Before anyone considers Forex trading, they should understand the facts that are outlined in this article. If you understand them before you trade, you can avoid the losing majority and join the small minority of winners...
Here are your facts - they are in no particular order of importance - they are all important.
1. Forex Trading is Not a Walk in the Park
Many traders simply think it's easy to win and yet it's not as 95% of traders lose and they want to follow others selling robots and sure fire systems which simply don't work. In Forex trading you can win but you need to get the right education and mindset
2. Forex Robots Don't Work
All the ones you see heavily advertised online never win. It's obvious you don't get financial freedom for $100.00. Don't be naïve, if they did work, the whole world would be trading and there would be no credit crunch. Pass them by, you need to make money by learning skills and how to apply them.
3. Hard Work Counts for Nothing
Many traders actually come in with the attitude the harder they work the more money they will make - but this is not true, you get rewarded for being right, not the effort you make. To Win, you need to work smart not hard.
4. Complicated Systems and Intelligence dont Guarantee Success
They count for nothing in terms of Forex trading success - it's a fact that simple systems work best, as they have fewer elements to break, than complicated ones. To win you don't need to be college educated, you just need the right mindset and a willingness to learn.
5. Prediction is not the way to make Money
This myth is put about by vendors, who claim markets move to some higher force but they don't. If you predict, you're simply guessing and your guess will be as accurate as your horoscope. Trade the reality of price change on a chart and you will have the odds on your side and win.
6. A good System is Enough
No its not. I have seen plenty of people with good systems lose. The reason they lose is - you need to understand the system needs to be applied by you! This means you have to apply it with discipline, through periods of losses and stay on course, as the market makes you look stupid and your emotions are trying to get involved.
Discipline is based on confidence and a sound Forex education. Discipline is actually the one trait that separates winners from losers.
7. Anyone Can Learn to Win
Its true, anyone can learn to win and if you work smart, you can learn forex trading in a few weeks and then be making big profits, in about 30 minutes a day. No other business will reward you with so much, for your effort as Forex trading.
The Challenge
The challenge is there and anyone can take it up.
Just decide that you want to win and understand, you can learn to trade and you can get confidence in what your doing which leads to discipline, the key trait for success.
Are you ready for the challenge?
If so, welcome to the world of Forex trading the world's most exciting investment opportunity.
Forex trading has the great potential of becoming a profitable and fulfilling career that will let you have a lifestyle that few other lucrative activities in the world can offer to people from many roads in life and without asking any of those men and women for a diploma or some special certification.
But Forex trading is not easy; it may be simple to enter and place your first trade but becoming a profitable trader is a different thing. You will need to acquire the right knowledge and techniques in order to understand and know when to enter or leave a trade always fulfilling the main objective every trader must have; making money
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There are two kinds of analysis you can perform on the Forex markets. They are known as technical analysis and fundamental analysis. It is common that traders tend to divide themselves into "technical" and "fundamentalists". Each group devoting themselves to the main tools each kind of analysis gives them.
Technical forex traders base their trading on the analysis of the charts and the number of indicators derived from the plots of price oscillations and patterns. Meanwhile Fundamentalists traders base their trading mostly on the fundamental numbers and economical indicators of countries economies. Though, even if divided, both tendencies tend to complement each other to some degree.
In this article I will place myself on the "fundamentalists" side and focus on one of the situations every forex trader must be aware of and don't let the events involved affect his trading efforts.
This risky situation is that when unprecedented chaotic world events start to develop as the trading day goes on. The power of the media (tv, internet, printed) can magnify and sometimes it may even distort the events taking place and impacting the trading journey in a significant manner. The result of this magnification and rapid diffusion of the news about the series of unfavorable events taking place is an increased atmosphere of fear, confusion and uncertainty in the trading world. And fearful traders are not prone to make the best trading choices because they have given themselves to panic and emotional reactions instead of reasoned and intelligent decisions.
If you need to have more specific examples of these kind of events you can search a bit inside your memories and consider the impact of just a few types of unfavorable chaotic world events as the political upheavals or corporate scandals of companies as; Enron, WorldCom, or of people as the case of Martha Stewart trial, etc. There is also the example of the terrorist attacks on Sep 11 in New York, March 11 in Spain, etc. Also natural disasters: tsunamis, earthquakes, floods, freezes, droughts, hurricanes along with wars can cause great disruption in a trading journey.
