Global Forex Trading
Foreign exchange trading includes, primarily, the selling and buying of foreign currency in order to reap maximum profits. Over the years, it has emerged as a highly lucrative trading business, owing to the amounts of profits gained. Therefore it is only natural that global interest in this particular trade has grown. Interestingly, since the trade flourishes on foreign currency, it has also transpired that various countries engage in it.

Every foreign currency’s value depends on the resources available in that particular nation. A large number of resources promote a higher value. Therefore, around the world, different foreign currencies have different values, which fluctuate according to the amount of resources available at any given time. This fluctuation is one of the most important, if not the main, factor promoting global foreign exchange trading.

Suppose a country’s foreign currency value is considerably higher than another country’s; it is beneficial for both of them to engage in trade. The country with the higher currency value can afford to buy goods, products or services from the other, at a comparatively cheaper price than the self national produce. Respectively, it is also beneficial for the country with a low currency value to engage in trade, as it provides it with higher value for its goods and products. Hence, it is seen that trading in foreign exchange has emerged profitable to both parties involved. It is also seen here that this unique relationship also gives rise to the characteristic property of global foreign exchange trading, making it one of the few forms of trading which is essentially based on the involvement of two business organizations.

Therefore, one might conclude, with the advent of modern times it is not only profitable but natural for various countries to engage in global foreign exchange trading.

Forex Trading Online
Foreign exchange trading online can be defined as trading, buying or selling, foreign capital through the use of the ‘World Wide Web’ as a medium for business transactions. In simple words, it allows one to buy or sell foreign exchange through a range of different websites dedicated to this field of speciality. Over the years, various advantages and disadvantages have emerged as a result of using the internet as a medium for trading in foreign exchange.

One of the many advantages of foreign exchange trading online include saving precious time, by using the comforts of one’s home or office to engage in business. Since the foreign exchange market is also a turbulent one, prices of various currencies change in the blink of an eye. It is therefore a good idea to use the internet as a medium because it provides accurate and instantaneous prices, which can be used to one’s profit in the least possible time, or as one might say; ‘with the click of a mouse’. Another major advantage earned out of the internet is the variety which it has to offer. With so many business having access to the internet, it is very probable that a business organization might end up with a very good deal on its hands.

Among other downfalls, foreign exchange scams might be considered as one of the major threat to trading online. With unrestricted access to the internet, it is not uncommon for a person to be faced by scrupulous companies under false names, engaging in business scams online. Therefore, one must only engage with trusted companies and websites.

In a nutshell, foreign exchange trading online may be defined as another milestone in trading for years to come. If used carefully, it might lead to enormous profits but at the same time one must exercise restraint and careful investigation.

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If you are going to learn forex online from home, you have to have a plan, otherwise you will lose money and you will have a bad time. therefore I propose the following 5 point plan.

1.Understand exactly what forex is, how it works, how you can make money from it and how you can lose money from it.
this includes not just a rough overview, but having a decent understanding of margins or leverage, pip spreads, commisions, everything

2.Know what makes a good trading platform
Find a few and try them out, because whilst some things that make a platform good are universal, such as low commisions and pip spreads, other things come down to personal taste, such as the layout of the software

3.Know how to use your choosen platform well.
Opening trades and setting stop points are an absolute minimum, in fact i say thats not enough, really you should be able to overlay and read several charts at different time intervals, integrate signals and know your way around.

4.Be able to emulate or develop different strategies, and test them on a demo account first
If you arent testing different strategies on play money, you may as well go to the casino

5.Be conservative
Once youve got real money on the table, you should only be risking it when conditions are just right. If you are making more than a couple of trades a week to begin with, your probably being to gun-ho and could be heading for a rude shock in the form of lost money(note some strategies call for many trades, but even if you adopt such a strategy, be ultra cautious when starting out)

So there you have, a simple plan if your just starting out, surely better than risking money up front and losing the lot!

