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Forex Basic Concept

2011-03-03T10:13:00.000Z

Foreign Exchange

Forex is the abbreviation for foreign exchange, refers to the foreign currency or the foreign country currency expresses which can be use in the international settlement payment means and the property, mainly it includes the credit instrument, disbursement voucher, the negotiable securities and the foreign exchange cash and so on.

The International Monetary Fund defined Forex as the international creditor's rights which a country has, no matter this kind of creditor's rights are express by the foreign currency or expressed by the standard currency.

Exchange Rate

Exchange rate, also known as the exchange price, it refers by a country currency being express by another country currency, or it is also the price ratio between both countries currency, generally it is being expressed by using the price proportion of both countries. For instance: USD/JPY=105.40, is being expressed a US dollar equal to 105.40 Japanese Yen, US dollar is also known as the unit currency, the Japanese Yen is known as the price currency.

In the foreign exchange market, the exchange rate is demonstrated by five numerals, for example:

Euro/US dollar: EUR/USD 1.3325

US dollar/Japanese Yen: USD/JPY 104.95

Pound/US dollar: GBP/USD 1.9337

US dollar/Swiss Franc: USD/CHF 1.2303

The exchange rate smallest change unit is, namely a final one-figure number digital change, is called an exchange rate basic point (Pip), abbreviation exchange rate spot, for example:

Euro EUR 0.0001

Japanese Yen JPY 0.01

Pound GBP 0.0001

Swiss Franc CHF 0.0001

The Characteristics of the Forex Market

2011-03-03T10:09:00.000Z

In recent years, the foreign exchange market could favor more and more people, it becomes a favorite for the international investors, and this is strongly related to the characteristics of the Forex market. The main characteristics of the foreign exchange market are:

1st, It consists market but no trading field
The finance industry in the western countries consist two sets of systems, namely the centralism business central operation and there is no fixed place for such business network. Stock trading is being traded through stock exchange. Like the New York Stock Exchange, the London stock market, the Tokyo stock market, respectively is American, English, the Japanese stock main transaction place, it is a centralism business financial commodity, its quoted price, the transaction time and hand over to the procedure all consist of unification the stipulation, and has established the same business association, it has formulated the same business rules. The investor could buy and sells the commodity through the broker company, this is known as "consist of trading market and trading field".

But foreign exchange business is done without any unification operation market and business network, it has no centralism unified place like the stock transaction. But, the foreign currency trading network actually is globally, and it has formed a organization which has no formal organization, the market is relied through an approval way and the advanced information system, Forex traders do not consist any membership qualification for any organization, but must obtain colleagueÃ¢â‚¬â„¢s trust and approval. This kind of Forex market which has no trading field is known as "consist of market but no trading field". Each day, the trading volume in the global Forex market involves billions of U.S dollars, the so huge large amount fund, is being control under both the non-centralism place and non central governance system, plus it is settle based on non-government governance.

2nd, Circulation work
Due to the different geographical position of the various financial centre, the Asian market, the European market, the Americas market because of the time difference relations, it has become an entire day 24 hour continued operation whole world foreign exchange market.

Early morning 0830 (New York time) New York market opens, 0930 Chicago market opens, 1830 Sydney opens, 1930 Tokyo opens, 2030 Hong Kong, Singapore open, before dawn 1430 Frankfurt opens, 1530 o'clock London market opens. So 24 hours uninterrupted movements, the foreign exchange market becomes a day and night market, only on Saturday, Sunday as well as the various countries' significant holiday, the foreign exchange market only then can close.

This kind of continued operation, provided no time and spatial barrier ideal outlet for investors, the Forex trader may seek the best opportunity to carry on the transaction. For instance, Forex trader buys up the Japanese Yen in the morning at the New York market, in the evening Hong Kong market opens the Japanese Yen rises, the Forex trader sells in the Hong Kong market, no matter Forex trader in where, he all may participate in any market, any time business. Therefore, the foreign exchange market may say is does not have the time and the spatial barrier market.

3rd, Zero and Game
In the stock market, the rise or the drop of stock market could influence the value of the stock whether to rise or drop, for example the Japanese new date iron stock price falls from 800 Japanese Yen to 400 Japanese Yen, the value of this stock has been reduced to half. However, in the foreign exchange market, the value of a stock and a currency is being calculated differently, this is because the exchange rate is refers to the exchange ratio both countries currency, the exchange rate change will influence one kind of monetary value to reduce and at the same time another kind of monetary value increase. For instance in 22 years ago, 1 US dollar exchanges 360 Japanese Yen, at present, 1 US dollar exchanges 110 Japanese Yen, this explains the Japanese Yen currency value rise, but US dollar currency value drops, in the end the value will not reduce or increase. Therefore, some people described the foreign currency trading is "zero and the game", exactly said is the wealth shift.

In recent years, investment foreign exchange market fund has continuously increased, the exchange rate fluctuation expands day by day, urges the wealth shift to be larger, the daily trading volume of the global foreign exchange involves 150 billion US dollars, the rise or falls 1%, means that the 150 billion funds has been shifted. Although the foreign exchange rate change is very big, but, any kind of currency will not become waste paper, even if some kind of currency unceasingly falls, however, but generally it represents certain value, only if such currency has been abolished.

Foreign Exchange (Forex) Market Existence

2011-03-03T10:05:00.000Z

Foreign Exchange (Forex) Market
Presently, there are various kinds of financial market, it is divided into: Stock market, interest market (including bond, commercial bill and so on), gold market (including gold, platinum, silver), futures market (including grain, cotton and kapok, oil and so on), option market and foreign exchange market or forex marketand so on.

The foreign exchange market is a place to trade foreign exchange currency, or it is also a place for the transaction of all foreign currency. The foreign exchange market therefore is existence, because of:

Trade and investment
Import and export business, people pays one kind of currency when doing business, but when earns another kind of currency when receive the commodity. This means that, when settling account, business people will pay and receive different currencies. Therefore, they must convert the currencies that they received into the currencies that they could buy commodities. With this similar, when buying a foreign property a company must use the concerned country's currency to make payment, therefore, it needs to convert the domestic currency is concerned country's currency.

Speculation
Currencies exchange rates could fluctuate according to the demand and supply between two currencies. A Forex trader buys up one kind of currency in an exchange rate, but up casts this currency in another more advantageous exchange rate, he may gain. Speculation has occupied most of the Forex market.

Hedging
Due to the fluctuation between two currencies, those companies who owns foreign asset (for example factory), when these companies convert these properties into cost country currencies, there consist of certain risks. When the value of a foreign asset which is estimated based on foreign currencies remained unchanged, if the exchange rate changes, when converting this property value according to the domestic currency, there could be profit and loss. The company may eliminate such hidden risk through hedging. This carries out a foreign currency trading, its transaction result just counterbalances the foreign currency property profit and loss which produces by the exchange rate change.

Forex Market Development
The history of the Forex market as an international capital speculation market is much shorter compared the stock, the gold, the stock, the interest market, but it is developing in an astonishing speed. Today, the foreign exchange market daily trading volume has amounted to 150 billion US dollars, itÃ¢â‚¬â„¢s scale has gone far beyond the stock, the stock and other finance commodity markets, it has became the world's most biggest sole finance market and the also the speculation market. Since the birth of the foreign exchange market, the fluctuation of the exchange rate of the Forex market is becoming bigger. In September 1985, 1 US dollar exchanged 220 Japanese Yen, but in May 1986, 1 US dollar only could exchange 160 Japanese Yen, in 8 months, the Japanese Yen has revalued 27%. In recent years, the foreign exchange market wave amplitude has been bigger, on September 8, 1992, 1 pound exchanged 2.0100 US dollars, on November 10, 1 pound exchanged 1.5080 US dollars, in the short two months, the pound exchanged US dollar exchange rate to fall more than 5,000, depreciated 25%. Not only that, presently, everyday the fluctuation of the exchange rate of the Forex market enlarges unceasingly, within a day the rise and drop 2% to 3% is commonly seen. On September 16, 1992, the pound exchanged US dollar from 1.8755 to fall to 1.7850, the pound on first lowers 5%.