In short, every forex trader should be totally sure that his method of trading has built-in safe guards (stops, limit orders) to prevent a major financial loss from his trading account in case any of the unfavorable events I mentioned above ever takes place. And being realistic, many of those events will surely happen in the future.
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The Pound has pulled back from 4-.month high at 1.5160 reached yesterday to levels right at 1.5000 support which has been tested on late Asian session. 1.4990/1.5000 support level remains intact and the Pound attempts to pick op from there.Initial support lies at the mentioned 1.4990/1.5000 level, and below there 1.4950 (Apr 15,17 and 30 high) and 1.4830 (May 4 low).
On the upside, the Pound could find resistance at 1.5065 (Apr 16 high) , and above there, 1.5095 and 1.5160.GBP/JPY rally from 139.00 low on Apr 28 has capped at 149.90 high yesterday and the Pound has dropped to 146.93 low on Asian session. Support levels for the Pound lie at 146.95 and 146.55. On the upside, Pound might find resistance at 147.80, and 149.90.
Dollar closed he day mixed against major rivals, mostly gaining ground on fears about economic recovery. With Wall Street down, local shares are expected to fall also, thus limited mostly a consolidative day; watch Nikkei 225 key 10.000 points support level, as under that, risk aversion could gain strength and be reflected across the board. Euro started the day under 1.4600 level, 38.2% retracement of 1.4190/1.4842, with the 50% of that rally around 1.4510, next key support level to watch.
Under that zone, pair could reach key 1.4450 static area, also close to the 61.8% of the mentioned rally. GBP managed to close the day to the upside, yet movement remains mostly corrective after almost 700 pips straight fall in 4 days. As long as under 1.6060, bearish trend remain intact; corrections could even extend to the 1.6110 area, but price should retreat strongly from that zone, to consider bearish trend still healthy.
EUR/USD is a little higher and USD/JPY is unchanged and dealers say that interest so far is muted. As stated earlier, there are said to be a lot of trailing stops above 132 in EUR/JPY which might attract attention. I'll hand over to Sam to guide you through the next few hours of market activity.
EUR/USD Current Price: 1.4588. Slowly regaining the upside, pair remains capped under the 38.2% retracement of the last daily up leg 1.4190/1.4842, around 1.4600. with hourly charts slightly bullish, pair needs to clearly confirm above that level to extend the upside rally, thus next strong resistance area came around 1.4650; if the last gives up, pair could regain previous day bullish strength.
Under 1.4550 static support zone, next support came at 1.4515 area, 61.8% of the mentioned rally. Nikkei 225 opened up 0.1% and quickly turned to negative territory, limiting pair rises. “Price broke above 20 SMA yet it still has a bearish slope, while in bigger time frames pair is well under the indicator, yet with no clear bias for next hours,” said Valeria Bednarik, collaborator at FXstreet.com.
Cable was the best performer between majors on Tuesday. The pair rose across the board after falling sharply in the last three days. Stocks fell in Europe and the U.S. but rose in Asia. A year after the Dow Jones suffered the biggest point decline in history; markets fell at a moderate pace in Wall Street, following a surprise decline in consumer confidence. The stock index closed lower on five out of the past six sessions.
Cable revives :GPB/USD rose for the first time after four days with losses. The pair posted an intra-day high at 1.5989 and failed to get back above 1.6000 but managed to hold on top of 1.5910. Against the Yen, Cable recovered after falling to a 4-month low on Monday. GPB/JPY rose from 142.50 to 143.90; the pair is facing a strong resistance at 144.00. To the Euro, the Pound posted interesting gains. EUR/GBP continued to pull back from 5-month high and fell to 0.9100.Despite rising across the board, Cable still holds below key levels, suggesting that it could start falling again in the next sessions.
Dollar mixed:With the exception of the Pound, Greenback rose across the board. Dollar appreciated constantly through the Asian and European session but pull back, losing part of the gains during the American. EUR/USD closed below 1.4600 for the first time since mid September. The pair bottomed at 1.4525 posting a fresh 2-week low. The Yen lost ground on Tuesday across the board. USD/JPY rose above 90.00 to 90.36. If Greenback can not break the resistance zone at 90.35 in the next hours, the pair could regain the downside.