The Basics of Internet Forex Trading for Retail Traders

In 1996 Forex trading became available to everyone thanks to the internet. Before that the only way individuals could break into the market was if they were big enough to apply for Forex contracts in person. Although you are technically trading different physical currencies in the online Forex trade, the currencies will basically never be delivered to you in real life. The internet means that random people in their pajamas trading online are pitted against hundreds of corporate suits making billion dollar trades every day. 90% of these pajama clad individuals lose money in the Forex market to scams, or simply based on their own inexperience. You obviously want to be in the 10% that make money Before you trade money online in the Forex market you have to realize what a formidable force you are up against in the form of huge banks and corporations. To prepare yourself to enter the Foreign exchange market you need to educate yourself in the basic principles of Forex before you drop thousands of dollars and end up losing money.

In the process of educating yourself in the specifics of the Foreign exchange market you need to be sure to stay clear of the many Forex scams out there. The average person caught up in a Forex scam lose around $15,000 from con artists promising to invest their money in a high earning market. Usually the money is never even invested in Forex at all, just blatantly stolen by the thief. There is no sure way to know if someone is legitimate over the internet, so try to look up well known reputable traders even if it costs a little bit more. You also have to be careful of more subtle Forex systems and software promising huge automated earnings, most of which don’t work. The only way to be part of the 10% of successful retail traders in the Forex market is to put in hard work and time into researching the market.

How to Make a Profit in Forex

Forex indeed is a risk driven market where losses are bound to happen. For instance around 90% of the investors have to bear the grunt of losses while only 3-5% is able to make the desired profit. So in no way Forex is an easy place for minting profit.

A right combination of experience and familiarization with the trading practices and keeping up to date with current scenario of market is required to incur profits in FOREX. Investors need to face losses but in turn can be kept on a lower side along with profits. At times the investors become too overconfident and invest more than what their pocket allows them to and land in hefty losses. This tendency must surely be avoided. If things are not working out, stay out of market for some time and start fresh.

Deciding when to quit from the market also prevents investors from incurring more losses. Knowledge about the trade helps in making the right decisions. However efforts are required to research such vast amount of knowledge. A smart trader will also have a proper planning before investing and will also make sure that he adheres to rules and regulations of the market. Traders must also be fully aware of the market margins to avoid losses.

Thus at the end what is required is control over emotions and adhering to a fixed plan with proper knowledge and analysis of the market.

A fool is easily parted with his money

If you are diving into the world of forex, its important to learn as much as you can. Learn forex online is a place where you can read news and info that has been carefully selected for you, a newcomer to the world of forex.

Trading Forex provides a great oppurtunity, but it is not a get rich scheme. Yes, some people make a living trading forex, and maybe one day you can to, but you can also think of forex as a wealth builder, like an investment only with potentially much higher rates of return(and the corresponding risk involved) than putting your money in the bank or shares(did I say higher risk than shares? the last year may dissprove this).

In light of this, learning as much as you can is a wise move, because whilst forex involves skill, if you dont arm yourself with knowledge it can be just like gambling, and no-one likes to lose money. Sure its possible to rush straight into trading real money, but the potential to lose money is high if you dont know what you are doing, and the reason most new traders fail is because they dont spend enough time learning. Even the best traders in the world are constantly learning and searching for new ways to improve, to get an edge, and you should to.

So please look around, the information here is constantly updated with the newest tools and news about the online forex industry,and if you like what you see subscribe to keep up-to-date with the forex world.

What is a scalping strategy?

A scalping stretegy is a short term forex strategy. Bascially what it entails is making very short term forex trades, often keeping trades open for only a matter of minute. The goal of this method is to make lots of very small profits, often in the region of only a handful of pips.

As you can imagine, if you are only going to make a few pips profit per trade, then you are going to have to have a significant amount of money on the line in order to turn any sort of reasonable profit, and this is where the danger of a scalping strategy comes into play.

If you’re trading forex at home and want to implement a scalping strategy, you are going to have to trade with a large margin. The larger the margin you have, the more capital you will need in your account to cover the trade if it moves in the wrong direction. If you dont have enough capital, your trade could be automatically closed and you could lose your entire account. not good.

For this reason, scalping strategies are not really recomended to people who have only just begun to learn forex. If you are just starting out, why not try our ultimate guide to forex, which offers a quick overview of how forex markets work.

Developed by Welles Wilder, it is otherwise known as
Wilder’s RSI. The common or suggested setting for this
study is 14 periods. However, I use 2 periods.