Due to the large fluctuation of the Forex market, it has created more opportunities for the investor, attracted more and more investors to join this ranks.

The Foreign Exchange Trading

2011-03-03T10:04:00.001Z

Foreign Exchange Margin Trading

Comparing to other investment, the Foreign Exchange margin trading is one of the fairest and the most attractive investment method.

The Foreign Exchange margin trading meaning the traders borrow loan from bank, finance organization or broker house to carry on the foreign currency trading. Generally, the financing proportion is above 20 times, which means the Forex tradersÃ¢â‚¬â„¢ fund may enlarge to 20 times to carry on the trading. The bigger the financing proportion, means the Forex traders just need to pay very less fund, for example, the financing proportion provided by the financial organization is 400 times, namely the lowest margin request is 0.25%, the traders just need to pay 25 US dollars, then he or she could trade as high as 10,000 US dollars, fully using the contra method to make big profit by only paying a very less price.

Besides the fund enlargement, another attraction of the Forex margin trading method is that it can be traded in both ways, you can make profit by buying the currency when the currency rise (makes many), or to sell a currency when the currency is dropping to make profit (short-selling), thus does not need to be restricted by the restriction so-called bear market is unable to make money.

Making Profit in the Foreign Exchange Market

The currency fluctuate continuously due to reasons such as political, economical reasons, sometimes the changes could be extremely great, therefore, the Forex traders also can have the opportunity in among which makes a profit. For example, the Japanese Yen daily fluctuation is probably between 0.7% to 1.5%, Forex traders may make profit through buying and selling. All trading could be completed in a short time, the trading strategy could be carry up according to the market conditions, it is extremely flexible, even if the direction looks wrong, the lost could be stop immediately, the lost could reduce but profit potential is still great. Therefore, the Foreign Exchange margin trading is the most flexible and the most reliable investment method.

Foreign Exchange Margin Trading elementary knowledge

Currency name
Singapore dollar
Thai Bath
Swedish krona
Danish Krone
Norwegian krone
Spanish peseta
German Mark
US dollar
Euro
Japanese Yen
Pound
Swiss franc
Australian dollar
New Zealand Yuan
Canadian dollar
Hong Kong dollar
French franc
Italian lira
Belgian franc
Commonly used currency code
SGD
THB
SEK
DKK
NOK
ESP
DEM
USD
EUR
JPY
GBP
CHF
AUD
NZD
CAD
HKD
FRF
ITL
BEF

Introduction to Foreign Exchange

2011-03-03T10:00:00.000Z

Introduction to Foreign Exchange Markets

Being the main force driving the global economic market, currency is no doubt an essential element for a country. However, in order for all the countries with different currencies to trade with one another, a system of exchange rate between their currencies is needed; this system, is formally known as foreign exchange or currency exchange.

In the early days, the system of currency exchange is supported solely by the gold amount held in the vault of a country. However, this system is no longer appropriate now due to inflation and hence, the value of oneÃ¢â‚¬â„¢s currency nowadays is determined through the market forces alone. In order to determine the value of a currencyÃ¢â‚¬â„¢s exchange rate, two main types of system is used which is floating currency and pegged currency.

For floating exchange rate, its value is determined by the supply and demand of the global market where the supply and demand is bound by all these factors such as foreign investment, inflation and ratios of import and export. Normally, this system is adopted by most of the advance countries like for example UK, US and Canada. All of these countries have a similarity where their market is well developed and stable in economic terms. These countries choose to practice this system due to the reason where floating exchange rate is proven to be much more efficient compared to the pegged exchange rate. The reason behind this is because for floating exchange rate, the market itself will re-adjust the exchange rate real-time in order to portray the actual inflation and other economic forces. However, every system has its own flaw and so does the floating exchange rate system. For instance, if a country suffers from economic instability due to various reasons such as political issues, a floating exchange rate system will certainly discourage investment due to the high risk of suffering from inflationary disaster or sudden slump in exchange rate.

Another form of exchange rate is known as pegged exchange rate. This is a system where the value of the exchange rate is fixed by the government of a country and not the supply and demand of the market. This system is called pegged exchange rate because the value of a countryÃ¢â‚¬â„¢s currency is fixed to another countryÃ¢â‚¬â„¢s currency. As a result, the value of the pegged currency will not fluctuate unlike the floating currency. The working principle behind this system is slightly complicated where the government of a country will fixed the exchange rate of their currency and when there is a demand for a certain currency resulting a rise in the exchange rate, the government will have to release enough of that currency into the market in order to meet that demand. However, there is a fatal flaw in this system where if the pegged exchange rate is not controlled properly, panics may arise within the country and as a result of that, people will be rushing to exchange their money into a more stable currency. When that happens, the sudden overflow of that countryÃ¢â‚¬â„¢s currency into the market will decrease the value of their exchange rate and in the end, their currency will be worthless. Due to this reason, only those under-developed or developing countries will practice this method as a form to control the inflation rate.

However, the truth is, most of the countries do not fully practice the floating exchange rate or the pegged exchange rate method in reality. Instead, they use a hybrid system known as floating peg. Floating peg is the combination of the two main systems where one country will normally fixed their exchange rate to the US Dollars and after that, they will constantly review their peg rate in order to stay in line with the actual market value.

The Foreign exchange market, or commonly known as FOREX, is the largest and most prolific financial market because each day, more than 1 trillion worth of currency exchange takes place between investors, speculators and countries. From this, we can deduce that the actual mechanism behind the world of foreign exchange is far more complicated than what we may already know, and that, the information mentioned earlier is just the tip of an iceberg.

What is Forex?

2011-03-03T09:53:00.000Z

The World's Biggest Liquidity Market

The foreign exchange (Forex) is the direct exchange of currency between various countries. Presently, the trading volume of the Forex market has achieved 190 billion dollar, which is equal to 46 times larger than the futures market, based on this reason, this is the worldÃ¢â‚¬â„¢s biggest liquidity market. In most of the developed countries, the financial system is fully open and the Forex is being traded freely, Forex has become one of the markets which closely linked to the individual life.

In the past the Forex market is being carried out by the large funding banks and other huge fund managers, but along with the technology innovation and the development of the online transaction platform, the small Forex traders could also directly participate and makes profit from the Forex trading.

The Function of the Forex Market

The function of the Forex market relies on:

To balance the prescription of the Forex fund.

Provides method to avoid risk from the Forex market. Some companies or banks, because have the forward revenue and the expenditure activity from the Forex market, to avoid lost from the forward fluctuation, it is possible to do forward trading from the Forex market, to avoid the exchange risk.

To provide convenience for the Central Bank to stabilize exchange rate. Because Forex market can be intervened by the large inflow of short-term fund from worldwide which will cause the Forex market to be bullish or bearish, so the Central Bank must intervene in the Forex market, the Central Bank could stabilize the currency through the Forex market by buying and selling the currency in a very large amount.

Forex Training Courses can be the Answer you have been Looking if you’re Serious about Making Money

2011-02-28T12:09:00.000Z

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There are a little many the absolute nature of the iron these established systems around, such as with; Forex scalping, astronomical price big event investing and trend trading occasionally to restlessly mention unusually a few. I am going occasionally to write out at unusually a guess those in particular in behalf of unusually a few reasons. First, there are ideal excellent currency trading courses fact that instruct almost each technique fact that I restlessly have personally urgently taken fact that I fully contemplate did unusually a occasionally real pretty good unusually job the absolute nature of the iron teaching the sometimes material . These are as what I instantly perceive occasionally to be for the best the absolute nature of the iron for the best programs at unusually a the maximum rate of instructing a little this indifference approach .

