of time.
The list does go on, but for me the biggest advantage is a psychological one. I know it probably sounds silly, but fear and intimidation can sometimes subconsciously defeat us before we even begin. I don?t like the idea of having to live up to, and in a way, compete with ?professional managers? who have more knowledge of the fundamentals of the markets than I ever will. It?s almost as if Forex, in some way, levels the playing field. I don?t have to psychologically compete against anyone?s idea of what kind of returns are ?acceptable and realistic? and what kind of returns are ?pure fantasy.? I only have to trade until I can find an acceptable reward to risk ratio, and consistent profitability thereof. The only one I compete against is myself.
-Joshua White
http://www.consistentforextrading.com
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Posted by Paul on 28th, 2010
Introduction To Forex Market
The Foreign Exchange (often abbreviated as Forex or FX) market is the largest market in the world with daily trading volume of over 1.9 %trillion in September 2004*. With its high liquidity, low transaction cost and low entry barrier, the 24-hour market has attracted investors around the world.
The following articles aim to introduce the key concepts in forex trading, the terminologies and the characteristics of the FX market.
The articles first introduced the concept ‘spread’, which is the most important transaction cost in forex trading, how the spread is presented in the price quotes, what is the significance of it and what is the trick behind it. As most of the retail customers choose to trade forex with margin account, the articles then introduced what is margin trading, what is the significance of margin, how to trade a margin account and how to choose the correct leverage ratio.
In trading online forex, there are many types of orders that you can make to facilitate your trades. The articles then explained the rationale behind each type of orders, when and how to use each of them.
Being one of the most actively trading markets, the forex market is yet, may not be the most well known market. The articles then gave a little historical background and explained the nature of the forex market, and made an overall comparison of various trading markets. It also discussed the pros and cons of trading forex market and what are the recent trends.
Like any other trading instruments, traders should understand the terminologies and the basis of the market before he/she starts real trading. The above articles serve as an essential beginners’ guide to the world of forex trading.
*According to the Triennial Central Bank Survey of the foreign exchange market conducted by the Bank for International Settlements and published in Sept 2004
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Posted by Paul on 22nd, 2010
5 Things You Must Do If You Want To Attain Financial Freedom Through Forex Trading
With the amazing growth of the forex market, you are going to see an astounding amount of traders lose all their money. Unfortunately, they haven’t followed the simple steps I have laid out for you. Go through these steps and give yourself the greatest opportunity to achieve your goals.
1. Have Faith In Yourself
To reach the level of elite forex trader, you must trust in yourself and your forex trading education. You must be willing to make all your trading decisions, instead of relying on someone else’s thoughts or ability (or lack of). Of course, you will prepare yourself fully before every risking any money.
2. Accept Your Learning Curve
Unless you are a veteran trader, you will lose money trading the Forex market. This is a near certainty. I don’t say this to talk you out of trading. In fact, quite the opposite. You will be trading against others that fall to this reality day in and day out. You, however, will not risk a dime until you have learned the skills you need to make money trading the forex.
3. Decide What Type of Trader You Are
There are many ways to trade the forex. They range from very active to very patient. You must decide which style suits you best. The best time to learn this about yourself is while you are trading a demo account. There is no need to allow your learning curve to cost you money.
4. Get Educated
Education is the shortest path to elite forex trading. Regardless of your ultimate goals, you will reach them quicker with a great forex trading education. Take some time to review different options before deciding on who to trust with your forex trading education needs. A forex seminar will help shorten your learning curve drastically.
5. Continue to Get Educated
In order to achieve and retain elite forex trading skills, you must constantly be adding to you knowledge base. Your education should never end. In fact, one of the key points to look for in an elite forex trading course is ongoing education. It’s nice to have an ongoing relationship with the person/people helping you to achieve your goals.
What separates an elite forex trader from all others is their desire and ability to be independent. Many traders are willing to follow signals, systems, strategies, or anything else you may call them. By taking this approach, however, these traders are only as good as the people they follow.
An elite forex trader will lead. Their decisions will be calculated and analyzed to near perfection. They will make decisions with no hesitation, and handle the growth of their account in a predetermined, intelligent fashion. Take your trading to their level and you will never look back.
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Posted by Paul on 16th, 2010
Currency Trading Tips! Get Rich!
What are you really selling or buying in the currency market?
The short answer is nothing. The retail FX market is purely a speculative market. No physical exchange of currencies ever takes place. All trades exist simply as computer entries and are netted out depending on market price. For dollar-denominated accounts, all profits or losses are calculated in dollars and recorded as such on the trader’s account.
The primary reason the FX market exists is to facilitate the exchange of one currency into another for multinational corporations who need to trade currencies continually (for example, for payroll, payment for costs of goods and services from foreign vendors, and merger and acquisition activity). However, these day-to-day corporate needs comprise only about 20%PRCTG% of the market volume. Fully 80%PRCTG% of trades in the currency market are speculative in nature, put on by large financial institutions, multi-billion dollar hedge funds and even individuals who want to express their opinions on the economic and geopolitical events of the day.
Meaning of Trading in Pairs
Because currencies always trade in pairs, when a trader makes a trade he or she is always long one currency and short the other. For example, if a trader sells one standard lot (equivalent to 100,000 units) of EUR/USD, she would, in essence, have exchanged euros for dollars and would now be short euro and long dollars. To better understand this dynamic, let’s use a concrete example. If you went into an electronics store and purchased a computer for %1,000, what would you be doing? You would be exchanging your dollars for a computer. You would basically be short %1,000 and long 1 computer. The store would be long %1,000 but now short 1 computer in its inventory. The exact same principle applies to the FX market, except that no physical exchange takes place. While all transactions are simply computer entries, the consequences are no less real.
Great Returns in Currency Trading
The opportunities for unmatched returns and investment protection in the brave new world of foreign currency investing are second to none. In Foreign Currency Trading, financial executives Russell Wasendorf, Sr., and Russell Wasendorf, Jr., describe foreign currency trading in plain terms, and help you understand the risks, benefits, and operational requirements that you will need to take advantage of this market?s tremendous potential. Look to Foreign Currency Trading for clear explanations on the mechanics of foreign currency trading, in-depth discussion of all pertinent foreign exchange rules and regulations, and a comprehensive glossary with literally hundreds of terms essential to forex trading. With formerly imposing currency trading restrictions having been struck down in recent court rulings, the world of foreign currency trading is an exciting and rapidly-expanding field.
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