Monday, February 23, 2009

Make sure you don't loose money

While it is simple to begin trading forex online, maintaining profitability in the long term is no easy task. You have probably heard that 90 percent of forex traders will loose their money in the long time. If indeed this is absolutely true, it is the result of a couple of different factors.

Overtrading:- Each trade costs you a couple of pipsa, consider your trades well befor you make them. Each faulty trade, even if excited quickly, drains equitey.
Bad money management:- One bad trade can wipe out a year of patient, smart trading. Manage your risk using stop loss orders, so that you never risk too high a percentale of your equity on any one single trade.

Lack of knowledge:- If you have never traded forex before, educate well for yourself. Successful traders are not born that way. The difference between the success and failure in the forex market depends in no small part on the knowledge and education on a trader. For the beginning trader, a proper education is essential before investing in the Foreign Exchange. Find a program yu are comfortable with, and begin practicing on a demo account.

Trading on the foreign exchange offers unparalleled opportunities for profit, but it is also extremely high risky. Make sure you know what you are getting into before you start trading, and start trading only when you are very comfortable in you knowledge and ability.

How do I get started with Forex Trading?

Before you can get started with forex trading, there are so many questions to answer. How do I choose a broker? Should I use a demo account? What do I need to know before making my first trade?
Let’s answer these questions one at a time, in order of importance.

Choose a broker
Making a decision on which broker to use is personal for each trader. Some brokers offer certain options that some traders will thrive on, while other traders will hate the broker for those same options. It is important to review and compare the options of each broker closely and choose the one that makes you feel most comfortable.

Open a Demo Account
Once you have made your decision on which broker you like the best, it is time to open a demo account. Most brokers will offer at least a 30 day trial of their trading platform giving you a chance to trade on the platform using play money. Using a demo account is a good opportunity to make sure that you feel comfortable using the broker’s trading tools. You would not want to trade real money without being fully comfortable with the trading platform. A demo account will not only help you get a grip on how to use the broker’s trading platform, but also trading the market in real time.

Learn About Leverage
Forex trading is typically carried out using leverage, or trading on margin. Margin is a useful tool, but it can be very dangerous if it isn’t used correctly. Forex brokers typically offer anywhere from 50:1 leverage up to 400:1 leverage. The higher the number, the less money required to put on a large trade. The use of leverage is something that needs to be taken with a lot of care.

Practice Reading Charts

Before you start making trades you should get familiar with charts and how they work. It is a good idea to get familiar with the different time frames and the different types of charts. The shorter time frames will give you an idea of how the market is moving minute to minute. The longer time frames can show you how the market moves over longer periods and will show the larger trends. Most charting software will offer charts as lines, candlesticks, or bars. Take plenty of time to try out different looks and time frames to find the style that you are comfortable with.

5. Making the first live trade
The first trade is a nervous and exciting experience. The demo account prepares you for the technical aspects of trading, but when real money is on the line, emotions will come into play. It is important that you keep a level head and do your best to trade with the same methods that you practiced on the demo account. It may prove to be difficult, but if you master your emotions and use sound money management, anything is possible after this step. If your first trade loses money, do not give up, just piece together where you think you went wrong, and try again.

Forex trading is a constant learning experience. Trading mistakes can be expensive. If you learn from those mistakes and do your best to avoid them in the future, you can become a very successful forex trader.


Some brokers have software in their Trade Stations that automatically calculates the required margin while others manually set the margin requirements are continually varying. Some brokers offer margins as low as US$50 per lot on their minis. Trading size is normally 1/10th the size of a regular account.

A mini forex account can be opened at anytime but many traders practice on a demo account first to test their trading strategies and techniques. The amount varies from broker to broker. Those with less than US$5,000 often favour mini accounts although regular accounts may be opened with a minimum of $2000-$5,000. A mini forex account is designed for those new to online trading and those with limited investment capital.


1. Plan your barter and barter your plan: You accept to accept a trading plan to succeed. A trading plan should abide of a position, why you enter, stop accident point, accumulation demography level, additional a complete money administration strategy. A acceptable plan will abolish all the affections from your trades.

2. The trend is your friend: Do not blade the trend. If the bazaar is bullish, go long. On the reverse, if the bazaar is bearish, you short. Never go adjoin the trend.

3. Focus on basic preservation: This is the a lot of important footfall that you accept to yield if you accord with your trading capital. You basic ambition is to bottle the capital. Do not barter added than 10% of your drop in a individual trade. For example, if your absolute drop is $10,000, every barter should absolute to $1000. If you don’t do this, you’ll be out of the bazaar actual soon.

4. Know if to cut loss: If a barter goes adjoin you, advertise it and let go. Do not authority on to a bad barter acquisitive that the amount will go up. A lot of likely, you end up accident added money. Before you access a trade, adjudge your stop accident price, a amount area you accept to advertise if the barter turns sour. It depends on your accident contour as of how abundant you should set for the stop loss.

5. Yield accumulation if the barter is good: Before entering a trade, adjudge how abundant accumulation you are accommodating to take. If a barter turns out to be good, yield the profit. You can yield accumulation all at one go, or yield accumulation in stages. If you’ve recovered your trading cost, you accept annihilation to lose. Sit bound and watch the accumulation run.

6. Be emotionless: Two better affections in trading: acquisitiveness and fear. Do not let acquisitiveness and abhorrence access your trade. Trading is a automated action and it’s not for the affecting ones. As Dr. Alexander Elder said in his book “Trading For A Living”, if you sit in foreground of a acknowledged banker and beam how he trades, you ability not be able to acquaint whether he is authoritative or accident money. That’s how emotionally abiding a acknowledged banker is.

7. Do not barter based on a tip from a acquaintance or broker: Barter alone if you accept done your own assay and analysis. Be an abreast trader.

