If you want to win at FOREX trading you need the right education. The fact is 95% of novice traders lose all their equity quickly, that’s not because they don’t work hard or can’t win - they simply put their efforts in the wrong area.
Let’s look at how to achieve currency trading success by learning forex trading the right way.
Use the Internet
You can get all the Forex education you need for free on the net, you simply have to look in the right areas, which we will explain in more detail in a moment.
A fatal mistake
Is to think you can buy success from a guru or mentor on the net.
Most of the information sold is junk or available free anyway.
Many traders are duped by attractive advertising copy, claiming that you can make huge regular profits by buying an e-book for $100 or so, but the reality is:
If the information was so good it would not be sold; these vendors would simply trade for themselves and the fact is they don’t.
They make money from selling you forex education NOT trading and their forex trading systems simply don't work.
If you can find a trader with a real time track record of profits, their information may be worthwhile, but trust me, there are not many who can provide this.
The best way is to do it on your own and you can get it all the Forex Education you need for free.
Working smart not hard
Trading is very different to many other ventures in life, in that the effort you put in has no relation to the money you make.
You get paid for getting market direction right not how much effort you put in.
You should as beginner either start with long term trend following strategy or try swing trading – NEVER attempt day trading.
Forex day trading simply doesn’t work, as the data is to short to be reliable and is meaningless.
More novice traders start with forex day trading than any other method and they lose – don’t fall into this trap.
Long term trend following suits the patient trader, while forex swing trading suits the trader who likes to trade a bit more and is less patient.
Basics
To start get an understanding of support of resistance and technical analysis.
Next, you need to integrate a few indicators to confirm price momentum into support and resistance levels and see the odds of them holding.
Below find some indicators that are great for triggering forex trading signals and determing price momentum:
Stochastics, Relative Strength Index (RSI), Average Directional Movement (ADX)
Below find some indicators to determine help you spot support and resistance (in addition to trendlines) and determine targets and strength of the trend.
Bollinger Bands, MACD and moving averages.
If you learn about all the above indicators, support and resistance and also how a breakout strategy works, you will have ALL the forex education you need.
This will help you put together a simple, robust currency trading system, that can make fx profits.
When devising a forex trading strategy the above will help you make money in swing trading or trend following and you should spend no more than 30 minutes a day.
A Simple way to Forex Profits
A simple system also works better than a complicated one, as its more robust in real trading, with fewer elements to break.
Many traders over complicate their system and think more is better, but the reverse is true.
Final Words
The above will get you started with your forex education for currency trading success and you will have the basics to build on to make great regular profits from forex trading in under an hour a day.
Finally, you wont have spent a cent finding out the basics for this success – good luck!
By: Kelly Price
FOREX Education – Getting the RIGHT Education to W
Currency Trading – GET Bigger Profits Now With These Simple tips
Do you want more and bigger consistent profits? Then this article will show you how to increase your currency trading profits.
There simple to learn, easy to apply and will ensure your forex trading strategy gets a welcome boost in profits.
Here we’re going to assume you already have a methodology, you are confident in and just need to get bigger FX profits so let’s look at the tips.
1. Accept Volatility and Risk
All successful Forex trading systems understand volatility and use volatility to their advantage.
You can't have a profitable Forex trading system without taking calculated risks - and taking losses.
If you can’t accept risk, then don’t get involved in forex trading.
Many traders try to restrict risk so much, that they actually ensure they will lose – they’re simply stopped out all the time by volatility.
To make profits, the secret is to take a risk at the right time risk as much as you can.
2. Patience
One of the best ways to make big gains in currency trading is to be patient and wait for the best opportunities.
Many traders trade frequently and always like to be in the market in case they miss a big trend.
Focus only on the longer term trends and these don’t come around every week. There’s no connection between how often you trade, and how much money you’ll make.
3. Don’t Diversify Your Trading
Most Forex traders are generally investing small amounts of money - and diversifying simply dilutes gains, you wont make much if you don’t risk much.
If you see a trade and it looks good, then risk as much as you can.
4. Have courage
You hear a lot about how important risk control is in any Forex trading strategy - but having the courage and conviction to accept profits is just as important.
Do you really need courage to accept profits? Of course you do!
When a trader makes a profit they get excited – and the bigger the profit becomes, the more they’re tempted to bank it before it gets away, but this is a huge mistake.
As volatility causes dips in their open equity, the trader snatches a marginal profit.
In many cases however, if the trader had the courage to hold the trade for the longer term they could have made a huge profit.
Many traders lose - not because they were wrong in the direction of the market - they just were stopped out by a volatile counter move or simply banked early.
5 Money Management
Taking risks does not mean being rash - here are some Forex trading money management tips to keep in mind:
• Keep your stop in its original position - until the move is well underway and in profit, before moving your stop.
• If you’re trading a small Forex account, don’t diversify - concentrate on one trade only.
• If you are following the longer-term trends, don’t exit a trade until your Forex signals tell you to do so. Have the patience and discipline to hold on for the longer term.
To make big profits in currency trading, you only want to focus on the best moves.
Don’t be tempted to diversify too much - have the courage to hold on for the longer term big profits.
Also understand and use money management techniques that will control risk - and at the same time, take into account the volatility that currency trading presents.
Currency trading involves risk - and you need to confront it and win and the above tips will help you do just that when you trade FX markets.
By: Sacha Tarkovsky
Online Currency Trading - 4 Tips to Build Wealth Quickly
Online currency trading gives you the opportunity to build big capital gains.
Here we're going to look at some simple tips to help you build wealth quickly that any trader can use novice or pro - so, let's get started and look at the tips.
Most of the tips provided in this article are not accepted investment wisdom - but as most traders actually lose, so don't let that worry you!
So, let's look at how to build wealth in online currency trading.
1. Your On Your Own
If you think you can buy success from an e-book on the net from a vendor, you will lose.
If their advice was good, they'd be too busy trading, and making money for themselves -- No one else can make you rich, its down to you, but thats no bad thing, its easier than most fx traders think.
If you want to make money in online currency trading, it's easy if you focus on getting the right Forex education.
2. The RIGHT knowledge
It's a fact that currency trading is VERY simple and everything about currency trading can be learned, yet few traders succeed at making money.
These people think that the more Forex education they have, the better their chances of success.
They build clever, complicated currency trading systems, - but bad news is they don't work.
If you want to win at Forex trading, keep this in mind!
Simple systems are far more likely to make money than clever complicated ones.
Another advantage of a simple currency trading system is that it's easy to understand the logic.
From understanding flows confidence.
Confidence then leads to discipline - you need to be able to stay with your system through losing periods or you dont have a system at all.
3. Risk & Reward
Many traders try to restrict risk so much that they simply create it and guarantee they will lose.
They put stops to close and move them to quickly and want to spread the risk but if you want to build wealth in FX trading this is a huge mistake.
If you want to win at currency trading, then hit risk head on cheerfully.
If you see a trading signal that looks good, risk a meaningful amount.
Small accounts should risk up to 10% or more of your capital and don't diversify.
If you diversify on a small account, it will dilute your profits.
4. Have conviction with trading signals.
All traders want to make big gains from their online currency trading -- but they lack the courage and conviction to accept them.
This may sound odd, as we all want big gains, but our emotions in many instances ensure we dont accept them.
When most Forex market traders see a profit ( even a small one) they get excited and nervous.
The bigger it becomes, the more they want to take it before it gets away from them. When these traders see volatility cause a dip in their open equity, they get nervous and snatch a marginal profit.
What happens next?
The trade goes on to make $10,000 to $30,000, 50,000 or more and they're not in - they were right about the direction but didnt have the courage of their conviction.
Accept Risk - Learn Forex Trading Correctly and Have Courage
If you want to learn online currency trading and build long term wealth - learn the above tips and they will lead to currency trading success - good luck.
By: Sacha Tarkovsky
Forex Trading Strategy – The Ultimate Momentum Indicator for Huge Profits
Many traders in their forex trading strategy simply pick levels and buy or sell into them and hope they hold. This simply sees them lose, as they are hoping levels will hold and NOT acting on confirmation of price momentum to put the odds in their favor.
Here we are going to look at the ultimate momentum indicator that will help you time your trading signals with laser accuracy.
The momentum indicator we are referring to is the stochastic and it simply should be considered by anyone serious about making money in forex trading.
The logic
Of the stochastic is based on the assumption, that when a market is rising, it will tend to close near the highs of the session - and when a market falls, it tends to close near the lows.
Lets look at the calculation – although you don’t need to understand just as you don’t need to understand an internal combustion engine to drive a car – you can look at it visually which we will return to in a minute first:
The Calculation
The stochastic oscillator is plotted as two lines called %K, a fast line and %D, a slow line.
