FOREX

Techniques for Advanced Forex Trading

noreply@blogger.com (muhammad rizwan) — Sun, 16 Aug 2009 04:14:00 +0000

Forex Position Trading: Forex position trading approach is yet another trouble-free technique to boost your position size without increasing your risk. This trading tactic is very effective with mini lots. The major highlight with this technique is that - with forex position trading your exposure to the market is less and so therefore is no need to monitor the market continuously. Moreover, you may even earn profit with negligible loss that can further boost your trading confidence. For Example- you might make a short trade on EUR/USD at 1.40. If the pair is ultimately trending lower, but happens to retrace up, and you take another short at say 1.42, your average position would be 1.41. Once the EUR/USD drops back below 1.41, you will be back in overall profit.

Today forex trading is all about watching your options when you make a trade. Aside from using effective risk management and extreme vigilance, advanced trading can be an alternate way to make profits and control losses. Nevertheless, these above mentioned advanced trading techniques are more about using the market behavior to your advantage. Utilizing these advanced techniques can give you the edge from other average trader.

Techniques for Advanced Forex Trading

noreply@blogger.com (muhammad rizwan) — Sun, 16 Aug 2009 04:13:00 +0000

Forex Scalping: It is a latest technique of trading where profits are taken after relatively small moves in the forex market. It is a technique where trading is done over small time frames, and smaller profits are taken more frequently. As the position exposed to the market is shorter, it automatically reduces the risk of adverse market events causing the price to go against the trade. It is a different approach to most other forex strategies, but still requires you to analyze the market to ensure that the set up for a trade is present. This type of trading greatly appeals to day traders and those who look to reduce the risk involved in trading currencies.

Forex Hedging: It is a technique that helps in reducing some of the risk involved in holding an open forex position. It decreases the risk by taking both sides of a trade at once. If your broker allows it, a simple way to hedge is just to initiate a long and a short position on the same pair. Advanced traders sometimes use two different pairs to make one hedge, but that can get very complicated.

It is important to understand that much of the risk involved in holding any forex position is market risk; i.e. if the market falls sharply, your losses may escalate dramatically. So if you have an open Forex position with fine projection but you think the currency pair may reverse against you, it is advised to hedge your position.

Techniques for Advanced Forex Trading

noreply@blogger.com (muhammad rizwan) — Sun, 16 Aug 2009 04:13:00 +0000

Forex is a potential platform for earning substantial profit. In fact it is one of the largest trading markets of the world. Featuring an average daily trade of US$ 2 trillion and above, this market is best known for its high scale trading volume and intense liquidity. Adding to this, today with the advancement of technology it can be done from anywhere of the world. Backed up by world-wide web, you can easily trade in the forex market at the comfort of your own home. However, it is important to understand that fx trading is based hugely on speculation. You must be smart enough to guess exactly when the rate of a certain currency pair will rise and go down, and then buy or sell based on that. Indeed it is said that if you learn to study the speculation of this market, you will have a better chance of getting profit.

Today, it is more advanced and turned into an active investment arena, where only a factual understanding of the intricacies and complexities can make your capital grow every day. Moreover, like any other business, it also involves some amount of risks. There is no shot fx trading technique for success in the currency trading market, but there are some well-known techniques that can assist you formulate a good advanced foreign exchange trading strategy. Here are few essential techniques that can help you cut your losses and increases profits:

Forex Killer Secrets For Massive Trading Profits

noreply@blogger.com (muhammad rizwan) — Tue, 11 Aug 2009 18:03:00 +0000

“The forex trading market will be doubled in just three years. This is all due to active participation of the fund managers and pension funds, says research by David Kurtz, published in Financial Times on October 9, 2006.”
“According to studies, 95% of the learned burn their money in the market as against the 5% cream of the crop, who enjoy magnificent currency trading success”

Do you want a consistent source of income? Do you want to work from home and still earn enormous amounts? Have you tried forex trading but have seen your investments plummet always? Despite your innumerous effort, you are not able to make substantial profits. What if you get the key to earn profit month after month? How about making your neighbors jealous of your new luxury car? How would it feel working by poolside in a big house, and a vacation every month? What would be life like if you could spend ample number of hours with your sweet little kid? Sounds like a dream, isn’t it?

Forex Online Trading: Some Advices To Build Quick Wealth

noreply@blogger.com (muhammad rizwan) — Tue, 11 Aug 2009 18:02:00 +0000

With every passing day, hundreds and thousands of Internet users are born. So, what are their intentions? Amongst others, one of the most tempting motives is to participate in online trading. The latest trends of online trading have made life easier for traders by providing them with the latest updates, precise information, and above all, the advantage to trade from their comfy seats.

Investments- The Synonyms For Risks

If you are impressed by the idea of online trading, from the beginning of this article, here is something more important than what you have heard till now. While switching from offline trading to online trading, an important aspect has firmly held its position. We are talking about risk factor involved in any type of investment and here are some expert advices to tackle it:

Forex Wealth Building With Most Apposite Trading Signals

noreply@blogger.com (muhammad rizwan) — Tue, 11 Aug 2009 18:00:00 +0000

The importance of Forex signals could not be overlooked, as these signals escort the most apposite entry and exit points to the market. If you, as an investor in forex trading market, are able to find best trading signal provider, you automatically become eligible to earn huge profits. Forex trading is most enchanting investment options, only if you are able to access right set of tools like trading signals. These signals mark the probability of success as well as failure for every investment in forex trading.

What Is Importance Of Forex Signals

Forex signals are the basic entities, which are capable of letting your investments to flourish in right direction. Here are few ways, by which forex signals provide help to the investors:

Online Forex Trading Course

noreply@blogger.com (muhammad rizwan) — Tue, 11 Aug 2009 17:59:00 +0000

If you are interested in forex trading I think it is time for you to start off by getting some good forex course or forex training. Forex Trading Course is a necessity for everybody who interested in this field. As you knew there are a lot of money is involved in this business. If we don’t have some forex trading knowledge or experiences that supposed we got from forex training, I am sure we will lose a lot of money. May be some of us not even know what is forex trading. Forex that stands for foreign exchange is basically exchange of currency between various countries. By doing this we hope gain some profit.

