Beginner’s Overview of Foreign Currency Exchange

Foreign currency exchange trading can be very rewarding, but can also be very intimidating to a beginner. To get started, you will need to know some basics:

1. What is foreign currency exchange?
2. How is it traded?
3. What are the benefits?
4. What are the risks?
5. How can I get started?

What is Foreign Currency Exchange?

The Foreign currency exchange (FOREX) market is a cash (or “spot”) market for currency. Unlike the stock exchange, the FOREX market is not located on a trading floor or centralized on an exchange. Instead, it is entirely electronic within a network of banks and runs 24 hours per day Sunday evening (5:00 pm EST) through Friday evening (4:00 pm EST), excluding some holidays. The fact that it is all electronic means that you can tap into it from your computer.

How is it traded?

FOREX is traded in currency pairs, for example EUR/USD is the Euro base currency and the US dollar counter (or quote) currency. There are six major pairs: EUR/USD, GBP/USD (Great Britian pound vs. US dollar), USD/JPY (US dollar vs. Japanese yen), USD/CAD (US dollar vs. Canadian dollar), AUD/USD (Australian dollar vs. US dollar), and USD/CHF (US dollar vs. Swiss Franc).

Currencies are traded in dollar amounts called lots. For a “standard” account, one lot (called a standard lot) is $1,000 and controls $100,000 in currency. For example, when you place an order to buy one lot of EUR/USD, you are buying the EUR and simultaneously selling the USD. The margin you must put up to place the order is $1000 (for a standard lot). You are going long the EUR and expecting it to strengthen against the USD. For every increase of $0.0001 in the EUR, you make one “pip” (price interest point) equivalent to $10 per lot traded.

Similarly, for a “mini-account” when you place an order to sell one mini-lot (one-tenth of a standard lot) of EUR/USD, you are selling the EUR and simultaneously buying the USD. You are going short the EUR and expecting it to weaken against the USD. The margin requirement is $100.00 per mini-lot. For every decrease in the EUR of $0.0001 you make one pip equivalent to $1 per mini-lot traded.

Note that unlike trading stocks, there are absolutely no restrictions on short-selling in FOREX. Short-selling is exactly like buying – except that you’re selling of course.

The pip value and amount per pip per lot differs when the USD is not the counter or quote currency. For example, when buying the USD/JPY pair with a ask price of 109.00 (meaning 1 USD equals 109.00 yen), a change in the Japanese yen of 0.01 yen is equivalent to 1 pip or $9.17 per pip per lot traded ($9.17 = $100,000 x 0.01 / 109.00).

The broker makes money off the spread which is the difference in the quotation ask and bid prices. You buy the base currency at the ask price and sell it at the bid price. Generally, the major currency pairs have relatively low spreads. The EUR/USD is commonly two to three pips and the GPD/USD is commonly four to five pips. For example, the current bid/ask price for EUR/USD is quoted at 1.2322/1.2324. This means that you can buy 1 EUR (the base currency) for $1.2324 USD (the counter-currency). You buy at the ask price. You can sell 1 EUR for $1.2322 USD (you sell at the bid price). You will pay the broker the spread or $1.2324 - $1.2322 = $0.0002 = 2 pips. For a standard lot, the broker fee (in this example) is $10 x 2 pips = $20 per standard lot for a roundtrip trade (1 buy and matching sell or 1 sell and matching buy). For a mini-lot, the fee would be $1 x 2 pips = $2 per mini-lot for a roundtrip trade. The broker fee is automatically deducted from your account.

Obviously, if you buy (go long) a currency pair, you expect the base currency to increase in price. Your objective is to sell later at a price higher than you purchased and make a profit. On the flip side, if you sell (go short) a currency pair, you expect the base currency to decrease in price. Your objective is to buy later at a price that is lower than the price you originally sold, and thus make a profit off the difference.

There’s more to it than can be explained in this overview, but you should get the basic idea.

What are the benefits?

1. With FOREX trading, there is no inventory, no employees, and no customers. Your overhead can be as minimal as a home computer with internet access.

2. You can get started with a “mini-account” investing as little as $300.

3. Currency prices tend to repeat in relatively predictable cycles creating strong trends. Once you learn how to trade properly, you can compound your money, and potentially turn a little into a lot.

4. You can trade for a few hours per week, or much more if you want to. It’s all up to you.

5. The FOREX market is very liquid, with trillions of dollars traded every day. On its slowest day, orders can usually be placed within a few seconds if you stay with the major currencies. Instantaneous execution (1 to 2 seconds) is the norm during normal trade volume days (for the major currencies).

6. You can trade from just about anywhere as long as you have a computer with internet access to your account.

What are the risks?

1. The market can be very volatile, especially during times of major news releases, also known as “fundamental announcements.” The time of these announcements is usually known in advance. Many traders simply stay out of the market during these announcements and wait until market volatility has settled back down.

2. If you use too much margin or risk too much on any one trade, your account could suffer badly on a trade that doesn’t go your way. Proper risk management, including sound placement of stops and not risking more than 2 percent of your account on any one trade, can alleviate this risk. Do not risk more money than you can afford to lose.

3. A major world event could trigger a huge volatility swing that could wipe out your account (or even more). However, some brokers limit the loss to the amount in your account. (Of course, a major world event could also cause the trade to go your way.)

4. Trader psychology (fear and greed) can play a big role in your success or failure as a trader. Trading education is one of the keys to overcoming these human flaws.

5. You could fail to place a stop loss with your order. A change in price could force a liquidation of your trade if your account falls below the required margin maintenance. To alleviate this risk, always set a stop loss when you place an order.

This list is not meant to be inclusive. There are other risks.

How can I get started?

You can easily open an online account by selecting one from many available FOREX brokers. You can, and should open a demo account to practice (and learn) for several months for free. The practice account makes simulated trades using real-time data. This is called “paper trading.” You should not trade your real account until you have proven to yourself that you can be profitable in your demo account.

Once you get started, you can trade currencies from just about anywhere. About all you need is a computer with internet access to your trading account. Many brokers also provide free charting software.

Jim McCabe

Choosing a Forex Third Party Signal Provider

With the growing popularity and easy access to the foreign exchange (ForEx) market, more and more people are drawn to it as their financial vehicle of choice. Along with this popularity come all the extras. This includes all kinds of software, trading systems for sale, books, videos, and third party signal party providers. Today I’m going to touch on a few points when seeking out a third party forex signal provider.

Before we get into choosing a provider we need to have a good understanding of what a third party signal provider is. A signal provider is a trader or analyst that generates trades that in turn get placed on your account. You can have several signal providers trading your forex account or just one.

Like anything else, all third party signal providers are not created equal. At first glance a trader may look like a home run. That same trader may well end up completely torpedoing your entire account in one afternoon. To help make sure this doesn’t happen we’ll set down a few guidelines. These guidelines will give us something to look for when choosing our third party signal provider.