The RSI compares the relative strength of the present
price action to the n number of periods that you have
chosen. In a 14 period RSI, the current position of the
RSI will be how strong this period is compared to the
last 14 periods.

So if you were trading on a 1 hr chart, it will compare the
strength of this hour to the last 14 hrs of price action and
give you a number. This will be your current RSI.

Wilder selected 70 and 30 percent levels as overbought
and oversold areas.

When the RSI shows a 70% reading or above, the market
is considered overbought. Expect a reversal to the
downside.

And when RSI reaches 30% or below, the market is
considered oversold. Expect a reversal to the upside.

In my optimized setting, I have settled on the 2 period RSI.
I have back-tested this extensively and this is what I trade
with.

The 2 period RSI is very sensitive to price change but not
jittery. I have compensated for this by devising my own
overbought and oversold levels.

When my 2 period RSI reaches 95%, it is considered
overbought to the upside. You then consider a trade to
the downside.

When it reaches 5% to the downside, it is considered
oversold. You then consider a trade to the upside.

I mark these levels on my chart with a horizontal line
across these levels on the study.

Below is a comparison of the two settings; the suggested
14 period and my optimized 2 period RSI. (Chart available thru email attachment)

This is a 4 hr chart of the GBP/USD. The RSI 2 period is in
green and the 14 period in red.

The 2 period RSI produced 10 signals for profitable
trades while I could only stake my money on 1 for the 14
period RSI.

On the left of the chart where I marked the 14 period RSI
with a blue horizontal arrow, notice how the 14 period RSI
stayed overbought for an extended period while the 2
period RSI was able to give at least 3 profitable signals in
the same time frame.

Also look closely at the chart and see if you can find the
9th and 10th signals from the 2 period RSI.

Can you find them?…….

If you can’t find them, it’s because I have not discussed
the other use that I employ the RSI for.

Please Take The Following Action Steps

• Pull up a chart of a forex pair you will like to trade
• Plot both my RSI 2 periods and the 14 period RSI, one on top of the other.
• Set the levels as you learned in the forex lesson and compare the two signals.

The forex plays a vital role in the world economy. Forex enables international trade. As long as people trade internationally, there will be a need for a forex. For example, it enables a seller in Australia to sell to the United States and be able to receive Australian dollars in exchange for US dollars. As technology in communications advances, international trade will only increase. As such, forex trading or currency trading will be in greater demand in the coming years.

How is forex trading compared to the stock market?

The stock market is the place where people buy and sell shares of companies. This is the place where shares are traded or exchanged. The main purpose is to make a profit from the transactions by buying low and selling high. The forex is similar in that people trade the currency of one country for the currency of another. The main purpose is also to make a profit by buying low and selling high from your currency trading.

Unlike the stock market where shares can be traded alone, in the forex trading market, currencies are always traded in pairs. Since you have to trade one currency for another, all forex transactions always involve a pair of currencies. The objective is to buy a ‘currency-pair’ at a price and then to sell it later at a higher price in your currency trading.

Another way to make money in the stock and forex trading markets is ‘short-selling’. With this method, you sell first at a certain price, and then buy it back later at a lower price. This will enable you to make a profit when the market is going down. As short-selling has much larger risks in stock trading, there are many rules to limit this activity. However, in forex trading, no rules are imposed on short-selling. The risks on short-selling in the forex market is the same as those in regular buying in the forex.

Forex trading is an exciting way to make money. Think about it. How frequently do currency rates change? Every second! Yes, they fluctuate all the time. This means that opportunities to make money with forex trading are created continuously in the forex market. Things move very fast in forex. Because the forex allows short-selling, opportunities to make money are created no matter how the market moves.

No other trading instrument comes close to the forex market when it comes to liquidity. Forex trading is a 24-hour currency trading market environment. This market never sleeps! With an average daily volume of more than US$ 1.5 trillion, the forex market is the largest financial market in the world. It is more than all of the global equity markets combined. The profit potential is huge.

