Forex Trading For Your Future

My friends at Forex Trading Platform recently provided me with some insight on how their system works and why it’s so popular.  I jumped at the chance at sharing this with our readers.  Sure you’ve heard of Forex and what probably comes to mind is making money.  That’s an accurate first impression because it seems that everyone involved with the Forex Trading Platform is getting their piece of the action in one way or the other.  I personally like dealing with this company for several reasons including the unlimited amount of wealth that someone can accomplish by getting involved.

Click Here for the Forex eBook - Read and Learn

What Exactly Is Forex Trading?

 “Forex” stands for foreign exchange; it’s also known as FX. In a forex trade, you buy one currency while simultaneously selling another - that is, you’re exchanging the sold currency for the one you’re buying.Currencies trade in pairs, like the Euro-US Dollar (EUR/USD) or US Dollar / Japanese Yen (USD/JPY). Unlike stocks or futures, there’s no centralized exchange for forex. All transactions happen via phone or electronic network.The Forex market is a nonstop cash market where currencies of nations are traded, typically via brokers.  Foreign currencies are constantly and simultaneously bought and sold across local and global markets and traders’ investments increase or decrease in value based upon currency movements. Foreign exchange market conditions can change at any time in response to real-time events.For those seeking to make calculated risks based on sound decision making, Forex provides an appropriate platform to accomplish this.The main enticements of currencyThe currency trading (FOREX) market is the biggest and the fastest growing market on earth. Its daily turnover is more than 2.5 trillion dollars, which is 100 times greater than the NASDAQ daily turnover. dealing to private investors and attractions for short-term Forex trading are:

• 24-hour trading, 5 days a week with nonstop access to global Forex dealers.
• An enormous liquid market making it easy to trade most currencies.
• Volatile markets offering profit opportunities.
• Standard instruments for controlling risk exposure.
• The ability to profit in rising or falling markets.
• Leveraged trading with low margin requirements.
• Many options for zero commission trading.

 Markets are places to trade goods. The same goes with FOREX. The Forex goods (or merchandise) are the currencies of various countries. You buy Euro, paying with US dollars, or you sell Japanese Yens for Canadian dollars. That’s all.

Forex Trading

The investor’s goal in Forex trading is to profit from foreign currency movements. Forex trading or currency trading is always done in currency pairs. For example, the exchange rate of EUR/USD on Aug 26th, 2003 was 1.0857. This number is also referred to as a “Forex rate” or just “rate” for short. If the investor had bought 1000 euros on that date, he would have paid 1085.70 U.S. dollars. One year later, the Forex rate was 1.2083, which means that the value of the euro (the numerator of the EUR/USD ratio) increased in relation to the U.S. dollar. The investor could now sell the 1000 euros in order to receive 1208.30 dollars. Therefore, the investor would have USD 122.60 more than what he had started one year earlier. However, to know if the investor made a good investment, one needs to compare this investment option to alternative investments. At the very minimum, the return on investment (ROI) should be compared to the return on a “risk-free” investment. One example of a risk-free investment is long-term U.S. government bonds since there is practically no chance for a default, i.e. the U.S. government going bankrupt or being unable or unwilling to pay its debt obligation.

When trading currencies, trade only when you expect the currency you are buying to increase in value relative to the currency you are selling. If the currency you are buying does increase in value, you must sell back the other currency in order to lock in a profit. An open trade (also called an open position) is a trade in which a trader has bought or sold a particular currency pair and has not yet sold or bought back the equivalent amount to close the position.

The nice thing about the FOREX market, is that regular daily fluctuations, say - around 1%, are multiplied by 100! (in general, Easy-Forexâ„¢ offers trading ratios from 1:50 to 1:200). If, for example, the exchange rate of “your” pair of currencies increased by 0.6% in the last 4 hours, your profit will be 60% on your investment! Such can happen in one business day, or in a few hours, even minutes.

Moreover, you cannot lose more than your “margin”! You may profit unlimited amounts, but you never lose more than what you initially risked and invested.

You can implement your choice (the pair of currencies, the volume amount) under any direction to which the market is moving, and yet make profit. It does not matter whether the exchange rate is going up or down: you can always decide to buy Euro and sell dollar, or vice versa - buy dollar and sell Euro. You don’t have to physically possess certain currencies in order to perform “buy” or “sell” with them.

Forex online. Without it, you are wasting your time (and money).
Forex trading involves substantial risk of loss, and may not be suitable for everyone.

However, it is estimated that anywhere from 70%-90% of the FX market is speculative. In other words, the person or institution that bought or sold the currency has no plan to actually take delivery of the currency in the end; rather, they were solely speculating on the movement of that particular currency.
 

