Ever since the invention of Forex software a lot more people around the world have been able to fully take advantage of the Forex market and trading. By using foreign exchange software, companies from around the globe are able to enter into trading with Forex online. The software also allows them to feel more secure in trading online any time of day or night without feeling that they will be cheated or manipulated. These software offers the advantages of convenience and security combined in one.

Forex software tends to be a lot more seamless and allows all traders of Forex around the world to know the Forex rate, number of trades happening and the volume of currency being traded from all around the globe. Foreign exchange software also allows for transparency and accountability to all parties involved, because of the uniform approach of how the software is produced and put together.

There are two options when it comes to choosing your FX software. One is online or server side software, while the other is called client side software. You can choose to use only one or to use both. Using both will help you by allowing you to be sure that the trade is conducted in real time online. It can also ensure you that everything is secure.

Forex software is known to help provide up to date and very accurate rates. The updates in themselves can assist in letting the trader know when to buy or sell and make general decisions in regards to their trades. Of course having the software available to you can make the exact amounts more accurate for every Forex trader around the world, so there is no discrepancy, which can result in the loss of huge amounts of money.

Security is another huge advantage of having Forex software. The way the software is programmed it is able to offer its users privacy and integrity when it comes to their private information. Another great security feature of FX software is the fact that it is encoded with protection against hackers who can set off major chaos if able to get into the inner workings of Forex trading. Another great feature of Forex software is its charting feature. This feature allows its users to track bigger and more general trends from all around the globe. By being able to see the bigger picture, better decisions can be made in regards to trading in the Forex market.

As you can see there are many advantages of obtaining and using this software if you are considering trading in the Forex market. In the end, FX software can give you the leg up on the competition by providing you all these benefits and a lot more.

There is so much talk about NASDAQ and NYSE, but how many people are aware of another similar market, called Forex Markets? Forex Market has ten times the average daily turnover of many similar global equity markets. Also, foreign exchange markets have thirty the times of the daily volume of NASDAQ and NYSE. Markets are also the most liquid market in the world with one of the highest turnovers ever recorded, estimated at $2 trillion in one day.

Foreign exchange markets, also known as FX or the foreign exchange is actually a decentralized market, commonly known as an Interbank or interdealer market. One of the main duties of FX Markets is to trade. Foreign banks, currency dealers and different Forex investors use the facility as a type of trading post. They use it to exchange foreign currencies, from all over the world. Of course for this to work in the best way, it has no centralized location. This is because all business is conducted online.
For a long time the main people that used Forex Markets were the banks. Recently though, FX Markets acquired the ability to leverage large positions with not very much available capital. This means that it is now a more liquid market and more easily accessible to smaller companies that would like to get involved as well.

From New Zealand, to Australia, to Asia, the Middle East, Europe and America, Forex Markets is open twenty-four hours a day. All the major markets, including London, New York, and Tokyo are part of it. Of course the United Kingdom and the United States account for over fifty percent of the turnover. When the time of day comes for all the major markets to overlap, trading can get pretty heavy.

Besides the major markets there are also five main currencies that are a part of Foreign exchange Markets. These currencies include the United States Dollar, the Euro, the Yen, the Franc and the British Pound. Each of these is traded in what are called pairs. In this particular market they are also called crosses, in what is known in the Forex Markets as the ‘spot’ market. A lot of this market is determined by supply and demand of certain major currencies and how they affect the current world market and its situations.

For those who have the money and the know how to survive on the world market, this market could be their best option. Being able to really read the current market and the world situation is definitely a plus when it comes to this market. If you have the need or the want to trade on the world market and are comfortable with what you know about it, Forex Markets are definitely the way to go.

When becoming a Forex trader you can definitely use great tools available to you, such as Forex charting. The charts produced by Forex analysis can give you great insight into different aspects of the market, including movements. By using charts in foreign exchange you can study the behavior of the market over a greater amount of time and analyze them and how they affect trading.

By using Forex charts you will be better informed as to certain patterns and trends. This advantage can help in not making rushed decisions, but instead making a more careful and weighted decision, based on the charts that Forex analysis can provide you with. This in the end can have you end up with a better decision rather than one that was too rushed and hastily made.

There is certain specified charting software that Forex analysis uses. This software goes through historical as well as current information to predict future trends in trading, and therefore give the trader who uses Forex charting an edge. This software can also be customized to meet each user’s specific needs. Some options in the charting software includes analyzing of prices based upon combinations of open, high, low or close points that have been taken and placed on the chart over a certain amount of time. While other options use only closing prices or base theirs on volume and open interests.

