FOREX TRADING 102: Learning the Forex Trading Strategies
If you’re a potential investment player who’d like to make it big in the business and financial world, then you go for Forex trading.
The FOREX, also known as the foreign exchange market is one of the largest financial markets in the world with and estimate of $5 trillion turn-overs every day.
Here are a few strategies on how to make it big in the Forex market.
Strategy One: Know your market. The best way to get advantage, earn profit and minimize losses is to familiarize yourself with the market and how the whole system works.
In the Forex market, the players are usually commercial banks, central banks and firms involved in foreign trade, investment funds, broker companies and other private individuals with large capital.
With the speed and high liquidity of asset, most companies engage in this business than in any other trading venture.
Transactions are done in a jiffy; there are no membership fees and there is always the allure and promise of big, big profit.
Trading is done in pairs. The most commonly traded currencies are usually the US Dollar, Japanese Yen, Euro, British Pound, Canadian Dollar, Australian Dollar and the Swiss Franc.
The more commonly traded currency pairs are the US Dollar and the Japanese Yen, the Euro and the US Dollar, the Swiss Franc and the US Dollar.
In Forex trading, everything is speculative and virtual.
There is no actual product being sold or bought. The activity mostly consists of computed entries made on the value of one currency against another.
Say for example, you can buy Euros with US Dollar, hoping that the Euro will increase it value. Once its value rises, you can sell the Euro again, thus earning you profit.
Strategy Two: Learn the language. There are three concepts you need to know in the currency market.
Pips refer to the increase of one hundredth of a percent of the value of the currency pair you are trading. Usually each pip has a value of $10 or $1.
Volume is the quantity or amount of money being traded at one particular time in the market.
Buying is the acquisition of a particular currency. A trader buys with the hopes that the price of the currency will increase.
Selling is putting a currency up for grabs in the market because of a potential or possibility of a decrease in its value.
There are also two techniques of analysis usually used in this business – the fundamental and the technical analysis.
Technical analysis is usually used by small and medium players. Here, the primary point of analysis revolves on the price.
Fundamental analysis, on the other hand, is used by bigger companies and players with higher capital as it involves looking at the other factors affecting the value of a particular currency.
In this type of analysis, the player also looks at the situation of the country, particularly issues like political stability, inflation rate, unemployment rate, and tax policies as these are seen to have an effect on the currency’s value.
Strategy Three: Develop a sound trading strategy. Your trading strategy would depend on what kind of trader you are.
The basic thing with developing a trading strategy is to identify what kind of Forex trader you are. A good trading strategy should lessen, if not, eliminate losses.
Plan also the size of your transactions. It is better to conduct many different trades than one huge transaction.
Not only does it develop discipline, but it also lessens any possible loss as only a fraction of the capital is affected.
Part of a trading strategy is developing the values of discipline and proper money management.
Strategy Four: Practice. Try paper trading, a great way to practice your skills, see how the market works and get acquainted with the software and tools being used.
There are online brokers who allow free paper trades, which allows practice and experience before doing it with real money.
Strategy Five: Choose the right Forex dealer. Make sure that they are regulated by the law.
Take not of dealers with investment schemes that give out too-good-to-be-true-just-false-hopes promises. Look at investment offers before getting started.
Forex trading may seem easy and manageable. But the emotional stress, the demands and challenges of being a Forex trader requires more than just the knowledge of the market.
It requires more than just a keen and sensible head for business. It’s all about a game-plan, a strategy.
Major Components of Forex Trading Strategy
Before, the Forex market was limited only to long-term investors, banks and people who have greater capitals.
The trading occurs via an agent or voice broker who will inform clients on what is going on. Later on, it was been replaced by a computerized automated systems.
This was the early form of Forex trading strategy.
The trader which is either home-based or office-based or retail investor can possibly trade on real time with different banks with an aid of a broker.
The broker then uses the computerized platforms of trading. It contains traders on live desks which places the trades on the broker’s books or on real investors.
However, when the trade was placed in the broker’s book, 95% of the money will be lost by the traders. So the brokers take this as an advantage on them.
Forex trading strategy comprises two major components. The first component is technical analysis. The technical area is based from the charts.
It uses a mathematical formula to observe the market movements. The traders learn about announcements and news on economics which influences Forex markets.
Its fundamental side is helpful in proper identification of the do’s and don’ts.
Technical analysis uses chart indicators. It is helpful in determining the areas of resistance and support. The situation where the price reverses, stop or get stuck are revealed.
The method that is very accurate and popular in calculations of the levels of resistance and support is the Fibonacci.
Seven hundred fifty years ago, Fibonacci discovered a sequential number form.