The stock market is essisntal a gaint auction-only indsead of antiques and heirlooms. At these sxghange, traders buy and sell shares of compines. Generally, the prices of a stock is determined by suppliy demend. For example, if there are more people wanting to by a stock then to sell it price wil be driven up because those shares are rarer and people will pay a higher price for them. On the other hand, there are a lot of shares for sale and one is interested in buying them, the price is quigkly fall.
Because,of this, the market can appear to fluctuate widely.Even if there is nothing wrong with a company, a large shareholder who is trying to sell millions of shares at a time can drive the price of the stock down, simply because there are not enough
Forex Trading Machine was developed by Avi Frister and his system uses three price driven trading strategies to trade the forex markets. Each is fitting, for the price action of the market, such trending or ranging.
The primary benefits of the Forex Trading Machine is that it is 100% mechanical and requires very little speculation. The majority of the profit targets are always pre-set so the trader has a good idea of when to open and close a trade.
Forex Trading Machine is a 180 page e-book, which also goes over the different aspects of forex trading, not just the system's rules. It discusses many of the different aspects of trading that most new traders are not familiar with, such trading psychology and money management.
The main apects that Forex Trading Machine is interested in, are time and price. The system has taken Frister 10 years to develop it.
The Forex Trading Machine claims that the systems used, go for large profits while using small stop losses, so there is a good risk to reward ratio
Many centuries ago, the value of goods were expressed in terms of other goods. This sort of economics was based on the barter system between individuals. 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.
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. Paper money could always be exchanged for gold. 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.
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 WWII, 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 worlds 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.
In Europe, the idea of fixed exchange rates had by no means died. The European Economic Community introduced a new system of fixed exchange rates in 1979, the European Monetary System. This attempt to fix exchange rates met with near extinction in 1992-93, when built-up economic pressures forced devaluations of a number of weak European currencies. 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.
Today, Europe has embraced the Euro in 12 participating countries. The physical introduction of the Euro on January 1, 2002 saw the old countries currencies made obsolete on July 1, 2002.
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 size of the FOREX market now dwarfs any other investment market.
It is estimated that more than USD 1,200 Billion are traded every day, that is the same amount as almost 40 times the daily USD volume on the American NASDAQ market
The difference between forex technical and forex fundamental analysis is that forex technical analysis ignores fundamental factors and is applied only to the price action of the market. Forex technical analysis primarily consists of a variety of forex technical studies, each of which can be interpreted to predict market direction or to generate buy and sell signals. The technical analysis works by correlating the results and moves of current markets to create a short-term outlook for currencies. The rolling data that is produced throughout the trading day creates the interest in the markets and informs traders of the strong markets to back.
The Trend is Your Friend
Forex technical analysis is largely based around forex market movement trends, thus creating the widely used phrase ’the trend is your friend’ amongst traders. Buying and selling at the right time is the key in maintaining good levels of profits, following a trend is also about knowing where to entry a trade and more importantly where to exit.
Support and Resistance
Support and resistance is the basic of forex technical analysis. Support and resistance levels are points where a chart experiences recurring upward or downward pressure. A support level is usually the low point in any chart pattern (hourly, weekly or annually), whereas a resistance level is the high or the peak point of the pattern. Buying and selling at the support and resistance points makes a greater profit margin as long as they remain unbroken.
History Tends To Repeat Itself
Another important idea in technical analysis is that history tends to repeat itself, mainly in terms of price movement. The repetitive nature of price movements is attributed to market psychology; in other words, market participants tend to provide a consistent reaction to similar market stimuli over time. Forex technical analysis uses chart patterns to analyze forex market movements and understand trends. Although many of these charts have been used for more than 30 years, they are still believed to be relevant because they illustrate patterns in price movements that often repeat themselve
You should build your own trading system
A trading system on the Forex market is a type of strategy that allows traders to trade with a set of rules. There are many free trading systems and strategies printed in trading articles, journals, books and on trading-related websites. I would have to say that if you are not inclined to learn how to develop your own trading methodology, then perhaps you should consider giving your money for someone else to invest. Give it to someone who is trading a system that he developed and tested himself because he is more likely to have the confidence and courage to follow his own trading system.
Why you need a forex trading system?
1. It’s easy to trade with a system.
2. A good system provides consistent result.
What makes a good trading system?
• It’s simple. Forget complicated systems with lots of rules - it’s a proven fact that simple systems work better - and are less likely to fail, in the brutal world of trading.
• A trading system with profitable expectation.
• It provides good ratio of reward/risk.