There are of course a few things to take into consideration when choosing the options you want for your Foreign exchange charting program. You can look up the different options online. The things you must look at when deciding on the right charting program for you include, making sure the charts are up to the minute and accurate, are meaningful and have significant information at first glance, that they integrate with the trading platform the trader uses and that you are able to use the software to view more than one at a time in order to get as full a picture as possible. Fully researching the different options in Forex tabulation can definitely help you in finding the correct combination or combinations that are right for you and your needs.

As you can see using charting can be an invaluable tool when trading on the Forex market. When properly prepared and researched, you can find the right options in charting to suit your needs. This than can make Forex charting the answer to many problems you may be having in trading, and instead make your profits soar.

A type of trading available in the Forex market is called Forex day trading. This financial trading option can be something that can definitely make trading work better for you. One of the biggest benefits of trading day currencies is that it is available twenty-four hours a day. This of course can give traders the obvious benefit of trading at any hour that they choose. With foreign exchange day trade there is no rush or panic, and decisions can be more carefully considered and executed.

Something else that is beneficial when it comes to day trading is that a lender can start a lot smaller if they choose. Starting smaller can also let them concentrate on a few major currencies rather than on tens of thousands. Foreign exchange day trading allows for more focus and a better ability to spread an investment. These benefits are not available with a traditional stock market approach. Something else that is great when it comes to Forex day transactions is that spreads can be narrower if the trader wishes. This allows the trader to regulate more easily the day spends. Of course this also leads to more liquidity.

Some other benefits that come with Forex day trade include there being no restrictions when selling currencies short. This allows for a trader to continue making money at a steady rate, whether markets are rising or falling. Also because of certain times when trading volumes are high, having day trading as an available tool can help a trader avoid these times if they choose, yet still make high enough profits. Foreign exchange day trading allows the trader to avoid times when the British, European, and United States markets are all open at the same time and activity is overwhelming, yet still make profits if they so choose.

Day trade also allows the Forex trader to take full advantage of some of the general benefits offered in the Forex market. These include twenty-four hour online currency trading, one hundred to one leverage, commission free trading and regulated FCM status. Having some of these advantages can definitely improve one’s chance of making large profits in the Forex market.

As you can see being able to use Forex day transactions in your trading activities could be a decision that could make you millions of dollars if used properly. Trading day currencies is a great option for those who like to make their own hours, yet still want to benefit fully from the Forex market in general.

In the Forex market the value of two separate currencies and how they relate to one another is what is known as the Forex exchange rate. Usually the Forex rate is how much of one currency is needed to buy a unit of another. Knowing the basics regarding the Forex exchange can help you get started in understanding it even better.

Just to give you an example of how the Foreign exchange rate can work and to help you better understands it we can compare the United States dollar with the Japanese yen. Let’s say that on a certain day the US dollar is able to buy one hundred and ten Japanese yens, this would indicate that the exchange rate for that day is 1:110 or a one to one hundred and ten ratio. This ratio in the exchange rate is also known as pairing. When you take it vice versa you can use it to indicate how many US dollars a single unit of Japanese yen can buy. Another term that is used in the Foreign exchange rate is ‘cross rates’. This term however is only used when it does not involve US dollars; it is only used when relating two foreign currencies.

A few other terms used in the Forex exchange are pips or basis points, which are actually two terms used for the same thing. These terms are used to indicate Forex rates that are calculated up to four decimal points and whether or not these are negative or positive movements. An example of this would be if you were to exchange euros with yen at a value of 135.1030, but then the euro rate goes up to 135.1035, it is called a five-pip improvement.

In using the Forex exchange rate you are required to use two currencies and this means they are quoted as ‘two tier’ rates. Also in the Forex market its price basis is called a bid/ask. Using the previous ratio between the yen and the US dollar in the Forex market, if this trade is made it is called a ten pip ‘spread’ and is secured. This term means it indicates the difference between the buying and actual selling price.
A lot of things can change the spread and affect it. These things include market conditions and traders’ instincts about the strength of certain currencies, which can fluctuate greatly from day to day. One thing you should remember however when it comes to the Forex is that only Forex traders who are licensed can access official quoted rates. This means therefore that smaller investors may not receive their currency at a very good rate, because they usually receive them from commercial banks.

One last thing concerning the Forex exchange rate is that it is independently determined. This is why it thrives so well, because solely buyers and sellers and their supply and demand of certain currencies determine it. In the end individual governments and banks cannot decide the values.

With the benefits and knowledge of how the Forex exchange works you can decide if entering the Forex market is the right move for you. But with all the advantages of Forex, why wouldn’t you want to?

Something that can help a Forex trader better predict price movements are what is called Forex forecasting. When you have such a high paced and chaotic environment has the Forex market, a tool such as Forex forecasting can be a great benefit. Forex forecasting uses both types of analysis, technical and fundamental. Although when they combine both types, this is when Forex forecasting gets its best results.

