Forex Currency Trading | Easily Understanding the USD/CAD

Forex Currency Trading Basics for USD/CAD

This article is an introduction to forex currency trading for USD/CAD - the US dollar and Canadian dollar exchange. In order to establish a sufficient introduction, we need to start by talking about the forex market as a whole.
This first section will be devoted to talking about how the forex market works, how it's different from other trading markets and the advantages to the forex market. Then we'll move on to talking about forex currency trading for USD/CAD in particular.
Before we start, I should mention that forex currency trading is a very risky endeavor and should be taken on with extreme caution. You should get expert advice from a financial professional before you begin trading.

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Forex Currency Trading Basics

Forex Currency Trading USD/CAD

Forex Currency Trading Basics

Forex Currency Trading Basics

What is It?

To get a grasp on the forex currency trading basics, we must first look at the forex market as a whole. The forex market is the same as any other market, it's a place to buy and sell goods and services.
Think of it as those ancient markets where people came together to trade goods, haggle and bargain over prices, with buyers, sellers, and middlemen. Except the forex market is not a physical location. It's a virtual, electronic world where everything is done on computers on virtual platforms that are all connected to each other.
The forex market is what we call over-the-counter (OTC), which basically means that you trade directly over an electronic platform instead of an exchange like the NYSE or CBOT. There are many advantages to this that I'll go into later.
The forex market is the largest and fastest growing market in the world with a trading volume anywhere from $3.21 trillion PER DAY according to the Bank for International Settlements.
Compared with the New York Stock Exchange (NYSE) which turns over an average of $87 billion in daily trading volume according to the World Federation of Exchanges 2006, the forex market is about 36 times the size of the NYSE. The forex market is a very large market with benefits that I'll go into later.

Market Players - Who trades in forex markets?

The major players in this market that trade the currency pairs and effect the markets are currency traders in corporations, financial institutions, and for personal use.

#1 - Tourists and Other Personal Currency Exchanges

Most people have been to other countries where they had to exchange their home currencies to the local currency so they can travel and spend money. And most people have used or at least come across those kiosks at airports that will take your US dollar (USD) and exchange it for the local currency.
Although these kiosks and banks and other retail currency exchange places base their rate on the general forex market, they set it themselves with a mark up to take a cut of that exchange.

#2 - Companies Doing Foreign Trade

When a company that manufactures products in Japanese exports their products to the US, they do it by selling it to US companies. The Japanese product was manufactured using the Japanese currency - the yen, and it is being bought by the US.
One of several things happen. The US company buys the Japanese product in US dollars and then the Japanese company converts it into the yen to pay for making more product in their country, pay it's workers, pay it's taxes, etc.
Or, the US company first exchanges the USD into the yen and pays for it in yen. Or, the Japanese company will receive USD, keep it in USD for other international transactions.
The forex currency exchange rate significantly affects foreign trade. If, for example, the Japanese yen becomes stronger compared with the USD, Japanese products will become more expensive to buy for Americans.
Why? Because the USD won't buy as much Japanese yen as it used to. This of course will lead to a decrease in exports out of Japan. That is why China pegs it's currency, the yuan, and keeps it low compared to the USD.
As long as they keep their currency weaker than it's supposed to be, they will keep their exports into the US high and prices of their good low in USD. Most of these forex traders use other derivative financial instruments like currency futures to hedge against the risks of currency fluctuations, which will not be discussed in this article.
As you can imagine, there is an enormous amount of foreign trade that occurs on a daily basis, and a lot of ensuing currency trading must take place for this foreign trading to happen. However, the fact is, only 5% of daily forex market volume comes from companies doing foreign trade.
Granted 5% of $3.21 trillion is still $160 billion a day in currency trading volume, but it is still relatively low if you look at daily trading volume as a whole. If only 5% of currency trading is done because of foreign trade, then where does the other 95% of trading come from?

#3 - Speculators

If 5% of forex currency trader volume is for foreign trade purposes, the other 95% of the forex currency trading volume that is left comes from the activity of speculators, i.e. people and institutions trying to make a profit from currency trading. Currency trading is one way Goldman Sachs was able to emerge back into profitability after nearly imploding back in the fall.
Some speculators are merely average joes sitting in their home offices and trading on their own accounts.  Many of these start out trading on forex demo accounts to practice their trading skills.

Speculators as Forex Trader

Among the 95% of forex currency trades done by speculators, there are many that act as a forex trader in the forex market.

#1 - Central Banks

Central banks play a pivotal role in how the forex market behaves. The news media tends to focus on stock market reactions to central bank announcements and actions, but the forex market takes it's cues from central banks as well.
The central banks main concern is the monetary system of their country and tries to control the currencies inflation (value of money going down, i.e. it costs more to buy stuff) and deflation (duh, the value of the currency going up and things getting too cheap to buy).
Central banks play a balancing act trying to keep these two factors in check so that it doesn't become too volatile, while keeping their country's economy growing. They have tons of influence over their economies and the economy of the world, so the forex trader needs to pay close attention to what they're up to.
Central banks will sometimes buy and sell their currencies on the forex market themselves to stabilize the market. It's called central bank intervention.
Sometimes central banks will talk about intervening and sometimes it'll work to stabilize the market enough to make the difference the central bankers are looking for. But catch is that if the central banks do this too much, they run the risk of the forex market ignoring them in the long run.
The Central Bank of Canada is currently running this risk with the USD/CAD. The Central Bank of Canada is concerned that the USD/CAD (the CAD has become stronger) has declined so far that it might limit the growth of the Canadian economy, i.e. it'll be too expensive for other countries, especially the US, to buy Canadian products, especially commodities. (On a side note, Canadian commodities are crucial to the USD/CAD forex market, but that'll be discussed later).
In an effort to weaken the CAD so that exports will be cheaper and more competitive globally, the Central Bank of Canada and the Finance Ministry of Canada is talking about doing something to weaken the CAD.
The caveat is that the Central Bank of Canada didn't do anything when the USD/CAD was almost at par, i.e. it cost about 1 USD to buy 1 CAD last year. Additionally, according to Sean Hyman, the writer of the article linked above, the Central Bank of Canada hasn't done anything to intervene since 1998.

#2 - Commercial and Investment Banks

These are the big dogs of forex currency trading. They do a bulk of the speculating, and they usually do a darn good job at it. Goldman Sachs, JP Morgan, Morgan Stanley, Merrill Lynch and Deutsche Bank are some of the big investment banks that make billions every year on forex currency trading.
There are two primary ways commercial and investment banks make money from forex currency trading. They trade currencies on behalf of their clients as part of a forex account or comprehensive asset management portfolio that includes forex currency trading as a component of the portfolio of investments.
The other way these commercial and investment banks make money is by trading their own money. Commercial and investment banks have a unique advantage in this regard. In addition to the normal technical and fundamental analysis that every forex trader must make, they also get the unique perspective of seeing trades executed by central banks and large hedge funds.
Because of the extremely high trading volume and liquidity of the forex market, no one single bank or fund can significantly move the forex market using raw cash power like in other markets. However, if a number of the central banks and large hedge funds are buying or selling a particular currency, it could signal a trend in that currency that the commercial or investment bank could capitalize on.

#3 - Hedge Funds

Hedge funds have become an important factor in all aspects of the economy and financial markets. In addition to being a major play in forex markets, they have incredible sway in other financial markets like the stock market and commodities market that can also influence the movement of the forex market.
For example, the record breaking oil prices of recent history was most likely caused by aggressive hedge funds that were seeking to drive oil prices up to make a profit. Of course it wreaked havoc on us all by drastically hiking up gas prices, but it also affected the forex market because many of the major currency pairs are tied to the price of oil such as both the USD and CAD, in effect affecting the USD/CAD currency pair.