• %K line is more sensitive than %D
• %D line is a moving average of %K
• %D line gives the trading signals
It’s actually similar to the way a moving average is plotted.
Therefore consider %K as a fast moving average, and %D as a slow moving average.
The lines are plotted on a scale of 1 to 100 scale.
"Trigger" lines are normally drawn on stochastics charts at the 80% and 20% level – this indicates when markets are overbought, or oversold and a trading signal maybe generated.
Using Stochastics
The best way to get a feel for stochastics and how they can help your forex trading strategy is to look at them – you can see them free on many services and a good one is futuresource.com
The 80% value is normally used as an overbought signal, while the 20% is used as an oversold signal.
The signals are even more reliable if a forex trader waits until the %K, and %D lines turn upward, below 5% before buying - and in conversely, above 95% before selling.
The most reliable way to trade stochastics is to use the above as a warning sign and wait for the stochastic lines to cross with bullish or bearish divergence.
For example, buy when the %K line rises above the %D line, and sell when the %K line falls below the %D line.
Beware of short-term crossovers these can generate a false signal and cause losses.
The best crossover is generated when the %K line intersects, “after” the peak of the %D line.
Don’t worry if it sounds confusing it becomes much easier when you look at the set up on a chart service such as the one we referred to earlier and you will soon be getting the hang of them.
Why they are so valuable
Because they allow you to shift the odds in your favor instead of relying on hope when you trade into support or resistance you will shift the odds in your favor by knowing the strength of price momentum.
Stochastics are the ultimate timing tool for traders and allow you to enter your trading signals with the odds on your side. In any forex trading strategy you need to trade the odds and the stochastic is a powerful weapon that you can use for currency trading success.
Discover the stochastic indicator and you may be glad you did.
By: Kelly Price
FOREX Education – Getting the RIGHT Education to Win
If you want to win at FOREX trading you need the right education. The fact is 95% of novice traders lose all their equity quickly, that’s not because they don’t work hard or can’t win - they simply put their efforts in the wrong area.
Let’s look at how to achieve currency trading success by learning forex trading the right way.
Use the Internet
You can get all the Forex education you need for free on the net, you simply have to look in the right areas, which we will explain in more detail in a moment.
A fatal mistake
Is to think you can buy success from a guru or mentor on the net.
Most of the information sold is junk or available free anyway.
Many traders are duped by attractive advertising copy, claiming that you can make huge regular profits by buying an e-book for $100 or so, but the reality is:
If the information was so good it would not be sold; these vendors would simply trade for themselves and the fact is they don’t.
They make money from selling you forex education NOT trading and their forex trading systems simply don't work.
If you can find a trader with a real time track record of profits, their information may be worthwhile, but trust me, there are not many who can provide this.
The best way is to do it on your own and you can get it all the Forex Education you need for free.
Working smart not hard
Trading is very different to many other ventures in life, in that the effort you put in has no relation to the money you make.
You get paid for getting market direction right not how much effort you put in.
You should as beginner either start with long term trend following strategy or try swing trading – NEVER attempt day trading.
Forex day trading simply doesn’t work, as the data is to short to be reliable and is meaningless.
More novice traders start with forex day trading than any other method and they lose – don’t fall into this trap.
Long term trend following suits the patient trader, while forex swing trading suits the trader who likes to trade a bit more and is less patient.
Basics
To start get an understanding of support of resistance and technical analysis.
Next, you need to integrate a few indicators to confirm price momentum into support and resistance levels and see the odds of them holding.
Below find some indicators that are great for triggering forex trading signals and determing price momentum:
Stochastics, Relative Strength Index (RSI), Average Directional Movement (ADX)
Below find some indicators to determine help you spot support and resistance (in addition to trendlines) and determine targets and strength of the trend.
Bollinger Bands, MACD and moving averages.
If you learn about all the above indicators, support and resistance and also how a breakout strategy works, you will have ALL the forex education you need.
This will help you put together a simple, robust currency trading system, that can make fx profits.
When devising a forex trading strategy the above will help you make money in swing trading or trend following and you should spend no more than 30 minutes a day.
A Simple way to Forex Profits
A simple system also works better than a complicated one, as its more robust in real trading, with fewer elements to break.
Many traders over complicate their system and think more is better, but the reverse is true.
Final Words
The above will get you started with your forex education for currency trading success and you will have the basics to build on to make great regular profits from forex trading in under an hour a day.
Finally, you wont have spent a cent finding out the basics for this success – good luck!
By: Kelly Price
How You Can Make Ten Times Your Salary- with Day Trading
Day trading - no, it's not something that Bill Murray wished he had in Groundhog Day. It's a style of trading on the foreign currency exchange market in which a trader completes all his trades within a single day. In other words, he may make a few dozen - or more - trades in a day with the objective of buying and selling quickly and making a profit from the fluctuations in a currency exchange rate over the course of the day.
Sound complicated? Depending on the method or system that you use to pick your trades it can be. The idea behind day trading is that currency exchange rates are subject to fluctuations over the course of the day - they go up and down depending on who's buying, who's selling and what rumors are floating around. In fact, day trading in the foreign currency market is probably the single segment of any type of stocks, currency or futures trading market most affected by rumors and real-time, real-world happenings. A savvy trader who is quick on his feet can roll up the profits by paying attention to what the current news is doing to the currency exchange rates.
The currency market, commonly referred to as the forex (short for Foreign Exchange), is the most liquid market in the world. The latest statistics say that daily trading on forex is in excess of $1.3 trillion U.S. dollars. That makes forex the world's largest, most efficient market. A major part of the reason for the liquidity and volume of trade is the practice of day trading. The difference between day trading and other types of trading is in how long you hold your stocks (or in this case, your currency). In day trading, you hold nothing beyond the close of the day's market. Think of it as a game in which the object is to keep trading cards back and forth, increasing the value of your cards - but have no cards in your hand at the end of the day.
Of course, since the currency market is a 24 hour market, there really IS no market closing - so the rules change slightly. The currency market is open from Sunday afternoon to Friday afternoon, with trading going on all the time, so you can pick your times to trade rather than being locked into the Stock Exchange timetable.
How You Make Money in Day Trading People will tell you that the difference between a day trader and an investor is the length of time that each holds onto their stocks. That's a superficial difference. The real difference is in the mindset of short-term vs. long-term and liquidity. An investor buys something that he believes will steadily increase in value, and holds onto it for the long haul. A day trader rides the minute fluctuations in the currency market minute by minute the way a surfer rides a wave. Because you're trading in lots of 100,000, a tiny fluctuation can mean a big profit - or a huge loss.
Limiting Loss in Day Trading One of the hardest concepts for new traders to grasp is that of limiting loss. Let's say you make a trade for a currency that is heading down because you believe that it's near its support point - the point where it will rebound and start heading back up. Instead, it breaks the point and keeps heading down - you're losing money instead of making it. You have two choices - hold onto it because you KNOW it will start heading back up soon, or get rid of it and limit the amount of money you're going to lose. In day trading, the name of the game is limiting your losses and maximizing your wins - decide ahead of time just how much you'll allow each trade to lose before you sell it, and then STICK TO YOUR LIMIT. By the same token, decide how much profit you want to make, set a sell order for when the currency reaches that point - and sell when it hits the mark.
Know what you're doing. Day trading on the forex is like any other business. The people who make money are the ones who take the time to learn the market and understand the ins and outs of the trades that they make. Those who jump in feet first without learning the terms, rules and trends of the forex market are priming themselves to lose - and lose big. Remember, there's no such thing as high profit potential without equivalent risk. Before you jump in, take a course in trading, or read read read all that you can.
About the Author
More of Joseph Plazo's killer articles: Art of Unstoppable Wealth Building, Sneaky Negotiation Techniques, and finding Jobs in the Philippines
Discover Some Magic to Beat The Forex: The Elliott Wave Theory for Forex Markets
One of the best known and least understood theories of technical analysis in forex trading is the Elliot Wave Theory. Developed in the 1920s by Ralph Nelson Elliot as a method of predicting trends in the stock market, the Elliot Wave theory applies fractal mathematics to movements in the market to make predictions based on crowd behavior. In its essence, the Elliot Wave theory states that the market - in this case, the forex market - moves in a series of 5 swings upward and 3 swings back down, repeated perpetually. But if it were that simple, everyone would be making a killing by catching the wave and riding it until just before it crashes on the shore. Obviously, there's a lot more to it.
