The Best Forex Resources

Forex Tutorials for beginners

2010-08-26T05:13:00.003-07:00

In the FX market, you buy or sell currencies. Placing a trade in the foreign exchange market is simple: the mechanics of a trade are very similar to those found in other markets (like the stock market), so if you have any experience in trading, you should be able to pick it up pretty quickly.

The object of Forex trading is to exchange one currency for another in the expectation that the price will change, so that the currency you bought will increase in value compared to the one you sold.

Exchange rate is simply the ratio of one currency valued against another currency. For example, the USD/CHF exchange rate indicates how many U.S. dollars can purchase one Swiss franc, or how many Swiss francs you need to buy one U.S. dollar.

Currencies are always quoted in pairs, such as EUR/USD or USD/CHF. The reason they are quoted in pairs is because in every foreign exchange transaction you are simultaneously buying one currency and selling another. Here is an example of a foreign exchange rate for the British pound versus the U.S. dollar:

GBP/USD = 1.7500

The first listed currency to the left of the slash ("/") is known as the base currency (in this example, the British pound), while the second one on the right is called the counter or quote currency (in this example, the U.S. dollar)..

When buying, the exchange rate tells you how much you have to pay in units of the quote currency to buy one unit of the base currency. In the example above, you have to pay 1.7500 U.S. dollar to buy 1 British pound.

When selling, the exchange rate tells you how many units of the quote currency you get for selling one of the base currency. In the example above, you will receive 1.7500 U.S. dollars when you sell 1 British pound.

The base currency is the “basis” for the buy or the sell. If you buy EUR/USD this simply means that you are buying the base currency and simultaneously selling the quote currency.

You would buy the pair if you believe the base currency will appreciate (go up) relative to the quote currency. You would sell the pair if you think the base currency will depreciate (go down) relative to the quote currency.

First, you should determine whether you want to buy or sell.

If you want to buy (which actually means buy the base currency and sell the quote currency), you want the base currency to rise in value and then you would sell it back at a higher price. In trader's talk, this is called "going long" or taking a "long position". Just remember: long = buy.

If you want to sell (which actually means sell the base currency and buy the quote currency), you want the base currency to fall in value and then you would buy it back at a lower price. This is called "going short" or taking a "short position". Short = sell.

Forex terminology

Ask: Price at which broker/dealer is willing to sell. Same as "Offer". For example, if EUR/USD is quoted at 1.1850/1.1854, the 1.1854 is the "Ask" or "Offered" price.

Bid: Price at which broker/dealer is willing to buy. For example, if EUR/USD is quoted at 1.1850/1.1854, the 1.1850 is the "Bid" price.

Bid/Ask Spread (or "Spread"): The distance, usually in pips, between the Bid and Ask price. A tighter spread is better for the trader.

Cost of Carry (also "Interest" or "Premium"): The cost, often quoted in terms of dollars or pips per day, of holding an open position.

Currency Futures: Futures contracts traded on an exchange, most typically the Chicago Mercantile Exchange ("CME"). Always quoted in terms of the currency value with respect to the US Dollar. Parameters of the futures contract are standardized by the exchange.

Drawdown: The magnitude of a decline in account value, either in percentage or dollar terms, as measured from peak to subsequent trough. For example, if a trader's account increased in value from $10,000 to $20,000, then dropped to $15,000, then increased again to $25,000, that trader would have had a maximum drawdown of $5,000 (incurred when the account declined from $20,000 to $15,000) even though that trader's account was never in a loss position from inception.

EBS: "Electronic Brokerage System", the electronic system on which major banks trade with each other. This is considered to be the most definitive indicator of prices at which currencies are "really" trading, at least for EUR/USD and USD/JPY.

Fundamental Analysis: Macro or strategic assessments of where a currency should be trading based on any criteria but the price action itself. These criteria often include the economic condition of the country that the currency represents, monetary policy, and other "fundamental" elements.

Leverage: The relationship between the notional contract value and the margin required to trade. For example, if the notional amount traded (also referred to as "lot size" or "contract value") is $100,000 dollars and the required margin is $2,000, the trader can trade with 50 times leverage ($100,000/$2,000); or "50:1" leverage. Leverage is the inverse of the percentage margin requirement.

Limit: An order to buy at a specified price when the market moves down to that price, or to sell at a specified price when the market moves up to that price.

Liquidity: A function of volume and activity in a market. It is the efficiency and cost effectiveness with which positions can be traded and orders executed. A more liquid market will provide more frequent price quotes at a smaller bid/ask spread.

Long: A market position that has been bought. It will generate profits as the market moves up and losses as the market moves down. For example, if you bought Euros, you will be "long" Euros.

Margin: The amount of funds required in a clients account in order to open a position or to maintain an open position. The percentage of the contract value required as margin is inversely related to the leverage.

Margin Call: A requirement by the broker to deposit more funds in order to maintain an open position.

Market Order: An order to buy at the current Ask price.

Offer: Price at which broker/dealer is willing to sell. Same as "Ask".

Pip: The smallest price increment in a currency. Often referred to as "ticks" in the futures markets. For example, in EURUSD, a move from .9015 to .9016 is one pip. In USDJPY, a move from 128.51 to 128.52 is one pip.

Premium (also "Interest" or "Cost of Carry" or "Roll"): The cost, often quoted in terms of dollars or pips per day, of holding an open position.

Short: A market position that has been sold. It will generate losses as the market moves up and profits as the market moves down. For example, if you sold Euros, you will be "short" Euros.

Spot Foreign Exchange: Often referred to as the "interbank" market. Refers to currencies traded between two counterparties for "spot" or current delivery rather than future delivery. Generally more liquid and widely traded than currency futures, particularly by institutions and professional money managers.

Stop: An order to buy at the market only when the market moves up to a specific price, or to sell at the market only when the market moves down to a specific price. For example, if EUR/USD is trading at around 1.1850, you could place a stop order to buy at 1.1870. This order would be filled only if the market moved up to 1.1870 or higher.

Technical Analysis: Analysis applied to the price action of the market to develop trading decisions, irrespective of fundamental factors.

Indicators and their update

2010-08-26T05:12:00.000-07:00

A technical indicator is created by applying a certain formula to the price data of a currency or other financial security. This data can include any combination of the open, high, low, and close over a period of time.

Technical indicators provide traders with a different perspective from which to analyze price action. Technical indicators can be derived from both simple formulas such as moving averages, while others can be more complex such as stochastics. The good news is that you do not need to know how these formulas are applied since the majority of indicators are shown in a graphical format allowing the trader to easily compare it with the corresponding price chart of the currency or security they are analyzing. All forex indicators are presented below:

Advance/Decline (A/D) Line

Advance/Decline (A/D) Ratio

Absolute Breadth Index (ABI)

Accumulation Swing Index (ASI)

Accumulation/Distribution (A/D)

Accumulation/Distribution of volume

Advance/Decline Line Breadth

Advancing-Declining Issues

Average Directional Movement Index (ADX)

Average Directional Movement Rating (ADXR)

Average True Range (ATR)

Beta

Bollinger Bands

Bollinger Bands Histogram

Breadth Thrust

Candlestick

Chaikin Money Flow

Chaikin Oscillator (CHO)

Chaikin Volatility (CHV)

Chande Momentum Oscillator (CMO)

Chaos Gator

Commodity Channel Index (CCI)

Commodity Selection Index (CSI)

CP volumentum trend

Correlation Analysis

Cumulative Volume Index (CVI)

Cutler's RSI

DeMarker (DeM)

Detrended Price Oscillator (DPO)

Directional Movement Index (DX)

Disparity index

Displaced MA

Double exponential moving average (DEMA)

Dynamic momentum

Ease of Movement

Ehler's Fisher Transform

Elder-rays

Elliot oscillator

Envelope

Exponential Moving Average (EMA)

Fast stochastic

Fibonacci Arcs

Fibonacci Fans

Fibonacci phi-Channel

Fibonacci Retracements

Historical volatility

Ichimoku Kinko Hyo (IKH)

Inertia

Intraday Momentum Index (IMI)

Kagi chart

Kairi

Keltner channel

Klinger Oscillator (KO)

Linear regression channel

Linear regression indicator

Linear regression slope

Linear Regression Trendline

Linear regression

Market Facilitation Index (BW MFI)

Modified moving average

Momentum

Momentum percent %

Money Flow

Money Flow Index (MFI)

Moving Average

Moving Average Convergence/Divergence (MACD)

MACD 2 lines

MACD Histogram

Moving Average Envelope

Negative Volume Index (NVI)

New Highs - Lows Cumulative

New Highs - Lows Ratio

New Highs - New Lows

Norton high-low indicator

Notis %V

On Balance Volume (OBV)

Open-10 TRIN

Oscillator of moving averages (OsMA)

Overbought/Oversold (OB/OS)

Parabolic SAR (pSAR)

Percent change

Percent of resistance (PCR)

Percent R

Percentage Volume Oscillator (PVO)

Polarized Fractal Efficiency (PFE)

Positive Volume Index (PVI)

Price action indicator

Price and Volume Trend (PVT)

Price channel

Price Oscillator

Qstick

Random Walk Index (RWI)

Range Expantion index (REI)

Range Indicator

Rate of Change (ROC)

Relative Momentum Index (RMI)

Relative Strength Comparative

Relative Strength Index (RSI)

Relative Volatility Index (RVI)

Ribbon Study

R-squared

Schaff trend cycle

Simple Moving Average

Slow stochastic

Speed Lines

Standard Deviation

Standard Deviation Channel

Standard Error

Standard Error Bands

Standard Error Channel

STIX

Stochastic Momentum Index (SMI)

Stochastic Oscillator

Stochastic RSI

Stoller Average range channel (STARC)

Swing Index

Ichimoku Kinko Hyo (IKH)

Time Series Forecast

Tom Demark Moving Average

Tom Demark Range Projection

Trade Volume Index

Trend Line

Triangular Moving Average

Triple exponential Moving Average (TEMA)

True Strength Index (TSI)

Typical Price

Ultimate Oscillator (UO)

Upside/Downside Ratio

Upside/Downside Volume

Variable Moving Average

Vertical Horizontal Filter (VHF)

Volume Rate of Change (VROC)

Weighted Close

Weighted Moving Average

Welles Wilder RSI

Welles Wilder Smoothing

Welles Wilder Volatility Index

Williams� Accumulation/Distribution (WA/D)

Williams %R

Zig Zag

Choosing a Trading method

2010-08-26T05:11:00.003-07:00

While there are many ways to achieve currency-trading success, all methods have the following salient points in common:

1. Simplicity

Most of the best trading systems are simple.

