Here are some tips to help you start trading Forex profitably:
There's so much information about Forex trading online that it's understandable for the novice trader to feel overwhelmed. Here are some guidelines on how to get started in the Forex market.
First of all, study. Read everything you can find on the basics of the Forex market, starting with these articles and continuing with whatever else you can find. With all the free information about the Forex market currently available online, you shouldn't have to purchase anything at this stage.
When the data makes sense to you, choose a broker. This decision should be based on your trading needs. If money is going to be tight, find a broker that offers a micro account, so you don't blow your entire trading budget in the first week.
Also, make certain there are no hidden fees. If you're trading on a small account, it would be inconvenient, to say the least, if your entire monthly profit was eaten up by a maintenance charge.
When you've found the perfect brokerage, open a demo account with them. This gives you access to their live feed, with up-to-the-second price quotes and charts and your choice of indicators, and his economic calendar and knowledge base.
Of course, with all this fresh information, you'll want to read it, too. While you're studying, get to know the brokerage's online trading platform. You should be able to open the chart of the currency pair that interests you, add and remove indicators, change the time frame of the chart and the parameters of the indicators, and use the graphic interface to draw trend lines. You should also be able to open market and entry orders, add and change stops and limits, manage a trailing stop, and close a trade quickly should the market be moving against you.
Then paper trade using the technique of your choice. Pick one currency pair for in-depth study; many people choose the EUR/USD or GBP/USD, because their volatility creates a lot of trading opportunities. But be aware that the best trading opportunities will be during the hours that market is open; for the European markets, that's five to seven hours before the United States, depending upon your time zone. Getting up at three in the morning to watch charts can get old fast, especially with a job or family. If that's the case, consider working with the USD/JPY, the Japanese yen, as Tokyo's trading hours begin during our evening.
Watch the chart of your selected currency pair for the parameters that signal a trade using your technique. Remember to start with the long-term charts before moving to the short-term. When it seems right to you, enter the trade.
Realize up front that paper trading doesn't involve that "Yikes!" feeling you get when real money is involved. In that sense, it's not realistic, but it will teach you the mechanics of working in the Forex market.
Don't quit paper trading until you reach the number of pips you've set as your goal more often than not. This is a very important step; if you quit paper trading too soon, you won't know enough to trade successfully in the "real world" of the Forex market.
When you do deposit funds into your brokerage account and begin trading with real money, start small to give yourself a chance to adjust to that added stress. Don't increase the stakes by adding additional lots or by stepping up to a larger account until you've learned to adjust for your emotions and again become an efficient trader.
When you feel comfortable with these simpler techniques, go on to study Fibonacci retracements, Bollinger bands, candlestick chart patterns, and the Elliott wave theory.
Congratulations! You're there!
2007-12-01
Great Tips For Profitable Forex Trading
Trading Forex With The Right Software
The trading software is one of the more overlooked aspects of trading Forex online. For those who are not familiar with the Forex market, it is extremely fast-paced and volatile. That is why all brokers claim that their software offers the minimum latency in providing real-market updates. Unfortunately, this is a very generous statement and it does not take into account the client's internet connection or his geographic location.
The client's connection to the web is obviously the most important factor regarding receiving real-market updates from the broker. It really should be the best connection that one can afford, whether it is cable, satellite or ISDN. Cable is the preferred connection, as it is more secure and offers greater bandwidth.
And then there is geography. It is common sense that Broker X who is located in Toronto can establish contact with Client A located in Montreal much faster than Client B, who is located all the way down in Mexico City. The fact is that all internet connections are affected by distance. The farther a client is away from his broker, the more delay he will receive as a result because of the physical limitations imposed on wiring. Thus, always research your broker's geographic location before selecting it as the right one for you. For best results, always choose a broker who is closer to you.
Any decent broker will offer its trading software for free. Some will even offer different versions of its software for traders of different skill levels. Usually, "advanced" versions loaded with extra features are available for free to those who request them.
Trading software comes in two flavours- web based and client based software. If your broker offers both kinds, great! Each has its own advantages, but it is the general consensus that web-based software is better.
Web based software operates completely on the broker's server and is interfaced through a web browser like Internet Explorer or Mozilla Firefox. This creates a lot of flexibility for the client, as he can access his Forex account anywhere providing he has access to an ISP and a browser. Security with web based software is not an issue, as all exchanges between the client and the broker take place over secured sockets and are heavily encrypted.
Client-based software is downloaded onto the computer and executed from there. It is faster and more convenient to access, and is more "homely" in the sense that it will blend into your desktop environment. However because client based software resides on your computer and stores sensitive information like name and passwords locally, it is very vulnerable to hackers. If they managed to sneak pass your firewall through Trojans or some other backdoor virus, they can do great harm to your bank account.
If you are just starting off with Forex, be sure to take these factors into consideration when selecting the best broker. Analyse the features of the provided software to make sure that they're right for you. So with all that said, good luck and happy trading!
Forex Day Trading A 100% Way To Lose All Your Money Quickly
Having been a forex trader for 25 years it amuses me when I see writers defend day trading. They say it really can make money! - Of course they have no track record to back it up just empty words. Fact is you are guaranteed to lose in day trading for one simple reason: All Movements in Short Time Frames Are Random
Trillions of dollars trade hands each day and million of trader s trade, all with different objectives and opinions and to say that you can predict what they do in a few hours or a day, is ridiculous. You can t. Volatility takes prices anywhere in a day and support and resistance levels are meaningless, so you would have the same success rate flipping a coin. It s absolutely impossible to get the odds on your side PERIOD This is of course why you NEVER see any of the vendors selling these systems give you a real time track record Why?Because they don t dare trade it! They would rather write some enticing copy and appeal to the greed and naivety of traders and make their money selling you the system they win you lose period. But I have seen a track record you may say and yes will have, but it s NOT real. If you check the disclaimer on it you will see there all hypothetical!What does that mean? It means done in hindsight knowing the closing prices! Now who can t do that it s not exactly hard. If we all knew tomorrows price today we would all be millionaires but we don t and neither do we know what will happen tomorrow, so there not worth the paper their written on. Day trading is a good story but the logic doesn t add up and the biggest lie about day trading is you can make money at it longer term. If you could you would see a track record or the vendor would shut up and trade it himself and not need your few hundred dollars. If you want to win Appreciate that trading is an odds game and to trade the odds you need to trade over longer periods ,where the data is valid and you can have a chance of getting the odds on your side.
Finally Don t day trade, get real and trade with the odds on your side.
Learning How to Execute Proper Forex Risk Management
The foreign exchange or forex market is one of the largest and most liquid financial markets in the world with a daily transaction of almost 1.5 trillion U.S. dollars. Banks, financial institutions and individual investors, therefore, have huge potential of economic gain as well as losses.
Foreign exchange risk is a potential gain or loss that occurs as a result of a change in exchange rate. In order to minimize the possibility of financial loss, every investor needs to adopt some forex risk management measures.
For minimizing forex risk, one must remember few basic points: (1) value of a currency changes frequently affecting firms and individuals engaged in international transactions; (2) assets, liabilities, and cash flows are affected through changes in the exchange rates.
So the forex market presents risks involving accounting and translation exposure, economic exposure, transaction exposure and real operating exposure.
Transactional exposures involve quite high risk for foreign exchange. Impact of exchange rate fluctuations on present cash flows, export and import, borrowing and lending in foreign currency, all can cause fluctuation in currency rates which should be considered while developing risk management features.
In most currencies there are futures or forward exchange contracts whose prices give indication on expected market prices of the currencies. These contracts can lock in the anticipated change. So the foreign exchange risk arises due to unanticipated exchange rate changes.
