Trading Rules and Steps

First of all we need to find out what we are going to do. We need to analyse market direction and take the decision are we going to sell or buy. To take the decision according direction of the market is easy: if market is going up – we buy; if down – we sell; if sideways – we wait for opportunity to buy or sell, or could enter the market on chart patterns. But how to find out where market is going?

FIRST STEP. First of all we should choose time frame: 5minute chart, 30 minute chart,1 hour chart, 4hour chart or bigger , according to traders personality and money management. How to choose time frame. Reason is – choosing the time frame is more psychological than technical factor. I am personally using 4 hour time frame as a major. So, I open 4 hour chart of currency pair I wish to trade.

SECOND STEP. Find the support and resistance. If somebody will take a look at any chart, visually there is no problem to see significant supports and resistances. But description of such things could become quite complicated. I do not think that exist strict rules to describe support and resistance (or simple I have not found yet such strict rules), but generally and I would say not very satisfying description would be this: place (or price) where market stops and starts moving in opposite direction of the current trend. Please, do not take it as complete truth, but I follow this description. Why? Because, my trading method is based on simple facts, that we do not know and hardly will ever know what market is going to do next, and I accept everything what is going in the market as correct events. I never say:”Market should go up! Why it is going down?” Market always goes in the right direction, question is: are you going in the same direction? So, for me the resistance will be when the first candle (I am using candlesticks charts) is positive and the next - negative, resistance will highest price of those two candles. And support will be when the first candle negative, the second positive and lowest price of those two will be the support. Too simple? Maybe, but it works for me. So I will find all support and resistances, but all the supports and resistances have different levels of importance. This everybody determines for themselves, probably this is the reason, why is very hard to have strict rules for support and resistance.

THIRD STEP. For now we have support and resistance lines on the chart. Important thing is to have just those supports and resistances which are significant for you. Less important ones is better to delete.

We see lots of places where we can consider as a support or resistance. Which one is correct? Answer is – all of them. So where to buy or sell?

After we found all support and resistance, we are going to take just last few of them and draw the lines, connecting most significant resistances and supports.

Now we have few lines, but for trading we going to use just one. Let's delete the lines which are crossing the price and leave just one which connects resistances or supports, but do not cross the price.

So now we have a direction. So until this trend line is not broken, I will sell on any movement up,close to the resistance. My stop will be when prices will cross the trend line. And until this trend line will not be broken I am taking just short positions.

Well, looks easy. Draw trend line, sold or bought, sit and wait for the profits. To cool your enthusiasm little bit I will say this: do not forget that trend line could be broken and eventually it will be. So entering the trade you must consider where your going to exit if market will turn around. You must be positive about your trade, but at the same time – careful.

Forex Trading Secrets to become profitable trader

Our currency trading forex courses are awesome and the hard work to come out these forex training course are proven logical, powerful, robust and well presented methodology. We have the great trader and mentor. The strategies that are being taught honestly in the course have paved & lighted the forex trading path & turned the dumb money into smart money. The pivot point trading method is analagous to precision guidance system. The signal analysis method gives high level of accuracy and most of the traders truly learn from the concise and useful technical information.

What are the Secrets in Forex Trading? :-o

More than 100 million people in the world are looking for profitable investment. We love talking investment because this is the energyless but high profit gain business. Forex Trading is the world's largest financial market with an estimated daily average turnover between $1.5 trillion to $2.5 trillion that we cannot doubt. If we want to make profit from this investment, there are some related knowledges that we definitely need to know.

• Use Future data to justify market trend.
• Pivot Program shows entry & exit signals.
• Familiar Chart Patterns and Trend lines.
• how big dogs are doing?
• euro vs USD Tricks.
• Be Smart to Filter Various Currency pairs.
• Confident to Control Up and Down Trendy.
• Avoid Pitfalls of Dumb money.
• Intelligent stop loss strategies implementation.
• AIME methodology
• History is your tips.
• Hedge currency Trades .

Advantages of Forex Trading :-o

Are you new to trade currency? Are you giving up due to your past trade? Get yourself to know the primitive advantages of Forex trading. And you are also essentially advised to refer to the risk-bearing.

• Two Way Market where traders can trade in Bull and Bear market
• Margin Trading 100 : 1 leverage
• Low Account Balance for entry
• Can work in odd work due to 24 hours a day from Sunday night to Friday noon
• Flexible transaction sizes
• Very dynamic and trendy
• No worry about bad fills due to price gaps
• Can practice at online simulation until you become expert
  read more..

Best Systems & Strategies in Forex Trade

" The Ultimate Forex Trading Strategies Delivering Profits Week After Week"

Learn these Forex trading strategies and Forex systems on 4 hour and daily charts, or if your time is really limited, you can trade just the Daily charts. Learn this simple strategy which is desgined to scalp for a quick 100 pips or leave the trade on for hours or even overnight to make 200 or more pips.

Watch this video for Forex Examples :-o

Lets talk about what might be the best forex trading strategy your ever going to use to make consistant profits ...

This comprehensive trading ebook is designed to train forex traders to read price action and trade the forex market like real professionals.

Does your trading system lose money? Its time for a huge change in your trading!. Join the group that make money consistently. If you’re a beginner and don’t know where to start, try thee daily forex trading strategies first. Stop looking for perfect mechanical forex system, and learn to read raw price action.

