Mini Forex Trading – What You Need To Know

Forex trading is the new way to make money through online currency trading. With a worldwide market and over 60 currencies for you to trade there has never been an easier way to make money online.

Forex trading until recently was reserved for banks and other large financial industries but thanks to the power of the internet and online currency trading, forex has now become feasible for everyday people. The forex market has become the largest trading market in the world and each day there is an estimated turnover of over $1.5 trillion dollars. Another added bonus is that forex trading is available 24 hours a day, 5 days a week unlike most other markets that operate on an 8 hour day. This means that people wishing to trade forex can do so at any given time.

Forex currency trading is done is pairs and these are known as crosses. These pairs are always against the US dollar and the main crosses you will find when trading forex are the USD/EUR and the USD/GDP. The most popular crosses are known as majors and these can make forex traders great profits. Currencies change on a regular basis and are based on the how the world financial markets see the value of the currencies. You can sell or buy these currencies and forex brokers do not charge commission fees.

There are two types of forex accounts; a mini forex account and a regular forex account. Mini forex trading is an excellent way for small investors to learn about and take part in forex trading and with the most forex brokers offering a leverage of 100:1, mini forex trading will allow you to control a $10,000 currency position with a deposit of only $100. Mini forex trading is a great way to get a feel for forex trading and learn the tricks and skills needed to succeed without having to go to great expense. Why not try mini forex trading now and see just how easy it is to profit with forex trading.

“How To” Start Trading The Forex Market ? (Part 4 )

How Currencies are quoted and what moves individual currencies?

ONE of the best advantages in FOREX Trading is

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

You have to know, that despite the super-high leverage offered by some Forex brokers up to (400:1); meaning if you put up $ 1000 the broker will allow you to trade like you really have $400.000).

Forex trading is still less riskier than Stock or Futures Trading, where you can loose more than you have deposited in your account.

This type of LEVERAGE does NOT EXIST in the equities or futures market

In the Equities or Futures markets, very often, sudden and dramatic moves occur, against which you can’t protect yourself, even by having placed your protective stops.

Your position may be liquidated at a loss, and you’ll be liable for any resulting deficit in the account.

But because of the FX market’s deep liquidity and 24-hour, continuous trading, dangerous trading gaps and limit moves are almost eliminated.

Orders are executed quickly, without slippage or partial fills. And finally, there are no margin calls. For your protection, the broker will automatically close out some or all of your open positions if your account equity falls below the level required to hold the positions.

Think of this as a final, automatic stop, always working on your behalf to prevent a debit balance.

Currencies are traded in dollar amounts called “ LOTS”

In Forex trading, with most Brokers, you have the choice between 2 different lot sizes.

Standard Lots or Mini Lots.

One Standard lot is equal to $100,000 in currency. The margin requirements, using a 400:1 Leverage, would be US$ 250, in other word you control $100,000 worth of currency for only 250 US dollars.

You mean, depositing $250 with a broker, I could trade 100,000$ worth of currency ???

NO, be aware, that your account size has to be more than the required margin of US 250. For example, if you place an order to buy 1 Standard lot ( @100,000) of USD/JPY and USD/JPY is quoted as 112.10/112.13, you buy USD/JPY at 112.13.

Your account balance would be $220, because you paid 3 pips or $ 30 for this trade.

If you would close this trade immediately, you have to sell it at 112.10 (the bid price) , for a loss of $ 30.

In fact you could not get executed on this trade, as the brokers trading platform would reject your order, for the reason of having insufficient funds in your account).

So, your account balance has to be minimum $280. $250 for margin and $30 for the trade.

BUT....IF, after you have initiated the trade to buy USD/JPY at 112.13, and the USD/JPY falls the next second 1 pip ( approx. $8), your position would be closed automatically, because of margin deficit.

I will explain later about having an adequate account size to trade the Forex Market.

Currencies are always traded in pairs in the FOREX. The pairs have a unique notation that expresses what currencies are being traded.

The symbol for a currency pair will always be in the form ABC/DEF. ABC/DEF is not a real currency pair, it is an example of a symbol for a currency pair. In this example ABC is the symbol for one countries currency and DEF is the symbol for another countries currency.

Some of the most common symbols used in Forex are:

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

There are symbols for other currencies as well, but these are the most commonly traded ones.