Its proportions are also found in nature such as sunflower seeds, and pineapple rinds.
This method is commonly learned in mathematics during your high school days, called as Fibonacci sequence. It says about finding the next number given within a series of numbers.
If Fibonacci numbers are put adjacent to each other, the percentage ratios are obtained. It can then be plotted on the chart. However, you don’t need to become a math wizard just to do this.
The charting Forex software is able to do the Fibonacci sequence for you. The key areas of resistance and support are potentially revealed to you as you move along the charts.
The Fibonacci sequence combined with proper indicators can show the strength and momentum of the latest market condition.
It will help you create a strategy that will be most profitable to you just by basing on this mathematical rule.
The rules clearly states that history can really be repeated, as what has happened before in the Forex market can still happen in the future.
The second component is the fundamental analysis. Each day, there are figures being disseminated to reveal some economic circumstances of a particular country. ‘
Take for example, non-farm payrolls that can possibly bring unpredictable effect on the Forex markets. The impacts will depend on the previous data and the figures implications.
The most important rule for beginners even for veterans is to keep away from the market when important announcements take place.
Forex trading profits are being made almost similar to a traditional business. The procedure is very simple. You are going to buy something at a lower price then sell it at higher prices.
The only difference is that in Forex trading this can be reversible.
The process is very easy. A trade is being placed either in the sell or buy categories. Then the base currency will automatically buy or sell its opposite currency in pairs.
The price will likely change every second. Take for instance; you purchased the GBP/USD pair. It literally means that you have purchased the pound currency and sold the dollar currency.
You want a rise on the pound’s value which will later on have a higher price when you resell it in the Forex market. That would make a profit on the value difference.
If the brokers allow you to have 200:1 capital leverage, then you can possibly control a lot of money than what you really have. It is because you have bought one currency and sold the other.
So, your capital can stay unmoved. The only crucial part which should be considered are the proportions which can be either gained or lost whenever changes in currency pair values occurs.
Other than that, the basic Forex trading strategies are great.
The Different Forex Trading Strategy to Help You Make More Money and Minimize Risks
People need to make money in order to live a comfortable life. They need it in order to pay for the utility bills, pay for food, for education and other things that are necessary in life.
This is why people tend to do anything to make money.
Some people work in a company, some people prefer putting up their own business and some people trade in the financial market as a career.
One such financial market that you can really make money from is the Forex market.
The Forex market is the largest and the most liquid market in the world with trades open for 24 hours a day and exchanges that amounts to trillions of dollars each trading day.
In order for you to be successful in this market, you need to know the basics about the Forex market. You need to be able to know how to trade, when to trade and what to trade.
You will also need to know the different trading strategies in the largest financial market in the world which is the Forex.
Knowing about the different trading strategies in Forex will allow you to minimize the risk of losing money and increase your chances of making huge profits.
First of all, it is important that you should remember that the Forex market can give you the chance to earn a lot of money.
It is a known fact that people who have traded in this very liquid market have made millions of dollars almost overnight.
You also have to know that the Forex market is also a very risky market to be in.
It is also a known fact that many traders in this market have experienced losing a lot of money even to the brink of bankruptcy or beyond.
This is why you should know the different strategies that are necessary in the Forex market.
Without these strategies, you will be like a blind man crossing a busy intersection with no one to guide you.
First, you need to realize that Forex trading strategies are very different from the strategies used in stock trading.
If you know about the different trading strategy in Forex, then you will really earn a lot of money from this very large financial market.
One of the most useful strategies that you can apply in the Forex market is called leverage.
This is one of the most common strategies that you can use in the Forex market and most Forex traders are familiar with the leverage strategy and many have made large profits from this strategy.
If you already have a funded Forex account, you can use the leverage strategy to help you trade more effectively in the Forex market.
Leverage strategy works by giving you 100 times the amount of money that you can trade in your deposited account. Therefore, if you do win, your income will also increase 100 times.
This will allow better results in your trades.
Another strategy that is commonly used in the Forex market is called the stop loss order. This strategy is used to protect you from potentially losing a lot of money.
This works by letting you choose a predetermined point in the trade where you will not trade. Therefore, it will eventually minimize the risks.
However, if the movement of the currency is not like what you actually predicted, you will end up losing potential money making opportunity with this kind of trade.
Automatic entry order is another Forex trading strategy that you can use when you trade in the Forex market.
This will allow you to enter the Forex market automatically when the price of a particular currency is right for you.
The price is predetermined and once it reaches that predetermined price, you will be automatically entered into the trades.
These strategies will help you trade in the Forex market more effectively. It will eventually help you minimize the risk and maximize your income earning potential.