8. Accumulate a trading journal: If you buy a bill or stock, address down the affidavit why you buy, and your animosity at that time. You do the aforementioned if you sell. Analyze and address down the mistakes you’ve made, as able-bodied as things that you’ve done right. By apropos to your trading journal, you apprentice from your accomplished mistakes. Improve on your mistakes, accumulate acquirements and accumulate improving.

9. If in doubt, break out: If you accept agnosticism and not abiding area the bazaar or banal is going, break on the sideline. Sometimes, accomplishing annihilation is the best affair to do.

10. Do not overtrade: Ideally you should accept 3-5 positions at a time. No added than that. If you accept too abounding positions, you tend to be out of ascendancy and accomplish affecting decisions if there is a change in market. Do not barter for the account of trading.

Sunday, February 22, 2009

Why Choose Forex Trading Over Stocks Trading?

Forex trading holds significant differences to stocks trading. Understanding these differences will aid a trader in deciding the right market to enter. Forex trading itself has several advantages over stocks trading and is ideal for the beginner and individual small investors.

1. Low Transaction Costs for Forex Trading.
There are no hidden fees for forex brokers as they are not paid by the traditional commission based fees. The fee paid to the forex broker is calculated directly from the trade in the form of the bid ask spread. In forex trading, the spread is the difference in how much you pay for a currency and how much you sell it for. This spread is commonly expressed in "pips" or points.
2. Forex Trading is a 24 Hour Market.
Forex trading can be done anytime of the day, the forex market is open for business twenty-four hours a day. This is considered a huge advantage for individual small investors who are just starting out forex trading in their spare time. This allows forex traders to juggle their schedule around their trading opportunities; they can schedule their forex trading when it is convenient for them.

For those of you who are night owls and prefer to trade at 1am, then forex trading is just right for you. Depending on where you stay, there are banks opposite the globe open for you to trade.

3. Fast Trade Execution and High Liquidity in Forex Trading
Trading forex means that you are trading in cash. No other form of investment has more liquidity than cash and as such, trades are executed almost instantly. There is no lag time in forex trading.

4. Having Leverage and Margin in Forex Trading
One of the significant advantages that forex traders have is the ability to trade on margin. This gives them a huge leverage in their trading and presents the potential for extraordinary profits with relative small investments. Let’s take for example; with a forex broker that allows a margin of 100:1, you can buy $100,000 in currency with only a small $1,000 deposit. A word of caution for the uninitiated, leverage can go both ways and may lead to large losses if you are not careful.

5. Forex Trading Requires Only a Small Sample to Study.
Stocks trading present thousands upon thousands of stocks to trade. Small and large companies, international companies, newly issued IPOs etc. It is highly impossible to follow them all.

Forex trading, on the other hand, presents only seven major currencies to follow so that you can devote more time to each of them. Many successful forex traders do not even trade in all seven major currencies; they just choose three or four and master them to achieve success in forex trading.

6. No Bear Markets in Forex Trading.
In forex trading, since you can trade either short or long, you will be able to make money whether the prices go up or down, that is if your predictions are accurate of course.

7. Forex Market is Not Easily Influenced.
The forex market is so amazingly huge that no one individual, bank, fund or government body can influence it for a long period of time. Forex trading is the opposite of stocks trading where one negative television appraisal of a company's stock could possibly send it into a tailspin.

Based on the above advantages, forex trading is a clear winner for the beginner and individual small investors. If you are deciding on a form of trading to enter and master, then forex trading is the choice for you

Saturday, February 21, 2009

Types of Foreign Exchange Orders

Entry Orders: An order used to enter a trade once a currency pair hits a pre-determined price level.

Entry Limit Orders: An order initiating an open position to sell as the market rises, or buy as the market falls. The client believes the market will reverse direction at the level of the order.
a. Buy Entry Limit: An order to buy at a price Below the current market

b. Sell Entry Limit: An order to sell at a price Above the current market.
Entry Stop Orders: An order initiating an open position to sell as the market falls, or buy as the market rises. The client believes that prices will continue to move in the same direction as the previous momentum after hitting the order level.

a. Buy Entry Stop: An order to buy at a price Above the current market.

b. Sell Entry Stop: An order to sell at a price Below the current market.

Limit Orders: A limit order is an order tied to a specific position for the purpose of locking in the gains from that position, while a limit order placed on a buy position is an order to sell. A limit order placed on a sell position is an order to buy. All limit orders remain in effect until the position is liquidated or cancelled by the client.

Market Order: An order to buy or sell which is to be filled immediately at the prevailing currency price.

OCO (One Cancels the Other): A stop-loss order and a limit order linked to a specific position. One order, the stop, is to prevent additional loss on the position, and one order, the limit, is to take profit on the position. When either order is executed, closing the position, the other is automatically cancelled.

Stop-Loss Orders: An order linked to a specific position to close that position and prevent additional losses. A stop-loss order will be executed when the displayed price on GTS touches the order price. The executed price will be the order price or in the case of a fast market the order will be executed at the next displayed price. When a stop-loss order is placed on a buy position it is an order to sell that position. While a stop-loss order on a sell position is an order to buy that position. All stop-loss orders remain in effect until the position is liquidated or cancelled by the client.

How are currency prices determined?

Currency prices are affected by fluctuations caused by economic, social and political events, as well as interest rates, inflation and political stability. FX Solutions leverages its proprietary interbank market price feed for price discovery and risk exposure. Our price feed uses algorithms to respond to changes in the marketplace within milliseconds, allowing FX Solutions to maintain fixed spreads so trading clients know the transaction costs they will be paying at all times during normal market conditions.

What does "bid/ask" mean?

All Forex quotes include a two-way price, the bid and ask. The bid is always lower than the ask price.

