10 Essential tips for online Forex Traders

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10 ESSENTIAL TIPS FOR NOVICE FOREX TRADERS

If you are new to the world of online FOREX trading you will realise its not as simple as people make out to be or what the ever so promising Forex Brokers promise.
The fact is most people who dont know the in and out of online forex trading will lose and lose quickly.

To win at currency trading online you need to have the right FOREX strategy - Here are 10 tips and if you incorporate them in your trading strategies, you should get a head start in your thirst for consistent FX profits

1. Don't believe the hype
You will see lots of people selling forex ebooks for "only" $100 which promises to make you strike gold in the world of online forex trading. Yes , their is good advice out there - you can get all the information you need free on the internet.

2. Don't day trade
The biggest myth of FOREX trading is you can make money FOREX day trading or Forex Scalping.
You can't!
Many novice traders fall for this myth and lose quickly and wonder why.
As I always say All short term volatility is random and there is no way of predicting where prices may go" up or down", so you might as well flip a coin.

For more on Forex Scalping , read this Article


If you want proof that FOREX day trading systems don't work, ask any vendor for a real time profits track record over the long term and you will not be able to fine one.

3. Work smart not hard
There is a lot of difference in hard work and smart work.You don'thave to work hard in online FOREX Trading, you need to work smart. This means focusing on getting the RIGHT FOREX education and learning and understanding the FOREX tools that actually work in the market not just hypothetically . If you focus on getting the right Forex information, you should be able to learn how to trade in a fortnight.
You will not be rewarded in FOREX trading market for working hard and spending lot of time, you get rewarded for being right and that means working smart.

4. Risk = Reward
If you don't like the idea of risk forget currency trading and pick up something else .
Many traders simply want to avoid as much risk as they can, putting stops to close, or snatching profits. If that's you - you will NEVER achieve currency trading success.
You need to be open minded and accept risk and losses to succeed in online FOREX Trading.

This is because to be a successful Forex trader, you need to be a enterpreneur and have to take risk, not avoid it. No Risk, no reward!

5. Do It on your own
Have confidence in your ability to understand the Forex Market. You are responsible for your own success.
If you follow someone else's strategy you will not have the right mindset to succeed. If you lack discipline and might want to quit after suffering a few losses. Do it on your own and your chances of success are manifolded.

6. Get a simple method
Simple methods always fare better than complicated ones, as they are much more easier to understand and follow.
There is never a correlation between how complicated a trading system is and how much profit it will make.
If you are just starting out in online forex trading, use support and resistance, a breakout methodology and some confirming indicators and that's just about it.
The above way of trading is perfect and will help you should get you the big profits from the big moves.

7. Trade Breakouts
A timeless way to trade FOREX markets.
It works well and will continue to work, simply look in our ebooks section for this powerful methodology.

8. Be patient
You do not get rewarded for how frequently you trade FOREX online- However, You do get rewarded for being quick on your feet and spotting and acting on the best trades and these don't come around very often.
Be patient and only trade FOREX signals from your system - don't be tempted to just trade for the sake of trading Forex.

9. Be realistic
There is potential for huge money in Forex Market, so what's realistic? The best Forex traders compound around 50 - 100% annualy so this is a good number to aim for or may be slightly lower.
These gains will compound quickly and build real wealth in the longer term.
Be realistic and don't try to become an overnight millionaire.

10. Know your edge
If you were good enough to understand the 9 forex tips mentioned above, you will understand that you must have an edge to make money in the long run in online FOREX market.

If after , devising your very own Online FOREX Trading strategy you don't know what your edge is - then you don't have one!
You need to know what your edge is over the majority of the losing traders to win in the Online Forex market.

Final words
If you incorporate the above 10 Forex tips in to your online FOREX Trading plan, You should be on your way to become a good Forex Trader.
Welcome to the world of Online FOREX trading! and Best of Luck!

You might like to read other articles in our Forex Articles section or download one of the huge number of forex ebooks in our Forex Ebooks section.

3 Most Important Forex Fundamental Indicators

There are many fundamental indicators available to the Forex traders today. If you count all of them only for the major currency pairs you’ll get more than a hundred distinct indicators — macroeconomic, monetary, economical, financial, weather-based, etc. For many traders it’s difficult to follow all of them, as it requires time and efforts in addition to the necessity to learn about the effect of all these fundamental indicators on various currency pairs. This article lists 3 most important (in my humble opinion) fundamental indicators that have the highest impact on the currency rates and are quite easy to follow as they are reported not so often.

• GDP or Gross Domestic Product is the main indicator of the macroeconomic strength of the country. The growth of GDP signals a stronger economy and a more competitive currency because the global investors will have to buy this currency in order to invest in this country, and they will want to invest in it because its economy is growing. GDP reports are usually published quarterly but they have three states of revision (advance, preliminary and final) published with the monthly intervals. GDP strongly affects currency pairs both in short-term and long-term. You’ll have a trading opportunity during the time of the release, as the volatility spikes up, and you’ll be able to adapt your long-term positions to the new data after the release.


• Interest Rates are set by the world’s central banks and are the main tools of the monetary regulation. Higher interest rates provide more value to the affected currency, while the lower interest rates decrease the value of the currency. Interest rates are usually revised every month or two during the special monetary policy meetings of the central banks. Interest rate decisions greatly depend on the growth of GDP and other macroeconomic indicators. Currency pairs react with the high volatility to the unexpected interest rate changes. It’s important to monitor the trends in the interest rates to forecast the long-term trends of the traded currencies.


• Unemployment Rates are influential indicators both for currency traders and for the monetary authorities when they set the interest rates. Non-farm payrolls are considered to be the most important of the unemployment indicators in USA and they are released monthly. Major currencies usually react with the short-term tendencies to such releases. Weekly reports on jobless claims can also be considered but they aren’t as influential.

In many cases it’s enough to be up to date with these fundamental indicators to understand the possible market trends in Forex. But, of course, if you wish to get a more detailed picture you shouldn’t limit yourself only with these indicators, especially if you pose yourself as a pure fundamental currency trader.