• A system of comprehensive risk management including market exposure weightings, stop-loss provisions and capital commitment guidelines that preserve capital during trend-less or volatile periods.
Once you learn how to develop trading systems and strategies, you can then be better equipped to test them as well. By this point you might even find that the system created by yourself is the best one for you, because it becomes the system more suited to your profit objectives while operating within your risk tolerance levels. It is likely that once you develops this level of competence, you will simply acquire other trading systems only to dissect them, grab the parts you likes and add them to your own system. To me, the irony is that for a trader to know which system to purchase, you must first learn how to create a system. And after knowing how to create a system, he will no longer have the need to buy one.
Forex trading is fast becoming one of the easiest ways to earn large amounts of money on your investment. Then again, it can also be the easiest way to lose all of your money in a short period of time. That is, if you do not know what you are doing. The fact is that even seasoned traders make mistakes and only through the understanding of basic principles and the application of sound strategies can you be assured of earning money in the long run.
One of the most basic things that you have to understand about Forex trading is that there will always be losing streaks along with the winning ones. Having this fact in mind will keep you going during those times that you do not get a good deal. The best way to handle Forex trading is to have a reliable trading system coupled with a rigid money management system.
There are many different strategies employed in Forex trading today. What you should do is either adopt one of them or come up with your own. No matter which path you choose to take, the important thing is that your trading system has been proven or can be proven to be reliable. How would you know that your trading system is reliable?
It is quite simple, really. A reliable trading system is one which gives you more winning trades than losing ones. More than this, your winning trades should be – in general – of greater value than your losing trades. You do not need to be a rocket scientist to figure this one out. More wins with greater value equals profits. No matter how you come up with your trading system, the bottom line is that you get consistent results.
Once you have come up with your trading strategy, try it out first. You can do this by using a demo account before trading live. Using a demo account is advantageous as you will be doing exactly the same thing as live trading – without real money. This way, you can test your strategy and pick out the flaws f there are any.
If, after you have tested your strategy, you are confident that you are getting consistent results, you could go live. Your strategy should not stop there, though. Once you engage in live trading, you must take care to instill strict discipline when it comes to money management. Do not deviate from your strategy once it is put in place. This is perhaps the foremost reason for traders to suddenly lose everything. Always remember that you cannot win all the time and that losses are part of trading. If you have a strategy in place, do not scramble to recoup your losses outside the boundaries of your strategy. The trend is that winning will come soon after your losses.
One rule you should stick to is never trading with more than 2% of your account at risk on a single trade. Whether you win or lose, this percentage is going to get you the long term results that you are aiming for.
Based on the chart below, which plots the Australian Dollar against the New Zealand Dollar over the last two years, one might be tempted to conclude that the two currencies are identical for all intents and purposes. Rather than suffer the inconvenience of separately analyzing the Australian Dollar, why not just read yesterday’s post on the New Zealand Dollar, and leave it at that?
But this chart belies the fact that while the two currencies, have risen and fallen (in near lockstep) in sync with the ebb and flow of risk aversion, this could soon change. While the near-term prospects for the New Zealand economy are dubious, sentiment towards the Australian economy is more consistently optimistic. “Central bank Governor Glenn Stevens said the nation’s economic downturn may not be ‘one of the more serious’ of the post-World War II era.” In addition, “Stevens said the nation’s economy may rebound faster than the central bank had predicted six months ago on improving confidence among consumers and businesses alike.” The latest projections are for a fall in .5% contraction in GDP in 2009 followed by a 1% rise in 2010.
Meanwhile, government spending is surging: “The Australian government forecast its largest budget deficit on record of A$57.6 billion for fiscal year 2009-10, or 4.9% of GDP.” Combined with the steady recovery in commodity prices and the resumption of residential construction, this could soon trickle down through the Australian economy in the form of inflation. It’s no wonder, then, that the Reserve Bank of Australia (RBA) could begin tightening interest rates as early as December, in order to mitigate against the possibility of inflation in 2011 and 2012.
australia-cpi-inflation
In fact, Governor Glen Stevens has been raising eyebrows with his unequivocal comments about raising rates. “I’ve never seen written down … I’ve never heard in discussion in the institution, some rule of thumb that says we wait until unemployment’s peaked before we lift the cash rate…I think it depends what else is happening, and also depends how low you went. We eased very aggressively,” he said recently. As a result, traders are betting that rates will be 1.13% higher one year from now than they are today.