To get forex trading course we can go through online and search from various online forex course. We can also get forex trading course from our local college campus.

Online Trading Academy is well-known as an online services that offering forex trading course. Their online trading course is free and contains with many video tutorial that really helpful both for beginner and professional who want to get more knowledge in forex trading. I think their website is full with tools that we need if we want to involve in forex business. Online Trading Academy is also has every resource that we need whether in forex market, stocks and options. It is hard to find website that provide some kind of source that relatively complete for us

Forex Successful Currency Trading

noreply@blogger.com (muhammad rizwan) — Tue, 11 Aug 2009 17:52:00 +0000

The Foreign Exchange - Forex, FX - market is one of the biggest markets today. Daily turnover has skyrocketed from approximately 5 billion USD in 1977, to a staggering 3 trillion (and more) US dollars today. This is more than 40 times the daily turnover of the NASDAQ.

Forex currency trading is attractive to traders as currency markets are cnstantly fluctuating and there is potential to profit whether a currency is going up or down. Traders trade on margin which leverages their potential gains. What also makes it so popular is that there is no centralized location for trading as there is in futures or stocks, as trading occurs around the clock over the telephone and on computer terminals at thousands of locations worldwide.

Currency trading occurs when one country's currency is traded for another country's currency at the prevailing exchange rate. All currency is traded in LOTS. Each lot has a different amount of currency. Currency trading is carried out on a point (or pip) system. Traders are trying to capture points. Depending on the currency, each point is worth a different amount. For example, if the Brittish Pound is worth about $10 per point that is traded per lot and you trade 1 lot and capture 40 points, you make $400.

Forex Currency Trading For Beginners

noreply@blogger.com (muhammad rizwan) — Sat, 04 Jul 2009 13:06:00 +0000

Forex Currency Trading For Beginners
Forex trading is perhaps one of the most attractive propositions for any investor these days. The main reason behind it is the potential in the forex market. What is more, the excitement of something happening all the time can't be resisted by many. Fortunes change in minutes and who would like to be on the side lines watching.
And if are someone who has been not just on the sidelines but out of the stadium itself, forex trading is the sale and purchase of international currencies. Forex currency trading for beginners could be understood as earning profits due to difference in sale and purchase prices. As is the rule of any business, if you purchase for less and sell for more, you are making a profit and vice versa loss.
It is true that anyone from anywhere can start transactions in foreign trading. The only requirements are a good internet connection and a funded forex account. But every trade has its fundamentals and without having an idea about the fundamentals one must not take the plunge.
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Here are a few fundamentals to suit forex currency trading for beginners.
Learning is the key to any field and the field of forex trading is no different. It should be the very first thing that you should do. You can take the help of books, video tutorials, online learning materials etc.You might also like to attend seminars and workshops related to forex trading. Implementation of charting in trading, learning to use indicators to find out the best time to enter or exit a market and using a demo account to simulate trading are a few ways to learn the intricacies of the market. Efforts in the beginning save a lot of bucks in the futures.
Whether it is forex trading for beginners or it is for any expert, you must plan your trade. Forex trading is a means of achieving some end. It might be to earn money or gain financial freedom or any such goals. You must be very clear with what you want and how much you want and more important than that how much can you afford losing. If you do that you would be in a good position to benefit from forex trading in the coming times.
Even if you are thinking about forex currency trading for beginners, there is one thing that is a sine qua non for any beginner. It is maturity. Yes, discipline also plays a vital role. Always remember that emotions have no role to play in forex currency trading. Greed and over cautiousness are two things which would always prove harmful to you. A lot of factors have contributed to the popularity of forex markets. There is no problem with market access, no problem of liquidity, no problem with short selling and yes there is zero commission fees. But with all these benefits, there is always the factor of market risks and no trader should forget it.

How You Can Trade Multiple Positions

noreply@blogger.com (muhammad rizwan) — Sat, 04 Jul 2009 13:06:00 +0000

To be a highly successful trader, novice traders must have a good trading plan. Trading multiple positions can be difficult without proper money management. Usually, traders will develop their own techniques of money management, based on their financial positions, trading styles, etc. One of the most popular strategies in money management is the Pyramid strategy, using which traders can effectively multiply Forex gains, with a relatively low risk.
Pyramiding is a strategy in which traders take advantage of high performing assets, by adding new positions at upper levels or doing what is called 'averaging up.' Traders trade multiple positions, after an increase in assets, with an intent to maximize profits. Averaging in a falling market is a very dangerous strategy, as the assets are getting lost, rather than being acquired. Pyramiding provides opportunities for traders to increase their positions, as the market goes up and at the same time, reduces their risk exposure.
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For example, Mr. X sees an opportunity in the USD/JPY pair and wants to trade with a $10,000 amount by taking a long position at 95.00. He also decides to take a stop loss of 2%, just in case the market goes against him. Rather than putting all of his money in at once, he decides to trade with $5000 and after an hour, when the trade goes in his favor, he invests an additional $3000 at 95.62. Let's say the pair rises sharply from thereon, he invests a further $2000 at 97.65, closing the trade at 99 with a profit of 400 pips.
Practical Examples
1. Long Positions - In an example of the US Dollar and Swiss Franc (USD/CHF), where traders played with multiple positions and adding new positions at each successive move to new highs:
In this example, the main entry points at which traders make long positions are; 1.0562, 1.0801, and 1.0916. Here, the exit point is 1.1567, at which all the long positions are closed.
2. Short Positions- Like with the long pyramiding strategy, traders can also hedge their risk using a short pyramiding strategy. The only difference will be that the strategy is applied when the market is in a downtrend.
This is again an example of the US Dollar and Swiss Franc (USD/CHF), where traders play with multiple positions and add new positions, at each successive move to new lows. In this example, the main entry points at which trader makes short positions are; 1.1700, 1.1673, and 1.1408. Here, the exit point is 1.10901 at which all the short positions are squared off.
Key Takeaways
Trading multiple positions without a good trading plan is very difficult but traders can make this easy, with the help of the Pyramiding strategy through which, traders can add more positions to the trade, whilst lowering their risk exposure at the same time.