Drawdown in Forex Trading

The drawdown is a very important property of any Forex trading report, strategy or expert advisor. The drawdown characterizes the risk of the employed strategy. Profitability of a given strategy should always be considered in couple with the drawdown because otherwise you won’t take the risk into account and that’s a very bad thing to do. Forex is a probability-based activity and thus should be treated from the risk/reward perspective.

The drawdown is a difference between some local maximum point in your balance chart and the next following minimum point in that chart. It’s the risk amount by which your strategy can go down during a streak of losses. There are two types of drawdown that are considered to be the important properties of expert advisors (for instance, in MetaTrader platform) — absolute drawdown and maximal drawdown.

Absolute drawdown is the difference between the initial deposit and the minimal point below the deposit level during all test period. It tells you how big your loss can become compared to the initial deposit during the trading. If this value was 0 during the test, then your deposit wasn’t at risk at all.

Maximal drawdown is the maximal difference between the local maximum extremum in your equity chart and the next local minimum extremum in your equity chart. It tells you how low your strategy can go after getting some profit. It can also be called a depth of a losing streak. Generally it’s a good idea not to trade with EAs with the maximal drawdown higher than the profit. But I don’t recommend trading even with strategies or expert advisors that have maximal drawdown at levels higher than 25% of the net profit. Mind your own risk-to-reward ratio and don’t trade with EAs that don’t comply with it.

Now you know what drawdown is and how it’s calculated in Forex trading. Unfortunately, the current version of MetaTrader 4 (Build 225), the strategy tester incorrectly calculates the drawdowns, so if you are testing your EAs, it’s better to calculate both the absolute drawdown and the maximum drawdown manually.

If you have your own opinion or questions about maximal or absolute drawdown, feel free to leave it in a comment to this post.

Forex Chart Patterns

Trading with the chart patterns can be easy if you know how to distinguish them and how to place the entry and exit orders correctly. There are many different chart patterns recognized by the expert financial traders. But in my opinion, in Forex trading there are five most important and rather frequently appearing patterns: ascending, descending and symmetrical triangles and rising and falling wedges. Here you will find the models of these patterns and their descriptions:

Ascending Triangle
Generally, it’s a bullish continuation pattern but the breakout in each direction is possible. If you like taking risk you can go long immediately after you spot this pattern. But if you want to be careful it’s recommended to wait until breakout appears in either side. The most important parts of the ascending triangle are the horizontal line and the upwardly sloping line. It’s also important for the price rate to touch each of those lines at least twice before breakout. This rule is vital for all of the 5 Forex chart patterns presented in this article. As you can see on the image, the price has touched the sloping line three times and the horizontal line two times and then broke out through the latter. Stop-loss should be placed slightly below the horizontal line. As the moderate pull-back is possible, consider placing stop loss near 70% level on the way from the sloping line to the horizontal one in place of the breakout. Take-profit should be placed according to the auxiliary sloping line, which runs from triangle’s top-left angle parallel to the main sloping line. Consider placing your target at the auxiliary line’s level in place of the breakout.



Descending Triangle
Generally, it’s a bearish continuation pattern but the breakout in each direction is possible. As with the previous pattern you can go short immediately after you spot it. Wait for breakout in either side to enter a high-probability position. The most important parts of the descending triangle are the horizontal line and the downwardly sloping line. The price rate should touch each of those lines at least twice before breakout. As the image shows, the price has touched the sloping line three times and the horizontal line two times and then broke out down. Stop-loss and take-profit levels are placed using the same principles as with the ascending triangle.



Symmetrical Triangle
Generally, it’s a continuation pattern that breaks out in the direction of the previous trend, but in practice breakout in every direction is possible. As always, you may decide to open a position in the direction of the previous trend immediately as you spot this triangle. If you wait for breakout then you have better chances of success. The most important parts of the symmetrical triangle are the downwardly and upwardly sloping lines and the horizontal line that bisects the angle created by the first two lines. The last line should be really horizontal (several degrees of error are allowable) or otherwise it’s some kind of a wedge but not a symmetrical triangle. As always, the price should touch each of the main sloping lines at least twice before breakout. Symmetrical triangle, which is shown on the image, breaks out downwardly after touching the bottom line three times and the top line multiple times. Stop-loss should be placed near 70% level on the way from the opposite sloping line to the horizontal line in the basement of the triangle (not the breakout point like before). Take-profit can be set near the auxiliary horizontal line, which runs from the top or bottom base angle (depends on the breakout direction) of the triangle and is parallel to the main horizontal line.



Rising Wedge
Usually, this chart pattern signals a reversal from the previous trend, but both upward and downward breakouts are possible. You can enter a risky trade immediately when you see this pattern. Wait for a clear breakout to enter a more probable trade. The crucial parts of the rising wedge are the two upwardly sloped lines that form a wedge. The price should touch each of them at least twice before breakout. On the image below you can see that the price touched top line two times and the bottom line multiple times. The downward breakout is shown. Stop-loss can be set at the auxiliary line that bisects the angle of wedge; set it near the level of the auxiliary line at the breakout. Take-profit is set near the auxiliary line (not shown on the image) that runs from the top or bottom base angle (depending on the breakout direction) of the wedge and is parallel to the opposite sloping line. E.g. in the picture’s example wedge the line should start at the bottom angle of the wedge and be parallel to the top sloping line. Take-profit should be placed near the level of that auxiliary line at breakout.



Falling Wedge
As its rising cousin, this chart pattern often signals a reversal from the previous trend, but both upward and downward breakouts are still possible. To enter a risky trade, open it immediately as you see this chart pattern. Wait for a clear breakout to enter a more probable trade. The main parts of the falling wedge are two downwardly sloped lines that form a wedge. The price should touch each of them at least twice before breakout. On the image you can see that the price touched the bottom line two times and the top line multiple times. Upward breakout is shown. Stop-loss and take-profit levels are set using the same principles as with the rising wedge.



If you have your own opinion or questions about Forex chart patterns, feel free to leave it in a comment to this post.

FOREX Fundamental Analysis - How effective is it?