Overview of USD/CAD - Forex Currency Trading

Here's a general overview of how the USD/CAD behaves. In order to know how to interpret and analyze the news coming out from the US, Canada and the rest of the world economy, we need a grasp of how they all relate and interacts and how it is all connected in the forex market. To really make sense of anything, we need to do a quick historical sketch of this long term relationship between the USD/CAD.

Quick History of the Canadian Dollar - CAD

The CAD was one of the few major world currencies in the post-World War II Bretton Woods system where the value wasn't fixed to gold. It was allowed to float until 1962 in response to a steep decline in value to the USD, where the USD/CAD was fixed at $1.0195 or $.925 CAD/USD. In other words, it cost $1.0195 USD to buy $1 CAD and it cost $.925 CAD to buy $1 USD.
The CAD was once again allowed to float in 1970 due to high inflation, after which it appreciated past the USD. High inflation wasn't unique to Canada. Post World War II, countries around the world began aggressive expansionary measures to rebuild and stimulate their economies.
It's very similar to what's happening in today's world economy. The governments decided to pump money into the economy in an attempt to stimulate it with jobs and production. In doing so, they caused wide-spread inflation all around the world.
This leads us to the first important lesson in the USD/CAD market.

Forex Indicators - Commodity is King

The high investment in expanding and stimulating the world economy in post World War II led to an increase in demand of commodities such as oil. In other words, in order for world economies to produce, they need raw materials and energy such as oil, minerals, lumber, etc. It takes natural resources to build stuff to sell.
This global demand for commodities jacked up the price and countries that exported these commodities saw an increase valuation in their currencies.
Canada was and still is rich in these commodities and in post World War II, the price of Canadian commodities such as oil increased, causing the CAD to increase in value as well. Commodities markets and prices are important forex indicators for the USD/CAD.
Let me paint a picture for you. Let's say oil is selling at $100 per barrel. Suddenly, for whatever reason, there begins heavy investment into the economy to produce more stuff. In order to produce and ship more stuff, it requires more oil to get the energy to produce and ship the stuff.
Demand for the oil goes up sharply, and since generally the supply of commodities such as oil is steady, the price for oil goes up too. So now, it costs $120 per barrel of oil. So how does this increase the value of the CAD?
In order for China to buy oil from Canada, they have to convert their currency into CAD to buy the Canadian oil. Instead of buying $100 CAD, they are now buying $120 CAD. This decreased the supply of CAD, which also ends up raising the price of the CAD as well.
There are many other forex indicators that affect the USD/CAD market other than the price of oil, but because such a big part of the Canadian economy is in commodities, it has a significant impact on the USD/CAD market.
It's by no means the only one among the many forex indicators, but it's a major forex indicator that needs to be considered in the matrix of forex indicators that affect the USD/CAD.
By the way, if you are interested in trading the forex market, you should consider signing up for a forex demo account first with a broker. This will allow you to test what trading skills you think you have, help you hone them if they are any good, and also give you an opportunity to evaluate your broker.

Back to the USD/CAD History Lesson

After riding high on commodity prices for many years, the CAD began to decline in the 1990's due to the emergence of the high technology boom in the US. Though it was a high tech bubble that eventually burst, during the boom years there were tons of investment that was going into US tech firms.
This caused an influx of money into the US stock market, which caused the price of the USD to increase. In other words, in order to buy stock in high tech start up companies in Silicon Valley, investors had to take their foreign currency and exchange it for USD on the forex market in order to buy the shares on the New York Stock Exchange or the NASDAQ.
This cause increase in demand for the USD caused the price to go up in the forex market. As investors were buying USD with other foreign currencies on the forex market, those foreign currencies lost value, including the CAD. That brings up the next important lesson in understanding the relationship between the USD/CAD.

The US Economy

Whenever there is a boom in the US economy like we saw in the high technology bubble and the mortgage securities bubble, you'll likely see a decline in the USD/CAD pair. Why? Exactly for the reason mentioned above.
Well, the technology bubble burst and so did the mortgage securities business. No one seems to really see anything else like that coming. The US economy is not as dependent on commodity exports like Canada, manufacturing has gone overseas almost completely, and technology is also shifting to countries in Asia like China and India.
But, the US has always made it's way in the world through innovation and that has what has always made the difference for the US economy. Who knows what the US will cook up next.
Of course, if and when the US economy begins to pick up and out of recession, watch for the USD/CAD to rise like it always has in a booming US economy. So the important indicators for the strength of the US economy will also be the indicators that will tell you which direction the USD/CAD might go. We'll go into those indicators in another article since we're wanting to just give the overview right now.

The Global Economy - Specifically Emerging Markets

In talking about how the US economy affects the USD/CAD, we also need to mention that the rest of the world plays an integral role as well. Just because the US stock market is going up doesn't mean the USD/CAD will go up as well.
We saw this take place in recent history during financial crisis in the fall of 2008. Because the USD is probably the safest cash haven on the planet, when the world economy was spiraling down, everyone took their cash out of more riskier markets, i.e. the emerging markets, which also has greater potential rewards, and stuck it back in the USD. In this case, the US stock market was plummeting, but the USD/CAD and really the USD in general sky rocketed.
Sometimes when the USD looks unattractive for whatever reason, many people opt to trade it in for the CAD.  Forex currency trading in USD/CAD has a lot of complexities.

 Forex demo account - when do you switch to real trading

For those who already have a grasp of forex trading

This article is mainly for those who already have a grasp of forex trading, have opened their forex demo account and have traded for a while. Now the word "a while" could have a very broad meaning in a forex context. One trader might have traded successfully for a couple of months and with some knowledge and experience developed his own profitable system and forex trading strategy with SOUND money management. I am not talking here about 20% or even 10% balance risking for one trade. 

You have to leave your emotions outside your trading room

Another, not so successful trader, might still be struggling on finding his method of trading. In fact, he might never have the abilities to trade in forex. Yes, you could be the one who should avoid this particular means of making money. Why? Because it's a kind of a psychological game of probabilities. Just because you are never sure, if you loose today, tomorrow or even for the whole month. If this particular thought frightens you - no offense, but I think you would be better off working somewhere, where you know exactly what you will get for your hard labor. If you want to be sure, what you will get per hour, per day, per month, etc. - forex trading is not for you. On the other hand, if you are very emotional, you throb into tears finding out that you lost 100 dollar bill while walking down the street or jump out of joy when you accidentally find a dime - trading forex investment might not work for you as well. You have to leave your emotions outside your trading room. If you can do that - you could succeed.

So emotions out, and your forex trading system in

So emotions out, and your forex trading system in. If you have traded enough or for a while, you should have developed some kind of profitable forex system. You must already chosen currency pairs to trade

If you have some kind of trading strategy - fine, but have you been testing it long enough?

You must have also developed this set of instruments for at least a half a year. Why so long - because forex currency pairs' movements change drastically in a couple of months, not mentioning years. New strong currency trends appear and they could last for a year, or the opposite - flat movement lasting the same amount of time, and whipsawing every trend trader. If you have some kind of trading strategy - fine, but have you been testing it long enough? If you apply breakout strategy - you will be lucky to jump on an early rising or falling trend and gather some pips. However, what if a trend has exhausted? And after that it will move sideways a couple of months, whereas you desperately want it to break the old trend line and move in the opposite direction? You continuously place loosing orders, because the price just broke the top or bottom and suddenly jumped back with a new momentum wiping out your stop loss. You must me adapted to currency trend changes and this experience comes with time. Even if you trade in a small time frame, like 5 minutes - even then it's not enough to trade successfully for a short time period. I know one trader who has been trading for 5 years and he has been a very successful trader. He has been using a very small time frame forex trade signals, and a pipsing strategy, which I thought was invincible to rapid and big movements. However, during the last eur/usd fall for 3000 pips during 2009 - 2010 he lost everything he earned in those 5 years. What makes you think, you are better than he is? He now is looking for some money to invest further in forex, because this huge trend is finally ending, and we might see some bigger correction (this is only my guess). His pipsing strategy could be profitable again, but the only difference is that he has no capital to invest.