Foreign currency risk management involves managing two types of risk: systematic and unsystematic risk. Systematic risk affects all investments, such as the market risk, inflation risk and interest rate risk. Unsystematic risk relates to individual events that affect a particular investment, such as the business risk and financial risk. Unsystematic risk can be hedged.
If you are a trader or an investor engaged in day or intra-day trading, you must have a trading strategy at place. Your online broker or trading platform should incorporate risk management features in their trading strategies.
The signals and indicator to be generated must be based on risk analysis. You can join some professional workshop or course on foreign exchange risk management where you can learn the basics. The course should be interactive and customized where you can get your specific queries answered.
It is important that foreign currency risk management begins before the risk exposures and not after it has developed. The risk management course should include practical examples from real life incidents on basis of which you can learn the techniques of decision-making.
For calculating foreign exchange risk factors, you can find many advanced project management software that has integrated risk analysis. You can seek help from financial advisers who monitor, assess and hedge the risk in particular investments and in overall portfolios, depending on the investment objectives of the investor.
The foreign exchange risk management should use market indexes and averages in market analysis. It should consider theories of forex market behavior, including technical fundamental analysis. The risk management methods should periodically review investment objectives like safety, growth, speculation, and should always inform the investor about his or her investments.
The Mindset of The Successful Currency Trader
Let me begin by saying that if you want to get into forex or currency trading online, DO NOT begin by buying a guide or a training course.
Too many low-lifes out there pander to the uninformed by selling them overpriced guides and manuals, sometimes for a few thousand dollars each.
A forex mentoring course can be a good option once you know the basics of forex and want to hone your skils, but there is just so much good information available on the internet for free that you could literally become an all-star trader without paying anything for education.
Today we are going to talk about the way you need to think if you want to be a profitable forex trader.
I consider myself to be pretty profitable when it comes to forex trading, and my first banking internship on the Foreign Exchange floor was when I was 16! (I was the youngest intern they ever had!) I got hooked on trading, and have been doing it ever since.
One thing that is really necessary to your success is to READ. Alot! The more you know about forex trading, the easier (and more profitable) it will be.
You want to know the mechanics of the forex markets from the inside-out. I'm not going to spend time discussing the practical aspects of the forex market, as you can and should discover this though your own reading.
When you begin to get comfortable with your knowledge of what this market is, how it works, and how to place successful trades, you are in a position where you can feel confident in your trading abilities.
The most important thing that the successful currency trader possess is the ability to separate his emotions from his trading. Confidence in your trading abilities is one important aspect to being emotionally detached from your trades, and the other aspect has to do with the way you fund your live trading account.
Make sure that when you put money into your live forex account, it is extra money that you do not need to survive and could afford to lose. If you are trading with the money that you need to pay your car insurance, your trading will be highly emotional and likely to fail.
In a way, this is kind of ironic, because I'm sure you've heard the saying that 9 out of 10 of new traders fail. Well, traders that CARE and are highly emotional about growing their forex account are the ones that lose their shirts, when the traders that DON'T CARE and have no emotional attachment to their trading make most of the profit.
That's the irony: The less you care about making money in the forex market, the more money you tend to make!
But also realize that you are not 'not caring' out of negligence (pardon the double negative), but rather because you are so confident in your trading abilities that you KNOW that in the long run you will always win.
To the successful currency trader, trading is not so much about making money as it is about collecting pips in their trading account!
Profitable forex trader's also tend to develop and follow their own trading systems. Finding or creating a certain system and trading within it is also important to successful trading.
Forex Software - Choosing the Best
When it comes to forex trading the forex software you choose is essential. There are so many forex trading companies all competing for your business that choosing the right forex software can be quite a difficult task. Most of the forex software products available offers live online forex trading platforms but what other components are vital when it comes to your forex software.
Key Elements For Your Forex Software
Before purchasing any forex software there are a few essential items that should be included. The most important is security and your online forex trading software should include a 128 bit SSL encryption which will prevent hackers from accessing any of your personal details and information such as your account balance, transaction history, etc.
Providing the best security for your forex trading will include a company that provides 24 hour technical server support for your forex software, 24 hour maintenance should anything go wrong, daily backups of all information, and a security system that has been designed to prevent any unauthorized access. Along with these security protocols there are also some forex trading companies that use smart cards and fingerprint scanners to ensure that only their employees can have access to their servers.
Another important factor when it comes to choosing your forex software is to check what the company s downtime is like. When it comes to trading forex and particularly your online forex trading you need to ensure that the forex software you choose is reliable and available 24 hours a day. The forex software you choose for your forex trading should also have technical support available at all times should your session be cut short.
Ensuring that all the above features are listed in the forex software you choose will help to ensure your forex trading success.
Real Estate Online Courses - What Should You Study?
You juggle many daily duties as a working professional and it may seem almost impossible to fit in education to pursue a fulfilling, lucrative career in real estate. With online distance learning, you can take real estate classes at your own time and pace rather than having to attend scheduled classes. Because distance learning is so flexible and convenient, the Washington Post reports that by 2008, one in ten students pursuing higher education will be enrolled in an online learning program.Imagine moving mountains to make money in real estate! Selling land, selling houses, listing houses for sale and determining the value of homes are a sampling of the exciting professions available in real estate. Distance learning courses are offered online in several areas of the real estate profession, such as:
Real Estate salesperson or brokers license. To sell houses, land or other real property, you need a real estate license. This course will prepare you for the licensing exam with courses in forms of ownership, recordation, rights and interests in land, license law, agency, rules and regulations, contracts, closings and closing costs, seller's net, leases, title transfer, finance, appraisal, Fair Housing and taxes. At the end of the required course, you can take the final exam with a proctor, such as a librarian. A student who passes the final exam is qualified to take the State Real Estate Licensing Examination to work in real estate sales. Students may also pursue a brokers license after performed as a salesperson. A real estate broker is allowed to transact business for their own company and employ other people who hold a real estate license.Real Estate courses to prepare for exams. If you are anxious about taking state examinations to become a real estate salesperson or a real estate broker, you can take preparation courses online prior to the big test. Preparation courses traditionally offer practice questions, activities to help you remember the material covered in the course, a list of relevant real estate terms and basic tips for taking an exam. These courses are not a requirement to take the real estate examination but they help to put many students at ease about taking the test.Real Estate courses to meet continuing education requirements. When you earn you real estate license, continuing education is required to maintain the license and qualify for renewal. Distance learning gives busy real estate professionals a chance to fulfill these necessary continuing education requirements while they continue to earn money.Real Estate courses in home inspection Real estate inspectors educate buyers about the physical condition of a perspective home to assist them in making a wise decision. Inspectors ensure a home is suitable to reside in and does not violate local laws according to the guidelines of the National Association of Home Inspectors (NAHITM). The online course in real estate inspection teaches you the basic standards of performance for a residential home inspection written report.Real Estate courses in appraisal. Requirements for appraisers vary from state to state but all students basically have to complete certain courses and pass a state licensing examination. Real estate appraisers decide the value of a home based on its condition, amenities and the current market value of similar homes in the area.
Distance learning gives you an accessible way to learn how to become real estate professionals. For current realtors, online courses are a flexible way to fit continuing education into your hectic schedules. With online education, you can land that long-awaited, lucrative position in real estate you always dreamed of.
Forex Broker
A broker is any person or firm that charges a fee in exchange for executing trades for a trader. A Forex broker does not charge a commission for placing a buy or a sell order the way a real estate broker would charge a percentage fee of the total price of a sale. A Forex broker is paid according to the spread or the difference between the trader s bid for a currency, and the seller s asking price for that currency. Usually this spread is less than 0.1% or ten pips. (Pips are the smallest movement a currency can make on the Forex. Pips are commonly called referred to as points.) The lower the spread, the less a trader pays a Forex broker for a trade.