One of the things that makes riding the Elliot Wave so tricky is timing - of all the major wave theories, it's the only one that doesn't put a time limit on the reactions and rebounds of the market. A single In fact, the theories of fractal mathematics makes it clear that there are multiple waves within waves within waves. Interpreting the data and finding the right curves and crests is a tricky process, which gives rise to the contention that you can put 20 experts on the Elliot Wave theory in one room and they will never reach an agreement on which way a stock - or in this case, a currency - is headed.
Elliot Wave Basics
* Every action is followed by a reaction. It's a standard rule of physics that applies to the crowd behavior on which the Elliot Wave theory is based. If prices drop, people will buy. When people buy, the demand increases and supply decreases driving prices back up. Nearly every system that uses trend analysis to predict the movements of the currency market is based on determining when those actions will cause reactions that make a trade profitable.
* There are five waves in the direction of the main trend followed by three corrective waves (a "5-3" move). The Elliot Wave theory is that market activity can be predicted as a series of five waves that move in one direction (the trend) followed by three 'corrective' waves that move the market back toward its starting point.
* A 5-3 move completes a cycle. And here's where the theory begins to get truly complex. Like the mirror reflecting a mirror that reflects a mirror that reflects a mirror, the each 5-3 wave is not only complete in itself, it is a superset of a smaller series of waves, and a subset of a larger set of 5-3 waves - the next principle.
* This 5-3 move then becomes two subdivisions of the next higher 5-3 wave. In Elliot Wave notation, the 5 waves that fit the trend are labeled 1, 2, 3, 4 and 5 (impulses). The three correcting waves are called a, b and c (corrections). Each of these waves is made up of a 5-3 series of waves, and each of those is made up of a 5-3 series of waves. The 5-3 cycle that you're studying is an impulse and correction in the next ascending 5-3 series.
* The underlying 5-3 pattern remains constant, though the time span of each may vary. A 5-3 wave may take decades to complete - or it may be over in minutes. Traders who are successful in using the Elliot Wavy theory to trade in the currency market say that the trick is timing trades to coincide with the beginning and end of impulse 3 to minimize your risk and maximize your profit.
Because the timing of each sequence of waves varies so much, using the Elliot Wave theory is very much a matter of interpretation. Identifying the best time to enter and leave a trade is dependent on being able to see and follow the pattern of larger and smaller waves, and to know when to trade and when to get out based on the patterns you identify.
The key is in interpreting the pattern correctly - in finding the right starting point. Once you learn to see the wave patterns and identify them correctly, say those who are experts, you'll see how they apply in every facet of forex trading, and will be able to use those patterns to trigger your decisions whether you're day trading or in it for the long haul.
About the Author
More of Joseph Plazo's killer articles: Art of Unstoppable Wealth Building, Sneaky Negotiation Techniques, and finding Jobs in the Philippines
Forex Trading Signals: Do You Need Them?
Nobody has ever claimed that learning the Forex trading system was an easy one. In fact, one of the hardest parts is knowing the good entrance and exit points and is likely the most time intense. Using currency trading signals can greatly improve the experience because they give the researched indicators of these entrance and exit points. The brokerages that send out the Forex trading signals monitor the ever-changing prices in currency and send out these signals to their subscribers.
It is entirely possible to conduct trades on the Forex market with currency trading signals. In fact many professional traders practice this method today. They spend the majority, if not all, of their waking hours in front of a computer screen studying the trends and analyses in order to provide their traders with the most up to date, factual information relating to the market. Most investors prefer not to have to be at the computer constantly monitoring changes in order to assess when the right entry and exit points are happening. Forex trading signals provide the individual investors the opportunity to have life outside of their foreign currency trading affairs.
The reason many investors who try their hand in the system decide against currency trading signal subscriptions is because of the cost. It is not a complementary service when one signs up for a Forex account. To be a subscriber an investor is required to pay for a monthly or yearly subscription. Luckily enough, many well-seasoned brokerages offer Forex trading signals as part of their service and are the main subscribers to the service. This will be included in the broker's fees when initially getting a Forex account of any type.
The companies that initiate the currency trading signals base the information from strict technical analysis to ensure accurate and real time information. Coupled with identifiable indicators to establish trends as well as exit and entrance points, the technical information is compiled into the latest Forex trading signals. They are sent out frequently as the foreign exchange market is a volatile market that is extremely fast paced. Once the trader receives the currency trading signals it is then up to the individual investor to act upon the information and execute trades accordingly.
It is imperative to understand to the beginner that although Forex trading signals are an extremely useful tool, it is not the bible of the foreign exchange market. They are merely implemented to give dependable information as an indication to the investor of how the market is currently performing. The currency trading signals are not a fail-safe to be trading on the market. To put that in perspective, if Forex trading signals were a absolute truth, there wouldn't be any failure in the foreign exchange market at all.
By: Troy Degarnham
Forex Markets - the Perils of Online News Sources
Forex markets are exciting and with the rise of the Internet, we've seen a huge rise in the amount of news available all at the click of a mouse.
However, despite all the advances in communications - and the quantity of news available, the ratio of winners to losers remains the same in the Forex markets:
90% of traders lose money, which may seem a starting fact as more information is seen by many as a key to success
Online currency traders think the news helps them -- however, in most cases the news ensures they lose money - for the following reasons:
1. News is discounted by the forex markets in seconds.
All the news is discounted by the markets quickly, in today's world of instant communications.
If you want to trade profitably, then you need to simply ignore the news.
Markets move on how investors perceive the future and for this you need to study human nature or trader psychology.
Technical analysis is the way to do this; a simple equation will make this clearer:
Supply and demand (Fundamentals) + Investor Perception (human perception) = Price
Humans decide the value of any investment market and that includes currencies.
By studying forex charts, you are seeing the complete picture -- and keep in mind investor psychology is constant and shows up in repetitive price trends that you can profit from.
2. They're stories that's all
When trading forex markets, online currency news is convincing, but their stories and they won't help you make money.
The financial writers are knowledgeable and of course they can explain everything in hindsight - but they're not traders.
If you listened to the news, you could have bought at the top of the market in 1987 - and the tech bubble of the 1990's.
All the news claimed the market would go on forever, but what happened next? Prices dropped like a stone causing huge losses.
Any market is most bullish at market tops, and most bearish at market bottoms, so listening to currency news will simply damage your online currency trading success.
3. Financial news and emotions
The biggest mistake any FX trader can make is letting his emotions dictate his trading.
If you want to win, then you need to remain disciplined with the execution of your forex trading strategy.
It makes us feel comfortable to go with the news and the consensus opinion but in trading, this is a bad trait to have. If you feel comfortable, you will not make money.
In trading, you need to stay disciplined and isolated.
Remember, the majority of traders are wrong! - and they listen to, and trade with the news.
Use a technical system - and try to ignore the news and focus on the reality of price.
In the Forex markets, this will enable you to stay detached, unemotional and disciplined and help you achieve currency-trading success while others fail.
By: Sacha Tarkovsky
Forex Education – 6 Essential books All Traders Should Read
If you want good forex education forget buying an e-book from a vendor for $100 or so, who has never made money in his life and get down to your bookstore and get some forex education from traders who have walked the walk - rather than simply talk the talk!
Of over 600 books I read, I have picked six that are essential reading for any trader and you can get them for $100 bucks or so, which could be the best money you ever invested.
So check out the books below and make them part of your forex education.
1. Market Wizards - by Jack Schwager
Interviews with the top traders in the world. A look at everyday life of people who make a living trading – this is simply a classic and I still find myself visiting it after 20 years and re reading it. If you can’t learn from such trading legends as Richard Dennis, Paul Tudor Jones, William O'Neil, and Marty Schwartz – then you can’t learn from anyone!
2. The New Market Wizards - by Jack Schwager
More interviews with top traders from around the world. This book is the same format as Market Wizards and brings together some top traders and again benefits from Schwager’s great interview technique.
3. Trader Vic--Methods of a Wall Street Master Victor Sperandeo
This is perhaps one of my favorite books and you will see why after reading it, he has been such a consistent trader and his focus on long term results, money management and long term trend following are essential reading - his "2B" test technique, it is worth the price of the book alone.
4. The Zurich Axioms: Investment Secrets of the Swiss Bankers – Max Günter
I picked this book up and read it in one sitting - an absolutely fantastic, if un-conventional book!
If you have accepted investment wisdoms such as diversify to make gains be prepared to re consider your view.
It’s the type of book that is so easy to read, yet gets your adrenalin pumping with every page, until you’re buzzing at the end and want to turn on your computer and trade!
5. What I Learned Losing a Million Dollars (Hardcover) Jim Paul and Brendan Moynihan
An inspiring story of a real person who lost a million and a half bucks and tells his tale, with great insight including, even contemplating suicide at one point. If you don’t think emotions get the better of you in trading this book will show you how they can.