Risk to Reward Ratio Explained...

noreply@blogger.com (muhammad rizwan) — Sat, 04 Jul 2009 13:05:00 +0000

Risk to reward ratio is used by traders and investors to calculate the ratio of potential gain to potential loss in a Forex trade. Mathematically, this ratio is calculated by dividing the amount of the expected profit with the amount of the assumed risk.
Risk to reward ratio = Risk (potential loss*)/ Reward (Potential Gain**)
Before jumping into the market, traders should know how to calculate the risk/reward ratio and how it is applicable to trading. Risk is the most certain and dangerous aspect of trading. Every trade carries some amount of risk and it is essential for traders to know how much risk is present in a particular trade and how he/she can minimize that risk, so that their trading capital is protected. The best way is to calculate it is by using the risk/reward ratio.
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For example,
1. If the trader is taking a risk of 1 pip to get the profit of 2 pips, then the risk/reward ratio is 1:22. If the trader is looking for a profit of 100 pips, with a tight stop loss of 75 pips, then the risk /reward ratio is 75:100 (75/100), which is 0.75.3. If the trader is expected to earn the profit (reward) of $1320, with a stop loss of $350, then the risk /reward ratio is $1320:$350($1320/$350) or 3.7714:1.
How to determine the risk/reward ratio?
Step 1 Risk - The very first step for a trader is to determine that how much risk is he/she is ready to assume on a particular trade. Stop loss is the best way through which traders calculate the risk value.
Step 2 Reward - Reward is the profit on an investment. Basically, this is the gain in currency pair value that a trader is hoping or attempting to earn from the currency price movement.
Example1. Let's say a trader has an account with Easy-Forex and deposits $5000 in his/her account for 20:1 leverage. The trader can trade with $100000 with the help of leverage and decides to take a risk of only 2% of his/her trading capital, which is $100 ($5000 * 2%) and to book profits, when the trading amount goes above $200. It means he/she will be out of the trade, once he/she is either -$100 or +$200.
Hence,Risk/Reward Ratio is = 100/200 = 1:2
Key Takeaways
Risks and reward are two sides of a single coin. Every one wants the reward side of the coin but nobody wants to accept the risk. Burying your head in the sand will not make the risk go away, but taking it out and doing a little homework will definitely make the risk hurt a lot less. The risk and reward ratio clears the loss that a trader will be looking at, from a potential Forex trade.

Crucial Money Management Guidelines

noreply@blogger.com (muhammad rizwan) — Sat, 04 Jul 2009 13:04:00 +0000

Money is the opposite of the weather. Nobody talks about it, but everybody does something about it" - Rebecca Johnson"Managing money requires more skill than making it."
The last phrase indicates the importance of money management in trading and this is the key skill for traders, if they intend to earn large profits from the Forex market.
Money Management is the fundamental element of successful trading. It is the process of planning, organizing, and controlling money related matters in a Forex trading 'strategy,' in which money management plays a crucial role in helping traders to establish a trading plan, work out their trading capital and make investments in accordance to their risk bearing capacity. Money management also helps in determining the ideal risk exposure for individuals.
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Generally, money management is related to the allocation of funds, more specifically; diversification and portfolio management. This is the most important aspect of trading that every trader must know, to preserve capital and make gains.
Risk is something that nobody wants to see in their portfolio, but unfortunately it is present in every financial portfolio or a trading decision. To minimize or hedge the risks; money management is very vital.
How does it relate to Forex trading?
There is a popular quote in trading that goes like; "Never trade with money which you cannot afford to lose." This quote is absolutely applicable here; novice traders must follow this rule by not trading in markets unnecessarily (or overtrading), without any clear direction or strategy. The importance of money management can be summarized as follows:-
1. Important in forming trading strategies - Money management is very useful in making trading strategies. A trading system with proper money management can provide mammoth returns to traders in the long term. 2. Helpful in managing risk - Managing risk is not difficult but it is nonetheless critical. Diversification and trading rules can be implemented to manage risk and reduce the downsides that are associated with a trade. For example, according to expert traders; averaging does not make sense in a falling market but it is good when the market goes up. Hence, when the market falls, they exit from long positions by taking a tight stop loss. On the other hand, if the market moves in their favor, they start adding new positions on every upward move.3. Helps in defensive trading - For a beginner, money management is very helpful in defensive trading. Novice traders can use trading objectives, limits and strategies to remain within a moderate zone, without going overboard with aggressive and risky trades, while they still make good returns.
Key Takeaways
Based on the principles of money management, traders can stop trading if their portfolio or individual pair goes below a particular percentage of stop loss. The main motive behind money management is to place a limit on the likelihood and extent of losses. With the help of money management, traders can increase the number of winning positions and reduce losing positions, while balancing their investments with their risk.