1. The first thing I look at is weather the trader is a winner or a loser. This may seem obvious to nearly everyone, but I often see losing signal providers with 50-100 people trading their signals.

2. The next thing I look at is how long they have been a winner. If a trader has been winning for a week that means nothing to me. I recommend that you don’t trade any signal provider with less than a few months of results to show you. Any one can place a few good trades one week and get lucky. If you are going to be trading this trader’s signals they need to be established.

3. Look at the max draw down. This is the largest peak to trough draw down in equity that the trader has historically had. Some traders refuse to take a loss. This causes them to hold on to losing trades forever or until they turn to a winner. Turning a loser into a winner sounds great, but it will eat up a huge chunk of margin and may never turn around. If it doesn’t turn in your direction, you will have your entire account destroyed by a trader that could have taken a 30 pip loss but held on until it was an 800 pip loss.

4. The first three are easy to look at. They will be displayed right on the main screen of signal providers to choose from. Once you get a few signal providers you are thinking of using, its time to dive a bit deeper into their history.

a. Look at their actual trades. Do they have a good win rate because they have opened a ton of trades all at the same time on the same currency pair? They may have 20 winners in a row. This looks great, but if you look a bit deeper you will see that its really only 1 winning trade places 20 times. Not as impressive is it?

b. Look at their draw down on individual trades. Do they let a trade go 300 pips against them and then close it out when it hits 5 pips of profit? This is a trader who lets their losses run out of control and cuts their winning trades short. It’s not a trader that you want in control of your money.

c. Do they add to losing positions? A trader who constantly adds to losing positions hoping it will turn for them is not someone you want trading your account.

5. Choose a signal provider that suits you. Some traders may provide larger returns over time, but take bigger risks leading to bigger draw downs. This might be OK with you. If you are more conservative and cannot stomach large drops in equity you probably should choose a more conservative trader.

These are just a few things to look for when choosing a third party signal provider to trade your forex account. You should always trade a demo account before opening a live account with real money. Remember it’s your account. In the end you choose the signal providers, and you are responsible for what happens.

Understanding Forex - #1 - What is Forex?

This is a series of articles about The Foreign Exchange Market. You will learn here what Forex is , how it works and how profitable it can be. The whole series contain the following articles . . .

1. What is Forex

2. Technical analysis

3. Fundamental analysis

4. Money management

5. Compound interest

What is Forex?

The word Forex is an acronym for The Forex Exchange Market. This is the most liquid market on the world where you can trade or exchange one currency for another. For example, if you think that the Euro will appreciate in value and you have US dollars, you can trade the dollars for the Euros. If you are right and the Euro appreciates in value in relationship with the dollars, then you can close the position realizing a profit.

That’s the basic idea behind the Spot Forex Market. This is an interbank system which means that it is not centralized. There is no central exchange where currencies are traded. It is a global market. You can trade Forex online 24 hours per day, 6 days per week.

This market emerged at the beginning of the 70's decade. The reason was that currencies where not backed up by gold anymore. They began floating freely. Their value depended on forces of supply and demand due to economic factors, speculation, etc. This originated the Forex Market.

You can trade Forex on the Internet as I said above. There are many brokers like www.oanda.com that allow you to open an account with just $300 to $500 and start trading online. You can also get a demo account first and trade with play money just to “test the waters” and see if you like this market or not.

Demo accounts are free with most brokers. Some brokers offer demo accounts which expire within 30 days while others never expire. It is important to trade on paper, because you can test your strategies and see if they work or not.

Trading Forex is risky, but it can be very profitable too. You can trade at anywhere from 20: 1 to 400: 1 leverage. This means that the broker will lend you more money than you have on the account to trade.

For example, let’s say that a broker allows you to trade at 100: 1 leverage. If you use all the leverage, for every dollar that you have on the account you can trade 100. Let’s say that you have $1,000. With $1,000 at 100: 1 you can trade $100,000 worth of dollars in exchange for other currencies. You multiply your trading potential a lot. This allows you to realize bigger profits, but you also incur in bigger risks.

Let me show you an example. Let’s say that you have 100: 1 leverage on the account and you trade at full leverage with $1,000. The EUR/USD pair (Euro/US Dollar) is trading at 1.2500. So, you enter a position on this pair.

Let’s say that you are long. If the market moves in your favor by just one cent (1.2600), you will double your money and end up with $2,000 on the account. If the market moves against you by just one cent (1.2400), you will lose all the money that you have on the account or most of it depending on the broker you are trading with.

This can happens really quick. The market can move this much in a matter of minutes or hours. This is what makes Forex very profitable, but also very volatile. I don’t know if novice traders can understand the magnitude of what I am saying here. Many people get into Forex trading only seeing half of the truth. They get pulled into this market by all the hype flying around it.

I do believe that no other market in the world offer the opportunity to make money like this market does. On the other hand, there are some risks involved. It is important for new traders to trade on paper first before compromising real capital. We learn doing. I didn’t learn many basic concepts about this market until I started trading with a demo account.

Now, let me explain other important facts. The Spot Forex Market is traded in currency pairs. Whenever you enter a position you trade one currency for another. For example if you buy EUR/USD you are buying Euros and selling US Dollars. If you sell EUR/USD you are selling Euros and buying US Dollars.

When you enter a position, you can not trade other currency pairs unless you have additional funds on your account, but you can trade several currency pairs at the same time as long as you have enough margin/funds to trade. If you have never traded Forex before, you can see how all this works when you practice with a demo account.

Another thing that you would like to know is that Forex is traded in pips. Your profit on every trade depends on many aspects. One of those aspects are pips. Another one is how much leverage you are using per trade. A pip is the minimum unit that the price of a currency pair can move.

For example, in the case of the EUR/USD a pip is equal to 0.0001. If the price is at 1.2500 and it moves to 1.2501, it moved one pip. If it moves from 1.2500 to 1.2600 it moves 100 pips, like in the example above.

Now, how much you make on every trade depends on how many pips you make and how much money you invested on that trade. Also, what is the leverage for that account. If you trade at full leverage with a 100: 1 leverage account and you trade $1,000, if the market moves 50 pips in your favor, then you will make $500. This can happen within just a few minutes after you enter your order.

Most experienced traders wouldn’t recommend you to trade this way though. The reason is that if the market moves against you, then you could lose everything within minutes. It is better to have lower profit goals for every single trade and compound your profits over time.

Money management principles stay that it is better to never risk more than 1% - 3% of your capital, specially if you are an inexperienced trader. This is something that I will explain more under other article of this series.

Well, I hope this information have been helpful to you. This was an introduction to the Forex Market. You can read more about Forex on my other articles.




EasyWebRiches © 2006

Better Understand Technical Analysis and Some Indicators

We’re focusing on technical analysis in this article with a description of some of the important indicators.