The Forex market is global and does not have one central regulatory agency like the Security Exchange Commission. Each country is responsible for the actions of trades in it s own country. A Forex broker in America must register with the Commodities Futures Trading Commission (CFTC). While traders are not regulated, Forex brokers are. A Forex broker must be registered as a Futures Commercial Merchant (FCM) before that Forex broker is allowed to accept a deposit for an account from a trader. Once registered, a Forex broker is given an identification number so that a trader can check the status of a Forex broker before hiring that Forex broker. There are such people known as introducing brokers who may solicit traders for a registered Forex broker, but the introducing broker cannot accept a deposit for a trader s account. It is a good idea for any trader hiring a Forex broker to check the status of the Forex broker with the authorities
Automatic Forex Trading Software
Forex trading has gained tremendously in interest and popularity in recent years mostly due to the introduction of automatic and automated forex trading systems. The market that was open to banks and similar big financial institutions is now luring medium and even small investors. Forex market is the place where currency of one country is traded for currency of another country. These trades happen round the clock with transactions of billions or perhaps trillion of dollars everyday, making it one of the largest and most active financial markets.
With the advent of the internet, network, communication technologies, and sophisticated automated forex trading systems, participating in the forex market is now open to virtually anyone having a computer, an internet connection, a forex brokerage account and a good trading platform. But staying on top of a forex position requires constant monitoring, as this global market is practically open round the clock. Automatic and automated forex trading systems is a tool that lets you specify a currency, an asking price, and a selling price beforehand. With a small seed amount and with the help of a broker, your purchase and sell orders will be executed instantly. An automatic and automated forex trading system allows you to benefit from the profitability of the forex market without having to become an expert in trading. In automated trading through managed accounts, the trading program or human experts executes the trades for you. With a reliable auto trading platform, you are not required to do the actual trading yourself and therefore you save your time. And if you can watch the market constantly, you can mange multiple accounts from your trading platforms, simultaneously, which was never possible with manual trading. Automated forex trading systems present advantage of trading multiple systems and multiple markets.An automatic and automated forex trading allow your trades to be made at any time of the day or night, regardless of your presence. You do not miss a single profitable trade even if you are not present in front of your computer terminal. An automatic and automated forex trading helps you in taking advantage of multiple forex strategies and different systems. Because different systems are designed to be triggered by different trade indicators, you can diversify your investment as well as your risk. An automatic and automated forex trading also eliminates human emotions and psychology that can often affect proper and profitable trading decisions. With an automatic and automated forex trading system, you will be capable of monitoring many currency pairs at a time and you can follow and execute all of them. But, even with automatic forex trading systems, you will have to learn the basics of the forex trading, methods of fundamental and technical analysis, market indicators, etc. for enjoying consistent profits.
Just being automated, the trading system never guarantees you success as the market is influenced by many variables and parameters. The forex automated system is not just mechanical, but is fully programmable and you can customize them according to your needs.
Simple Forex Trading System - Follow this Simple Forex Trading System For Faster Forex Profits
Follow this simple Forex trading system for faster profits and faster results. Only a select group of 10 percent of Forex traders consistently perform winning trades. This article will discuss a simple Forex trading system for you to implement to fast track your Forex education and profits.
Simple Forex Trading System One: Generally currencies always trade well and the price always is the leading indicator so be sure to look for convincing clues and follow the lead.
Simple Forex Trading System Two: Your indicators are really your best friend. You must believe in what they are telling you 100 percent of the time with no exceptions. Analyze the clues that they are giving you and act upon them. Never second guess them.
Simple Forex Trading System Three: Always draw pivot points on your 15 minute chart with no exceptions.
Simple Forex Trading System Four: The area between never points is never the place to trade. The best trade are always made in and around the pivot points. Avoid all other areas at all costs.
Simple Forex Trading System Five: After 2am New York time is the busiest time on the Forex market as it's when the major rallies for the Euro begins.
Simple Forex Trading System Six: If you are anxious to follow one signal that you have been given then by all means one signal is all you need. However, for a clearer signal and clue wait for more.
Simple Forex Trading System Seven: Always be aware for combinations of price patterns as well as obvious price patterns when looking for clues.
Simple Forex Trading System Eight: The most successful Forex traders only think one way, in one direction. If the trend is up then buy the dips and if the trend is down then sell the rallies. Forex trading does not need to be any more complicated than that.
Nine: Make sure you get the best Forex trading system education that you can. Avoid free Forex trading system courses and find one that you can budget for. Also be sure to expand your Forex trading education throughout your Forex trading career.
Forenoon Snow (Minnesota's Emerald Snow)(Now In Spanish and English)
Above , emerald snow, flowsDown (On Minnesota green),As I look out my window:Gaze upon the snowy skies,Capture the morning scene !
Boundless and swift, untroubled:Are , its snowy glistening hues!...Happy I thought: to see this softEmerald, forenoon snow
Follow me, O yes, please do :I called unto the Forenoon Snow: Follow me into my memories,For times when I am old!...
#940 (12/3/05)
Note (by the author): This afternoon, I walked out into the soft snow in my driveway; whizzed the snow away from my car with a broom. Then I remembered how beautiful it all is, winter in Minnesota (how it was, used to be, is); I was kind of in a trance looking at it all descend from the sky, onto the green tree in our yard, the car, driveway, me. I had waked up earlier, and looked out the window (prior to this), and it was boundless snow that filled my eyes: I remember thinking, What a blessing to be able to simply absorb this all . Later on that evening my wife said: I love walking in the snow, she s from Peru, and this is her sixth winter in Minnesota. She has learned there is no other place on earth that has such a wonderful and full winter. Long it is, but beautiful. And then she said that evening as we left the bookstore, to get into our car, Look at the snow how it glistens, it was doing just that with the lights of the bookstore, and arch light by the car, and moon, it all set the mood, touched our senses, this was not a perchance thing, it was a God sent thing; she has learned what we Minnesotans take for granted: Minnesota is by far, the wonderland of all lands in the world, in winter, and St. Paul, is surely the city of cites to enjoy a winter in.
I have learned one must grab the novelistic beauty of a thing, and bottle it, before it disappears
In SpanishTranslated by Nancy Penaloza
Nevada matutina(La Nieve De esmeralda de Minnesota)
Encima-, la nieve de esmeralda fluyeAbajo (Sobre Minnesota verde), Mientras miro fuera de mi ventana:Mirando fijamente sobre los cielos nevosos, Capturo la escena de la ma ana-!
Abundante y r pido, sin problemas:Son-, sus matices nevosos que brillan!... Feliz pens : por ver esta suave
Esmeralda, nieve de la ma ana
S game Oh s , por favor h galo":
Llam a la Nieve de la Ma ana:
S game dentro de mis memorias,
Para tiempos cuando este viejo! ...
940 (12/3/05)
Note (por el autor): " Esta tarde, ande sobre la nieve suave en mi camino regreso; sacudiendo la nieve lejos de mi coche con una escoba. Entonces record cuan hermoso es todo esto,, el invierno en Minnesota (como era, sol a ser, es); era una especie de en un trance mirando descender todo del cielo, sobre el rbol verde en nuestra jard n, el coche, me conduc a. Yo hab a andado temprano, y mirado por la ventana (antes de esto), y esto era la nieve abundante que llen mis ojos: recuerdo pensando Que bendici n ser capaz de absorber simplemente todo este . M s tarde esa tarde mi esposa dijo: " Me gusta andar en la nieve , ella es de Per , y esto es su sexto invierno en Minnesota. Ella ha aprendido que no hay ning n otro lugar sobre la tierra que tiene un invierno tan maravilloso y lleno. Largo es este, pero hermoso. Y luego ella dijo esa tarde cuando dejamos la biblioteca, para entrar en nuestro coche, " Mira la nieve como brilla , estaba haciendo justo esto con las luces de la biblioteca, y por la luz de arco del coche, y la luna, todo esta disposici n del juego, toc nuestros sentidos, esto no era una cosa incierta , era algo enviado por Dios ella ha aprendido lo que nosotros los Minnesotanos damos por echo: Minnesota es por ahora, el pa s de las maravillas de todas las tierras en el mundo, en el invierno, y Saint Pa l, es seguramente la ciudad de ciudades para disfrutar de un invierno. He aprendido que hay que agarrar la belleza novel stica de una cosa, y embotellarlo, antes de que esto desaparezca
Day Trading Stock Picks
Day trading stock picks are the best stock deals that are available for day trading. Awareness regarding day trading stock picks allows a day trader to gain maximum returns from the market. The day trader has to capitalize on intra-day price volatility in the most active stocks to reap a regular profit from the stock market.