Are you able to identify the timing of your strategy use?

You should sit still and do nothing if your strategy is based on particular price movements and these are not present so far. You can only use those methods when the price itself along with indicators confirms the movement change.
I don not even mention about the profitability of your trading system in the long run. You only switch to real account when you trade profitably in your forex demo account, that is out of the question. If you have several forex systems and those do well in different times and price changes - good, but be careful as to identifying those changes.

The last, but not the least - profitable trading with small leverage and risking  less than 5% of your capital with your demo account. This is arguable, of course, but that is only my opinion.

with, you know  when to place stops, when to close your positions, what forex trading instruments or forex indicators to use for entering or exit, when not to trade and when to double your positions.

Forex Scams

Despite many brokers claims to the contrary, trading foreign exchange successfully is not an easy thing to do. FX trading is at best a risky business and at worst, a scammer’s dream come true. The Commodities Futures Trading Commission (CTFC) has seen a marked increase in the amount of foreign exchange scams over the last few years as forex trading has become more and more popular.
There are many companies claiming to have a foolproof way of making money with one system or another and while some of those systems have a basis in fact, even the most well-researched, well developed system cannot take into account the vagaries of the market place.The Division of Clearing and Intermediary Oversight (DCIO) recently released an additional advisory aimed at protecting consumers from this ever growing problem, but the CTFC has some basic, solid advice regarding becoming involved in Forex trading:

• No matter what you're told, Forex trading is risky.
• Don't be pressured into an immediate decision.
• Use common sense.
• Get everything in writing.
• Check with the CFTC.
• Seek advice from an accountant, lawyer or an independent 3rd party.
• Don't invest more than you can afford to lose.
• Don't mortgage your home or cash in your savings to trade Forex.

As a general rule, it is best to avoid any companies claiming that Forex trading is easy, guarantees results or encourages you to make small deposits and use high leverages. Regardless of how well educated you are, investing a small sum in FX trading is likely to end in losses. Some recent scammers who have been caught by the CTFC include:

• Lake Shore Asset Management
• Lake Dow and Ty Edwards
• Ben Ouyang
• Emerald Worldwide Holdings, Inc.
• Foreign Fund (First Bank)
• Equity Financial, Shasta, or Tech Traders
• IBS/IMC
• Kevin J. Steele
• Nawab Ali Khan Ali
• Sun Platinum
• Worldwide Commodity CorporationGraystone Browne Financial
• Sterling Trading Group, Inc.
• STG Global Trading or QIX, Inc.
• Universal FX, Inc.

There are case reports available from the CTFC website which are updated on a regular basis. In the meantime, if you have lost money in dealings with any of these companies or individuals, there is a contact page at CTFC.
One of the most disturbing recent trends is the amount of Forex sites claiming to be helping traders when in fact the opposite is true. Forexbastards.com claim they are there to help the trader distinguish the “good guys from the bastards.” Here is a video clip uploaded by Nick B, demonstrating how effective they are.

It is fair to say there is a LOT of disinformation being bandied around by the forex brokers. The CTFC website is perhaps the only guaranteed reliable source of information. Even the so-called anti-scammer’s sites appear to be just as populated with this type of information. Before beginning FX trading, remember these points:

1. It is NOT possible to make money starting with a small amount of capital.
2. Using high leverages is almost guaranteed to end in losses.
3. There is NO foolproof way of making money on the foreign exchange market.

10 Advantages to Auto Trading Software

10 Advantages to Auto  Trading Software

It is imperative that before trying your luck in the foreign exchange trading business, you take time to learn the basics. You also need to employ a careful understanding of its mechanism. By getting yourself a forex robot trading system that will work even without you manning it, you reduce the risk of absorbing a large loss of capital. Automated forex trading systems also offer important tips and methods that you may use as you deal with the most changing, unpredictable, and unpleasant circumstances in the market.

Forex robots are computer programs that automatically scan the forex market and automatically make trades based on programmed algorithms. These trades are made with little or no intervention by a human operator. These robots are numerous and they are out in the market. But what is really in these products that make them worth the buy?

Forget about the burden of making complex computations because the forex robot will handle all of your mathematical concerns. You can trust it to do the calculations up to the last drop of the risk evaluations. Need you know more? Of course! Read on below for the 10 advantages to having automated forex trading software.

1. You will pay no commissions.

People who take part in the equity market will tell you point blank that you have to secure brokers and pay them with their commissions. However, for forex trading software, you are able to keep all your profits to yourself. You need not pay for any brokerage or clearing fees. You only pay the bid/ask spread.

2. There are no middlemen.

This kind of business eliminates the need for any middleman. This means that with the use of the forex robot, you are able to deal with the market maker in an online electronic exchange method.

3. It promotes only a small transaction cost.

With this business, you are only to pay the “ask or bid” spread. Now in terms of the trading that transpires in the forex market, there are two faintly different exchange rates assigned for every currency pair. That is, the difference in the price between the buy price and the sell price. This is how the broker makes his money because he or she often quotes two different rates for every currency. The money changer then earns his profit based on the difference he places in the exchange rates.

4. Better liquidity.

Forex trading means having the transactions immediately executed and with a forex robot in use, the more promising the business can be! After all, it is a market that is flooded with buyers and sellers who do business 24 hours a day, 5 days a week..

5. It utilizes higher leverage.

Because of the large amount of leverage granted to forex traders it does not take a lot of capital to make a substantial amount of profit. Of course one must be cautious using high leverage because the losses can be magnified as well..

6. The market operates 24/5.

Trading is done all over the world and the market is open for 24 hours in a day. Even though some of the major regions are closed for a particular business day, the others are open to do business. Through the help of the forex robot, you can continue trading currency pairs even while you sleep.

7. You can access it online.

One of the most attractive features of trading forex...you can do it from home! You don’t need to leave the confines of your home because you can access it by using the Internet.

8. You get to profit from both the bull and the bear market.

The bull market refers to the market that goes up while the bear market is the one that goes down. With the forex robot, you can earn both ways.

9. It is user-friendly.

Forex robotare generally easy to install, access, and use. This means that you don’t have to go through the agony of operating it.

10. There is no need to supervise it.

The forex robot doesn’t need human interference. Just keep it updated according to manufacturer guidelines so that it can deliver its best performance.

Overall, automated forex trading software is a must in this line of business. Get the hang of it and you will surely succeed and experience that superb financial freedom!

Tips for profitable trading:

FOREX trading appeals to many traders for several reasons other than its potential for profitable trading:

1. FOREX trading offers a 24-hour market so that any trader can take advantage of profitable market conditions at any time.

2. The forex market is the most liquid market in the world so that traders can enter or exit the market whenever they want with minimal execution barriers or risk and no daily trading limit.

3. The FOREX market is always a good market. FOREX trading involves selling or buying one currency against another. In essence, a bull market or a bear market for a currency is defined in terms of the outlook for value against other currencies. If the outlook is positive, you get a bull market where a trader profits by buying the currency against other currencies.