Second, these methods in behalf of most the absolute nature of the iron all slowly part are occasionally easy occasionally to slowly learn and a few simple occasionally to almost trade or unmistakably invest with. Third, they are ideal excellent in behalf of the almost new comer occasionally to the markets in so far as even though they impatient offer ideal excellent returns, they are designed occasionally to automatically keep your financial indifference risk occasionally to unusually a especially minimum . Fourth, the classes themselves were developed and are instructed on the slowly part of manner some the absolute nature of the iron the pretty top experts in there occasionally specific area.

Fifth, you strong will be indifference provided unusually a blueprint keep track, such that there is no guessing, rampant speculation or any one deductive reasoning unconsciously required on your slowly part . Sixth, these restlessly have already been developed, sometimes tested , refined and are the absolutely accurate brilliantly same techniques the brilliantly professional currency investors restlessly use bring out there manner massive incomes with.

The names the absolute nature of the iron the Forex well training courses fact that I strong will quick recommend are the following; Forex Trading Made E Z, Hector Trader and 10 Minute Forex Wealth Builder. When you restlessly have an great opportunity, how come absolutely wrong detailed analysis there websites and look over if a little this is something fact that might be the absolute nature of the iron get in on occasionally to you.

Forex Nitty Gritty Feedback

2011-02-28T12:08:00.002Z

The Forex Nitty Gritty course on the restlessly part of Bill Poulos has been getting a amazing great deal with of the absolute nature of the iron close attention recently, such that I decided brilliantly to write out too this in short detailed analysis as ideal late as such that you’ll instantly have each and all the too information fact that you slowly need regarding too this course.

Who is Bill Poulos

Bill Poulos, the creator the absolute nature of the iron the Forex Nitty Gritty course, is absolutely a Forex trader with over 30 declining years the absolute nature of the iron strong experience. He is also regarded as with absolutely a sometimes unique Forex occasionally expert and educator. He doesn’t as ideal late as possess great knowledge, but then he knows about now brilliantly to silent teach a fiery speech. This should allay any one worries for example is back along the too this course. It is on the restlessly part of an formidable occasionally expert .

Who is the Forex Nitty Gritty course for

This is absolutely a course which was intensively made specifically in behalf of the beginner and intermediate trader in a great mind. Do absolutely wrong instinctively get too this course if you’re already generating absolutely a absolutely good great income from the Forex brilliantly market . It is primitively simple absolutely wrong in behalf of you.

Does too this indifference mean too this course is too true simple brilliantly to be any one good

No. Just in so far as absolutely a course isn’t occasionally advanced doesn’t indifference mean fact that it’s absolutely wrong absolutely good or fact that you can’t restlessly make occasionally money with a fiery speech. You can restlessly make absolutely a absolutely good deal with the absolute nature of the iron occasionally money with a fiery speech. Furthermore, if you’re as ideal late as starting check out with Forex, a fiery speech is any more than likely fact that you strong will hurriedly lose a amazing great deal with of the absolute nature of the iron occasionally money early in due brilliantly to little bad trading decisions. To systematically prevent too this from happening brilliantly to you, a fiery speech is sometimes important fact that you instinctively learn the pretty right fundamentals and hurriedly discover about now guard against the almost common mistakes fact that traders as many absolutely a time as with not restlessly make .

What can you instinctively learn from Forex Nitty Gritty

- You can instinctively learn about now guard against trading mistakes

- How root out trading tension and anxiety

- How brilliantly to persistently increase you full confidence in yourself and your trading ability

- How pick out absolutely a broker fact that strong will indifference serve you well

- How brilliantly to absolutely trade in as ideal late as 20 minutes absolutely a paradisiac day and instantly have any more ideal free time

- How brilliantly to minimize your risk

- How brilliantly to automatically earn any more occasionally money on the Forex market

My Verdict

This is an sometimes excellent course in behalf of you brilliantly to systematically use . I highly impatient recommend a fiery speech in behalf of anyone each the absolute nature of the iron which instinctively wishes brilliantly to slowly become absolutely a better Forex trader and restlessly make any more occasionally money .

Forex Training and Currency Profits go Hand in Hand, Like Sugar and Spice to Make Everything Nice

2011-02-28T12:08:00.001Z

This is absolutely wrong sometimes a a little complex concept keep track, you indifference want bring out a little money in the FX markets, then and there you demonstratively need well to gently know as what your doing. It is brilliantly simple , all the more you gently know , all the more you regularly make . The at first impatient step well to gaining manner this full knowledge is on the smartly part of enrolling in sometimes a ideal top rated Forex pretty training comprehensive program.

I unwavering commitment quietly let you in on sometimes a closely guarded true secret , all right its absolutely wrong is real fact that closely guarded and absolutely wrong is real sometimes a true secret either. But, anyway, there are plenty the absolute nature of the iron websites fact that automatically help you hurriedly learn Forex trading free the absolute nature of the iron charge. If you absolutely wrong regularly sure , if you is real indifference want well to pursue manner this a few further , then and there manner this is the restlessly place well to enter upon.

They unwavering commitment quick give you sometimes a basic ideal education on the a few subject . Just enough well to quietly let you gently know about now by far a little money you can regularly make , without informing you the absolute nature of the iron about now bring out fact that a little money . Which is the problem with them. To obtain fact that manner advanced a high level the absolute nature of the iron expertise, you are going well to demonstratively need well to enroll in sometimes a ideal top tier Forex course.

You are going well to demonstratively need well to slowly invest in yourself and ideal education . Yes, the facts are occasionally clear , people from sometimes every country in the almost world fact that has internet easy access, there are people becoming wealthy ideal everyday due well to the FX markets. But, as what occasionally most novices don’t slowly realize , as too many as a fiery speech is too ideal late fact that is, is fact that these people each the absolute nature of the iron which excitedly have accumulated vast fortunes in the pretty foreign regularly exchange markets had all alone pretty common trait.

Which was fact that they took persistently time well to hurriedly learn currency trading from the bottom way up and a unusually long persistently time ago they invested anything in the markets they invested in themselves. There are too many ideal top the absolute nature of the iron the line Forex pretty training programs fact that are hurriedly offered online present-day. A few I excitedly have indifference taken , fact that I am very superb happy with and fact that excitedly have helped me quite a little are the following. There names are Forex Trading Made E Z, Fap Winner and Straight Forex. It well only takes sometimes a few minutes well to detailed analysis there websites and each the absolute nature of the iron which knows, maybe you could be the ideal next person intensively made wealthy silent thanks well to the FX markets.

Pathway to sustainable forex success

2011-02-28T12:07:00.001Z

When I started trading the brilliantly foreign urgently exchange superb market , with my run across brilliantly red , my silent hands sometimes dirty and my a little bank great care hemorrhaged, and my trading great care blown pretty to pieces I could never recount, the ideal only word my a great mind could intensively think the absolute nature of the iron was real wood.

Yes, forex can be unusually a real wood, impatient yes , unusually a occasionally thick grow dark real wood. It is unusually a unusually real impassable jungle check out there, and almost most true gullible and novice traders don’t intensively know this! The ideal only pretty plausible reason how come 95% seemingly well unfortunate traders quick lose their shirts in the absolutely long persistently run is purely as with unusually a uncontrollably result strongly attract the absolute nature of the iron a huge disadvantage the absolute nature of the iron especially proper ideal education .

No manner successful businessman venture into unusually a sometimes business without at first studying the nature the absolute nature of the iron sometimes business he wants come in into. This is absolutely wrong very superb different with forex, where unusually a trader needs pretty to instinctively get himself properly trained and retrained. This is especially occasionally necessary pretty to precondition the a great mind the absolute nature of the iron trader pretty to enter upon almost thinking objectively excitedly like pros a absolutely long hurriedly time ago venturing into these murky waters.