The main advantage of day trading is that one s stock positions are not held beyond the current trading day. Hence, the chances of potential losses that may arise due to holding a stock overnight are minimized. Increased leverage and profit in any market condition are the other key advantages of day trading. Since trading period is limited, day trading stock picks become a crucial helping factor.
However, day trading may sometimes lead to immediate financial losses. Lower liquidity, higher volatility, changing prices, and unlinked markets are some of the drawbacks of day trading. It is, therefore, necessary for a day trader to have adequate experience and thorough knowledge regarding the securities market and trading techniques. This also necessitates a detailed analysis of the stock picks list and applying one s discretion when selecting the stock.
Day trading stock picks are chosen based on a set of strategies or methodologies, of which the most important are technical analysis, trend analysis, relative strength ranking, fractals and volumes, chart formations, and algorithms. One can look out for reliable newsletters which provide expert advice related to the most active stocks and indices. Further, there are myriad Web sites that provide tips and day trading picks. Interactive chat rooms provide first-hand information on the day trading stock picks. Many good books are available which can educate the day trader on day trading stock picks, as well, though this information is not as up-to-date as Web sites and newsletters, in general.
Online Forex Trading Education
There are many people who are interested in forex trading. But before you start trading in forex, getting a good online forex trading education is important. The forex market is largely a technical market with its own forex terms and processes so it is important you grasp the fundamentals with an online forex trading education.
Why Online Forex Trading Education?
Most people who want to try forex trading are often busy with other aspects of life to take care of. They probably do not have the time to attend a course on forex trading. Therefore, an online forex trading education is more suited.
Since it s online, you can take your time to read and digest the information at your own pace. Also most of the basics of forex trading can be found online for free. There are tons of websites that provide free forex trading courses and tutorials.
There are also free forex trading seminars online available plus advanced forex trading courses online such as the forexmentor program. While it s usually not free, the costs are pretty cheap compared to attending a forex trading course in a classroom.
Another important part of an online forex trading education is practice. I believe no matter how well you understand forex trading or if you score an A in a forex trading course, the real deal comes when you actually start trading.
Most forex trading sites provides a demo account for new beginners to forex trading to learn how to manage their forex trading account. There is no monetary risk, so it is a very good way to learn the ropes.
Once you feel you have sufficient experience, you can open a regular forex trading account or a mini forex account. I would highly recommend you open a mini forex account and start trading in smaller amounts. It has all the features of a regular forex accounts yet you can start one usually with about US $100.
It s important you do not rush through your online forex trading education. Take your time to understand and start trading in small amounts to practice. As the saying goes, practice make perfect.
A Mini-Guide To The Managed Forex Account
.jpg)
A managed forex account is forex made easy. It is especially tailored for those investors who do not have the time or desire to monitor their own forex account. Many different companies offer these accounts to their clients. A managed forex account is often chosen by individuals who wish to take advantage of the high liquidity and high profitability of the forex market without taking the time to learn forex trading.
The world of forex trading is highly complicated and success requires education and familiarity with terms, charts, signals and indicators. With a managed forex account, the investor can rely on someone who is already familiar with and successful in the forex world.
One type of managed forex account utilizes robots to trade the investors account. To the investor, no human hand means that there will be no emotional trades. These automated systems are designed by experienced traders and take into account all the indicators and statistics of any good forex trading system to signal the robot to trade. This is really forex made easy.
Another type of managed forex account attempts to take the difficulty out of self-trading by allowing the investor to employ a professional trader to make the trades. These accounts remain solely in the individual investor s name, meaning that money can be withdrawn at any time, unlike conventional stock trading. In other words, a managed forex account is not merely combining one investor s money with numerous other investors money to obtain results. These managed forex accounts are actively traded by individuals for individuals. Forex made easy for individuals.
Perhaps you are looking for forex, but you wish to trade your account yourself, for fun or as a hobby. Without a managed account, you must follow all the rules of successful forex trading. Forex education is absolutely necessary. There is no way to trade a forex account successfully without education because this is a complex financial undertaking. In fact, professional advice is highly recommended. Try a demo account, before you invest real money. Software, seminars, daily newsletters and much more is available for the new trader. If you are not looking for a managed forex account, you are not really looking for forex made easy. You are looking for the tools needed to maximize your chances of success.
Forex trading is a risky business. According to statistics, only 5-10% of new traders make it through their first six months with their initial investment intact. Even less make a profit. A managed forex account is a way to reduce the risk and increase the profit.
How To Use Divergence Trading And Capture Hidden Stock Market Profits
Although divergence trading is not a new stock trading method it nevertheless is a powerful one. Through divergence trading you can take advantage of market trend reversals and uncover profit opportunities.By locating trend reversals that other traders miss you can position yourself to benefit from hidden trading movements. This can be accomplished whether the market is bearish or bullish. Just by simply knowing which direction the market is going through divergent tracking you can realize considerable profits.
The divergence trading formula is an uncomplicated and straightforward method composed of simple indicators and simple rules that multiplies the power of trend reversal. The method consists of 3 elements: exponential moving average, simple moving average envelopes and stochastics. By monitoring these three indicators you can spot divergent trends that will forecast price changes you can exploit.
Also divergence trading is compatible with the more commonly used trend-following method. By coupling divergence trading with trend-following trading you can profit from both sides of any transaction and not leave any money on the table. And the best thing is that divergence trading can be applied to any trading market whether it be Forex, day trading, options, futures, etc. Divergence trading is multidimensional and can show you where to enter a trade, when to stop a trade and where to take profits.
So if you are a newbie stock trader or a seasoned veteran it will pay to learn how divergence trading can diminish your stock trading risks and make your trades more profitable. Add divergence trading to your stock trading toolkit and watch your trading profits grow.
2007-11-08
A Look at Online Forex Brokers
.bmp)
Forex - You Need A Real System!