Maybe you’ve bought a forex system or used a trading strategy before and your trading results still weren’t up to scratch, most likely because they where useless curve fitted systems that have no use in real world trading. The con artists all over the internet never tell you the truth, back tested results are useless!.

It's time to learn a real forex tading method based on pure price patterns which is simple and effective. ...

This ebook is filled with solid forex strategies, similar to those used by banks and financial institutions. It's going to teach you powerfull trading setups, which we have used to profit considerably and consistently. We dont teach a bogus one hit wonder forex system, We are talking about you going away from this ebook with a concrete plan of action , powerfull forex system in hand, ready to make serious money. You will have unlikley seen these trading strategies taught anywhere.

This is a genuine trading plan, containing everything we know and have learned from the markets. And the best thing is, its simple enough for you to copy every time you make a forex trade..

So what kind of trading can you expect with these methods? Well, You can swing trade the daily charts if you live a busy lifestyle, of if time allows, move down to 1 hour and 4 hour forex charts for quicker trade setups. This forex trading system is used for end of day trading allowing you to walk away from your computer after you have placed a trade and do what you have to do. This strategy was designed for traders who can't spend much time watching forex charts.

Posotions and Understandings in Forex Trade

Understanding the Trades : -o

The best way to understand what happens in a forex trade is to demonstrate by way of example. In this case we will outline a trade in which we buy EUR/USD at 1.2100.

Remember, when buying or selling in the forex market you are doing so in regards to the base currency (the first one listed in the pair). That means for EUR/USD we are long the Euro, and by extension, short the USD.

This diagram shows the way the transaction runs it's course:

Simple Spot Forex Trade :-o

Buy 100,000 EUR/USD at 1.2100

Borrow 121,000 USD (100,000 x $1.21)

||

Convert USD to EUR at 1.2100

||

Deposit 100,000 EUR

When we close out this trade, it is a simple reversal process. The EUR position is converted back in to USD and we pay-off the USD loan we took out. If the exchange rate increased, then we would have Dollars left over, which would be our profit. For example, if the rate went to 1.25 we would have $4000 left over after paying back our loan (100,000 x $1.25 = $125,000 - $121,000 = $4000) If the rate had dropped, we would have a shortfall on our loan repayment, and thus a loss on the trade.

For a trader whose account is denominated in US Dollars, the above example is pretty straightforward. There is only one exchange happening each way. When one is trading cross-rates, however, things get more complex.

Everything remains essentially the same when we enter the trade. If, for example, we were buying 100,000 EUR/JPY at 131.00 we would borrow 13,100,000 JPY (100,000 x 131), exchange that in to EUR, and deposit it. We would pay interest on the JPY loan and earn it on the EUR deposit, just like we did in the EUR/USD example.

The complexity of a cross trade comes when unwinding the trade. Assume EUR/JPY rises to 132.00, and see how the long position unwind would look:

Cross-Rate Trade :-o

Unwind 100,000 EUR/JPY long

(Entered trade at 131.00)

100,000 EUR

||

Convert EUR back to JPY at 132.00

(100,000 x 132 = 13,200,000 JPY)

||

Repay 13,100,000 JPY

(13,200,000 - 13,100,000 = 100,000 JPY remains)

You will note that there are 100,000 JPY remaining after the original JPY loan is repaid. That is our profit, but as USD-based traders we need to convert that back in to USD for our accounting purposes. That happens by exchanging the JPY for USD at the current USD/JPY rate. If that rate is 107.00, then we have a gain of $934.58 on the trade (100,000/107.00). Of course, we must also take in to account the interest carry when determining our net profit.

Calculating Profits & Losses :-o

The above outlines of forex trades may seem complicated, but as an individual trader, you don't see all that stuff. When it comes down to determining your profit or loss (P&L), it's pretty simple. The essence of determining one's P&L boils down to starting value and ending value (as set by the market).

Here are the formulas for calculating your profit or loss on a forex trade:

Non-USD Base (i.e. EUR/USD):

Long: (Units x R2) - (Units x R1) or Units x (R2—R1)

Short: (Units x R1) - (Units x R2) or Units x (R1—R2)

Where R1 is the starting rate and R2 is the ending one.

Ex: Buy 100,000 EUR/USD at 1.3000 and sell at 1.3100:

(100,000 x 1.31 = $131,000)—(100,000 x 1.30 = $130,000) = $1000

USD Base (i.e. USD/JPY):

Long: ((R2/R1) - 1) x Units

Short: ((R1/R2) - 1) x Units

Long Ex: Buy 100,000 USD/JPY at 110.00 and sell at 111.00:

(( 111.00 / 110.00 ) - 1) x $100,000 = $909.09

Short Ex: Short 100,000 USD/JPY at 110.00 and cover at 109.00:

(( 110.00 / 109.00 ) - 1) x $100,000 = $917.43

As we know from the EUR/JPY example, cross trades require an additional step. The same calculation can be used as above (the non-USD base is probably the easiest, though either could be used), but the Profit/Loss figure would then have to be converted using one of the currencies involved to get it back to the account currency as demonstrated earlier.

Remember, forex trades have an interest rate carry based on the interest rate differentials. This can be either positive or negative. For longer-term trades, this can be a significant influence on the final P&L.

Multiple Open Positions :-o

A common piece of advice offered by experienced forex traders to novices is to focus on one currency pair and stick to that. There are two reasons. One is to develop a good understanding of one forex relationship and not spreading things too thin. The other reason is to avoid some of the issues which can crop up when a trader has positions open in multiple currency pairs.