How much can one profit from forex trading? Due to the way the forex is structured, it enables you to profit enormously from small price fluctuations. A 1% price fluctuation can result in a 200% profit. The opportunity to make big money in the forex market is tremendous. However, the risks are also very high. You can make big, you can lose big too. So, you should equip yourself with sufficient knowledge in forex trading before you go in.

We also recommend a book on economics as a basis for understanding exactly what it is that drives the world market. If you can, take the time to familiarize yourself with the thoughts of Freidman and Greenspan. Learn how the Fed works and what role it plays in the American and global economy.

Another tool which we recommend is that you build your own chart by reading the world news and charting the various exchange rates against such newsworthy events as floods earthquakes, hurricanes, volcanic eruptions, etc., not to forget such things as changes in government, by peaceful or violent means.
The more you know about all of the factors that may affect the economy of either a nation or a region, the greater the possibility that you might predict with a modicum of accuracy, at least a short term movement in the Forex rates of exchange so that you might profit from trading in it. In addition, many different forex tools and trading platforms are available for download nowadays to the public. This makes the forex trading market more available than ever to the average person. You don’t need to be a professional trader with specific financial expertise in order to trade forex. An example of such a platform is the eToro trading platform.

As always, there is another method. No, we don’t recommend throwing darts at the wall. The other method is based on the idea, also used in the stock market, that one can chart trends of movement, and based on the historic, (known) trends, one can predict the future with some accuracy. In fact, as stated trends of performance are historical documents and while some chartists annotate their charts with what they consider to be the significant driving events of the price trends, the trend charts stand (or fall) in the end with little or no reference to outside conditions.

(In the stock market, for example, a steady upward trendline is good to know as a predictor of future performance, with some very serious caveats. The knowledge that the founder and chief designer are about to be indicted, and that they are both going to plead guilty to massive fraud charges, is far more important than the company’s performance over the past ten years. If you find that a bit dramatic, I cite Enron and MCI in recent U.S. economic history.)

While we must constantly watch what is happening, we cannot be omniscient. In the world’s money markets, the fall of the Soviet Union, and the fall of South Africa were significant events. The Ruble and the SA Rand were two stable currencies, and it doesn’t matter why they were stable, even though we now know that they were artificially stabilized. One might have thought that the Ruble would fall, but the question in the Forex as in any market is not if, but when.

What is important and what is not? There si an adage that the truly free market discounts everything. All news influences the price of commodities, especially a commodity such as foreign exchange. If you are a newshound, you already will have heard the question, “what will the market think about Hillary’s Presidency?” this question is being asked because those who have money invested need to determine their own response to any eventuality; especially a probability. This is also true about the Forex market.

In all of this attempting to determine whether you should buy or sell, the three key factors which you are trying to pin down at the determinants of a “trend.” These three determinants of a trend are, “direction,” “level,” and “timing.” It is simple to predict that a market with a volume of three trillion dollars per day will be volatile. This is especially in an atmosphere where there is an ever increasing accessibility to the market throughout the world. Add to that the idea that there are some people who have an interest in using the market for money laundering (in which it would be conceivable that losses are acceptable as though they were “fees” for invisibility). Others at the same time might be in the market to make “killings” to finance terrorist acts, including, but not limited to the planned rapid deterioration of the value of a single currency as an economic attack on a specific government.

Add to all of the above, the idea that each nation has some vested interest in its own currency. Understand also that the nation’s interest in their currency’s “position” may change from wanting a “strong” currency to a “weak” currency, or the other way around to balance out the internal economic cycles of that specific nation with only secondary concern for the effects this might have on other nations and their economies.
Please note that the rule of trading which requires that for every seller there must be a buyer at that price, also applies in Forex. In addition, you will see charts which show that the USD has dropped almost as a mirror to the chart of the rise of the Euro EUR. While this is historically accurate, since there are other currencies trading against each, this is not necessarily a hard and fast rule into the future. The two may converge or act independently and only time and outside influences will show us.

The Forex market is an exciting place, (although it occupies no place, per se). The rules are not at all as simple, straightforward, or consistent as those of the NYSE or the NYNEX or even the CBOT. The Forex is an infant with a giant appetite, and some people are walking away from the table having eaten while others are carried from the table having been eaten.

Forex is actually the beginning of the words Foreign Exchange joined together. In effect when someone says forex, they are refering to the Foreign Exchange Market.