Although it has been some years since I was actively involved in trading, I have just returned to the markets and have begun to trade a small account on my own behalf. This has perhaps given me a slightly skewed perspective of the markets, almost like a new entrant, but one with a lot of experience.There have been some big changes whilst I have been inactive, not least in the number of online brokerages fighting for every dollar.But many things stay the same, at the heart of which is one, I guess, unbreakable truth. Trading is basically a very simple business, with any trading stocks, options, FOREX, whatever only really involving three steps:1. Find several possible trades evaluate them and decide which to go for,2. Calculate how much to trade, and decide at what points to enter and exit the market3. Keeping an eye on, or monitoring, open market positionsNow, these three steps were basically all there was to it a few years ago, and they still And, guess what, people are still getting totally bogged down right here, at this early stage of the trading process, generally, for one of two reasons.The first possible reason is that they simply are not aware that these are the steps involved in the trading process, or (the second reason) they have no clearly defined rules for actioning these steps. Thus, less experienced, more nervous, traders can often take hours to evaluate a small number of potential trades.Experienced day traders, on the other hand, are fully aware that, with little time available to execute their trading, they must have a process plan and they must stick to it.A day trader will set out his (or her) plan of action something like this:1. Recognize the opportunity, enter the market2. Stay in the trade for as long as possible if it is going for him or3. Get the heck out of there with minimum losses, as soon as it is clear it is going to go the wrong wayThat s it! That s essentially what a day trader in any market was doing years ago, and that is what a day trader is still doing today, with little or no change to their working practices brought about by the vastly more advanced technology of today.Savvy day traders learn very quickly that they must plan ahead of time, so that they are in prime position to take full advantages of the opportunities that occur in real time.Thus, day trading, which on paper at least is a pretty dangerous and risky manner of working markets is, in fact, one of the most disciplined trading schools! By the nature of market movements and the way they operate, day traders simply cannot afford to run their trading business on a wing and a prayer!How To Choose a Forex Trading System That Works and Suits You
There are so many different trading systems you could use to trade the forex market, some better suited to certain people than others. For example some people may find it easier to comprehend and take into account fundamental factors as opposed to looking at a screen covered in technical indicators, and vice-versa.The first logical step in determining what type of trading system would best suit you is actually being aware and understand the widely known methods of analysis used in trading the currency market. Once you are aware of the tools that are available, you can generally tell what type of analysis suits you. For example some of the main technical analysis methods which are popular include:Pivot pointsChart patternsFibonacci retracementsCandlestick patternsAnd some fundamental factors which are widely used include analyzing:Interest ratesTrade balancesUnemployment ratesGross domestic product (GDP)You may now actually be able to develop your own system by combining certain methods of analysis together, giving you a method which you are comfortable with. On the other hand you may decide that you would like to trade someone else’s system, either way, that brings us to the next step which is determining the profitability of a trading system.Determining ProfitabilityMost people would think that back testing is the best way to determine a systems profitability. However back testing doesn’t always give you a true idea of how profitable a system is. The reason for this is because when you’re back testing your system on historical charts, you are only seeing the obvious setups which have occurred, and not always seeing the ones that are less obvious. These less obvious ones sometimes can produce losses, which is why back testing isn’t always the best method to implement.A better method of determining profitability is by trading your system in real-time with a demo account. This would give you a true understanding of what your system is capable of. This would also allow you to familiarize yourself with your trading platform at the same time. When determining profitability you must look at it in terms of expectancy and opportunity.Expectancy & OpportunityThese two factors together will be able to tell you what you could expect to make over a period of time. Expectancy is calculated with the following formula:(Probability of winning × average win) – (Probability of losing × average loss)This will give you a figure which is the average amount you can expect to make per trade. This shouldn’t be a negative amount, if it is you should look at some other method of trading since you cannot make money on a system that produces a negative expectancy. Obviously the higher this figure is the better. Now to the opportunity factor.The opportunity factor is how often you are able to trade using your system. By multiplying your expectancy figure with your opportunity factor it will tell you how much you could expect to make over a period of time. The more opportunity you have to trade, the more money you should expect to make. This now brings us to the last component of a trading system, money management.Money ManagementWithout proper money management you will end up as a statistic. In other words one of those 90%+ of traders who loose their money. Money management tells you how much of your account balance to risk per trade. The whole point of money management is to ensure your survival over the long term, and to preserve your capital.The most common form of money management is the percent risk model which tells you not to risk more than x percent of your account balance on any one trade. A range between 1-3% is generally an accepted amount which has been a reliable percentage to use in order to make money in the long term.ConclusionBy taking into consideration the above factors you will be able to determine if a trading system best suits you, and with some simple mathematical calculations you will be able to determine its profitability
How to Find a Broker for the FOREX Trading Market
It's not always easy to know what to look for in a broker in any market, much less a market as complex as the FOREX. But, if you want to trade in FOREX you need a broker. While it might be tempting to simply ask the brokers what they can do for you, you can't always depend on them to give you a straight answer. Here are a few things to consider when choosing your broker. You will want a broker that has low spreads. Since FOREX brokers don't charge a commission, this difference is how they make money. Low spreads will save you money. Along with this, you should be looking for a broker attached to a reputable institution. Unlike equity brokers, FOREX brokers are usually attached to large banks or lending institutions. The broker should also be registered with the Futures Commission Merchant (FCM) as well as regulated by the Commodity Futures Trading Commission (CFTC). Once you've narrowed your choices down to brokers that won't cost you too much, and that are reputable, consider the trading tools that they are offering you. FOREX brokers have many different trading platforms for their clients, just like brokers in other markets. These often show real-time charts, technical analysis tools, real-time news and data, and may even offer support for the various trading systems. Before you commit to any one broker, request free trials of their tools. Brokers generally provide technical as well as fundamental commentaries, economic calendars, and other research to help you make good trades. Shop around until you find a broker who will give you what you need to succeed. The next item that you will need to evaluate carefully is the number of leverage options your potential broker has. Leverage is a necessity in FOREX trading because the price deviations in the currencies are set at fractions of a cent. Leverage is expressed as a ratio between the total capital that is available to be traded and your actual capital. For example, when you have a ratio of 100:1, your broker will lend you $100 for every $1 of actual capital you have. Many brokerage firms will offer you as much as 250:1. If you have low levels of capital you will need a brokerage with high levels of leverage to make reasonable profits. If capital is not a problem, any broker that has a wide variety of leverage options would be a good choice for you. A variety of options will let you vary the amount of risk you choose to take. For example, less leverage (and therefore less risk) may be preferable if you are dealing with highly volatile (exotic) currency pairs. Along with different levels of leverage, look for brokers that offer different types of accounts. Many brokers will offer you two or more types. The smallest account is known as a mini account and it requires you to trade with a minimum of around $300. The mini account also generally offers a high amount of leverage. The standard account allows you to trade at a variety of different leverages, but it requires minimum initial capital of $2,000. And finally, there are premium accounts, which often require significant amounts of capital. They also generally have different levels of leverage available to the traders who use them, and often offer additional tools and services. You will need to make sure that the broker you choose has the right leverage, tools, and services for the amount of capital that you are able to work with.
