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Main » Articles » Forex for Beginners

Forex Trading Secrets

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Reasons for the Popularity of Forex and Currencies

July 29th, 2009 by Forex Admin | No Comments | Filed in Forex basics

Forex or Foreign Exchange is nothing but a market where corporations, nations and retail investors exchange their money to make a profit. Though the smallest increment in the Forex, the pip, has only a value of 0.0001 of a dollar in most cases, its value quickly adds up to huge profits or losses, due to the fact that trillions of dollars are exchanged in the Forex market which is open 24 hours a day, 6 days a week. Added to that, Forex is one of the most exciting, highly volatile and attractive investment markets in the world.

To explain the exchange of currencies let’s take the following example. If an organisation in the U.S. wants to send money to their office in Europe, they have to convert their U.S dollars into Euros, as one U.S. dollar does not have the same value as a Euro. In order to convert the money, the organisation has to buy Euros with their U.S. dollars through the Forex market. The transaction has to be made in pairs, which means that the organisation has to buy the USD/EUR currency pair to send money to its office in Europe. The converted value of the money depends on the current value of the currency pair in the market. If the USD/EUR has a current value of 1.2500USD, then the organisation will obtain 80,000 Euros if it converts $100,000 at the Forex.

Now coming to the pips, one movement of the above transaction will equal $10 (0.0001 x $100,000). If a trader moves in and out of a position quickly, it is possible for him to make a profit even if the price fluctuates by a few pips. Although it is possible to make a substantial profit in the transactions, making an equal loss is also a possibility.

Because of the huge amounts invested and the strict rules and regulations of the Forex, trading in this market was restricted until recently to corporate giants, central banks and big investment firms. But now, due to advances in technology and relaxation of rules, Forex market is open to retail investors also. An investor can now secure a position with just 1/100th of the total amount traded. On the other hand the probability of losing the investment is high due to the highly volatile nature of the market.

However, with careful analysis and using different strategies, charts and trading systems, it is possible for a trader to determine when to enter and exit a position to make a profit. Though it is possible to make unlimited profits, because of the unpredictability of the Forex market, stops are placed on orders to prevent losses. Even if you are a seasoned trader and use a proven system, it is always wise to place stops on each and every order, as the market can swing unexpectedly sweeping away your investment in the blink of an eye.

The non-stop excitement and the potential to make unlimited profits are the main reasons for the popularity of the Forex. On the other hand, Forex is a high risk market where millions are made and lost every day. If you are a beginner, with hopes to make your millions, it is better to start with a dummy account to gain enough knowledge before entering the real, highly volatile but extremely profitable Forex market.

How to Deal With a Series of Forex Investment Losses

April 26th, 2009 by Forex Admin | No Comments | Filed in Forex risks, Forex strategies

In any business, especially forex trading, you have an equal probability to lose as to win. Losses are unavoidable as nobody can predict the future. There are only three possibilities in trading, a win, a loss or a break-even. Once a trader has the misfortune to run into a series of losses it triggers a destructive behaviour on his part to get away from the misery of his situation. A simple forex trading secret says that the destructive behaviour starts when one indulges in activities that may seem harmless in the beginning. On excessive use, the activities become uncontrollable which puts your physical and mental health at risk. Smoking, drinking and indulging in other harmful activities are a few examples. Though these activities seem to help you with your situation, they only serve to cover up your problem and does nothing to solve it.

Sadly this is not a good approach to your problem with your forex trading account. To get rid of your misery, the first step is to acknowledge your destructive behaviour and take steps to put a stop to it. Instead of ruining your health and being forced to take action when the situation gets impossible, it is better and easier to put a stop to your destructive actions as soon as possible. The only way to solve your problem is to face it. Be honest with yourself and analyze the reasons for your failure. You cannot succeed without hard work, dedication and determination. Review your steps to find out where and what you have done wrong. You have to review both your system and yourself. Minimize your risk to make things easier for you here is a checklist to review yourself and your system.

Checklist for your system:
• Did you check your system or software thoroughly before trading?
• Did you use an out-of-sample data to check your system?
• Did you check your system code?
• Where you over-enthusiastic and over-optimized your system?
• Did you start with a small initial investment before going for higher transactions?
• Are you aware of the limitations of our system?
• Do you even have a system to help you in trade?
• If you do not have a system, how do you know that your strategy will be profitable?

Forex trading

Checklist for You:
• How comfortable are you with your system and your signal service?
• Is the current drawdown performance of your system satisfactory?
• Are you aware of the risks in using your system?
• Are you trading with comfortable amounts that you can afford to risk?
• Are your goals realistic?
• Are you over-dependant on your performance?

Your failure or success depends equally on your trading system and your emotions. Once you go over the checklist and find the cause for your problem, it is time to take action to solve it. Unfortunately there is no easy way to fix your problem, whether it is emotional or your system. It entirely depends on your determination and drive to succeed. Make sure to keep your health, both physical and mental, in top condition as well as your trading system.