A currency can never be traded by itself. So you can not ever trade the USD by itself. You always need to BUY one currency and SELL another currency to make a trade possible.

Some of the most traded currency pairs are:

EUR/USD Euro against US Dollar

USD/JPY US Dollar against Japanese Yen

GBP/USD British Pound against US Dollar

USD/CAD US Dollar against Canadian Dollar

AUD/USD Australian Dollar against US Dollar

USD/CHF US Dollar against Swiss Franc

EUR/JPY Euro against Japanese Yen

The currency left of the / is called the base currency.

The currency right of the / is called the counter currency.

When you place an order to buy the EUR/USD, for instance, you are actually buying the EUR and selling the USD.

If you were to sell the pair, you would be selling the EUR and buying the USD. So if you buy or sell a currency PAIR, you are buying/selling the base currency.

The best way to remember is, by just thinking of the entire currency pair as one item.

If you buy it...you buy the first currency and sell the second currency. If you sell it...you sell the first currency and buy the second currency.

That means you would to be able to short-sell with no restrictions so you could make money when the market drops as well as when it rises.

The problem with traditional stock market or commodity trading is that the market has to go up for you to make money. With FOREX trading you can make money in all directions.

Online Currency Trading – Why It's Harder Today than Ever Before

There are many who believe that the markets today, require the same skills as 30 years ago - but today’s markets are actually much harder to trade.

It may surprise you, but markets have changed and are now harder to trade - but if you know why, you can increase your profits dramatically.

If you don’t already understand why online currency trading has made making money harder, then you need to know - because you can then make huge profits, at the expense of other traders.

The Internet has Increased Volatility

Online currency trading has brought all the trading tools, once reserved for institutional investors, into the hands of any trader with an Internet connection.

This means that traders anywhere in the world can get all the news in a split second – just 30 years ago, this was not the case. Then the information flowed out more slowly - this meant that volatility was lower and trends were smoother - making it easier to catch, and follow the trends.

Online currency trading has now made this much more difficult.

Today, volatility is higher than ever, and pullbacks are more severe - causing traders big problems when trying to stay in a trend, without getting stopped out.

A Common Problem

Today, all traders get into moves at the same time - which increases volatility.

Example:
The market moves in the perceived direction quickly, and then recoils back (stopping traders out) - the market then continues – but many traders are stopped out, and left frustrated - as the trend continues the way they thought it would – but instead of making thousands of dollars in profit, they’re stopped out at a loss.

Does this sound familiar? - All traders face this problem.

So how can we trade more effectively with these changes in online currency trading?

Here are some tips to help you gain an edge over the other traders:

1. Staying power

As the chances of being stopped out on reactions are greater, you need staying power - so options are an ideal tool - if they’re used correctly.

Make sure you only use “in the money” and “at the money” options, to increase your odds of success.

2. Don’t Predict!

Don’t try and predict market moves in advance - wait for confirmation.

The best way to take advantage of a move, is to use a breakout method that will confirm the move - you should already have your orders set to take advantage when you reach your specified levels.

3. Trade Long Term

One thing that has not changed is that currency trends last a long time - months or years. These are the trends you need to milk for serious profits.

Forget day trading, with its high levels of volatility, and the impact of commission - all you will do is lose.

4. When in a Trend don’t worry about Pullbacks

Today, pullbacks can be severe - and no one likes losing short term. Don’t be deceived, if the longer trend is up - stick with the trend.

Don’t trail stops to close - allow for the volatility, you have to take it short term, to win long term.

Some traders are so obsessed when online currency trading, to protect their losses, that they can never follow a long-term trend.

5. Trade Infrequently

Don’t trade frequently - have patience.

Only trade the big moves and make sure you hold them.

Keep in mind, that the big trends last months, or years - and these are the ones to milk for maximum profits.

Forget, the commonly touted phrase: “If I am not in the market I may miss a move” - you won’t, if you focus on trades selectively.

6. Money Management

Don’t fall into the trap of you should only risk 5% on a trade - which is a frequent number touted by many authorities on trading.

On a $10,000 trade, that’s just $500.00 - if that all you’re risking, your chances of losing, or being stopped out are high.

Use 10 – 30% on trades that look good - and have the guts to go for the trade, if you believe in it.

Volatility is greater than ever - but so to is opportunity, if you know how to deal with it.

Following the above advice, you could be making big profits from online currency trading.

Good luck!