The reason that Forex forecasting uses fundamental analysis is because this type better predicts future price movements. When using this type of analysis it is very important to look at economic, political, environmental and other relevant external factors that have a direct or indirect effect on supply and demand. Someone who analyzes using this type of analysis has to be someone who is very skilled. This is because in the Forex market, when using this type of analysis for Forex forecasting they have to be able to predict fairly accurately what the price of currency should be based on external factors, not the actual current price.

On the other hand Forex forecasting involving technical analysis has a bit of advantage in basing its predictions on past market fluctuations. This makes it more based on factual information, rather than hypothetical like fundamental analysis is. Another advantage of this type of analysis is that they can look at several different markets and indicators at the same time. When using Forex forecasting with technical analysis you must remember three things. These three things are that there are no surprises when using this type of analysis. Also when using this type of analysis the specific patterns are followed, which the market is based on, it is easier to predict a repeat of these patterns and successfully use this to your advantage. Lastly these patterns are a direct reflection of human psychology.

Details involved in technical analysis involves five different and distinct theories in order to be used in Forex forecasting. These theories include indicators such as oscillators (i.e. Relative Strength Index theory), the number theory including Fibonacci numbers and Gann numbers, waves such as the Elliott wave theory, gaps such as high-low and open-closing theory and trends such as following the moving average theory.

Regardless of all the theories that can be used in forecasting or which method is used, a lot of data and research goes into it. The use of new software and the readily available historical information can definitely make Forex forecasting a lot easier now then it used to be.

When investing in the Forex market, making a Forex investment can be the best decision and can definitely earn you the best profits. Because there is very little in the way of barring entrance to the Forex market making a Forex investment is an excellent opportunity. Especially for those individuals who have low investments to start with, this can allow them to gain a large return regardless. Of course it also depends on how well they understand the Forex market in order for them to truly benefit from a Forex investment.

In the past Forex investment was limited to only banks and financial institutions due to large transactions and strict financial requirements. Of course now with online trading widely available making a Forex investment is more readily accessible to individuals as well. This means just about anyone can invest in Forex and actually make money from it.

When making a Forex investment you are allowed to do so either directly or through a Forex broker. Banks and financial institutions now are forced to acknowledge that small and individual investors are involved in the Forex market and therefore have been providing online trading packages to them. A lot of these have high leverage available to clients, which when it involves a Forex investment can lend itself to an environment where high gains are made with comparatively small amounts.

This means that someone who chooses to open a mini account in the Forex market has a great leverage ratio of one hundred to one. This means that a one thousand dollar investment can buy or sell a ‘lot’ of one hundred thousand dollars in foreign currencies. Most mini accounts can be opened with two hundred and fifty dollars as a minimum Forex investment.

Because of this a huge increase has occurred in the amount of trades currently in the Forex market. This also causes a high liquidity with a daily turnover that has been known to reach two trillion dollars. Yet this has also mad Forex trading a bit more transparent. Making a Forex investment can be done in multiple currencies in multiple markets in real time without any barriers or physical boundaries.

What is very important in making a Forex investment is realizing that the there is an instant nature to the trade and huge amounts being traded every single day. This means that each investor must be very familiar with the way the Forex market works. They also need to have a clear understanding of trading strategy in order to gain the best profits. Those who don’t understand this can feel that the Forex market is too risky. So when making a Forex investment, make sure you have someone who thoroughly understands the inner workings and who can handle the risky nature of the Forex market, and you will have a better chance of gaining the best profits.

In the world of Forex trade, the concept of automating foreign exchange trading is becoming a new trend that a lot of people are looking into. Exchange-traded futures are the first group to seriously consider automated transactions. Also the Interbank spot FX market has decided to use the automated method as well. Why exactly are these groups looking to it? Let’s take a closer look at automatic forex and see if we can figure out why.

1) Real-time Transactions: One of the reasons it has begun to become successful is because transactions can be conducted in real time. With manual systems it is very difficult to achieve this advantage that is offered by automated Forex systems. A lot of trades happen within milliseconds and this can be a huge push for auto transactions versus manual. A few other problems that can be greatly helped or avoided with auto Forex trading include when a trader is away from their desk or if they have had several losses in a row that hinders them from making new trades for a while. Both of these can be greatly helped by using auto trade as opposed to manual.

2) Greater Diversification: Having better options in regards to diversification can be an advantage when it comes to automatic transactions. This means that a single trader can trade in different markets in different time zones at once. This also allows them the option of multiple exchange models. Another great advantage when it comes to this advanced trading system is having models to analyze short-term data. An option that is not available in any other way. This therefore can help give those using this system a bigger advantage over other traders. This means they can then predict in as short a period of times as fifteen minutes to half an hour. This once again helps you out in trading in different markets at different times.