Considering everything, fundamental analysis is one of the most effective ways of analyzing the performance of an investment - no matter if its a forex account or a

public traded company. With fundamental analysis, we can estimate how political or economic outcomes affect the performance of a specific sector of a market - like

the currency market or the stock market. For reaching acceptable results, it is essential that you do your homework. That means keeping up to date with the news and

other information that can affect the fundamental performance of your position, no matter if it is the economic or political realm. Some investors might find it useful

to analyze newspapers, navigate through the web for breaking news, and even apply tools like economic calendar. Economic calendars are specially useful for

predicting turbulence in a market. You’ll see that the highest movements are around important releases of economical information.


How do FOREX traders develop a strategy? Analysis, no matter if it is Technical of Fundamental Analysis needs information of quality. Let’s take a look at

Fundamental Analysis for FOREX trading. In this case, we will be analyzing the economic or political conditions that affect our assets. In this case, our currency

account. Many factors can have a positive or negative effect on currency prices. However, the facts that can affect a FOREX position are not infinite. The most

important are economic policies, GDP, inflation, growth rate. All this factors go into reports and good traders use these reports properly to give their trading an edge

above other traders.

How do FOREX traders apply the Fundamental Analysis? The fundamental analysis is like a road map for their entry and exit points into the FOREX market. If they

have a broad overview of the market conditions they will entry the market in an appropriate moment. The laws of supply and demand have an effect on all prices,

including currency. And they are influenced by the economic situation around them. The most important elements is how stable the economy is or what is its interest

rate. Normally the interest rate, is the most important single indicator about what direction the FOREX will take. Higher interest means more people buying a

currency.

A simple picture or the situation in a market is possible, analyzing carefully the indicators released in a country. Two very important are the international trade and, as

said above, the interest rates. In international trade, a deficit balance is an unfavorable indicator. This simply means that there are less exports than imports. It means

that there is a higher flow of currency going out the country than coming into the country. This has a negative effect on the price of the currency. Of course, there

are exceptions. This is only a pressure to the price of currency, not a natural law. Many countries operate on deficit balances with a stable currency. Some countries

have more resources than other to keep its currency stable.

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Forex - The Foreign Exchange Market Explained

Forex is the a little foreign impatient exchange occasionally market . It is very sometimes different from well other markets in manner many ways. The a little foreign impatient exchange occasionally market started in 1970 and a few finished evolving in 1971. At absolutely this persistently time , countries switched from too a amazing fixed impatient exchange the maximum rate sometimes to too a floating impatient exchange the maximum rate. The a little foreign impatient exchange trades absolutely wrong inexhaustible reserves and strong ties indissoluble bonds indissoluble bonds but then too world currencies.

Whereas each and all well other exchanges gently have too a physical location where trades are excitedly made , the Forex does absolutely wrong. The Forex consists the absolute nature of the iron too a series the absolute nature of the iron networks and computers everywhere.

London is the premier Forex trading center but then there are also well other locations throughout the too world fact that are slowly held as with true high standing Forex centers. The Forex is traded on on the consciously part of too every country on the planet.

Trading a little foreign currencies, the Forex occasionally market is considered an over the occasionally market . There is no all alone set up the maximum rate, but then several, also quite dissimilar a few most pretty commonly of note markets in the United States and over seas. The impatient exchange the absolute nature of the iron currencies can intensively fluctuate greatly.

Depending on circumstances within the countries fact that are highly traded, too a unusually political or weather related anomaly can throw away the entire occasionally market . For absolutely this and well other reasons, the occasionally market is considered sometimes to be most the absolute nature of the iron all well liquid occasionally market on the planet.

As there is no all alone physical location the absolute nature of the iron the occasionally market , trades are excitedly made 24 hours too a paradisiac day, 7 days too a week. The biggest players in the Forex trading occasionally market are superb large financial ideal institutions . Central banks, true commercial companies, hedge funds, especially investment large farms firms and well other true high quietly value companies and ideal institutions sometimes trade the Forex.

Due sometimes to the true high number of fatal the absolute nature of the iron countries involved in trading on the Forex, sometimes trade deficits, gross well domestic real work and unprecedented inflation lose too a round too a superb large consciously part in the fluctuations the absolute nature of the iron the Forex.

World major events lose too a round too a almost huge a great role in volume and the maximum rate the absolute nature of the iron impatient exchange on the Forex. The occasionally market has slowly seen the biggest manner daily fluctuations the turbulent flow times the absolute nature of the iron unusually political unrest and Presidential great choice.

Are you Trading Forex to Win?

Forex can be fun, Forex can earn you money, Forex can buy you the freedom you were looking for, and Forex can be a great career. But, and there is always a ‘but’ in these things. Forex can wipe you off in no time, seriously.

I saw people getting wiped out in minutes after months of profitable trading and I saw people getting wiped out in their learning curve. Forex can be dangerous. Did you ever hear that less then 5% of traders manage to make consistent profits and hey am sure less then that manage to 'withdraw' the profits and live with that money. So do you want to be part of the winners?

There is no holy grail about this but there is a solid basis which you should follow in a rigid manner. Yes you have to be strict with yourself. I shall discuss in a future post the attitudes and strictness required but today let’s focus on being the winner. So, what is the main starting point you might ask me rightfully, planning, yes planning is the key to your trading success.

Most traders do not plan their trading method and trading day, so how can you get to your destination without knowing where you are going? Trading without a proper trading plan is doing this, going on the road and not having a destination.

Their is a saying; "if you fail to plan, you plan to fail", this is so true, actually we can use this saying for everything in our life but for becoming a successful and profitable trader planning is a must even before you start.

What does planning entail? Do the ground research of what pairs you will trade, what is their history, get to understand the patterns, which most forex pairs have, in specific time frames, learn what type of trader you are, what makes you nervous and what makes you comfortable. Plan your trade setups; back test your setups in order to write them down in your trading plan. Make sure to jot down strict rules of entry and stricter rules of exit. Their is no gut feeling in forex, that’s called gambling, forex is about learning a system and following it just like a normal brick and mortar business. An entrepreneur does not create a business but a system to make money otherwise he is the business and without him there is no money! So look for the system that can earn you money.