There are too few books that tell us how to avoid losing money they all ocncentrate on how easy it is to make money and thats what makes this book so unique.
All the mistakes that forex and other traders make are outlined, explained, and amusingly told in this boo.
The book gives you an affinity with the author which brings makes his message even more powerful.
This book is not an outline of how to trade, but how to get the right mindset.
These are lessons about how we accept a trading loss, how to learn from losing trades, and finally how each of us can be tempted to rationalize losses.
6. Technical Analysis - by Jack Schwager
There are loads of books on technical analysis and this is simply to most complete guide you can get.
It’s more of a reference book than an entertaining read, but as with all Schwagers books there is a wealth of knowledge you can tap into – Everything you need to know about technical analysis is here and the fact that I picked over John Murphy's work shows how highly I rate it.
So there you have it six different but essential reading for all traders novice or pro.
These six books together, present a great mix of forex education and I personally feel all traders should read these books.
I hope you enjoy the above books as much as I did and that they give you some great forex education and a head start in your quest for currency trading success.
By: Kelly Price
The best investment to learn forex you can ever make is in yourself.
The basic approach of how to achieve success by trading forex looks "a piece of cake" compared to the other markets like stocks, futures and options. Trading the foreign exchange market, in a very simplified way, is to exchange one currency for another in the expectation that the price will change, so that the currency you bought will increase in value compared to the one you sold. The principle is very easy to understand but then, why more than 90% of traders lose their money?
Everybody have access to the same data's: same charts, same quotes, same proven trading methods, etc. but only a few traders make consistent profits over time. And this is because most of traders simply waste their time by trying to reach perfection at the easiest part like how to read charts and data, and trying to perfect entry and exit skills, but they neglect the first step to success: the trader's mind. Think about this. What can you do with the best education and the best forex trading system if don't have the right attitude?
Acquiring the knowledge of the market in not difficult for anyone with average intelligence but it is neither the level of intelligence nor the knowledge that decides the outcome of the market operations of a trader. It is the decision making process that is so hard for most traders to overcome and that is the main reason for a success or a failure for all the traders. Some find it easy to make decisions and stick to it and most find it so hard to make decisions and stick to it. Unfortunately, any decision making process in trading is a pain-taking process and humans tend to avoid pains and go for pleasures even if for temporary ones.
Honestly, how many traders can say they can compromise their wealth when the trade is suggested by their own system and let the profit run for weeks and months when their system tells them, and how many can manage to cut the loss as a routine process when the situation arise. It all sounds so easy when saying it but when your money is on the line, it's difficult to remain calm, rational, and in complete control. What happens if you lose? How will you recover? It's natural to become consumed with self-doubt and abandon your trading plan, or act irrationally. But winning traders control their impulses. They execute a trading strategy effortlessly and flawlessly, even under the most adverse market conditions. Successful traders have discipline, confidence, patience and persistence. If you don't have this characteristics work to build it up.
By: Diana O.
ADB chief economist urges more active forex reserve investment
Asian governments and central banks should invest their foreign reserves more actively in financial markets so they can use the returns to develop their economies and reduce poverty, the Asian Development Bank's chief economist says.
''Today, under very conservative estimates, about 50 percent of reserves that are held by developing Asia are in excess of what would be required under very adverse conditions,'' Ifzal Ali said, casting doubt on the current situation in which a major part of those reserves are held in ''very low-yielding U.S. Treasuries and euro bond issues.''
Developing countries in Asia should benefit from setting up government-affiliated investment corporations to invest excess reserves in global financial markets, he said in an interview with Kyodo News on Monday. But he said such a move would take time due to their fears of taking risks that may hurt their credibility.
Ali, who was in Japan to present the ADB's annual development outlook report for 2007, said foreign reserves held by Asian countries other than Japan have sharply increased due to traumas from the 1997 currency crisis in the region.
Developing Asian countries had $497 billion in reserves at the end of 1997. The amount has so far increased to $2.3 trillion, of which over $1.1 trillion is in China, the biggest holder followed by such economies as India, South Korea, Hong Kong and Singapore, he said.
Asian countries have created a ''firewall to insulate themselves from financial contingents'' by building up foreign reserves, Ali said. But they all have been reckoning that ''this has been greatly overdone,'' he said.
Given many of Asian currencies appreciating recently, he said that ''in domestic currency term, you are losing money...It's in this context that India, (South) Korea, China are all considering options of how to more actively manage their reserves.''
Last month, Chinese authorities said they are to set up a state agency to actively manage part of China's huge foreign reserves through investments in financial markets.
In Singapore, meanwhile, the Monetary Authority of Singapore is in charge of the country's foreign reserve management but the Government of Singapore Investment Corp. manages part of the reserves like an investment fund.
Ali argued such moves could lead to further development and prosperity in Asia.
''If other countries also pursue this route and one assumes, for the sake of argument, that you can make 5 percent higher return through the active management of your resources, then this would lead to an additional approximately $60 billion,'' he said.
''And it will enable governments to employ a variety of reasons to reduce debt (and) increase fiscal space, investing in social infrastructure...It's a lot of money,'' Ali added.
However, he said things ''cannot be done overnight,'' pointing out that governments and central banks in developing Asia should first take time in their efforts to accumulate expertise on the management of foreign reserves.
Ali said there are deep-rooted fears over taking risks in active investments because ''if something goes wrong, credibility of a government and central bank will be adversely affected.''
''So I would expect most countries will hasten very slowly in this regard,'' he said.
Asian Economic News, April 2, 2007
Forex Trading - Combining Internal and External Indicators for Bigger Profits
If you are involved in forex trading, you obviously need to generate forex trading signals for profit and you will be able to make bigger profits and achieve long term currency trading success, if you combine a visual view and then trade off shifts in price momentum, so let's look at how to do this.
A Visual view
Be objective! The right price is the market price and you can see this clearly by using trend lines. There is no better way to spot areas of support and resistance to trade than to use trend lines.
Many traders however like to use subjective indictors to do this like cycles and Elliot wave but these require you to decide where support and resistance lies.
Why bother? Drawing trend lines and looking at support and resistance gives you the reality and objective areas you can trade against.
You can use other indicators such as moving averages and Bollinger bands, but you need to start with trend lines and use these as back up.
Furthermore avoid Fibonacci retracments, they are simply assumed levels and they break at least as often as they hold.
An internal view.
As we have discussed above, good old fashioned trend lines will give you the reality of price and important support and resistance levels clearly right in front your eyes.
You now need to calculate the odds of success of trading into these levels.
You will need some momentum indicators to do this - these will tell you the strength of price movement up or down and help you calculate the odds of success.
For example if price momentum weakens into resistance chances are it will hold if it increases on a break of resistance chances are the trend will continue.
There are two great price momentum indicators that any novice can use effectively:
The relative strength Index (RSI)
Developed by trading legend Wells Wilder (if you have not read new concepts in technical trading get a copy) its over 25 years old but a classic work and this is a classic powerful indicator.
The stochastic indicator
Developed by George Lane, this is one of the best momentum indicators if not the best, you can use.
There easy to use in forex trading and are covered in our other articles in more detail.
Trading is an odds game!
Trading is an odds game and for this you need to see the reality of price as it is and then get the odds in your favour by watching shifts in price momentum.
It is the shifts in price momentum you can use to execute your trading signals and get the odds in your favour.
If you follow the above tips and get both an external visual view and combine this with price momentum, you will have the basis of a powerful currency trading system.
Furthermore, you will be using objective analysis and trading on the facts, rather than using subjective analysis, which means you have to predict, which by its very nature is doomed to failure.
Follow the above tips and they will help you get the odds in your favour when trading forex and lead you to currency trading success.
Forex Managed Accounts Explained
Do you want to trade in the highly liquidated and extremely profitable foreign exchange market, but don't want to learn all those terms, charts, indicators, and technical details that you need to be successful on your own? Then maybe you're looking for forex managed accounts. Don't know what that is? Then keep reading; maybe you'll learn a thing or two after all.
Forex managed accounts are as simple as they sound: accounts in the foreign exchange market which are managed by a trader, paid for by an investor, and result in lots of good money. There are two kinds of forex managed accounts, and each has its own advantages and disadvantages when it comes to trading in the market. It's up to you which you pick.
The first type of forex managed accounts is the robot, or the automated account. This completely automatic program is designed by experienced traders in the forex market and supplied to the investor for simplicity. This is clearly the most efficiently managed account available to you, as it takes into consideration all indicators and statistics open to it. When the time comes, the robot receives a signal--and trades. It's that easy. However, robots do lack an instinct--which can be a good thing, if you're hoping to avoid emotional trades, or a bad thing, if you want someone who'll take advantage of a huge opportunity.