3) Greater Liquidity: Auto foreign exchange can also give traders more liquidity. This was discovered when futures exchanges had a huge rise in trades after they started using the programmed system. With all the advantages to this modern system, are there are any problems we need to look at? In fact there are.
One of these problem areas is that some people are worried that the orders will increase too much if everyone adopts this automatic system. This can cause problems with lack of bandwidth or engine capacity trying to process all these trades in real time, though there are already people looking into how to avoid this problem before it happens.

4) Risk management: Another problem area for the auto system is risk management. There is always the consideration of checks having to be made when trades are being made. These checks need to happen in an environment where everything is properly synchronized. This is a technical problem and can be resolved when technology improves. Besides these two problems, there seems to be a lot more advantages, than disadvantages. This makes auto transactions the best option for most if not all Forex traders.

Besides traditional methods of learning about the Forex market, there are scores of Foreign exchange books that can assist in learning as well. Professionals and experts write not only by Forex traders but these Forex books also as well. Forex books also are known for the great amount of information they provide on market behavior, trading strategies and trading tools.

Technical analysis is a very important aspect of the Forex market and Forex books on this subject are invaluable. These Forex books have all kinds of information from macroeconomic indicators and how to chart. Sometimes these books will analyze things for you and help you with insights and patterns. These kinds of foreign exchange references will help beginners immensely because they will then be able to better spot patterns in the future.

Factors that can affect currency and its rates are something else that can be found in some materials on forex. The kind of information that can be found regarding this is political turmoil, environmental crises or natural calamities and wars. All of these can affect currencies and economies as well. Someone who uses this type of book will better be able to take into consideration this kind of thing in the future.

There has been an influx of information on forex software lately as well. These are more popular now because the development of software has greatly and significantly increased. Reading these can help with information on the latest regarding computer technology and those who are attracted to the technical aspects will be the most interested.

Books can also be extremely beneficial to hedge managers as well. This is because they tend to diversify their portfolios. By diversifying and using these books to gain information on foreign trade they can greatly increase their profits.

One disadvantage to using these forex information sources is trying to get through it all and find what you need. This requires a lot of patience on your part. Sometimes when professionals and experts tend to write these books they will use mathematical formulas that may be extremely complicated and hard to understand to the average person. Being able to have enough patience to get through all this will be worth it though.

But if you are able to overcome this disadvantage there are several advantages as well. One of these includes case studies that are often provided in forex references. They are known to be easier to follow because they are gleaned from real life. They are usually combined from marketing information as well as academic research.

Of course the best forex books and one that have the most advantage are those written by already successful Forex traders or brokers. A lot of these can give you an insight into their personal strategies for success. Since they have already had success there is a lot to be gained from these.

There are many different ways to go about learning about the Forex market. Among these are online courses or classroom classes. Another way is through Forex references. Which one you choose depends on what aspect you wish to learn about and how much you want to learn about that aspect. In the end foreign exchange books provide some excellent benefits if used properly.

Being involved in the Forex market you may have heard the term Forex broker many times before. But do you really know what this individual does or what it means? A Forex broker is one who assists not only traders and firms, but also individuals involved in the Forex market. The Forex broker’s assistance can be in providing information or may be actually trading for the person or company they are representing. A Forex broker does charge a fee for any services they provide, depending on which one it is.

A list of services that a Forex broker can provide can range from general advice to real time quotes to news feeds. There are different ways that these brokers can give advice. Some Forex brokers use their own personal experience and understanding. While others rely on software to provide the information their service provides.

There have been some advantages and new benefits allowed for Forex brokers and the Forex market since the Internet has evolved. Because of this the individual Forex broker can better provide accessibility to the Forex market, impossibility in previous years. This meant that only banks or large financial institutions would have any access to the Forex market.

There has been a huge growth since then of Forex brokers, which can make it hard to choose, especially for beginning or new traders to the market. The best advice when looking for your Forex broker is to get as many referrals and recommendations as you can. This can better help you decide in finding a reputable and competent Forex broker.

In the instance where you cannot get a referral or recommendation, it is up to you to do your own thorough and careful research. You should find out the amount of trades they are conducting and with how many clients. Of course you should also find out the Forex broker’s amount of experience. The most important thing to look for in your own research is a Forex broker who has learned by experience over several years and has the right amount of instinct to give the right advice. Of course you should also examine what kind of services and what variety they provide, such as mini accounts, market intelligence, market analysis, news feeds and real time quotes.

When deciding if you would like to use a broker or not, you need to take all advantages as well as disadvantages into consideration. This is a personal decision, one in which referrals and recommendations are highly recommended when looking, or at the very least extensive research on your part. Choosing the right Forex broker, in the end, can make the difference between success and failure in the Forex market.