The 3 Basic Fundamentals of Money Management

noreply@blogger.com (muhammad rizwan) — Sat, 04 Jul 2009 13:04:00 +0000

Money management is a part of investment management that teaches us how much risk an investor can and should take up. Money management in some form or the other is also referred to as the asset allocation, portfolio allocation, trade management, position management and size management. In Forex trading, money management requires trade planning, which helps in cutting losses and preserving capital.
The following are the key guidelines for money management which can help an investor in allocating their funds wisely, in turn helping them with greater capital appreciation.
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Good money management starts with good planning and planning starts with the setting up of specific financial goals. Set long terms goals for your financial needs in terms of retirement, education, children, etc., and see how forex trading fits in. Ideally, forex trading shouldn't be a whimsical reaction to a night of binge drinking, so to speak!
The second guideline for money management, as experts suggest, is that the total investment of funds should at any time, be no more than 50% of the total capital available to an investor . The other half of the available funds should be kept in reserve, in case of any market downturn or adverse direction.
Another critical aspect of money management is never to put all your eggs in one basket- often tempted by potentially large gains, novice investors will dump a large sum of money in a single Forex contract. This, while offers a potentially large gain, can also mean the end of your entire life's hard earned savings. Again, having a trading plan with clear risk tolerance metrics is critical. Experts suggest that the total investment in any pair should be limited to 10-15%, of the total portfolio.
The amount of risk in any trade should be limited to no more than 2% of the total invested capital. This is essentially a cap on how much risk or loss a trader is willing to bear, if there is any downturn or adversity in the market.
A trader should not invest capital in just a single pair, but ideally in multiple pairs, to achieve the benefits of diversification. For instance, take EUR/USD, USD/JPY, and AUD/CAD. Rather than putting all the money in one pair, traders can make portfolio of different pairs, according to their choices (based on research) and can take long or short positions.
2 contract - Long Position in EUR/USD.2 contract - Short Position in USD/JPY.2 contract - Long Position in AUD/CAD.
The given guidelines are essentially just that- guidelines! They cannot be thought of as strict rules. For instance, based on one's own preferences, a Forex trader may choose to invest up to 20% in a single contract. However, these guidelines on money management can be a critical asset for novice and expert traders alike, in helping them create a sensible trading system, set limits on their trading, make realistic trading goals and earn profits through intelligent Forex trading.
Key Takeaways
The recipe for success in FX trading: Sound entry/exit strategy, money management and emotional control. Don't put all your money in one market or one trade, design a portfolio and set goals. Remember, diversification is the key to effective portfolio returns while trading Forex!

What is Meant by Money Management

noreply@blogger.com (muhammad rizwan) — Sat, 04 Jul 2009 13:03:00 +0000

'What to do', 'when to do' and 'with how much money;' these are the basic questions which every trader has to think about before he/she starts trading. Successful Forex trading requires in-depth knowledge of price forecasting through which traders know exactly 'what to do,' (which currency to buy, which currency to sell, etc.). After selecting the currency, the next question is 'when to do,' (means the right time to enter the market to buy the pair). Last but not the least, for successful trading, money management is the key to earning long term profitability in the Forex.
--- advertisment --- Proper management of money- No trader can make profits in the market without the proper knowledge of money management. Money management helps traders gain an edge in terms of lowering risk exposure while still staying in the green. Nobody can control the market, but they can control the amount of money and risk on each and every trade that they make. Money management is a skill that traders have to acquire with experience and patience. When should the lot size be doubled? How to manage the capital with risk? How much should I risk on this trade? These are some of the key questions, which every trader wants to be clear about, before jumping in to the market. Traders can apply money management techniques, through the following simple rules:2 % rule - Most of the traders in the market follow the 2% trading rule, which means they exit from the trade when the pair goes below 2% of the capital.For example, if one trader invested $1000 in the market, then he/she should decide to exit from the trade, when their trade value falls by $20.Lot size - Lot size plays an important role in trading. Some traders believe in entering the market all at once (or buy lots at once), while on the other hand; some traders believe in pyramiding or averaging, which refers to the incremental purchase of lots, when the market is moving in their favor.Setting a financial plan - In today's world, financial planning is very important, whether it's an individual or a family, corporation or sole proprietorship; all of them need to manage their money. Everyone thinks about their children's education, marriage and retirement. A financial plan is a plan in which a budget related to future saving and spending is laid out. Everyone wants to gain profits in his/her life, whether it comes from business, investment or trading. Forex is a nonstop market and a very good option for those who want to earn a few extra bucks after their day job. Key Takeaways
In order to be successful in trading, novice traders have to follow the three step method:
A) To conduct research to forecast future price trend on the basis of the fundamental and technical analysis. B) To make trading plans, as per their research as well as financial situationC) Conduct proper money management and always go with their trading strategy.

How You Can Get Experience Trading

noreply@blogger.com (muhammad rizwan) — Sat, 04 Jul 2009 13:02:00 +0000

Real market experience can be very risky for novice traders, because in the beginning they have to start with nothing but risk- their hard earned money can be easily lost due to lack of knowledge and practice. However, is it also possible to gain real market experience without actually betting the farm? The answer is yes, thankfully!
Many Forex trading brokers offer a demo trading account so that their clients can watch real-time market activity, without trading with their actual money. In such an account, traders trade real contracts at actual prices, albeit with virtual money. Demo trading account provides novice traders an excellent opportunity to learn about the Forex market. In Forex trading, this can be the difference between going bankrupt and learning the ropes without actually fighting the fight. Traders or investors can easily download the trading software and after registering their basic details.
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The demo account usually comes with the benefit of learning how to use that specific software or terminal as well. While most terminals come with standard features, some such as Easy Forex come with additional features such as Inside Viewer. Gaining familiarity with the terminal itself can be a critical asset in forex trading. Demo accounts usually have all the features available in a real trading account and are usually free to download from nearly every broker.
Some of the advantages of the demo trading account are as follows:-
1. Easy to understand real market conditions - The best way to understand real market conditions is to watch the market closely to understand what exactly is going on. As it is not advisable for novice traders to take trades in the market without having in-depth knowledge about the market, a demo account is very beneficial, nay, recommended!
2. Easy to learn software by taking trades- To learn the software is not a difficult task for anyone. Novice or experienced traders can easily operate on this software and it usually takes a few minutes to a couple of hours to gain familiarity with the key functions- how to enter an order in the system, how to read bid and ask rates, how to view portfolio balances and how to use the toolbars.
3. Easy to learn charting techniques- The biggest advantage of any demo trading platform for traders is the tick by tick live data that is not easily available outside the demo system. Another advantage of the demo account is the ability to read and plot charts and indicators that are available on the system. Different terminals come with different features, although almost all of them have the basics- moving averages, RSI, stochastic oscillators, Fibonacci retracement and others
4. Live market update- Live market news and updates are also available. These help in gaining fundamental insight on factors that have a bearing on the forex market- GDP and other micro/macro economic indicators, employment numbers, etc.
Demo trading is thus a boon for novice traders. Through 'virtual trading', beginners can understand the market, learn to execute trades, take advantage of charting and other features and at the same time, become a skilled forex trader.