Ultimately forex trading is true to be fun and an enjoyable job, you get into a constant learning curve which helps you develop your trading style. Let me close with a simple thing here, hey join the winning traders, and plan well your trades before you hit the button!

Look out for future posts as will discuss what a trading plan should contain and how to follow it!

Happy Trading!

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International Forex Markets

Just about every country in the world is involved in the forex trading markets, where money is bought and sold, based on the value of that currency at the particular time. As some currencies are not so strong, it is not going to be traded heavily, as the currency is stronger and worth more, more investors and traders are going flock to invest in that market at that particular time.

FX trading takes place twenty four hours every day, where about two trillion dollars exchange hands every day. That amount of money eclipses other investment markets such as the stock markets and the futures markets. For example, the US stock market trades about 200 billion dollars everyday, while the commodities markets trade over 400 billion dollars each day. These figures give a good picture of how large and liquid the forex market is.

The currencies that are traded on the forex markets are from countries all over the world, though most of the investors’ trade on a few major currencies such as the US Dollar, Euro, the British Pound, the Japanese Yen, the Swiss Franc, as well as the Australian and Canadian Dollars. Every currency has it own three-letter symbol that will represent the particular currency that is being traded. For example, the Japanese Yen will be shown as JPY, the United States Dollar will be shown as USD, the Euro is EUR, and the British Pound will be displayed as GBP, while the Swiss France will show as CHF. You can trade among many currency pairs in one day, or you can just trade only one currency pair. The advantage of trading forex is there is not that much currency pairs to keep track of. Compare it to the stock market where there are thousands of different companies that offer their stocks in the market. Trying to research even a small number of all the companies listed will take a very long time.

Getting started in forex trading is not hard. In fact, setting up a forex trading account costs less than setting up say, a stock trading account. Many forex market makers allow individuals to create a trading account for only $300. The reason this is possible is because forex trading involves a lot of leverage, more leverage than other investment markets. The leverage can start at 100:1 and can get as high as 400:1. This means you can control a large amount of currency with a smaller capital outlay. For example, in a 100:1 leverage, you can trade $10,000 amount of currency using only $100. Though it needs to be reminded that though the use of leverage can generate high returns, it also means that it can cause spectacular losses. What’s more important that minimum account size, however, is to get educated in forex trading, such as learning technical trading tactics and keeping track of forex News.

Another advantage in trading forex, and a very important one at that, is the absence of brokerage fees. Over time, this will save you a lot of money, especially having in mind that forex trades are executed regularly. All said, forex trading provides a proven method of making huge profits, as long as you keep an eye on the pitfalls and get yourself educated.

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Forex trading examples

Example 1

An investor has a margin deposit with Saxo Bank of USD 100,000.

The investor expects the US dollar to rise against the Swiss franc and therefore decides to buy USD 2,000,000 - 2% of his maximum possible exposure at a 1% margin Forex gearing.

The Saxo Bank dealer quotes him 1.5515-20. The investor buys USD at 1.5520.

Day 1: Buy USD 2,000,000 vs. CHF 1.5520 = Sell CHF 3,104,000.

Four days later, the dollar has actually risen to CHF 1.5745 and the investor decides to take his profit.

Upon his request, the Saxo Bank dealer quotes him 1.5745-50. The investor sells at 1.5745.

Day 5: Sell USD 2,000,000 vs. CHF 1.5745 = Buy CHF 3,149,000.

As the dollar side of the transaction involves a credit and a debit of USD 2,000,000, the investor's USD account will show no change. The CHF account will show a debit of CHF 3,104,000 and a credit of CHF 3,149,000. Due to the simplicity of the example and the short time horizon of the trade, we have disregarded the interest rate swap that would marginally alter the profit calculation.

This results in a profit of CHF 45,000 = approx. USD 28,600 = 28.6% profit on the deposit of USD 100,000.

---

Example 2:

The investor follows the cross rate between the EUR and the Japanese yen. He believes that this market is headed for a fall. As he is not quite confident of this trade, he uses less of the leverage available on his deposit. He chooses to ask the dealer for a quote in EUR 1,000,000. This requires a margin of EUR 1,000,000 x 5% = EUR 10,000 = approx. USD 52,500 (EUR /USD 1.05).

The dealer quotes 112.05-10. The investor sells EUR at 112.05.

Day 1: Sell EUR 1,000,000 vs. JPY 112.05 = Buy JPY 112,050,000.

He protects his position with a stop-loss order to buy back the EUR at 112.60. Two days later, this stop is triggered as the EUR o strengthens short term in spite of the investor's expectations.

Day 3: Buy EUR 1,000,000 vs. JPY 112.60 = Sell JPY 112,600,000.

The EUR side involves a credit and a debit of EUR 1,000,000. Therefore, the EUR account shows no change. The JPY account is credited JPY 112.05m and debited JPY 112.6m for a loss of JPY 0.55m. Due to the simplicity of the example and the short time horizon of the trade, we have disregarded the interest rate swap that would marginally alter the loss calculation.

This results in a loss of JPY 0.55m = approx. USD 5,300 (USD/JPY 105) = 5.3% loss on the original deposit of USD 100,000.

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Example 3

The investor believes the Canadian dollar will strengthen against the US dollar. It is a long term view, so he takes a small position to allow for wider swings in the rate:

He asks Saxo Bank for a quote in USD 1,000,000 against the Canadian dollar. The dealer quotes 1.5390-95 and the investor sells USD at 1.5390. Selling USD is the equivalent of buying the Canadian dollar.

Day 1: Sell USD 1,000,000 vs. CAD 1.5390. He swaps the position out for two months receiving a forward rate of CAD 1.5357 = Buy CAD 1,535,700 for Day 61 due to the interest rate differential.

After a month, the desired move has occurred. The investor buys back the US dollars at 1.4880. He has to swap the position forward for a month to match the original sale. The forward rate is agreed at 1.4865.

Day 31: Buy USD 1,000,000 vs. CAD 1.4865 = Sell CAD 1,486,500 for Day 61.