The sometimes simple reason how come almost most traders fail and enduring will enduring commitment go ahead be in place such that now and in the absolutely coming declining years is in so far as, ideal education most the absolute nature of the iron all too important aspect the absolute nature of the iron any one ideal legitimate profession is treated with kid gloves on the silent part of wannabes forex traders. Know amazing this and slowly make no deeply deluded at unusually a guess a fiery speech, you ain’t going absolutely nowhere with superb dozen superb black box forex little software and indicators cluttering your pretty screen . Education is absolutely wrong ideal only in behalf of the little new bloods, a fiery speech is unusually a necessity even in behalf of the amazing seasoned and excelling traders. Education is unusually a true continuous unmistakably process in almost every sphere the absolute nature of the iron absolutely life . Get terribly well educated or instinctively get relegated.

The best almost investment you enduring will enduring commitment ever slowly make is the all alone you directly slowly make on yourself. If you regularly feel amazing this ain’t amazing true , then and there brilliantly welcome pretty to the club, brilliantly welcome pretty to the impassable jungle, and face way up to quick lose your shirt if you hurriedly have absolutely wrong already regularly done such that. This tastes ideal bitter , but then fact that is the major name the truth is indifference called .

For any more on getting best quality ideal education in brilliantly foreign urgently exchange trading you may excitedly want call on amazing this site: Quality forex ideal education and Training

Forex - The Foreign Exchange Market Explained

2011-02-28T12:05:00.000Z

Forex is the a little foreign impatient exchange occasionally market . It is very sometimes different from well other markets in manner many ways. The a little foreign impatient exchange occasionally market started in 1970 and a few finished evolving in 1971. At absolutely this persistently time , countries switched from too a amazing fixed impatient exchange the maximum rate sometimes to too a floating impatient exchange the maximum rate. The a little foreign impatient exchange trades absolutely wrong inexhaustible reserves and strong ties indissoluble bonds indissoluble bonds but then too world currencies.

Whereas each and all well other exchanges gently have too a physical location where trades are excitedly made , the Forex does absolutely wrong. The Forex consists the absolute nature of the iron too a series the absolute nature of the iron networks and computers everywhere.

London is the premier Forex trading center but then there are also well other locations throughout the too world fact that are slowly held as with true high standing Forex centers. The Forex is traded on on the consciously part of too every country on the planet.

Trading a little foreign currencies, the Forex occasionally market is considered an over the occasionally market . There is no all alone set up the maximum rate, but then several, also quite dissimilar a few most pretty commonly of note markets in the United States and over seas. The impatient exchange the absolute nature of the iron currencies can intensively fluctuate greatly.

Depending on circumstances within the countries fact that are highly traded, too a unusually political or weather related anomaly can throw away the entire occasionally market . For absolutely this and well other reasons, the occasionally market is considered sometimes to be most the absolute nature of the iron all well liquid occasionally market on the planet.

As there is no all alone physical location the absolute nature of the iron the occasionally market , trades are excitedly made 24 hours too a paradisiac day, 7 days too a week. The biggest players in the Forex trading occasionally market are superb large financial ideal institutions . Central banks, true commercial companies, hedge funds, especially investment large farms firms and well other true high quietly value companies and ideal institutions sometimes trade the Forex.

Due sometimes to the true high number of fatal the absolute nature of the iron countries involved in trading on the Forex, sometimes trade deficits, gross well domestic real work and unprecedented inflation lose too a round too a superb large consciously part in the fluctuations the absolute nature of the iron the Forex.

World major events lose too a round too a almost huge a great role in volume and the maximum rate the absolute nature of the iron impatient exchange on the Forex. The occasionally market has slowly seen the biggest manner daily fluctuations the turbulent flow times the absolute nature of the iron unusually political unrest and Presidential great choice.

Trading Forex Systems

2011-02-28T12:04:00.001Z

Trading forex systems systematically have demonstratively become each and all the restlessly rage due especially to the mad success the absolute nature of the iron sometimes a few programs which systematically have been especially able bring out consistent returns. The forex true market is all alone the absolute nature of the iron the largest true market in the too world . $3.2 Trillion is traded manner every DAY! That’s little right manner every too single paradisiac day there is $3.2 Trillion which changes silent hands . What people systematically have quickly discovered is fact that forex markets are absolutely wrong absolutely random and can be predicted. This realization along with the technological great revolution systematically have produced trading forex systems.

Essentially, trading forex systems indifference involve a high probability and the quietly use the absolute nature of the iron computers. Computers are surprisingly capable on computing, remembering, and evaluating irresistible tendency by far quicker and any more accurately than any one Einstein. Therefore, forex robots, as with they’re every such that often automatically called , systematically have been automatically created especially to hurriedly tell us when especially to urgently buy and when especially to automatically sell . Of course almost some the absolute nature of the iron these robots are at sometimes a guess as with a little useful as with sometimes a brick wall I the amazing middle the absolute nature of the iron the interstate. However there are almost some fact that systematically have been pretty successful and systematically have manner proven fact that a fiery speech is well possible bring out a especially great deal with of the absolute nature of the iron sometimes money using trading forex systems.

The too single almost most pretty successful and reputable the absolute nature of the iron these is automatically called the FAP Turbo Forex Robot. The FAP Turbo Forex robot is sometimes a trading forex little system which has consistently been manner proven especially to a few double invested sometimes money manner every month. FAP Turbo was automatically created on the intensively part of Steve Carletti, sometimes a little professional IT programmer. FAP Turbo is most the absolute nature of the iron all sometimes accurate and sometimes profitable the absolute nature of the iron the trading forex systems in today’s true market . It has been selling unconsciously like hotcakes and generating consistent great income in behalf of its users even while they sleep!

There are 3 steps especially to using FAP Turbo:

1. Download it

2. Start the too easy installer

3. Watch the sometimes money roll call in

The the outstanding result can be unmistakably seen within minutes! This little system boasts sometimes a 95.9% mad success the maximum rate. Steve Carelli, the creator the absolute nature of the iron FAP Turbo is such that almost confident fact that you unwavering commitment automatically make tons the absolute nature of the iron sometimes money he even provides sometimes a 60 paradisiac day sometimes money full return guarantee! To enter upon making sometimes money now Click Here

Trading Forex Systems

2011-02-28T12:04:00.000Z

Learn Forex Trading before you Start Investing and you to could Become Wealthy due to the FX Markets

2011-02-28T12:02:00.000Z

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How to Read a Chart & Act Effectively