The first of those issues is creating excessive exposure to one currency. This is done by going long or short the same currency in different pairs. For example, I you were to sell EUR/USD and at the same time buy USD/JPY you would have two USD long positions. In shorting EUR/USD you are going long USD, and obviously in buying USD/JPY you are doing the same thing. This is a very quick way to put your trading account at serious risk if you are not aware of your total exposure. If the USD were to suffer a decline you would likely lose on both those positions.

The other issue in holding positions in multiple currency pairs is that you can accidentally create a position completely different than what you intended. For example, if you were to buy EUR/USD and buy USD/JPY the USD exposure in those trades would at least partially offset each other (you are selling USD in the first trade and buying it in the second), depending on the values of the two trades in question. What you are left with is a long EUR/JPY position, which has very different trading characteristics than either EUR/USD or USD/JPY.

The combination of the risk factor and the offsets that can happen is why even experienced traders often will only carry one open forex position at a time. It just keeps things simpler.

Top Countries Globally in Forex Trading

Trading in foreign exchange, which saw global daily volumes of more than $3 trillion (Dh11trn) last year, has been drawing interest from investors across the world. Estimated to be 20 times higher than the daily volume of the New York Stock Exchange, providers of online forex trading platform are quite buoyant on the growth of this asset class in spite of the global economic crisis.

Betsy Waters, Global Director, dbFX, an online margin foreign exchange trading platform launched by Deutsche Bank, says forex trading is in for massive growth. Excerpts from an interview:

What has been the impact of the ongoing volatility in global markets on forex trade?

Forex trading has gone up. If I look at our bank, we were 200 per cent of our normal weekly average this month [October] in volumes. The impact of volatility has been positive as people who do not want to trade other asset classes have been moving into forex. For instance, in case of equities, investors are not able to buy and hold at the moment, given the global financial turmoil.

In case of forex trading, volatility is good. It means one can always buy and sell and make a positive investment. Volatility is in fact good for trading of currencies unlike other asset classes, a factor that is making it much more attractive.

Has this been a good period?

It is proving to be the best period for volumes. As far as investments are concerned, it depends whether you are right or not.

How has forex trade grown in the Middle East? Where is maximum growth in the region coming from?

Of the four regions that we have categorised - the United States, Europe, Asia and Middle East - we see high potential in Middle East. We recorded a year-on-year growth of 70 per cent this year and countries in the Middle East have significantly contributed to it. The UAE and Jordan have been among the best performing countries in this region and we have a heavy clientele here.

What are the factors that are driving growth in this region and how would you describe investor behaviour here vis-á-vis other countries?

The driving factor is that people here like to trade and earn quick money. Investor behaviour is also unique. Unlike other countries where we saw investors focusing on a wider variety of currencies, Middle Eastern foreign currency traders have been trading heavily in the euro/dollar currency pair. As much as 60 per cent of our second quarter volume from the Middle East came from euro/dollar, whereas in other regions euro/dollar formed 25 per cent to 30 per cent of the volume. This is interesting and reflects that investors here are really looking to trade the currency that trades the most, which shows that they seek quick returns.

They are looking at this as purely a trading opportunity. Other factors that would push trade are the low entry costs for forex trading. We open accounts from as low as $5,000 (Dh18,350). The platform is easily accessible and understandable. Besides, technical analysis makes it easy for people to trade.

Deutsche Bank has a large share of forex trading globally. How was this been built and how is it maintained?

We have a 20 per cent market share, which is the highest. Backed by strong research team, good technicals have helped us to maintain this position. It has been built over a period of years. We launched our online products several years ago. As a bank and being in foreign exchange we always look forward to innovations and launching product and that has helped us to keep up.

How do you see the overall forex trading segment growing in 2009?

The scenario looks quite bright. Due to high volatility, people are not necessarily able to trade in asset classes such as equities. In our business, we had a 70 per cent year-on-year increase, and we look forward to maintaining at least a similar growth rate next year. As per the Triennial Central Bank Survey of Foreign Exchange and Derivatives Market Activity 2007, daily turnover of the world's currency markets is close to $3trn a day, compared to $500 billion for the US Government bond market and $70bn for the New York Stock Exchange.

The growth next year is expected to be quite high. The factor that would drive growth next year is the rising inclination towards forex trading.

What are the risks associated with forex trading and how can an investor minimise them?

Over-leveraging is the biggest risk. Using too much of leverage could lead to losses. Another risk is that one does not use the tools provided in the system like stop losses. One needs to plan the trade carefully before executing it.

Betsy Waters: Global Director, dbFX

Waters is the Global Director at dbFX, Deutsche Bank's market-leading online margin forex trading platform. In this role, she is responsible for overseeing sales and trading for dbFX's diverse retail client base - located in more than 70 countries around the world. Waters has had a long and established career in forex, with more than 20 years experience in sales and trading roles. Her experience - initially in an institutional capacity at Goldman Sachs and Citibank - has been instrumental in the development of dbFX as a trading platform of choice for retail investors.

Top Best Ways to Forex Trade

Forex is the acronym of Foreign Exchange. Typically, it denotes the exchange of one country’s money with another’s. Many use it as a kind of business. In fact currency trading can be an interesting area of investment. In it, a person has to take care that he or she is exchanging a currency with another that will earn the person money in future.