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Benefits of Trading in the Forex Market

April 26th, 2009 by Forex Admin | No Comments | Filed in Forex basics

Investors and entrepreneurs are moving away from conventional financial markets such as commodities futures, bonds, stocks and other commodities and prefer to invest their money in the Forex market. The reason behind this migration is due the fact that the Forex market has lucrative and far better benefits when compared to any other type of financial market.

The power of Forex market is such that even a seasoned Commodities or Stocks trader will find out in a short time the advantages of Forex over their traditional trading avenues. It is possible for you to make up to $3000 by trading in the Forex market for just 30 minutes everyday. When compared to futures market, trading currencies in Forex market involves less risk. It is also far easier and more profitable than trading stocks.

Following are some of the benefits of trading in the Forex market.

• The most unique feature of Forex market is that it is open 24 hours a day. Unlike trading stocks where you have to wait for an opening bell, you can buy or sell currencies whenever you want in the Forex market. This also gives you the added advantage of choosing the right time to make your transactions.
• Forex market has a huge trading volume in the range of about $1.5 trillion. The Forex market is about 30 times larger than all of the U.S equity markets put together.
• As far as Forex day trading is concerned, you can make a profit out of a raising market, as well as from a falling market. This is because you have the power to decide whether to buy or sell a currency after carefully analyzing the market trend.
• You can trade in the Forex market from anywhere in the world. If you have a computer with an internet connection, you can make your transactions from anywhere.
• Forex trading requires considerably less initial investment. You can even start your Forex career with an investment of as low as $300. Once you learn the ropes of the trade and make a success out of your strategy, you can increase your trade up to 200 times your initial investment. Moreover in Forex market you just need to post a meagre 1% margin when compared to a 50% margin in the stock market.
• The price movements are easily predictable in the Forex market. Though the price movement themselves are highly volatile, the foreign currency market follows a pattern that is easily predictable with proper technical analysis.
• In Forex trading you don’t have to pay any commissions to brokers on transactions.

To sum it up, Forex trading has far more advantageous than other trading platforms and gives you more control over the features and freedom to choose. You can make huge profits if you know what you are doing.


Alchemy of Forex News Trading for Consistent Profits

April 13th, 2009 by Forex Admin | No Comments | Filed in Forex software

Forex trading has become one of the most coveted businesses in recent times. The advent of internet has made Forex trading accessible to everyone. The convenience of setting up a business at home with a computer and internet connection, without the hassles of employees, customers or inventory and lure of making huge profits is the reason for the growing popularity of Forex trading. But many forget an important fact when they decide to enter the Forex market.

Studies show that only about 5% of the retail Forex traders are able to make consistent profits. Consistent profit in Forex is possible only if one has an in depth understanding of the various factors that influence the market like global economy and other technical factors. Jumping in without taking time to gain knowledge of the Forex market will only land you in trouble. A little time and effort taken to follow a professional trader’s guidance is one way of learning the trade. You can subscribe to a free Forex trading signal website to receive news updates and information about the market, which you can use to make the right decisions in live trades, after testing their reliability with your trading account.

The daily news on economy from different sources of media that is just used as a conversation material among friends can be used to make profits in the Forex market. This can be done with proper training that teaches you how to interpret the information into trading terms to be used for your benefits in the Forex market. Converting information of little value to solid gold can be referred as ‘forex news trading alchemy’. Extensive training and experience is needed to make this interpretation which is called Forex trading signal.


Undestanding Commodity Futures and Option Contracts

April 13th, 2009 by Forex Admin | 1 Comment | Filed in Commodities, Currencies, Futures

A futures commodities contract between two parties is a legal agreement to buy or sell a particular financial commodity in the future for which the exchange, quantity and price are predefined. The two parties will also agree on a specific date and time in the future to make this transaction, which is called as the ‘settlement date’. An option contract between two parties is a legal agreement that bestows the buyer, who pays the ‘premium’ or the market price within a particular time period, the right and not the obligation to exercise his option.

A buyer can exercise the option when he has signed a futures contract agreeing with a particular price called ‘strike price’ or the options contract can give the right to buy or sell the commodity directly. In the United States, an individual or firm has to trade on your behalf the futures contracts and options on futures contracts in the exchange. This individual or firm has to be registered with the Commodity Futures Trading Commission.


Guidelines to Trade in Forex and Commodities Futures and Options

April 12th, 2009 by Forex Admin | No Comments | Filed in Currencies, Dolar, Yen

Though trading futures and options is an extremely risky area to invest, this niche is growing rapidly in recent years due to the easy accessibility of instant updated data through the internet, which makes it possible for day traders to make substantial profits. Small investors are now able to invest and trade in this highly risky area with the same comfort, ease and speed of big companies.