The second type of forex managed accounts is the employee--the investor hires an experienced trader, someone who has long been successful in the market, to make the investor's trades for him. This is at least as good as the robot--probably because the employee designed the robot in the first place--and it's all personalized. Unlike other markets, where money is pooled to maximize profits, your trades are done in your name, and yours alone. It's forex trading by an individual, for another individual, and it stays that way. On the other hand, a personal employee to make your trades for you could cost you a lot more in commissions and fees. You can find out more about forex trading and forex accounts at http://www.forextradingsystemsoftware.com
But why should you have one of these forex managed accounts? Why can't you just casually trade on your own, like a money-making hobby on the side? Because trading in the forex market is hard work, and not just anybody can do it. This is a market in which over two trillion dollars are traded every day, and with a market that size, somebody has to be losing. Statistics indicate that that somebody is 90-95% of new traders. Without the right education, you'll lose quickly in the forex market, and education costs money, too. If you're not getting a forex managed account, then you're not getting a hobby--you're getting a job, complete with prior training and continuous studies.
Still interested in working the forex market as a hobby? Or are you sure that one of these forex managed accounts is the right thing for you? It's up to you which type you use, and it's up to you where you get the program or individual to do your trades for you--but a managed account lets you keep your job if you want and rest easy at night, knowing that you're still making money, even while you sleep, without the hassle of training.
Forex Online Currency Trading
A lot of people are surprised to find out just how easy it is to learn even the basics in relation to Forex online currency trading. You will be surprised just how quickly you can actually start to make a profit through this type of trading, but at the end of the day this will depend a lot on which type of trader are you. Through this article I will be explaining just how easy it is to learn about the basics of forex online currency trading and how easy it is to make a profit.
Certainly if you are someone who is looking to invest some money in order to make a little extra income then Forex currency trading may be what you should be thinking of. However it is vital that you first learn a little bit more about Forex online trading before you do. There are literally hundreds of sites on the internet which can provide you with tips and courses on how to make money from Forex trading.
There are a number of different tutorials now available online which can help explain everything a person needs to know about the Forex market and is ideal for the complete novice. These tutorials will show a person how the Forex market works, what is a Forex technical indicator, plus the types of economic indicators that a trader should be aware of when trading in Forex. Plus there are a number of different Forex trading systems now readily available for people to try and use which will help to make their Forex online currency trading much more successful.
What is extremely important if you really are interested in getting involved in Forex trading is that you do some training first. Forex currency trading is not something a person should dabble in without learning everything that they can about the subject. Certainly, you should depend on luck or based on someone's insider tips as well.
The great thing about many of the Forex online currency trading courses that are now available is that those running them understand what an enormous risk someone is taking getting involved in this type of trading. The people running these courses have made it extremely easy for those who want to learn as they offer their members free training, free demonstrations as well as tutorials and simulations of Forex trading accounts. The great thing about these simulations is that you can try them out without actually placing any of your money in to them and will help you learn the basics of Forex currency trading. Actually finding a course or tutorial is extremely simple all you need to do is key in "Forex currency trading online courses" and you will be amazed at the results that appear.
FOREX Brokers - 9 Essential Points to Consider When You Open an Account
There are lots Forex brokers to choose from when trading currencies online - and finding the right one to work with us critical, if you’re going to maximize your FX trading profits.
Here are 9 points to consider when choosing a Forex broker.
1. Pip Spreads Offered
Spreads between brokers vary dramatically and the difference can be as much as double so first and foremost when trading FX you need a tight spread
Transaction costs mount up - especially if you are trading frequently and impact on your profits and add to your losses. The tighter the spread, the more profits you will make.
Today, many brokers offer 3 - 5 pips - and this is what you should look for.
2. Deposit Online & ease of account operation
Look for a broker who will take online payments to your Forex account via and secure online payment method. This is great for funding your account quickly - and getting your trading profits back to.
3. Negative Balance Protection
Leverage or gearing is one of the main reasons that people are attracted to online currency trading. Of course, leverage is a double-edged sword - and where there are high rewards, there is high risk.
With this in mind many Forex brokers now offer guaranteed stops and negative balance protection which is a big comfort to those traders who are new to the market or want to have a finite risk.
Fees for the service tend to be quite competitive and their a popular option with many traders
4. Leverage Offered
The leverage brokers will give you varies from broker to broker, but today 100 – 200:1 leverage is common and some brokers will go as high as 400:1 meaning you have the potential to leverage your account for greater FX profits
5. Other Charges & Broker assist accounts
Your only transaction cost should be the currency spread - you should NOT pay other commissions.
Avoid broker assisted accounts where a broker supposedly will help you make money from Forex trading they wont! If brokers were good traders they wouldn’t be brokers!If you trade in this way you will lose and you will extra commissions to. You are responsible for your FX profits so accept this fact and go with an execution only broker.
6. Investment Minimum
Today, currency trading is not just the preserve of wealthy individuals and banks - anyone can get involved and minimum deposits have dropped dramatically.
You can open a trading account online with some Forex brokers with as little as $100.00.
This means that novice traders can start off with small amounts.
7. Trading Platform
If you are trading online, you will go through a Forex trading platform.
You want ease of use and reliability – Many brokers offer demo accounts so try them out.
8. FOREX Trading Education
While you should always make your own investment decisions, it’s good to get some freebies that can help you with your Forex trading strategy such as:
• FREE trading guides
• Forex trading seminars
• Trading news and charts
• Trading recommendations & ideas
• Forex trading systems
• Trading books etc
9. Look at the overall package
When choosing a Forex broker you have a lot of choice and the above tips will help you while there are a lot of small brokers around and many are good go for someone who has been around for a while and is established.
Forex brokers are not all the same and some are far better than others in what they offer and if you use the above tips you will find one that will help you maximize your online currency trading profits.
Switch from Casual Trading to Forex Day Trading
Forex day trading is the buying and selling of foreign currency within an individual trading day. Most day traders take on this role as a full time investor and are working with significant amounts of money. Day traders tend to be highly educated as well and without them, there would be no liquidity within the Forex market. Forex day traders have a pivotal part to play by keeping the markets flowing liquidly through their daily activities on the Forex market.
Many people who initially set out to invest in the Forex day trading field are typically funded through various sources and have made it the full time job of choice. There have been many companies that promise huge results to the beginner. Specifically promising large returns in Forex day trading however, the majority of those who try to day trade without a fundamental understanding of the workings of the market generally lose their shirts. Don't be fooled, there is no get rich quick scheme hidden behind the curtain of Forex day trading. It has to be understood and all aspects of the Forex day trading business need to be comprehended fully in order to succeed.
The pivotal difference between casual trader and Forex day traders is usually the amount of capital, which is a definite advantage. The average Joe who gets into Forex day trading hoping to make a ton of money on intra-day movements is in for a huge disappointment. In order to benefit from Forex day trading, a large amount of capital is required as well as able to be lost. Capitalizing on small investments can accrue earnings but it is a much longer process when using small amounts of capital. Like most things, you've got to spend the big bucks to generate the big bucks. But not without the knowledge and safeguarding measures that Forex brokers can provide for any investor.
Gaining a complete understanding of the Forex day trading market will bring forth personal strategies. Coupled with the tried and true strategies that are utilized in by Forex brokers will give an individual investor the tools needed. Forex day trading strategies such as swing trading, trading news and arbitrage are a few of the most common ones that are implemented by brokers and investors. Remember that these strategies that are in print are strategies that have previously tried until they showed effective limit losses and a solid history of profits consistently.
With the Forex day trading system rising so rapidly in popularity there has naturally been a negative connotation associated with this controversial subject. The Forex day traders that are both professional and individual investors keep the Forex market rolling day after day. Many people suggest avoiding day trading at all costs while others will state that Forex day trading is the only way to generate substantial income from the foreign exchange market. If there is not the presence of required skills to navigate the financial markets and the resources needed, it is best the amateurs leave the Forex day trading to the professionals.
Getting the Most Out of Forex Trading Tutorials
The foreign exchange market is one that has only recently been made available to regular investors. Because of this fact, the Forex market has risen to be not only the most popular, but also accumulates more than $1.3 trillion dollars each day. These facts make this fast paced market one of the most sought after however there are some precautions and investments of other types to make. Jumping into the Forex market without the essential tools and knowledge that can be gained from Forex trading tutorials can be a very dangerous thing to do. The Forex market is a complex place to be for beginners and that is predominantly why most brokers offer free Forex trading tutorials to potential investors that are new to the market.