risks-by-foreign-exchange-on-forex
As it was mentioned above the trading on the Forex is essentially risk-bearing. By the evaluation ofthe grade of a possible risk accounted should be the following kinds of it: exchange rate risk, interest raterisk, and credit risk, country risk.Exchange rate risk. Exchange rate risk is the effect of the continuous shift in the worldwidemarket supply and demand balance on an outstanding foreign exchange position. For the period it isoutstanding, the position will be subject to all the price changes.The most popular measures to cut losses short and ride profitable positions that losses should be keptwithin manageable limits are the position limit and the loss limit. By the position limitation a maximumamount of a certain currency a trader is allowed to carry at any single time during the regular trading hours isto be established. The loss limit is a measure designed to avoid unsustainable losses made by traders bymeans of stop-loss levels setting.Interest rate risk. Interest rate risk refers to the profit and loss generated by fluctuations in theforward spreads, along with forward amount mismatches and maturity gaps among transactions in theforeign exchange book. This risk is pertinent to currency swaps, forward outright, futures, and options (Seebelow). To minimize interest rate risk, one sets limits on the total size of mismatches. A common approachis to separate the mismatches, based on their maturity dates, into up to six months and past six months.All the transactions are entered in computerized systems in order to calculate the positions for all thedates of the delivery, gains and losses. Continuous analysis of the interest rate environment is necessary toforecast any changes that may impact on the outstanding gaps. Credit risk. Credit risk refers to the possibility that an outstanding currency position may not berepaid as agreed, due to a voluntary or involuntary action by a counter party. In these cases, tradingoccurs on regulated exchanges, such as the clearinghouse of Chicago. The following forms of credit riskare known:1. Replacement risk occurs when counterparties of the failed bank find their books are subjectedto the danger not to get refunds from the bank, where appropriate accounts became unbalanced. 2. Settlement risk occurs because of the time zones on different continents. Consequently,currencies may be traded at the different price at different times during the trading day. Australian and NewZealand dollars are credited first, then Japanese yen, followed by the European currencies and ending withthe U.S. dollar. Therefore, payment may be made to a party that will declare insolvency (or be declaredinsolvent) immediately after, but prior to executing its own payments. Therefore in assessing the credit risk, end users must consider not only the market value of theircurrency portfolios, but also the potential exposure of these portfolios. The potential exposure may bedetermined through probability analysis over the time to maturity of the outstanding position. Thecomputerized systems currently available are very useful in implementing credit risk policies. Credit linesare easily monitored. In addition, the matching systems introduced in foreign exchange since April 1993 areused by traders for credit policy implementation as well. Traders input the total line of credit for a specificcounterparty. During the trading session, the line of credit is automatically adjusted. If the line is fully used,the system will prevent the trader from further dealing with that counterparty. After maturity, the creditline reverts to its original level.Dictatorship risk. Dictatorship (sovereign) risk refers to the government's interference in the Forexactivity. Although theoretically present in all foreign exchange instruments, currency futures are, for allpractical purposes, excepted from country risk, because the major currency futures markets are located inthe USA. Hence, traders have to realize that kind of the risk and be in state to account possible
kinds-of-forex
Spot Market. Currency spot trading is the most popular foreign currency instrument around theworld, making up 37 percent of the total activity (See Figure 3.1). The features of the fast-paced spotmarket are high volatility and quick profits (as well losses). A spot deal consists of a bilateral contract whereby a party delivers a specified amount of a givencurrency against receipt of a specified amount of another currency from a counterparty, based on an agreedexchange rate, within two business days of the deal date. The exception is the Canadian dollar, in whichthe spot delivery is executed next business day. The two-day spot delivery for currencies was developedlong before technological breakthroughs in information processing. This time period was necessary tocheck out all transactions' details among counterparties. Although technologically feasible, thecontemporary markets did not find it necessary to reduce the time to make payments. Human errors stilloccur and they need to be fixed before delivery. By the entering into a contract on the spot market a bank serving a trader tells the latter thequota – an evaluation of the currency traded against the U.S. dollar or an other currency. A quotaconsists from two figures (for example, USD/JPY = 133.27/133.32 or, which is the same, USD/JPY= 133.27/32). The first from these figures (the left part) is called the bid – price (that is a price atwhich the trader sells), the second (the right part) is called the ask - price (the price at which thetrader buys the currency). The difference between asks and bid is called the spread. The spread, asany currency price alteration, is being measured in points (pips). In terms of volume, currencies around the world are traded mostly against the U.S. dollar, becausethe U.S. dollar is the currency of reference. The other major currencies are the euro, followed by theJapanese yen, the British pound, and the Swiss franc. Other currencies with significant spot market sharesare the Canadian dollar and the Australian dollar. In addition, a significant share of trading takes place in thecurrencies crosses, a non-dollar instrument whereby foreign currencies are quoted against other foreigncurrencies, such as euro against Japanese yen.The spot market is characterized by high liquidity and high volatility. Volatility is the degree towhich the price of currency tends to fluctuate within a certain period of time. For instance, in an activeglobal trading day (24 hours), the euro/dollar exchange rate may change its value 18,000 times "flying"100-200 pips in a matter of seconds if the market gets wind of a significant event. On the other hand, theexchange rate may remain quite static for extended periods of time, even in excess of an hour, when one
Forex Treminology
Glossary of forex related terms*American-style option An option contract that may be exercised at any time before it expires.Ask The quoted price at which a customer can buy a currency pair. Also referred to as the 'offer,' 'ask price,' or 'ask rate.'Base Currency For foreign exchange trading, currencies are quoted in terms of a currency pair. The first currency in the pair is the base currency. For example, in a USD/JPY currency pair, the US dollar is the base currency. Also may be referred to as the primary currency.Bid The quoted price where a customer can sell a currency pair. Also known as the 'bid price' or 'bid rate.'Bid/Ask Spread The point difference between the bid and ask (offer) price.Call A call option gives the option buyer the right to purchase a particular currency pair at a stated exchange rate.Counterparty The counterparty is the person who is on the other side of an OTC trade. For retail customers, the dealer will always be the counterparty.Cross-rate The exchange rate between two currencies where neither of the currencies are the US dollar.Currency pair The two currencies that make up a foreign exchange rate. For example, USD/YEN is a currency pair.Dealer A firm in the business of acting as a counterparty to foreign currency transactions.Euro The common currency adopted by eleven European nations (i.e., Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain) on January 1, 1999.European-style option An option contract that can be exercised only on or near its expiration date.Expiration This is the last day on which an option may either be exercised or offset.Forward transaction A true forward transaction is an agreement that expects actual delivery of and full payment for the currency to occur on a future date. This term may also be usedto refer to transactions that the parties expect to offset at some time in the future, but these transactions are not true forward transactions and are governed by the federal Commodity Exchange Act.Interbank market A loose network of currency transactions negotiated between financial institutions and other large companies.Leverage The ability to control large dollar amount of a commodity with a comparatively small amount of capital. Also known as 'gearing.Margin See Security Deposit.Offer See ask.Open position Any transaction that has not been closed out by a corresponding opposite transaction.Pip The smallest unit of trading in a foreign currency price.Premium The price an option buyer pays for the option, not including commissions.Put A put option gives the option buyer the right to sell a particular currency pair at a stated exchange rate.Quote currency The second currency in a currency pair is referred to as the quote currency. For example, in a USD/JPY currency pair, the Japanese yen is the quote currency. Also referred to as the secondary currency or the counter currency.Rollover The process of extending the settlement date on an open position by rolling it over to the next settlement date.Retail customer Any party to a forex trade who is not an eligible contract participant as defined under the Commodity Exchange Act. This includes individuals with assets of less than $10 million and most small businesses.Security deposit The amount of money needed to open or maintain a position. Also known as 'margin.'Settlement The actual delivery of currencies made on the maturity date of a trade.Spot market A market of immediate delivery of and payment for the product, in this case, currency.Spot transaction A true spot transaction is a transaction requiring prompt delivery of and full payment for the currency. In the interbank market, spot transactions are usually settled in two business days. This term may also be used to refer to transactions that the parties expect to offset or roll over within two business days, but these transactions are not true spot transactions and are governed by the federal Commodity Exchange Act.Spread The point or pip difference between the ask and bid price of a currency pair.Sterling Another term for British currency, the pound.Strike price The exchange rate at which the buyer of a call has the right to purchase a specific currency pair or at which the buyer of a put has the right to sell a specific currency pair. Also known as the 'exercise price.'*Extract from NFA guide "Trading in Off-Exchange Foreign Currency Market: What Investors Need to Know".
Online Currency Trading and the FOREX Market - A Flexible Alternative to Commodity Trading
Online currency trading is all done through the Foreign Exchange or FOREX. It is the largest market in the world with about $1.9 trillion going into different hands everyday. Unlike all other financial markets on the planet, FOREX doesn't actually have an actual physical location. That is because it is all done on the Internet and through banks with individuals trading their local currency for another. Or, if they have come back from a different country, then they might be changing from that currency into their home currency. Because FOREX is all based on the Internet, you can use online currency trading services to work within the market 24 hours a day.But to be able to use the FOREX service, you have to sign yourself up to one of the many companies that offer FOREX trading accounts to customers. You can open an account with any one of the hundreds of companies available; and then immediately begin trading currencies. You will not want to use this service if you only exchange currency once a year, as you can do that at your local bank. Although this choice of account is available, large corporations mostly use online currency trading and they are the ones that will use this service the most.Also, on these online currency trading websites, you will get up to minute exchange rates from all over the world, so you will know the exact amount that you will get from your money. This also enables you to know the best time to use the online currency trading services. When the rates are just right for you, then that is when you can exchange your money.However, it is important to note that some currency trading companies will need two days advance notice before you withdraw your money, so it is always wise to plan ahead if your goal is to make money with FOREX trading then use that money to pay bills or to pay for living expenses.
