forex guide » Currency Trading

writing about forex trading techniques

admin — Sun, 25 Apr 2010 21:00:13 +0000

You may forget this after a while, but going back to the beginning, the single biggest barrier before I could consider FOREX as a legitimate investment channel, was that I didn’t comprehend what it meant to trade FOREX.

Well, I obviously understood, you sort of gamble about a pair of currencies’ ratio – “would the dollar outperform the euro?”, but is this really gambling, meaning, is it completely random? what’s my edge here?

I certainly didn’t know how to explain (though I admittedly heard about) leverages, technical analysis strategies, hedging strategies. let alone did I know anything about spot or forward deals etc’.

Going back to those days, I realized it’s far more important to teach these concepts and explain them, before I could send you off to scout for your perfect broker and start trading or even just compare brokers, before you understand the foundations.

I hereby declare the opening of my pet project – the guide4fx.com online forex trading school.

I think it’s far an important topic to be left here on our blog, so we will add such a category to the site, for your reference, and my personal enjoyment.

most important to point out: even after you read this school’s curriculum, you’d probably have to do some homework about practical trading issues such as broker’s interests, software usage etc’. we believe to cover that in our site, so it will stay out of the scope of the school.

hope you’ll find it useful.

Trading quality currency exchange trade in less time – Is it possible, but how?

admin — Sat, 16 Jan 2010 15:36:32 +0000

With a huge daily turnover of around $3.4 billion, trading currency in foreign exchange markets is becoming increasingly popular. There is money to be made; however, many FOREX traders are not consistently profitable. Because of the availability of the mini-forex accounts, FOREX trading can be traded by anyone with just a small amount of capital.
>> Before you carry on anything; educate yourself on the working process of the foreign exchange market. You should get to know and understand the basics of relative currency values, which will mean understanding a little economics.
>> Pick your trading period. Day traders buy large quantities of currency and then wait for small swings in prices to sell for a profit but if you are taking this approach, you will be requiring a great deal of time and micromanagement. And on the other hand, for the swing traders; they take a long-term approach and don’t require being constantly attentive to small changes in the market.
>> Decide which approach are you on? Are you going to trade using the technical analysis or the fundamental analysis? Majority of the forex traders who are also technical analysis traders make their decisions based on charts, buy and sell currencies when they reach certain predetermined levels. And on the other hand, the users or the traders of the fundamental analysis trade on the basis of market fundamentals like news reports, macroeconomic trends and commodity prices. But you will require quite more experience if you are trading with the fundamental analysis. But though, you can find several currency traders out there who are trading the forex market with the blend of these two approaches.
>> Why not buy specialized currency trading software? It will ease your task. With the help of such trading software, you are able to track and analyze data more easily. Besides, you can also enroll in many online FOREX courses, but please be careful to not get trapped in the unrealistic promises or so – called high profits with absolutely no work. Avoid those who are charging you unreasonable amounts of money.
>> Give it a try to trade simulator. So what is this? Trade simulator is a system that uses fake money but tracks the real currency markets. With the help of this, you will be able to practice your trading skills without risking your own capital, and it allows you to evaluate your own abilities at absolutely zero size risk.
>> Set up a mini – FOREX account. If you are setting these things up, you will require only a small amount of capital and allow you to begin trading immediately as possible.
>> Using the resourcefulness and knowledge of your forex broker is one way how you could trade forex in less time and in a well manner. You should always feel free to ask your broker to explain you the dynamics of forex trade. If you are attentive, you would realize that through simplified explanations by your broker, you could actually learn how trading is done and closed and execute your trade in the shortest possible time by learning and mastering the required forex skills.

What’s your approach to trading foreign currency?