Forex trading tutorials not only educated the investor on the intricate workings of this market, they also enable the user to practice their own ideas by way of a simulated environment. This is an empirically important aspect of the Forex trading tutorials because without that experience of practice, most raw recruit investors end up losing the farm. Taking measures to safe guard against losing financial investments should be taken and outlined in most tutorials that are presented to the investor by the broker or brokerage firm that the investor has chosen.
Being exposed to the actual Forex market without actually losing or gaining money is among the best teaching tools available. It is the main component to look for in any Forex trading tutorial that is chosen. These programs will offer the investor all of the training tools that are needed to begin a productive career in foreign currency trading. While this is an exciting and fast moving market, the Forex trading tutorial will help break it down into smaller sections enabling the user to gain a deeper understanding of the market.
That being said however, the Forex trading tutorials that the investor choose should also develop personal strategy and trading theories. After all, being told what to do doesn't exactly enhance the experience because eventually that method is doomed to fail. The Forex trading tutorials help develop and nurture individual trading skills thereby giving the investor more confidence and assurance that he has complete control over his investments. Lowering the risk of losing money is attractive to any financial investor and starting out with the proper mindset and Forex trading tutorial will ultimately pay off. Remember the Forex market is not a get rich quick scheme and anyone that says so, is simply trying to take your money. Forex, like any economic market takes research, education and discipline in order to be successful.
Forex Trading Platform: Real Time Quotes are Essential
There are several strategies that are implemented and considered when making a solid decision for choosing a Forex trading platform. An inadequate platform can damage the actual trading style and can affect the outcome of trades whether losing or gaining financially. In an attempt to help any prospective investor in selecting a Forex trading platform that can be deemed excellent, it would be wise to follow this set of criteria.
The Forex trading platform that is ultimately selected should have one very simple component. It should be user-friendly without the hassle of add-on downloads as this creates a chaotic environment for trading and can be confusing. The criteria to follow are to ensure that the investor can log to the system at any time, anywhere that offers an internet connection. One of the real bonuses to utilizing this type of trading system is that it can be accessed 24 hours a day. The availability to log onto the system to execute trades and check trading status from any location worldwide allow for many more opportunities.
Another upper edge on getting the most efficient type of Forex trading platforms is to ensure that the platform provides real time quotes. This is one of the most essential tools of the Forex trading platform is the real time quotes platform because it allow for access to the trading accounts in real time. The trader can always be ensured access at any time, from any location to obtain real time information regarding the investments. This type of Forex trading platform makes it easy to be in organize and manage finances and execute trades.
The importance of technical support plays a monumental role in the selection process of Forex trading platforms. Keeping in mind that there is no opening bell to wait for in the Forex market and similarly, there isn't a closing bell. It is open for business at all times and being unable to access technical support should a problem be encountered, means losing money. Most traders take this position when finding the appropriate Forex trading platform, as it is imperative to enter the market with precise timing. Failing to do so ensures a trader investment not being directed sufficiently and as a result, financial loss is often suffered.
Before investing in the Forex market, spend a significant amount of time studying and learning how to use the different Forex trading platforms. This will not only assist in the use of the program, it will familiarize the investor with the components. Investing in the proper research required to check individual Forex trading platforms can literally make the difference to the success of each trader. Choosing carefully ensures a much smoother path down the foreign exchange trading superhighway!
Free Forex Trading Courses: Are They Worth It?
There are some who will tell any investor that free Forex trading courses are just as good as any paid Forex course. Then there are some who will be adamant in saying the exact opposite. Finding out the truth that lies somewhere in the middle is not an easy task to accomplish. Before any prospective investor makes the final decision on any Forex trading courses, it is advisable to ask a few fundamental questions as the search continues.
Finding a good quality Forex trading course that is free is not impossible. A good source will provide information that is not readily found all over the internet. If the Forex trading courses include the information that comes up time after time in a search, that is the first red flag. The potential Forex trading course is not worth the time it will take to read it and practice some of the techniques. Leave it behind and keep researching until a suitable Forex trading course is located as this is the best defense against suffering a financial loss. There is not a bigger risk than that of starting out with an incorrect set of skills and knowledge as that pretty much cements in financial failure.
Forex trading courses that are given away free are done so for a reason. It is wise to find out that reason before committing any significant time or energy on them. The idea behind the free give away is to get a potential investor to sign up to that specific company. Finding out if that specific company will benefit your interests is the best move to make in this situation. A company that deals largely in futures trading will offer a Forex trading course as a trap to get investors to sign up. If Forex is what the mission is, settle for nothing less than strictly Forex brokerages or companies.
Don't take unnecessary risks when it comes to finding suitable Forex trading courses, as these are the mistakes that generate bad financial decisions later on. Ask questions about the free offer and why it is free. Do the research into any said company and find out if they are a exclusively Forex company or if their interests lie in another financial market. Most of all, if the free Forex trading courses are claiming that it can make you a millionaire overnight. Flag it! Move on because that scam won't get anyone further except the one who is collecting the money. Forex cannot give anyone independent wealth in a short time period especially to any investor who is new to the scene. Be diligent in seeking the answers to all questions and in dissecting the answers. It could be the very key to Forex financial success!
Timing is Everything With Forex Trading
The most challenging part of getting started with Forex trading is to learn this innovative way of trading. Many potential investors that try to navigate the Forex system unaided end up being frustrated and financially intimidated. There are very simple strategies to becoming successful using the foreign exchange trading system but the first step is gathering all of the necessary information surrounding this type of trading specialty. Securing a reliable Forex trading broker is likely the first and most pivotal step after learning the initial principles.
Unlike many types of trading and futures, foreign exchange trading is not designed to make the client rich quickly. Many people are frightened off by the word that Forex trading is a get rich quick scheme that in large part, doesn't work. This is a financial myth despite all the hype surrounding the foreign exchange trading system. There are steps and gains to be taken in order to secure a future in successful trading. Expect to dedicate a large portion of time to researching and understanding the market in general before setting out with your pocket book ready to invest. Learn all you can about the Forex market in the beginning in order to make the Forex trading path a smooth and triumphant one.
There is no doubt that there are numerous types of orders that can be utilized in order to open and close trades and becoming familiar with them is a must. In the foreign exchange trading business there are charts, graphs and other visuals to help you effectively analyze trends in currency trading. These charts and graphs will assist in making well-informed decisions on what currency to sell. Timing is everything and it goes without saying that when experiencing with the Forex trading system, knowing when to trade can be the pivotal difference between success and failure. Understanding the analysis tools and how to use them efficiently will put any investor on the right track.
As well as proficient trading tools, it is an absolute necessity when using the foreign exchange trading system to understand how to use the software to perform actual trades. The only way to become comfortable with using Forex trading software is to use it and learn how to plot a course through the process. Selecting a good trader is the most imperative tip at this stage because an established trader can help you with the services required as well as giving you in depth tutorials using the foreign exchange trading system.
The most critical tool that will be utilized in the Forex trading system is patience and discipline. As mentioned earlier, foreign exchange trading is not a get rich quick proposal so learning patience and discipline can help you to become profitable in a timely fashion without losing money. Most brokers offer a demo account that can be used to practice and learn the foreign exchange trading system that mimics the real account with the exception of real money being traded. This gives a client insight into the market and its behaviors before actual money is invested. Learn how to make a profit using paper trading on a regular basis before risking your capital with Forex trading.
Learn Forex Trading: Where to Start
The foreign exchange market is a dog eat dog world and if an investor ventures in without the essential arsenal of knowledge and tools, it can lead to financially devastating results. The most vital issue for any investor wanting to learn Forex trading is that there is no get rich quick associated with it. There are many frauds out there that claim to have the ultimate Forex system that will make you rich overnight. If that were true, there wouldn't be Forex brokers who have been in the business for thirty years. These brokers would be rich, retired and living in a hot tropical island someplace having margaritas delivered to them by pretty girls in grass skirts.
With that said, it should now be obvious that there are no shortcuts with being able to learn Forex trading. The investment of time is required before any actual money can be invested by learning the various tools, programs and platforms that are utilized on the Forex market. Having the confidence of knowing that you were able to learn Foreign Exchange trading though experience with demo accounts can create an atmosphere to generate unlimited return potential.
In order to learn Forex trading a prospective investor should solicit the expertise of a Forex broker or brokerage firm. They will greatly assist any investor in learning the Forex principles and the reasons that drive this volatile market. Before one can really succeed with the Forex market, these skill sets needs to be acquired and well comprehended. The Forex broker will set any investor up with a demo account in order to learn Forex trading like it is actually being executed. This is often the best type of learning mechanism because it gives the user hands on experience without suffering any financial loss. This stage of trying to learn Foreign Exchange trading is often referred to as paper trading as no actual money is being gained or lost.