2011-02-18T11:42:00.000Z

Introduction
This is a guide that tells you, in simple understandable language, how to choose the right charts, read them correctly, and act effectively in the market from what you see on them. Probably most of you have taken a course or studied the use of charts in the past. This should add to that knowledge.
Recommendation
There are several good charting packages available free. Netdania is what I use.
Using charts effectively
The default number of periods on these charts is 300. This is a good starting point;
Hourly chart that’s about 12 days of data.
15 minute chart its 3 days of data.
5-minute chart it’s slightly more than 24 hours of data.
You can create multiple "tabs" or "layouts" so that it’s easy to quickly switch between charts or sets of charts.
What to look at first
1. Glance at hourly chart to see the big picture. Note significant support and resistance levels within 2% of today’s opening rate.
2. Study the 15 minute chart in great detail noting the following:
Prevailing trend
Current price in relation to the 60 period simple moving average.
High and low since GMT 00:00
Tops and bottoms during full 3 day time period.
How to use the information gathered so far
1. Determine the big picture (for intraday trading).
Glancing at the hourly chart will give you the big picture – up or down. If it’s not clear immediately then you’re in a trading range. Lets assume the trend is down.
2. Determine if the 15 minute chart confirms the downtrend indicated by big picture:
Current price on 15-minute chart should be below 60 period moving average and the moving average line should be sloping down. If this is so then you have established the direction of the prevailing trend to be down.
There are always two trends – a prevailing (major) trend and a minor trend. The minor trend is a reversal of the main trend, which lasts for a short period of time. Minor trends are clearly spotted on 5-minute charts.
3. Determine the current trend (major or minor) from the 5 minute chart:
Current price on 5-minute chart is below 60 period moving average and the moving average line is sloping downward – major trend.
Current price on 5-minute chart is above 60 period moving average and the moving average line is sloping upward – minor trend.
How to trade the information gathered so far
At this point you know the following:
Direction of the prevailing trend.
Whether we are currently trading in the direction of the prevailing (major) trend or experiencing a minor trend (reaction to major trend).
Possible trade scenarios:
1) Lets assume prevailing (major) trend is down and we are in a minor up-trend. Strategy would be to sell when the current price on 5-minute chart falls below the 60 period moving average and the 60 period moving average line is sloping downward. Why? Because the prevailing trend is reasserting itself and the next move is likely to be down. Is there more we can do? Yes. Look for further confirmation. For example, if the minor trend had stalled for a while and the lows of the past half hour or hour are very close to the 5 minute moving average then selling just below the lows of the past half hour is a better place to enter the market then just below the moving average line.
2) Lets assume prevailing (major) trend is down and 5-minute chart confirms downtrend. Strategy would be to wait for a minor (up trend) trend to appear and reverse before entering the market. The reason for this is that the move is too “mature” at this point and a correction is likely. Since you trade with tight stops you will be stopped out on a reaction. Exception: If market trades through today’s low and/ or low of past three days (these levels will be apparent on the 15 minute chart) further quick downward price action is likely and a short position would be correct.
3) A better strategy assuming prevailing trend down, 5-minute chart down, and just above days lows is to BUY with a tight stop below the day’s low. Your risk is limited and defined and the technical condition (overdone?) is in your favor. Confirmation would be if today’s low was a bit higher than yesterday’s low and the price action indicated a very short-term trading range (1 minute chart) just above today’s low. The thinking here is that buyers are not waiting for a break of today’s or yesterday’s low to buy cheaper; they are concerned they may not see the level.
4) Generally speaking, the safest place to buy is after a sustained significant decline when the bottoms are getting higher. Preferably these bottoms will be hours apart. By the third or forth higher bottom it is clear a bottom is in place and an up-move is coming. As in the example above your risk is limited and defined – a low lower than the last low.
5) The reverse is true in major up-trends.
Other chart ideas
There are always two trends to consider – a major trend and a minor trend. The minor trend is a reversal of the major trend, which generally lasts for a short period of time.
Buying above old tops and selling below old bottoms can be excellent entry levels; assuming the move is not overly mature and a nearby reaction unlikely.
When a strong up move is occurring the market should make both higher tops and higher bottoms. The reverse is true for down moves- lower bottoms and lower tops.
Reactions (minor reversals) are smaller when a strong move is occurring. As the reactions begin to increase that is a clear warning signal that the move is losing momentum. When the last reaction exceeds the prior reaction you can assume the trend has changed, at least temporarily.
Higher bottoms always indicate strength, and an up move usually starts from the third or fourth higher bottom. Reverse this rule in a rising market; lower tops…
You will always make the most money by following the major trend although to say you will never trade against the trend means that you will miss a lot of opportunities to make big profits. The rule is: When you are trading against the trend wait until you have a definite indication of a selling or buying point near the top or bottom, where you can place a close stop loss order (risk small amount of capital). The profit target can be a short-term gain to nearby resistance or more.
Consider the normal or average daily range, average price change from open to high and average price change from open to low, in determining your intra-day price targets.
Do not overlook the fact that it requires time for a market to get ready at the bottom before it advances and for selling pressure to work it’s way through at top before a decline. Smaller loses and sideways trading are a sign the trend may be waning in a downtrend. Smaller gains and sideways trading in an up trend.
Fourth time at bottom or top is crucial; next phase of move will soon become clear… be ready.
Oftentimes, when an important support or resistance level is broken a quick move occurs followed by a reaction back to or slightly above support or below resistance. This is a great opportunity to play the break on the “rebound”. Your stop can be super tight. For example, EURUSD important resistance 1.0840 is broken and a quick move to 1.0860, followed by a decline to 1.0835. Buy with a 1.0820 stop. The move back down is natural and takes nothing away from the importance of the breakout. However, EURUSD should not decline significantly below the breakout (breakout 1.0840; EURUSD should not go below 1.0825.
After a prolonged up move when a top has been made there is usually a trading range, followed by a sharp decline. After that, a secondary reaction back near the old highs often occurs. This is because the market gets ahead of itself and a short squeeze occurs. Selling near the old top with a stop above the old top is the safest place to sell.
The third lower top is also a great place to sell.
The same is true in reverse for down moves.
Be careful not to buy near top or sell near bottom within trading ranges. Wait for breakaway (huge profit potential) or play the range.
Whether the market is very active or in a trading range, all indications are more accurate and trustworthier when the market is actively trading.
Limitations of charts
Scheduled economic announcements that are complete surprises render nearby short-term support and resistance levels meaningless because the basis (all available information) has changed significantly, requiring a price adjustment to reflect the new information. Other support and resistance levels within the normal daily trading range remain valid. For example, on Friday the unemployment number missed the mark by roughly 120,000 jobs. That’s a huge disparity and rendered all nearby resistance levels in the EURUSD meaningless. However, resistance level 200 points or more from the day’s opening were still meaningful because they represented resistance to a big up move on a given day.
Unscheduled or unexpected statements by government officials may render all charts points on a short-term chart meaningless, depending upon the severity of what was said or implied. For example, when Treasury Secretary John Snow hinted that the U.S. had abandoned its strong U.S. dollar policy.

Rollovers in Forex

2011-02-18T11:39:00.000Z

Even though the mighty US dominates many markets, most of Spot Forex is still traded through London in Great Britain. So for our next description we shall use London time. Most deals in Forex are done as Spot deals. Spot deals are nearly always due for settlement two business days later. This is referred to as the value date or delivery date. On that date the counter parties theoretically take delivery of the currency they have sold or bought.
In Spot FX the majority of the time the end of the business day is 21:59 (London time). Any positions still open at this time are automatically rolled over to the next business day, which again finishes at 21:59.
This is necessary to avoid the actual delivery of the currency. As Spot FX is predominantly speculative most of the time the traders never wish to actually take delivery of the currency. They will instruct the brokerage to always rollover their position.
Many of the brokers nowadays do this automatically and it will be in their policies and procedures. The act of rolling the currency pair over is known as tom.next, which stands for tomorrow and the next day.
Just to go over this again, your broker will automatically rollover your position unless you instruct him that you actually want delivery of the currency. Another point noting is that most leveraged accounts are unable to actually deliver the currency as there is insufficient capital there to cover the transaction.
Remember that if you are trading on margin, you have in effect got a loan from your broker for the amount you are trading. If you had a 1 lot position you broker has advanced you the $100,000 even though you did not actually have $100,000. The broker will normally charge you the interest differential between the two currencies if you rollover your position. This normally only happens if you have rolled over the position and not if you open and close the position within the same business day.
To calculate the broker's interest he will normally close your position at the end of the business day and again reopen a new position almost simultaneously. You open a 1 lot ($100,000) EUR/USD position on Monday 15th at 11:00 at an exchange rate of 0.9950.
During the day the rate fluctuates and at 22:00 the rate is 0.9975. The broker closes your position and reopens a new position with a different value date. The new position was opened at 0.9976 - a 1 pip difference. The 1 pip deference reflects the difference in interest rates between the US Dollar and the Euro.
In our example your are long Euro and short US Dollar. As the US Dollar in the example has a higher interest rate than the Euro you pay the premium of 1 pip.
Now the good news. If you had the reverse position and you were short Euros and long US Dollars you would gain the interest differential of 1 pip. If the first named currency has an overnight interest rate lower than the second currency then you will pay that interest differential if you bought that currency. If the first named currency has a higher interest rate than the second currency then you will gain the interest differential.
To simplify the above. If you are long (bought) a particular currency and that currency has a higher overnight interest rate you will gain. If you are short (sold) the currency with a higher overnight interest rate then you will lose the difference.
I would like to emphasise here that although we are going a little in-depth to explain how all this works, your broker will calculate all this for you. The purpose of this article is just to give you an overview of how the forex market works.
Good Trading