We could say, all wealthy traders use technical analysis but not all technical analysis traders are wealthy although T.A. is the most precise way of trading the Forex market. It’s also useful note that fundamentals play their part in indicating whether a price will move up or down. It gives you the edge over other traders.

Technical Analysis is so powerful because of a few reasons

1) it represents numbers. All information and its impact on the market and traders is represented in a currency’s price.
2) It helps to predict trends and the foreign exchange market is very ‘trendy’.
3) Certain chart patterns are consistent, reliable and repeat themselves. T.A. helps us to see them.

Here’s one way of putting technical analsysis into perspective (wish I had a dollar each time I said ‘technical analysis’). We all know that prices move in trends. Research has shown that those that trade ‘with the trend’ greatly improve their chances of making a profitable trade.

Trends help you become aware of the overall market direction and often rescue us from less then profitable entry points. I attended a 2 day course costing me over $2500 AUD and the biggest thing I learned from it was the need for discipline and emotional control. The content was so basic that within the next 3 or 4 articles, I would have covered all of it. So learning the ‘tools of the trade’ the technical indicators and their applications will help you to diagnose what the market is doing but even then you need to expect ups and down and trade with emotional control.

Stay with the trend, follow the price.

Find the price of the currency pair. If EUR/USD is 1.4224 and moves to 1.4180 then 1.4090 then the market is in a down trend. Concern yourself only with what the market IS doing not what it might do. Listen to the markets and the indicators will backup what they are telling you.

Moving Averages.
Tell you the price at a given point of time over a defined period of intervals. They are called moving because they give you the latest price while calculating the average based on the selected time measure.

They lag the market so to give you an indication of a change in trend, use a shorter average such as a 5 or 10 day moving average. By combining a shorter term and longer term M.A. you can detect a buy signal when the shorter term crosses the longer term moving average in the upward direction. Or a sell signal if it crosses in a downward direction. For example, you could use a 5 day versus a 20 day moving average or a 40 day versus a 200 day moving average.
There are simple moving averages, linearly weighted which gives more importance to the recent prices or exponentially weighted. The latter is a favourite because it considers all prices in a time period but emphasizes the importance of the most recent price changes.

MACD
Based on moving averages, a MACD plots the difference between a 26 exponential moving average and a 12 day exponential moving average, with a 9 day used as a trigger line. If a MACD turns positive when the market is still plummeting it could be a strong buy signal. The converse also works.

Bollinger Bands (sounds like an elastic band)
Prices tend to stay between the upper and lower bands. They widen and become more narrow depending on the volatility of the market at the time. A sell signal would be when the moving average is above the Bollinger bands and vice versa for a buy signal. Some traders use it in conjunction with RSI, MACD, CCI and Rate of Change.

Fibonacci Retracement
Describe cycles found throughout nature and when applied to technical analysis can find shifts in the market trends. After a climb prices often retrace a large portion sometimes all of the original move. Support and resitance levels often occur near the Fibonacci retracement levels.

RSI
Relative Strength Index measures the market activity to see whether it’s overbought or oversold. This is a leading indicator so helps to indicate what the market is going to do (awesome!). Ahigher RSI number indicates overbought (so expect a bearish shift) and a lower number indicates oversold.

Successful traders will generally use 3 or 4 signals to provide a more conculsive signal before entering a trade.

Always remember, “If in doubt, stay out!” . Technical analysis doesn’t factor in political news, a country’s economic profile or fundamental supply and demand.

Technical Analysis helps us figure out how much money to risk on a trade. How and when to enter the market and how to exit the trade for profit or to minimize loss.

I sincerely hope you found this article useful.

Forex Trading Software

If you are looking to get started trading the Forex, you will find that there are numerous software programs available (both web based and desktop based) for you to use in your trading. In fact, most brokers offer clients a software package for free or as part of their trading account. Usually the software that comes with your trading account is a very basic "bare bones" model. Sometimes, more features are available for a price. The software packages your broker provides can be an important consideration in choosing a broker. You may want to download and try some different packages using a demo account. This will give you a better idea of which software package you find most suitable to your unique style of trading.

Forex trading software comes in two basic flavors - desktop software, and web based software. Which one you choose to work with depends on your preference and other more technical factors. Obviously, the Forex market is very dynamic and you need to have the most reliable up to date connection to the data as possible. Your internet connection speed is a factor here, and if you can afford it, you really should be connecting via broadband.

Your internet connection speed is just one of the factors you should consider when selecting forex trading software. The biggest consideration should be one of security.

Generally speaking, web based forex software is more secure than a desktop based software package. Why is that? Well, with a desktop software, your information and data is stored on your hard drive thus making it vulnerable to numerous security issues. If your computer became infected by a virus, your personal data and the integrity of your trading system can become compromised. Likewise, in the event of hard drive failure, your important data can be lost. Then there is the threat of prying eyes accessing your trading systems.

Luckily, if you choose to go with a desktop based software for your forex trading, you can do some things to limit the risks. For starters, a dedicated computer just for trading the forex would be a wise investment. Due to the popularity of forex trading, there are computers made specifically with a forex traders needs in mind. Even if you cant afford a dedicated machine, you should still apply the following tips to your trading computer:

* Password protect your trading software and personal data
* Make regular backups of your trading data
* Use a anti virus program and keep it up to date
* Update your trading software regularly

If you choose to go with a web based trading software, allot of the security and maintenance issues are handled by the provider. Online based forex systems are hosted on secure servers, the same type of servers credit card processing is handled on. This gives you a great deal of protection, as your data is encrypted. Also, backups and mirrors of your account data are made by your software provider to protect you from data loss.

Aside from the security considerations, you may find that an online based trading software is simply more convenient. There is no software to download as the software runs in your regular web browser. This means that you always will have access to the latest versions and features. Also, if you travel you will certainly appreciate the ability to log in and trade from any computer with an internet connection.

As you can see, there are many options in forex trading software. You ultimately should choose to work with the software that you personally find easiest and most intuitive to use. that you personally find easiest and most intuitive to use.

Understanding Forex - #4 - Money Management.

This is a series of articles about The Foreign Exchange Market. You will learn here what Forex is , how it works and how profitable it can be. The whole series contain the following articles . . .

1. What is Forex

2. Technical analysis

3. Fundamental analysis

4. Money management

5. Compound interest

Money Management.

This is one of the most important aspects of a good trading system. Even if your market forecasts are accurate, you may still not be profitable in the long run unless you implement proper money management techniques.

Money management refers to how you manage your trading capital. It has to do with how much money you invest on each trade. Also, how much do you expect to make on each trade compared to how much you are risking. Furthermore, you can also use different kinds of orders that allow you to manage your trades automatically like stop loss, limit order and trailing stop.

In my opinion the two more important aspects of money management are position sizing and expectancy. Position sizing refers to the size of your positions. You should not risk more than 1% - 2% per trade.