There is no correlation between how complicated a strategy is and how successful it will be.

In fact, the simpler a system the more likely it is to be robust in the face of changing market conditions.

Some of the most successful systems of all time have been extremely simple and you don’t need much mathematical knowledge to understand them.

2. Liquidate Losers Quickly and Run Big Profits:

The basis of any successful trading systems that deals in leveraged products is:

You need to be able to run the big profitable trends and exit losers quickly.

All good trading methods do this, and use strict money management rules, to ensure preservation of equity.

3. Understand your Method

This may sound obvious, but you need to understand your trading method, and the logic behind it, so you can execute it with confidence and discipline.

4. The Importance of Discipline

Currency trading success is rooted in a successful method applied with discipline. This means a trader has a method and follows it. This however is much harder in practice than many traders believe.

When money is on the line all traders emotions come into play and unless they can maintain discipline, currency-trading success will elude them.

Let's look at some ways to maintain self-control and discipline when making trading decisions:

Firstly, you must be confident in your trading method. You should know exactly what you are going to do:

· When a signal indicates that you should enter a trade

· When a signal tells you to exit

You must execute your trading method in a disciplined fashion; if you don’t, you won’t have a method in the first place!

Secondly, and perhaps the best way to maintain self-control and discipline, is to feel confident in your trading method from the start.

If you have confidence when you execute your trades, you will "know" that over time they will be successful - even if you are suffering a string of short-term losses.

You must execute the buy and sell signals with confidence - these signals will lead to currency trading success in the long run, as you rigidly adhere to your method.

You need to stick with your method through good and bad times, and confidence in the underlying logic, will help you remain disciplined.

The more disciplined you are in trading, the more profits you will make longer term.

You should not underestimate the need for discipline, if you want long-term currency trading success.

If you read Jack Shwager’s Market Wizards, and the New Market Wizards, where he interviews the top traders of all time, you will see how all of them place an influence on discipline.

Currency trading success relies on a number of factors and these are:

Robust trading method + discipline = currency trading success

Remember, when trading any method, it will be of little use to you, unless you have confidence in it and can execute it with discipline.

There are a number of variables involved in longer-term currency trading success and the above are the salient points to keep in mind when deciding how to trade currencies.

what is strategy?

2010-08-26T05:10:00.001-07:00

Most successful traders develop a strategy and perfect it over time. Some people focus on one particular study or calculation, while others use broad spectrum analysis to determine their trades. Most experts suggest trying a combination of both fundamental and technical analysis, with which you can make long-term projections and also determine entry and exit points. But in the end, it is the individual trader who needs to decide what works best for him or her (most often through trial and error).

So basically speaking, a strategy consist in using proper indicators in order to analyze a chart. Strategies are simple ones or more complex ones. In the following i will show you some of the most used strategies. That should help you in developing your own strategy.

Elliot waves

2010-08-26T05:09:00.001-07:00

The Elliott Wave Principle is a detailed description of how groups of people behave.

It reveals that mass psychology swings from pessimism to optimism, are creating specific and always measurable patterns.

The idea is that if you can identify repeating patterns in prices, and figure out where in those repeating patterns you are today, then you can predict where you will be going in the future.

The Elliott Wave Principle is named for its discoverer, Ralph Nelson Elliott (1871 - 1948), who completed the bulk of his work in the 1930s and 1940s.

This principle interprets market actions in terms of recurrent price structures.

The wave is a movement in the market, either up or down. The size of the wave depends upon the period of time that is being analyzed.

Basically, market cycles are composed of two major types of Waves:

A. The Impulse Wave:

It is a wave that moves in the direction of the main trend of the market. Every impulse wave can be sub-divided into a 5 - wave structure (1-2-3-4-5).

B. The Corrective Wave:

It is a wave that moves counter to the direction of the main trend of the market. Every corrective wave can be sub-divided into a 3 - wave structure (a-b-c).

An important feature of the principle is that it is "Fractal" in nature. "Fractal" means market structure is built from similar patterns on a larger or smaller scales. Therefore, we can count the wave on a long-term yearly market chart as well as short-term hourly market chart.

The stock market has three attributes of the principle that make it quite applicable:

1. It is a true free market.

2. It provides consistent and regular metrics that can be measured.

3. It is manipulated by a statistically significantly large group of people.

There are two assumptions behind the Elliott Wave Principle:

1. The market is not efficient. It is an inefficient market place that is controlled by the whims of the masses. The masses consistently overreact and will make things over and under priced consistently.

2. If the above is true, then you should be able to do a "sociological" survey of stock prices independent of other news that effects stock prices. The general explanation for this behavior is that the masses tend to listen for the news they are ready to hear, and that the movement that actually happens depends on other effects.

When doing wave studies of stocks, one of the most difficult things to overcome is the personal ability to separate your own emotions from affecting your analysis.

As an individual you have the same fear and greed internal mechanisms that affect the entire market place as a whole.

Without being able to work to dismiss those emotions you will not be able to stay in a position that will allow you to fully understand and profit from the sociological effects that you are measuring.

The following wave description applies to a market moving upwards. In a down market there are generally the same types of behavior in reverse:

Wave 1: The stock makes its initial move upwards. This is usually caused by a relatively small number of people that all of the sudden feel that the previous price of the stock was cheap and therefore worth buying, causing the price to go up.

Wave 2: The stock is considered overvalued. At this point enough people who were in the original wave consider the stock overvalued and start taking profits. This causes the stock to go down.

Wave 3: This is usually the longest and strongest wave. More people have found out about the stock, more people want the stock and they buy it for a higher and higher price. This wave usually exceeds the tops created at the end of wave 1.

Wave 4: At this point people again take profits because the stock is again considered expensive.

Wave 5: This is the point that most people get on the stock, and is most driven by hysteria. People will come up with lots of reasons to buy the stock, and won't listen to reasons not to. At this point is where the stock becomes the most overpriced. At this point the stock will move into one of two patterns, either towards a correction (a-b-c) or it will start over again with wave 1.

A correction (a-b-c) is when the stock will either go down or up in preparing for another 5 way cycle. During this time volatility is usually much less than the previous 5 wave cycle, and what is generally happening in the market is taking a pause while fundamentals catch up.

"On a moderately philosophical level, the Wave Principle suggests that the nature of mankind has within it the seeds of social change." * (*www.elliottwave.com) Prosperity ultimately breeds reactionism, while adversity eventually breeds a desire to achieve and succeed!

The social mood is always in flux at all degrees of trend, moving toward one of two polar opposites in every conceivable area, from a preference for heroic symbols to a preference for anti-heroes, from joy and love of life to cynicism, from war to peace, from love to hatred, from a desire to build and produce to a desire to destroy.

Most important to individual investors, portfolio managers and investment corporations is that the Wave Principle can sometimes indicate in advance the relative magnitude of the next period of social progress or regress.

Living in harmony with those trends can make the difference between success and failure in financial affairs.

As the Easterners say: "Follow the Way"

An important feature of Elliott Wave is that they are fractal in nature. 'Fractal' means market structure are built from similar patterns on a larger or smaller scales. Therefore, we can count the wave on a long-term yearly market chart as well as short-term hourly market chart.

Among Wave 1, 3 and 5, only one should unfolded into extended wave. 'Extension' means the wave is elongated in nature and sub-waves are conspicuous in relation to waves of higher degree.

forex fibanocci method

2010-08-26T05:08:00.003-07:00

In this report, we will look at the history and background ofFibonacci numbers and The Golden Ratio. We will then outline three specific money management tips that can help increase your profit potential.

Support and resistance levels are an important consideration for most traders to help identify entry and exit points when trading. Fibonacci percentage "retracement" levels based upon the Fibonacci number sequence and golden ratio are very popular with many traders but what are they exactly?

What are Fibonacci Numbers and the Golden Ratio?

The Fibonacci sequence first appeared as the solution to a problem in the Liber Abaci, a book written by Leonardo Fibonacci in 1202 to introduce the Hindu-Arabic numerals used today to a Europe still using Roman numerals.

The original problem in the Liber Abaci posed the question: How many pairs of rabbits can be generated from a single pair, if each month each mature pair brings forth a new pair, which, from the second month, becomes productive.

The Golden Ratio

After the first few numbers in the Fibonacci sequence, the ratio of any number to the next higher number is approximately .618, and the lower number is 1.618. These two figures are the golden mean or the golden ratio.

Its proportions are pleasing to the human senses and it appears throughout biology, art, music, and architecture. A few examples of natural shapes based on the Golden Ratio include DNA molecules, sunflowers, snail shells, galaxies, and hurricanes.

Important Retracement Levels

The two Fibonacci percentage retracement levels considered the most important in trading are 38.2% and 62.8%. Other important retracement percentages include 75%, 50%, and 33%. Three Profit Tips for Using Fibonacci Numbers

1. Fibonacci Defines Stop Loss Levels

A trader can use Fibonacci numbers to set stop loss orders.

For instance, if at least three Fibonacci price levels come together in a relatively tight zone, a stop loss placement just below or above the zone may be set.

A Fibonacci number helps define stops in the following way, if a trader trades against a support zone, if the support zone is violated and the price trades below that zone, the reason for the trade is negated and the position should be closed.

Setting stops using Fibonacci retracements takes the emotion out of trading and gives a pre defined exit point.

2. Fibonacci Defines Position Size

Depending on the risk you are prepared to take per trade, Fibonacci numbers can also define position size. For instance, if prices are right on a specific level, you may wish to have more positions than if the price is further away.