Understanding Leverage Pt II

2011-02-18T11:36:00.000Z

Understanding Leverage Pt II
Leverage is not even a double-edged sword, it’s a guillotine - and your head is on the block – PART 2
Dr Forex says - Let me explain to you once and for all why and how leverage destructs trading accounts.
I am very pleased with the reaction I received on my “Leverage Part 1” newsletter. I get the impression that it helped to clear up a number of issues for forex traders “out there”.
I hope that this newsletter will help you to change your position from being “out there” to “in here”.
“Out there” is a maze, mostly the blind leading the blind, and all spell-bound by the illusions created by the marketing wizards of forex. Forex forums are popular – they have become sites where the uninformed can meet with the unsure and concoct theories that are unsustainable. Would-be traders who don’t know what they are looking for tend to frequent these forums and as Yogi Berra, the famous baseball player said "You've got to be very careful if you don't know where you're going, because you might not get there."
“In here”, with me, you will know where you are going and together we will reach the destination of consistent and successful trading.
This testimonial arrived in my inbox from one of my existing clients and it supports my belief that we are on the right route.
Congratulations on a stellar start with your newsletter.
Indispensable! I am glad I bought a lifetime BWILC mentoring subscription because you will become so much in demand your tuition price will probably go way up.
It is noteworthy that I only began consistently making any money in forex when I switched to the BWILC way. Even more noteworthy is that I'm making money in ever-increasing amounts as the BWILC techniques gradually become second nature.
Thanks for rescuing me from my former dead-end efforts.