Expectancy refers to how much do you expect to make vs how much you are willing to lose. The expectancy should be always positive. For example, if you enter a position and you expect to realize a 50 pips profit while you are willing to lose only 15 pips, that’s positive expectancy.

The example above means that you can be wrong three times in a row and still be profitable the fourth time. A method to implement positive expectancy on your trading strategies is by using trailing stops. I will explain this now and the other orders that I mentioned above.

Let’s start with a stop loss order. This one helps you automatically close a losing position and prevent it from decreasing your total trading capital. Why you need stop orders? Many things could go against you and make you lose big time.

The platform you are treading on could freeze. The place/computer you are trading from could go off power. Market news could drive the price of currencies mad quickly. Do you get the point? Many people use stop loss orders just as an “insurance” against these events taking place.

Something else a stop loss order could be good for is to establish an automatic trading system. Some trading systems do not require you to be in front of your computer all day. You can set them on autopilot and let the market/platform do its thing. If the market moves against you, the stop loss will be triggered and your losing position will be cancelled automatically.

The second order mentioned above is the limit order. This one is good to automatically take a profit once the price of the currency pair has moved to a desired level. You can use a limit order for the same purpose you use a stop loss order. It is good to automate your trading in general. Once the target price is reached, the limit order will be triggered canceling your winning position and preventing it from turning into a losing position.

Now, something very important about trading “cut your loses short, let your winners run.” Most traders do this the other way around. That’s why they lose in the long run.

Some of the easiest ways you can implement this technique is by using a trailing stop. These kinds of orders let you get positive expectancy, which is one of the most important aspects about money management as mentioned above.

A trailing stop is like a limit order and a stop order at the same time. For example, let’s say that you enter a position and the market moves in your favor. Then notice what happens.

With a trailing stop you have a chance that you don’t have with a limit order. If the market keeps moving in the direction you expected, the trailing stop order will move with the market. This way there is no limit to how much profits you can get. On the other hand if after moving in your favor the trend retraces a certain percentage, the trailing stop will be triggered canceling the position and preventing it from turning into a losing trade.

These are common techniques used in most successful trading systems. You can learn other important aspects about Forex like technical analysis and fundamental analysis from other articles on this series.




EasyWebRiches © 2006

Factors Involved In Becoming A Successful Forex Trader.

These days everyone is talking about Forex trading and the great opportunity this activity represents for people willing to brake free from the corporate world and start working from home or any where else without losing their current lifestyle and even improving it.

Forex trading has changed dramatically in the last 10 years thanks to the technological advancements of the internet era. With real-time streaming technology and faster and more efficient computer systems, almost anything, from roses to FX trading, is available at the click of a button.

Some of the great reasons why Forex trading is a great way of entering the capital markets is that your trades are all commission-free and it has a low transaction cost. All the best forex brokers have these characteristics and even Mini FX traders (i.e., traders starting with accounts having a capital as low as $250), who are just starting in this field, can buy and sell currencies online always commission-free.

But one thing is to start Forex trading and other very different is becoming a profitable Forex trader. In order to become a profitable trader the new trader will immediately discover the imperative need of having an accurate knowledge of the markets and a good understanding of the forex technical indicators. Concepts as Moving Averages, Fibonacci levels, Bollinger Bands, etc; are the basic knowledge every trader must have.

But having a good knowledge of these concepts is not everything you need. Fear is one of the worst enemies of the Forex trader. In order to become a profitable trader it is essential that the person involved in trading understands that he must leave fear aside and stick to the trading plan he has constructed and arranged before, always understanding that losing trades happen to everyone and they are always part of a profitable trading career. A forex trader must learn how to profitable use his stops without heavily compromising the capital in his trading account, i.e., he must play safe but realizing that a calculated risk must be undertaken in order to maximize profits.

In short knowledge is the key to a successful trading career but it also must go along the proper psychological preparation of the trader in order to be able to tame the markets and become a profitable trader.

Forex Trading System: Discretionary vs. Mechanical Systems

There are basically two types of Forex trading systems, mechanical and discretionary systems. The trading signals that come out of mechanical systems are mainly based off technical analysis applied in a systematic way. On the other hand, discretionary systems use experience, intuition or judgment on entries and exits. But which one produces better results? Or more importantly, which one fits better your trading style? These are the answers we will try to answer on this article.

We will first analyze the pros and cons about each system approach.

Mechanical systems

Advantages
This kind of system can be automated and backtested efficiently.
It has very rigid rules. Either, there is a trade or there isn’t.
Mechanical traders are less susceptible to emotions than discretionary traders.

Disadvantages
Most traders backtest Forex trading systems incorrectly. In order to produce accurate results you need tick data.
The Forex market is always changing. The Forex market (and all markets) has a random component. The market conditions may look similar, but they are never the same.
A system that worked successfully the past year doesn’t necessary mean it will work this year.

Discretionary systems

Advantages
Discretionary systems are easily adaptable to new market conditions.
Trading decisions are based on experience. Traders learn to see which trading signals have higher probability of success.

Disadvantages
They cannot be backtested or automated, since there is always a thought decision to be made.
It takes time to develop the experience required to trade successfully and track trades in a discretionary way. At early stages this can be dangerous.

Now, which approach is better for Forex traders? The one that fits better your personality. For instance, if you are a trader that finds it hard to follow your trading signals, then you are better off using a mechanical system, where your judgment won’t play an important role in your system. You only take the trades that your system signals.

If the psychological barriers that affect every trader (fear, greed, anger, etc.) puts you in unwanted scenarios, you are also better off trading mechanical systems, because you only need to follow what your system is telling you, go short, go long, close a trade. No other decision has to be made.

On the other hand, if you are a disciplined trader, then you are better off using a discretionary system, because discretionary systems adapt to the market conditions and you are able to change your trading conditions as the market changes. For instance, you have a target of 60 pips on a long trade. But the market suddenly starts trending up pretty strongly, then you could move your target to say 100 pips.

Does it mean that trading a discretionary system has no rules? This is absolutely incorrect. Trading discretionary systems means that once a trader finds his/her setup, the trader then decides what to do. But every trader still needs certain rules that need to be followed, such as the size of the position, conditions that have to be met before thinking to get in the market, and so on.

I am a discretionary trader. The main reason I chose a discretionary system is that my trades are based on price behavior, and as you already know, the price behaves similar to the past, but it is never identical, therefore the outcome of every trade is unknown. However, I do have rigid rules on my system, certain conditions have to be met before I even think in getting in a trade. This keeps me out of trouble, once my setup is present and in accordance with the rules I have set, then I closely watch the price behavior and finally decide whether it is a good opportunity or not.

Whether you choose to be a discretionary or a mechanical trader there are some important points you should take in consideration:

1. You need to make sure the Forex trading system you are using totally fits your personality. Otherwise you will find yourself outguessing your system.
2. You also need to have some rules and most importantly have the discipline to follow them.
3. Take your time to build the perfect system for you. It’s not easy and requires time and hard work, but at the end, if done correctly, it will give you consistent profitable results.
4. Before going live, try it on a demo account or even on a small account (I will go for the second option, since psychological barriers will be present.)