There are factors that can change the value of a currency. It can change from market news or from the financial developments around the globe. To give an example, a person will make profit if he or she closes the position when the price of a currency appreciates in value.
However, in that case, the person is only dealing with the counter currency. Thus in the currency markets, one currency is valued against another and consequently, a rate of worth can be found out. The reason of this is the fact that the value of the currency of a country is always relative and it can not be measured without comparing it to the currency of the other countries.

As one can clearly see; the trading needs a lot of understanding. The person must have a strong understanding and a simultaneously strong sense to judge the potential value of a currency. Most importantly, a successful trader must have the capability to interpret different Forex trade signals.

Fortunately, there are different tools available to solve the problem. There are different charting programs along with trading guides that are sure to help a person understand Forex systems better. There are also interactive training rooms with live video footages to teach an interested person the pros and cons of the business. The World Bank publishes Forex report every day. This report can be of great help in making the right decisions.

Launched in 1973, FOREX has now become one the most prolific areas of investment when it comes to currency trading. As far the report goes, as much as $1.2 trillion worth of exchange takes place everyday. Obviously, there are certain forex advantages that have lured investors into it. Unlike most securities, FOREX does not trade on a fix rate.

Here, the exchange is basically done between the banks, non-banking corporations, private investors and speculators. In the initial days, the large amount of investment would dissuade small investors. However, as the competition grew tougher, the requirements to take part in FOREX have come down too. Now, smaller investors can try it out as well.

Another major forex advantage is its accessibility. One can trade for 24 hours a day, 5 days a week. One can do their entire trading on computer as well.

Now, to make it a successful deal, one needs the help of experts who will help understand FX signals. And utilize tools that can present comprehensive market analysis right in front of your eyes. At the same time, it is important the information be updated on a regular basis.

The AFFX desktop is a tool that helps you get what you need. It offers all the essential information and much more. It provides forex alerts and other useful services. It is also offered at a reasonable price. No wonder why it has become one of the most preferred tools in this sector.

Forex Trading Benefits, Advantages & Reasons

There are many benefits and advantages for getting in Forex Trade. Here are just a few
reasons why so many people are choosing this market as a business
opportunity:

1. LEVERAGE:

In Forex trading, a small margin deposit can control a much larger total contract value. Leverage gives the trader the ability to make extraordinary profits and at the same time keep risk capital to a minimum. Some Forex firms offer 200 to 1 leverage, which means that a $50 dollar margin deposit would enable a trader to buy or sell $10,000 worth of currencies.
Similarly, with $500 dollars, one could trade with $100,000 dollars and so on.

2. LIQUIDITY:

Because the Forex Market is so large, it is also extremely liquid.
This means that with a click of a mouse you can instantaneously buy and sell at will. You are never 'stuck' in a trade. You can even set the online trading platform to automatically close your position at your desired profit level (limit order), and/or close a trade if a trade is going against you (stop order).

3. PROFIT IN BOTH 'RISING' AND 'FALLING' MARKETS:

On the stock markets, you can only make money if shares are rising, but in economic
recession and falling 'bear' markets, there is little chance of making big money.
Forex is different. One of the most exciting advantages of FX trading is the ability to generate profits whether a currency pair is 'up' or 'down'. A trader can profit by taking a 'long' position, (buying the currency pair at one price and selling it later at a higher price), or a 'short' position, (selling the currency pair and buying it back at a lower price). For example, if you think the US dollar will increase in value vs. the Japanese Yen then you will buy Dollars and sell Yen (go long). If you think the Yen will increase in value against the Dollar then you will sell Dollars and buy yen (go short). As long as the trader picks the right direction, a potential for profit always exists.

4. 24 HRS:

From Sunday evening to Friday Afternoon EST the Forex market never sleeps. This is very desirable for those who want to trade on a part-time basis, because you can choose when you ant to trade--morning, noon or night.

5. FREE 'DEMO' ACCOUNTS, NEWS, CHARTS AND ANALYSIS:

Most Online Forex firms offer free 'Demo' accounts to practice trading, along with Forex breaking news and charting services. These are very valuable resources for traders who would like to hone their trading skills with 'virtual' money before opening a live trading account.

6. 'MINI' TRADING:

One might think that getting started as a currency trader would cost a lot of money. The fact is, it doesn't. Online Forex Firms now offer 'mini' trading accounts with a minimum account deposit of only $200-$500 with no commission trading. This makes Forex much more accessible to the average individual, without large, start-up capital.

Forex Trade Basics Detail

Forex Basics :-o

The following is an introduction to some basic terms, definitions and concepts used in forex trading. It is designed to be read in chronological order, starting with the most simplest terms and moving through to some more advanced terms used in the forex market.

Foreign Exchange Market :-o

The Foreign exchange market is a large, growing and liquid financial market that operates 24 hours a day. It is not a market in the traditional sense because there is no central trading location or “exchange". Most of the trading is conducted by telephone or through electronic trading networks. The primary market for currencies is the “interbank market” where banks, insurance companies, large corporations and other large financial institutions manage the risks associated with fluctuations in currency rates.

Spot Market :-o

The market for buying and selling currencies at the current market rate.

Rollover :-o

A spot transaction is generally due for settlement within two business days (the value date). The cost of rolling over a transaction is based on the interest rate differential between the two currencies in a transaction. If you are long (bought) the currency with a higher rate of interest you will earn interest. If you are short (sold) the currency with a higher rate of interest you will pay interest. Most brokers will automatically roll over your open positions allowing you to hold your position indefinitely.