Bid Price
The price at which the market is willing to buy a currency. This is the price at which the trader may sell the base currency.

Ask Price
The price at which the market sells a currency. This means the trader can buy the base currency at this price.

What is Forex Pip?

A pip is the smallest price increment in online forex trading. Pip stands for percentage in point. The value of pip refers to the amount of money you gain/lose for each pip you gain or lose in currency trading.

Exchange rate usually consists of an integer part and 4 decimal points (or 2 decimal points when expressed per 100 units like e.g. dollar/yen). Thus the decimals are expressed either at 10th thousands or hundreds. Each such 0.0001 is called basis point or pip. E.g. a 50 pips change of 1.5000 is either 1.5050 or 1.49.50. The Japanese Yen (JPY) is an exception - it is quoted only to the second decimal point.


Pip Value = 1 pip x Trade Size

Example: USD/CAD

If you trade 1 lot (1 standard lot, equal to USD 100,000 trade size), the pip value will be:

Pip Value = 0.0001 x 100,000 = 10 (US Dollar)

If you trade 0.1 lot (1 mini lot, equal to USD 10,000 trade size), the pip value will be:

Pip Value = 0.0001 x 10,000 = 1 (US Dollar)

If you trade 0.01 lot (1 micro lot, equal to USD 1,000 trade size), the pip value will be:

Pip Value = 0.0001 x 1,000 = 0.1 (US Dollar)

When is the Forex market open for trading?

The Forex market is a true 24-hour market - at any time of the day, somewhere around the world a financial center is open for business. Banks and other institutions exchange currencies every hour of the day and night with generally only minor gaps on the weekend. Forex trading begins at 14:15 Eastern Time Sunday markets open in Sydney and Singapore. At 19:00 Eastern Time the Tokyo market opens, followed by London at 2:00 Eastern Time. And finally, New York opens at 8:00 Eastern Time and closes at 17:00 Eastern Time - creating a seamless 24-hour market.

A benefit of Forex trading, unlike other financial markets, is that investors can respond to currency fluctuations caused by economic, social and political events at the time they occur - day or night. FX Solutions' trading hours are 17:15 Eastern Time Sunday to 16:30 Eastern Time Friday.

Pivot Point Trading

To trade forex using a pivot point is basically a value around which it is expected that trends will reverse or breakout and therefore it is a point of a lot of importance around the quantitative day trading that many people do. The idea is to use the numbers for the previous day to calculate the different values that will be of importance in the area and therefore use those calculated numbers to make the trades for that specific day. Professional traders and market makers use pivot points to identify important support and resistance levels.

The pivot point is the level at which the market direction changes for the day. Using some simple arithmetic and the previous days high, low and close, a series of points are derived. These points can be critical support and resistance levels. The pivot level, support and resistance levels calculated from that are collectively known as pivot levels.

The calculation for a pivot point is shown below:

* O = open price from previous day

* C = closing price from previous day

* H = high value from previous day

* L = low value from previous day

Calculate the pivot point (PP) first…

*PP = (H + C + L) / 3

Then calculate the first support and resistance levels (S1 and R1)…

* S1 = (2*PP) – H

* R1 = (2*PP) – L

Then calculate the second support and resistance levels (S2 and R2)…

*S2 = PP – (R1 – S1)

*R2 = PP + (R1 – S1)

Then calculate the third support and resistance levels (S3 and R3)…

*S3 = L – 2(H – PP)

*R3 = H + 2(PP – L)

The three most important pivot points are R1, S1 and the actual pivot point. Don’t worry you don’t have to perform these calculations yourself. Your charting software will automatically do it for you and plot it on the chart.

There are number of ways that you can apply the pivot point and the support and resistance levels in relation to the pivot point. The only set rule for you to keep in mind is this; if the opening price for the day is below the pivot point, then your preference should be towards sell/short trades whereas if the opening price for the day is above the pivot point, you should be looking primarily for buy/long trades.

Forex Terminologies

Foreign Exchange
The simultaneous buying of one currency and selling of another.

Foreign Exchange Market
An informal network of trading relationships between the world's major banks and other market participants sometimes referred to as the 'interbank' market. The foreign exchange market has no central clearinghouse or exchange, and is considered an over-the-counter (OTC) market.

Spot Market
Market for buying and selling currencies usually for settlement within two business days (the value date). USD/CAD = 1 day.

The process whereby the settlement of a transaction is rolled forward to the next value date, typically at 5PM EST/10PM GMT. If you open a position on Monday, the settlement date is Wednesday, however, if you hold this position past rollover on Monday, the new value date is Thursday. Most brokers will automatically roll over your open positions, allowing you to hold a position for an indefinite period of time. The cost of this process is based on the interest rate differential between two currencies. Depending on your broker's rollover policy, if you are holding a currency with a higher rate of interest in the pair, you will earn interest, however if you are holding a currency with a lower rate of interest in the pair, you will pay it.

Exchange Rate
The value of one currency expressed in terms of another. For example, if the EUR/USD exchange rate is 1.3200, 1 Euro is worth US$1.3200.

Market Maker
A market maker provides liquidity in a particular financial instrument and stands ready to buy or sell that instrument by displaying a two-way price quote. A market maker takes the opposite side of your trade.

A firm that matches buyer and seller together for a fee or a commission.

The smallest price increment a currency can make. Also known as points. For example, 1 pip = 0.0001 for EUR/USD, or 0.01 for USD/JPY lot The standard unit size of a transaction. Typically, one standard lot is equal to 100,000 units of the base currency, and 10,000 units for a mini.