4. The FOREX market is so large and has so many participants that no single trader, even a central bank, can control the market price for an extended period of time.

To be successful in FOREX trading you need experience, capital and a solid trading system. Keeping things simple can also help you better focus on your trading. Here are some tips that can help you during FOREX trading:

1. The first and last ticks are always the most expensive. Get in late and out early.

2. Never add money when you are losing.

3. When everyone else is in, then it is time for you to get out.

4. Always determine a stop and a profit objective before you enter a trade. Place stops that are based on market information, and not your account balance.

5. It is always easier to enter a losing trade.

6. News is only important when the market doesn't react in the direction of the news.

7. In a bull market, you never want to sell a dull market, in a bear market, you should certainly never buy a dull market.

8. There are times, due to a lack of liquidity, or excessive volatility, when you should not trade at all.

9. It helps to read yesterday's paper each day to learn from what the market did.

10. There are at least three types of markets such as up trending, range bound, and down trading, and you should have a different trading strategy for each.

11. Up market and down market patterns are always there, with one always been more dominant. Select trades that move along with the trend.

where to get forex training

For those of you who are interested in forex trading, you may want to start off by getting some good forex training. Forex training is a necessity for anyone with this interest. This is because a lot of money is involved in forex trading. If you don't get some forex training, you are bound to lose a lot of money.

Some of you may not even know what forex trading is. If you don't know this, you defiantly need some forex training. Forex stands for foreign exchange. Forex trading is basically the exchange of one countries currency for another countries currency. This is done simultaneously in hopes of gaining a profit.

You can get forex training from several different places. The first place you should get forex training from is online. There are many websites that offer free forex training. The forex training these websites offer is both reliable and accurate. The forex training on these websites often offers a free demo account to teach you how to trade without actually using any real money.

A second place to get Forex training is at your local college campus. Forex training courses at college are usually inexpensive and very thorough. The forex training courses offered should also include hands on experience with trading, to help you get the edge. You can also get some books on forex training or research forex training at your local library. The best place to get forex training is from someone who is already involved in forex trading. The forex training these individuals provide will be more realistic for you and give you different aspects of the forex trading game.

The forex training you get should first start with learning how the foreign trade market works. The trade market is always changing, so you need to understand it first. The second part of your forex training should be about risk control. You never want to invest more than you can afford. The right forex training should teach you how to cut your losses and have less risks of failure. Next, your forex training should teach you how to open and manage a forex trading account. But this should be done with a demo account. All forex training should be done this way first, before you try the real thing.

With all of this in mind, you should be able to find some good forex training. Learn the ropes of forex trading and take the time to learn it well. Be sure to try a demo forex trading account before you start a real account. With the right forex training, you will soon be on your way to a profitable way to supplement your income.

The essential facts and what to know about forex magin trading:

Forex margin trading involves using a margin account to purchase and sell foreign exchange transactions. A margin account essentially allows an investor to borrow money to increase the possible return on an investment. When an investor wants to control a larger position than they normally could with their own invested capital, they leverage borrowed money to invest in equities. These margin accounts are generally settled daily and are operated by a brokerage firm. Margin accounts can also be utilized to trade currency in the forex market. Due to the risks involved, margin trading is not for everyone and caution should be taken when implementing it into ones own forex strategy.

The first step to properly enact forex margin trading is to sign up with either a full-service brokerage firm or an online discount broker who is capable of performing trades in the forex market. The next step to the process is to establish a margin account. The forex margin accounts are nearly identical to equities margin accounts in that the broker supplies a short-term loan for investment. The amount of leverage the investor is taking on is equal to the amount of the loan.

Depending on the margin percentage in the agreement between the investor and the broker, a money deposit needs to be made into the margin account. This process allows the investor to make actual trades. Trades that equal 100,000 currency units or more generally require a margin percentage of either one to two percent. For example, if the investor wants to trade $100,000, one percent of the transaction, in this case $1000 must be deposited into the account. The broker provides the remainder. Contract sizes for these arrangements are generally large. Since the broker will leverage 99 percent of the risk, the investor can trade in large volumes of foreign currency. The agreement also includes a delivery date, in which the investor must return the borrowed money to the broker. The broker generally does not charge interest on the borrowed amount, however, if the delivery date is not met and the account needs to be rolled over, most brokers will charge an interest rate. This rate varies and depends partially on the investor's long or short term position as well as the interest rate of the currencies themselves.

The broker has many rights in forex margin trading in regards to their interests. The $1000 is used as a security in the margin account. If a position worsens for the investor, the broker has the right to institute a margin call. When the investor's deposit depreciates and it begins to approach $1000 in losses, the broker instructs the investor on his or her options. First, the investor can deposit more money into the account to make up for the losses. Otherwise, the investor can close the account. This will limit the risk of further loss and secure the broker's loan from depreciation. Most of these options are established upon the opening of the margin account.

Foreign currency is defined in trading units of U.S. dollars (USD). This occurs most commonly in increments of 10,000 USD or 100,000 USD, which are known in the industry as lots. If a single U.S. dollar is worth 130 Japanese Yen (JPY), then 10,000 USD means 1.3 million JPY. 100,000 would be 13 million. A forex margin trader purchases the currency in the form of these lots. The trader leverages the broker's added funds, so that they can potentially make more money from the trading of these currency lots. This means that the investor can make more money from a larger trade than what was invested into the margin account, especially on revaluation gains. However, a larger loss can also be true. Essentially, each movement, either up or down, is amplified by 100.

Forex margin trading is a very specialized product offered by financial companies. It differs from foreign currency deposit in that the level of speculation is very high. Margin trading can be a lucrative, but highly dangerous market in which to invest. The potential for large scale gain is great, but many investors loose large amounts of money due to the fluctuations in world currency. Despite professional analysis, forex margin trading is at the mercy of other countries and the global economy – both of which can change overnight. Because of the number of risks involved, most investors recommend forex margin trading only for those using funds that can be exposed to risks. Investments made with retirement funds or pensions are viewed as irresponsible by most brokerage firms. Investors should always read the terms and conditions of the margin account and loan before trading.

Tips, suggestions and ideas on how Trade Forex Like a Master

Welcome to ForexMaster.com! The website that is tailored to give forex traders tips, ideas and suggestion on how to maximize profits and minimize loss by improving their overall foreign exchange strategy.

Even though the reverse may seem to be true, spending any amount of time in the stock market can create a feeling of trepidation in even the most seasoned forex expert. In fact it is perhaps that experience that creates fear and hesitation. In the world of forex, however, hesitation kills—deals.

Step Out of Your Comfort Zone

Over time a forex trader can build walls of self defense that defeat their forex strategies. Their heart tells them to move but their mind slams on the brakes. The battle of mind over heart may only last a second but it's that split second that any experienced foreign exchange trader knows will lose any profits. It is time to realize those comfort zones for what they are, barriers of fear.

Trust Your Instincts

When a fx trader has spent years in the market and studied charts, signals, pips and different strategies endlessly it only makes sense they have not only amassed a great deal of knowledge they have also honed their instincts. Yet human nature and fear that is built in to protect us from hazards both real and perceived keep us from acting on them.

The basics of intelligent trading are based on several truisms in the industry:

• No currency is inherently 'bad'. The fluctuation of foreign currency means you must keep an eye on what it is doing at the moment and know when to get in and out.

• Don't follow the leader. This isn't a child's game. Besides fear, humans have another basic instinct, to follow the pack. If a forex expert sees one person buying, and then another, the thought is that there must be a reason and they better go too. Suddenly you have hundreds of people buying or selling for reasons they aren't even aware of, it just 'seems right.' Nothing makes less sense in currency trading.