admin — Sat, 16 Jan 2010 15:29:21 +0000

A currency trading approach based on sound study and technical analysis can become your magic wand while operating in the forex market. Some of the most common currency trading approaches may include scalping, swing, position, discretionary, and automated trading. However, if you are a new investor it is better to first understand which forex trading style suits you best.
There are basically two types of Forex trading systems — mechanical and discretionary, on the basis of which you can formulate your forex trading style. The trading signals that come out of mechanical systems are mainly based on technical analysis applied in a systematic way. In discretionary systems you use experience, intuition or judgment on entries and exits.
If you are methodical and not willing to invest until you understand every aspect of how the different political, economic, and psychological factors going to affect the currency rates then your Forex trading style is going to be based on trends. Now you can predict currency momentum trends by understanding all factors that affect exchange rates between different economies.
On the other hand, if you are typically looking for the highest profits in the least amount of time, your Currency Trading or Forex trading approach will be based on the strategies. For example, Scalping is a favorite currency trading strategy as it involves predicting future exchange rates a few hours or days into the future.
By mobilizing capital faster, you can buy in, make a quick but reasonable profit, and get out before the rest of the market has had time to adjust. So in this particular forex trading style you can make your profits before the markets can retrace and are known as counter-trend investors.
If your forex trading method is based solely on technical analysis you will focus upon the recent history of the currency exchange rate movements to predict future changes. In this specific forex trading style, you consider the fundamental indicators such as economic or political news as inconclusive and unreliable predictors of future price movements.
However, through technical analysis, it is possible to examine how similar political or economic news events affected past prices – and then you can formulate your own forex trading style to predict the future price movements.
You should not develop your currency trading approach exclusively based on only one type of analysis. Although you will find that the trend investors and counter-trend advocates do differ greatly in their currency trading approach, trend investors are expected to do better when they focus on fundamental factors and their potential effects on currency exchange rates.
Here, as an investor you are incorporating many factors GDP growth, interest rates, trade deficit/credit figures, and commodity prices and their impact in your currency trading approach.
For example your forex trading style should choose the right currency pair. You must decide on how long you plan to stay in a trade. You should also have clear exit plan. You can place your stops and limits accordingly.
Your currency trading method should guide you in deciding how much you are willing to risk and how much you are looking to gain. Always keep track of important news and technical levels, which may be tested within your time frame.

How can I handle risks while I am trading foreign currencies?

admin — Sat, 16 Jan 2010 15:27:35 +0000

It can be difficult to tell what you should risk while trading your account. Some sources say no more than 2% or your account, others say no more than 3 or 4 % of your account. The actual percentage doesn’t matter as much as the mindset behind the percentage. You need to be conservative as a trader; never risking more than 5% of your account, from there the actual number could be lower but not higher. If you think 5% isn’t very much then you are right but you should also step back and evaluate your motives for trading.
Forex traders who are trading to earn money will be very conservative in how much of their account they are willing to put on the line because they realize their account is what is going to keep them trading from day to day. If a trader is looking to get rich quick then they will often put large percentages of their account at risk because they don’t view money as an asset. Greed has been, is and will be the fall of many good traders.
Starting out small and then adding to the trade is a good idea because it gives you a chance to see where the trade is headed before you put large amounts of money on it. A good way to look at it is to start by trading 1-2% and then adding on from there. This will help you see that you are caring for your money in the best way possible. Practice knowing when to add real money to the trade in your demo account and dont trade real money until you is very comfortable about judging the trend of the trade.
A lot of traders think they will be able to get the market to give them certain money. However it is important to understand that the market may not be willing to give the amount you are looking for. Go into trading with the mindset of getting what the market is willing to give. This mindset will protect you against making decisions because you need more money; instead it will give you the edge because you are studying what is really in the market.
You need to keep your emotions in check. If you have a loss you need to know how to handle it so it doesn’t affect the rest of your trades. If you win you need to know how to handle it so it doesn’t affect the rest of your trades. Set an amount you can afford to lose, an amount that you can lose without having it shakes your world. Once you feel good about the amount and that you can stay within the bounds you have set then move to live trading
And besides why not try out some tips?
Just get to the depth of the following points and perhaps you could of course be able to manage your risks.
>> Exit the forex market at profit targets. How? Take the aid of limit orders.
>> Control risk by capping losses. You could control risks to some extent by placing stop loss orders.
>> Get to know where you would have to place stop and limit orders.
These points if considered will certainly work to your benefit.