3. Fibonacci Defines Objectives

With Fibonacci numbers, once a pattern completes against a Fibonacci price zone you can use them to set profit objectives to bank partial profits or tighten stop loss levels. This clear objective for traders helps them to lock in profits. The great advantage of Fibonacci numbers and the golden ratio is the fact that they take the emotion out of trading and can define not only stop losses to exit a market, but also set profit objectives as well.

W D Gann and Fibonacci - The Perfect Trading Combination!

One trader who incorporated Fibonacci numbers and The Golden Ratio into his trading was the legendary trader W D Gann. We feel that the use of Fibonacci numbers with the Gann trading method provides traders with the best possible combination to seek long term trading profits.

Moving averages

2010-08-26T05:07:00.001-07:00

The Moving Average (MA) indicator is the most frequently used indicator in technical analysis. One of the oldest technical indicators in existence. The moving average line will be plotted directly in the price movement chart. The moving average is calculated with a certain predefined period. The shorter the period is, the higher the probability of false signals is. The longer the period is, the weaker the sensibility of the moving average is.

Moving averages is one of the most useful indicators and tag them right up there with RSI and Stochastics. A basic definition of a moving average is that it is the average price of a market at a specific point in time. A moving average shows a trend. The purpose of the moving average is to show the trend in a smoothed fashion.

The moving average is one of the most versatile and widely used of all technical indicators. Because of its method of construction and its susceptibility to quantification and testing, it is the basis for most "mechanical" and "discretionary" trading systems in use today.

As its name implies, a moving average is an average of a changing body of data. A 10-day moving average, for instance, is obtained by adding closing prices for the last ten periodsbeing measured (ie. days) and dividing by 10. The term "moving" is used because only the last 10 days are used in the calculation. Therefore, the body of data to be averaged moves forward with each new trading day.

In essence the moving average is a smoothing device. By averaging the price data, high and low prices are obscured and the basic underlying trend of the market is more easily discerned. By its very nature, however, the moving average line lags the market action. A shorter period moving average, such as a 3 or 5 day, would hug the price action more closely than, say, a forty day moving average. Shorter term moving averages are more sensitive to day-to-day movements.

In general, a Moving Average is an indicator that shows the average value of a security's price over a period of time. When calculating a moving average, a mathematical analysis of the security's average value over a predetermined time period is made. As the security's price changes, its average price moves up or down.

There are five popular types of moving averages: simple (also referred to as arithmetic), exponential, triangular, variable, and weighted. Moving averages can be calculated on any data series including a security's open, high, low, close, volume, or another indicator. A moving average of another moving average is also common.

The only significant difference between the various types of moving averages is the weight assigned to the most recent data. Simple moving averages apply equal weight to the prices. Exponential and weighted averages apply more weight to recent prices. Triangular averages apply more weight to prices in the middle of the time period. And variable moving averages change the weighting based on the volatility of prices.

The most popular method of interpreting a moving average is to compare the relationship between a moving average of the security's price with the security's price itself. A buy signal is generated when the security's price rises above its moving average and a sell signal is generated when the security's price falls below its moving average.

Indicators which are especially well-suited for use with moving average penetration systems include the MACD, Price ROC, Momentum, and Stochastics.

Some indicators, such as short-term Stochastics, fluctuate so erratically that it is difficult to tell what their trend really is. By erasing the indicator and then plotting a moving average of the indica-tor, you can see the general trend of the indicator rather than its day-to-day fluctuations.

money management

2010-08-26T05:06:00.001-07:00

Forex Money Management

By FX Master

Money management is a critical point that shows difference between winners and losers. It was proved that if 100 traders start trading using a system with 60% winning odds, only 5 traders will be in profit at the end of the year. In spite of the 60% winning odds 95% of traders will lose because of their poor money management. Money management is the most significant part of any trading system. Most of traders don't understand how important it is.

It's important to understand the concept of money management and understand the difference between it and trading decisions. Money management represents the amount of money you are going to put on one trade and the risk your going to accept for this trade.

There are different money management strategies. They all aim at preserving your balance from high risk exposure.

First of all, you should understand the following term Core equity

Core equity = Starting balance - Amount in open positions.

If you have a balance of 10,000$ and you enter a trade with 1,000$ then your core equity is 9,000$. If you enter another 1,000$ trade,your core equity will be 8,000$

It's important to understand what's meant by core equity since your money management will depend on this equity.

We will explain here one model of money management that has proved high anual return and limited risk. The standard account that we will be discussing is 100,000$ account with 20:1 leverage . Anyway,you can adapt this strategy to fit smaller or bigger trading accounts.

Money management strategy

Your risk per a trade should never exceed 3% per trade. It's better to adjust your risk to 1% or 2%

We prefer a risk of 1% but if you are confident in your trading system then you can lever your risk up to 3%

1% risk of a 100,000$ account = 1,000$

You should adjust your stop loss so that you never lose more than 1,000$ per a single trade.

If you are a short term trader and you place your stop loss 50 pips below/above your entry point .

50 pips = 1,000$

1 pips = 20$

The size of your trade should be adjusted so that you risk 20$/pip. With 20:1 leverage,your trade size will be 200,000$

If the trade is stopped, you will lose 1,000$ which is 1% of your balance.

This trade will require 10,000$ = 10% of your balance.

If you are a long term trader and you place your stop loss 200 pips below/above your entry point.

200 pips = 1,000$

1 pip = 5$

The size of your trade should be adjusted so that you risk 5$/pip. With 20:1 leverage, your trade size will be 50,000$

If the trade is stopped, you will lose 1,000$ which is 1% of your balance.

This trade will require 2,500$ = 2.5% of your balance.

This's just an example. Your trading balance and leverage provided by your broker may differ from this formula. The most important is to stick to the 1% risk rule. Never risk too much in one trade. It's a fatal mistake when a trader lose 2 or 3 trades in a row, then he will be confident that his next trade will be winning and he may add more money to this trade. This's how you can blow up your account in a short time! A disciplined trader should never let his emotions and greed control his decisions.

High return strategy

This strategy is for traders looking for higher return and still preserving their starting balance.

According to your money management rules,you should be risking 1% of you balance. If you start with 10,000$ and your trade size is 1,000$ (Risk 1%) After 1 year,your balance is 15,000$. Now you have your initial balance + 5,000$ profit. You can increase your potential profit by risking more from this profit while restricting your initial balance risk to 1%. For example,you can calcualte your trade in the following pattern:

1% risk 10,000$ (initial balance)+ 5% of 5,000$ (profit)

In this way,you will have more potential for higher returns and on the same time you are still risking 1% of your initial deposit.

In the following i shall present Martingale method:

Assumptions:

* You are using a discretionary or mechanical trading system.

* You know your system well therefore you know how many consecutive losses your system has ever had. For this example, we'll assume your system has had at most 10 consecutive losses.

* You trade 3 lots.

Scenario:

* You have had 10 losses in a row trading 3 lots per trade.

Conservative Martingale Method I Example:

1. On your very next trade after losing 10 in a row, increase the lot size to 4

2. If this 4 lot trade is a winner, go back to normalcy trading 3 lots. Your done using Martingale for now

3. If this 4 lot trade is a loser, increase the lot size to 5

4. If this 5 lot trade is a winner, go back to normalcy trading 3 lots. Your done using Martingale for now

5. If this 5 lot trade is a loser, increase the lot size to 6

6. etc, etc, etc

Keep increasing lot sizes by 1 until you win. I think you get the point.

Martingale Method II

Assumptions:

* You are using a discretionary or mechanical trading system.

* You know your system well therefore you know the average number of losses your system has before turning a winner. For example, we'll say that on average, your system has 3 losses before turning a winner.

* You trade 3 lots.

Conservative Martingale Method II Example:

1. You are currently not in a trade. You will wait until your system has 3 consecutive losses before doing anything. You WILL NOT trade.

2. Once your system has 3 losses in a row, start trading your system again. Your first trade will be a 3 lot trade.

3. If you win, great. If you lose, increase the number of lots to 4.

4. Increase the number of lots until you win.

Aggressive Martingale Method II Example:

The only change here would be to enter your first trade with a larger lot size than normal after your system has 3 losses in a row. So instead of just trading 3 lots, trade 4.

Money management general advices

* Trade pairs, not currencies

* Don't place very tight orders

* Use reasonable stop losses

* Increase your leverage in line with your experience and success

* Don't trade during off peak hours

* The best time to trade is when news is released

* If you place a trade and it's not working out for you, get out

* Trade in the direction the price is going

* Learn the business before you trade - possibly the most important tip

* Focus on your current position(s) and place reasonable stop losses at the time you do the trade

* Focus on one cross at a time

* Don't trust demos - demo trading often causes new traders to learn bad habits. Once you know how your broker's system works, start trading small amounts and only take the risk you can afford to win or lose (new traders - remember that!)

* Stick to your strategy and invest profits on the next trade that matches your long-term goals

* Don't trade if you are bored, unsure or reacting on a whim

* Read forums, blogs and chats around the net to get an unbiased opinion before you choose your broker

forex brokers and their details

2010-08-26T05:05:00.000-07:00

We have selected the best forex trading platforms and brokers for you, so that you can shop around, test with a practice (demo) account or open a live account. For our services we are compensated by the forex brokers; So you won't be confronted with any additional pips, costs, fees or any other surcharges. The only addition we offer is a personal service and support, where you can count on if you need it. If you want to open a live account, you always make your agreement directly with the broker of your choise. Your initial investment has to be transferred to that broker. Account opening forms or online opening procedures can be found on this website.

Online currency trading with GFFOREX: always getting the price you've clicked on! 2-3 Pips on all majors.

At the real-time online trading platform "WYCIWYG" (What You Click Is What You Get), requotes and slippages are belonging to the past. We are the first and only foreign exchange broker to offer Straight Through Processing (STP) on a fully Executable Streaming Price feed (ESP) and guarantee every valid order. Choose between our 1. Flash based trading platform (you can log in, where ever you are; no downloading of the online trading platform is needed), our 2. Java based dealing platform incl. WAP trading, with additional forex orders and other functionality and the 3. HTML based trading platform. This is the beautiful combination of portability and functions, with all the ordertypes of the Java based platform. No download needed and trade wherever you like. All 3 platforms are very user friendly and easy to use. 2-3 Pips spread on all majors and chose EURO, USD, GBP, CHF or JPY as base currency. 1% Margin and free multiple forex charts, news, analysis and one-click-dealing. Minimum account opening USD5000. Multiple language (11 languages) trading platforms. More information -->

GFFASTFOREX: Click and Deal for all forex traders, NO dealer intervention. NO requotes and tight spreads in all market conditions.