Pip Value
The value of a pip. To calculate pip value, divide 1 pip by the exchange rate and then multiply it by the number of units traded. So for example, to calculate the pip value for USD/CHF, divide 0.0001 by the current exchange rate of 1.2765 and multiply it by 100,000 to get a pip value of $7.83. For EUR/USD, divide 0.0001 by the current exchange rate of 1.2075 and multiply it by 100,000 to get a pip value of €8.28. To convert this back to US dollars, multiply it by the current exchange rate of 1.2075 to get a pip value of $10.

The difference between the sell quote and the buy quote. For example, if the quote for
EUR/USD reads 1.3200/03, the spread is the difference between 1.3200 and 1.3203, or 3 pips. In order to break even on your trade, your position must move in your direction by an amount equal to the spread.

Standard Account
Trading with standard lot sizes

Mini Account
Trading with mini lot sizes

The deposit required to open a position. A 1% margin requirement allows you to trade a $100,000 lot with a $1,000 deposit. A mini account is 1/10th of a standard account. A 1% margin requirement allows you to trade a $10,000 lot with a $100 deposit.
Leverage The effective buying power of your funds expressed as a ratio. Calculated by the amount of times the notional value of your transaction exceeds the margin required to trade. e.g. 100:1 leverage allows you to control a $100,000 position with a $1,000 deposit. You can get leverages as high as 400:1 with some brokers.

Long Position
A position whereby the trader profits from an increase in price. (Buy low, sell high)

Short Position
A position whereby the trader profits from a decrease in price. (Sell high, buy lower)

Market Order
An order at the current market price

Entry Order
An order that is executed when the price touches a pre-specified level

Limit Entry Order
An order to buy below or sell above the market at a pre-specified level, believing that the price will reverse direction from that point.

Stop-Entry Order
An order to buy above or sell below the market at a pre-specified level, believing that the price will continue in the same direction from that point.

Limit Order
An order to take profits at a pre-specified level

Stop-Loss Order
An order to limit losses at a pre-specified level

OCO Order
One Cancels the Other. Two orders whereby if one is executed, the other is cancelled.

The difference in pips between the order price and the price the order is executed at.

Forex Features

MB Trading understands the needs of retail traders. Through MB Trading Futures, Inc. (MBTF), we provide an advanced proprietary trading platform, rapid order execution, the tight spreads, live access to vital market information, and excellent customer support.

Extended Trading Hours - Extended Trading Hours - There's no need to wait for the opening bell. MBTF is open around the clock, from 5:00 p.m. EST on Sunday through 4:58 p.m. EST on Friday.

High liquidity - The Forex market has an average trading volume of over $1.5 trillion per day, making it the most liquid market in the world.

Low transaction cost - The commission on a Forex trade is as low as $5 per $100,000 of currency traded. Click here for full details.

Uncorrelated to the stock market - A trade in the Forex market involves selling or buying one currency against another. There is limited correlation between the foreign currency market and the stock market. A bull market or a bear market for a currency is defined in terms of the outlook for its relative value against other currencies. If the outlook is positive, we have a bull market in which a trader profits by buying that currency against other currencies. Conversely, if the outlook is pessimistic, we have a bear market for that currency and traders may profit by selling the currency against other currencies.

Inter-bank market - The backbone of the Forex market consists of a global network of dealers. They are mainly major commercial banks that communicate and trade with one another and with their clients through electronic networks and telephones. There are no organized exchanges to serve as a central location to facilitate transactions the way the New York Stock Exchange serves the equity markets. The Forex market is referred to as an over the counter (OTC) market.

No one can corner the market - The Forex market is so vast and has so many participants that no single entity, not even a central bank, can control the market price for an extended period of time. As the market has grown, even central bank interventions have become increasingly ineffectual and short lived as a tool for controlling the value of a particular currrency.
Due to the high degree of leverage used in forex trading, investors should only use risk capital because there is always the risk of substantial loss. Forex trading may not be appropriate for all investors. Account access, trade executions and system response may be adversely affected by market conditions, quote delays, system performance and other factors

Essential Training For Forex Traders

In the world's largest financial market where exchanges reach up to trillions of dollars each day, many people would really want to participate in this market. Aside from being the largest financial market in the world, Forex is also the most liquid market in the world where trades are done 24 hours a day.

A lot of traders have become very rich trading in the Forex market. And, many people who trade in the Forex market everyday have found a great way to replace their day jobs. Some even became millionaires almost overnight by just trading in this financial market.

Trading in the Forex market can be very attractive. However, you should also know that there have been people who suffered extreme financial losses in the Forex market. It is true that the Forex market offers a very good money-making opportunity to a lot of people, but it also has its risks.

It is a fact that people who didn't have the right knowledge and skills trading in the Forex market suffered huge financial losses and some even went into debt. So, before you enter the Forex market, it is essential that you should have the necessary knowledge and skills as a Forex trader in order to minimize the risk of losing money and maximize the potential of making money.

Many people who were successful in the Forex market have went through a Forex trading course to get the knowledge and skills needed to successfully trade in this very liquid and very large financial market.

In a Forex trading course, you will learn about when it is the right time to buy or sell, chart the movements, spot market trends and also know how to use the different trading platforms available in the Forex market.

You will also be familiarized with the terminologies used in the Forex market. Even the basic knowledge about trading in the Forex market can be a great help with your money-making venture in the world's largest market.

There are different Forex trading courses available, all you need to do is choose one that suits your needs as a trader. There are crash courses where all the basic things about Forex will be taught to you in a short period of time, full time online courses, where you will learn all about Forex through the internet and there are also full time real life classroom courses where you can learn the ropes about Forex in a real classroom with a live professor.

You can also become an apprentice. However, in order to learn a lot about Forex as an apprentice, you need to make sure that you have a seasoned Forex trader who can share a lot of things to you about the Forex market.