However, you should always remember that you should know when you should use these strategies.
It is also important that you should remember that there is always the risk of losing money when trading in Forex. These strategies will not necessarily eliminate the risk but will minimize it.
Forex Trading System: Knowing How to Trade in Forex
Do you want a very good career that has a potential to make you earn a lot of money? Do you want to enter a particular financial market but don’t know which one to choose?
If you answered yes to either of these questions, then the Forex market is right for you. If you want to make a lot of money, the Forex market can provide that for you.
You have to realize that the Forex market is the largest and the most liquid financial institution in the world.
With trades that go on for 24 hours a day, you will have an opportunity to make money any time of day you wish to.
It is also a fact that the Forex market generates currency exchanges that amounts up to trillions of dollars each day.
With these kinds of features, who wouldn’t want to trade in this very large financial market?
Forex trading is not as complicated as it may sound. With the right knowledge and skills, you can instantly trade Forex for a minimum of 500 dollars in a mini-Forex account.
The Forex trading system is very simple.
Basically, Forex is the exchange of currencies of the world. You should realize that all the currency of the world is involved in the Forex market.
It may be confusing to choose which one to trade but all you need is to know the major currencies that are frequently traded. Here are the major currencies that you can choose from to trade:
• US Dollar (USD)
• Japanese Yen (JPY)
• British Pound (GBP)
• Swiss Franc (CHF)
• European Union Euro (EUR)
• Australian Dollar (AUD)
• New Zealand Dollar (NZD)
• Canadian Dollar (CAD)
These are the major currencies that you should consider trading. With these trades, you can be sure that you can maximize your money making potential.
The basic thing that you need to know when trading in the Forex market is that you should buy low and sell high.
And, since you will be trading with different countries currency, the economy and the government stability of a particular country can literally affect the value of the particular currency.
The next thing you need to know is that Forex trades are done by trading currency pairs. Currency pairs are the simultaneous buying one currency and selling the currency of another.
So, basically, Forex is in fact trading.
Aside from knowing how to trade currencies of the world or at least the major currencies, you also have to know about the different strategies used when trading in the Forex market.
An example of a Forex trading strategy that is used in this market is the leverage strategy. This will enable you to trade 100 times the amount of money you deposited in your Forex account.
This means that you can earn a potential of 100 times more. With this kind of strategy, you can really maximize your income opportunity.
You should also consider the stop loss order strategy. This strategy minimizes the risk of losing money. The stop loss order works when you choose to stop trading at a specific price.
If the currency reaches that point, you will automatically stop trading.
There are other strategies that you can use in the Forex market that you should be aware of.
If you want to be successful in the Forex market, you also have to realize and accept the fact that you will lose money in the first few months when you trade in Forex.
This is why it is also important to remember that you should invest what you can afford to lose in the Forex market.
If you can’t afford to lose the money you plan on investing in the Forex market, then it is recommended that you should never trade in this very large and very risky market.
Now that you know how to trade in the Forex market, all you need to do now is decide whether you really want to trade in this trillion dollar industry.
If you do decide that you want to trade, then all you have to do is open an account with Forex brokerage companies and start using their Forex trading software to trade.
Choosing Among Online Forex Trading Systems
Forex is not really new in the financial market. In fact, it is not only known by big players in the world, but also by small organizations and individuals lately.
Forex is no longer ruled by the big players; people from all walks of life can actually do Forex trading.
Before plunging in trading, you must know certain terms that are used in the market. One important term is the Forex trading system. What it is all about, and what is its use.
The birth of the internet has changed the face of Forex trading. Because of this very valuable tool, the FX market is easier to access, making it more convenient to small players.
And all most importantly, all of this happens in real time, which is why online traders can actually make quick decisions regarding their trade.
Forex trading system is ergonomic and intuitive. All the necessary functions involved in Forex trading can be done from your main screen. You can place a trade and leave an order.
And not only that, you can also conduct margin analysis and position/order management.
There are many companies, located in different countries, which can provide you with a Forex trading system. The very first thing that a system usually involves is investment of money.
Some companies would require you to invest as low as five dollars while some can ask for as high as five hundred dollars for upfront payments.
Forex systems greatly vary, and it depends largely on the company offering such service.
With the system, you can purchase companies, stocks, and make investments even in other places.
You can enhance your wealth and personal preferences by investing in a Forex trading system. By investing a certain amount of money, you can make even more money in the future.
The Forex trading system that many traders know about is built among leading companies, investors, and worldwide currencies.
The trading system can be offline or online. You are free to choose which system will work best for you.
However, online trading systems are gaining more and more popularity because you have easy access to the money that you’ve invested.