The 3 Basic Principles of Trading

noreply@blogger.com (muhammad rizwan) — Sat, 04 Jul 2009 13:02:00 +0000

Trading is a risky business whether it is stock, commodity or Forex trading. It requires discipline, patience and experience, not to mention knowledge. In financial assets (like stocks, commodities, Forex), there is no perfect buy or sell. When someone buys, another person sells, which means that someone might end up with the short end of the stick. Trading can a tough job even for experienced traders as they have to follow a set of rules defined by him before taking up the trade.
1. Discipline- Discipline is the key to success in trading. Traders can become successful in the financial market only if they follow set rules and strategies in trading. In the beginning, profit and loss should not matter for novice traders; the only thing that matters is how they trade as in the long term, traders will make huge profits if they follow the discipline of trading. Disciplined trading also helps traders overcome the problem of greed and fear. Some of the basic rules which have to be followed by traders are as follows:-
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A) HonestyB) Set trading hoursC) A clear view of how much loss are they able and willing to bearD) Profit targets
2. Market psychology- Market sentiments also play a key role in trading. Greed, fear, emotions and expectations are the most important factors which affect investment or trading decisions. Behavioral finance generally disagrees with economics' concept that the market behaves rationally and it is difficult for traders to go with a rational decision in the irrational market. Market psychology suggests that the market's sentiment, whether it is positive or negative, ends up being the key direction for the market, whether the pair is undervalued or overvalued. Technical analysts use chart patterns, trends, oscillators and other important momentum indicators to gauge the expected behavior of the market. Technical analysis reflects not only the fundamentals but also the emotions of the crowd.
3. Trading system- A trading system is a set of rules and parameters defined by traders, based on which they execute forex trades. It provides guidelines on entry points, exit points and the most significant factor- the stop loss, which traders have to keep in the front of their minds before even entering a trade. It is essential for every trader to design a trading system so that it takes the emotion out of the game and saves a lot of time. Things that traders have to keep in mind, while designing a trading system are as follows:-
A) Designate all key parameters, including entry and exit points, as well as stop loss.B) Decide the trading amount.C) Select the time frame or holding periodD) Make extensive use of technical indicators such as RSI, OBV, and stochastic oscillatorE) Back-test the system.F) Start trading!
In summary, beginners and experienced traders alike must remember the key principles of forex trading- discipline, method and a strong understanding of market psychology.

How To Make Money Trading Forex

noreply@blogger.com (muhammad rizwan) — Sat, 04 Jul 2009 13:01:00 +0000

Buying and selling in the forex market is like buying or selling stocks, bonds and commodities market. The only difference is that currencies are traded in pairs, while on the other hand individual scrips and commodities are traded in the stock and commodity markets. Traders who are experienced in trading in other markets can still easily understand Forex markets. Novice traders may face a little difficulty in the beginning, but with a little investment of time, they can easily understand the forex market.
Leverage and cost are the beauty of Forex trading, which gives an additional edge to the Forex market as compared to equity and other markets. The most important thing for trading in Forex is to understand Forex quotes and be able to calculate profit and loss. Examples can be a good way to understand currency pips and trade 'balances'. In Forex market, the key is to compare one currency to another and to think about whether the price will fluctuate in favor of the trader or not. Let's understand this with the help of an example.
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Example of Stock and commodities:-
In this example, a trader bought 100 shares of Microsoft at $20 and sold the stock in the next month at the rate of $22, which means that the trader made the profit of $200 at the end of the trade.
In the next example, the trader bought Gold for $930 and after a week sold it for $940, for the gain of $10, making a profit of $1000 on the trade.

What is a PIP and How is it Calculated?

noreply@blogger.com (muhammad rizwan) — Sat, 04 Jul 2009 13:00:00 +0000

Before trading, it is essential for traders to clearly understand the concept of Point in Percentage (or pip), so that they can easily calculate their profits and losses.
PIP - Pip means percentage in points. This is the smallest price increment a currency can make. In Forex, prices are quoted up to the 4th decimal point, which is 1/100th of a cent. Most of the pairs in Forex market are quoted to 4 decimal points (.0001); however there is an exception with the Japanese Yen for which prices are quoted only to two decimal points. For instance:-
1. EUR/USD- The pair is traded at 1.3568 and if the pair moves from 1.3568 to 1.3569, then the movement in the pair is 1 pip. In the same way, if the pair moves further up to 1.3588, then the movements in the pair is equivalent to 20 pips.
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2. USD/JPY- In the USD/JPY, prices are quoted up to 2 decimal points like 95.65, 98.89. If the pair is traded at 95.65 and rises up to 95.66; it shows an increase in the pair movement of 1 pip.
Lot Size- Spot Forex markets are traded in lots. The standard size of a lot is 100,000 units. A 'mini' lots are also available with some brokers, which is equal to 10,000 units each. A 'micro' lots consists of 1,000 units, but this lot size is not always available.
Calculation of pip value:
Formula Pip Value = (One pip/exchange rate) * lot size