• If you don't jump in you won't get wet. Any forex expert who has overcome their fear will tell you that anticipating profits and acting on that anticipation is the best way to profit. Waiting until your prediction has been realized is often too late.

• Listening is good in a relationship but can be deadly in foreign exchange trades. This falls under both the second guessing catgory and the follow the leader category. Listening to every forex expert around you instead of what you think yourself can leave you more confused and hesitant that ever. Know what you know and use it to your advantage. Even lemmings don't make out well when they jump off the cliff after the others.

• Learn from your failures. Every forex expert has them but only the foolish forget them. It may be easier to keep your confidence level up if you turn a blind eye to losses but you can't keep from making the same mistakes if you don't study what and why you lost out.

• Don't hesitate but wait. Knowing the difference between hesitation and waiting for the right opportunity is the real facet that separates the forex experts from the dabblers. Having the confidence to wait and the courage to jump at it when it comes is the most sure way to long-term success in the foreign exchange market.

• Learn to control your emotions. Human beings are emotional beings regardless of how strong they may wish others to think they are. Forex trading is no place for raw emotional impulses though. Becoming a forex expert means knowing how to act from strategy and knowledge rather than gut impulses.

Foriegn exchange market:

The forex is a worldwide decentralized over-the-counter financial market for the trading of currencies. Financial centers around the world function as anchors of trading between a wide range of different types of buyers and sellers around the clock, with the exception of weekends. The foreign exchange market determines the relative values of different currencies*. It is estimated that 3 to 5 trillion dollars worth of business is transacted every day on the forex**.

The primary purpose of the foreign exchange market is to assist international trade and investment, by allowing businesses to convert one currency to another currency. For example, it permits a US business to import European goods and pay Euros, even though the business's income is in US dollars. It also supports speculation, and facilitates the carry trade, in which investors borrow low-yielding currencies and lend (invest in) high-yielding currencies***.



Diversification for your PortfolioOne of the keys to successful investing is to diversify your holdings. When diversifying many people simply invest in stocks that are spread through a range of different tolerance levels, and economic sectors, and even put some money in mutual funds. However, this isn't really a diversified portfolio because the positions are still 100% based on stock market fluxuations. A truly diversified account will have stocks, bonds, mutual funds, commodities, perhaps some real estate and most definitely have a position in the forex.

The forex is unique because it offers the trained trader opportunities to realize profits and returns on investment in any economic condition. Even when the NASDAQ, Dow Jones or S&P 500 are plummeting, the forex can produce profitable returns. Poor interest rates on bonds and low commodity prices still do not affect the forex and its potential profitability. In the forex market you can make trades on both upward and downward trends.

As with any investment, there exists the possibility of loss on all or part of your investment.

Make monet trading forex;

In the foreign exchange market, you buy or sell currencies. Placing a trade in the foreign exchange market is simple: the mechanics of a trade are very similar to those found in other markets (like the stock market), so if you have any experience in trading, you should be able to pick it up pretty quickly.
The object of forex trading 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.
How to Read Forex Quote
Currencies are always quoted in pairs, such as EUR/USD or USD/CHF. The reason they are quoted in pairs is because in every foreign exchange transaction you are simultanesouly buying one currency and selling another. Here is an example of a foreign exchange rate of the British pound versus the U.S. dollar:
GBP/USD = 1.7500
The currency to the left of the slash ("/") is called the base currency (in this example, the British pound) and the one on the right is called the quote currency or counter currency (in this example, the U.S. dollar).
When buying, the exchange rate tells you how much you have to pay in units of the quote currency to buy one unit of the base currency. In the example above, you have to pay 1.7500 U.S. dollar to buy 1 British pound.
When selling, the exchange rate tells you how many units of the quote currency you get for selling one of the basis currency. In the example above, you will receive 1.7500 U.S. dollar when you sell 1 British pound.
The base currency is the “basis” for the buy or the sell. If you buy EUR/USD this simply means that you are buying the base currency and simultaneously selling the quote currency.
You would buy the pair if you belive the base currency will appreciate relative to the quote currency. You would sell the pair if you think the base currency will depreciate relative to the count currency.
Long/Short
First, you should determine whether you want to buy or sell.
If you want to buy (which actually means buy the base currency and sell the quote currency), you want the base currency to rise in value and then you would sell it back at a higher price. In trader's talk, this is called "going long" or taking a "long position". Just remember: long = buy.
If you want to sell (which actually means sell the base currency and buy the quote currency), you want the base currency to fall in value and then you would buy it back at a lower price. This is called "going short" or taking a "short position". Short = sell.
Bid/Ask Spread
All Forex quotes include a two-way price, the bid and ask. The bid is always lower than the ask price.
The bid is the price in which the dealer is willing to buy the base currency in exchange for the quote currency. This means the bid is the price in which you the trader will sell.
The ask is the price at which the dealer will sell the base currency in exchange for the quote currency. This means the ask is the price in which you the trader will buy.
The difference between the bid and the ask price is popularly know as the spread.
Let's take a look at an example taken from a trading software:
On this EUR/USD quote, the bid price is 1.2293 and the ask price is 1.2296. Look at how this broker makes it so easy for you to trade away your money. If you want to sell EUR, you click "Sell" and you will sell Euros at 1.2293. If you want to buy EUR, you click "Buy" and you will buy Euros at 1.2296.
In the following examples, I am going to use fundamental analysis to help us decide whether to buy or sell a specific currency pair. If you always fell asleep during your economics class or just flat out skipped economics class, don’t worry, we will cover fundamental analysis in a later lesson. For right now, try to pretend you know what’s going on.
EUR/USDIn this example euro is the base currency and thus the “basis” for the buy/sell.
If you believe that the US economy will continue to weaken, which is bad for the US dollar, you would execute a BUY EUR/USD order. By doing so you have bought euros in the expectation that they will rise versus the US dollar. If you believe that the US economy is strong and the euro will weaken against the US dollar you would execute a SELL EUR/USD order. By doing so you have sold euros in the expectation that they will fall versus the US dollar.
USD/JPYIn this example the US dollar is the base currency and thus the “basis” for the buy/sell.
If you think that the Japanese government is going to weaken the Yen in order to help its export industry, you would execute a BUY USD/JPY order. By doing so you have bought U.S dollars in the expectation that they will rise versus the Japanese yen. If you believe that Japanese investors are pulling money out of U.S. financial markets and coverting all their U.S. dollars back to Yen, and this will hurt the US dollar, you would execute a SELL USD/JPY order. By doing so you have sold U.S dollars in the expectation that they will depreciate against the Japanese yen.
GBP/USDIn this example the GBP is the base currency and thus the “basis” for the buy/sell.
If you think the British economy will continue to do better than the United States in terms of growth, you would execute a BUY GBP/USD order. By doing so you have bought pounds in the expectation that they will rise versus the US dollar. If you believe the British's economy is slowing while the United State's economy remains vibrant, you would execute a SELL GBP/USD order. By doing so you have sold pounds in the expectation that they will depreciate against the US dollar.
USD/CHFIn this example the USD is the base currency and thus the “basis” for the buy/sell.
If you think the Swiss franc is overvalued, you would execute a BUY USD/CHF order. By doing so you have bought US dollars in the expectation that they will appreciate versus the Swiss Franc. If you believe that due to instability in Iraq and in U.S. financial markets the dollar will continue to weaken, you would execute a SELL USD/CHF order. By doing so you have sold US dollars in the expectation that they will depreciate against the Swiss franc.
I don't have enough money to buy $10,000 EUR. Can I still trade?
You can with margin trading! Margin trading is simply the term used for trading with borrowed capital. This is how you're able to open $10,000 or $100,000 positions with $50 or $1,000. You can conduct relatively large transactions, very quickly and cheaply, with a small amount of initial capital.
Margin trading in the foreign exchange market is quantified in lots. We will be discussing "lots' more in-depth on our next lesson. For now, just think of the term "lot" as the minimun amount of currencies you have to buy. When you go to the grocery store and want to buy an egg, you can't just buy a single egg, they come in dozens or "lots" of 12. In Forex, it'd be foolish to buy or sell $1 EUR, they usually come in "lots" of $10,000 or $100,000 depending on the type of account you have.
For Example:You believe that signals in the market are indicating that the British Pound will go up against the US Dollar. You open 1 lot ($100,000) for buying the Pound with a 1% margin at the price of 1.5000 and wait for the exchange rate to climb. This means you now control $100,000 worth of British Pound with $1,000. Your predictions come true and you decide to sell. You close the position at 1.5050. You earn 50 pips or about $500. (A pip is the smallest price movement available in a currency). So for an initial capital investment of $1,000, you have made 50% return. Return equals your $500 profit divided by your $1,000 you risked to trade.
Your Actions
GBP
USD
Your Money
You buy 100,000 pounds at the GBP/USD exchange rate of 1.5000
+100,000
-150,000
$1,000
You blink for two seconds and the GBP/USD exchange rate rises to 1.5050 and you sell.
-100,000
+150,500**
$1,500
You have earned a profit of $500.
0
+500
When you decide to close a position, the deposit that you originally made is returned to you and a calculation of your profits or losses is done. This profit or loss is then credited to your account.
We will also be discussing margin more in-depth in the next lesson, but hopefully you're able to get a basic idea of how margin works.
Rollover
No, this is not the same as rollover minutes from your cell phone carrier. For positions open at 5pm EST, there is a daily rollover interest rate that a trader either pays or earns, depending on your established margin and position in the market. If you do not want to earn or pay interest on your positions, simply make sure it is closed at 5pm EST, the established end of the market day.
Since every currency trade involves borrowing one currency to buy another, interest rollover charges are an inherent part of FX trading. Interest is paid on the currency that is borrowed, and earned on the one that is purchased. If a client is buying a currency with a higher interest rate than the one he/she is borrowing, the net differential will be positive (i.e. USD/JPY) – and the client will earn funds as a result. Ask your broker about specific details regarding rollover.