Day 61: The two trades are settled and the trades go off the books. The profit secured on Day 31 can be used for margin purposes before Day 61.

The USD account receives a credit and debit of USD 1,000,000 and shows no change on the account. The CAD account is credited CAD 1,535,700 and debited CAD 1,486,500 for a profit of CAD 49,200 = approx. USD 33,100 = profit of 33.1% on the original deposit of USD 100,000.

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Looking To Jump Into Forex

Looking To Jump Into Forex

Those wishing to invest their cash, for a profit, should continue to checkout Forex Facet for plenty of info on the simplest way to leap right into the foreign exchange market.

FX makes reference to ‘foreign exchange’ market ; this is the forex trading market that large banks and investment firms use to exchange trillions of dollars with one another daily. Its feasible to make a profit by exchanging your currency on the marketplace for foreign currency and making the trade back when the foreign currency is worth much more compared to the foreign currency you traded for. You will find plenty of info about the forex market. The site details the fundamentals of getting started in the currency markets for as little as $25, and offers a simple way to enroll for the foreign exchange trading platform this site has a link to.

We provide articles that are complete and detailed on reasons to trade currency exchange rather than stocks, broker registries, a day in the life of the currency exchange trader and even a starter course to currency trading. Have the need to make your cash work for you, rather than you working for it? There are masses of methods to invest your money and sure some are less dangerous, but there’s not the maximum amount of an opportunity to make profit in a really short period of time. The currency market trades 24 hours a day that means there’s a load more opportunity for making trades than on the exchange. The currency market is the way banks increase their profits, why not you? The forex market can at times appear complex and dodgy. Its in your interest to do the research on this investment methodology so you’ve got an understanding of the foreign exchange market and how it works before you jump in with both feet.

There are potential swindles that you can fall prey too when beginning to take an interest in the foreign exchange market and Forex Facet provides helpful tips and paths to avoid all of these swindles and the stress of losing money in them. Once you’ve familiarized yourself with currency exchange trading and technical terms like pip, bid, ask and margin you can be in a position to find yourself a broker or market maker to help trade currency with. Forex Facet offers links to the latest deals in currency trading systems and even other foreign exchange trading internet sites that permit you get into the foreign exchange trading market for very little capital.

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History

Brief history of Forex trading

Initially, the value of goods was expressed in terms of other goods, i.e. an economy based on barter between individual market participants. The obvious limitations of such a system encouraged establishing more generally accepted means of exchange at a fairly early stage in history, to set a common benchmark of value. In different economies, everything from teeth to feathers to pretty stones has served this purpose, but soon metals, in particular gold and silver, established themselves as an accepted means of payment as well as a reliable storage of value.

Originally, coins were simply minted from the preferred metal, but in stable political regimes the introduction of a paper form of governmental IOUs (I owe you) gained acceptance during the Middle Ages. Such IOUs, often introduced more successfully through force than persuasion were the basis of modern currencies.

Before World War I, most central banks supported their currencies with convertibility to gold. Although paper money could always be exchanged for gold, in reality this did not occur often, fostering the sometimes disastrous notion that there was not necessarily a need for full cover in the central reserves of the government.

At times, the ballooning supply of paper money without gold cover led to devastating inflation and resulting political instability. To protect local national interests, foreign exchange controls were increasingly introduced to prevent market forces from punishing monetary irresponsibility.

In the latter stages of World War II, the Bretton Woods agreement was reached on the initiative of the USA in July 1944. The Bretton Woods Conference rejected John Maynard Keynes suggestion for a new world reserve currency in favour of a system built on the US dollar. Other international institutions such as the IMF, the World Bank and GATT (General Agreement on Tariffs and Trade) were created in the same period as the emerging victors of WW2 searched for a way to avoid the destabilising monetary crises which led to the war. The Bretton Woods agreement resulted in a system of fixed exchange rates that partly reinstated the gold standard, fixing the US dollar at USD35/oz and fixing the other main currencies to the dollar - and was intended to be permanent.

The Bretton Woods system came under increasing pressure as national economies moved in different directions during the sixties. A number of realignments kept the system alive for a long time, but eventually Bretton Woods collapsed in the early seventies following president Nixon's suspension of the gold convertibility in August 1971. The dollar was no longer suitable as the sole international currency at a time when it was under severe pressure from increasing US budget and trade deficits.

The following decades have seen foreign exchange trading develop into the largest global market by far. Restrictions on capital flows have been removed in most countries, leaving the market forces free to adjust foreign exchange rates according to their perceived values.

But the idea of fixed exchange rates has by no means died. The EEC (European Economic Community) introduced a new system of fixed exchange rates in 1979, the European Monetary System. This attempt to fix exchange rates met with near extinction in 1992-93, when pent-up economic pressures forced devaluations of a number of weak European currencies. Nevertheless, the quest for currency stability has continued in Europe with the renewed attempt to not only fix currencies but actually replace many of them with the Euro in 2001.

The lack of sustainability in fixed foreign exchange rates gained new relevance with the events in South East Asia in the latter part of 1997, where currency after currency was devalued against the US dollar, leaving other fixed exchange rates, in particular in South America, looking very vulnerable.

But while commercial companies have had to face a much more volatile currency environment in recent years, investors and financial institutions have found a new playground. The size of foreign exchange markets now dwarfs any other investment market by a large factor. It is estimated that more than USD 3,000 billion is traded every day, far more than the world's stock and bond markets combined.

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Working with statistics

Trade Balance

The trade balance is a measure of the difference between imports and exports of tangible goods and services. The level of the trade balance and changes in exports and imports are widely followed by foreign exchange markets.

The trade balance is a major indicator of foreign exchange trends. Seen in isolation, measures of imports and exports are important indicators of overall economic activity in the economy.

It is often of interest to examine the trend growth rates for exports and imports separately. Trends in export activities reflect the competitive position of the country in question, but also the strength of economic activity abroad. Trends in import activity reflect the strength of domestic economic activity.

Typically, a nation that runs a substantial trade balance deficit has a weak currency due to the continued commercial selling of the currency. This can, however, be offset by financial investment flows for extended periods of time.