Here are some of the basic things you should look for in a Forex trading course in order for you to get the sufficient knowledge about Forex trading:

•Types of orders
•Major currencies

A good Forex trading course will also explain a lot about the fundamental and technical analysis of charts. As a trader, knowing how to analyze a chart is an essential skill that you should have. So, when you are looking for a Forex trading course, you should look for a course that offers fundamental and technical analysis instruction.

Stress plays a vital part in Forex traders. Knowing how to deal with stress is also a skill that you should develop. A good Forex trading course should teach you how to deal with stress and trade effectively and efficiently.

As much as possible, you should look for a Forex trading course that offer actual trading systems where students can trade real money on the Forex market or at least trade on dummy accounts in a simulated Forex market. This hands-on experience will greatly benefit you. Besides, the best way to learn about anything is by actually experiencing it. Live trading and simulations should be offered in a Forex trading course.

So, if you plan on getting involved in the Forex market, consider finding all these things in a Forex trading course. Developing the right knowledge and skills in trading in the world's largest and most liquid market in the world will definitely help you make it to the top and achieve your dreams as a Forex trader.

Understanding Forex Statistics

Once you become somewhat familiar with how the forex market works, and you understand to a point what is involved in trading on the Foreign Exchange Market, you would want to start to gauge market trends in order to profit from your business ventures on the open market.

The name of the game is statistics, and the first rule is that you must be aware there is no such thing as a sure thing on the forex market. While you can never be 100% sure at any given time of the next move that will be made on the market as a whole, being able to read statistics and interpret them will place you ahead of the pack in regards to "guessing" what will happen next.

Forex trading is a lot like gambling. If you can keep track of the cards that have already been played, you are more informed, statistically, regarding what is likely to be dealt next, meaning you can place a bet with greater insight than someone who has no clue what has already been played. With the forex market, if you have information as to what has already occurred over the past few days, months, or even years, you are again placed in a better position to more logically conclude what will happen next. You simply learn the pattern and follow it to the end, reaping the financial rewards.

Charts And Chartists

Wait, did you think you were going to have to research and map out the market's past all by yourself? Of course not! There are people who get paid to do that sort of work. They monitor the market hourly, daily, weekly, monthly, and yearly so that they can provide big-time traders with the same knowledge mentioned before. The more a trading company knows about the market, the more money they can make.

The best part of this is that you have access to the same information as these VIP clients. Chartists, who are essentially market analysts that publish their findings in easy to read charts, produce what is referred to as a candlestick charts. These charts are basically a combination of a line graph and a bar graph that show the trend of various stocks, indexes, or other interests over a specified period of time. Therefore, you can easily determine if the currency is on an uptrend or if it is taking a downturn, when the last major change occurred, and how long it is predicted that the currency pair will continue on the current path.

If your broker does not supply you with these charts, then you should easily be able to draw them yourself with the modern day charting software or trading platform that you get from your broker. These software platforms can draw most charts for you by entering a couple of parameters and viewing the result.

It is recommended however that you learn at least the basics of charting and statistics before you start trading live.

Forex Trading Versus Stock Trading

The forex (foreign currency exchange) market is the largest and most liquid financial market in the world. The forex market unlike stock markets is an over-the-counter market with no central exchange and clearing house where orders are matched.

Traditionally forex trading has not been popular with retail traders/investors (traders takes shorter term positions than investors) because forex market was only opened to Hedge Funds and was not accessible to retail traders like us. Only in recent years that forex trading is opened to retail traders. Comparatively stock trading has been around for much longer for retail investors. Recent advancement in computer and trading technologies has enabled low commission and easy access to retail traders to trade stock or foreign currency exchange from almost anywhere in the world with internet access. Easy access and low commission has tremendously increased the odds of winning for retail traders, both in stocks and forex. Which of the two is a better option for a trader? The comparisons of retail stock trading and retail forex trading are as follows;

Nature of the Instrument
The nature of the items being bought and sold between forex trading and stocks trading are different. In stocks trading, a trader is buying or selling a share in a specific company in a country. There are many different stock markets in the world. Many factors determine the rise or fall of a stock price. under stock section to find more information about the factors that affect stock prices. Forex trading involves buying or selling of currency pairs. In a transaction, a trader buys a currency from one country, and sells the currency from another country. Therefore the term “exchange”. The trader is hoping that the value of the currency that he buys will rise with respect to the value of the currency that he sells. In essence, a forex trader is betting on the economic prospect (or at least her monetary policy) of one country against another country.
Market Size & Liquidity
Forex market is the largest market in the world. With daily transactions of over US$4 trillion, it dwarfs the stock markets. While there are thousands of different stocks in the stock markets, there are only a few currency pairs in the forex market. Therefore, forex trading is less prone to price manipulation by big players than stock trading. Huge market volume also means that the currency pairs enjoy greater liquidity than stocks. A forex trader can enter and exit the market easily. Stocks comparatively is less liquid, a trader may find problem exiting the market especially during major bad news. This is worse especially for small-cap stocks. Also due to its huge liquidity of forex market, forex traders can enjoy better price spread as compared to stock traders.

Forex Trading Strategies

The Forex market incorporates two primary types of Forex trading strategies. One such Forex strategy is based on a fundamental analysis and the other is based on a technical analysis. As a trader, you will likely have to incorporate both types of Forex strategies in your overall Forex trading strategy. Fundamental analyses are based on economic factors while technical analyses are based on price. There is a general consensus among market participants that the most highly traded currency pairs in the Forex market tend to be technical and the more exotic currency pairs tend to be more fundamental.

While both types of analysis are necessary for successful and profitable trades, most traders tend to rely more on one type than the other. When your Forex trading strategy incorporates technical analysis, you must be prepared to deal with the mathematical concepts necessary to manipulate pricing data. Likewise, when you incorporate fundamental analysis in your trading strategy, you must be prepared to handle the multitude of economic factors necessary to base your trades. In the end, the variety of economic data must be converted into price predictions and many traders resort to technical analysis because it is thought to have a built in mechanism for completing the conversion. However, incorporating a purely technical Forex trading strategy without regard for the fundamental aspects of the market is much like trading on luck. Sometimes you win, sometimes not.