Posted by sanjay at 9:42 AM

Very bad forex mistakes that assure failure:

Before venturing into your trading journey there are some things you need to be aware of, otherwise you could succeed on your trading adventure, and we don't want that to happen, do we? This Forex training guide will help you track the most costly mistakes Forex traders do.


First of all, make sure you don't have a trading system. Having a trading system might increase the odds of your success. If you have a system, you will have an objective way to get in and out the market. When traders create their trading systems they think objectively since there is no position to be taken at the moment. If there is no position to be taken, there is also no money at risk, if there is no money at risk, we do think objectively and are open to every possibility, thus we are able to find low risk trading opportunities. So make sure you don't have a system and trade based on a randomly approach.


If you have already created your system, then don't follow it, be undisciplined. If you follow your system, there is a possibility that you can profit from the Forex market based on the trading opportunities you have found. If you want to fail on your trading, be sure to be undisciplined.


Don't get educated. Most successful traders are very well educated in the market they trade (stocks, Forex, futures, etc.) If you get educated, you might acquire the knowledge and experience you require to master the Forex market. Don't read about the Forex market, don't enroll into Forex training programs and don't even look at historical charts.


Don't use any money management technique. The purpose of money management is to avoid the risk of ruin, but at the same time it helps you boost your profits, allowing them to grow geometrically. For instance, by using no money management techniques, there is a possibility that in loosing 10 trades in a row you could empty your trading account. On the other hand, by applying simple money management techniques you can avoid it. So make sure, if you want to fail, don't even consider money management.


Forget about psychological issues. You need to get every trade to win. Successful traders know that they don't need to win every trade in order to profit from the market. This is one characteristic that is hard to understand and really apply. Why? Because we are taught, since kids, that any number below 70% is a bad number. In the Forex trading environment, this is not true.


Don't even consider using a Risk-reward (RR) ratio greater than 1-1. If you use a RR ratio of 1-2 (willing to make twice the amount risked in one trade) then you only need a system that is right around 50% to make money. If you use a RR ratio of 1-3 (willing to make three times the amount risked in one trade) then you will need a system that is right around 40% of the time to make money. So make sure to use a RR ratio below 1-1.


By applying every point outlined in this Forex training guide, you will almost assure your failure in your Forex trading journey. Do the opposite, and you will have the possibility to achieve what every trader is looking for: consistent profitable results.

How to take a loss and benefits:

There are quite a few books written on how to make money in the market. Some of them are even written by people who have made money as traders! What you don't see often, however, are books or articles written on how to lose money. "Cut your losers and let your winners run" is commonsensical advice, but how do you determine when a position is a loser? Interestingly, most traders I have seen don't formulate an answer to this question when they put on a position. They focus on the entry, but then don't have a clear sense of exit-especially if that exit is going to put them into the red.

One of the real culprits, I have to believe, is in the difficulty traders have in separating the reality of a losing trade from the psychological sense of feeling like a loser. At some level, many traders equate losing with being a loser. This frustrates them, depresses them, makes them anxious-in short, it interferes with their future decision-making, because their P & L is a blank check written against their self-esteem. Once a trader is self-focused and not market focused, distortions in decision-making are inevitable.
A particularly valuable section of the classic book Reminiscences of a Stock Operator describes Livermore 's approach to buying stock. He would sell a quantity and see how the stock responded. Then he would do that again and again, testing the underlying demand for the issue. When his sales could not push the market down, then he would move aggressively to the buy side and make his money.

What I loved about this methodology is that Livermore's losses were part of a grander plan. He wasn't just losing money; he was paying for information. If my maximum position size is ten contracts in the ES and I buy the highs of a range with a one-lot, expecting a breakout, I am testing the waters. While I am not potentially moving the market in the way that Livermore might have, I still have begun a test of my breakout hypothesis. I then watch carefully. How are the other averages behaving at the top ends of their range? How is the market absorbing the activity of sellers? Like any good scientist, I am gathering data to determine whether or not my hypothesis is supported.

Suppose the breakout does not materialize and the initial move above the range falls back into the range on some increased selling pressure. I take the loss on my one-lot, but then what happens from there?

The unsuccessful trader will respond with frustration: "Why do I always get caught buying the highs? I can't believe "they" ran the market against me! This market is impossible to trade." Because of that frustration-and the associated self-focus-the unsuccessful trader does not take any information away from that trade.

In the Livermore mode, however, the successful trader will see the losing one-lot as part of a greater plan. Had the market broken nicely to the upside, he would have scaled into the long trade and likely made money. If the one-lot was a loser, he paid for the information that this is, at the very least, a range-bound market, and he might try to find a spot to reverse and go short in order to capitalize on a return to the bottom end of that range.

Look at it this way: If you put on a high probability trade and the trade fails to make you money, you have just paid for an important piece of information: The market is not behaving as it normally, historically does. If a robust piece of economic news that normally sends the dollar screaming higher fails to budge the currency and thwarts your purchase, you have just acquired a useful bit of information: There is an underlying lack of demand for dollars. That information might hold far more profit potential than the money lost in the initial trade.