If you’ve been checking out ways to get started in investing, chances are you’ve heard about the foreign exchange market, or FOREX trading. If you’re unfamiliar with this type of trading, it can all seem a bit too hard, but in fact the hardest part is getting started. Keep reading to find out the basics of FOREX trading and what you need to do to get involved.

In the past, foreign exchange was the territory of large players, such as multi-national corporations and national banks. However in the 1980s the rules were changed, giving smaller investors the change to participate using margin accounts. The popularity of FOREX trading has increased mainly because of these margin accounts, as people can participate with much smaller amounts of money. Basically, having a 100:1 margin account means that you can control $100,000 using only $1,000 of your own money.

Having said that, FOREX trading isn’t always simple, and it’s very important to make sure you educate yourself in order to make good investment decisions. Once you start, the trading process itself is simple, but there are risks involved. Learning about FOREX will help you to be profitable and is a good place for any beginner to start.

You will need to open a brokerage account. Generally, brokers are associated with a large financial institution such as a bank, and so can be considered reputable. They have to be registered as a Futures Commission Merchant (FCM), which is administered by the Commodity Futures Trading Commission (CFTC), to help protect the consumer from abusive trade practices and fraud.

Once you’ve filled out the necessary forms and provided ID, you can open your FOREX account. Part of the form will be a margin agreement. What this does is give the broker the right to interfere with any trade it feels has become too risky. This is reasonable, as most of the money used for trading will actually belong to the broker, and they need to be able to protect their interests.

Now you have your account, it’s time to put some funds in there and begin trading. The size of your account is your choice – some brokers will allow you to have a mini account of $250, while others prefer a minimum of between $1000 and $2500. The broker will also determine how much leverage you’re entitled to. So one client may be able to control $100,000 with his $1000, while another may only be able to control $80,000. The higher your level of leverage, the more money you have available for trading.

It’s never a good idea to start out by putting all your money into the market in your first trade. It’s vital to get some practice first, usually by paper trading. This involves working out transactions and pretending to trade them, without actually putting the money into the market. Paper trading is a great way to learn how the market works, and become familiar with the software tools your FOREX broker will provide to you. Most online brokers will allow you free paper trades for a period of time, so look for the ability to trade a demo account if you’re choosing an online broker. If you find that your paper trading results in losses, you may want to learn some more before trading with real money.

Your FOREX broker will have their own software for you to use, but there are some tools that are common to all brokers. These include real time quotes, technical analysis and charges, news feeds and profit and loss analysis, just to name a few. You will want to access this sort of information, so make sure you can get it from your broker’s site, or else consider using another broker. From your end, you will need a fairly modern computer, a good, fast Internet connection, and an up to date operating system. You should be able to access your broker account from any computer, which can be handy if you’re traveling. Check that the broker can also be contacted by phone for trades, just in case you’re without internet access at any stage.

One of the advantages of FOREX Trading is that trades don’t incur brokerage fees, which is different to trading stocks. Brokers make their money based on the spread, which is the difference between bid and ask prices.

Recently Forex trading has become one of the most looked after occupations that will allow you to earn a living from home or anywhere else. If you are really considering entering the forex trading world you must, by all means, learn and understand a number of indicators that will lend you a big hand on predicting with a high probability the directions forex markets may take as you analyze the price charts for any currency pair you are trading at the moment. Two of these great indicators are: “Bollinger Bands” and “Fibonacci Retracements”.

“Fibonacci retracement levels” are based on a sequence of numbers discovered by the noted mathematician Leonardo da Pisa in Italy. These numbers describe cycles found throughout nature and when applied to technical analysis can be used to find pullbacks in the currency market.

“Fibonacci retracement levels” are a quite effective way “to see the future” (at least in the world of forex markets), with this I mean that it involves anticipating changes in trends as prices near the levels indicated by the Fibonacci ratios. After a significant price move (either up or down), prices will often retrace a significant portion of the original move. As prices retrace, support and resistance levels often occur at or near the “Fibonacci Retracement levels” (See my other articles on “Fibonacci trading” for more details about this).

The interpretation given to “Bollinger Bands” is that prices tend to stay within the space formed by the tracings of the upper and lower bands. The distinctive characteristic of “Bollinger Bands” is that the spacing between the bands varies based on the volatility of the prices. During periods of high volatility, the bands widen to become more forgiving. During periods of low volatility, the bands narrow to contain currency prices. The common use is that the bands are plotted two standard deviations above and below a simple moving average. They indicate a “sell” when prices are above the moving average and a “buy” when prices are below it. The bands are used by some forex traders in conjunction with other analyses, including RSI, MACD, CCI, and Rate of Change.

If you want to find an appreciable number of profitable trades when trading Forex you need to enter the forex market at the best period of time. This means you should enter when the activity, the volume of transactions, is the highest. All experienced traders focus on the hours when the currency markets tend to make their biggest moves, i.e., during the big market overlaps, which therefore, are usually the best times to trade.