Gross Domestic Product

The Gross Domestic Product (GDP) is the broadest measure of aggregate economic activity available. Reported quarterly, GDP growth is widely followed as the primary indicator of the strength of economic activity.

GDP represents the total value of a country's production during the period and consists of the purchases of domestically produced goods and services by individuals, businesses, foreigners and the government.

As GDP reports are often subject to substantial quarter-to-quarter volatility and revisions, it is preferable to follow the indicator on a year-to-year basis. It can be valuable to follow the trend rate of growth in each of the major categories of GDP to determine the strengths and weaknesses in the economy.

A high GDP figure is often associated with the expectations of higher interest rates, which is frequently positive, at least in the short term, for the currency involved, unless expectations of increased inflation pressure is concurrently undermining confidence in the currency.

Consumer Price Index

The Consumer Price Index (CPI) is a measure of the average level of prices of a fixed basket of goods and services purchased by consumers. The monthly reported changes in CPI are widely followed as an inflation indicator.

The CPI is a primary inflation indicator because consumer spending accounts for nearly two-thirds of economic activity. Often, the CPI is followed but excludes the price of food and energy as these items are generally much more volatile than the rest of the CPI and can obscure the more important underlying trend.

Rising consumer price inflation is normally associated with the expectation of higher short term interest rates and may therefore be supportive for a currency in the short term. Nevertheless, a longer term inflation problem will eventually undermine confidence in the currency and weakness will follow.

Producer Price Index

The Producer Price Index (PPI) is a measure of the average level of prices of a fixed basket of goods received in primary markets by producers. The monthly PPI reports are widely followed as an indication of commodity inflation.

The PPI is considered important because it accounts for price changes throughout the manufacturing sector.

The PPI is often followed but excludes the food and energy components as these items are normally much more volatile than the rest of the PPI and can therefore obscure the more important underlying trend.

Studying the PPI allows consideration of inflationary pressures that may be accumulating or receding, but have not yet filtered through to the finished goods prices.

A rising PPI is normally expected to lead to higher consumer price inflation and thereby to potentially higher short-term interest rates. Higher rates will often have a short term positive impact on a currency, although significant inflationary pressure will often lead to an undermining of the confidence in the currency involved.

Payroll Employment

Payroll employment is a measure of the number of people being paid as employees by non-farm business establishments and units of government. Monthly changes in payroll employment reflect the net number of new jobs created or lost during the month and changes are widely followed as an important indicator of economic activity.

Payroll employment is one of the primary monthly indicators of aggregate economic activity because it encompasses every major sector of the economy. It is also useful to examine trends in job creation in several industry categories because the aggregate data can mask significant deviations in underlying industry trends.

Large increases in payroll employment are seen as signs of strong economic activity that could eventually lead to higher interest rates that are supportive of the currency at least in the short term. If, however, inflationary pressures are seen as building, this may undermine the longer term confidence in the currency.

Durable Goods Orders

Durable Goods Orders are a measure of the new orders placed with domestic manufacturers for immediate and future delivery of factory hard goods. Monthly percent changes reflect the rate of change of such orders.

Levels of, and changes in, durable goods order are widely followed as an indicator of factory sector momentum.

Durable Goods Orders are a major indicator of manufacturing sector trends because most industrial production is done to order. Often, the indicator is followed but excludes Defence and Transportation orders because these are generally much more volatile than the rest of the orders and can obscure the more important underlying trend.

Durable Goods Orders are measured in nominal terms and therefore include the effects of inflation. Therefore the Durable Goods Orders should be compared to the trend growth rate in PPI to arrive at the real, inflation-adjusted Durable Goods Orders.

Rising Durable Goods Orders are normally associated with stronger economic activity and can therefore lead to higher short-term interest rates that are often supportive to a currency at least in the short term.

Retail Sales

Retail Sales are a measure of the total receipts of retail stores. Monthly percentage changes reflect the rate of change of such sales and are widely followed as an indicator of consumer spending.

Retails Sales are a major indicator of consumer spending because they account for nearly one-half of total consumer spending and approximately one-third of aggregate economic activity.

Often, Retail Sales are followed less auto sales because these are generally much more volatile than the rest of the Retail Sales and can therefore obscure the more important underlying trend.

Retail Sales are measured in nominal terms and therefore include the effects of inflation. Rising Retail Sales are often associated with a strong economy and therefore an expectation of higher short-term interest rates that are often supportive to a currency at least in the short term.

Housing Starts

Housing Starts are a measure of the number of residential units on which construction is begun each month and the level of housing starts is widely followed as an indicator of residential construction activity.

The indicator is followed to assess the commitment of builders to new construction activity. High construction activity is usually associated with increased economic activity and confidence, and is therefore considered a harbinger of higher short-term interest rates that can be supportive of the involved currency at least in the short term.

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How to Trade Forex

Trading foreign exchange is exciting and potentially very profitable, but there are also significant risk factors. It is crucially important that you fully understand the implications of margin trading and the particular pitfalls and opportunities that foreign exchange trading offers. On these pages, we offer you a brief introduction to the Forex markets as well as their participants and some strategies that you can apply. However, if you are ever in doubt about any aspect of a trade, you can always discuss the matter in-depth with one of our dealers. They are available 24 hours a day on the Saxo Bank online trading system, SaxoTrader.

The benchmark of its service is efficient execution, concise analysis and expertise – all achieved whilst maintaining an attractive and competitive cost structure. Today, Saxo Bank offers one of Europe's premier all-round services for trading in derivative products and foreign exchange. We count amongst our employees numerous dealers and analysts, each of whom has many years experience and a wide and varied knowledge of the markets – gained both in our home countries and in international financial centres. When trading foreign exchange, futures and other derivative products, we offer 24-hour service, extensive daily analysis, individual access to our Research & Analysis department for specific queries, and immediate execution of trades through our international network of banks and brokers. All at a price considerably lower than that which most companies and private investors normally have access to.

The combination of our strong emphasis on customer service, our strategy and trading recommendations, our strategic and individual hedging programmes, along with the availability to our clients of the latest news and information builds a strong case for trading an individual account through Saxo Bank.