The "platinum" platform is one the most advanced online currency trading platforms today. You can trade 32 currency pairs plus gold and silver. Traders receive live streaming prices, a very high level of liquidity and instantaneous executions, with "double" click dealing for your safety. The platform is easy to use, fast and efficient, made by traders for traders. No dealer intervention; you can trade the way you want. NO requotes and tight spreads in all market conditions. Due to size and institutional clientele, we are able to offer tight rates provided by our relationships in the interbank market. Use Market, OCO, Stop, Limit, If Done and Trailing Stop orders. Free live, streaming financial news and commentary, extended actual analysis about currencies, metals, fundamentals and indices. News highlights will be displayed on your screen directly. Free professional enhanced charting and studies. The dealing rates presented on the demo platform are exactly the same as on the live platform; You will be able to see the consistent rates and liquidity offered. Minimum account opening USD1000. Leverage 100:1. You can also trade FX Options, with auto execution, via the same account. More information -->

One World Capital Group LLC: Execute your trades directly from real time streaming quotes, provided by the largest banks in the FX market

OWCG offers a user friendly FOREX trading platform, designed for quick and instantaneous executions. Clients have the ability to execute trades directly from real time streaming quotes, provided by the largest banks in the FX market with superior customer service for all types of forex market participants. 2 Pips spread on EUR/USD & USD/JPY, 3 pips on other majors. No commissions, leverage up to 200:1, 24-hour non-stop trading facility and customer support. Free extended charting, analytical tools and on-line streaming news from financial markets. Orders may be entered at any rate - inside or outside the existing spread - using the following ordertypes: Limit orders, Stop Loss orders, Trailing Stop Loss, One Cancels Other orders (OCO's). Multi-Language program interface. API protocol. One World Capital Group offers you a Mini and a Standard (100K) Account. Minimum investment from USD300 resp. USD5000. More information -->

Exclusive Interbank Forex by DUKASCOPY Suisse SA. Attention Professional traders: over USD100 Million at one click and slippage control.

Dukascopy provides active professional traders, banks, hedge Funds and institutions, with exclusive access to the Swiss biggest FOREX Interbank liquidity network . If you are a news trader, you will enjoy this platform: Real interbank pricing and excellent liquidity provided by over 50 banks worldwide. For every USD100 Mio at one click, there is a liquidity of over USD200 Mio. From "0" pips spread on majors. Choose from 2 online trading platforms: JAVA based and Web (html) based (loading within seconds, no software downloading, trade where ever you like). Dukascopy offers proprietary software, which makes them very flexible and not depending from others. Use market, entry, stop/loss and limit orders. “Slippage Control” define the maximum slippage you accept at execution of your order. The platform is perfectly suitable for all kind of traders, from forex scalpers to news traders. Built-in charting, news streams from AFX and Dow Jones, technical analysis, studies, hedging, market depth (level II) etc.. Minimum account opening USD50,000, minimum trading size USD250,000. Commission USD10 – USD30 per Million traded, depending on your trading volume. API Protocol offered, managed accounts and many more. More information-->.

GFX SA Group: Trade 33 currency pairs, gold, silver, platinum, palladium, crude oil and 14 stock market Indices.

NOT for US residents. The proprietary GFX "GlobalTrader" software sets a new standard in online trading functionality, performance, and ease of use. The secure trading environment, and superior trading conditions make GFX SA one of the fastest growing Forex dealers today.

Clients can trade 33 currency pairs, 4 spot metals, crude oil and 14 stock market Indices incl. Dow Jones, Nikkei and Hang Seng, with one click of the mouse on the easy to use, clearly structured platform.. GFX accepts all trading strategies. FREE realtime charts, news, quotes, profit and equity tracking, fast accessible from the menus. Instant order execution and guaranteed fills. Mini and standard account on 1 platform; Clients can trade .5 of a lot, 1.2 lot, or any other amount. The platform takes only seconds to download and install, and performs flawlessly on all Windows operating systems. Incl. Trailing stop, hedging and entry orders. GFX offers you a leverage of up to 200:1. More information -->

Trading currency directly on the charts with GFCURRENCY. Equal price feed on the charts and the price feed box.

GFCURRENCY offers you a revolutionaly online forex trading platform, where you can trade currency directly on the chart. No more swapping from page to chart and back, but executing your decision right on the chart. Make the waves, swings and trends visual and trade them directly from the chart with the same price feed as the dealing box. With over 100+ tools and technical indicators, enhanced charting, and more customizable options and Intraday information on the currency market, such as news, events, and technical levels that directly impact currency prices via real-time charts and streaming news. It even allows you to build and program your own instruments for technical analysis, using your own formulas, which will then automatically execute orders based on your custom indicators! 3 Pips on EUR/USD and USD/JPY even on the MINI account. Interest on unused margin and Instant pip rebate. Hedging, mini forex account opening from USD200, 10 different base currencies. Leverage of up to 400:1! More information -->

You may wish to take a look at MARKETIVA and NORTH FINANCEalso. E-gold accepted as payment method.

Here is a site that offers a complete tutorial about how to choose a forex broker, and much much more useful info.

Automated trading services

2010-08-26T05:04:00.001-07:00

The following sites provide automated trading services and software for the forex market:

FX Engines

About FX Engines:

"FX Engines is the only trading platform built around trading the news. Our feature set and internal expertise can arm you for trading success, and we make it easy with our no-worry fee structure - no fees! Along with our execution speed, our automation system stands at the forefront of the tools needed to trade the news effectively."

MetaTrader 4

About MetaTrader 4:

"As well as many technical indicators and line studies, there is built-in language for trade strategies programming MetaQuotes Language 4. Using this language, you can create Expert Advisors, Custom Indicators and Scripts. Expert Advisors can analyze the situation on the market, make decisions, put pending orders, and open positions in on-line mode without trader's participation."

OneDayTrades

About OneDayTrades:

"With our total automation you can simply open up a brokerage account at our premiere forex broker and automatically have the account traded for you to the exacting standards of the OneDayTrades EURUSD & GBPUSD system."

ProSignal

About ProSignal:

"ProSignal delivers an Automated Forex Trading System and Charting Software/Alert package that makes trading the foreign currency market a reality for everyone. A simple automated trading system you can implement within hours."

Strategy Runner

About Strategy Runner:

"Strategy RunnerTM is a leader in fully automated system trading solutions. Strategy Runner Ltd. offers financial institutions and private traders a complete trading solution that brings definition and execution of trading strategies to a new level."

TradeBolt

About TradeBolt:

"TradeBolt™ is the world's premier fully automated system trading application. TradeBolt will take buy/sell order signals from any signal-generating system and automatically send them to any broker for execution within milliseconds. Enjoy hands-free trading™ with TradeBolt!"

forex news and historical data

2010-08-26T05:03:00.001-07:00

dukascopy

Free historical data, you can download them instantly and use them in your analysis.

dailyfx

FXCM is one of the largest Forex Dealer Members (according to the financial data posted on the CFTC website). With substantial operations around the world, the FXCM Group has serviced over 78,000 accounts to date and in addition, services over 400 institutional clients from more than 80 countries. FXCM has a proven track record of reliability and success with over 1,500,000 trades executed each month via the FX Trading Station.

fxstreet

Live forexs news, great site, highly recommanded.

ac-markets

The latest forex news. Registered broker also.

reuters

Forex and economic news, live update.

yahoo

Yahoo news system.

northfinance

Some of the latest forex news provided by North Finance broker.

forex-markets

Another trusted site providing forex news

my own strategy

2010-08-26T05:02:00.001-07:00

My own strategy is a very simple and very effective one. I use it on the H4 and D1 timeframe. Buy and sell signals are provided by two exponential averages, having 10 and 80 period, short ema(10) and long ema(80) . This is combined with a Zig Zag indicator in order to spot elliot waves. The picture speaks for itself, no need for further explanations.

Download the strategy+complete indicators, instructions and templates from here

forex forecast

2010-08-26T05:01:00.001-07:00

The ultimate research would show you in advance exactly what is going to happen at some future date. Of course this is not possible and never will be.

It is possible, however, to consistently project currency prices within a range of acceptable margin of error.

Forex Predictions delivers high and low currency forecasts for both daily and weekly time frames using advanced technology and market experience. Further, trade signals are offered on the majors, minors and crosses via 3rd party providers.

A speculator day trading can use the daily high/low forecasts as a guide for entry and exit points. A position trader can also use the daily predictions for stop losses and trailing stops. Similarly, the weekly forecasts can be used by position traders to select those potential trades that offer the most reward.

A corporate hedger can use the predictions to measure risk using both daily and weekly prediction modules and take appropriate action based upon their own proprietary risk tolerance criteria.

If you need some good forex prediction websites, try this, but i wouldnt relay on any forex prediction:

http://www.fxstreet.com/technical/forex-forecasts/

http://www.fxtoolkit.com/

forex pivot points

2010-08-26T05:00:00.002-07:00

Pivot points are a form of support and resistance indicator, used by traders to anticipate price movement. Unlike fundamental analysis which relies heavily on economic indicators such as interest rates, trade balances, unemployment rates etc, pivot points provide traders with a visual tool to base their trading decisions on.

Determining pivot levels begins with the calculation of the actual pivot point, which is simply an average of the previous days high, low, and closing price. This number will be the basis from which all other pivot points will be calculated from. If the market rallies above this pivot point for example, this might indicate some strength in the market and vice versa. From this point you would then refer to the other 3 main pivot points to determine what the price may do next.

15 minute USD/JPY chart. Pivot Points based on prior days activity.