So what is the Foreign Exchange Market then?

The Foreign Exchange Market is the largest market in the world, it is where all international currencies are traded over the entire planet, so as you can imagine it is huge. How big? Well try over $3 trillion every day, that’s $3000000000000 every single day. The reason this is so ridiculously large is that a lot of money can go into the market then come back out again several times a day as large companies make many trades to try to maximise their profits.

Foreign Exchange? Like a bureau de change?

Kinda, when you go on holidays, you have to get local currency from a change office. When you trade forex you dont actually get any cash in whichever currency you have bought, instead when you trade currency you open what is called a position which remains open for as long as you wish to ‘hold on’ to whichever currency you have bought. When you want to sell that foreign currency you must ‘close’ your position and any profit you have made shows up as your home currency in your account. If you’ve used these change offices before you may have noticed that they have two prices for each currency, these are a buy price and a sell price, which will be examined more closely in the next section of this guide.

So how do you make money off it?

The best bit! with Forex markets, it is always possible to make money. Unlike stock markets, housing markets and all the other markets that can, as we have recently seen, crash, on Forex markets if one currency is going down against another, you can be making profit. The entire market cant crash, because is based on what currencies are worth compared to other currencies, so when one is going down, its the same as another going up.

How does that work?

Well, lets say you had 100 US dollars(US$100) and you thought the dollar was going to go down against the euro, so you bought euros with your dollars. If the exchange rate between dollars and euros was 0.75 you would get 75 euro cents per dollar. So now you have €75. Now just say you were right! The dollar went down! This would mean the the exchange rate would go down, lets say to .65, meaning one dollar was worth 65 euro cents. This is great news for you, because you bought euros, so if you swapped back your €75 to US dollars you would now have US$115.38. All you have done is move your money from one currency to another and back, and you have made a profit.

Thats it? sounds easy

It literally is that easy, there are a few things to take into account, such as commission you must pay to your broker(choose your broker carefully!) and something called “pip spread” which will be explained in the next edition of this guide, but there you have the basics of forex.In the next part, as well as talking about pip spreads, I’ll introduce you to the tool which can really crank up your profits on forex markets, margins. Margins are what make forex trading the exciting money making venture that it is, so stay tuned!

What the hell is a Forex pip?

Well, when you look at forex charts, you see that each currency pair has two sets of numbers, a pip is the last digit of each number, so if a price changes from 0.870 to 0.873 it has moved 3 pips. The pip spread is the gap between each number, for example 0.910/0.915 has a 5 pip spread. This is important stuff, because what you want is lower pips, the lower pip, the easier it is for you to profit.

Why is that?

Well, when you start a trade, you always open at the ‘worse’ position and therefore you must cover the pip spread before you start making profit. If the pip spread is too large its hard to profit even if you get the direction of the trade right, so always look for a broker with good spreads.

Ok, so maybe i can make a little profit, but i dont have enough money to make any serious cash

This situation may seem familiar, its that old adage(or is it myth?) that it takes money to make money. In forex there is a little twist to this, you can use someone elses money but keep all the profits. Nothing illegal or bad, its called margins, and essentially what works is you use your money to cover the margin of a trade. As an example, if you had $100 and traded with a margin of 50:1, you would be able to open trades worth $5000. if you did this and the pair you were trading improved by 1%, you would be $50 up(before commision), but then your next trade you can open $7500, another 1% and thats $75 for you. If you are good at picking what will happen between a currency pair, you can quickly build your capital trading like this, however there is a catch, this is the real world and money can be lost. When trading margins your risks go up with your rewards so always be careful that your not risking to much, becasue just as you can make fast profits with margin trading, you can also lose it carefully.

When I first started trading currencies, I spent a lot of time in forex forums and forex chat rooms. I spent 80% of my forex trading resources looking for that perfect forex system that would make me money every day, every trade and forever. It was easy to be side tracked with the latest and greatest forex systems out there.Every day a new system would be introduced in the forex forums. Before I knew it, I was spending more time chatting in forex forums than actually trading the forex market.

It did not take long for the fruits of my labor to be realized with my trading account being reduced to zero. Talking to some better forex traders than I , I came to the following conclusions to the reason why some forex traders are better than others.