What Do You Need To Keep in Mind

noreply@blogger.com (muhammad rizwan) — Sat, 04 Jul 2009 12:59:00 +0000

There are few small yet important factors which traders should keep in mind while trading Forex, particularly for novice traders.
1. Start small and grow with experience- "Big money attracts big profits." This statement is the biggest trap that a novice trader can fall into. It definitely is true for experienced traders who have a hold on the market. However, novice traders are not advised to enter the market with large sums of money. Inexperienced traders should play in the market with small amounts of capital so that their losses, if any, will be limited and the gain in terms of experience is high.
2. Don't play with huge leverage - "The more leverage you use (greed), the more fearful you become (fear), which ultimately results in wrong decisions."
In the forex market, leverage is typically high and can become a burden for the novice trader. As novices are attracted by quick, large profits, they fall in the trap of trading with high leverage which comes back to bite them as a trade turns the wrong way.
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3. No Speculative Trading or overtrade- Speculative trading is very harmful for both new traders as well as for those who have a lot of experience in the market. For novice traders, given the lack of knowledge about the market, acting on instinct or 'tips' from unreliable sources can be very harmful. However, trading on non-quantifiable metrics can be extremely harmful for even experienced traders.
4. Do your proper research before taking an order.
Do your homework! This goes completely opposite to speculative trading. It is important to understand fundamentals and the general technical characteristics of the forex contract, before entering a trade.
Analysis is the first thing that every trader should do before taking any position. Traders must have a clear idea why he/she is buying; whether on the basis of the fundamental analysis or on the basis of the technical analysis, or purely based on a 'he said, she said'.
5. Decide your stop loss and profit target- Always cut your losses and let your profits run- financial trading can never make good of emotions. A novice trader in particular, can become very attached to an instrument or position and refuse to cancel out a trade that's not yielding positive returns. Traders must define their profit target and stop loss ahead of the trade. After taking the position, they must follow discipline and do things according to their trading plan.
6. Always keep your trading history- Traders should always maintain their trading history, so that they can easily refer to it to learn from their previous mistakes and also for understanding future trends.
"Plan your trade and trade your plan"
After conducting thorough analysis, it is important to make a trading plan, covering not only entry and exit points, but also the amount of money to be thrown into the ring. Losses made with a good plan are far better for novice traders than making profits with speculative trades. In the long term, trading with a good plan will yield positive results.
Thus, remember they key tenets of trading- start small, plan your trades, research before you leap and don't get too tempted by leverage!

How Does The Forex Market Differ From

noreply@blogger.com (muhammad rizwan) — Sat, 04 Jul 2009 12:58:00 +0000

How does the forex market differ from the Equity market?
The main differences between Forex and Stock markets are as follows:
Basis
Forex Market
Equity Market
24 hour market
Yes
No
Volume and Liquidity
Very High
Less than Commodities and Forex
Commission
No
Yes
Exchange
No
Yes
Margin Trading
High
Low
Manipulation
Difficult
Commonplace
1. 24 Hour Market - The major difference between the forex and equity market is that forex market is a non-stop, continuous market which gives full freedom for traders to choose their own time to trade. On the other hand, the stock or equity market opens for about 8 hours a day from Monday to Friday, depending on the exchange in question.
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2. Volume and Liquidity - Volume and liquidity are the biggest advantages of the forex market, leading to its substantial popularity among traders. The volume in Forex markets is about 100 times higher than global equity markets. Liquidity plays a crucial role in its popularity, which helps traders exit trades easily when the market is not favorable.
3. Commission and Transaction cost - Transaction cost and Commission in the forex market is close to nil. This is also another reason that forex is becoming a strong alternative to equity markets, particularly as corporate fraud and crashing markets take their toll on investors. In addition, equity markets involve substantial brokerage and commissions which increase the overall cost of trading.
4. Exchange trading - Forex market is an inter-bank market and most transactions is carried out over the phone or the internet between banks on behalf of their customers. Only Currency futures are traded on the exchange. In the case of equity markets, trading cannot take place in the absence of an exchange- even in case of the Over-the-Counter (OTC) market.
5. Margin Trading - In forex trading, margin trading is a common norm as currencies are traded based on a margin (initial and maintenance margin). However, in case of equity markets, margins are typically expensive are not commonplace. Cash is the most common form of trading in the spot equity market. In addition, the forex market involves much higher leverage than in the case of equity markets. For instance, forex brokers can provide tremendous leverage of upto 50X or even 100X. Equity markets typically involve much smaller amounts of say 10X.
6. Manipulation and intervention - Manipulation in the stock market is very common, in the form of insider trading, block deals, etc. This adds to the risk of the equity markets across the world. In case of forex, however, manipulation is very difficult as the market is much larger and far more complex.
Equity operators and market makers play their own game by buying and selling blocks of equity to manipulate stock prices. Typically, the only intervention in the forex market is done by government bodies, particularly the central banks, who buy and sell currencies to maintain a certain level of currency valuation

Here Are Some Essential Terms For Forex Traders...

