Forex Trading in Focus

International Currency Trading: A Simple Introduction

fxeditor — Wed, 10 Mar 2010 20:31:02 +0000

What is international currency trading and why should it matter to you? The answer is that maybe it does not matter at all, unless you are interested in making money from home with this fast growing speculative trading method.

Have you ever thought about the way that the dollar or another currency is constantly rising or falling, and what this means in practice? It means that they can be traded on the open market, just like stock. Money can be made from assessing which currencies are likely to rise or fall, and trading them one way and then the other in order to make a profit on the difference.

Keep in mind that when you see financial news reports on TV, they do not just say "the dollar rose" or "the dollar fell". They always talk about it rising or falling against another currency, such as the euro, or against a basket of currencies. This is because a currency only has exchange value when you compare it with one or more other currencies.

The international currency trading market is usually known as the foreign exchange market, or forex for short. This is a huge global market, much bigger than the stock market, that trades in all time zones, operating 24 hours a day.

It is something that can be done from home these days if you have a computer with a high speed internet connection, but trading currencies can be very risky, especially if you do not know what you are doing. As with any speculative investment there is no guarantee that you will make money and there is always a risk of losing your investment.

However, there is a safe way to get started and that is by opening a demo or practice account. This is a dummy account that lets you trade using real time prices but without any real money. It's a little like the play money that you might use in certain online games.

To make the most of your practice trading you should do everything you can to convince yourself that it is real, so that you learn not to take unnecessary risks. You will find that sometimes you gain and sometimes you lose, but when your profits are consistently exceeding your losses you are probably ready to begin trading with real money.

These accounts are available from forex brokers who are doing all they can these days to attract new clients. When you are ready to start forex trading for real, they will often let you begin with just a few hundred dollars or even less.

There are many facilities available to help you make money from your international currency trading. When you are starting out you will find plenty of books, ebooks, instructional DVDs and online videos aimed at helping beginners to get started and find a successful trading system. You will also find free newsletters, forex forums and charting services. As you become more serious about your trading you may find it worthwhile to attend one of the many currency trading seminars that are run by brokers or successful traders.

The hardest part of learning forex trading is having the discipline to stick to your system so that you do not take too many risks. Focus on this when you are looking for training and you will have the best chance of setting yourself up for success with international currency trading.

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Forex Analysis: What Should You Base Your Trades On?

fxeditor — Sun, 07 Mar 2010 10:41:28 +0000

In any discussion of forex trading you will see discussion of the two main types of forex analysis. These are technical analysis, where trading is based on historical and mathematical factors such as price charts and indicators, and fundamental analysis, where traders pay more attention to economic factors such as financial and political news.

Which one of these will give you more successful forex trading signals? It is a difficult question and the answer is not agreed by all traders. If you look around the internet you will probably find more discussion of technical analysis but that is partly because there is more to get a grip on. Beginners are frequently advised to identify trends on price charts and then trade on the basis of those alone. This is one of the easiest ways to begin forex trading and it can be successful.

Fundamental analysis depends on knowledge and news of the constantly changing real world. This makes it more difficult to take into account if you are not in the habit of checking out the financial section of your newspaper. However, there is no doubt that ultimately it is the economic factors which cause major price movements. Advocates of fundamental analysis will argue that any evidence on charts is historical and not predictive. In other words, the charts tell you what happened 5 minutes ago but not what is coming next.

One thing is for certain. Major financial reports and other events of national or international importance can have a huge and sudden effect on currency prices. So even if you prefer the technical method of forex analysis, it is wise to keep an ear to the ground and avoid being trapped in a bad trade when the US government announces a change in interest rates and the dollar leaps or plummets by 50 pips or more.

It can be helpful to think of price movements in the forex market as having a kind of elasticity. They are constantly stretching out to certain limits and then moving back, not necessarily to their starting point but often less or more. The fundamental factors are what make the prices move but technical analysis can be used to predict how far they are likely to stretch and when they are likely to start to reverse.

So the bottom line is that the best way to profit from forex trading is to make use of the technical tools such as charts and indicators but at the same time, be aware of the fundamental factors that are the real driving force behind any trends. The successful forex trader will be comfortable with both types of forex analysis.

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Currency Trading Chart Types And Uses

fxeditor — Thu, 04 Mar 2010 00:22:25 +0000

The currency trading chart is one of the most important tools for the forex trader. Charts are at the root of forex technical analysis, which forms trading systems based on studying price movements rather than economic forecasts which are the basis of fundamental analysis in forex trading. Most traders these days prefer technical analysis which does not require any special knowledge or training in economics.