1. Good Forex Traders are Properly Capitalized.
A forex trader with an account size of $1000 trading full lots or even mini lots, is on track to losing his forex trading capital. A lot of forex brokers entice new forex traders with low account opening requirements. Their literature is full of traders who made 1 million dollars trading the forex market. The only information they do not give is that out of their 1000 clients only 1 of them made that 1 million dollars, the rest were so undercapitalized they lost their accounts and had to add more money.

2. Good Forex Traders Treat Forex Trading as a Business
Reading forex charts can be addictive. Before long the forex trader finds himself trying to read those beautiful charts and making forex systems, they forget that forex trading is not a hobby. A good forex trader has set up his trading as a business like any other. Tracking your profits and loses as well as your tax requirements is essential for the forex trader. Keeping proper records of your business is essential. Otherwise, you are just gambling. Actually some gamblers do take gambling like a business, so why don’t forex traders do the same.

3. Good Forex Traders Trade When There is An Opportunity
I feel sad when I look at my earlier accounts and see that 80% of my loses occurred after I had decided to enter the market when my trading plan did not require me to. Intuition is not a very good attribute for forex traders with a trading plan. Chasing the market is the biggest crime a forex trader can make but it happens to be the most common problem with traders of all levels. Wait patiently for you trading opportunity and only trade then.

4. Good Forex Traders Hate RiskI
used to believe that forex trading is a risky undertaking until, I discovered that when I stopped risking trades, I made more money.A proper trading methodology is meant to reduce the forex trader’s risk to tolerable levels. It is not wise to risk trades for the sake of it.The first few months of a traders life should be spent on trying to reduce their trading risk to levels where they can consistently make profits and predict the outcomes of their trades. If you have a trading plan that tells you all the possible outcomes of your trades, then you are on the way to becoming a risk free forex trader.

Of course there are other attributes that great forex traders have but these were the ones I worked on for sometime. I am still working on them and the beauty of forex trading is that you can only get better the more you practice the proper methods of forex trading.

However, there are a number of mistakes that all forex traders seem to repeat .Cutting down on these, would greatly increase the success probabilities for the forex trader.

1. Choosing Your Forex Broker.

Some 5 years ago, I could count the number of retail online forex brokers in  my hands. Now we have over 200 forex brokers and they are still increasing in number . So why do new forex brokers still flock to brokers who are undercapitalized and who’s cost of doing business is too expensive for them.
Cost of doing business for the forex trader includes the pip spread. If you choose a broker who’s pips are 2 or more pips than my own broker, I am making at least 2 pips profit over you each and every time we put the same trade . This adds up .For example if you lose 2 pips each trade at $10 per pip at the end of 1000 trades, I will be $10,000 in profit though we are trading the same system.

2.  Lack of Forex Business Plan
I know forex brokers like making forex trading seem like the best get rich quick scheme ever created but the truth of the matter is that forex trading is just like any other business you will ever start.
The best way to fail in any business is to not have a business plan.The forex trader must be savvy in identifying his source of trading capital, costs of doing his business especially opportunity costs etc.
I have seen very few forex traders with a business plan and this may be one of the main reason for forex traders turnover.

3. Lack of a Forex Trading  Plan
This might seem to be the same as a forex business plan but they are not. A forex trader without a forex trading plan is like a fisherman without a hook. You will never catch any fish without a forex trading plan.
A forex trading plan should be very specific. If a 10 year old child read the trading plan, they should be able to execute it. The basic items to be listed in a forex trading plan include

a.Entry strategy

b.Exit strategy

c.Trade Continuation Strategy

d.Money Management Strategy

There should be no questions asked about a trading plan and it should be written down. Again ,very few forex traders even bother with this.

4.  Think Long Term in Forex
It is true that some people make a killing in a very short time in the forex market. However, it is more likely that you will lose your forex trading capital in an even faster time. The best forex trader is probably George Soros, but he is still trading forex because he thinks long term, not because he made a quick buck.

Any forex trader who thinks of trading in terms of a get rich quick scheme might as well go over to Las Vegas and gamble. He might have better odds of beating the forex market.