noreply@blogger.com (muhammad rizwan) — Sat, 04 Jul 2009 12:57:00 +0000

Basic Forex Glossary
1. Bears - Bears are the opposite of bulls, and they bet on a falling market. Hence, they are by virtue of their expectations, short traders.
2. Bid / Ask Price - Bid price is the price quoted by the bidder to purchase a currency. The ask price is the price which is offered by the trader on the other side of the trade.
3. Bid / Ask Spread - The difference between the bid and ask price is called the spread. This is also the main indicator which helps in predicting the volatility in the market. If the spread is more, it indicates high volatility and if it less it shows low volatility.
4. Bulls - Bulls refer to traders who trade in an uptrend. In other words, bulls are essentially long traders and expect the price to go up.
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5. Cross rates - Cross rate is also an exchange rate between two currencies, ut traded in another market. For instance, GBP/CHF is a primary currency pair in the UK and Switzerland, but a cross rate in the US and Japan.
6. Good till Day - this is an order that's placed with a broker to be valid for only that day. If the specified limits are not reached, the order gets automatically cancelled at the end of the trading day.
7. Good till cancelled - A good till day order, except that it remains valid until the limit is met. It is mostly not favored by brokers or traders as it exposes them to long term market risks.
8. Initial Margin - Initial margin is the money deposited by investors before entering into a contract. This is sort of a down payment on a loan- it needs to be furnished with the broker in order to participate in a forex trade.
9. Long / Short Entry - Long means buying a currency or pair. This is a position to buy (plus) assets or instruments when an investor believes that the market will go up. On the other hand, when investors want to take advantage of downward moves, they take short positions.
10. OTC - Over the Counter (OTC) market is where transactions take place over the phone between banks and dealers. No interaction takes place between the parties.
11. Stop loss - Stop loss is the amount of loss which traders or investors are ready to bear in an unexpected turn of events. In a trading system, stop loss play a key role for traders by limiting their downside by automatically completing a round-trade. For instance, if someone bought EUR/USD at 1.3575 on a bullish expectation, and the pair starts falling, the stop loss can automatically be triggered, at say, 1.3400, to limit losses due to a crash.
12. Transaction Cost - Transaction cost is the cost of buying and selling a financial instrument. The Bid/Ask spread is also the transaction cost and is the income earned by the bank in a forex trade. For example, in the USD/JPY bid/ask is 96.60/96.62, and the transaction cost is 2 pips.
13. Volume - Volume is the quantity of trade. It indicates the total quantity and amount of trading that took place in a financial market.
14. Volatility - Volatility is the measure of movement in prices over a period of time. Beta and standard deviation are the two statistical measures through which one can estimate volatility.
15. Limit order - Limit order is an order placed by traders to buy or sell a currency pair automatically at a specified price. This is also the way stop losses are executed by forex traders.

What Are Direct and Indirect Quotes? How Do You Read Forex Quotes?

noreply@blogger.com (muhammad rizwan) — Sat, 04 Jul 2009 12:57:00 +0000

Direct and Indirect QuoteIn the foreign exchange market, two rates are quoted in pairs by market makers (or dealers). Exchange rate - Foreign Exchange rate (or FX rate) is the rate at which the one currency is valued in terms of another currency. For e.g., 1USD = 96.62 JPY. This is the exchange rate between the US Dollar and Japanese Yen, which means that 1 US dollar is equal to 96.62 Yen.

Direct Quote - A direct quote means indicates how many units of local currency traders need to buy one unit of foreign currency. In other words, it's the home currency price of 1 unit of foreign currency. In a direct quote, the domestic currency is always listed as the base currency.
For instance, for a US trader to compare the Singapore Dollar (SGD), to say, the US Dollar, the pair will be listed as USD/SGD, which indicates how many US Dollar are required to buy one Singapore Dollar. Here, the USD is the base and the SGD is the counter currency.
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Indirect Quote - Indirect quote indicates how many foreign currencies are needed to purchase one unit of domestic currency. In an indirect quote, the foreign currency is the base currency and the domestic currency is the counter or quote currency.
For instance, if Singapore is the foreign market, then an Indirect Quote will be displayed as SGD/USD. This quotation is the reverse of direct quote which means that how many Singapore Dollars are needed to buy a single US Dollar.
Learn how to read FX quotes
In the Forex market, currencies are traded in pairs and it is not difficult to understand forex quotes. Currency pairs consist of two currencies; Base currency and Quote currency. Base currency is the first currency of the pair (numerator) and the second one is called the quote currency (denominator). For e.g. In the USD/JPY pair, the US Dollar is the base currency and the Yen is the quote currency.
Before start trading, traders have to understand basic terminology. The most important thing is to be able to read forex quotes and to understand how to simultaneously buy one currency and sell the other.
For example:1. USD/CAD- the picture below depicts a typical forex quote and shows how to read the bid and ask prices for the USD/CAD. Here, the US Dollar is the base currency and the Canadian Dollar is the quote currency. The bid price for the pair is 1.1735 and the ask price is 1.1738. If a trader takes this trade, then it means that he is buying the US Dollar and simultaneously selling the Canadian Dollar.

How Much Capital Do You Need To

noreply@blogger.com (muhammad rizwan) — Sat, 04 Jul 2009 12:56:00 +0000

How much does an individual have to pay to start trading in Forex?
Forex trading is far easier than trading equities, as traders need to cover only a few major currencies such as the USD, GBP, EUR, and JPY. Trading forex is still not child's play and warrants good knowledge and awareness about the world's different markets, economy, and currencies pairs, in addition to news and current affairs that affect forex.
In order to start trading forex, in addition to the basic money required, some other requirements are mandatory.
1. Open an account with a broker - The first step is to open an account with a reputable and reliable broker - easyforex.com for instance. Traders have the choice of opening an account on their own name or (family members), or even an account on their business name. Various brokers provide various kinds of account types; Easyforex provides 4 types of accounts as follows:-
Account Type
Minimum Deal
Margin
Mini:
$2,500 minimum deal
$200 margin
Gold:
$50,000 minimum deal
$500 margin
Platinum:
$250,000 minimum deal
$5,000 margin
VIP:
$500,000 minimum deal
$10,000 margin
Shariah (Islamic) Accounts are also available for those traders that would like to remain Shariah compliant, particularly muslim traders.
Platinum and VIP accounts are used by expert trades who understand the market better than the novice traders. Small or Novice traders who have a small amount of capital can use the Gold and Mini account as their main purpose is to learn the forex trading.
2. Complete Registration work - After deciding on the account type, traders have to go through a some registration formalities in which they need to provide some personal information (like name, address, date of birth), etc. along with payments, bank account and other related informatoin
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3. Activation - After the completion of paperwork, brokers will get in touch with the client to notify of activation, after which they will provide details on accessing the terminal or platform for trading in forex. Money can be deposited in a number of ways; this needs to be clarified with the broker beforehand. However, most brokers will accept the common payment methods such as credit card, PayPal and wire transfer.
After opening an account, the main question is how much capital will be required by a novice trader in the beginning? Money management plays a key role in trading decisions. For a novice trader, a smaller amount is better ,as their main aim is to gain familiarity with forex trading, atleast for starting out. This amount cannot be fixed; it differs from person to person- while one novice trader might say $1,000 is sufficient, another might think a minimum of $5,000 is required. The decision is a personal one, and like we said earlier, money management is critical.
For instance, Mr. X is 30 years old, working as a bank manager in New York. He wants to start trading in forex. His annual income is $30,000 and has a savings account with a balance of $40,000. A financial planner advised him to go for a 40:30:30 capital allocation plan, which means he places 40% in a risky investment (such as equity and forex) and the remainder in bonds and money market instruments. Based on this plan, he may choose to start with a balance of $5,000 to trade forex, where he can invest upto $250,000 in the market (platinum account with