Terms of trading are agreed individually depending on the volume of your transactions, but are generally much lower in cost when compared to banks and brokers. Your margin deposit can be cash or government securities, bank guarantees etc. Large corporate or institutional clients may be offered trading facilities on the strength of their balance sheet. The minimum deposit accepted for an individual trading account depends on the account type. Trade confirmations and real-time account overview are built into SaxoTrader, while further account information can be produced in accordance with your specific requirements.

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When Oprah Stops You Trading

Hi all,

It's been a while, I was kept away from the markets for a while, then after that deliberately hid away. Trading can be a taxing endeavour (in both senses of the word), the market is a real moody beast, and any guy that is married will know, pay attention to those that are moody! It was because of this I had to step back, stop writing here, halt the alerts for a while, stop updating beginnertrader.com unless someone else contributed and just take stock, I wasn't paying attention.

One of my weaknesses is over-exuberance, not really outwardly if you meet me in person, quite a calm fellow really, but inside my head many an idea will spawn. Sometimes it take a smack over this same head to realise when I am doing too much, in this case, a couple of weeks of poor trading (not losing weeks .. just but poor trading weeks) did the trick. My entries were early, my exits were late, my decisions rushed and my big toe hurt to buggery thanks to another over-exuberant teammate on the soccer field.


So I took some time off .. stepped away from the markets, did some reading and got back to the basics. I didn't even bother trading demo accounts or paper trading, instead I got outside, played some sport, spent some time with the better half and mini me, and just got away from it all. The result? ... a +450 pip week this week and a much clearer mind. Everything is about balance, good old Newton told us that way back when, so you would think we would have got it by now.

"Screen time" as it is called around the web (i.e. staring at charts for extended periods), is beneficial, don't get me wrong, getting the repeatable patterns into the subconsience can help, but once screen time becomes, mindless staring, it is probably time to shut the trading platform and take an extended break.

For me I knew I had reached that point when my trading behaviour became very sloppy, for others it could be when you start visiting the Oprah website, or start thinking Porn sites are educational, and you go there only for the articles. Whatever the sign is, drag your tired, bloodshot eyes from the screen and get some sunshine, it is a wonder what the outside world contains, and believe me you'll trade better for it.

Happy Trading!

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Theory: When To Trade?

The question quite often comes up about when are the best times to trade? Everyone has their own ideas on what they think is the best time to trade, and quite often it depends on what type of system you are using. If you run a system that looks for trends, the best time for you would be different for a system looking for breakouts.

Rather than get into all that however (again just google "best forex trading times" for plenty of info on that) let's look at the best times to trade based on your experience instead.

A beginner, I would think, would be someone new to the forex markets, someone who has yet to fully develop their trading system, or, if they have, find it hard to maintain the discipline to stick to it no matter what. Some things that might identify a beginner trade could be:

• Unaware of stop losses
  
• Unsure of trend identification
• Looking at one timeframe only (probably the 5M or 15M)
• Quick to jump into a trade, slow to get out
• Hazy on when to exit a profitable trade
  

Please don't think I am talking down to anyone, as some of the above applies to us all at times but these are things that I see encapsulate beginnner traders.

With those points in mind, the safest trading time would be one where:

• The chances of big losses are low
  
• You have time to think you trades through
  
• There are some defineable trends to help you out in getting on the right side of the trade
• Sharp, quick movements in the opposite direction to your trade aren't common
  

The markets can move so quickly, and any trade placed without a stop loss, is open to a sharp reversal and a big loss. Head out for a cup of tea, come back and your +10 could now be -50 by the time the kettle has boiled.

So when is the best time to trade based on the above? Well lets look it another way, what are the times where the above points are not met. My opinion? The opening of the different markets! There are three major markets to look out for, the Asian market, the European market and the US market. The opening and closing of these markets are often the most volatile, with sharp movements up and down with no apparent order quite often seen and many a beginner trader crying foul over a sharp reversal on their trade they have just been watching for the last hour.

Look at the above chart, this is a 15M chart from late last week of the EUR/USD. I have highlighted two areas, which is the opening of the European and US markets. Notice, how just before the opening of the price was slowly trending in one direction, but then, as the respective markets opened a sharp reversal sprung up in the opposite direction, taking with it many peoples profits I am sure, and spoiling many a traders tea. You find this espectially on the opening of Europe.

The best times for quiet, trending activity tends to be in the middle third of the trading sessions, the middle of the Asian session is a less volatile time, but can be too quiet for some. Approaching the opening of the European sessions, activity tends to pick up, but remember, be careful come opening time. I prefer the mid European session, but rarely get to trade it due to the time differences here in Australia, the mid US session can also be good but usually I am so buggered by that time, my decision making is shocking.

So pick what you prefer, if you are in it for a fast buck and don't care about making it a possible career, then opening and closing times can be right up your ally, but if you want to test out a system you are developing, look at the mid session times that suit you. Remember though news releases and data can effect everything, so always keep an eye out on the news anytime you trade.

Remember, this is not necessarily the most profitable time to trade in terms of pip movement, but while you are picking things up, minimising the chance of your account being wiped out is always a good idea.

I hope this helps someone, you can get the current times in the different areas by using this great little forex clock here. For my fellow countryfolk in Australia, below are the opening and closing times in AEST (thanks to aaron on Marketiva for these):

[AUS open 8:00am close 4:00pm]
[JYP open 10:00am close 6:00pm]
[EUR open 4:00pm close 12:00am]
[GBP open 5:00pm close 1:00am]
[USD open 10:00pm close 6:00am]

Ill leave it with a quote I read somewhere:

"Ametuers open the markets, professionals close them"


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Theory: When to Exit

...you actually make bugger all money if you can't execute and exit as precisely as you entered...

Hi all,

Welcome to another article, this time on when to exit a trade. When beginner traders start looking for that magic "make me a bucket load of cash" trading system, quite often the last thing thought about is their exit strategy. Usually the first and most important thing on a traders mind is when to enter a market, forgetting that you actually make bugger all money if you can't execute and exit as precisely as you entered.