Notice on this particular chart there are only support & resistance levels 1. There is no need to put the 2nd and 3rd support & resistance pivot levels in because the volatility isn't great enough in this particular example. The actual price levels of the pivot points are shown under the respective pivot level. Here are the formulas used in determining the most commonly used pivot points, which is called the five-point system:

To calculate the actual pivot point (P) = (H+L+C)/3. Where H is the highest price, L is the lowest price, and C is the closing price of the previous days trading. In 24 hour markets such as the forex market, the high, low and closing prices are often calculated by using the Once the daily pivot number has been calculated, the next step is to calculate the initial support (S1) and resistance (R1) levels. Resistance Level 1 = (2*P)-L Support Level 1 = (2*P)-H

A second pair of support and resistance points are used when the price breaks the previous day’s trading range, and continues in the same direction until it comes to a second higher level of resistance or lower level of support. The calculation of these second pivot points are as follows: Resistance Level 2 = P + (R1 – S1) Support Level 2 = P - (R1 - S1)

These are the main pivot point levels used by traders around the world. Although you can have as many pivot levels as you want, it is most of the time unpractical, since the volatility that is needed to reach further pivot point levels would not often be adequate enough. Pivot points are a very widely used technical analysis tool, especially in the forex market.

Forex chart patterns

2010-08-26T05:00:00.000-07:00

In order to effectively spot those patterns the Zig Zag indicator is highly recommended, along with MetaTrader Platform which allows the most complex charts.

Symmetrical triangle pattern

A symmetrical triangle pattern is considered to be a continuation pattern. They are formed by trend lines connecting higher lows, and lower highs which eventually meet to form the apex of the triangle.

Ascending triangle patern

The ascending triangle pattern is a variation of the symmetrical triangle. They are generally considered to be bullish patterns, and have higher forecasting abilities when formed in an up-trend. The top of the triangle is flat, while the bottom section has an upward slant.

Parabolic curve pattern

The parabolic curve pattern is probably one of the most sought after patterns, and often produces quick returns in a relatively short period of time. Most of the time this pattern will appear near the end of a major market move or advance, and often looks like a stair case which eventually ends and dives downwards.

Wedge pattern

The wedge formation looks very similar to a symmetrical triangle pattern. Wedge patterns are distinguished by their apparent slant either up or down (rising & falling wedges).Falling wedges are generally considered to be a bullish signal often found in up-trends. They are formed with a series of lower highs and lower bottoms.

Descending triangle pattern

The Descending Triangle, also a variation of the symmetrical triangle, is generally considered to be bearish and is usually found in downtrends. The descending triangle pattern is characterized by a flat bottom with the top part having a downward slant.

Channel pattern

Channel patterns are most of the time considered as a continuation pattern, and usually continue in the direction of the main trend. Channels are formed by two trend lines running parallel to each other forming a rectangle shape, where prices bounce up and down between often forming double tops and bottoms.

Head Shoulders pattern

The Head and Shoulders pattern is considered as a reversal pattern, and is most often and most reliable up-trends. Head and shoulder patterns are formed when prices are pushed upwards then fall back down to what starts the neckline. Prices are then pushed back up forming a new high then once again are pushed back down. Prices then go higher but not quite reaching the previous high point. They are then pushed back down to the neckline, and the pattern is completed once the neckline is broken. The neckline is formed with a trend line connecting the two low points of the pattern.

Cup and Handle pattern

As its name suggests, the cup and handle pattern is made up of two parts: the cup and the handle. The cup is formed after a strong market advance and has a rounded bottom. After the cup has been formed, the handle develops in the form of a trading range. Most consider duration of 2-4 months a good time frame for the cup to form and around 1 month for the handle. The handle section that is formed is generally around 5% below the old high point, and any lower than that is in most cases considered not to be a cup and handle pattern.

Download Forex Made Easy: 6 Ways to trade the Dollar

2010-08-18T02:44:00.001-07:00

Hey all ,

Well, I have been pity keen on updating myForex blog since quite a few days. I have been posting Forex books mostly or whipping up an article or two. I am looking forward to make the trading experience for our visitors much better.

All the recent Forex Books I have added are mainly on the Home Page with pics and reviews of them and of course the downloadlink.

Up here , we have Forex made easy by James Dicks. I personally find this particular Forex Book of decent use to newbie Forex Traders and even Amateur Investors. Inspite of a few negative reviews of Forex Made Easy doing the rounds on the net, I believe it has a decent value attached to it.

Forex Made Easy by James Dicks is quick paced and informational. The books deals with relatively advanced techniques as well.

Well, now that we have the download for Forex made easy , you can check it out with out spending a dime and let me know whether you share the same views as me or not.

DOWNLOAD FOREX MADE EASY: 6 Ways To Trade the Dollar by James Dicks.

Like I always say, if you liked this post or the other content we have on our Forex Blog, do vouch for us by leaving back an appreciative comment or two(or even a critical comment for that matter) , Give us a digg or stumble or some link love from your own site/blog/forum.

Thanks all! Enjoy

7 Tips to better Currency Trading

2010-08-18T02:42:00.001-07:00

Currency trading training is not over when a trader finally sees the equity increasing in their account.

The Forex market is a very demanding environment and for a trader to maintain a success level, constant currency trading training is necessary.

The following 7 favorite tips can be used as timely reminders and need to be read and absorbed on a regular basis:

#1 - Take Responsibility

"The buck stops here." Don't blame the markets, or a host of other factors for a losing trade. You entered it for whatever reasons you had at the time. Take responsibility for it.

#2 - Use Each Losing Trade As A Stepping Stone

You lost a trade? Good. It will help you focus on a potential problem in your trading method. If after careful analysis you are satisfied you worked according to your plan, fine. Move on.

#3 - Never Become Impatient With The Market

New traders in the early stages of their currency trading training can be eaten alive by the market. During periods of consolidation with little liquidity the anxious impatient trader will force trading opportunities where there none.

Learn to accept the fact that around 70% of the time price will be in a consolidation channel.

#4 - Focus Daily On Improving Your Trading Skills

Currency trading training is an ongoing process. Day by day, step by step the trader improves. So rather than be preoccupied with profits and losses, concentrate on developing the skills. Your account will start to reflect your focus in time.

#5 - Be Pleased With Well Executed Trades Whatever The Outcome

Is this possible? Yes. You can feel well pleased even with a losing trade if you stuck to your methodology and executed the trade well. It is dangerous to feel good about a winning trade when you went against your trading method to achieve it. Your elation is likely to be short lived. Learn to execute the plan!

#6 - If In Doubt Stay Out

The feeling of regret can drain a person mentally and emotionally from entering a poorly considered trade. Once the trigger has been pulled and the trade starts going wrong, the agony of watching it inch towards your stop should renew in the trader the determination to stay out when in doubt!

#7 - Always Have A Good Reason

Currency trading training involves careful analysis of reasons for entering a trade. Just because price is high is not a reason to go short or long if price is low. Price will do what price wants to do so rather than trading from gut reaction, e.g. "Price can't go any higher (or lower)" learn to detach emotions and use pure technical analysis to establish a number of reasons why you should take a trade.

As currency trading training is a long term commitment, skills and disciplines learned can sometimes be forgotten as bad habits creep in.

It is necessary to constantly renew the thinking processes by repeating over and over the habits of successful traders.

These 7 favorite tips will keep the newer trader out of a lot of trouble!

133 Trading tips

2010-08-18T02:41:00.001-07:00

Hey there,

Here we have a collection of tips for the average forex trader

133 TRADING TIPS by (Ak forex)

1. Learn the basics of forex trading. It's amazing how many people simply don't know

what they're doing. In order to compete at the highest level in the trading business and

be one of the few truly successful participants you must be well-educated about what

you are doing. This does not mean having a degree from a well-respected university –

the market doesn’t care where you were educated.

2. Forex trading is a zero sum game. For every long there is also a short. If 80% of

the traders are on the long side ,then the remaining 20% are on the short side. This

means further that the shorts must be well capitalized and are considered to be strong

hands. The 80%, who are holding much smaller positions per trader, are considered to

be weaker hands who will be forced to liquidate those longs on any sudden turn in

prices.

3. Nobody is bigger than the market.

4. The challenge is not to be the market, but to read the market. Riding the wave is

much more rewarding than being hit by it.

5. Trade with the trends, rather than trying to pick tops and bottoms.

6. Trying to pick tops and bottoms is another common fx trading mistake. If you're

going to trade tops and bottoms, at least wait until the price action actually confirms

that a top or a bottom has been formed before you take a position in the market.

Trying to pin-point tops and bottoms in the foreign exchange market is very risky, but

exercising a little patience and waiting for a proven top or bottom to form can

increase your odds of profiting and somewhat reduce your risk.

7. There are at least three types of markets: up trending, range bound, and down. Have

different trading strategies for each.

8. Standing aside is a position.

9. In uptrends, buy the dips ;in downtrends, sell bounces.

10. In a Bull market, never sell a dull market, in Bear market, never buy a dull market.

11. Up market and down market patterns are ALWAYS present, merely one is more

dominant. In an up market, for example, it is very easy to take sell signal after sell

signal, only to be stopped out time and again. Select trades with the trend.

12. A buy signal that fails is a sell signal. A sell signal that fails is a buy signal.

13. Let profits run, cut losses short.

14. Let your profits run, but don't let greed get in the way. Once you've already made

a nice profit on a trade, consider taking either some or all of the money off the table

and move on to the next trade. It's natural to hope that one trade will end up as your

"winning lottery ticket" and make you rich, but that is simply not realistic. Don't hold

the position too long and end up giving all your well-deserved profits back to the

market.

15. Use protective stops to limit losses.

16. Use appropriate stop-loss orders at all times to cut your losses and never, ever sit

back and let your losses run. Almost every trader at some point makes the mistake of

letting his or her losses run in hopes that the market will eventually turn around in his

or her favor but, more often than not, it simply leads to an even greater loss. You win

some, you lose some. Simply learn to cut your losses, take your occasional lumps and

move on to the next trade. And if you made a mistake, learn from it and don't do it

again. To avoid letting your losses run, get into the habit of determining an

acceptable profit target as well as an acceptable risk tolerance level for each and every

forex trade before entering the market. Then simply place a stop-loss order at the

appropriate price - but not so tight (close to the market) that the stop could quickly

take you out of the position before the market has a chance to move in your favor.

Using a stop is always the smart move.