What Are The Different Types of Forex Traders?

noreply@blogger.com (muhammad rizwan) — Sat, 04 Jul 2009 12:56:00 +0000

Who can trade in the Forex market?
In the forex market, investors or (traders) are of three main types- Hedgers, Speculators and Arbitrageurs. All of these investors contribute to the substantial liquidity of the forex market. This classification is on the basis of their trading orientation or objective- to hedge currency fluctuations, making a quick profit from price differential or simply betting on expected rise and fall of the currencies.
1. Hedgers - Hedgers are investors who aim to eliminate the risk of fluctuations in currency rates, based on which their basic revenue or profitability depends. The hedger's motive is not to make a huge gain but rather to safeguard their existing position. Hedging also helps investors and corporates (particularly export oriented) lock their profit stream by taking another position in the derivatives market. In general, it is like insurance against the probability of a loss due to currency rate changes. The loss cannot be avoided completely, but the hedge can minimize the extent of the loss. A perfect hedge is rare, but investors can reduce or minimize their risk in the event that the market goes against them. For Example - X YZ Ltd. has a main office in the US and one subsidiary in Japan. If the Japanese Yen weakens, it could reduce the revenue or profit in the Japanese segment. To overcome this situation, XYZ can hedge their position by making a short position in the Yen. If the Yen weakens they will get a profit from the short position which can be used to offset the business loss.
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2. Speculators - Speculators tend to act like other equity or debt traders, taking a single position, intending to make a profit from the movement in price. Speculators usually end up taking a certain amount of risk, with the hope of a substantial profit. For Example - Speculators may short the US dollar, with the hope that with a fall in the US GDP numbers, the USD may weaken. When the dollar actually falls, they will cover their positions making a profit.
3. Arbitrageurs - Arbitrageurs are those investors who trade in two different markets, exchanges or contracts, to simultaneously to take advantage of price inefficiencies. Price inefficiencies are very time sensitive, meaning that once a gap occurs, it has to be taken advantage of very quickly or it will be lost. Typically speaking, arbitrage is a very low risk strategy as a trade is only made when the opportunity is available. For Example - Exchange rates EUR/USD = 0.6522, (New York) EUR/USD = .6524 (London) with $10,000 one can buy 6522 Euros in New York, and with another $1000 one can short 6524 in London. With the help of that traders can earn 4 pips without any risk.

What Are The Advantages of Trading Forex?

noreply@blogger.com (muhammad rizwan) — Sat, 04 Jul 2009 12:55:00 +0000

What trade Forex?
Traditionally, equity markets or debt markets have been the sole center of attention for most investors and traders around the world. Currency markets have much to offer, over and above the other traditional and upcoming markets such as commodities, it's not surprising that the volumes in Forex are far above and beyond any other exchange.
1. Non Stop Market (24 Hour Market) - Forex market is a 24 hour market open from Sunday afternoon EST to Friday afternoon EST. In FX markets, traders can decide their own timings to trade.Even those individuals who don't have time to trade during say, their office hours can trade the - the market is always open. The market is connected electronically so it is easy for buyers and sellers to trade without physically meeting.
2. High Liquidity - Liquidity can be one of the biggest assets for traders; this is perhaps the biggest advantage of forex markets. The forex market is the largest financial market with trade value of over $4 trillions a day.
3. Low Transaction Cost - The forex market is a direct OTC market involving trades directly with the market makers- hence does not involve commission. This means that traders have to pay little or no money to middlemen. Under normal conditions, the retail transaction cost is less than .01%.
4. Interbank Rate -The Forex market is connected through a network of dealers or major commercial banks, which deal only through electronic networks and telephones. The forex market does not have any organized exchange such as the NYSE or the LME.
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5. Not easy to manipulate by operators - Forex markets involve large sums of money, which is why it is rather difficult for any trader, operator or market maker to manipulate the market for a sustained period of time.
6. Not Regulated - the forex market is basically not regulated. However, the market makers- commercial banks, etc., are monitored via the relevant rules and regulations in place for them.
7. Hedging, Speculation and Arbitrage - A majority of market participants in forex markets is based on speculative activity, which in turn provides the substantial liquidity available for forex trading .In addition to speculation, hedging and arbitrage are common in the forex market. Banks, institutions, government bodies and jobbers frequently use the forex market to hedge positions in corporate settings (export based businesses). Arbitrageurs are another type of speculative trader who trade on price differential in various currency pairs
8. Highly Leverage - Leverage or Margin makes it possible for a trader to trade in much larger quantities than would be otherwise possible. In the forex market, use of leverage is common and typically brokers provide a tremendous amount of margin to traders.
9. Bull opportunities - When traders shorts one currency, he or she is buying or 'long' trading another. This means that there is always an opportunity for bulls to stay active in the market.
10. Market Information - News and information related to currencies is easily available for investors of the Forex market through various online as well as offline sources.