Any currency trading chart will show price movements. Usually you can track these over a variable period of time. You can look at the last few minutes, hours, days or longer. Using a chart in conjunction with the mathematical indicators provided by most brokers and charting services, you can identify emerging tendencies and trends that can signal a trading opportunity.

Forex charts come in three formats.

1. The Line Chart

A line chart plots the closing prices at the end of each trading period, which could be anything from one minute to one day, you can set this. These are joined with a line to show the direction of movement. However, a line chart does not tell you anything about what happened at different times during the time period, only the final closing price.

2. The Bar Chart

A bar chart gives you four prices for each period: opening, high, low and closing price. You will see a vertical line for each period. The top of the line marks the high and the bottom is the low. A notch on the left side shows the opening price and a notch on the right shows the close. Usually these are at different levels but they could be the same. Either one of them could be the same as the opening or closing price but more commonly they are somewhere between.

The advantage of the bar chart over the line chart is that it shows you how wide the fluctuations were during the period, giving you an idea of the volatility of the pair at a glance.

3. The Candlestick Chart

This last type of chart gives you all of the same information as the bar chart but in a colored format which many people find easier to take in.

Again a vertical line marks the high and low prices during a period, but there is also a wider block that runs between the opening and the closing price. This block will be filled with color, usually red if the price is falling (opening price is the high end of the block, closing price is the low end) and green or blue if it is rising (closing price is the high end of the block, opening price is the low end). If shown in black and white you will see black for a falling price and white for a rising price.

The colors give you an instant view of whether prices rose or fell during the period. This makes candlesticks quicker to read at a glance than a bar chart. You can immediately see a reversal, which will show up as a series of green blocks marking the trend followed by one red marking the reversal, or vice versa. That is why candlesticks are the favorite type of currency trading chart for many traders.

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Forex Currency Trade In A Choppy Market

fxeditor — Sun, 28 Feb 2010 14:14:52 +0000

Whether you are a new or an experienced forex trader, you can add to your skills by learning forex currency trade strategies for a choppy market. Many systems are based around identifying trends and it is true that this is often the best way to make money from currency trading, but many traders find that trends alone are not enough to secure them an income.

The market does not always trend; you could have long periods when you cannot trade your usual system at all. And even when a trend is in full flow and you are holding an open position, there can be short term choppy periods that you could take advantage of.

So what is a choppy market? It is one where the price moves quickly up and down, sometimes quite dramatically. It can be a very dangerous market because traders are often fooled into thinking that a trend is forming, and then just when they open a trade to follow the apparent trend, the price dives back the other way.

Here are some tips for trading this type of fluctuating market.

1. Do not expect to hold your trades for long, and watch the market closely. You will probably want to close with less profit than you might expect to get from trend based trading, and set shorter stops too. If you start out winning, move your stop into the breakeven position as soon as you can.

2. Look at closely correlated currency pairs to help you decide when to open a position. If you are trading EUR/USD, check the support and resistance levels on USD/CHF because almost every time you will find that one of these currency pairs falls when the other rises. The same applies with EUR/GBP and GBP/CHF.

3. Check the announcements calendar. Two or more financial news releases within a short period can often result in wide fluctuations as the market responds to first one then another set of data. It is best to keep out of the market at times like this even if you are normally comfortable trading choppy markets. Technical analysis will not help you and trading in this situation is nothing more than gambling.

4. A genuinely choppy market will have fairly steady support and resistance levels. Watch out for funnel patterns where the highs and lows are converging, because this often indicates a coming breakout. Here you will be better off waiting for the breakout rather than trying to pick up pips from the fluctuations during the convergence.

Finally, remember that some markets are so wild that your best solution is to stay out. Some days there is nothing to do but shut down your computer and head for the beach. A zero at the end of the day is better than taking a large loss because you insisted on opening a forex currency trade in a crazy market.

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Interbank Currency Trading: What It Means For You

fxeditor — Thu, 25 Feb 2010 04:19:03 +0000

Interbank currency trading is a term that you might see many times on forex websites and forums. So what does it mean?

Originally the forex market consisted almost entirely of banks and other large financial institutions who were exchanging the various currencies of the world with each other. Each one of them would have a dealing desk from which they would communicate with the other banks in their own financial center and around the world. They would be quoting each other the prices at which they or their clients would be prepared to exchange one currency for another and striking deals when they could get a match.