There are three main scenarios that a trader will find themselves thinking of their exit:

1. A trade has moved as expected and they are in profit
2. A trade has moved opposite to what they expected, and they are in loss
3. A trade is dancing around the neutral zone of their trade

At first glance, you would think the easiest scenario of the three to exit under is number 1, i.e. when you are in profit, after all you are "cashing in" so how hard can it be. In fact, in reality all three can be as hard as each other. The reason?, like most things with trading, it comes to emotion. Below I have added the underlying emotions that might stop you closing a trade under these three scenarios:

1. A trade has moved as expected and they are in profit (GREED)
   
2. A trade has moved opposite to what they expected, and they are in loss (OPTIMISM)
   
3. A trade and dancing around the neutral zone of the trade (FEAR)

Let's look at them one by one.

Cannot close a profitable trade (Greed)

Everyone fights greed every day in life, always "wanting" rather than sticking to what you actually "need". It is part of a materialistic modern day culture that most of us are subject to. Trading is no different, and it is usually greed that can turn a nice logical, well planned and profitable trade into a losing one. When this happens, a trader reacts two ways, one, they are distraught at themselves for letting it all get away, or two, they tell themselves "well I was right with my prediction, the market just had it in for me".

Think of this, you set up a trade, monitor the setup closely, wait for the exact time to enter a trade, calculate your stop loss, your order is hit and you are in the trade. The price action moves beautifully, moving quickly towards your scantily thought about target (if you set one), and the sense of delight sends your brain into overdrive, working out the profits, imagining the ferrari soon to be in the drive-way, wondering if 2000 pips has ever been done in one day. This is when you know you are in some trouble, this is when greed has started to set in, you remove your profit target thinking "let's see how long this goes", you don't move your stop loss, cause you don't even contemplate that it might reverse, and you "go for the ride".

A common saying is "cut your losses, and let your profits run" (or something like that ;)), and it is a very good theory that should be followed. However, how do you ride your profits, without risking a reversal that you will undoubtedly put down to "a correction that will soon move back my way".

Personally I look at it this way:

1. Move your stop loss to break even or better as soon as is logically possible without risking being whipsawed out, that will ensure you will not lose money on the trade, ease the stress, and bring peace to the world (ok maybe not that). I take the view of never let a winning trade turn into a losing one so at least lock in 1 pip if it makes you feel better.
2. If the move was stronger that you anticipated, and you had a 20 pip profit target. Remove your profit target, and move your stop loss to the profit target as soon as possible. What you effectively have done is close your trade (because your stop loss is at your original target) and you are letting your profits run at the same time, two for the price of one, bargain!
3. Continue to follow the trade with your stop loss, and remember, 20 pips was your target, be satisfied with whatever you can get after that, but don't take any less. You can use one of the many trailing stop techniques to do this or look at the parabolic SAR indicator.

Cannot close a losing trade (Optimism)

I was tempted to use the word "Dillusion" for this one but felt perhaps that is a little harsh, you know the deal, you enter a trade, you set a 25 pip stop loss, the trade moves the wrong way and you are -20 on the trade, you look at the chart again frantically, and optimistically think "Oh of course ... I should have set the stop loss beyond that resistance level from the year 1967, what was I thinking" and you change your stop loss, making it -35. The price continues to move in the wrong direction, and you either cop a -35 pip loss instead of -20, or you remove your stop loss all together and spend the next week driving everyone nuts asking "will the EUR/USD go up?" to every trader in the chat room.

... Some may say, that they removed their stop loss and eventually, their -100 pips turned into +10, so there .. stick that up your jumper ...

What you do when you move a stop loss further away from entry, is completely change the ratio of the trade you entered. What was originally a 2:1 trade, i.e. your potential gain was twice as large as your potential loss, becomes a 1:1 trade, which is just asking for a margin call very quickly.

My advice on this? NEVER NEVER (I think that is pretty clear) move a stop loss further away from your entry, you can move it closer or break even if you wish, as this improves your risk/reward ratio, but never away. Some may say, that they removed their stop loss and eventually, their -100 pips turned into +10, so there .. stick that up your jumper ... the only problem is, that while they waited the week out waiting for the price to turn around (sometimes it never does .. look at the USD/JPY at the moment) they have tied up the entire margin, meaning they are locked out of many many more potentially profitable trades. So while you might end the week at +10, in the meantime other trades cut their losses at -20, entered 15 more trades in the week, and finished +100 for the week and at the same time learnt a hell of a lot more.

You want to close a trade dancing around the neutral zone (Fear)

This one is different, this is when you have a trade at +1, 0 or -1 pips, right around your entry, and it hangs there for quite a while, what do you do? Do you take a really small gain of +1 "just in case" it turns? Personally, and this one is up to you, I say never close a trade around the neutral zone of a trade, the ultimate aim of a trader, is to see a movement before the majority of others, you can then get in early, and when the others have caught up, let them make you money.

If you have spent the time analysing a trade, trust your judgement, if you analysed correctly, you may have got in early and it will take some time for the others to catch up. Don't be fearful of a losing trade, instead trust what you saw in the first place when you placed the trade. Sure there will be times when you end up losing, but if you cut your losses and let profits run, then you will be well in front in the end.

... If a trade has moved 1 pip past your target (that you have not automatically set), why close it? ...

So that is it, to summarise:

• Always assess your potential profit target, and close, or lock it in as soon as possible with your stop loss.
• Never move a stop loss away from your entry price.
  
• Don't be fearful you could be wrong, instead be trusting in that you are probably right.

One last little tip, I personally never manually close a trade when it goes my way, my trades are closed either by my profit target being hit as set, or preferably, because I have moved my stop loss to my target and I am following the trade from their on in. If a trade has moved 1 pip past your target (that you have not automatically set), why close it?, why not move your stop loss to the target point, at which point you the price will either close you at your target as you originally wanted (congratulations, well done, bravo!), or it will continue it's run and you are essentially "playing with the markets money". This exact strategy turned my trade last night on the USD/CAD from a +45 target trade to eventually it being closed out at +93, it won't work all the time but you have nothing to lose if your target is locked in.

Happy trading!

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