17. Avoid placing protective stops at obvious round numbers. Protective stops on long

positions should be placed below round numbers (10, 20, 25, 50,75, 100) and on short

positions ,above such numbers.

18. Placing stop loss is an art. The trader must combine technical factors on the price

chart with money management considerations.

19. Analyze your losses. Learn from your losses. They're expensive lessons; you paid

for them. Most traders don't learn from their mistakes because they don't like to think

about them.

20. Stay out of trouble, your first loss is your smallest loss.

21. Survive! In forex trading, the ones who stay around long enough to be there when

those "big moves" come along are often successful.

22. If you are a new trader, be a small trader (mini account) for at least a year, then

analyze your good trades and your bad ones. You can really learn more from your bad

ones.

23. Don't trade unless you're well financed...so that market action, not financial

condition, dictates your entry and exit from the market. If you don't start with enough

money, you may not be able to hang in there if the market temporarily turns against

you.

24. Be more objective and less emotional.

25. Use money management principles.

26. Money management increases the odds that the trader will survive to reach the

long run.

27. Diversify, but don’t overdo it.

28. Employ at least a 3 to 1 reward-to-risk ratio.

29. Calculate the risk/reward ratio before putting a trade on, then

guard against holding it too long.

30. Don’t trade impulsively ; have a plan

31. Have specific goals and objectives.

32. Five steps to build a trading system:

a) Start with a concept b)Turn it into a set of objective rules.

c) Visually check it out on the charts d) Formally test it with a demo

e) Evaluate the results.

33. Plan your work and work your plan.

34. Trade with a plan - not with hope, greed, or fear. Plan where you will get in the

market, how much you will risk on the trade, and where you will take your profits.

35. Follow your plan. Once a position is established and stops are selected, do not get

out unless the stop is reached or the fundamental reason for taking the position

changes.

36. Any successful trading system must take into account three important factors:

price forecasting , timing , and money management. Price forecasting indicates

which way a market is expected to trend. Timing determines specific entry and exit

points. Money management determines how much to commit to the trade.

37. Don't cherry-pick your system's set-ups. Trade every signal.

38.Trading systems that work in an up market may not work in a down market.

39. Establish your trading plans before the market opening to eliminate emotional

reactions. Decide on entry points, exit points, and objectives. Subject your decisions

to only minor changes during the session. Profits are for those who act, not react.Don't

change during the session unless you have a very good reason.

40. Double-check everything.

41. Always think in terms of probabilities. Trading is all about thinking in

probabilities NOT certainties. You can make all the “right” decisions and the trade

still goes against you. This does not make it a “wrong” trade, just one of the many

trades you will take which, through probability, are on the “loosing” side of your

trading plan. Don’t expect not to have negative trades - they are a necessary part of

the plan and cannot be avoided.

42. The place to start your market analysis is always by determining the general trend

of the market.

43. Trade only with a strategy that you've proven to yourself.

44. When pyramiding (adding positions), follow these guidelines.

a. Each successive layer should be smaller than before.

b. Add only to winning positions.

c. Never add to a losing position. One of the few trade management rules

that we can state we never break is ‘Never add to a losing trade’.

Trades are split into winners and losers, and if a trade is a loser, the

chances of it turning right around and becoming a winner are too small

to risk more money on. If indeed it is a winner disguised as a loser,

why not wait until it shows it’s true colors (and becomes a

d. winner)before you add to it. If you do this you will notice that nearly

always the trade ends up hitting your stop loss and does not look back.

Sometimes the trade turns around before it hits your stop and becomes

a winner and you can count yourself very fortunate. Sometimes the

trade hits your stop loss and then turns around and becomes a winner

and you can count yourself unlucky. Whatever the result, it is never

worth adding to a loser, hoping that it will become a winner. The odds

of success are just too low to risk more capital in addition to the initial

risk.

e. Adjust protective stops to the breakeven point.

45. Risk Control

A)Never risk more than 3-4 percent of your capital on any trade

B)Predetermine your exit point before you get into a trade

c)If you lose a certain predetermined amount of your starting capital, stop trading,

analyze what went wrong, and wait until you feel confident before you begin trading

46. Don’t trade scared money.

No one ever made any money trading when they had to do it to pay the mortgage at

the end of the month. Having a requirement to make X dollars per month or you will

be financially in trouble is the best way I know to completely mess up all trading

discipline, rules, objectives, and leads quickly to disaster.

Trading is about taking a reasonable risk in order to achieve a good reward. The

markets and how and when they give up their profits is not under your control. Do not

trade if you need the money to pay bills. Do not trade if your business and personal

expenses are not covered by another income stream or cash reserve. This will only

lead to additional unmanageable stress and be very detrimental to your trading

performance.

47. Know why you are in the markets. To relieve boredom? To hit it big? When you

can honestly answer this question, you may be on your way to successful forex

trading

48. Never meet a margin call; don’t throw good money after bad.

49. Close out losing positions before the winning ones,

50. Except for very short term trading, make decisions away from the market,

preferably when the markets are closed.

51. Work from the long term to the short term.

52. Use intraday charts to fine-tune entry and exit.

53. Master interday trading before trying intraday trading.

54. Don't trade the time frame. Trade the pattern. Reversal patterns, hesitation patterns

and breakout patterns appear often. Learn to look for the pattern in any time frame.

55. Try to ignore conventional wisdom; don’t take anything said in the financial

media too seriously.

56. Always do your homework and stay current on global events. You never know

what's going to set off a particular currency on any given day.

57. Learn to be comfortable being in the minority. If you are right on the market, most

people will disagree with you. (90% losers,10% winners).

58. Technical analysis is a skill that improves with experience and study. Always be a

student and keep learning.

59. Beware of all tips and inside information. Wait for the market's action to tell you

if the information you've obtained is accurate, then take a position with the

developing trend.

60. Buy the rumor, sell the news.

61. K.I.S.S – Keep It Simple Stupid, more complicated isn’t always better.

62. Timing is especially crucial in forex trading.

63. Timing is everything in forex trading. Determining the correct direction of the

market only solves a portion of the trading problem. If the timing of the entry point is

off by a day ,or sometimes even minutes ,it can mean the difference between a winner

or a loser.

64. A “buy and hold” strategy doesn’t apply in forex trading

65. When you open an account with a broker, don't just decide on the amount of

money, decide on the length of time you should trade. This approach helps you

conserve your equity, and helps avoid the Las Vegas approach of "Well, I'll trade till

my stake runs out." Experience shows that many who have been at it over a long

period of time end up making money.

66. Carry a notebook with you, and jot down interesting market information. Write

down the market openings, price ranges, your fills, stop orders, and your own

personal observations. Re-read your notes from time to time; use them to help analyze

your performance.

67. Don't count profits in your first 20 trades. Keep track of the percentage of wins.

Once you know you can pick direction, profits can be increased with multi-plot

trading and variations in using your stops. In other words, now is the time to get

serious about money management.

68."Rome was not built in a day," and no real movement of importance takes place in

one day.

69. Do not overtrade.

70. Have two accounts. One real account and the other a demo account. Learning

doesn't stop when trading real dollars begins. Keep the demo account and use it to test

alternative trades, alternative stops, etc.

71. Patience is important not only in waiting for the right trades,but also in staying

with trades that are working.

72. You are superstitious; don't trade if something bothers you.

73. Technical analysis is the study of market action through the use of charts,for the

purpose of forecasting future price trends.

74. The charts reflect the bullish or bearish psychology of the marketplace.

75. The whole purpose of charting the price action of a market is to identify trends in

early stages of their development for the purpose of trading in the direction of those

trends

76. The fundamentalist studies the cause of market movement, while the technician

studies the effect.

77. Rising commodity prices generally hint at a stronger economy and rising

inflationary pressure. Falling commodity prices usually warn that the economy is

slowing along with inflation.

78. The longer the period of time that priced trade in a support or resistance area,the

more significant that area becomes.

79. There are three decisions confronting the trader –whether- to go long, go short or

do nothing. When a market is rising ,the best strategy is preferable. When the market

is falling, the second approach would be correct. However ,when the market is

moving sideways ,the third choise –to stay out of the market- is usually the wisest.

80. Channel lines have measuring implications. Once a breakout occurs from an

existing price channel ,prices usually travel a distance equal to the width of the

channel .Therefore, the trader has to simply measure the width of the channel and then

project that amount from the point at which either trendline is broken.

81. The larger the Pattern ,the Great the potential. When we use the term “larger” ,we

are referring to the the height and the width of the price pattern. The height measures

the volatility of the pattern. The width is the amount of time required to build and

complete the pattern. The greater the size of the pattern-that is ,the wider the price

swings within the pattern (the volatility ) and the longer it takes to build –the more

important the pattern becomes and the greater the potential for the ensuing price

move.

82. The breaking of important trendlines . The first sign of an impending trend

reversal is often the breaking of an important trendline. Remember however ,that the

violation of a major trendline does not necessarily signal a trend reversal.The

breaking of a major up trendline might signal the beginning of a sideways price

pattern ,which later would be intedified as either the reversal or consolidation

type.Sometimes the breaking of the major trendline coincides with the completion of

the price pattern.

83. The minimum requirement for a triangle is four reversal points. Remember that it

always takes two points to draw a trendline.

84. The moving average is a follower , not a leader. It never anticipates;it only reacts.

The moving average follows a market and tells us that a trend has begun, but only

after the fact.

85. Shorter term averages are more sensitive to the price action ,whereas longer range

averages are less sensitive.In certain types of markets ,it is more advantageous to use

a shorter average and ,at other times , a longer and less sensitive average proves more

useful.

86. When the closing price moves above the moving average , a buy signal is

generated. A sell signal is given when prices move below the moving average.

87. A buying signal on a two-moving average combination occurs when the shorter

term of two consecutive averages intersects the longer one upward. A selling signal

occurs when the reverse happens, and the longer of two consecutive averages

intersects the shorter one downward.

89. Shorter average generates more false signals ,it has the advantage of giving trend

signals earlier in the move .The trick is to find the average that is sensitive enough to

generate early signals, but insensitive enough to avoid most of the random “noise”.