Forex markets are open worldwide with the following schedule:

* New York Market trade times: 8am-4pm EST

* London Market trade times: 2am-12Noon EST

* Great Britain Market trade times: 3am-11am EST

* Tokyo Market trade times: 8pm-4am EST

* Australia Market trade times: 7pm-3am EST

Forex markets have also these timing chraceristics:

* Forex Trading begins in New Zealand, followed by Australia, Asia, the Middle East, Europe, and America

* The US & UK account for more than 50% of the market transactions

* Forex Major markets: London, New York, Tokyo

* Nearly two-thirds of NY activity occurs in the morning hours while European markets are open.

From this timing facts, it is evident that at any given time, somebody somewhere in the world is buying and selling currencies. As one market closes a different market opens. Business hours overlap, and the exchange continues as day becomes night and night becomes day.

The great liquidity of Forex, combined with the fact that’s traded 5.5 days a week around the world, offers every trader an exceptional independence and choices to trade Forex when you want to and not when the market wants you to do it. It’s a facts that trades always develop with relatively the same frequency, regardless of time. As long as the Forex market is open, there is about the same probability that you will find a trade, whenever your look for it.

Forex market volume of transactions remains high during the whole day, but peaks highest when the Asian market(including Australia & New Zealand), the European market and the U.S. market are open simultaneously. And these are the best trading hours you must target in order to find the highest possible amount of profitable trades.

During each trading day, the total Forex “volume” is determined by the number of markets that are open and the times each of these markets overlap one another.

Forex trading is a great option for those who want a great income from home or anywhere else. But in order to be a successful forex trader you need to learn the basics of the currency markets and familiarize yourself with the world of trading. One of the first things you will notice as you start analyzing forex charts is that the currency markets often display’s some very familiar patterns of price movements. Once a clear pattern is established, it becomes the most probable course of future price action until the market
changes.

Considering this, it’s important that you identify and understand that there exist two types of markets; these are: trending and trend-less markets. Each market type has pretty clear and specific patterns which you will alsonotice over time.

Trending Markets are characterized by steady and elongated price movements with less than a 45 degree angel with occasional pauses, profit taking, or resting periods.

But even in trending markets you can notice the existence of other two important patterns. These are:

- Uptrends – A pattern of higher highs and higher lows.

- Downtrends – A pattern of lower lows and lower highs.

In the case of Trend-less markets, the main characteristic is the erratic price movements which are often steep ( greater than 45 -degree angle ) and that cannot be sustained therefore they must reverse in a short period of time. Although the movements can move many points in a short period of time, they often result in very little net price movement over time.

In Trend-less markets you can also distinguish tow main patterns:

- Choppy – An erratic pattern of higher highs and lower lows.

- Sideways – A narrow pattern of lower highs and higher lows.

While markets with an up-trend and down-trend behavior can offer generally excellent trading results, choppy markets often create stop outs, while sideways markets produce for little in either direction making them hard to trade, hence making it hard to make any significative profit during these trend-less periods.

Although FOREX traders are generally aware of the importance of daily economic calendars, in order to be profitable, they must go further and understand the difference between surprise and expected.

In order to grasp these concepts, you have to know that this is a game between the financial authorities and the community of analysts, trying to predict the numbers.

While natural disasters, accidents and political moves cannot be expected and therefore they are always considered as surprise news, the economic calendar is well known by the investment community.

In a highly speculative investment environment like the FOREX market, the most important volatility creator is the economic calendar.

Indicators like GDP (Gross Domestic Product), CPI (Consumer Price Index), PPI (Producer Price Index), Unemployment Rate, Interest Rate, Retail Sales and Trade Balance are widely followed and evaluated.

Prior to each report, estimates are published and traders try to position themselves according to what the numbers are expected to be.

These estimates will set the tone and drive the market prior to the publication of each report.

Here comes a rule you have to integrate into your trading, the market discounts every piece of information. Simply stated, the price is the result of all that is known and expected by the investment community.

Even if the report indicates a good economic result, if this has been anticipated through the estimates, the market will not move much, as it already discounted this information early in the process.

However, if the economic announcement does not come in line with the expectations, then we have the so-called surprise reports. The investment community quickly tries to digest and adapt to the new expectations and in doing so, it drives the market in the direction of the surprise news.

Professional FOREX operators avoid having opened positions prior to key economic reports. They prepare trading plans for both, the expected as well as the surprise scenarios and act upon what is published, consequently limiting their risk exposure.

Always remember, only surprise news will move the market. Even if the report shows a strong economic sector, if the actual numbers are in line with the analysts’ expectations, the market has already absorbed and discounted the numbers, therefore it will not move much.