Exchange Rate

Because currencies are traded in pairs and exchanged one against the other when traded, the rate at which they are exchanged is called the exchange rate. The majority of the currencies are traded against the US dollar (USD). The four next-most traded currencies are the euro (EUR), the Japanese yen (JPY), the British pound sterling (GBP) and the Swiss franc (CHF). These five currencies make up the majority of the market and are called the major currencies or “the Majors”. Some sources also include the Australian dollar (AUD) within the group of major currencies.

The first currency in the exchange pair is referred to as the base currency and the second currency as the counter or quote currency. The counter or quote currency is thus the numerator in the ratio, and the base currency is the denominator. The value of the base currency (denominator) is always 1. Therefore, the exchange rate tells a buyer how much of the counter or quote currency must be paid to obtain one unit of the base currency. The exchange rate also tells a seller how much is received in the counter or quote currency when selling one unit of the base currency. For example, an exchange rate for EUR/USD of 1.2083 specifies to the buyer of euros that 1.2083 USD must be paid to obtain 1 euro.

At any given point, time and place, if an investor buys any currency and immediately sells it - and no change in the exchange rate has occurred - the investor will lose money. The reason for this is that the bid price, which represents how much will be received in the counter or quote currency when selling one unit of the base currency, is always lower than the ask price, which represents how much must be paid in the counter or quote currency when buying one unit of the base currency. For instance, the EUR/USD bid/ask currency rates at your bank may be 1.2015/1.3015, representing a spread of 1000 pips (also called points, one pip = 0.0001), which is very high in comparison to the bid/ask currency rates that online Forex investors commonly encounter, such as 1.2015/1.2020, with a spread of 5 pips. In general, smaller spreads are better for Forex investors since even they require a smaller movement in exchange rates in order to profit from a trade.
 

Margin

Banks and/or online trading providers need collateral to ensure that the investor can pay in case of a loss. The collateral is called the margin and is also known as minimum security in Forex markets. In practice, it is a deposit to the trader’s account that is intended to cover any currency trading losses in the future.

Margin enables private investors to trade in markets that have high minimum units of trading by allowing traders to hold a much larger position than their account value. Margin trading also enhances the rate of profit, but has the tendency to inflate rates of loss, on top of systemic risk.
 

Leveraged Financing

Leveraged financing, i.e., the use of credit, such as a trade purchased on a margin, is very common in Forex. The loan/leveraged in the margined account is collateralized by your initial deposit. This may result in being able to control USD 100,000 for as little as USD 1,000.

Five ways private investors can trade in Forex directly or indirectly:

• The spot market
• Forwards and futures
• Options
• Contracts for difference
• Spread betting
• A spot transaction

A spot transaction is a straightforward exchange of one currency for another. The spot rate is the current market price, also called the benchmark price. Spot transactions do not require immediate settlement, or payment “on the spot.” The settlement date, or “value date,” is the second business day after the “deal date” (or “trade date”) on which the transaction is agreed to by the two traders. The two-day period provides time to confirm the agreement and arrange the clearing and necessary debiting and crediting of bank accounts in various international locations.
 

Risks

Although Forex trading can lead to very profitable results, there are risks involved: exchange rate risks, interest rate risks, credit risks, and country risks. Approximately 80% of all currency transactions last a period of seven days or less, while more than 40% last fewer than two days. Given the extremely short lifespan of the typical trade, technical indicators heavily influence entry, exit and order placement decisions.

How do I start?

Register (Easy-Forexâ„¢ offers the simplest and quickest registration process, no obligation); deposit your first trading “margin” amount (credit cards are welcome, only by Easy-Forexâ„¢); start trading.

It can’t be simpler or easier than that. Need help? We’ll provide you with 1-on-1 training and service, as much as necessary (Easy-Forexâ„¢ offers real people service, live, in your own language).

How do I trade Forex?

You select the pair of currencies with which you wish to make a Forex deal. You determine the volume (the amount of the deal). You deposit the “margin” (collateral needed to facilitate the deal. Usually - only a very small portion of the whole deal, say: 1% or 1:100).

Before you finally activate the deal, you can still “freeze” it for a few seconds. That enables you to either change the terms, or accept it as is, or altogether regret the whole idea. The “freeze” feature is a unique service by Easy-Forexâ„¢.

When your Forex deal is running (you hold an “open position”), you can monitor its status and check scenarios online, whenever you wish. You may change some terms in the deal, or close it (and cash the profit, if any, or minimize the loss, if any). Moreover, Easy-Forexâ„¢ lets you determine a “take-profit” rate, with which the deal will close automatically for you, when and if such rate occurs in the market. Meaning: you do not have to stay near your computer when you hold open positions.

And finally, I want to leave you with some helpful tips for trading Forex.  These tips will guide your successful trading to earn the profits you are seeking. 