90. Cutting losses is painful for every trader.The ability to cut one’s losses in time is

the sign of a seasoned trader.

91.A channel breakout suggests a target for the currency price equal to the width of

the channel.

92. Long term charts provide important information regarding long-terms or cycles.

The trader can get a correct perspective regarding the real direction of the market in

the long run, the strength or direction of the current trend occurring within that trend,

or the possibility of a breakout from the long-term trend.

93. Common Points All Of Reversal Patterms

A)The first signal of an impending trend reversal is often the breaking of an important

trendline.

B)The larger the pattern,the greater the subsequent move

C)Topping patterns are usually shorter in duration and more volatile than bottoms.

D)Bottoms usually have smaller price ranges and take longer to build

94. The head-and-shoulders formation is confirmed only when the completion of the

three rallies and their reversals is followed by a breach of the neckline. The failure of

the price to break through the neckline on closing prices basis puts on hold or negates

the validity of the formation.

95. The double-top formation is confirmed only when the full completion of the two

rallies and their respective reversals is followed by a breach of the neckline (the

closing price is outside the neckline ).The failure of the price to break through the

neckline puts on hold or negates the validity of the formation.

96. The flag formation is a reliable chart pattern that provides two vital signals:

direction and price objective. This formation consists of a brief consolidation period

within a solid and steep upward trend or downward trend. The consolidation itself

tends to be sloped in the opposite direction from the slope of the original trend, or

simply flat.

97. A Breakaway gap provides the direction of the market.

98. The runaway or measurement gap provides the direction of the market. This gap

confirms the health and velocity of the trend.

99. The runaway or measurement gap is the only type of gap that provides a price

objective. The price objective is the previous length of the trend, measured from the

runaway gap, in the same direction as the original trend.

100. The exhaustion gap provides the direction of the market.

101. Near the beginning of important moves, oscillator analysis isn’t that helpful and

can be misleading. Toward the end of market moves ,however ,oscillators become

extremely valuable.

102. When the oscillator reaches an extreme value in either the upper or lower end of

the band, this suggest that the current price move have gone too far too fast and is due

for a correction of some type.

103. The oscillator is most useful when its value reaches an extreme reading near the

upper or lower end of its boundaries. The market is said to be overbought when it is

near the upper extreme and oversold when it is near the lower extreme. This warns

that the price trend is overextended and vulnerable.

104. A divergence between the oscillator and the price action when the oscillator is in

an extreme position is usually an important warning.

105.-Oscillator-The crossing of the zero line can give important trading signals in the

direction of the price trend.

106.Because of the way it is constructed, the momentum line is always a step ahead of

the price movement. It leads the advance or decline in prices , then levels off while

the current price trend is still in effect. It then begins to move in the opposite direction

as prices begin to level off.

107. RSI is plotted on a vertical scale of 0 to 100. Movements above 70 are

considered overbought, while an oversold condition would be a move under 30

.Because of shifting that takes place in bull and bear markets, the 80 level usually

becomes the overbought level in bull markets and the 20 level the oversold level in

bear markets.

108. The first move of RSI into the overbought or oversold region is usually just a

warning. The signal to pay close attention to is the second move by the oscillator into

the danger zone. If the second move fails to confirm the price move into new highs or

new lows, a possible divergence exists. At that point ,some defensive action can be

taken to protect existing positions. If the oscillator moves in the opposite direction,

breaking a previous high or low, then a divergence or failure swing is confirmed.

109. Stochastics simply measures , on a percentage basis of 0 to 100, where the

closing price is in relation to the total price range for a selected time period. A very

high reading (over 80) would put the closing price near the top of the range ,while a

low reading (under 20) near the bottom of the range.

110. One way to combine daily and weekly stochastics is to use weekly signals to

determine market direction and daily signals for timing(it depends from the type of

the trader). It’s also a good idea to combine stochastics with RSI.

111. Most oscillator buy signals work best in uptrends and oscillator sell signals are

most profitables in downtrends. The place to start your market analysis is always by

determining the general trend of the market. Oscillators can then be used to help time

market entry.

112. Give less attention to the oscillators in the early stages of an important move, but

pay close attention to its signals as the move reaches maturity.

113.The best way to combine technical indicators is use weekly signals to determine

market direction and the daily signals to fine-tune entry and exit points. A daily signal

is followed only when it agrees with the weekly signal. (daily-weekly, 4 hour-daily,4

hour-1 hour).

114. The failure of prices to react to bullish news in an overbought area is a clear

warning that a turn may be near. The failure of prices in an oversold area to react to

bearish news can be taken as a warning that all the bad news has been fully

discounted in the current low price. Any bullish news will push prices higher.

115. -Elliot Wave Theory- A complete bull market cycle is made up of eight waves,

five up waves followed by three down waves.

116 -Elliot Wave Theory- A trend divides into five waves in the direction of the

longer trend.

117-Elliot Wave Theory- Corrections always take place in three waves.

118-Elliot Wave Theory- Waves can be expanded into longer waves and subdivided

into shorter waves.

119-Elliot Wave Theory- Sometimes one of the impulse waves extends. The other

two should then be equal in time and magnitude.

120-Elliot Wave Theory- The Finobacci sequence is the mathematical basis of the

Elliot Wave Theory.

121-Elliot Wave Theory- The number of waves follows the Finobacci sequence.

122-Elliot Wave Theory- Finobacci ratios and retracements are used to determine

price objectives. The most common retracements are 62%, 50% and 38%.

123 -Elliot Wave Theory- Bear markets should not fall below the bottom of the

previous fourth wave.

124 -Elliot Wave Theory- Wave 4 should not overlap wave 1.

125 .Support and resistance are the most effective chart tools to use for entry and exit

points. For purposes of placing stop loss, support and resistance levels are most

valuable.

126. One of the commodities most effected by the dollar is the gold market. The

prices of gold and the U.S. dollar usually trend in opposite directions.

127. The Yen is sensitive to changes in the price or structure of the raw material

markets.

128. The commodity-producing countries (Canada, Australia, N. Zealand ) are more

dependent on Japan than the other way around.

129. The Yen is sensitive to the fortunes of the Nikkei index, the Japanese stock

market and the real estate market.

130. The majority of the pound transactions take place in London with a volume

decreasing significantly in the U.S. market, and slowing down to a trickle in Asia.

Therefore, in the New York market, many banks have to stop quoting the pound at

noon.

131. Swiss Franc has a very close economic relationship with Germany, and thus to

the euro zone.

132. The major markets are London, with 32 percent of the market,New York with 18

percent and Tokyo with 8 percent. Singapore follows with 7 percent, Germany has 5

percent and Switzerland, France and Hong Kong have 4 percent each.

133. Don't use the markets to feed your need for excitement.

A Few Tips For Day Trading the Stock Market

2010-08-18T02:38:00.003-07:00

Day trading the stock market involves the rapid buying and selling of stocks on a day-to-day basis. This technique is used to secure quick profits from the constant changes in stock values, minute to minute, second to second. It is rare that a day trader will remain in a trade over the course of a night into the next day. These trades are entered and exited in a matter of minutes.

The main question that most people ask when it comes to day trading is simple: Is it necessary to sit at a computer watching the markets ALL day long in order to be a successful day trader?

The answer is no. It's not necessary to sit at a computer all day long. There are a number of factors to consider, but generally the rule of day trading is to trade when everyone else is trading. In other words, trade in the morning.

As with all financial investments, day trading is risky in fact, it's one of the riskiest forms of trading out there. The stock prices rise or fall according to the behavior of the market, which is entirely unpredictable. Day traders buy and sell shares rapidly in the hopes of gaining profits within the minutes and seconds they own those particular stocks. Simple to do in theory, harder to do in practice.

If you are constrained by a small amount of capital, you may not be able to buy large amounts of a stock, but buying only a small amount can add to the risk of a loss. And, obviously, it is impossible to predict with certainty which stocks will result in profits and which in losses. Even the best of traders must learn to accept both outcomes.

It's also important to know that in day trading, it is the number of shares rather than the value of shares that should be the focus. If you day trade, you WILL face losses, but even for the more expensive stocks, the loss should be marginal, because prices do not usually fluctuate to an extreme degree over the course of just one day.

The day trading industry deals in a large variety of stocks and shares. Here are just a few:

Growth-Buying Shares shares made from profit, which continue to grow in value. Eventually, these shares will begin to decline in price, and an experienced trader can usually predict the future of this type of share.

Small Caps shares of companies which are on the rise and show no signs of stopping. Although these shares are generally cheap, they are a very risky investment for day traders. You'll be safer to go with large caps and/or mid-caps, which are much more secure and stable thanks to a premium.

Unloved Stocks company stock that has not performed well in the past. Traders buy these shares in the hopes of generating profits if and when the stock rises in value. As with small caps, unloved stocks can be a risky choice for day traders.

These examples are NOT your only options when it comes to day trading stocks. The best way to determine which type of stock is right for you is to invest some time for careful research, a knowledge of market patterns, a solid strategy, and a disciplined trading plan.

The key to successful day trading is to be prepared. Know as much as possible about the industry before you begin actually trading. You need to learn to trade ONLY when the market gives the right signals, and ONLY when the volume of activity in the market supports a successful trading opportunity.

Origin of the Currency Exchange Market

2010-08-18T02:38:00.001-07:00

Forex trading has a pretty long history and could be seen in ancient Middle Ages when foreign exchange just started out as international merchant bankers devised bills of exchange, which could be transfered to third-party payments that allowed flexibility and growth in foreign exchange dealings.

The modern FX market is is variable with periods of high volatility and relative stability . By the mid-1930s, London became known as the leading center for foreign exchange and the British pound served as the benchmark currency to trade and was kept as reserve currency.

After the 2nd World War, when the British economy was decimated and the United States was the only country unscathed by war, U.S. dollar ($) became the reserve currency for most of the countries . In turn, the U.S. dollar was pegged to gold at $35 per ounce. Thus, the U.S. dollar became the world's reserve currency.