2007-11-03
Forex Trading Software
If you are looking to get started trading the Forex, you will find that there are numerous software programs available (both web based and desktop based) for you to use in your trading. In fact, most brokers offer clients a software package for free or as part of their trading account. Usually the software that comes with your trading account is a very basic "bare bones" model. Sometimes, more features are available for a price. The software packages your broker provides can be an important consideration in choosing a broker. You may want to download and try some different packages using a demo account. This will give you a better idea of which software package you find most suitable to your unique style of trading. Forex trading software comes in two basic flavors - desktop software, and web based software. Which one you choose to work with depends on your preference and other more technical factors. Obviously, the Forex market is very dynamic and you need to have the most reliable up to date connection to the data as possible. Your internet connection speed is a factor here, and if you can afford it, you really should be connecting via broadband. Your internet connection speed is just one of the factors you should consider when selecting forex trading software. The biggest consideration should be one of security. Generally speaking, web based forex software is more secure than a desktop based software package. Why is that? Well, with a desktop software, your information and data is stored on your hard drive thus making it vulnerable to numerous security issues. If your computer became infected by a virus, your personal data and the integrity of your trading system can become compromised. Likewise, in the event of hard drive failure, your important data can be lost. Then there is the threat of prying eyes accessing your trading systems. Luckily, if you choose to go with a desktop based software for your forex trading, you can do some things to limit the risks. For starters, a dedicated computer just for trading the forex would be a wise investment. Due to the popularity of forex trading, there are computers made specifically with a forex traders needs in mind. Even if you cant afford a dedicated machine, you should still apply the following tips to your trading computer: * Password protect your trading software and personal data * Make regular backups of your trading data * Use a anti virus program and keep it up to date * Update your trading software regularly If you choose to go with a web based trading software, allot of the security and maintenance issues are handled by the provider. Online based forex systems are hosted on secure servers, the same type of servers credit card processing is handled on. This gives you a great deal of protection, as your data is encrypted. Also, backups and mirrors of your account data are made by your software provider to protect you from data loss. Aside from the security considerations, you may find that an online based trading software is simply more convenient. There is no software to download as the software runs in your regular web browser. This means that you always will have access to the latest versions and features. Also, if you travel you will certainly appreciate the ability to log in and trade from any computer with an internet connection. As you can see, there are many options in forex trading software. You ultimately should choose to work with the software that you personally find easiest and most intuitive to use.
Risks Of Forex Trading
Despite the claims you may see on some FOREX web sites, FOREX is not risk-free. You are trading with substantial sums of money and there is always a possibility that trades will go against you. There are several trading tools, however, that can minimize your risk, and with caution, and above all education, the FOREX trader can learn how to trade profitably and while minimizing losses.
Scams
FOREX scams were fairly common a few years ago. The industry has cleaned up considerably since then, but you still need to exercise caution when signing up with a FOREX broker. Do some background checking – reputable FOREX brokers will be associated with large financial institutions like banks or insurance companies and they will be registered with the proper government agencies. In the United States brokers should be registered with the Commodities Futures Trading Commission (CFTC) or a member of the National Futures Association (NFA). You can also check with your local Consumer Protection Bureau and the Better Business Bureau.
Risks
Assuming you are dealing with a reputable broker, there are still risks to FOREX trading. Transactions are subject to unexpected rate changes, volatile markets and political events.
Exchange Rate Risk – refers to the fluctuations in currency prices over a trading period. Prices can fall rapidly resulting in substantial losses unless stop loss orders are used when trading FOREX. Stop loss orders specify that the open position should be closed if currency prices pass a predetermined level. Stop loss orders can be used in conjunction with limit orders to automate FOREX trading – limit orders specify an open position should be closed at a specified profit target.
Interest Rate Risk – can result from discrepancies between the interest rates in the two countries represented by the currency pair in a FOREX quote. This discrepancy can result in variations from the expected profit or loss of a particular FOREX transaction.
Credit Risk – is the possibility that one party in a FOREX transaction may not honor their debt when the deal is closed. This may happen when a bank or financial institution declares insolvency. Credit risk is minimized by dealing on regulated exchanges which require members to be monitored for credit worthiness.
Country Risk – is associated with governments that may become involved in foreign exchange markets by limiting the flow of currency. There is more country risk associated with 'exotic' currencies than with major currencies that allow the free trading of their currency.
Limiting Risk
FOREX trading can be risky, but there are ways to limit risk and financial exposure. Every FOREX trader should have a trading strategy – knowing when to enter and exit the market and what kind of movements to expect. Developing strategies requires education - the key to limiting FOREX risk. At all times follow the basic rule: Do not place money in the FOREX that you cannot afford to lose.
Every FOREX trader needs to know at least the basics about technical analysis and how to read financial charts. He should study chart movements and indicators and understand how charts are interpreted. There is a vast amount of information on FOREX trading available both on the Internet and in print. If you want to be successful at FOREX, know what you are doing.
Even the most knowledgeable traders, however, can't predict with absolute certainty how the market will behave. For this reason, every FOREX transaction should take advantage of available tools designed to minimize loss. Stop-loss orders are the most common ways of minimizing risk when placing an entry order. A stop-loss order contains instructions to exit your position if the currency price reaches a certain point. If you take a long position (expecting the price to rise) you would place a stop loss order below current market price. If you take a short position (expecting the price to fall) you would place a stop loss order above current market price.
As an example, if you take a short position on USD/CDN it means you expect the US dollar to fall against the Canadian dollar. The quote is USD/CDN 1.2138/43 - you can sell US$1 for 1.2138 CDN dollars or sell 1.2143 CDN dollars for US$1.
You place an order like this:
Sell USD: 1 standard lot USD/CDN @ 1.2138 = $121,380 CDNPip Value: 1 pip = $10Stop-Loss: 1.2148Margin: $1,000 (1%)
You are selling US$100,000 and buying CDN$121,380. Your stop loss order will be executed if the dollar goes above 1.2148, in which case you will lose $100.
However, USD/CDN falls to 1.2118/23. You can now sell $1 US for 1.2118 CDN or sell 1.2123 CDN for $1 US.
Because you entered the transaction by selling US dollars (buying short), you must now buy back US dollars and sell CDN dollars to realize your profit
You buy back US$100,000 at the current USD/CDN rate of 1.2123 for a cost of 121,223 CDN. Since you originally sold them for CDN$121,380 you made a profit of $157 Canadian dollars or US$129.51 (157 divided by the current exchange rate of 1.2123).
Forex Tools
There are many tools available to the FOREX trader for analyzing the market as well as for buying and selling currencies. Software tools are a necessary part of FOREX because of its volume and volatility. Software can be used to automate some of the trading procedures and safeguard against losses.
In order to make rational, successful trades, the FOREX trader needs information – lots of information. Current exchange rates are the tip of the iceberg – the trader needs historical data as well as current information about political and economic conditions that could affect currency prices. All this information is provided by many FOREX brokers on their web sites.
Successful FOREX trading relies on making accurate assessments of current political and economic conditions. Being able to predict whether a currency will fall or rise against another currency allows the FOREX trader to profit from currency movements.