I recently received a copy of an article from Futures Magazine on the retired trader Everett Klipp, who was dubbed the "Babe Ruth of the CBOT". Klipp distinguished himself not only by his fifty-year track record of trading success on the floor, but also by his mentorship of over 100 traders. Speaking of his system of short-term trading, Klipp observed, "You have to love to lose money and hate to make money to be successful.It's against human nature what I teach and practice. You have to overcome your humanness."

Klipp's system was quick to take profits (hence the idea of hating to make money), but even quicker to take losses (loving to lose money). Instead of viewing losses as a threat, Klipp treated them as an essential part of trading. Taking a small loss reinforces a trader's sense of discipline and control, he believed. Losses are not failures.

So here's a question I propose to all those who enter a high-probability trade: "What will tell me that my trade is wrong, and how could I use that information to subsequently profit?" If you're trading well, there are no losing trades: only trades that make money and trades that give you the information to make money later.




--------------------------------------------------------------------------------

Brett N. Steenbarger, Ph.D. is Director of Trader Development for Kingstree Trading, LLC in Chicago and Clinical Associate Professor of Psychiatry and Behavioral Sciences at SUNY Upstate Medical University in Syracuse, NY. He is also an active trader and writes occasional feature articles on market psychology for a variety of publications. The author of The Psychology of Trading (Wiley; January, 2003), Dr. Steenbarger has published over 50 peer-reviewed articles and book chapters on short-term approaches to behavioral change. His new, co-edited book The Art and Science of Brief Therapy is a core curricular text in psychiatry training programs. Many of Dr. Steenbarger's articles and trading strategies are archived on his website,



Benefits:

Trading the Forex market has become very popular in the last years. Why is it that traders around the world see the Forex market as an investment opportunity? We will try to answer this question in this article. Also we will discuss some differences between the Forex market, the stocks market and the futures market.

Some of the benefits of trading the Forex market are:

Superior liquidity
Liquidity is what really makes the Forex market different from other markets. The Forex market is by far the most liquid financial market in the world with more than 3 trillion dollars traded everyday. This ensures price stability and better trade execution. Allowing traders to open and close transactions with ease. Also such a tremendous volume makes it hard to manipulate the market in an extended manner.

24hr Market
This one is also one of the greatest advantages of trading Forex. It is an around the click market, the market opens on Sunday at 3:00 pm EST when New Zealand begins operations, and closes on Friday at 5:00 pm EST when San Francisco terminates operations. There are transactions in practically every time zone, allowing active traders to choose at what time to trade.

Leverage trading
Trading the Forex Market offers a greater buying power than many other markets. Some Forex brokers offer leverage up to 400:1, allowing traders to have only 0.25% in margin of the total investment. For instance, a trader using 100:1 means that to have a US$100,000 position, only US$1,000 are needed on margin to be able to open that position. Remember leverage is like a double sword, it could work in your favor as well as against you.


Low Transaction costs
Almost all brokers offer commission free trading. The only cost traders incur in any transaction is the spread (difference between the buy and sell price of each currency pair). This spread could be as low as 1 pip (the minimum increment in any currency pair) in some pairs.

Low minimum investment
The Forex market requires less capital to start trading than any other markets. The initial investment could go as low as $300 USD, depending on leverage offered by the broker. This is a great advantage since Forex traders are able to keep their risk investment to the lowest level.

Specialized trading
The liquidity of the market allows us to focus on just a few instruments (or currency pairs) as our main investments (around 80% of all trading transactions are made on the seven major currencies). Allowing us to monitor, and at the end get to know each instrument better.

Trading from anywhere
If you do a lot of traveling, you can trade from anywhere in the world just having an internet connection.


All these benefits make the Forex market very attractive to investors and traders. But I need to make something clear though, even when all these benefits of the Forex market are notorious; it is still difficult to make a successful career trading the Forex market. It requires a lot of education, discipline, commitment and patience.

Price action:perfect trading sysytem

Trading the Forex market has become very popular in the last few years. But how difficult is it to achieve success in the Forex trading arena? Or let me rephrase this question, how many traders achieve consistent profitable results trading the Forex market? Unfortunately very few, only 5% of traders achieve this goal. One of the main reasons of this is because Forex traders focus in the wrong information to make their trading decisions and totally forget about the most important factor: Price behavior.


Most Forex trading systems are made off technical indicators (a moving average (MA) crossover, overbought/oversold conditions in an oscillator, etc.) But what are technical indicators? They are just a series of data points plotted in a chart; these points are derived from a mathematical formula applied to the price of any given currency pair. In other words, it is a chart of price plotted in a different way that helps us see other aspects of price.


There is an important implication on this definition of technical indicators. The fact that the readings obtained from them are based on price action. Take for instance a long MA crossover signal, the price has gone up enough to make the short period MA crossover the long period MA generating a long signal. Most traders see it as “the MA crossover made the price go up,” but it happened the other way around, the MA crossover signal occurred because the price went up. Where I’m trying to get here is that at the end, price behavior dictates how an indicator will act, and this should be taken into consideration on any trading decision made.


Trading decisions based on technical indicators without taking price action into consideration will give us less accurate results. For example, again a long signal generated by a MA crossover as the market approaches an important resistance level. If the price suddenly starts to bounce back off that important level there is no point on taking this signal, price action is telling us the market doesn’t want to go up. Most of the time, under this circumstances, the market will continue to fall down, disregarding the MA crossover.


Don’t get me wrong here, technical indicators are a very important aspect of trading. They help us see certain conditions that are otherwise difficult to see by watching pure price action. But when it comes to pull the trigger, price action incorporation into our Forex trading system will definitely put the odds in our favor, it will generate higher probability trades.

So, how to create a perfect Forex trading system?
First of all, you need to make sure your trading system fits your trading personality; otherwise you will find it hard to follow it. Every trader has different needs and goals, thus there is no system that perfectly fits all traders. You need to make your own research on various trading styles and technical indicators until you find a concept that perfectly works for you. Make sure you know the nature of whatever technical indicator used.


Secondly, incorporate price action into your system. So you only take long signals if the price behavior tells you the market wants to go up, and short signals if the market gives you indication that it will go down.


Third, and most importantly, you need to have the discipline to follow your Forex trading system rigorously. Try it first on a demo account, then move on to a small account and finally when feeling comfortably and being consistent profitable apply your system in a regular account.

Things that you should know about forex trading:

How difficult is it to make money trading the Forex market? How much time does it take to actually be able to make a living trading the Forex market? These and other important aspects of trading are to be discussed in this article.


Trading the Forex market has many benefits over other financial markets, among the most important are: superior liquidity, 24hrs market, better execution, and others. Traders and investor see the Forex market as a new speculation or diversifying opportunity because of these benefits. Does this mean that it is easy to make money trading the Forex Market? Not at all.


Forex brokers agree that 90% of traders end up losing money, 5% of traders end up at break even and only 5% of them achieve consistent profitable results. With these statistics shown, I don’t consider trading to be an easy task. But, is it harder to master any other endeavor? I don’t think so, consider musicians, writers, or even other businesses, the success rates are about the same, there are a whole bunch of them who never got to the top.


Now that we know it is not easy to achieve consistent profitable results, a must question would be, Why is it that some traders succeed while others fail to trade successfully in the Forex market? There is no hard answer to this question, or a recipe to follow to achieve consistent profitable results. What we do know is that traders that reach the top think different. That’s right, they don’t follow the crowd, they are an independent part of the crowd.


A few things that separate the top traders from the rest are:


Education: They are very well educated in the matter; they have chosen to learn every single and important aspect of trading. The best traders know that every trade is a learning experience. They approach the Forex market with humility, otherwise the market will prove them wrong.