An Introduction To Forex Trading

Most people have heard of trading, like the New York Stock Exchange, and Forex trading isn’t far off from that. The difference is, is that Forex trading is the trading of currencies, not stocks. It also has a larger volume than stock and bond markets combined! As with stocks, it is a high-risk investment, but it can also have an extremely high return, easily doubling investments in minutes.

The best part about Forex trading, is that it is done using a margin. That is, you don’t need the full amount to buy a currency. A Forex trader can buy $100,000.00 with just $1,000.00. This allows traders to make huge profits with minimal investment. And the Forex market is open to all types of investors, not just big organizations, and banks.

The best place for an investor to start when considering the Forex market, is the Forex community. Research is key to understanding Forex trading. Consulting Forex forums and community boards can be extremely beneficial.

The next thing to do would be to choose a system. A system, is a specially designed method, software, or course developed by professional in Forex trading. There are many systems out there, so research must be dome to make sure the system fits your needs. Before purchasing a system, you should ask them a few questions like, how long have they been in this business, and and if there is a trial version available. Make sure that they have customer testimonials too.

By going to Forex forums, and chat rooms, one might be able to find out what system others are using, or what systems are recommended most. Most professional traders believe that having a trading system is an important factor in establishing a stable revenue in the forex market. Systems tell investors when, and what, should be done in each trading situation.

Another thing that an investor will need is a broker, to assist with transactions. There’s a wide variety of brokers, so be prepared with questions about their credentials. Ask them about their leverage, and their spread. As these are both determining factors in how much money the investor can make with each investment. The investor may also choose to handle transactions themselves.

An investor also needs to master analysis, and form a strategy, to get a competitive edge, and improve their odds. They need to learn to recognize the different factors that affect the Forex market. A person has a much better chance of success at trading forex, if they do their research, and know what to look for. And, in conclusion, it doesn’t matter if a person is experienced or a beginner in the world of Forex!

Online Forex Trading - Market System

Forex trading is derived from a combination of two words, foreign and exchange. More simply put it is the trading of foreign currencies and is often referred to as the FX market. If you are searching for excitement and profits this could be the market to trade.

Forex trading has become extremely popular the world over and has people from all different countries and backgrounds trading like only the professional traders could do just a short time ago. Until recently Forex trading was performed mostly by major banks and large institutional traders. The technological advancements that have occurred of late have transformed Forex into the playground of average traders like you and me.

It's easy to find an online FX trading system, platform or software that can make it easy and fun to trade the market. Simply browse the web and you will be inundated with many exciting offers and promotions. There are many firms that sell or even give away free training software, charts or other useful tools for your future in Forex trading.

Foreign currency trading is done in pairs or combinations. For example, trading the Dollar versus Yen, the Euro vs. the Dollar or the British Pound against the dollar. The most popular currencies that are used for trading and investment purposes are the United States Dollar (USD), Japanese Yen, British Pound, Euro and Swiss Franc. The make up the major portion of all currency trading.

When you come across these currencies in the market you will see them written as a pair: USD/JPY (U S Dollar and Japanese Yen), EUR/USD (Euro and U S Dollar), USD/CHF (U S Dollar and Swiss Franc) and GBP/USD (British Pound and U S Dollar).

The vast majority of all day trades of foreign currency involve these five major currencies. Your goal as a trader is to pick out which currency will appreciate against another. If you can find or develop a system that will allow you to choose the correct direction a currency will be taking it is possible to make good profits in the FX market.

Most trades on the FX market are done by Forex brokers and dealers at major banking institutions across the globe. And since it is a world wide market that makes it a 24 hour a day market. The brokers or dealers work in different shifts so that major institutional traders can perform their trades 24 hours a day around the clock.

However, don't be alarmed. You do not have to be awake all day and all night to trade the market. It is a simple matter of placing stop orders with brokers to buy or sell at pre-determined price levels even while you are sleeping. If your pre-specified price points are met the order will go through as planned. If your price points are not met the orders will not be placed or carried out. This is the key to stopping potentially big losses. You'd hate to be asleep when the market turned against you without a way to get out. Having specified price levels can save you a lot of stress in the market place. With stop orders you don't have to constantly follow your currencies every second of the day. You can place your orders and then go about your normal daily routine.

The FX is unlike stock exchanges in that stock exchanges can be very volatile. The FX market is ordinarily a great deal smoother and doesn't gyrate up and down as quickly or rapidly. The market is actually very easy to trade and is very liquid, meaning you can get your money in or out at any time. Placing an order can be done in a matter of seconds. If you have the temperament for this type of activity it can be a very worthwhile endeavor.

Forex Technical Analysis: The Art of Predicting the Future by Studying the Past

Technical Analysis is the easiest and most precise way of trading the FOREX market known by the forex traders community. All available information on any particular currency, and its impact on traders, and the market, are already reflected in a currency's price. The foreign exchange market is mostly composed of trends and is, therefore, a place where technical analysis can be used very effectively. Experience in trading has shown that history repeats itself - over time, certain chart patterns become consistent, predictable and very reliable. The problem is being able of spoting them. There's always more than meets the eye at first glance.

Prices move in trends; and the traders who don't know this fact obviously have no need to implement a trading methodology on technical analysis, they haven’t even realized yet. But, over 100 years of research has shown that those who trade "with the trend", more often than not, greatly improve their chances of winning in the forex markets (i.e., making a profitable trade).


Many times finding the prevailing trend will help you become aware of the overall market direction and offer you better visibility--especially when shorter-term movements tend to clutter the picture. And many times following the trend will bail you out of an initially less than great entry point.


The main question you may be asking yourself by now is; how does technical analysis help you to determine what the trend of the market is and how does it help your efforts to trade with the trend and not against the trend?


It is important to mention that no one is claiming technical analysis as the “magic bullet” of trading . And if you ask, which indicators are better in Forex trading? The answer is none - technical indicators should simply be components of your overall customized / personalized trading system and not systems in and of themselves. They are like tools in a tool kit, not the kit itself!)/

As a Forex Technical Trader, your goals are:


#1) To figure out the price action of the currency pair. Price is the main concern. If the EUR/USD is at 1.3226 and goes to 1.3219, 1.3112, 1.3008 - the market is in a down trend. Despite what every technical indicator might predict, if the trend is down, stay with the trend. Indicators showing where price will go next or what it should be doing are useless. A trader need only be concerned with what the market is doing, not what the market might do. The price tells you what the market is doing.


#2) To always remember that technical indicators are only giving you confirmations based on what the market is telling you. So listen and pay close attention to the market and let it dictate which method you will use and which tool you will pull out of your bag of strategies and techniques. For only by listening to the markets will you ever be able to conquer it successfully and become a profitable trader.