The word 'inter' means between, so the interbank market was the market set up between these institutions. As well as banks, they included insurance companies, retirement fund holders and even governments, but in the forex market they are usually all called banks to keep things simple.

When most of the major currencies' exchange rates ceased to be fixed in the 1970s, speculative trading became possible. The banks employed full time traders to increase their profits by speculating on the rise and fall of currency prices. At that time the trading was done almost entirely by telephone. By the beginning of the 21st century it was becoming possible to use the internet.

Now that so many homes in the more prosperous countries have computers with a high speed internet connection just about anybody can become a currency trader on their own account. However, we do not have the ability to set up our own dealing desk and communicate directly with the banks and other traders. We need an intermediary, and this is where forex brokers come in.

Forex brokers, or dealers, take on the retail traders like you and me as clients and then negotiate with the interbank currency trading market. Some brokers have their own dealing desk so they are directly part of the market. These brokers are less likely to offer mini forex accounts and most of their clients will be trading standard lots.

Other brokers have an arrangement with one of the banks to use their dealing desk which is another link in the chain. This gives them the ability to accept smaller fund balances but it can mean higher costs. You may have a higher spread or you may find that the price is manipulated to guarantee the broker a fee on top of the bank's spread.

Many people these days use the term interbank to include anybody who is involved in foreign currency exchange as a buyer or seller. However, interbank currency trading is not the same as retail forex trading. Understanding the difference can help you to ask questions of a potential broker that could result in a better deal for you.

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Candlestick Analysis: The Most Popular Trading Chart

fxeditor — Sun, 21 Feb 2010 18:54:33 +0000

Candlestick analysis is one of the simplest and most effective methods of technical analysis for currency trading as well as stock trading. While there are other types of charts available including line and bar charts, the candle patterns are the most popular.

History Of Candlestick Charts

This type of price tracking chart was developed in Japan in the 18th century and that is why you will sometimes see them referred to as Japanese candlestick charts. It also explains why many of the common recognized patterns have Japanese names such as doji and marubozu.

The charts are believed to have been invented or at any rate used by the very successful Japanese commodity trader Mr. Homma who mainly profited from trading in the price of rice. Previously, simple line charts had been used to track commodity closing prices. Candlesticks gave traders a way of plotting more variables while staying within a two dimensional chart.

While bar charts can also plot the open, close, high and low, the advantage of candlesticks is their visual utility. Bullish and bearing periods are clearly visible at a glance.

Mr. Homma's phenomenal success as a trader led other Japanese commodity traders to adopt his analysis tool and in the early 20th century it was introduced to the American stock market by Charles Dow, the founder of the Wall Street Journal and co-founder of the Dow Jones company.

What Is A Candlestick

A typical candlestick has a block that is the body of the candle, plus vertical lines known as shadows or wicks which stick up and down from the body. The top of the upper shadow is the highest price reached during the trading period and the bottom of the lower shadow is the low.

The top and bottom of the candle block mark the opening and closing prices in either order. The candle was originally unshaded (white) for a rising market where the open was the bottom of the candle and the close was the top, or shaded (black or green) for a falling market where the open was the top of the block and the close the bottom. You may now see other colors used, e.g. green or blue for a rising market and red for a fall.

In a case where there is some coinciding of prices and the open, close, high and low are not all different, the candle may look slightly different. Here are some examples:

Doji – period with an equal opening and closing price, looks like a cross.

Marubozu – period when the opening price was the low and the closing price was the high (white marubozu) or vice versa (black marubozu). Has a candle body block only, with no shadow sticks top or bottom.

Candlestick Analysis In Real Time Trading

Candlesticks can record any measured time period. Typically traders will use 5 or 15 minute candles with the resulting chart showing several hours, but it is possible to set your chart for a longer term or shorter term view. Patterns can be identified that indicate emerging trends or possible forthcoming breakouts. You can then compare with indicators or other time periods to check the signals.

Trading decisions in the live market often need to be made very fast. The colored blocks of candlestick analysis help traders to see movements and reversals at a glance and avoid mistakes.

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Currency Trading Course: Is Currency Trading Safe?

fxeditor — Thu, 18 Feb 2010 08:34:45 +0000

One of the first questions that many people ask when they are thinking about taking an online currency course, is whether currency trading is really safe. There are so many advertisements and promotions on the internet, as well as in magazines an on TV, that people often become suspicious. Is it really such a great way to make money? Can anyone profit from it? And is your investment secure?