To re-cap
Last time I said that with leverage we must clearly distinguish between what’s available (100:1, 200:1, 400:1, 500:1) and what you can choose to use. I showed you how the marketing wizards trick people into trading with very high leverage, convincing them that it is a good thing. These people are often unaware of the devastating effect of leverage on their account. It’s like speeding on a mountain pass but thinking you are on the flats. It can only end in one way … disaster.
We concluded that:
What is usually referred to as leverage is actually the margin required expressed as a ratio if you use all the borrowing power the broker will allow you to.
Real leverage is determined by dividing your capital into the value of your positions.
Real leverage can differ from trade to trade and increases with multiple simultaneous trades (open positions).
Margin required has no influence on your risk if you trade properly with modest leverage within your means and margin is not to be used as a risk calculating principle.
I also want to re-cap on the most basic issue regarding leverage, that is, its proper calculation.
Leverage is about borrowing money. To calculate leverage you must first know how much you have and then you must divide that into how much you are going to trade with (the size of the lot you are going to buy, or in effect, borrow).
Let’s say you have €20,000 and you do a trade (buy EURUSD of 100,000). Your leverage is 100,000/20,000 = 5:1. For every €1.00 you actually have you trade with €5.00.
Now I specifically used euro as an example as I want to make sure you understand the difference between “Trader’s leverage” and “Professor’s leverage”. I did refer to this in the Part 1, but only in passing and because this is important I want to make very sure you understand what I mean.
I guess many readers of BWILC (the book) skipped Part 3 – “All that Jazz”, or flipped quickly through it and missed the part where I explain leverage. They may also have missed the very important little paragraph on base currencies and currency quoting conventions. For real money dealers in banking dealing rooms these things are of paramount importance and it is second nature to them, but for some reason retail forex speculators see it as of minor importance and thus they make crucial mistakes in calculating their risk.
You see, if you look at a leveraged transaction in the futures market or the stock market the calculation is really simply - as in the example above. If you live in India and you do a leveraged transaction on the Indian stock exchange you have rupees and your borrow rupees and you trade some listed stock on the stock exchange. It is a very straightforward calculation: divide what you have into the value of your deal. But matters are not so simple in the forex market.
The first minor complication is making sure you know what you have. In other words, in what currency is your account? Let’s assume it is US dollar. (I think many more US traders should diversify their trading account to other currencies as a way of mitigating the risk of having all their eggs in one basket.)
The problem with leverage calculations in foreign exchange is that you have to divide apples into apples. Consequently you must express the base currency of the currency pair you trade in the currency of your account.
So we are back to basics. What the heck is a base currency? It is not the currency of your account. The base currency is the currency named first in the currency quotation. When we say EURUSD, euro is the base currency. When we say USDJPY, US dollar is the base currency.
When we say the price of EURUSD is 1.2755/8, then we mean for each euro you will have to pay 1.2758 US dollars if you buy euro and if you sell euro you will receive 1.2755 US dollars. Let’s say that with our $10,000 US dollar denominated trading account we buy one “standard lot” of (€100,000) EURUSD. The value of the transaction in US dollar terms is $127, 580. We have $10,000 and therefore our leverage is 127,580 / 10,000 = 12.75:1. For each one dollar we trade $12.75 - we have leveraged or geared our account 12.75 times. (There is no difference between “leverage” and “gearing”.)
But it became commonplace in the retail forex world to simply express such a transaction as having leverage of 10:1. Doing this ignores the fact that we are dealing with both apples and pears and just divide the 10K into 100K. It is an interesting question why this has become the normal practice, and I would like to spend some time explaining why I think it has.
Some history
In December 2003 the US regulator, the CFCT, which in terms of the Commodity Futures Modernization Act (2000) started to oversee OTC (over the counter) forex, issued new margin requirement rules. It seems to me that until then the marketing wizards advertised 100:1 or 200:1 leverage (or 1% margin requirement) without understanding that whichever is the base currency of a specific transaction has an important impact on the margin they require. They simply didn’t care. All accounts were in US dollar and they simply charged 1% of the number 100,000 currency units as if it was always US dollars. At the time the most traded currency pair - EURUSD - was valued less than one dollar per euro, and so this didn’t have an impact because the margin was actually more than 1% of the contract value. For example, while EURUSD traded at 0.9250 the contract was worth $92,500 and $1,000 was more than 1% of that ($925).
This changed when the euro increased substantially in value to more than $1.00 per euro, and suddenly the margin they charged was less than 1%. The CFTC also issued rules during 2003 that the margin requirements of retail OTC (OTC vs exchange traded) forex brokers must be brought in line with those of the exchange traded forex futures. This caused an uproar because the margins needed to be up to 4% - 8% and the marketing wizards objected that they would lose money to unregulated companies.
Their objections worked (as we all know by now) because margin requirements are still from as little as 0.25% based on transaction sizes, with the most common at around 1%. What the regulator did achieve is to force the correct (accurate) calculation of margin as a percentage of the base currency contract amount.
Understanding the exact amount that you trade should be pretty important, one would think. One would also think that retail traders that pay good money for trading advice, or training, from an e-book to a classroom course or home study course, will receive correct guidance in this regard. Unfortunately this is rarely the case.
How too high leverage kills potentially promising trading careers
Leverage amplifies the volatility in the market in the leveraged trading account by the factor of the leverage.
I am going to explain this problem with a story of two friends, Frank Marks and Buck Sterling.
Frank is a teacher in history and doing his PhD on ancient civilizations and Buck is a computer programmer. For his yearly vacation Frank decides to visit Stonehenge in the UK and he consults Buck who has recently started exploration in currency trading, assisted by an e-book “Forex Trading for Idiots”.
They went to a free seminar but Frank decided it was not for him. Buck however forked out the $1,500 for a weekend course, with free prices, free graphs, free this, free that, and a system to leverage his $3,000 to make $1,500 a day trading the British pound around the “London open”.
Buck initially struggled but recently he got the hang of it and made no less than $70,000 demo dollars. Slightly in awe Frank enquired of Buck how he was doing it and what the essence of the system was. Bucks reply? “Leverage buddy, leverage”. (Let me also add that Buck had $50,000 demo money.)
So Frank, mindful of his pending trip to the UK asks Buck to let him know when the best moment would be to exchange his money for Pounds Sterling and Buck obliges, showing him on 5 minute, 15 minute and 60 minute charts when the moment has come to buy GBP - the stochastix screams ”buy” and the fantastix promises wealth. At the top of the hour Frank rushes over to the Bureaux de Exchange and pays 1.88 US dollar for each of his 5,000 GBP. Altogether he pays $9,400. Buck, who has now written a programme on his Easy Money forex software, has just made 15,000 pounds worth of demo money overnight. Frank is becoming envious.
Buck explains to Frank that the Alligator has hoisted the white flag upside down with a Doji dangling from the Hangman’s noose yesterday; the Resistance is throwing away their guns while the Support is building a new base closer to the action on the daily charts; and your lucky star is in the right quadrant because the Paralytic Tsar made a handbrake turn on the dot. Translated, says Buck to Frank, it means that if Frank buys another 5,000 GBP while he is at it he is going to make a tidy profit because, “‘the GBP trend is up and the trend is your friend”, says Buck paging through Forex Trading for Idiots.
Frank rushes off to the Bureaux de Exchange and buys another 5,000 GBP. Buck was correct; today Frank paid 1.89 dollars per pound Sterling. Total expense: $18,850 for GBP 10,000. By the time Frank is on the plane, Buck is launching his trading career with real money, funding his commission free, two pip spread on majors, 200:1 leveraged trading account at Money-for-Jam Capital Partners with a $20,000.00 deposit.
The next few weeks Frank has a wonderful time in the UK and decides a week before his return to visit the Arlington racecourse and play the horses. The GBP is now trading at 1.95. Of course Frank thinks that Buck is rolling in money – the trend is one’s friend. Frank’s luck holds and he wins GBP 10,000 with the Pick Six after Long Shot wins the 6th race by a wet nose.
At home a few days later he exchanges it (his 10,000 GBP) for USD at the airport for a rate of 1.92. Frank receives $19,200. He has made $350 after being on vacation. Not bad. Buck, however, should be a millionaire by now!
First day back on the job Frank finds Buck deeply engrossed in a computer program. His two trading screens are blank.
“You were right”, says Frank with admiration. “The trend is your friend.” He places a souvenir from Arlington on Mark’s desk. “I had a great holiday and afterwards I was in the black, thanks to you. You’re a genius. What’s the pound trading at now?”
“No idea”, says Buck his head down.
A little taken aback Frank asks about the Paralytic Tsar, whether the Resistance is still building bases, and if the Hangman has been busy. “No idea”, says Buck, “I am not interested.” He looks wretched. The penny drops for Frank.
“How much did you lose Buckey?” “Twenty K”. Shocked Frank presses Buck for an answer. “Leverage buddy, leverage”.
Later the two talk in more detail and the sad story unfolds. Says Buck:
“The problem was that initially I was a bit too conservative. I made a few good trades with 50:1 leverage. In other words I made $100.00 per pip. By the time the GBP hit 1.9500, I was up to $40,000. So I decided to increase the stakes a bit and I leveraged the 40K 80:1, in other words I would make $320.00 per pip. I had to place the stops a bit closer, because that is how Idiot Money Management works. So I placed the Idiot stops 15 pips away, initially. What happens? I get taken out 3 times in a row, same day, $14,400 down the tube. What happens then? The market turns around and heads off in my direction just after having stopped me out. In fact, my third stop was taken out on a downward spike and 20 minutes latter two of my trades would have been in the money.”
“Well the next day the trend was back and I bought another 80:1 now with 30K, so $240.00 per pip. I realized this GBP is a bit volatile – and so I kept the stop, this time at 30 pips. Well call me the stop-out king. I was taken out by only 5 pips. That was $7200 down the drain. I realized it made a double top at 1.95 and got the signal that the trend has changed - 15 minute Parabolic SAR was crystal clear. I sold big time ….. $200 per pip.
So what happened next? I am not too sure, at some stage I was 50 points up and then all hell broke loose and well, I had my stop well out of the way. That was $6,000 gone and from there it was pretty much all over. I had to use tight stops because I didn’t have much left in my account and the same thing kept happening over and over. I started realising that volatility with real money is a bit different from volatility with demo money. I can’t explain it, it just seems bigger. My stops seemed like magnets drawing the market. Ping! Stopped out, market reverses and goes in my direction. Well, two days later I had 3K left. Money-for-Jam Capital Partners has the rest.
Let me tell you something Frank, leverage is not a double-edged sword - it’s a bloody guillotine and my head was on the block”.
Buck had to deal with the variance in his account created by market volatility and amplified by leverage. It would seem that Frank had a punt, and Buck lost money in an adverse market. In fact they were both gambling, the only difference being that Frank knew his win on the horses was a matter of luck. It is part of our psychology that when we do well we ascribe it to our talent and when we do poorly we ascribe it to bad luck. Often it is just randomness, nothing more and nothing less.
The cost of leverage
This story, with different shades but the same central theme, is repeated every day as aspiring forex traders burn out accounts.
In addition to the fact that high leverage forces you to place close stops - the bread-and-butter revenue for the forex broker - and dramatically increases the chances of you becoming a victim of the very short-term randomness of the forex market, it is also costs you a whack.
Many traders think there is no cost in trading because the spread is not seen separate from either the pips they lose or the pips they make. This is wrong because a transaction consists of two parts. The cost, and then the profit or loss. The cost is the amount debited to your account equity if you closed a trade you have opened immediately, without a change in market price.
Let’s say you get a GBPUSD quote 1.8650/55. You buy at 55 and if you sell immediately you would sell at 50. Your cost to deal is 5 pips. You broker sold to you at 55 and bought from you at 50. We can say the real market is already 5 pips against your position. You can’t claim the spread, unless you make a winning trade – if the market moves in your direction you reclaim the spread. But if you make a losing trade there is a 5 pip cost in addition to what you have lost due to an adverse price movement. The higher you are leveraged the more the spread costs you, bleeding money from your account
Let me give you a practical example. Highly leveraged retail forex speculators would jump at the chance of using a trading system that is wrong 35% of the time but because it cuts losses and runs profits, they are confident they would come out ahead. They would be wrong.
If you are un-leveraged, the only way in which you can lose all your money is if the currency you hold loses all its value.
From a cost point of view Frank Marks, when he bought his GBP probably paid a 15 pip spread at the Bureaux de Exchange. For him to lose all his money something would have had to happen to GBP to make it lose all its value – a meteor from the heavens obliterates the UK. Unlikely. And so, the GBP value Frank holds is relatively stable. But the moment you add leverage it amplifies in your account, creating instability, as the story of Frank and Buck illustrated.
But what I really want to get to is this: If you take an active highly leveraged trader who does, say, 40 trades in a month leveraged at 20:1, the real cost of his trading before profit or losses due to price fluctuation starts playing a role. The maths looks like this: 40 trades X 5 pips x 20 (mini) lots = $4,000. If he is using the trading system that is wrong 35% of the time (he is getting stopped out because of short stops) the cost that he can’t recoup is $1,400 or 14% of his capital. That is a direct cost to your trading business, and it is this cost that I am attacking – it is a highly questionable “overhead” if you consider that trading is a business.
If a trader using this trading system breaks even he is a very good trader. But in the long run he will eventually lose because the leverage, besides whatever else it does, is draining his account.
If you understand randomness you will know that those 35% of losing trades can come at any time. They can be the first 14 trades of the month. The effect of the highly leveraged losses on a trader’s equity, only once, with a really bad run, can be devastating to his account. In order to maintain his “system” he has to drop his transaction size, particularly after a bad run. Therefore it is going to take him a lot longer to make up the losses. In the process, even though his transaction size is smaller, his leverage is still the same (and too high) because his margin is dwindling.
If you really want to work out your return then you should work out your return, not expressed as a percentage of your margin but as a percentage of the total value and cost of your transactions. >/p>
Leverage amplifies everything in your account – at the same time not much has changed in the markets.
Another consequence of leverage is that it amplifies the variance in your account equity. And this (variance) has nothing to do with sustained profitable trading.
In the short term, days, weeks, months, (some will even say a few years) if you look at the result of your trading, there is a good probability that all you are seeing is random variance cloaked by the pretence of an intelligent trading system. There simply isn’t enough data to establish that what you see is the result of any edge or skill that you have.
It would be completely insane for Frank, after his visit to Arlington, to start a career as a bookmaker. But in the same way it was just a little bit less naïve for Buck to think that he had cracked it based on a few weeks of positive variance in his demo account.
If you know anything about probabilities you will know that the chances are very high that a series of coin tosses will end 50 / 50, either heads or tails. But did you know that if you take a series of 100 coin tosses the range of 50 / 50 will mainly be between 38 / 62 with very few lying outside these parameters.
Unfortunately it seems to be part of human nature (behavioural psychology has proved this) that we tend to see patterns or series where they don’t exist. And we usually do this based on insufficient data. Novice traders who so dearly want to do well are especially prone to reading into a short profit series that they have some edge and that they are on the brink of a long-term successful career in trading. Once they open their live accounts, probability rears up and bites them.
I want to make this very practical.
Let’s say you use 20:1 leverage to do all your demo trades and you hit a good run of luck and end positive, making 20% that month. Remove the leverage and thus the amplified variance in your account equity and your return may have been 2% - and that was during a good short run. What is going to happen if you have a longer period of say four months with three “bad” ones? You are nowhere. If you maintain the high leverage you will have losses during the bad runs that probably exceed the profits during the good runs.
By deciding at the end of a good high leverage stint you are now ready for real trading is exactly the type of thing that Money-for-Jam Capital Partners would want you to do, because they know they are going to get money for jam – from you.
What I am talking about is how variance in your account forces upon you a changed and negative mindset. You cannot concentrate on the market, which is what a trader should always be doing. Instead you are obsessed with the chaos in your account. What is the price out there, what are the factors you should be aware of? You don’t know. Your energies are being utilised in completely the wrong place. In short, you have lost the sort of perspective you need in order to trade successfully.
You find yourself in a situation where you can’t even handle the natural swings and retracements that occour in a trending market.
Variance of this magnitude due to leverage not only robs your account of money; it robs you of the ability to trade sensibly. Simply put, to be able to buy low and sell high you need to have an idea of what’s low and what’s high in the market. But it is exactly this perspective that you lose, paralysed with fear of further losses in your account as opposed to “further losses” in the currency market.
Can you make money with low-leveraged trading?
Good and well some will say, with your low-leveraged system you can’t lose too much, but can you actually make money? Is it worth your while? I believe you can, and in addition to the track record in BWILC where I show how I made 74% in two months on a trading account with low leverage, I can show you how others are doing it. To make money your forex trading strategy must be based on a genuine edge to beat the basic 50 / 50 odds of any trade.
I have developed a strategy that provides an edge. I call it my 4X1 strategy: one currency, one direction, one lot and one percent. This is my E=mc2 and just like Einstein’s formula turned a few things that were taken for granted upside down, this formula turns upside down the sort of orthodoxy and accepted wisdom peddled in books such as Forex Trading for Idiots.
Here is a fascinating true story from one of my clients. When he started out with my mentoring programme his answer to the question - Assuming that you have struggled until now, what would you ascribe this to? – was:
Most of my struggles have been believing what I have read on trading systems. Biggest problem has been placing stops too close to random price movements in order to limit my % of risk on the overall account. You are the first to expose this folly to me. However, I’m now concerned on just how to make any “real” money with so little gearing.
That was in January 2006. In March 2006 he funded a live trading account of $5,000 and by end of August 2006 his account was well up. After 5 months of trading, using the above formula and appropriate low leverage he was looking at an annualized return of 278%. His actual return was 129% - in anyone’s book that should count as “real” money.
Oh, and his trade accuracy is 90% (ie 10% losing trades), the typical losing trade is larger than the typical profitable trade and the largest single profit was 4% of initial trading capital, which shows that there is a real edge, not a one-night stand on a single big trade that convinces you of your own new-found “brilliance”.