To execute these goals the IMF uses such instruments as Reserve trenches, which allows a member to draw on its own reserve asset quota at the time of payment, Credit trenches drawings and stand-by arrangements. The letters are the standard form of IMF loans unlike of those as the compensatory financing facility extends financial help to countries with temporary problems generated by reductions in export revenues, the buffer stock financing facility which is geared toward assisting the stocking up on primary commodities in order to ensure price stability in a specific commodity and the extended facility designed to assist members with financial problems in amounts or for periods exceeding the scope of the other facilities.

At the end of the 70-s the free-floating of currencies was officially mandated that became the most important landmark in the history of financial markets in the XX century lead to the formation of Forex in the contemporary understanding. That is the currency may be traded by anybody and its value is a function of the current supply and demand forces in the market, and there are no specific intervention points that have to be observed. Foreign exchange has experienced spectacular growth in volume ever since currencies were allowed to float freely against each other. While the daily turnover in 1977 was U.S. $5 billion, it increased to U.S. $600 billion in 1987, reached the U.S. $1 trillion mark in September 1992, and stabilized at around $1.5 trillion by the year 2000.

Main factors influences on this spectacular growth in volume are mentioned below. A significant role belonged to the increased volatility of currencies rates, growing mutual influence of different economies on bank-rates established by central banks, which affect essentially currencies exchange rates, more intense competition on goods markets and, at the same time, amalgamation of the corporations of different countries, technological revolution in the sphere of the currencies trading. The latter exposed in the development of automated dealing systems and the transition to the currency trading by means of the Internet. In addition to the dealing systems, matching systems simultaneously connect all traders around the world, electronically duplicating the brokers' market.

Advances in technology, computer software, and telecommunications and increased experience have increased the level of traders' sophistication, their ability to both generate profits and properly handle the exchange risks. Therefore, trading sophistication led toward volume increase.

The Magic of Moving Averages

2010-08-18T02:37:00.001-07:00

Perhaps, the first indicator you’ve seen and used when you first started to trade Forex was Moving Average. For me it was that. Moving averages come in several forms — simple, weighted, exponential, smoothed, etc. And they present the most basic way to measure the current trend direction and to spot its change. At a first glance simple moving average indicator looks like a miraculous tool that is easy to use and can tell you where to enter a position and where to exit one. Let’s try to understand this indicator — is it really as good as it seems?

What moving average shows? No matter if it’s a simple, exponential or any other form of MA the only thing it’s showing is the average rate of the currency pair over a certain period of time, hence the name. For example, MA with a period set to 7 on a daily chart for any given bar will show the average price over the previous 7 bars (days). That’s not a magic, right? Various forms of moving average just influence the way to calculate the average value (to make the line look more smooth or sharp, or to throw out spikes), but in the end we get the averages of the previous periods.

So what happens when the current price crosses MA? Faster MA crosses slower MA? 3 MAs cross each other? The cross of the MA and a price or other MA (or any amount of other MAs) is usually considered as the buy/sell signal or at least a partial signal. Why? Because they really show a change in the trend. The problem is that the change could have happened long ago (up to the MA’s period bars ago). When the moving average is crossed by the price chart from below that simply means the current price became higher than the average price for the last N bars (where N is the period of MA) — that’s it and nothing else. If MA with a period of 7 days crosses MA with a period of 14 days from below that means that the average price in the last 7 days is higher than the average price during the last 14 days (the actual trend change here could happen up to 14 days ago). Some strategies employ even 5 moving averages cross — that won’t change the fact that the only thing you’ll know when such cross occurs is the ratio of the average price over 5 different periods.

So is there any point to use moving average? Yes, I think that the moving average is a good indicator, but not as a signal producer or a trend change indicator. What does it do best? It indicates the average price. So, it’s better to use it when you want to know the average price over a certain period. You can compare current price to the moving average to consider overbought/oversold state, measure the volatility comparing the price action with the large-period MAs, use the long-term moving averages as the support and resistance levels (because so many traders and even institutional traders use it in this way), etc.

Maybe that’s not a pleasant thing to know if you base your trading strategy on moving averages’ crosses, but the facts don’t lie and with more trading experience it becomes clear that moving averages can’t do magic and shouldn’t be used as an easy way to create another Forex strategy.

4 Reasons to Practice on Small-Size Real Account before Risking Big on Forex

2010-08-18T02:36:00.003-07:00

Practicing on the demo accounts before moving on to the real money trading is an obvious requirement for successful participating on the Forex market. It’s always better to lose virtual money while you are learning new market theories, developing your trading system or improving your practical Forex skills. But is it right to jump from the virtual account to a big real money one when you suddenly realize that you manage to be profitable for a long period of time in your demo trading? Here are some reasons to move on to just a small real account before risking a lot of hard-earned money on Forex:

Real trading is different from virtual, because you get real emotions when you lose or earn money. Trading with $100 on real will get you more real feeling than trading with $10,000 on demo. It’s better to lose $50-$100 to learn controlling those emotions than several thousands dollars.
Know your broker’s real account servers’ behavior. With some brokers virtual trading is smooth and fast, while real account bring unpleasant surprises with order delays, requites, refusals, slippage and stop-hunting. Trading with a small real account can save you big money if you are unlucky to stumble upon a bad broker.
Know your broker’s funds handling practice. Don’t risk depositing thousands dollars before trying small deposits to see how smooth transfers go with this broker. Pay attention to user support if you encounter some problems with the depositing or withdrawing your money. If your broker doesn’t take seriously small money deposits/withdrawals than you should be careful with it, since it may treat big amounts the money in the same way.
Practicing on small real account has another advantage before the demo trading – you get the real rewards when you trade right and you get real losses when you do something wrong. This way you’ll quickly learn to do everything right and won’t be doing the same mistakes again and again.

Demo trading is one of the greatest tools to learn Forex trading, just don’t forget that nothing will teach you better than trading on a real account. But why risk big before being confident in your skills, when you can start with a small-size real account?

Functions of the Retail Forex Market

2010-08-18T02:36:00.001-07:00

Retail Forex market became very popular after the development of the on-line trading technologies. Millions of new traders are attracted to Forex each year. They try to earn profits trading the currencies, developing the new intraday strategies and gaining on the long-term trends. But why does the retail FX market exist? Is it only a way to earn money for the brokers and some lucky traders? Here is the list of some functions — obvious and not — that are performed by the retail Forex market:

Earning opportunity — this is probably the most popular, obvious and important function of the retail Forex market. It provides the earning opportunity to traders, brokers, affiliates, webmasters, marketing companies and a lot of other on-line industries. Without a promise of profits retail Forex market would be limited to a simple exchange of the physical or current-account money.
Extra liquidity — this is definitely a positive function of the retail currency market. Although, not many traders use huge amounts of cash on Forex, the total sum of the money provided by the retail customers adds a good chunk of liquidity to the Forex market.
Extra volatility — a not very positive function at a first glance. Retail Forex market makes the rate movement less smooth and more volatile as the traders prefer short-term trading, which leads to the sharp reactions on the daily news and technical signals. Excess volatility is bad for the long-term traders, but it can be good for those who know how to benefit from such markets.
Social function — many communities were formed around the Forex trading. Traders prefer to get help from other traders and they also like to share the knowledge that is related to Forex.
Technical strategy development — popularity of the Forex trading and especially the on-line and automated versions of this trading led to the creation of thousands of the automated trading strategies. Based on technical analysis some of such strategies can be applied not only in Forex trading but in many other industries.

Of course, this list can't be considered as full and complete, but these functions are the main attributes of the contemporary retail Forex market, in my opinion.

3 Advantages of the Short-Term Forex Trading

2010-08-18T02:35:00.001-07:00

Trading on the short-term periods at the Forex market is often considered a more popular practice than the long-term trading. In short-term trades your positions usually don't last longer than a day, while in the long-term trading they can remain open for years. Although, I prefer to trade on the long-term charts and hold my positions open for the long periods of time, the short-term Forex trading has its advantages:

You can trade on thousands of opportunities when the currency rates change with a high volatility. You can capture every swing — up or down, trade inside the ranges and channels. Even the sideways market can be traded in short-term. When you trade long-term you miss these opportunities.
You don't have to tie up your funds for the long periods of time. Your margin capital is locked only for the short periods and you can even get it out of the trading account if you really need it and then put it back and continue trading without any problems. In long-term trading your money gets caught into positions for months.
The majority of the Forex trading signals work only for the short-term trading. Usually both technical and fundamental signals are played out in several hours of trading on the Forex market. The number of signals and events that influence currency rates on the long-term scale is really minimal.

This is what you get if you like to trade inside the day and use such techniques as breakout trading, scalping, news trading, range trading and any other short-term strategy. Of course there are also some disadvantages in the short-term trading, but they are not the topic of this post.

3 Advantages of the Long-Term Forex Trading

2010-08-18T02:34:00.001-07:00

As a long-standing supporter and practitioner of the long-term Forex trading it's hard for me judge this style of trading objectively, but pointing out the advantages is an easy task in this case. Apart from the obvious subjective advantages that are appealing to the certain features of the trader's character, long-term Forex trading has some features that are good for everyone:

Spread economy. If you trade on the long-term periods you tend to get more than 100-200 pips from every position, if you trade on the short-term periods your trades will rarely go beyond 50 pips in profit. Assume a broker with 2 pips spread and you make 2,000 pips a month with it (more optimism!). With 10 profitable trades yielding 200 pips each you get 2,000 pips of profit minus 20 pips paid in spread to your broker — that's 1 percent. With 100 trades yielding 20 pips each you get 2,000 pips minus 200 pips left to broker in spreads — that's 10 percent.
Resistance to the short-term volatility. Long-term Forex traders don't have to worry about stop-hunting or the intraday spikes. Their positions are safe from the usual daily market volatility. If you trade long-term you always have enough time to change your position's parameters when something important happens.
Long-term trading is simple. To trade successfully on the long time periods you have to forecast the general trend and the possible exit points and on the long-term charts that's not a difficult thing to do usually. And since you trade rarely you won't need to make the decisions too often, while in short-term trading you have to develop the complex strategies to succeed.

I can't make you switch to the long-term Forex trading if you don't like it and the majority of the traders enjoy the short-term trading, but now at least you know the advantages of the other trading style. If you experience difficulties trading inside the day you could always switch to the long-term trading.