Other factors that will influence your Forex trading strategy are your ability to manage money and to handle the psychological implications of participating in the Forex market. While many people have profited from their Forex trading strategies, losses are all but guaranteed with Forex trading systems. One of the nuances of Forex trading is that it involves calculated risks. If your financial situation or emotional circumstance is such that you cannot afford to sustain losses, you will likely loose more than your investment dollars, particularly if your losses are easily converted to physical illness.

It is important to develop a Forex trading strategy that complements your lifestyle and temperament. You need to understand the investment, the risks and the impact that your choices will have on your investment dollars and your lifestyle. In Forex trading, it is quite possible for a loss to multiple itself as market conditions vary and change. Your Forex trading strategy must include a plan of action in the case of a loss as well as a win. Another consequence of Forex trading is overconfidence. Overconfidence has caused many traders to engage other more costly and more risky trades following a win or series of wins. You will have to be responsible to dedicate the time necessary to track and analyze the trades that you engage. It only makes since that you engage a number a trades that you are reasonably able to manage during a given trading session. Forex trading can also become addictive for certain personalities. Your Forex trading strategy should include indicators that alert you when it is time to enter or exit trading. You cannot become overconfident about a win or series of wins. Likewise you cannot become too depressed over a loss or series of losses. FOREX trading systems are based on calculated risks and the wrong calculation leads to more risk and the potential for more loss.

Forex trading tools

Forex is the largest and most happening financial market of the world. It is the venue where one currency is traded for the other. The market place is distinguished from the rest because of its high trading volume and geographical dispersion. A trader with sound knowledge of currency trading can earn substantial profit in forex market. Along with the knowledge of trading, he should have access to a few tools of forex trading. These tools are made to strengthen the confidence of a trader and can prove out to be a great help for a winning currency trading in forex. Being an awakened trader of forex market, you should remain aware about every latest happening of currency trading. Therefore, it’s important for you to have access to daily forex trading summary for important currencies and currency pairs. Add to this, a weekly forex trading summary is also beneficial as it will encompass detailed analysis of your sought subject. Tools that help you to access and monitor the interest rates, financial calendar, glossary database are also worthwhile. Apart from the above, there are several other tools of currency trading available around you. Several software containing detailed analysis and information about currency trading are also available at your disposal. All these tools and software packs are important for a successful forex trading. With access to such tools, a trader can easily execute his trading. Now, how to get these tools easily and satisfactorily? Well, it’s easy. With the availability of internet, you need not to get out of your home to access these tools and software packs. Just a single click and you can access valuable information and tools regarding currency trading in forex. Several online forex firms have been established only to offer you tools and software packs for forex trading. Some of them may charge money from you to download or access the software packs and tools. If you are not at all interested to cut your pocket, go for those forex firms, who offer free download facility. Online forex firms are beneficial in many ways. They not only offer you currency trading tools and software but also keen to give you an insight into the latest incidents of forex market. They also publish economic reports and influential topics on their websites with an aim to update a trader about what matter in currency trading. You can also access live charts of the forex market and trading secrets from such online firms. These forex firms are usually run by experienced professional, who own years of experience in currency trading. So, you can trust them. Thus trading in forex market has become easy with the availability of tools and software packs. And the advent of internet has made it easier. Today any one from any corner of the world can access forex trading tools for simplifying his currency trading.

Friday, February 20, 2009

Top Most Tradeable Currencies

1. U.S. Dollar (USD)
Central Bank: Federal Reserve (Fed)

Created in 1913 by the Federal Reserve Act, the Federal Reserve System (also called the Fed) is the central banking body of the U.S. The system is itself headed by a chairman and board of governors, with most of the focus being placed on the branch known as the Federal Open Market Committee (FOMC). The FOMC supervises open market operations as well as monetary policy or interest rates.

The current committee is comprised of five of the 12 current Federal Reserve Bank presidents and seven members of the Federal Reserve Board, with the Federal Reserve Bank of New York always serving on the committee. Even though there are 12 voting members, non-members (including additional Fed Bank presidents) are invited to share their views on the current economic situation when the committee meets every six weeks.

Sometimes referred to as the greenback, the U.S. dollar (USD) is the home denomination of the world's largest economy, the United States. As with any currency, the dollar is supported by economic fundamentals, including gross domestic product, and manufacturing and employment reports. However, the U.S. dollar is also widely influenced by the central bank and any announcements about interest rate policy. The U.S. dollar is a benchmark that trades against other major currencies, especially the euro, Japanese yen and British pound.

2. European Euro (EURO)
Central Bank: European Central Bank (ECB)

Headquartered in Frankfurt, Germany, the European Central Bank is the central bank of the 15 member countries of the Eurozone. In similar fashion to the United States' FOMC, the ECB has a main body responsible for making monetary policy decisions, the Executive Council, which is composed of five members and headed by a president. The remaining policy heads are chosen with consideration that four of the remaining seats are reserved for the four largest economies in the system, which include Germany, France, Italy and Spain. This is to ensure that the largest economies are always represented in the case of a change in administration. The council meets approximately 10 times a year.

3. Japanese Yen (JPY)
Central Bank: Bank of Japan (JoP)

Established as far back as 1882, the Bank of Japan serves as the central bank to the world's second largest economy. It governs monetary policy as well as currency issuance, money market operations and data/economic analysis. The main Monetary Policy Board tends to work toward economic stability, constantly exchanging views with the reigning administration, while simultaneously working toward its own independence and transparency. Meeting 12-14 times a year, the governor leads a team of nine policy members, including two appointed deputy governors.