Bogdan Vasile

www.forex-arena.com

The Spot FX market or “Forex” used to be limited to banks and long term investors, plus those who had masses of capital money. Trading would take place via a guy shouting what what going on on the trading floors or a “voice broker” which has gradually been replaced by automated computerised systems.

It is now actually possible for the retail investor or “home office based trader” to trade real time with the banks through the environment of a broker using computerised trading platforms which may have live desk traders placing trades either in the brokers books (95% of traders lose money so it’s in their interests not to trade for real), or for real – for the winners.

A forex trading strategy must usually comprise of two main components – technical analysis and fundamental analysis. The technical side is looking at the charts and using mathematics to reflect the movement of the market and the fundamental side requires knowing about important market-influencing economic news and announcements.

So let’s talk about fundamental analysis in your forex trading strategy. Every day, figures are released which are designed to reflect certain economic circumstances of a country. Some of these announcements for example “Non-Farm Payrolls” will almost certainly have an unpredictable affect on the market depending on previous data and implications of the figures released. A hard, fast rule for beginners trading (and veterans) is to stay out of the market during important announcements. You can find out where to get these by taking one of our courses.

Technical analysis will involve the use of indicators on charts to bring out areas of support and resistance areas where the price may either “get stuck” or “stop and reverse” in the opposite direction. One of the most popular (and accurate) methods of calculating support and resistance levels is the use of “Fibonacci”. The sequence of numbers discovered by Fibonacci 750 years ago is a proportion found in nature (for example pineapply rind or sunflower seeds) and is commonly learned in high school math. Did you ever get a question “What is the next number in this sequence….1,1,2,3,5,8,13,21,X?” That is the fibonacci sequence.

When we put the fibonacci numbers against each other we get a percentage ratio which can be plotted on out chart (you don’t need to be a math whiz – most forex charting software does this for you). This will bring out key areas of potential support and resistance for each move on your charts. Using Fibonacci in combination with indicators showing momentum or strength of the current market can give you a strategy to be profitable on a consistent basis because a mathematical rule in forex is “what has happened before will happen again – history repeats itself”.

Profit is made in forex trading much like in traditional business – in fact call to mind a haberdashery! You make a profit by buying at a lower price and selling at a higher price. The difference in forex is that it is also just as common sometimes to be able to sell at a higher price and then buy at a lower price. The profit can be made in both direction.

The process is simple. A trade is placed (either a buy or sell or the base currency) which automatically (sells or buys) the opposite currency in the pair. The price will change live every fraction of a second and for example if you bought the GBP/USD you have bought the pound and sold the US dollar. You want the value of the pound to rise and then you will sell your pounds (in other words “close your position”) and make a profit on the difference in value. This can be done in seconds, minutes or hours.
The broker takes his cut and you’re left with a little less than the actual “distance” the price has moved.

Due to brokers allowing you a leverage of up to 200:1 on your capital, you can control a lot more money than you actually have. Since you are buying one currency and selling the other, not all of your capital is at stake really. Only the proportion which will be lost or gained considering the change in value of the currency pair you are trading together.

For example, you have a forex trading strategy that tells you to buy the Euro against the dollar. The exchange rate is 1.2866 which means 1 EUR = 1.2866 USD

EUR/USD 1.2866

Due to your broker having a “spread” you are offered to buy at 1.2868 or to sell at 1.2864 (in other words the price must change by 2 [analagous] pips or points (significant figures or 4th decimal place) in order to break even. This is usually equivalent to paying a commission and you will not pay a commission depending on your broker.

Your forex trading strategy or system is accurate and you have timed the trade well and continue to watch the exchange rate rise 22 points over the next 15-20 minutes.

You see that the price is now 1.2888 and close your position.

You have made 20 points profit. This was a successful trade.

What do the 20 points mean though in terms of your portfolio?

Good question. With a 100:1 leverage, you have required at least $1000 to place your money in your account will have risen by $200 bcause each “pip or point” has been worth $10 to you. (I have deducted a 2 pip brokers spread or $20).

So, with a capital of about $2000 (you need a $1000 deposit to trade and some surplus equity in case the price goes in the opposite direction to what you wanted at first) you can traded 1 lot at 100:1 for each pip to be worth $10 profit. Since the market moves rapidly – sometimes 30 pips or more in a few minutes during very volatile times, you can make money fast placing accurate trades. The risk associated is that you can also lose money fast. We therefore need risk management plan to complete our forx trading strategy. This at it’s most basic level means placing a “stop loss” to have your trade closed automatically if you misplace a trade. You can also have a “take profit” level or a “trailing stop” which you can move to break even or more as your trade becomes more profitable. That way, you have a guaranteed profit even if you “let the trade run”.

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Trading the FOREX market is considered one of the riskiest forms of investment. As volatility is the name of the game, and because margins are huge (up to 200x), the only way to protect your trading capital is to employ a coherent Risk Management strategy.