FOREX Fundamental Analysis

Most FOREX traders rely on analysis to make plan their trading strategy. This article will discuss fundamental analysis. The other common form of analysis is technical analysis. After reading this article you should have a better understanding of fundamental analysis and how to use it as part of your FOREX strategy.

Political and economic changes are the basis of fundamental analysis. These can frequently affect currency prices. Traders that take advantage of fundamental analysis will gather their information from a variety of news sources. They are looking for information about unemployment forecasts, political ideologies, economic policies, inflation and growth rates.

Fundamental analysis will provide you with an overview of currency movements and a broad picture of the economic conditions. Most traders then will combine their fundamental analysis with technical analysis to plot actual entrance and exit points as well as confirming the information provided by their fundamental analysis.

Just like most markets the FOREX market is controlled by supply and demand. Many economic factors can affect the supply and demand but the two most critical ones are interest rates and the strength of the economy. The over all strength of the economy is affected by changes in the GDP, trade balances and the amount of foreign investment.

There are many economic indicators released by government and academic sources. These indicators are usually released on a monthly basis but will sometimes be released weekly. These are pretty reliable measures of economic health and are closely followed by all traders.

There are many indicators that are released but some of the most important and commonly followed are : interest rates, international trade, CPI, durable goods orders, PPI, PMI and retail orders.

Interest Rates - can cause a currency to either strengthen or weaken depending on the direction of movement. In some cases high interest rates will attract foreign money, however high interest rates will frequently cause stock market investors to sell of their portfolios. They do this believing that the higher cost of borrowing money will adversely affect many companies. If enough investors sell of their holdings in can cause a downturn in the market and negatively affect the economy.

Which of these two affects will take place depends on many complex factors, but there is usually an agreement among economic observers as to how the current change in interest rates will affect the general economy and the price of the currency.

International Trade - If there is a trade deficit (more items imported than exported) it is usually considered a negative indicator. When there is a trade deficit it means that more money is leaving the country to buy foreign goods than is entering the country and this can have a devaluing effect on the currency. Usually though trade imbalances are already factored into the market consideration. If a country normally operates with a trade deficit then there should not be an affect on the currency price. The currency price will normally only be effected by trade differences when the deficit is greater than the market expected.

The measurement of the cost of living (CPI) and the cost of producing goods (PPI) are a couple of other important indicators. You should also watch the GDP which measures the value of all the goods produced in a country and the M2 Money Supply which measures the total amount of currency for a country.

In the US alone there are 28 major indicators, these can have a strong effect on the financial market and should be closely watched. This information can be found many places on the internet and is provided by many brokers.

The forex market exposed, wait until you see what’s inside

Dear Friend,

Forex traders are raking in big profits with low risk high yield, investment strategies that exist only in the foreign currency market. Especially those who have a trained eye that can see excessive profit points that explode when done correctly. The forex market has created many millionaires who understand the exceptional leverage that is provided by trading currency. To be exact a 100:1 leverage ratio, this means you can leverage your money 1x100 so $100 leverages $10,000 and $10,000 leverages $100,000. This extraordinary benefit of the currency market allows you to realize windfall profits in a short period of time and can quickly make you a lot I mean a whole lot of money. Big Businesses, banks, and wealthy investors have been making billions for years from foreign currency exchange, and now the little guy with a few hundred bucks has the same opportunity to profit from this supercharged money making forex machine.

My friend the forex boom is just beginning and I have a secret weapon that neither the newbie nor professional forex fanatics possess. Let me put this in perspective for you, lets say you could have been friends with Warren Buffet before he became a billionaire and he was willing to show you all his techniques and insight into the markets. Would you have listened? I hope you answered yes, because every investor that got involved with Warren Buffet before he became a household name has since become super multi millionaires. Now you have a similar opportunity, but there is one problem (a good problem) the leverage that is available to you through the forex market will speed up the amount of time it takes to make substantial gains that made those select few multi millionaires.

There is a little known multi millionaire forex trading champion that I discovered online who has been dumping his number crunching brain power and secret proprietary forex strategies which have made millions for everyone to see. You would not believe some of the simple yet powerful techniques this forex fiend was revealing. I mean I was floored at the sight of some the stuff this guy was showing me because I knew it meant the difference between making millions of dollars, or still trying to figure out what a pip was (forex jargon). I had to put this in writing so everyone could A. (know about the forex market) and B. (get access to this forex fortune teller). The forex market has opened up new doors for everyday Joe Schmoes such as myself and will continue to grow and give new opportunities to those who want to discover a new way to wealth. The fact of the matter is when you combine a market like foreign currencies and a Warren Buffet like forex genius that equals profits, period.

Currency Trading

Have you heard about FOREX? How currencies are traded?

When you think about Forex, what do you think of first? Which aspects of Forex are important, which are essential, and which ones can you take or leave? You be the judge.

Let’s talk about FOREX and advantages of FOREX trading.

The good thing about FOREX is that the amount of money you need to place a trade (known as "margin") is all that can be lost!

Of course, with the proper self-taught education you will win more than you will lose, but you should know that despite the high leverage of FOREX trading (200:1 is possible, which means that when you put up $1 the trading vendor will allow you to trade it as if you have $200), it’s still less risky than futures (commodities) trading. And when you trade stocks you can’t get this type of leverage.

Because of the FOREX market’s liquidity and twenty four hours continuous trading, dangerous trading gaps and limit moves are eliminated. Orders are executed very quickly, without slippage. If you do your research and find good brokers, they will automatically close some or all of your open positions if your account’s equity falls below the level required to hold the positions. You’ll never lose more than you have in your FOREX account.

Currencies are traded in dollar amounts called *lots* -- One lot is equal to $1,000, which controls $100,000 in currency.
This is the "margin" I talked about above. You can control $100,000 worth of currency for only 1,000 dollars.

Currencies are always traded in pairs. The most popular currencies and their symbols are:

USD - The US Dollar
EUR - The currency of the European Union "EURO"
GBP - The British Pound
JPN - The Japanese Yen
CHF - The Swiss Franc
AUD - The Australian Dollar
CAD - The Canadian Dollar

A currency can never be traded by itself, so you can't trade a USD by itself. You always need to compare one currency with another currency to make a trade possible.

The most commonly traded currency pairs are:

EUR/USD Euro / US Dollar
"Euro"

USD/JPY US Dollar / Japanese Yen
"Dollar Yen"

GBP/USD British Pound / US Dollar
"Cable"

USD/CAD US Dollar / Canadian Dollar
"Dollar Canada"

AUD/USD Australian Dollar/US Dollar
"Aussie Dollar"

USD/CHF US Dollar / Swiss Franc
"Swissy"

EUR/JPY Euro / Japanese Yen
"Euro Yen"

The currency on the left is called the base currency. The currency on the right is the counter currency. For example, when you place an order to buy EUR/USD pair, you are actually buying the EUR and you are selling the USD. When you place an order to sell EUR/USD you are selling the EUR and you are buying the USD. Buying or selling a currency PAIR means buying or selling the base currency, and doing the opposite with the counter currency.