Starting with the time and effort required to learn Forex trading will pay off handsomely once the investor goes 'live' on the Forex market. At the time the investor goes live and begins putting his or her own capital on the line, they will have been showing a steady track records of gains and be familiar from the demo or paper trading period. Learn Forex trading by starting with the time; learn everything that pertains to this quickly changing market so that success is just a trade away. There is the potential to earn unlimited income once a significant margin account is built up but as with anything, skipping the training step will put you in a snake pit unprotected. Learn Forex trading and minimize the financial risk associated with the biggest financial market in the world.
Foreign exchange market
The foreign exchange (currency or forex or FX) market exists wherever one currency is traded for another. It is by far the largest financial market in the world, and includes trading between large banks, central banks, currency speculators, multinational corporations, governments, and other financial markets and institutions. The average daily trade in the global forex markets currently exceeds US$1.9 trillion. Retail traders (individuals) are a small fraction of this market and may only participate indirectly through brokers or banks.
Market size and liquidity
The foreign exchange market is unique because of:
-its trading volume,
-the extreme liquidity of the market,
-the large number of, and variety of,
-traders in the market,
-its geographical dispersion,
-its long trading hours - 24 hours a day (except on weekends).
-the variety of factors that affect exchange rates,
According to the BIS, average daily turnover in traditional foreign exchange markets was estimated at $1,880 billion.
Global foreign exchange market turnover:
$621 billion spot
$1.26 trillion in derivatives, ie
$208 billion in outright forwards
$944 billion in forex swaps
$107 billion in FX options.
Exchange-traded forex futures contracts were introduced in 1972 at the Chicago Mercantile Exchange and are actively traded relative to most other futures contracts. Forex futures volume has grown rapidly in recent years, but only accounts for about 7% of the total foreign exchange market volume, according to The Wall Street Journal Europe (5/5/06, p. 20).
Average daily global turnover in traditional foreign exchange market transactions totaled $2.7 trillion in April 2006 according to IFSL estimates based on semi-annual London, New York, Tokyo and Singapore Foreign Exchange Committee data. Overall turnover, including non-traditional foreign exchange derivatives and products traded on exchanges, averaged around $2.9 trillion a day. This was more than ten times the size of the combined daily turnover on all the world’s equity markets. Foreign exchange trading increased by 38% between April 2005 and April 2006 and has more than doubled since 2001. This is largely due to the growing importance of foreign exchange as an asset class and an increase in fund management assets, particularly of hedge funds and pension funds. The diverse selection of execution venues such as internet trading platforms has also made it easier for retail traders to trade in the foreign exchange market.
Because foreign exchange is an OTC market where brokers/dealers negotiate directly with one another, there is no central exchange or clearing house. The biggest geographic trading centre is the UK, primarily London, which according to IFSL estimates has increased its share of global turnover in traditional transactions from 31.3% in April 2004 to 32.4% in April 2006. According to Celent, the London Stock Exchange is the largest exchange in terms of equity trading value, accounting for 36% of European trading turnover and 20% of trading volume, as of June 2007.
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. 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). The top-tier inter-bank market accounts for 53% of all transactions. After that there are usually smaller investment banks, followed by large multi-national corporations (which need to hedge risk and pay employees in different countries), large hedge funds, and even some of the retail forex market makers. According to Galati and Melvin, “Pension funds, insurance companies, mutual funds, and other institutional investors have played an increasingly important role in financial markets in general, and in FX markets in particular, since the early 2000s.” (2004) In addition, he notes, “Hedge funds have grown markedly over the 2001-2004 period in terms of both number and overall size” Central banks also participate in the forex market to align currencies to their economic needs.
Banks
The interbank market caters for both the majority of commercial turnover and large amounts of speculative trading every day. A large bank may trade billions of dollars daily. Some of this trading is undertaken on behalf of customers, but much is conducted by proprietary desks, trading for the bank's own account.
Until recently, foreign exchange brokers did large amounts of business, facilitating interbank trading and matching anonymous counterparts for small fees. Today, however, much of this business has moved on to more efficient electronic systems, such as EBS (now owned by ICAP), Reuters Dealing 3000 Matching (D2), the Chicago Mercantile Exchange, Bloomberg and TradeBook(R). The broker squawk box lets traders listen in on ongoing interbank trading and is heard in most trading rooms, but turnover is noticeably smaller than just a few years ago.
Commercial companies
An important part of this market comes from the financial activities of companies seeking foreign exchange to pay for goods or services. Commercial companies often trade fairly small amounts compared to those of banks or speculators, and their trades often have little short term impact on market rates. Nevertheless, trade flows are an important factor in the long-term direction of a currency's exchange rate. Some multinational companies can have an unpredictable impact when very large positions are covered due to exposures that are not widely known by other market participants.
Central banks
National central banks play an important role in the foreign exchange markets. They try to control the money supply, inflation, and/or interest rates and often have official or unofficial target rates for their currencies. They can use their often substantial foreign exchange reserves to stabilize the market. Milton Friedman argued that the best stabilization strategy would be for central banks to buy when the exchange rate is too low, and to sell when the rate is too high — that is, to trade for a profit based on their more precise information. Nevertheless, the effectiveness of central bank "stabilizing speculation" is doubtful because central banks do not go bankrupt if they make large losses, like other traders would, and there is no convincing evidence that they do make a profit trading.
The mere expectation or rumor of central bank intervention might be enough to stabilize a currency, but aggressive intervention might be used several times each year in countries with a dirty float currency regime. Central banks do not always achieve their objectives, however. The combined resources of the market can easily overwhelm any central bank. Several scenarios of this nature were seen in the 1992-93 ERM collapse, and in more recent times in Southeast Asia.
Investment management firms
Investment management firms (who typically manage large accounts on behalf of customers such as pension funds and endowments) use the foreign exchange market to facilitate transactions in foreign securities. For example, an investment manager with an international equity portfolio will need to buy and sell foreign currencies in the spot market in order to pay for purchases of foreign equities. Since the forex transactions are secondary to the actual investment decision, they are not seen as speculative or aimed at profit-maximization.
Some investment management firms also have more speculative specialist currency overlay operations, which manage clients' currency exposures with the aim of generating profits as well as limiting risk. Whilst the number of this type of specialist firms is quite small, many have a large value of assets under management (AUM), and hence can generate large trades.
Hedge funds
Hedge funds, such as George Soros's Quantum fund have gained a reputation for aggressive currency speculation since 1990. They control billions of dollars of equity and may borrow billions more, and thus may overwhelm intervention by central banks to support almost any currency, if the economic fundamentals are in the hedge funds' favor.
Retail forex brokers
Retail forex brokers or market makers handle a minute fraction of the total volume of the foreign exchange market. According to CNN, one retail broker estimates retail volume at $25-50 billion daily, which is about 2% of the whole market and it has been reported by the CFTC website that unexperienced investors may become targets of forex scams.
Trading characteristics
There is no single unified foreign exchange market. Due to the over-the-counter (OTC) nature of currency markets, there are rather a number of interconnected marketplaces, where different currency instruments are traded. This implies that there is no such thing as a single dollar rate - but rather a number of different rates (prices), depending on what bank or market maker is trading. In practice the rates are often very close, otherwise they could be exploited by arbitrageurs.
The main trading centers are in London, New York, Tokyo, and Singapore, but banks throughout the world participate. Currency trading happens continuously throughout the day; as the Asian trading session ends, the European session begins, followed by the US session and then back to the Asian session, excluding weekends.
There is little or no 'inside information' in the foreign exchange markets. Exchange rate fluctuations are usually caused by actual monetary flows as well as by expectations of changes in monetary flows caused by changes in GDP growth, inflation, interest rates, budget and trade deficits or surpluses, large cross-border M&A deals and other macroeconomic conditions. Major news is released publicly, often on scheduled dates, so many people have access to the same news at the same time. However, the large banks have an important advantage; they can see their customers' order flow.
Currencies are traded against one another. Each pair of currencies thus constitutes an individual product and is traditionally noted XXX/YYY, where YYY is the ISO 4217 international three-letter code of the currency into which the price of one unit of XXX is expressed. For instance, EUR/USD is the price of the euro expressed in US dollars, as in 1 euro = 1.3045 dollar. Out of convention, the first currency in the pair, the base currency, was the stronger currency at the creation of the pair. The second currency, counter currency, was the weaker currency at the creation of the pair.
The factors affecting XXX will affect both XXX/YYY and XXX/ZZZ. This causes positive currency correlation between XXX/YYY and XXX/ZZZ.
On the spot market, according to the BIS study, the most heavily traded products were:
EUR/USD - 28 %
USD/JPY - 18 %
GBP/USD (also called sterling or cable) - 14 %
and the US currency was involved in 89% of transactions, followed by the euro (37%), the yen (20%) and sterling (17%). (Note that volume percentages should add up to 200% - 100% for all the sellers, and 100% for all the buyers).