There are two basic trading methods for buying and selling currencies. Reactive trading means the trader responds to changes in the political or economic climate. Speculative trading means the trader makes buying decisions based on predictions on how the market will respond to current events. While most FOREX trading is speculative, both types of trade require up-to-the-minute information and an analysis of current and historical conditions.
Traders rely on both fundamental and technical analyses. Fundamental analysis is based on news information about political conditions, economic policies, trade patterns, interest rates and unemployment rates. Technical analysis relies on historical charting to identify trends and patterns over time. Information needed for both types of analyses is available in real time on the Internet. Most online brokers offer live news feeds and streaming rates for observing minute by minute changes in the market.
The Risk Probability Calculator (RPC) can be used to identify trades that have more potential gain than potential loss. The RPC can also help you target exit points to end the trade.
Pivot Points can be used to predict movements of currency prices. They are calculated as an average of the currencies high, low and closing prices. Pivot Point Calculators tell you whether prices fall in the normal trading range or extreme trading ranges.
Pip value calculators are used to tell you the value of each pip (smallest currency unit) according to various sized lots. Pip calculators can tell you the actual profit or loss that will result from movements in the FOREX.
Once a trader has decided which currency pair to trade, he logs on to his online account provided by his broker. The desired currency pair is entered and the current exchange rate appears on the screen. The amount of the trade is entered (how much currency you wish to buy). Some brokers may give you the option of specifying the amount you wish to risk. This automatically enters a 'stop loss rate' into your order.
After the details of the trade are entered, you will be taken to a confirmation screen where you can accept the current price on screen. You may be given the option of 'freezing' the quoted price, meaning the price of your transaction is exactly what you see on screen without any slippage. Accept the rate and your deal is running.
Just as you can enter a 'stop loss rate' to automatically sell the currency if it falls below a certain rate, you can enter a 'take profit rate' to automatically sell the currency when it reaches a certain level. If you don't enter a 'take profit rate' you need to monitor the movement of the currency to decide when to close the deal and take either your profits or your losses.
Forex vs. Stocks
Stocks have been a popular investment for hundreds of years. Companies issue stocks to raise capital for expansion and new projects, and each share of the stock represents a partial ownership in the company.
When the company does well and makes a profit, the value of the stocks rise. Stock owners can sell their shares for a profit or hold on to the stock for even more gain in the future. Sometimes companies will issue dividends – part of the profits that are distributed to share holders.
Stocks are traded on stock exchanges. Most stocks are bought and sold through brokers who charge a commission or fee for this service. American stock exchanges include the New York Stock Exchange (NYSE) and the National Association of Securities Dealers Automated Quotation System (NASDAQ). Most stocks are only listed on one exchange, although large companies may have listings on several exchanges.
Stocks were traditionally seen as long term investments. So called 'blue chip' stocks - those having proven value over many years - may form the backbone of an investment portfolio. Short term trading is a relatively new phenomenon made possible with the advent of Internet trading. Day traders attempt to take advantage of large daily fluctuations in the market by buying and selling many times in one trading period. It is relatively risky and any profits realized are reduced by broker commissions charged on each transaction.
Stocks may sometimes be bought on margin, meaning that the investor borrows money to buy the stocks. Margin rates are usually around 50% - the investor can borrow as much as half the value of the stock.
FOREX
The Foreign Exchange Market (FOREX) is quite different from the stock exchange. In contrast to the stock exchange, the FOREX is primarily a short term market. Most traders enter and exit deals within a 24 hour period – sometimes within a few minutes. Many FOREX trades can be made in one day without building up a large brokerage fee because FOREX trades are commission free. Brokers earn money by setting a spread – the difference between asking and selling prices.
The FOREX is the largest financial market in the world. It is handles transactions worth $1.5 trillion every day. By comparison, all the American stock exchanges combined handle daily transactions worth about $100 billion. The huge volume of FOREX means that it is one of the most liquid markets in the world. There is always a buyer and seller for any type of currency because the world economy relies on the movement of goods from country to country. The stock market is less liquid because participants may choose to hold their investments or move on to other markets.
The FOREX is not located in any one location. Trading markets are located world-wide and because of difference in time-zones trades can be made 24 hours a day, 5 days a week. Trading begins in Sydney, Australia on Monday morning (Sunday afternoon New York time) and continues non-stop until Friday afternoon New York time.
Stock exchanges have more limited trading hours. While it is possible to trade on exchanges world-wide, each exchange is independent and operates for just 7 hours a day. There is no way to buy or sell a certain stock that is only traded on one stock exchange when that exchange is closed.
Other advantages of FOREX? It is more predictable than stocks. It follows well established trends; it allows high leverage – typically 100:1 instead of 2:1 on the stock market; and it doesn't require a large investment – mini accounts as small as $250 can get you started in FOREX.
Forex vs. Futures
The origins of today's futures market lies in the agriculture markets of the 19th century. At that time, farmers began selling contracts to deliver agricultural products at a later date. This was done to anticipate market needs and stabilize supply and demand during off seasons.
The current futures market includes much more than agricultural products. It is a worldwide market for all sorts of commodities including manufactured goods, agricultural products, and financial instruments such as currencies and treasury bonds. A futures contract states what price will be paid for a product at a specified delivery date.
When the futures market is played by speculators, the actual goods are not important and there is no expectation of delivery. Rather, it is the futures contract itself that is traded as the value of that contract changes daily according the market value of the commodity.
In every futures contract there is a buyer and a seller. The seller takes the short position and the buyer takes the long position. The futures contract specifies a buying price, a quantity and a delivery date. For example: A farmer agrees to deliver 1000 bushels of wheat to a baker at a price of $5.00 a bushel. If the daily price of wheat futures falls to $4.00 a bushel, the farmer's account is credited with $1000 ($5.00 - $4.00 X 1000 bushels) and the baker's account is debited by the same amount. Futures accounts are settled every day.
At the end of the contract period, the contract is settled. If the price of wheat futures is still at $4.00 the farmer will have made $1000 on the futures contract and the baker will have lost the same amount. However, the baker now buys wheat on the open market at $4.00 a bushel - $1000 less than the original contract, so the amount he lost on the futures contract is made up by the cheaper cost of wheat. Similarly, the farmer must sell his wheat on the open market for $4.00 a bushel, less than what he anticipated when entering the futures contract, but the profit generated by the futures contract makes up the difference.
The baker, however, is still in effect buying the wheat at $5.00 a bushel, and if he hadn't entered into a futures contract he would have been able to buy wheat at $4.00 a bushel. He protected himself against rising prices but he loses if the market price drops.
Speculators hope to profit by the daily fluctuations in the futures market by buying long (from the buyer) if they expect prices to rise or by buying short (from the seller) if they expect prices to fall.
FOREX
The foreign exchange market (FOREX) has several advantages over the futures market. FOREX is a more liquid market – as the largest financial market in the world it dwarfs the futures market in daily exchanges. This means that stop orders can be executed more easily and with less slippage in the FOREX.
The FOREX is open 24 hours a day, 5 days a week. Most futures exchanges are open 7 hours a day. This makes FOREX more liquid and allows FOREX traders to take advantage of trading opportunities as they arise rather than waiting for the market to open.
FOREX transactions are commission-free. Brokers earn money by setting a spread – the difference between what a currency can be bought at and what it can be sold at. In contrast, traders must pay a commission or brokerage fee for each futures transaction they enter into.
Because of the high volume of trading FOREX transactions are almost instantly executed. This minimizes slippage and increases price certainty. Brokers in the futures market often quote prices reflecting the last trade – not necessarily the price of your transaction.
The FOREX is less risky than the futures market because of built-in safeguards in the trading system. Debits in futures are always a possiblility because of market gap and slippage.