The Japanese yen (JPY) tends to trade under the identity of a carry trade component. Offering a low interest rate, the currency is pitted against higher-yielding currencies, especially the New Zealand and Australian dollars and the British pound. As a result, the underlying tends to be very erratic, pushing traders to take technical perspectives on a longer-term basis. Average daily ranges are in the region of 30-40 pips, with extremes as high as 150 pips. To trade this currency with a little bit of a bite, focus on the crossover of London and U.S. hours (6am - 11am EST).

4. British Pound (GBP)
Central Bank: Bank of England (BoE)

As the main governing body in the United Kingdom, the Bank of England serves as the monetary equivalent of the Federal Reserve System. In the same fashion, the governing body establishes a committee headed by the governor of the bank. Made up of nine members, the committee includes four external participants (appointed by the Chancellor of Exchequer), a chief economist, director of market operations, committee chief economist and two deputy governors.

A little bit more volatile than the euro, the British pound (GBP, also sometimes referred to as "pound sterling" or "cable") tends to trade a wider range through the day. With swings that can encompass 100-150 pips, it isn't unusual to see the pound trade as narrowly as 20 pips. Swings in notable cross currencies tend to give this major a volatile nature, with traders focusing on pairs like the British pound/Japanese yen and the British pound/Swiss franc. As a result, the currency can be seen as most volatile through both London and U.S. sessions, with minimal movements during Asian hours (5pm - 1am EST).

5. Swiss Franc (CHF)
Central Bank: Swiss National Bank (SNB)

Different from all other major central banks, the Swiss National Bank is viewed as a governing body with private and public ownership. This belief stems from the fact that the Swiss National Bank is technically a corporation under special regulation. As a result, a little over half of the governing body is owned by the sovereign states of Switzerland. It is this arrangement that emphasizes the economic and financial stability policies dictated by the governing board of the SNB. Smaller than most governing bodies, monetary policy decisions are created by three major bank heads who meet on a quarterly basis.

Similar to the euro, the Swiss franc (CHF) hardly makes significant moves in the any of the individual sessions. As a result, look for this particular currency to trade in the average daily range of 35 pips per day. High-frequency volume for this currency is usually pitted for the London session (2am - 8am EST).

6. Canadian Dollar (CAD)
Central Bank: Bank of Canada (BoC)

Established by the Bank of Canada Act of 1934, the Bank of Canada serves as the central bank called upon to "focus on the goals of low and stable inflation, a safe and secure currency, financial stability and the efficient management of government funds and public debt." Acting independently, Canada's central bank draws similarities with the Swiss National Bank because it is sometimes treated as a corporation, with the Ministry of Finance directly holding shares. Despite the proximity of the government's interests, it is the responsibility of the governor to promote price stability at an arm's length from the current administration, while simultaneously considering the government's concerns. With an inflationary benchmark of 2-3%, the BoC has tended to remain a shade more hawkish rather than accommodative when it comes to any deviations in prices.

Keeping in touch with major currencies, the Canadian dollar (CAD) tends to trade in similar daily ranges of 30-40 pips. However, one unique aspect about the currency is its relationship with crude oil, as the country remains a major exporter of the commodity. As a result, plenty of traders and investors use this currency as either a hedge against current commodity positions or pure speculation, tracing signals from the oil market.

7. Australian/New Zealand Dollar (AUD/NZD)
Central Bank: Reserve Bank of Australia/Reserve Bank of New Zealand (RBA/RBNZ)

Offering one of the higher interest rates in the major global markets, the Reserve Bank of Australia has always upheld price stability and economic strength as cornerstones of its long-term plan. Headed by the governor, the bank's board is made up of six members-at-large, in addition to a deputy governor and a secretary of the Treasury. Together, they work toward to target inflation between 2-3%, while meeting nine times throughout the year. In similar fashion, the Reserve Bank of New Zealand looks to promote inflation targeting, hoping to maintain a foundation for prices.

Both currencies have been the focus of carry traders, as the Australian and New Zealand dollars (AUD and NZD) offer the highest yields of the seven major currencies available on most platforms. As a result, volatility can be experienced in these pairs if a deleveraging effect takes place. Otherwise, the currencies tend to trade in similar averages of 30-40 pips, like other majors. Both currencies also maintain relationships with commodities, most notably silver and gold.

8. South African Rand (ZAR)
Central Bank: South African Reserve Bank (SARB)

Previously modeled on the United Kingdom's Bank of England, the South African Reserve Bank stands as the monetary authority when it comes to South Africa. Taking on major responsibilities similar to those of other central banks, the SARB is also known as a creditor in certain situations, a clearing bank and major custodian of gold. Above all else, the central bank is in charge of "the achievement and maintenance of price stability". This also includes intervention in the foreign exchange markets when the situation arises.

Interestingly enough, the South African Reserve Bank remains a wholly owned private entity with more than 600 shareholders that are regulated by owning less than 1% of the total number of outstanding shares. This is to ensure that the interests of the economy precede those of any private individual. To maintain this policy, the governor and 14-member board head the bank's activities and work toward monetary goals. The board meets six times a year.

Seen as relatively volatile, the average daily range of the South African rand (ZAR) can be as high as 1,000 pips. But don't let the wide daily range fool you. When translated into dollar pips, the movements are equivalent to an average day in the British pound, making the currency a great pair to trade against the U.S. dollar (especially when taking into consideration the carry potential). Traders also consider the currency's relationship to gold and platinum. With the economy being a world leader when it comes to exports of both metals, it is only natural to see a correlation similar to that between the CAD and crude oil. As a result, consider the commodities markets in creating opportunities when economic data is scant.