Although trading in the euro has grown considerably since the currency's creation in January 1999, the foreign exchange market is thus far still largely dollar-centered. For instance, trading the euro versus a non-European currency ZZZ will usually involve two trades: EUR/USD and USD/ZZZ. The only exception to this is EUR/JPY, which is an established traded currency pair in the interbank spot market.
Factors affecting currency trading
Although exchange rates are affected by many factors, in the end, currency prices are a result of supply and demand forces. The world's currency markets can be viewed as a huge melting pot: in a large and ever-changing mix of current events, supply and demand factors are constantly shifting, and the price of one currency in relation to another shifts accordingly. No other market encompasses (and distills) as much of what is going on in the world at any given time as foreign exchange.
Supply and demand for any given currency, and thus its value, are not influenced by any single element, but rather by several. These elements generally fall into three categories: economic factors, political conditions and market psychology.
Economic factors
These include economic policy, disseminated by government agencies and central banks, economic conditions, generally revealed through economic reports, and other economic indicators.
Economic policy comprises government fiscal policy (budget/spending practices) and monetary policy (the means by which a government's central bank influences the supply and "cost" of money, which is reflected by the level of interest rates).
Economic conditions include:
Government budget deficits or surpluses: The market usually reacts negatively to widening government budget deficits, and positively to narrowing budget deficits. The impact is reflected in the value of a country's currency.
Balance of trade levels and trends: The trade flow between countries illustrates the demand for goods and services, which in turn indicates demand for a country's currency to conduct trade. Surpluses and deficits in trade of goods and services reflect the competitiveness of a nation's economy. For example, trade deficits may have a negative impact on a nation's currency.
Inflation levels and trends: Typically, a currency will lose value if there is a high level of inflation in the country or if inflation levels are perceived to be rising. This is because inflation erodes purchasing power, thus demand, for that particular currency.
Economic growth and health: Reports such as gross domestic product (GDP), employment levels, retail sales, capacity utilization and others, detail the levels of a country's economic growth and health. Generally, the more healthy and robust a country's economy, the better its currency will perform, and the more demand for it there will be.
Political conditions
Internal, regional, and international political conditions and events can have a profound effect on currency markets.
For instance, political upheaval and instability can have a negative impact on a nation's economy. The rise of a political faction that is perceived to be fiscally responsible can have the opposite effect. Also, events in one country in a region may spur positive or negative interest in a neighboring country and, in the process, affect its currency.
Market psychology
Market psychology and trader perceptions influence the foreign exchange market in a variety of ways:
Flights to quality: Unsettling international events can lead to a "flight to quality" -with investors seeking a "safe haven". There will be a greater demand, thus a higher price, for currencies perceived as stronger over their relatively weaker counterparts.
Long-term trends: Currency markets often move in visible long-term trends. Although currencies do not have an annual growing season like physical commodities, business cycles do make themselves felt. Cycle analysis looks at longer-term price trends that may rise from economic or political trends.
"Buy the rumor, sell the fact:" This market truism can apply to many currency situations. It is the tendency for the price of a currency to reflect the impact of a particular action before it occurs and, when the anticipated event comes to pass, react in exactly the opposite direction. This may also be referred to as a market being "oversold" or "overbought". To buy the rumor or sell the fact can also be an example of the cognitive bias known as anchoring, when investors focus too much on the relevance of outside events to currency prices.
Economic numbers: While economic numbers can certainly reflect economic policy, some reports and numbers take on a talisman-like effect - the number itself becomes important to market psychology and may have an immediate impact on short-term market moves. "What to watch" can change over time. In recent years, for example, money supply, employment, trade balance figures and inflation numbers have all taken turns in the spotlight.
Technical trading considerations: As in other markets, the accumulated price movements in a currency pair such as EUR/USD can form patterns that may be recognized and utilized by traders for the purpose of entering and exiting the market, leading to short-term fluctuations in price. Many traders study price charts in order to identify such patterns.
Algorithmic trading in forex
Electronic trading is growing in the FX market, and algorithmic trading is becoming much more common. There is much confusion about the technique. According to financial consultancy Celent estimates, by 2008 up to 25% of all trades by volume will be executed using algorithm, up from about 18% in 2005.
Financial instruments
There are several types of financial instruments commonly used.
Spot: A spot transaction is a two-day delivery transaction, as opposed to the futures contracts, which are usually three months. This trade represents a “direct exchange” between two currencies, has the shortest time frame, involves cash rather than a contract; and interest is not included in the agreed-upon transaction. The data for this study come from the spot market. Spot has the largest share by volume in FX transactions among all instruments.
Forward transaction: One way to deal with the Forex risk is to engage in a forward transaction. In this transaction, money does not actually change hands until some agreed upon future date. A buyer and seller agree on an exchange rate for any date in the future, and the transaction occurs on that date, regardless of what the market rates are then. The duration of the trade can be a few days, months or years.
Futures: Foreign currency futures are forward transactions with standard contract sizes and maturity dates — for example, 500,000 British pounds for next November at an agreed rate. Futures are standardized and are usually traded on an exchange created for this purpose. The average contract length is roughly 3 months. Futures contracts are usually inclusive of any interest amounts.
Swap: The most common type of forward transaction is the currency swap. In a swap, two parties exchange currencies for a certain length of time and agree to reverse the transaction at a later date. These are not contracts and are not traded through an exchange.
Options: A foreign exchange option (commonly shortened to just FX option) is a derivative where the owner has the right but not the obligation to exchange money denominated in one currency into another currency at a pre-agreed exchange rate on a specified date. The FX options market is the deepest, largest and most liquid market for options of any kind in the world.
Speculation
Controversy about currency speculators and their effect on currency devaluations and national economies recurs regularly. Nevertheless, many economists (e.g. Milton Friedman) have argued that speculators perform the important function of providing a market for hedgers and transferring risk from those people who don't wish to bear it, to those who do. Other economists (e.g. Joseph Stiglitz) however, may consider this argument to be based more on politics and a free market philosophy than on economics.
Large hedge funds and other well capitalized "position traders" are the main professional speculators.
Currency speculation is considered a highly suspect activity in many countries. While investment in traditional financial instruments like bonds or stocks often is considered to contribute positively to economic growth by providing capital, currency speculation does not, according to this view; it is simply gambling, that often interferes with economic policy. For example, in 1992, currency speculation forced the Central Bank of Sweden to raise interest rates for a few days to 150% per annum, and later to devalue the krona. Former Malaysian Prime Minister Mahathir Mohamad is one well known proponent of this view. He blamed the devaluation of the Malaysian ringgit in 1997 on George Soros and other speculators.
Gregory Millman reports on an opposing view, comparing speculators to "vigilantes" who simply help "enforce" international agreements and anticipate the effects of basic economic "laws" in order to profit.
In this view, countries may develop unsustainable financial bubbles or otherwise mishandle their national economies, and forex speculators only made the inevitable collapse happen sooner. A relatively quick collapse might even be preferable to continued economic mishandling. Mahathir Mohamad and other critics of speculation are viewed as trying to deflect the blame from themselves for having caused the unsustainable economic conditions.
References
1. Triennial Central Bank Survey (March 2005), Bank for International Settlements.
2. Foreign Exchange (October 2006), International Financial Services, London.
3. Celent Report: According to figures published by Celent 5 June 2007. Other large centres include the US (with a 18.2% global share), Japan (7.6%) and Singapore (5.7%) (Chart 2). Most of the remainder was accounted for by trading in Germany, Switzerland, Australia, Canada, France and Hong Kong. The ten most active traders account for almost 73% of trading volume, according to The Wall Street Journal Europe, (2/9/06 p. 20). These large international banks continually provide the market with both bid (buy) and ask (sell) prices. The bid/ask spread is the difference between the price at which a bank or market maker will sell ("ask", or "offer") and the price at which a market-maker will buy ("bid") from a wholesale customer. This spread is minimal for actively traded pairs of currencies, usually only 0-3 pips. For example, the bid/ask quote of EUR/USD might be 1.2200/1.2203. Minimum trading size for most deals is usually $100,000. These spreads might not apply to retail customers at banks, which will routinely mark up the difference to say 1.2100 / 1.2300 for transfers, or say 1.2000 / 1.2400 for banknotes or travelers' checks. Spot prices at market makers vary, but on EUR/USD are usually no more than 3 pips wide (i.e. 0.0003). Competition has greatly increased with pip spreads shrinking on the major pairs to as little as 1 to 2 pips.
By http://www.wikipedia.org