It might seem a little confusing, but actually it is easier to treat the currency PAIR as one item. It means when you place trades you simply sell or buy the pair. The base/counter concept is only important for fundamental analysis.

To decide when to sell or buy you will need to learn technical analysis and/or fundamental analysis.

In currency trading you can make money both, when the currencies go up or down.

The FOREX currency trading is a great way to work from home in your free time. You can trade any time you want, from Monday to Friday. But you must know that you can lose money in FOREX. So, getting the proper education and trading before doing any real trades is a must. Fortunately you can first practice on a demo account, until you get to the point that you win 70% of your trades. Nobody wins 100%. But you can be in profit even with 50% wins.

There are plenty of books and courses to learn currency trading, but be careful with all those $1000+ courses. Usually you can find courses with the same content for much less.

If you want to learn more about FOREX go to: http://www.currencytradingmethod.com. You will get a free e-book “Forex Freedom”.

Mistakes of beginning futures and forex traders

There are many so called opportunities on the internet promising vast riches for little work in the area of forex trading and futures trading. Statistically 95% of beginning forex traders fail and quit. In this article I hope to provide a little sane advice, to increase this percentage for the good of all.

If you are like me you were attracted to futures or forex trading because both financial arenas offer highly leveraged results, which means that your profit "potential" in the short term seems to be very high.

Human emotion such as hope and greed trigger at this stage as you see an opportunity to escape your daily grind, and get a better life for you and your family. There is nothing wrong with this, but it is at this point that I need to inject a dose of reality.

Remember - 95% of all beginning forex traders fail! I'm going to try your patience and repeat this.

95% of all beginning forex traders fail! This also applies to futures trading and just about any form of speculation.

The exact reason for this is that they have been sold an idea - a potential for profit and they just look at the goal. Now this is fine, but all goals to be achieved involve doing something.

There are no free lunches in this world.

This is the point that is not confronted. You absolutely MUST confront this point if you want to have any chance of success.

We have a couple of things working against us and it's not just the skill of trading that needs to be developed.

1. We are not used to getting something for nothing. Even if we win in trading we will believe that we just got free money and will unconsciously give it back.

2. We do not have the experience, even though we may have the education.

Knowledge without experience is shaky!

Therefore, to counteract these negative factors, we must have at least 2 things in place.

1. Trade a demo account for at least a few months until you can profit consistently from that.

2. Discipline to follow a trading system

3. A Money Management plan and policy.

Without taking at least these steps you are on very shaky ground and could be heading for the 95% class very fast.

I want you to be in the 5%

How To Win At Forex

Foreign currency exchange, the greatest game in the world with a daily trading volume of over a trillion and a half dollars (thirty times larger than the volume of all the U.S. equity markets combined), has it's share of winners and mostly losers. Do you want to learn how to be in the winners circle?

Like any game it's important to know the rules in order to win. You don't have to be a professional to enter the sport, but you should have a basic understanding of the game and how it's played. Most of this can be learned for free from the online brokerage houses who also give you free trading software so you can actually practice playing the game and gain your confidence and skills before plunking down your real cash in the big leagues.

As in any sport, the most important thing to do is practice before you actually play in the real game. I can't stress that enough. Practice, practice, practice makes perfect. The only thing it will cost you is your time. When you think your ready to step on the playing field, start small. Most brokers will allow you to start trading in mini accounts with as little as 300 dollars.

And now for what you've been waiting for, the secret to winning at Forex. You need to have a trading strategy. In other words you need to know what to look for and how to trade to make money. Work out a basic game plan you expect to follow and never let your emotions influence your trades. Rule number one is never to risk more than 2% of your account balance on any one trade. That way if you have a streak of bad luck you will not wipe out your account. Rule number two is that if you have a string of five loses in a row, stop trading real money and go back to demo trading until you have demonstrated success for at least a week. Only then do you go back to trading with real money. Rule number three is to employ strict trading rules that you stick to no matter what and do not trade wildly. If you preserve your capital from big risks you will allow it to grow steadily and consistently. Don't try to make a killing in a short time and you can reasonably expect to grow your account by 10% a month or more.

Remember to have fun with it and learn a little more each day. This could turn into a lifelong professional career.

Wishing you success,
Edward Karniewicz

The Benefits of FX Trading

Many people are looking at getting into day trading, and start with studying the Stock Market, and the different stock exchanges. What many don’t realize is that there are different markets and financial instruments that one can profit from. One market that has recently become available to the public to trade is the Foreign Currency Exchange, the FOREX.

The foreign exchange market is the largest financial market in the world. It trades upwards of 2.5 trillion dollars per day, which is approximately 1000 times the volume of the New York Stock Exchange. Quite easily, the foreign exchange market dwarfs the stock market of any country.

So, where is the foreign currency market? Well, unlike the stock exchanges of the world. The foreign currency market is a virtual market that is connected by the internet, phones, and fax.

The advantage of having a worldwide currency market is that it is open 24 hours a day, 5 days a week. Living in the USA, one could trade 24 hours per day Sunday 5pm to Friday 4pm EST. One can only trade stocks during normal market hours, so for those that have jobs during the day, the FOREX market is much more accessible as trading can be done at night or early in the morning before going to work.

Other benefits of the foreign currency exchange include:

1. High Leverage: Currency brokers usually give their traders 100:1 leverage, meaning that if there is $1000.00 in ones account, they will let one control $100,000.00, which allows currency traders to reap large gains from relatively small price movements in the market.

2. High Liquidity: Because the currency market is the largest market in the world with huge daily volumes, one is always able to get in and out of trades as liquidity is never an issue.

3. Stops are always honored: Except in extremely volatile markets, which is rare, limits and stops are always honored. Because of the market’s liquidity and 24 hour continuous trading periods, dangerous trading gaps are eliminated altogether. Orders are executed very quickly, without slippage. In the stock market, it is much more frequent that stops get skipped over as stock prices plummet, but in the FOREX, one can be much more confident that the stops are honored.

4. Entry orders are instant: There is no lag time in placing an order. Orders are processed instantly at the current market price, or the price at which you set the order to enter the market in the future.

5. No Commissions: There are no commissions in currency trading, the broker just takes a small difference between the bid price and the ask price as its fee for the transaction.

As currency markets are some of the most volatile markets, many fundamental variables such as weather, and war affect the price of the currency, however, since there is no one apparent reason much of the time for price movement, the fundamentals get discounted and one can use an almost purely technical approach to trading. This is why the FOREX is considered one of the most predictable trending markets that follows technical analysis methods more than any other market.