Don’t be influenced: You have your own game plan stick to it. If you are influenced by others you will constantly be changing your mind, learn to insulate external sources once you have made up your mind. You will always find someone who will give you a logical reason to do the opposite.

Know your risk vs. reward ratio: The minimum ratio you should be using is 2:1, so if you are successful on 50% of your trades you are doing well. For instance, if you are long GBP/USD and you want to earn 30 pips you should not risk more than 15 pips. You should never risk 30 pips in order to make 10 pips, For if you do you’ll make more a lot more successful deals then unsuccessful ones, but the poor ones will ruin any your chances for profit. Your risk vs. reward analysis is extremely important to trading successfully.

Trending or Neutral: Learn to analyze the market; is it a trending market or a neutral market? In a trending market then follow the trend in a neutral market buy on lows and sell on highs as long as you use stop-losses you are controlling your risk.

Don’t fight the trend: Don’t try to buy on dips and sell on highs on a trending market. The old saying “the trend is your friend” is a good one, why fight it go with it!

Set a Stop Loss: Before entering any trade, decide beforehand the amount you are willing to lose and stick to it, set a stop loss on the trade before you enter. Do not fluctuate your stop loss if you are in a losing trade. during times of extreme volatility it can be difficult or impossible to execute orders. stop orders become market orders when executed so the order may not be filled at the desired price.  As a result, the initial risk can be estimated, but not guaranteed.

Averaging – don’t do it: One of the most common mistakes traders make is the continuing adding of a losing position. Averaging will be the death of short-term trades. For short-term trades, preserving capital is the most important thing, and putting too much capital at risk will jeopardize success. In short term trading, if a strategy is right the market should move in the correct direction within a relatively short period of time, however if it’s wrong, the short-term traders should realize that they traded incorrectly, they should take the loss and move on. There is not much room for pride in short term trading. You should never add to a losing position.

Chasing a bad idea: Happens all the time, you see a potential trade - decide to wait till the next day to see if it sets up, when you see that it did exactly what you thought it may be too late. Review your reasoning for the trade, make sure your initial reason is still there if not forget about the trade. There will always be trading opportunities be patient and strike.

Understand the way the market thinks: You should understand that all the information (except for newly released information which the market adjusts too within a short moment) is already built into the price of the cross. You should know what indicators are coming; particularly the majors and you should know what is already anticipation by the market. There are many publication of market anticipation for major indicators.

Trading - a game of probabilities: You will not be correct 100% of the time, it’s a fact. Good experienced traders roll know this, it’s a numbers game, and you’ll make some and lose some the idea is simply to win more than you lose, not to catch all the fish in the pond. Understand trading is a game of probabilities and if you do the right thing in the long run, you will come out ahead. Learn from mistakes, when you start trading you may well lose more in the beginning than you make, think about what you did wrong, try not to be emotional about the trades, if you stick to your game plan and learn hopefully your profits will out weight your losses.

Know why you are in the trade: Keep a trading log, and write down why you entered a trade. Don’t be impulsive have a plan, this way you will learn which strategies work for you in the long run and which don’t. If trading before or after releases work for you, look for them and trade those.

Have a maximum run: If you have 4 or 5 bad trades in a row, take a break, something isn’t working, go away regroup, don’t be afraid to take a break.

Study: Learn new ideas, keep up to date, and don’t trade other people’s ideas, you should always know why your in the trade.

Have Fun: Enjoy what you do, keep calm, stay as unemotional as possible - you will be more successful.

Keep your position sizes within your limitations: Successful traders know that in order to profit you trade for the long term. Trading is a game of probabilities, and over the long run as long as you stick and implement sound strategies and stay consistent – success is much more likely to come. To be a successful trader you should never take a position that puts substantial capital in jeopardy. In actuality you will rarely find successful traders who risk more than 10% of their account in any trade. For instance, if you deposit USD 25,000 your maximum loss should be USD 2,500 on a margin of 5% and a EUR 100,000 minimum trade that works out at about 2.5 figures or 250 pips (on a EUR/USD trade) as a maximum. Normally trade with a stop loss of under 50 pips and a maximum stop loss of one-figure or 100 pips and trade sizes of 100,000 to 200,000 base units (the leading currency), thereby risking substantially less then 10% and more like 2-5% of the deposit on hand. You might want to start small and increase your trade sizes as your confidence grows.

If the logic goes you go: If the reason you entered the trade disappears then so does your reason to remain in the trade. If you think you’re at a low and it breaks through, get out, then reevaluate and decide once more.

Let your profits run: Do not be emotional about a trade, you will lose some and win some – just know it. Know the reason why you entered a trade and stick to those reasons. The less emotional you are the more successful you will be. Stick to your game plan, move your stop loss as the market moves in your favor and let your profits run. During times of extreme volatility it can be difficult or impossible to execute orders.

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