While the trading desks of hedge funds and investment banks have to take into account several portfolio optimization procedures, as an individual operator, trading just one currency pair is often the best approach.

Thanks to strong correlation between different currency pairs, be it positive or negative, it only makes sense to focus both attention and resources on just one pair. Among other important advantages, the trader can become familiar with certain habits of a currency pair, as daily range, best time of day to trade it, or main actors.

As the primary objective of a professional FOREX operator is the protection of his or her trading capital, and not the profit, each trading decision must be accompanied by a comprehensive plan to protect this capital.

You have to deal with this term, protection, from a trader’s perspective, as opposed to the general understanding. In trading terms, by protecting your capital means offering you as many chances as possible to stay in the game, to live to fight another day, without being forced to close down the business. This means that you are going to lose money, as cost of business, but you have to do it in a way to continue it as long as possible.

The following example is eloquent.

We will consider an initial trading capital of 10,000 USD. As each trade has an intrinsic risk, we will use two levels here, the first at 50% and the second at 1% out of the total trading capital of 10,000 USD. This means that in the first case the operator risks to lose 5,000 USD, while in the second case, his or her risk is limited to 100 USD.

Simply put, you will never lose more than a certain percentage of your trading capital in just one trade. Be aware that even if you trade heavily margined, the percentage must refer to your trading capital and not to the position. If you open a 100,000 USD (10x) with a 10,000 USD capital, then the percentage must be applied to your 10,000 USD.

By using obvious extremes, it is quite easy to comprehend the advantages of a percentage risk management. If you lose half of the capital in just one trade and you keep this way of trading, just one more mistake will put you out of business.

On the other hand, a 1% loss is by no means dangerous for your trading capital. In addition, this gives you time to err, time to learn from your mistakes while you progress on your way of becoming proficient in this business.

The percentage varies from trader to trader, according to their “risk tolerance”. Some trade with 2%, others prefer a more aggressive 5%, but the overwhelming majority NEVER risks more than 10% in just one trade.

Along with a trading plan with specific entry and exit levels, both for profit as well as loss and maximum time in a trade, this percentage rule is a powerful tool for protecting your trading capital.

Bogdan VASILE

Professional FOREX trader and owner of FOREX education website Forex-Arena.com

www.forex-arena.com

headoffice@forex-arena.com

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It should be noted that millionaire traders, Elder, Williams and some others are in fact professional psychiatrists. And it is not accidental that not the economists are the leaders and most successful traders, but professional psychiatrists and psychotherapists. Think about it. You will become a successful trader when you understand why it happens with Forex. You will understand what your Forex mistakes are, and why you are making them. And when you correct these mistakes you will become a trader who has no psychological barriers and obstacles on his way to better earnings in the Forex market.

So, why do the psychiatrists make better traders than economists who, as one would think, have the Forex market at their finger tips?

The economists are confused by:

- the fact that exchange rates are not always related directly to the economic circumstances in the countries. Well, do you know any economist who would be bidding for low fx rates when the economic situation is getting better and better? Or the one who admits that technical analysis of currency pairs is more important for Forex trading than the fundamental one? Any economist is confident that this can never happen because he knows all the economic dogmas. But it happens in the Forex. After all, how can a trader lose with the currencies moving up and down by the economic rules? The currency will surely react to the economic changes in the country, but who knows when and how? Here is a tip: there is the Elliott fifth way to teach a lesson to the ones who believe that fundamental knowledge is enough (before the trend turns, the currency spurts absurdly by the old trend), to confuse and draw the newbies into the game, while the experts wait for the trend to turn back.

- the lack of psychological knowledge that helps to understand the behavior of the crowd. And that is self-evident.

Are there any methods to overcome this fear?

It seems that every Forex book, every article offers efficient solutions for psychological difficulties experienced by the traders.

IN FACT NEITHER OF THESE BOOKS CONTAINS METHODS TO OVERCOME THE FEAR EXPERIENCED BY A FOREX TRADER!

But what do these books offer instead?

Almost every book of this kind consists of two unequal parts:

- the bigger part of the book narrates about traders’ problem that interfere with their Forex work and make it unsuccessful (nervousness, doubts, worries, fear, sleep deprivation, etc.). As if the traders do not know their own problems.

- the considerably lesser part contains conclusions and recommendations to the traders who are to solve their problems and overcome their fears to become successful.

The conclusions are disappointing:

Many psychiatrists realize that the new field opens before their eyes – now they may treat traders whose number amounts to millions all over the world and is growing with every day. And since most traders have a dream to become as successful as George Soros and other famous traders, this new field promises to be rather lucrative.

One thing is bad though: the overwhelming majority of these new-sprung trader brain specialists do not even know what the Forex is all about.