As one can see, there are many great benefits to using the FOREX as a highly profitable financial instrument. One can trade from home in their spare time, but first it is important to get a solid education in learning specific FX trading methods. Before trading in a live account, it is important to first get educated using books, or online courses. There are many courses online selling for upwards of $3000.00, but it is not necessary to spend that kind of money to get a good education. Usually the expensive courses come with DVD’s and other expensive items that raise the price. Much of the time one can find a course for under $500 that teaches the exact same content for much less money.

Wishing You Success in Trading!

David Molina

If the banks do it - Why don't you

All major banks including central and government throughout the world make a “shed” load of money from the currency or foreign exchange market (FOREX).

In the year 2004 the Bank of America made over $750 million.

Until de-regulation in 1997, this money generator was only available to the large financial institutions, but now with as little as $300 any individual can open an account and trade FOREX.

Trading currencies is relatively unknown which is surprising because it is the largest market in the world (trillions of dollars are traded each and every day). It is the best trending market as it keeps moving in the same direction (this can be UP or DOWN) over 78% of the time. As there is no central exchange and because it is a world market FOREX can be traded 24 hours a day so it need not get in the way of your other business interests or social life.

Foreign currency trading is such a lucrative and easy to understand market that many who used to trade stocks, bonds, commodities and futures have switched to trading nothing but FOREX. Even Bill Gates and the world renowned trader Warren Buffet now trade currencies as part of their overall strategies. If they are doing it shouldn’t we follow them, after all isn’t it true that to become wealthy or successful you have to do what wealthy and successful people do.

You can make this market as exciting or as dull as you want, just turn the knob and you can have the adrenalin rush of jumping in and out of the market literally within seconds (commonly known as SCALPING, but we’re not playing cowboys and indians) or the more sedately approach of making your trade and then sitting back (this is known as INVESTING). Somewhere in between there is DAY and SWING Trading. It is entirely up to you which way you to trade or if you really want to go for it DO THEM ALL.

A word of caution, trading currencies may or may not be right for you but the good thing about this market is you can try it out. That’s right, you can open a demo or virtual account and do everything that you can do on a real account. But the really good bit is, it won’t cost you a dime.

Like everything else in life, from learning to crawl, to walking, to riding a bike, to swimming, to driving, and so on, you need to know what you are doing. Build your knowledge, study and practice, practice, practice.

Finally, once you know what you are doing and have proper money management skills, there is absolutely nothing to stop you becoming EXCEPTIONALLY WEALTHY as a result of trading foreign currencies.

I traded stocks when I first started but there were so many factors that you had to account for and so much to learn about each individual share and it’s company that it was a daunting and time consuming task. It was a very easy switch to trade currency.

I trade the FOREX market full time now and if you visit my website http://www.HomeForexTrading.com you can enrol on a FREE Trading course.

Why Trade the FOREX?

My purpose for writing this article is to demonstrate to you the advantages of trading on the FOREX market. However, there is one myth that I want to dispel before I go further. The myth is that there is a difference between trading and investing. To dispel that myth I quote from Al Thomas, President of Williamsburg Investment Company, who wrote “If It Doesn’t Go Up, Don’t Buy It”. He said “Everyone who invests is a trader, only the time period is different.” It is a lesson that I took seriously after taking a beating in the stock market in 2000.

So now, let’s compare features of currency trading to those of stock and commodity trading.

Liquidity - The FOREX market is the most liquid financial market in the world around 1.9 trillion dollars traded everyday. The commodities market trades around 440 billion dollars a day, and the US stock market trades around 200 billion dollars a day. This ensures better trade execution and prevents market manipulation. It also ensures easily executable trading.

Trading Times – The FOREX market is open 24 hours a day (except weekends) which means that in the US it opens at 3:00 pm Sunday (EST) and closes Friday at 5:00 (EST), allowing active traders to choose the times they want to trade. Commodities trading hours are all over the board depending on which commodity you are trading. Including extended trading times US stocks can be traded from 8:30 am to 6:30 pm (ET) on weekdays.

Leverage – Depending on your FOREX account size, your leverage may be 100:1, although there are FOREX brokers that offer leverage of up to 400:1 (not that I would ever recommend that kind of leverage). Leverage in the stock market can be as high as 4:1, and in the commodities market, leverage varies with the commodity traded but it can be quite high. Because the commodity markets are not as liquid as the FOREX market, its leverage is inherently riskier. Although I was never shut out of a commodity trade by the day limit, the fear was always in the back of my mind.

Trading costs – Transaction costs in the FOREX market is the difference between the buy and sell price of each currency pair. There are no brokerage fees. For both the stock and the commodity markets, there are transaction costs and brokerage fees. Even when you use discount brokers, those fees add up.

Minimum investment – You can open a FOREX trading account for as little as $300.00. It took $5,000 for me to open my futures trading account.

Focus – 85% of all trading transactions are made on 7 major currencies. In the US stock market alone there are 40,000 stocks. There are just over 200 commodity markets, although quite a few are so illiquid that they are not traded except by hedgers. As you can see, the fewer number of instruments allows us to study each one more closely.

Trade execution – In the FOREX market, trade execution is almost instantaneous. In both the equity and commodity markets, you count on a broker to execute your trades and their results are sometimes inconsistent.

While all of these features make trading the FOREX market very attractive, it still requires a lot of education, discipline, commitment and patience. All trading can be risky.

Online Forex Trading Platform Brings The Trading World Home.

Forex trading has entered the home and lives of many people around the world, both men and women; all of them coming from many walks of life. Being this a relatively new phenomenon in the department of alternative income opportunities.

It was only about ten years ago that the Forex market moved into our homes. And this was made possible only thanks to the invention and rapid spreading of the internet. The technology that made online forex trading possible.

Before the internet era, trading was an activity reserved only to the big players, banks, brokerage firms, in short; only wealthy people could aspire to enter the currency markets. But the arrival of the internet and the online trading platforms available for downloading, most of them free of charge, to the computers of regular citizens have come to transform the face of forex currency trading in a few years.

The easy accessability to the forex markets and the ever increasing number of new forex traders that has taken place in the last few years has motivated the brokerage firms to improve their services and the accessibility of their trading platforms. Not only with better and more efficient software but also with new financial products as the Mini-account that allows people to trade with an awaesome minimum margin of only $100 or even less in their trading account.

Once you download and install the trading platform from your broker, there are many out there you can choose from. You will notice the many features made available to the trader thanks to these platforms. For example, they will show you the current prices of the most important currency pairs, also included with the platform will be the charting software that will let you perform the technical analysis needed in order to find good trades.

The charting tools coming in with the software included in the trading platform package is really handy. It usually has all the important indicators, RSI, Bollinger Bands, Fibonacci levels, etc. and they are just one click away from you to use. And yes, you can even draw on the chart. The software also includes applications for the entering and exiting of trades (stop, limit, etc), and all is managed in real time through your home internet connection. And of course, when involved in online forex trading it is important to consider the fact that the higher the speed of your connection the better your trading experience will be. No one wants to lose information in the middle of a tight trade.