Best hours for forex trading

Forex is a highly dynamic market with lots of price oscillations in a single minute, this characteristic of the Forex market allows traders to enter the market many times a day and pull some profit from these number of trades. If you want to find an appreciable number of profitable trades you need to enter the forex market at the best period of time, i.e., when the activity, the volume of transactions, is the highest.The main timing characteristics of the Forex market are the following:* Forex is 24 hour market – It starts from Sunday 5pm EST through Friday 4pm EST. Rollover at 5pm EST * Forex Trading begins in New Zealand, followed by Australia, Asia, the Middle East, Europe, and America * The US & UK account for more than 50% of the market transactions * Forex Major markets: London, New York, Tokyo * Nearly two-thirds of NY activity occurs in the morning hours while European markets are open.* Forex Trading activity is heaviest when major markets overlap.From this timing facts, it is quite visible that at any given time, somebody somewhere in the world is buying and selling currencies. As one market closes, another market opens. Business hours overlap, and the exchange continues as day becomes night and night becomes day. The great liquidity of Forex, combined with a market that's traded 5.5 days a week around the world, offers you an exceptional independence and choices to trade Forex when you want to and not when the market wants you to do it. Trades always develop with relatively the same frequency, regardless of time. As long as the Forex market is open, there is about the same probability that you will find a trade, whenever your look for it.During each trading day, the total Forex “volume” is determined by the number of markets that are open and the times each of these markets overlap one another. Forex market volume of transactions remains high during the whole day, but peaks highest when the Asian market(including Australia & New Zealand), the European market and the U.S. market are open simultaneously. And these are the trading hours you must target in order to find the highest possible amount of profitable trades.This is the breakdown of OPEN Market Times for your reference:* New York Market trade times: 8am-4pm EST* London Market trade times: 2am-12Noon EST* Great Britain Market trade times: 3am-11am EST* Tokyo Market trade times: 8pm-4am EST* Australia Market trade times: 7pm-3am ESTIf you pay attention to the last schedule you will notice that there are two times when two of the major markets overlap during trading hours; between 2am and 4am EST (Asian/European) and between 8am to 12pm EST(European/N. American).So here you have it, if you want to find a great number of profitable trades, focus on the hours when the markets tend to make their biggest moves, i.e., during these big markets overlaps, which therefore, are usually the Best Times to Trade.

Foreign exchange market

The foreign exchange (currency or forex or FX) market exists wherever one is traded for another. It is by far the largest financial market in the world, and includes trading between large banks,and institutions. The average daily trade in the global forex markets currently around 1.9 trillionRetail traders (individuals) are a small fraction of this market and may only participate indirectly through or banks.

Unlike a stock market, where all participants have access to the same prices, the forex market is divided into levels of access.
At the top is the inter-bank market, which is made up of the largest investment banking firms.
Within the inter-bank market, spreads, which are the difference between the bid and ask prices, are razor sharp and usually unavailable, and not known to players outside the inner circle.
As you descend the levels of access, the difference between the bid and ask prices widens (from 0-1 pip to 1-2 pips only for major currencies like the euro).
This is due to volume. If a trader can guarantee large numbers of transactions for large amounts, they can demand a smaller difference between the bid and ask price, which is referred to as a better spread.
The levels of access that make up the forex market are determined by the size of the “line” (the amount of money with which they are trading).

Covering the basics of the forex market

The foreign exchange, or forex, market is relatively young, having begun in the early 1970s after the United States dropped the gold standard and national currencies started to fluctuate widely. For about 30 years prior to that, most nations had agreed to keep their currency values stable in relation to the U.S. dollar, making a forex market unnecessary. With that no longer the case, banks quickly realized that a profit could be made in “buying” currency when it was devalued and “selling” it after it strengthened, just like any other commodity.

Today, the forex market handles about $1.9 trillion in transactions every day, and it runs 24 hours a day, five days a week. (With nations around the world involved, it’s always daytime somewhere.) The most traded currencies are the U.S. dollar, the euro, Japanese yen, British pound, Swiss franc and Australian dollar.

The forex market is overwhelmingly dominated by international banks, government banks, investment banks, corporations, and hedge funds. In fact, individual traders account for only about 2 percent of the market. Nonetheless, a lot of people do try their hand at it, with varying degrees of success.

In the forex market, transactions are always handled in pairs: You buy one currency and sell another one. The idea is to make a trade when you believe the currency you’re buying is going to go up in value compared to the one you’re selling. Then, if it turns out your prediction was correct, you do another trade in the reverse direction -- selling the currency you originally bought and buying the one you sold -- in order to reap the profits.

For example, let’s say the market reports this: GBP/EUR 1.2200. That means the cost of buying one British pound is 1.22 euros. If you believed that course was going to change, and the euro was going to become more valuable than the pound, you might sell 100,000 pounds, buy 100,000 euros, and wait. Then let’s say a few weeks later, the exchange rate fluctuates to this: EUR/GBP 1.3100. Sure enough, the euro is now worth 1.31 pounds, a profit of 0.11 per unit.

The forex market is vast and daunting and mostly inhabited by giant organizations. But it can be navigated by individuals who have studied the finer points and who want to take a risk on something potential profitable. And since the whole world uses money, the trading of that money is always going to be a major force in the financial world.

Thursday, February 19, 2009

Who is a Forex Broker?

A Forex broker is very similar to a stock broker, and many new online Forex brokerages have recently emerged. The key difference is that Forex brokers deal only in currency exchange investments.

Similar to securities brokerages, Forex brokers come in all sizes, shapes, and levels of service. An online Forex broker provides minimal service at minimal cost. If you require more advice and expert guidance, there are many full service Forex brokers available, as well.
If you do go with an online broker, make sure that you choose one that has an extensive online knowledge base and 24/7 support so that you can execute all trades wisely, and quickly.