Entering into the foreign currency trade as a forex trader

admin — Sat, 16 Jan 2010 15:24:10 +0000

The Forex market exists as a consequence of the import and export business. It is available for you to make a living from every day and will be for a very long time. If you go about learning to be a Forex trader in the right way, then you can build a lucrative career well into the future.
Sound good? Let’s take a closer look then!
The Forex is a vast global market. So how can you make money trading this market as a consistent Forex trader? It has to be mentioned that trading Forex is a high-risk strategy. Just make sure you have followed the points detailed below and build the foundations, slowly.
Ok, so how can you be consistently successful and build a career working from home, trading the hours of your choice?
The answer is by being professional and business-like, taking your trading seriously and being organised with discipline. Learn as much as you can, watch the charts and see what happens.
Find out about candlestick charts including the most important trend reversal signals and also the confirmation candles. Watch how the market changes quickly when economic announcements are released. It is advised NOT to trade during these times as price movement is almost impossible to predict and wild swings are likely.
But the most important thing to remember is that you can make a lucrative future for a long time as a Forex trader, so it is well-worth taking it slowly, building the foundations and fine tuning your strategy. This will take time but many people see the Forex market as a fast moving profit machine! It can be that too but you need to have some good experience behind you first!
Paper trade your strategy to begin with, and see what works and what does not. Paper trade for at least 3 months and write everything down in your trading note book.
Record the time, date, setup, position size, entry price, stop loss, exit price and most importantly how you felt during the trade. Include if you were stopped out, if you came out early and when you took profits. Take time to consider how you felt you did and any notes to self to remember for the next trade.
Once you have been paper trading for awhile you can then move onto using a demo account with your chosen Forex broker (a recommended broker follows at the end).
Learn to use the Broker’s software with your demo account first before opening a live account. Adding pressing the buy or sell button to the equation with your live account, with your hard earned money at stake is a big step in your development as a Forex trader.
The final step is developing your trading account using your own money. This adds more information to digest and is when your emotions come into play. This is why it helps to have a good strategy you are comfortable with before this final stage.
The above points are essential to planning a successful career as a Forex trader and none of them should be ignored or taken lightly. The Forex market has huge rewards for those who are disciplined and have the right approach. The alternative is that the market will take your hard earned money. Which side will you be on?

How can I handle risks while I am trading foreign currencies?

admin — Tue, 12 Jan 2010 14:14:03 +0000

Entering into the foreign currency trade as a forex trader

admin — Tue, 12 Jan 2010 14:10:49 +0000

How can I handle risks while I am trading foreign currencies?

admin — Thu, 07 Jan 2010 15:21:14 +0000

Cross Currency – An Introduction to the Cross Currency Trading in the Forex Market

admin — Wed, 06 Jan 2010 10:24:37 +0000

Simply defining, a currency-cross is any currency pair in which the US Dollar is neither the base nor counter currency. As for example, GBPJPY, EURJPY, EURCAD, and AUDNZD are all considered currency crosses.
Investopedia.com defines cross currency as, “Historically, an individual who wished to exchange a sum of money into a different currency would be required to first convert that money into U.S. dollars, and then convert it into the desired currency; cross currencies help individuals and traders bypass this step. The GBP/JPY cross, for example, was invented to help individuals in England and Japan who wanted to convert their money directly without having to first convert it into U.S. dollars.
So, how heck does the currency trading work?
Historically, forex transactions had to involve the US dollar. When two Non – USD currencies had to be traded, it was required for the trader to first convert the currency he was holding into US Dollars and then convert US Dollars into the desired currency. Now the cross currency trading bypasses this step.
When it comes to the types of currency pairs, there are two types of cross currency pairs:-
1. Pairs involving the Euro as the reference currency, such as Euro/Japanese Yen (EUR/JPY), Euro/Swiss Francs (EUR/CHF) and Euro/British Pound (EUR/GBP). Cross rates that involve the Euro are known as Euro crosses.
2. Pairs that involve neither the Euro nor the US dollar, such as Malaysian Riggit/Singapore Dollar/Thai Baht (SGD/THB). We can understand these as cross currency pairs or cross rates.
How can cross currency pairs be of benefit for the forex traders?

>> A trading can be simple with the help of cross currency pairs. A trader is able to directly convert one currency into another, without first converting money into US dollars. This will probably save your busy time and avoid unnecessary hassles.
>> Cross currency trading offers high profit potential.
>> Cross currency pairs can be used to diversify the portfolio.
>> Price fluctuations in cross currency pairs are usually lower than in pairs involving the US dollar. Cross currency pairs are, thus, suitable for traders who are quite a newbie to the forex market.

Though you will find several benefits of cross currency trading out there, but though like every good things do; cross currency trading also comes with some to be mentioned drawbacks.
Some of the drawbacks of the cross currency trading are:-
1. Cross currency markets are highly insecure.
2. The political and financial condition of underdeveloped and developing countries can change suddenly, resulting in high risk.
Above mentioned are some of the features of cross currency trading that every trader like you and me require understanding in order to carry out our trades smoothly and efficiently. Proper knowledge of the cross currency trading enables you to go deep into the foreign currency trading along with enabling smooth flow with the economic trend when it comes to the foreign currency market. So are you ready to make yourself a learned trader? Best of luck and Happy Trading!

Entering into the foreign currency trade as a forex trader

admin — Wed, 06 Jan 2010 10:12:35 +0000