The first thing to understand is how currency trading works. It is also known as forex or foreign exchange trading, and it a kind of speculative investment that allows traders to make money by speculating on the rise and fall of currency exchange values. These are the prices that you often see quoted in the financial pages of the newspaper, that tell you what the dollar is worth against other currencies.

These prices are constantly changing, so a person who can predict which way they will move can make money by buying a currency that is about to rise or selling one that is about to fall. But how can you tell which way the prices will go? Currency values are closely linked to economic performance: when a country's economy is strong, its currency is likely to have a high value. When there is an economic crisis, the currency value will fall.

However, most forex traders do not rely on predictions of the economic status of a nation to make their money. Instead they use analytical tools that help them to identify emerging trends on a mathematical basis. This is called technical analysis. Fortunately these days everything is computerized so there are no calculations to do. Brokers and charting services provide tools such as charts and indicators to give traders signals that tell them when to enter and leave the market.

Forex trading used to be something that was only done by professional traders working from banks, but now everything is online and you can get involved from home. Brokers are keen to attract more clients and so they will let you start with just a few hundred dollars.

There are many kinds of currency trading course and also systems that you can follow that will help you to be successful with forex trading. It is also possible to get software that will trade automatically for you according to a pre set system. This is called a forex robot.

However, even with all the tools and software programs that are available these days, forex trading remains a risky business. Predictions are never 100% correct and all traders make losses at times. Also, an unexpected event such as a terrorist attack or the sudden collapse of a bank can turn everything around without warning. So it is very important to understand the risks and put stops in place to minimize your losses when things go wrong.

Most people who begin forex trading are hoping to make a lot of money in a short time. They soon find out that this is not realistic. It is much better to aim for slow and steady profits, and keep your risks as low as possible. Nevertheless, there are no guarantees that you will make money.

Forex trading is exciting and it can be very profitable but no, it is not safe. As any currency trading course will tell you, forex is for people who are prepared to take a risk.

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How To Trade Currency: The Basics

fxeditor — Sun, 14 Feb 2010 22:42:00 +0000

If you are considering getting involved in forex trading, it is essential that you know the basics of how to trade currency. Even if you plan on using an automated forex trading system (or forex robot) you will need to understand something about what it is doing in order to set it up right.

Forex trading and currency trading mean the same thing. You will be trading world currencies on the foreign exchange market. Forex and FX are simply abbreviations of 'foreign exchange'.

If you do not use a robot then you will need some system that will help you sort out whether a country's currency is rising or falling, so that you can decide whether to buy or sell the pair that you are trading. You always have to trade a pair of currencies because you are exchanging one currency for another. A popular pair for beginners is EUR/USD, the euro and the US dollar.

Currency trading systems are usually based on technical analysis, which means watching price movements and indicators on charts. Most brokers supply this kind of data or if you do not get everything that you want from your broker, you can sign up to one of the many online forex charting services.

You can get started for a very low initial investment these days. Competition between brokers and the ease of access through the internet has meant that brokers are offering mini and micro forex trading accounts to encourage the smaller investor to get involved.

Costs are generally low too. Most brokers do not charge a fee or commission, but make their money from the difference between the bid and ask prices of the currency pair (that is, the different prices depending whether you are buying or selling). This is good for small investors who can make many small trades without paying any fixed fees. This is one of the reasons why more and more private individuals are getting into forex and wanting to know how to trade currency.

The forex market is open 24 hours a day from Sunday evening to Friday evening (or Monday morning to Saturday morning if you are in Australia or Asia). This can be very convenient if you have a day job and want to get into trading in the evenings. It is also a huge market, with deals totalling almost $4 trillion a day. Prices move fast and there is a lot of money to be made.

Of course there is also a risk. Like any speculative investment, you may lose more than you make, especially in the beginning. You should be prepared to possibly lose your investment funds so do not trade with money that you need for other purposes.

It is important to stick to a system exactly and keep clear records of your trades. If you do not do this you will be shooting in the dark and the net results could be damaging. You need to be sure of what you are doing and able to look back and see what worked and what did not work.

There are many forex trading systems sold online but remember that you only need one profitable system to make money. It is not a good idea to try to use more than one system, and certainly do not switch from one to another all of the time, because that will not work for you. Being consistent in your trading is the key.