Offline trading systems usually involves a lot of paperwork; while with an online system, you can instantly invest, trade, move, and remove money faster.
All it takes is for you to learn about the investment, and how to trust the right brokers in case you may need to make additional decisions in the future.
You must be involved with a company which you can communicate with any time during a business day.
That particular company should be able to provide you with a telephone number, fax number, and email address. Steer clear from companies which do not disclose such information.
Without the right trading system, you can’t trade effectively. Therefore you must choose a system which is suited for you as an individual.
You must consider the trading style and the risk that it involves. A system which focuses more in risk and money management techniques is a good one.
Look for a company who has been in business for many years and those with proven professional experience.
It must also provide you with tools and strategies that will help you in developing your very own online trading system.
If you select the right company, you can find one that is of best value for your money.
Choosing a good, and probably the best, Forex trading system is one of the first things that you should learn in Forex.
There are three factors usually considered in choosing a Forex trading system, namely: profitability, acceptability, and one that fits your daily routine.
Profitability is probably the most important consideration. People invest money to make profits, and a good system should provide that. It is shown in dollar amounts or pips/month.
Every system has a drawdown, and it is also expressed in pips. It is the biggest decrease in equity in the past.
In comparing different systems, you should take a close look on its historical drawdown.
Also check for the systems profit and loss ratio, as well as its win and loss ratio.
The system should have consistency and you can effectively tell this by looking into their monthly or quarterly, and yearly results.
Once you’ve chosen a system, learn all about it, and you can expect to gain a lot from your investment.
Creating Profitable Forex Trading Systems in Five Easy Steps
One rule of thumb that every aspiring entrepreneur should remember is that to make huge profits, you should know how to do it by yourself—and not rely on other’s efforts.
Being independent from other people will help you determine what things are best for your business.
Such rule applies on all types of investments, including foreign currency trading, or mostly known as Forex trading.
It cannot be denied that Forex is the largest existing market around the world, which is estimated to have an excess of 5 trillion U.S. dollars worth of foreign currencies are traded each day.
It is larger than the magnitude of the New York Stock Exchange, which is approximately 100 billion U.S. dollars. Thus, Forex market exceeds all combined equity markets around the world.
With such huge wealth circulating around the Forex market, one of your financial goals is to grab a major slice of that $5 trillion average daily turnover in the market.
How you will be able to get a substantial portion of that average turnover if you do not know how you will handle your Forex business?
Although you cannot live in the market alone (you need business partners and/or financial advisers to help you along), only you can determine what the best Forex business there is for you.
To get huge profits out of your Forex trading career, you need to build your own profitable system—a trading system that will bring you not just hundreds but thousands of dollars worth of Forex revenues.
Such trading system is available on the market, but as previously mentioned, you need to be independent—and you need to have your own Forex trading system that will help you achieve your financial goals.
For new traders, it is difficult to device their own trading system since they do not have too much knowledge about the Forex market.
However, even a neophyte trader can device a trading system that will fit on his personal preference and needs—in just five easy steps!
Before we discuss the five easy steps towards a profitable Forex trading system, you need to learn first the three main characteristics of a successful Forex trading system.
These are as follows:
1. A successful Forex trading system is simple. There is no need for a complicated trading system with too many rules. It is a proven truth that simple systems work better than complicated ones, and they have higher chances of success despite of the “brutal” characteristic of Forex trading.
2. A successful Forex trading system cuts losses and runs profits. Keep in mind that you need a trading system that gets the huge possible profits and eliminates losses quickly, if not instantly.
3. A successful Forex trading system follows long-term trends. You will never cover your losses if you are just generating small profits. Keep in mind that the Forex market is worth $2 trillion U.S. dollars, thus there is no point in trading in exchange for just small profits if you have the opportunity to make trades for larger revenues. Focus on long-term trends and you will be able to see better results.
Now, here are the five easy steps in building a profitable Forex trading system:
1. As previously mentioned, your trading system must be as simple as possible. Integrate few yet essential rules and an extensive investment management system.
2. Always look for long-term trends (preferably on a weekly basis), then shift to daily charts and to time entry. This will help you analyze market trends efficiently.
3. The ideal way of trading foreign currencies is through breakout method.
4. Always watch for any break that you will note on your chart, which is commonly confirmed by stochastic crossed with bearish divergence. This will be your great timing tool whether you will enter a certain deal or not.
5. You must integrate effective time management within your system. Time is gold and is one of your precious resources. Design a trading system that is time efficient—where you can maximize the potential of your time resources to generate huge profits.
Stay away from complicated systems; they will just ruin your entire Forex trading career. Build a simpler one and see for yourself how profitable it can be.