Exchange Rate :-o

The value of one currency expressed in terms of another. For example, if EUR/USD is 1.3200, 1 Euro is worth US$1.3200.

Currency Pair :-o

The two currencies that make up an exchange rate. When one is bought, the other is sold, and vice versa.

Base Currency :-o

The first currency in the pair. Also the currency your account is denominated in.

Counter Currency :-o

The second currency in the pair. Also known as the terms currency.

ISO Currency Codes :-o

USD = US Dollar
EUR = Euro
JPY = Japanese Yen
GBP = British Pound
CHF = Swiss Franc
CAD = Canadian Dollar
AUD = Australian Dollar
NZD = New Zealand Dollar

Currency Pair Terminology :-o

EUR/USD = "Euro"
USD/JPY = "Dollar Yen"
GBP/USD = "Cable" or "Sterling"
USD/CHF = "Swissy"
USD/CAD = "Dollar Canada" (CAD referred to as the "Loonie")
AUD/USD = "Aussie Dollar"
NZD/USD = "Kiwi"

FCM :-o

Futures Commission Merchant. An individual or organisation licensed by the U.S. Commodities Futures Trading Commission (CFTC) to deal in futures products and accept monies from clients to trade them.

Dealing Desk :-o

A dealing desk provides pricing, liquidity and execution of trades.

Market Maker :-o

A market maker provides pricing and liquidity for a particular currency pair and stands ready to buy or sell that currency at the quoted price. A market maker takes the opposite side of your trade and has the option of either holding that position or partially or fully offsetting it with other market participants, managing their aggregate exposure to their clients. If a market maker chooses to keep the trader's position without offsetting it in the market, the trader's profit is the market maker's loss and vice versa, leading to a possible conflict of interest between the trader and his market maker. A market maker earns their commission from the spread between the bid and offer price.

NDD :-o

An acronym for 'No Dealing Desk'. A no-dealing desk broker does not have a dealing desk but instead uses external liquidity providers to provide pricing and liquidity for its clients. The liquidity providers send in competing bids and offers into the platform, resulting in the best bid and offer being displayed to the client. Some no-dealing desk brokers may display the market depth which is the amount of liquidity available at each price. A greater number of liquidity providers providing pricing to the no-dealing desk broker leads to tighter spreads. A no-dealing desk broker may increase the spread to earn its commission.

Forex ECN Broker :-o

ECN is an acronym for Electronic Communications Network. A Forex ECN broker does not have a dealing desk but instead provides a marketplace where multiple market makers, banks and traders can enter in competing bids and offers into the platform and have their trades filled by multiple liquidity providers in an anonymous trading environment. The trades are done in the name of your ECN broker, thereby providing you with complete anonymity. A trader might have their buy order filled by liquidity provider "A", and close the same order against liquidity provider "B", or have their trade matched internally by the bid or offer of another trader. The best bid and offer is displayed to the trader along with the market depth which is the combined volume available at each price. A greater number of marketplace participants providing pricing to the ECN broker leads to tighter spreads. ECN's typically charge a small fee for matching trades between their clients and liquidity providers.

Counterparty :-o

One of the participants in a transaction.

Sell Quote / Bid Price :-o

The sell quote is displayed on the left and is the price at which you can sell the base currency. It is also referred to as the market maker's bid price. For example, if the EUR/USD quotes 1.3200/03, you can sell 1 Euro at the bid price of US$1.3200.

Buy Quote / Offer Price :-o

The buy quote is displayed on the right and is the price at which you can buy the base currency. It is also referred to as the market maker's ask or offer price. For example, if the EUR/USD quotes 1.3200/03, you can buy 1 Euro at the offer price of US$1.3203.

Spread :-o

The difference between the sell quote and the buy quote or the bid and offer price. For example, if EUR/USD quotes read 1.3200/03, the spread is the difference between 1.3200 and 1.3203, or 3 pips. In order to break even on a trade, a position must move in the direction of the trade by an amount equal to the spread.

Pip :-o

The smallest price increment a currency can make. Also known as points. For example, 1 pip = 0.0001 for EUR/USD, or 0.01 for USD/JPY.

Pip Value :-o

The value of a pip. Pip value can be either fixed or variable depending on the currency pair. e.g. The pip value for EUR/USD is always $10 for standard lots, $1 for mini-lots and $0.10 for micro lots.

• How to Calculate Pip Values
• Pip Value Calculator

Lot :-o

The standard unit size of a transaction. Typically, one standard lot is equal to 100,000 units of the base currency, 10,000 units if it's a mini, or 1,000 units if it's a micro. Some dealers offer the ability to trade in any unit size, down to as little as 1 unit.

Standard Account :-o

Trading with standard lot sizes, generally 100,000 units of the base currency. e.g. The pip value is $10 for EUR/USD.

Mini Account :-o

Trading with mini lot sizes, generally 10,000 units of the base currency. e.g. The pip value is $1 for EUR/USD.

Micro Account :-o

Trading with micro lot sizes, generally 1,000 units of the base currency. e.g. The pip value is $0.10 for EUR/USD.