Forex trading signals

Before entering this high risk area of Forex trading you should:
• Make an honest review of your capabilities, both monetary and knowledge wise and decide on the amount to invest.
• Be aware of the commodity futures and option contracts and your responsibilities before making the actual investment.
• Make sure that you receive the risk disclosure documents from your broker and review it thoroughly.
• Gather as much information as possible and clear all your doubts before you take the first step to open a trading account.
• Know who to contact in case of trouble or if you have a question.


Classifications of Forex Trading Accounts

April 12th, 2009 by Forex Admin | 1 Comment | Filed in Forex day trading, Forex trading, Online forex trading

Simple classification of Forex Trading Accounts
Individual Account: When transactions are done only for you, then it is referred as an individual account. This account can be a ‘non-discretionary’ type where only you have the right to make decisions and a broker must get your prior permission or sanction to carry out any transactions, or it can be a ‘discretionary’ account where you give the right to make decisions on your behalf to a broker or any third party.

Commodity Pool: Here the trade is executed on behalf of a group of individuals who trade commodities by means of a ‘commodity pool’. You have to purchase a share in the pool and the transactions are made for the pool as a whole and not based on the interests of an individual. And likewise, the profit or loss is shared by the entire pool.

Before making transactions you should:
• Set your goals and be aware of your capabilities to invest and handle a risk or loss.
• Know the extent of help you need from a trading advisor and signals to make decisions.
• Check the reputation and registration status of the advisor with the National Futures Association.
• Obtain and review the disclosure document before opening a trading account.
• Not hesitate to ask any question regarding trading that you do not understand or have doubts.


Can you make profits by Buying and Selling Simultaneously in the Forex?

April 12th, 2009 by Forex Admin | No Comments | Filed in Currencies, Forex learning

There are lots of views, principles and truths that exist regarding Forex trading done by hedging using the grid trading system. Some believe that one should cut one’s losses and let your profit run, while some believe that one cannot make profits in the Forex market by making transactions of buying and selling at the same time. Now, let’s see how you can make money by breaking these rules. The principle behind a hedged grid trading system is that one should be in a position to cash in at the point of gain, irrespective of the direction that a market takes. This means that a stop is not required at all. This scenario is possible only when one has a buy and sell active simultaneously. But most traders consider that this is highly risky and extremely foolish.

Forex selling profits

So, let’s take a closer look at this. Say for example that a trader enters the market when a currency has a level of about 100, with a buy and sell active. This means at the point of entry his buy will be a positive 100 and the sell a negative 100. Here is where we deviate from the principles and cash in the positive and increase the trading account by 100, which makes the sell as a negative 100.


A reliable Forex trading signal

April 11th, 2009 by Forex Admin | No Comments | Filed in Forex strategies, Forex trading, Online forex trading

A reliable Forex trading signal will predict the final price by taking into account the favourable and resistant levels, together with the fluctuations between past, actual and any possible alterations to the numbers. That most important factor in this is the timing of the indicator, as a particular variation can have an entirely different impact on the market in different times. Though the technical terms are quite complex and needs training and experience to get familiar with, one can follow a simple method that gives an overall trading strategy of how to interpret the news in regards to stop loss limit and exit and entry points.

Forex traders and markets

Keeping track of trading indicators is not only a best way to ensure profits, but is also an important part of the overall Forex market training. It helps a beginner to interpret a trading signal and use it to his advantage. The only way to become proficient in this method which helps one to make consistent profit, is to execute live trades. Making meticulous notes of your transactions and your strategy is also invaluable to make future trades. Once you decide to enter the Forex market your goal will be to get into that exclusive 5% category of successful traders. To make this possible all you have to do initially is acquire proper training by subscribing to a Forex trading signal software provider like the Alchemy of forex news trading.

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Liquidate all of the Forex transactions and make a decent profit

April 11th, 2009 by Forex Admin | 1 Comment | Filed in Forex brokers

Now, as laid out by the grid system, one should check the status of the cash for any movement in the forex market. To accomplish this, one should re-enter the market and conduct a buy and sell transaction. At this point, let’s make an assumption that the market price is back to 100. This makes the second sell positive by 100 and similarly the second buy has a negative 100. As said by the rules, one should cash in the sell and increase the account by another 100, which makes a total profit of 200 at this point. The first sell made which has remained active will have moved from the level of 200, from a negative 100 to a positive 100, at this point where it is breaking even.

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Now if you add all the four transactions made above, you will be surprised to see a gain. In the first transaction, we cashed in the buy for a +100, the second transaction we cashed in the sell for +100, at which point the first sell is breaking even and the second buy was a -100. This makes up to an overall profit of 100. You can now liquidate all of the transactions and make a decent profit. This is just one market strategy that can be applied to turn the ‘buy and sell simultaneously’ action into profits. There are numerous other strategies that can be applied to such scenarios to make substantial profits.


Category: Forex for Beginners | Added by: forex-market (2009-09-11)
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