This development should be of especial interest to forex traders. Australian interest rates are already the highest in the industrialized world. When you consider “the market’s expectations that the RBA is likely to be the G-10 central bank which is likely to hike first,” it goes a long way towards explaining the 18% rise in the Aussie that has taken place in 2009 alone. Compare a hypothetical 4% RBA benchmark rate to the .1% in Japan and ~0% in the US, and carry traders will start to salivate.
Currency exchange rates are an important monetary unity of measure that indicates the relative value of one currency against another. Typically, world currency exchange rates are quoted on the basis of a base rate. For example, one unit of the Australian dollar may be worth 91 cents expressed in US dollar terms. These rates are offered by international currency conversion brokers or money converters and can vary depending on where you attempt to change your money. The current currency exchange rate offered reflects market forces of supply and demand as determined by the fundamental factors that influence the market. Foreign currency trading takes places in what is essentially an over the counter market where brokers and dealers negotiate with each other. There is no central exchange per se and most of the trading takes place on the interbank market via the large international banks that quote prices on the basis of bid/ask spreads. The prices offered for retail transactions do not necessarily reflects these spreads. Retail customers are subject to bank mark ups. If you have ever tried to conduct money currency exchange you would notice that currency exchange rates can vary between exchangers. Usually, you get better rates at the banks themselves as the rates charged by money converters and exchange booths such as American Express reflect the base rates and any markup the provider is adding to these rates
EUR/USD Current Price: 1.4588. Slowly regaining the upside, pair remains capped under the 38.2% retracement of the last daily up leg 1.4190/1.4842, around 1.4600. with hourly charts slightly bullish, pair needs to clearly confirm above that level to extend the upside rally, thus next strong resistance area came around 1.4650; if the last gives up, pair could regain previous day bullish strength.
In 11th century France the courtiers de change were concerned with managing and regulating the debts of agricultural communities on behalf of the banks. As these men also traded in debts, they could be called the first brokers.Some stories suggest that the origins of the term "bourse" come from the Latin bursa meaning a bag because, in 13th century Bruges, the sign of a purse (or perhaps three purses), hung on the front of the house where merchants met.
Twenty Major Stock Exchanges In The World: Market Capitalization & Year-to-date Turnover at the end of January 2009Region ↓ Stock Exchange ↓ Market Value(millions USD) ↓ Total Share Turnover(millions USD) ↓Africa Johannesburg Securities Exchange 432,422.1 17,999.7Americas NASDAQ 2,203,759.6 2,325,238.3Americas São Paulo Stock Exchange 611,695.0 30,748.5Americas Toronto Stock Exchange 997,997.4 84,323.0Americas New York Stock Exchange 9,363,074.0 1,517,615.7Asia-Pacific Australian Securities Exchange 587,602.7 37,400.1Asia-Pacific Bombay Stock Exchange 613,187.6 14,425.0Asia-Pacific Hong Kong Stock Exchange 1,237,999.5 80,696.8Asia-Pacific Korea Exchange 470,417.3 81,755.0Asia-Pacific National Stock Exchange of India 572,566.8 39,057.1Asia-Pacific Shanghai Stock Exchange 1,557,161.3 142,144.2Asia-Pacific Shenzhen Stock Exchange 389,248.3 75,365.5Asia-Pacific Tokyo Stock Exchange 2,922,616.3 301,781.5Europe Euronext 1,862,930.9 146,173.3Europe Frankfurt Stock Exchange (Deutsche Börse) 937,452.9 264,970.3Europe London Stock Exchange 1,758,157.7 241,151.1Europe Madrid Stock Exchange (Bolsas y Mercados Españoles) 871,061.4 114,994.0Europe Milan Stock Exchange (Borsa Italiana) 456,206.7 48,094.8Europe Nordic Stock Exchange Group OMX1 503,725.8 55,299.9Europe Swiss Exchange 761,896.1 63,435.6
Every trading activity is in fact participating in a battle. Winning the battle is a matter of knowledge, skill and experience. If you miss any of those you are going to join the long line of losers. Some says that 95 to 99 percent of the traders are lining up on the loser’s side.
A currency is a mean of exchange, facilitating the transfer of goods and/or services. It is one form of money, where money is anything that serves as a medium of exchange, a store of value, and a standard of value. Currencies are the dominant medium of exchange. Coins and paper money are both forms of currency.