Margin :-o

The deposit required to open or maintain a position. Margin can be either "free" or "used". Used margin is that amount which is being used to maintain an open position, whereas free margin is the amount available to open new positions. With a $1,000 margin balance in your account and a 1% margin requirement to open a position, you can buy or sell a position worth up to a notional $100,000. This allows a trader to leverage his account by up to 100 times or a leverage ratio of 100:1. If a trader's account falls below the minimum amount required to maintain an open position, he will receive a "margin call" requiring him to either add more money into his or her account or to close the open position. Most brokers will automatically close a trade when the margin balance falls below the amount required to keep it open. The amount required to maintain an open position is dependent on the broker and could be 50% of the original margin required to open the trade.

Leverage :-o

Leverage is the ability to gear your account into a position greater than your total account margin. For instance, if a trader has $1,000 of margin in his account and he opens a $100,000 position, he leverages his account by 100 times, or 100:1. If he opens a $200,000 position with $1,000 of margin in his account, his leverage is 200 times, or 200:1. Increasing your leverage magnifies both gains and losses.

To calculate the leverage used, divide the total value of your open positions by the total margin balance in your account. For example, if you have $10,000 of margin in your account and you open one standard lot of USD/JPY (100,000 units of the base currency) for $100,000, your leverage ratio is 10:1 ($100,000 / $10,000). If you open one standard lot of EUR/USD for $150,000 (100,000 x EURUSD 1.5000) your leverage ratio is 15:1 ($150,000 / $10,000).

Manual Execution :-o

An order which is executed by dealer intervention.

Automatic Execution :-o

The order is executed automatically without dealer intervention or involvement.

Slippage :-o

The difference between the order price and the executed price, measured in pips. Slippage often occurs in fast moving and volatile markets, or where there is manual execution of trades.

Drawdown :-o

The decline in account balance from peak to valley, until the account surpasses the previous high, usually measured in percentage terms.

Support :-o

Support is a technical price level where buyers outweigh sellers, causing prices to bounce off a temporary price floor.

Resistance :-o

Resistance is a technical price level where sellers outweigh buyers, causing prices to bounce off a temporary price ceiling.

Common Order Types :-o

Market Order :-o

An order to buy or sell at the current market price.

Limit Order :-o

An order to buy or sell at a pre-specified price level.

Stop-Loss Order :-o

An order to restrict losses at a pre-specified price level.

Limit Entry Order :-o

An order to buy below the market or sell above the market at a pre-specified level, believing that the price will reverse direction from that point.

Stop-Entry Order :-o

An order to buy above the market or sell below the market at a pre-specified level, believing that the price will continue in the same direction.

OCO Order :-o

One Cancels Other. An order whereby if one is executed, the other is cancelled.

GTC Order :-o

Good Till Cancelled. An order stays in the market until it is either filled or cancelled.

Common Trade Types :-o

Long Position :-o

A position in which the trader attempts to profit from an increase in price. i.e. Buy low, sell high.

Short Position :-o

A position in which the trader attempts to profit from a decrease in price. i.e. Sell high, buy low.

Common Trading Styles :-o

Technical Analysis :-o

A style of trading that involves analysing price charts for technical patterns of behaviour.

• Technical Analysis Books

Fundamental Analysis :-o

A style of trading that involves analysing the macroeconomic factors of an economy underpinning the value of a currency and placing trades that support the trader's long or short-term outlook.

Trend Trading :-o

A style of trading that attempts to profit from riding short, medium or long term trends in price.

• Forex Trend Trading System

Range Trading :-o

A style of trading that attempts to profit from buying and selling currencies between a lower level of support and an upper level of resistance. The upper level of resistance and the lower level of support defines the range. The range forms a price channel where the price can be seen to oscillate between the two levels of support and resistance.

• Article: Identifying Trending & Range Bound Currencies

News Trading :-o

A style of trading whereby a trader attempts to profit from fundamental news announcements on a country's economy that may affect the value of a currency, usually seeking short term profit immediately after the announcement is released.

Scalping :-o

A style of trading that involves frequent trading seeking small gains over a very short period of time. Trades can last from seconds to minutes.

Day Trading :-o

A style of trading that involves multiple trades on an intra-day basis. Trades can last from minutes to hours.

• Forex Day Trading Systems

Swing Trading :-o

A style of trading that involves seeking to profit from short to medium term swings in trend. Trades can last from hours to days.

Carry Trading :-o

A style of trading whereby the trader attempts to profit from holding a currency with a higher rate of interest and selling a currency with a lower rate of interest, profiting from the daily interest rate differential of the position.

Position Trading :-o

A style of trading that involves taking a longer term position that reflects a longer term outlook. Trades can last from weeks to months.

Discretionary Trading :-o

A style of trading that uses human judgement and decision making in every trade.

• Managed Discretionary Accounts

Automated Trading :-o

A style of trading that involves neither human decision making nor involvement, but uses a pre-programmed strategy based on technical or fundamental analysis to automatically execute trades via an automated software programme.

Example Trade :-o

Assume you have a trading account at a broker that requires a 1% margin deposit for every trade. The current quote for EUR/USD is 1.3225/28 and you want to place a market order to buy 1 standard lot of 100,000 Euros at 1.3228, for a total value of US$132,280 (100,000 * $1.3228). The broker requires you to deposit 1% of the total, or $1322.80 to open the trade. At the same time you place a take-profit order at 1.3278, 50 pips above your order price. In taking this trade you expect the Euro to strengthen against the U.S. dollar.