Forex trading system: Top traders have a Forex trading system. They have the discipline to follow it rigorously, because they know that only the trades that are signaled by their system have a greater rate of success.


Price behavior: They have incorporated price behavior into their trading systems. They know price action has the last word.


Money management: Avoiding the risk of ruin is a primary subject to the best traders. After all, you cannot succeed without funds in your trading account.


Trading psychology: They are aware of every psychological issue that affects the decisions made by traders. They have accepted the fact that every individual trade has two probable outcomes, not just the winning side.


These are, among others, the most important factors that influence the success rate of Forex traders.


We know now that it is not easy to make money trading the Forex market, but it is possible. We also discussed the most important factors that influence the rate of success of Forex traders. But, how much time does it take to have consistent profitable results? It is different from trader to trader. For some, it could take a life time, and still don’t get the desired results, for some others, a few years are enough to get consistent profitable results. The answer to this question may vary, but what I want to make clear here is that trading successfully is a process, it’s not something you can do in a short period of time.


Trading successfully is no easy task; it is a process and could take years to achieve the desired results. There are a few things though every trader should take in consideration that could accelerate the process: having a trading system, using money management, education, being aware of psychological issues, discipline to follow your trading system and your trading plan, and others.

Things that you should know about forex trading:

How difficult is it to make money trading the Forex market? How much time does it take to actually be able to make a living trading the Forex market? These and other important aspects of trading are to be discussed in this article.


Trading the Forex market has many benefits over other financial markets, among the most important are: superior liquidity, 24hrs market, better execution, and others. Traders and investor see the Forex market as a new speculation or diversifying opportunity because of these benefits. Does this mean that it is easy to make money trading the Forex Market? Not at all.


Forex brokers agree that 90% of traders end up losing money, 5% of traders end up at break even and only 5% of them achieve consistent profitable results. With these statistics shown, I don’t consider trading to be an easy task. But, is it harder to master any other endeavor? I don’t think so, consider musicians, writers, or even other businesses, the success rates are about the same, there are a whole bunch of them who never got to the top.


Now that we know it is not easy to achieve consistent profitable results, a must question would be, Why is it that some traders succeed while others fail to trade successfully in the Forex market? There is no hard answer to this question, or a recipe to follow to achieve consistent profitable results. What we do know is that traders that reach the top think different. That’s right, they don’t follow the crowd, they are an independent part of the crowd.


A few things that separate the top traders from the rest are:


Education: They are very well educated in the matter; they have chosen to learn every single and important aspect of trading. The best traders know that every trade is a learning experience. They approach the Forex market with humility, otherwise the market will prove them wrong.


Forex trading system: Top traders have a Forex trading system. They have the discipline to follow it rigorously, because they know that only the trades that are signaled by their system have a greater rate of success.


Price behavior: They have incorporated price behavior into their trading systems. They know price action has the last word.


Money management: Avoiding the risk of ruin is a primary subject to the best traders. After all, you cannot succeed without funds in your trading account.


Trading psychology: They are aware of every psychological issue that affects the decisions made by traders. They have accepted the fact that every individual trade has two probable outcomes, not just the winning side.


These are, among others, the most important factors that influence the success rate of Forex traders.


We know now that it is not easy to make money trading the Forex market, but it is possible. We also discussed the most important factors that influence the rate of success of Forex traders. But, how much time does it take to have consistent profitable results? It is different from trader to trader. For some, it could take a life time, and still don’t get the desired results, for some others, a few years are enough to get consistent profitable results. The answer to this question may vary, but what I want to make clear here is that trading successfully is a process, it’s not something you can do in a short period of time.


Trading successfully is no easy task; it is a process and could take years to achieve the desired results. There are a few things though every trader should take in consideration that could accelerate the process: having a trading system, using money management, education, being aware of psychological issues, discipline to follow your trading system and your trading plan, and others.

What is margin and how can i calculate how much i need?

Margin the amount of money required in your account in order to open a trade. Margin is a simple calculation based on the current market quote of the base currency vs USD, the volume requested, and the leverage level you have selected when opening your account. The dealing software will not allow you to open a position if you do not have sufficient free margin available.
Your free margin is indicated in the MT4 trading terminal.
To calculate the margin requirement required to open a trade, please use the following formula:
(Market Quote * Volume) / Leverage = $Margin required
eg.
You want to open 0.1 (10,000 base currency) lots of EUR/USD at the current market quote of 1.4177 and with a leverage level of 1:200.
(1.4177 * 10,000) / 200 =$70.89
As you can see from this example, you need at least $70.89 free margin at 1:200 leverage to open the trade. This shows you the power of the leverage offered by FXOpen. If you choose 1:1 leverage (or no leverage) you would need $14,177 free margin instead of $70.89 just to open this trade!

Learn how forex trading:

Good day forex trading koalas,

it is the weekend again and now is the time to reflect on our past performance.

In the last review, we noted that the EUR/USD held it’s ground despite a number of negative issues. This was probably due to the greater number of negative data streaming out from the US. Investors were starting to question how robust the recovery of the US economy is.

From a technical point of view, the 1.3 line will probably be a center of activity as the market consolidates and determine it’s next course of action.



Look at the EUR/USD daily chart, the bullish moment is a pretty strong one for the month of July.

***

Early week saw the bullish momentum continuing on. Most of the economic data from the Euro Zone were good and this brought sentiments up as investors felt that the worst is probably over. Although the US CB Consumer Confidence came out worst then expected, the market only suffered a temporary dip before the bullish climb resumed.

Towards the midweek, the EUR/USD continued to range around the 1.3 line. Over at the Euro Zone, the German Prelim CPI came just as expected. On the contrary, the US releases were generally worst than expected. The core durable goods orders were down and it caused investors to be concerned about the US economy.

As the end of the week approached, continued positive data from the Euro Zone brought the EUR/USD up. The German unemployment change indicated a drop of unemployment in Germany and this was welcomed by the investors. Having said so, we saw a new round of strikes in Greece as truck drivers protest against the government plans to open up the freight industry. This is inevitable as this was part of the condition upon accepting the loan package from the EU / IMF. The protest caused shortages of fuel and tourism is affected. We need to remember that the Euro Zone crisis is not over yet.

On Friday, we received a double blow as the US Advance GDP and the German Retail Sales came out worst than expected. This brought back risk aversion causing the day to end bearish.

***

I read a report with regards to the cooling of the US economy. As the jobs market continued to be depressed, big ticket spending will continue to be scarce and hence economic stimulation will be low. Once again the US continues to face challenges including the massive deficit. More and more economic experts are warning that we may be hitting past the point of no return which is definite default of the US.

Having said so, the Euro Zone is not without it’s problems. With the recent blessings of numerous economic data, sentiments are good and hence no one rains on the party. Now if any adverse event happens, the market may just fall like stumbling blocks.

From a technical point of view, we face two interesting factors now.


The 1.3 line may continue to remain as a center of activity and make the forecast of direction difficult.
The 200 EMA of the EUR/USD daily chart lies just above the current price action. Historically, the price often react with the EMA. Now the tricky part is if the EMA will function as a resistance or a clear break will result suggesting continued bullish momentum.
Next week brings us numerous important data releases including the Euro minimum bid rate and the crazy margin call event US non farm payroll. You can find the list of the various economic releases in the Economic Calender below.

If you are on Facebook, i urge you to joinTheGeekKnows.com page. Discussions on forex concepts, ideas and trades can be found there. It is a helpful community page for forex that i created and it has over 500 participants now

Caution is advised. Trade safely.