Forex trading is risky, but it can also make you a lot of money. Follow these pointers and you will soon have mastered how to trade currency.

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Is Forex Demo Trading Bad For Your Financial Health?

fxeditor — Thu, 11 Feb 2010 12:57:54 +0000

Since brokers began providing free forex demo accounts, forex demo trading has received a lot of attention. It is generally recommended without reservation both for beginners and for more experienced traders who want to test new systems. But is it right for all circumstances, or does it sometimes have disadvantages? Could too much forex demo trading be bad for your financial health? We look at the pros and cons of demonstration accounts so that you can make up your own mind.

First let's look at what's in it for the broker. Why do they let you play around with their system, using their resources, for free? The main reason, of course, is that they are hoping you will sign up for a real account. If you are a beginner, they want to get you making money on a practice account so that you get real excited about putting in your own money. If you are already trading, they want you to see how great their platform is so that you will consider switching your account.

There is nothing wrong with any of that. Practicing trading is a great way to learn. In fact, if you were to read a couple of books on forex and then start trading for real right away, pretty much anybody would tell you that you were crazy. So the main advantage of a practice account is that it lets you test out a broker's services or a system without any risk.

The problem comes if you do not realize that there is a difference between trading virtual money and trading for real. In your demo account, you are likely to take bigger risks than you would take in real trading. If you are lucky and do well on those trades, you could become overconfident. You could think you had mastered forex trading when really you were just starting out. So you put all your savings into a live trading account, start to try to follow the same system, and bang! The risks were too high, the stress was too great, a couple of losing trades and you are wiped out.

So currency trading demos can be very useful, but they have to be used right. From the moment that you open a demo account, remember that it is very important to stay disciplined. Use a system, follow a trading plan, make a big effort to act as if that was your money. Then switch to real trading once you can see a pattern of profits and losses, with an overall gain. At that time you can open a micro account and start trading very small sums. That is the best way to use a forex demo trading account.

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Profitable Expert Advisor For Forex Scalping

fxeditor — Mon, 08 Feb 2010 02:46:09 +0000

If you want to get involved in forex scalping, you will want to look around for a profitable expert advisor that is designed for scalping strategies on the currency trading markets. One example of a scalping EA is FAP Turbo, which offers a scalping option along with a longer term trading option. This is probably the best known EA on the market right now since it has had some quite stunning results.

Forex scalping is a very quick way of making money in the foreign currency trading markets. You nip in and out, grabbing a small profit each time. It is vital not to leave each trade open too long or try for too much profit, because you are usually trading on breakout and retracement movements that will soon reverse. You have to grab your profit while you can, before the market turns around.

A robot is the ideal way to do this because it can be hard to act at exactly the right moment when you are entering and closing your own trades. A few seconds can make all the difference with scalping strategies. A visit to the bathroom or a break to grab a coffee can see you missing a trading opportunity or, worse, missing the right moment to close a trade.

Scalping also solves one of the problems that some people encounter when they start trading with a robot, that is, the fact that when you are dealing with longer term trades you have to leave your computer on and connected to the internet 24 hours a day. This is fine if you have a dedicated computer at home and a reliable broadband connection, but if you share the computer with your spouse, roommate or (worst of all) kids, it is very likely that somebody someday will accidentally shut it down. On top of that, some people have ISPs that automatically cut an internet connection that is idle more than a certain length of time.

With a forex robot in scalping mode, the trades only last for a short time so it would be possible to have the robot live only when you are around the computer yourself. You could simply wait for it to close a trade, and then shut down. Of course you will miss some opportunities this way but anything is better than having your funds wiped out because the connection broke at the wrong moment.

Be aware that it can be difficult to find a broker who will be happy for you to use scalping strategies, especially automated with a profitable expert advisor. Brokers have a problem with this for two reasons. First, they may not be putting your trade into the market but matching it themselves. In this situation they don't really want you making regular profits at all. It is best to avoid that kind of broker if you plan on being a successful forex trader.

Second, even regular brokers who do have your order matched in the market are likely to experience some delay. This can be just a few seconds but the price may change in this time. If they pass this on to you so that you do not necessarily get the price that you clicked on, that is fine for them but it may mess up what would have been a profitable trade for you. On the other hand, if they guarantee your price and then take the risk of slippage themselves, they are not likely to be happy with you using scalping which does not always give them time to make up the slippage.

So it is worth looking for a broker that will accept the forex scalping strategies of FAP Turbo or whichever other profitable expert advisor you plan to use.

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