As you expected, the Euro strengthens against the U.S. dollar and you take your profit at 1.3278, closing out the trade. As each pip is worth US$10, your total profit for this trade is $500, for a total return of 38%.

Forex Trade History

The origin of FOREX trading traces its history to centuries ago. Different currencies and the need to exchange them had existed since the Babylonians. They are credited with the first use of paper notes and receipts. Speculation hardly ever happened, and certainly the enormous speculative activity in the market today would have been frowned upon.

In those days, the value of goods were expressed in terms of other goods(also called as the Barter System). The obvious limitations of such a system encouraged establishing more generally accepted mediums of exchange. It was important that a common base of value could be established. In some economies, items such as teeth, feathers even stones served this purpose, but soon various metals, in particular gold and silver, established themselves as an accepted means of payment as well as a reliable storage of value. Trade was carried among people of Africa, Asia etc through this system.

Coins were initially minted from the preferred metal and in stable political regimes, the introduction of a paper form of governmental I.O.U. during the Middle Ages also gained acceptance. This type of I.O.U. was introduced more successfully through force than through persuasion and is now the basis of today’s modern currencies.

Before the First World war, most Central banks supported their currencies with convertibility to gold. However, the gold exchange standard had its weaknesses of boom-bust patterns. As an economy strengthened, it would import a great deal from out of the country until it ran down its gold reserves required to support its money; as a result, the money supply would diminish, interest rates escalate and economic activity slowed to the point of recession. Ultimately, prices of commodities had hit bottom, appearing attractive to other nations, who would sprint into buying fury that injected the economy with gold until it increased its money supply, drive down interest rates and restore wealth into the economy.. However, for this type of gold exchange, there was not necessarily a Centrals bank need for full coverage of the government's currency reserves. This did not occur very often, however when a group mindset fostered this disastrous notion of converting back to gold in mass, panic resulted in so-called "Run on banks " The combination of a greater supply of paper money without the gold to cover led to devastating inflation and resulting political instability. The Great Depression and the removal of the gold standard in 1931 created a serious lull in FOREX market activity. From 1931 until 1973, the FOREX market went through a series of changes. These changes greatly affected the global economies at the time and speculation in the FOREX markets during these times was little.

In order to protect local national interests, increased foreign exchange controls were introduced to prevent market forces from punishing monetary irresponsibility.

Near the end of World War II, the Bretton Woods agreement was reached on the initiative of the USA in July 1944. The conference held in Bretton Woods, New Hampshire rejected John Maynard Keynes suggestion for a new world reserve currency in favor of a system built on the US Dollar. International institutions such as the IMF, The World Bank and GATT were created in the same period as the emerging victors of WWII searched for a way to avoid the destabilizing monetary crises leading to the war. The Bretton Woods agreement resulted in a system of fixed exchange rates that reinstated The Gold Standard partly, fixing the USD at $35.00 per ounce of Gold and fixing the other main currencies to the dollar, initially intended to be on a permanent basis.

The Bretton Woods system came under increasing pressure as national economies moved in different directions during the 1960’s. A number of realignments held the system alive for a long time but eventually Bretton Woods collapsed in the early 1970’s following president Nixon's suspension of the gold convertibility in August 1971. The dollar was not any longer suited as the sole international currency at a time when it was under severe pressure from increasing US budget and trade deficits.

The last few decades have seen foreign exchange trading develop into the world’s largest global market. Restrictions on capital flows have been removed in most countries, leaving the market forces free to adjust foreign exchange rates according to their perceived values.

The European Economic Community introduced a new system of fixed exchange rates in 1979, the European Monetary System. The quest continued in Europe for currency stability with the 1991 signing of The Maastricht treaty. This was to not only fix exchange rates but also actually replace many of them with the Euro in 2002. London was, and remains the principal offshore market. In the 1980s, it became the key center in the Eurodollar market when British banks began lending dollars as an alternative to pounds in order to maintain their leading position in global finance.

In Asia, the lack of sustainability of fixed foreign exchange rates has gained new relevance with the events in South East Asia in the latter part of 1997, where currency after currency was devalued against the US dollar, leaving other fixed exchange rates in particular in South America also looking very vulnerable.

While commercial companies have had to face a much more volatile currency environment in recent years, investors and financial institutions have discovered a new playground. The FOREX exchange market initially worked under the central banks and the governmental institutions but later on it accommodated the various institutions, at present it also includes the dot com booms and the world wide web. The size of the FOREX market now dwarfs any other investment market. The foreign exchange market is the largest financial market in the world. Approximately 1.9 trillion dollars are traded daily in the foreign exchange market. It is estimated that more than USD 1,200 Billion are traded every day. It can be said easily that FOREX market is a lucrative opportunity for the modern day savvy investor.

Forex Trade Introductions

Forex Exchange :-o

This short introduction explains the basics of trading Forex online, a brief explanation of the markets and the major benefits of trading Forex online. There are also two scenarios describing the implications of trading in a bear as well as a bull market to better acquaint you with some of the risks and opportunities of the largest and most liquid market in the world.

As an additional aid for those who are new to Forex, there is also a glossary at the bottom of this text which explains some of the terms used in connection with currency trading.

Overview :-o

Foreign exchange, Forex or just FX are all terms used to describe the trading of the world's many currencies. The Forex market is the largest market in the world, with trades amounting to more than USD 3 trillion every day. Most Forex trading is speculative, with only a low percentage of market activity representing governments' and companies' fundamental currency conversion needs.

Unlike trading on the stock market, the Forex market is not conducted by a central exchange, but on the “interbank” market, which is thought of as an OTC (over the counter) market. Trading takes place directly between the two counterparts necessary to make a trade, whether over the telephone or on electronic networks all over the world. The main centres for trading are Sydney, Tokyo, London, Frankfurt and New York. This worldwide distribution of trading centres means that the Forex market is a 24-hour market.

Trading Forex :-o

A currency trade is the simultaneous buying of one currency and selling of another one. The currency combination used in the trade is called a cross (for example, the euro/US dollar, or the GB pound/Japanese yen.). The most commonly traded currencies are the so-called “majors” – EURUSD, USDJPY, USDCHF and GBPUSD.

The most important Forex market is the spot market as it has the largest volume. The market is called the spot market because trades are settled immediately, or “on the spot”. In practice this means two banking days.

Forward Outrights :-o

For forward outrights, settlement on the value date selected in the trade means that even though the trade itself is carried out immediately, there is a small interest rate calculation left. The interest rate differential doesn't usually affect trade considerations unless you plan on holding a position with a large differential for a long period of time. The interest rate differential varies according to the cross you are trading. On the USDCHF, for example, the interest rate differential is quite small, whereas the differential on NOKJPY is large. This is because if you trade e.g. NOKJPY, you get almost 7% (annual) interest in Norway and close to 0% in Japan. So, if you borrow money in Japan, to finance the trade and buying NOK, you have a positive interest rate differential. This differential has to be calculated and added to your account. You can have both a positive and a negative interest rate differential, so it may work for or against you when you make a trade.

Trading on Margin :-o

Trading on margin means that you can buy and sell assets that represent more value than the capital in your account. Forex trading is usually conducted with relatively small margin deposits. This is useful since it permits investors to exploit currency exchange rate fluctuations which tend to be very small. A margin of 1.0% means you can trade up to USD 1,000,000 even though you only have USD 10,000 in your account. A margin of 1% corresponds to a 100:1 leverage (or “gearing”). (Because USD 10,000 is 1% of USD 1,000,000.) Using this much leverage enables you to make profits very quickly, but there is also a greater risk of incurring large losses and even being completely wiped out. Therefore, it is inadvisable to maximise your leveraging as the risks can be very high. For more information on the trading conditions of Saxo Bank, go to the Account Summary on your SaxoTrader and open the section entitled “Trading Conditions” found in the top right-hand corner of the Account Summary.

Why Trade Forex?

• 24 hour trading :-o

  One of the major advantages of trading Forex is the opportunity to trade 24 hours a day from Sunday evening (20:00 GMT) to Friday evening (22:00 GMT). This gives you a unique opportunity to react instantly to breaking news that is affecting the markets.

• Superior liquidity :-o

  The Forex market is so liquid that there are always buyers and sellers to trade with. The liquidity of this market, especially that of the major currencies, helps ensure price stability and narrow spreads. The liquidity comes mainly from banks that provide liquidity to investors, companies, institutions and other currency market players.

• No commissions :-o

  The fact that Forex is often traded without commissions makes it very attractive as an investment opportunity for investors who want to deal on a frequent basis.
  Trading the “majors” is also cheaper than trading other cross because of the high level of liquidity. For more information on the trading conditions of Saxo Bank, go to the Account Summary on your SaxoTrader and open the section entitled “Trading Conditions” found in the top right-hand corner of the Account Summary.

• 100:1 Leverage :-o

  Leverage (gearing) enables you to hold a position worth up to 100 times more than your margin deposit. For example, a USD 10,000 deposit can command positions of up to USD 1,000,000 through leverage. You can leverage the first USD 25,000 of your investment up to 100 times and additional collateral up to 50 times.

• Profit potential in falling markets :-o

  Since the market is constantly moving, there are always trading opportunities, whether a currency is strengthening or weakening in relation to another currency. When you trade currencies, they literally work against each other. If the EURUSD declines, for example, it is because the US dollar gets stronger against the euro and vice versa. So, if you think the EURUSD will decline (that is, that the euro will weaken versus the dollar), you would sell EUR now and then later you buy euro back at a lower price. In case that the EURUSD indeed declines, then you can take your profit. The opposite trading scenario would occur if the EURUSD appreciates.

Important Forex Trading Terms :-o

• Spread :-o

  The spread is the difference between the price that you can sell currency at (Bid) and the price you can buy currency at (Ask). The spread on majors is usually 3 pips under normal market conditions. For more information on the trading conditions at Saxo Bank, go to the Account Summary on your Client Station and open the section entitled “Trading Conditions” found in the top right-hand corner of the Account Summary.

• Pips :-o

  A pip is the smallest unit by which a cross price quote changes. When trading Forex you will often hear that there is a 3-pip spread when you trade the majors. This spread is revealed when you compare the bid and the ask price, for example EURUSD is quoted at a bid price of 0.9875 and an ask price of 0.9878. The difference is USD 0.0003, which is equal to 3 “pips”.
  
  On a contract or position, the value of a pip can easily be calculated. You know that the EURUSD is quoted with four decimals, so all you have to do is cancel out the four zeros on the amount you trade and you will have the value of one pip. Thus, on a EURUSD 100,000 contract, one pip is USD 10. On a USDJPY 100,000 contract, one pip is equal to 1000 yen, because USDJPY is quoted with only two decimals.