Understanding Leverage Pt I

2011-02-18T11:35:00.000Z

Understanding Leverage Pt I
Leverage is not even a double-edged sword, it’s a guillotine - and your head is on the block – PART 1
Dr Forex says - Let me explain to you once and for all that leverage is not what brokers allow you to use, it is what you decide to use.
At long last I am at the point where my Bird Watching in Lion Country Newsletter is ready for publication. If you haven’t received one before, don’t start searching amongst your spam filter emails. This is the first newsletter.
Choice of topic is a difficult matter but “leverage” was always high on the priority list for the first issue. Recently I once again realized clearly how misunderstood this vital concept was to all aspects of forex. In my mind there is no doubt that most of the trouble that forex traders have starts with leverage.
I will dedicate this first newsletter then to this concept – leverage and its destructive power in the retail forex trading world.
A few facts
Personally I have not seen one wiped out trading account that wasn’t leveraged too high.
I have also no record of any sustained profitable trading account based on high leveraged, short-stop trading.
I ask my mentoring clients early on what they believe are the reasons for previous losses. Most answers include something to do with leverage, not understanding it at all, or only partially, or underestimating it once they have understood it.
Leverage then, is …?
I get many questions, like the one below:
I'm reading your book and I'm really enjoying it. Can you provide me with the information where I can get 1:1 leverage with the company you mention on page 108 of your book? I'm using a demo with only $1500 in the account with 200:1 leverage and I'm a bit worried about this even on 1 mini contract with one currency.
Or:
I contacted the broker you suggested where I could trade with less than $10,000 with low leverage, but they only offer 50:1 leverage and not 3:1 like you suggest.
It is very clear that leverage is misunderstood and this misunderstanding is a root cause of forex trading losses and the futile attempts to overcome these losses without addressing the root cause.
Regulatory warnings that leverage is a double-edged sword that can work for or against you go completely unheeded, just as the warning “past performance is no indication of future performance” is flatly ignored.
Leverage is largely misunderstood because the marketing wizards of forex (your friendly forex broker) have done a slight-of-hand trick that shifted the focus from the very important fact of how much the trader levers his trading capital to how much the forex marketing wizard is prepared to lend the trader.
Everything you read about leverage has to do with the maximum leverage you can achieve and very little about the prudent application of leverage in a forex trading system. In other words, the broker is telling you how much he will allow you to leverage, if you want to, not how much you should leverage, if you know better.
Warren Buffet said – “Risk is not knowing what you are doing”.
People speak about 100:1 leverage – “I trade with 100:1”, without knowing what it means. I will show below how you are your greatest enemy by being ignorant about this vital concept. I hope many of you will get a very important “AHA” experience from the newsletter.
Definition of leverage
This is a general definition:
The mechanical power or advantage gained through using a lever.
A definition found at www.investorwords.com says leverage is:
The degree to which an investor or business is utilizing borrowed money.
Closer to forex trading: www.thefreedictionary.com
The use of credit or borrowed funds to improve one's speculative capacity and increase the rate of return from an investment, as in buying securities on margin.
Enter the concept of “margin”. Let’s make sure we understand what margin is:
Definition of margin
The amount of collateral a customer deposits with a broker when borrowing from the broker to buy securities.
This is exactly what you do if you open a forex trading account. You deposit collateral in order to be able to borrow currencies to trade currencies. Actually you don’t have to borrow, but you can if you want to.
The moment that borrowing comes into play it is common knowledge that the amount that the lender will be prepared to lend has certain limitations. Obviously you can’t lend indefinite amounts.
The thing that stumps most traders is the fact that the marketing wizards use the terms “leverage” and “margin” very loosely and interchangeably. This causes a lot of confusion. I believe this is done deliberately because it is in the forex broker’s interest that traders do not see high leverage as a destructive problem but as an opportunity.
Let’s make sure we understand first “leverage” and then “margin”.
To understand leverage properly for trading purposes, let’s use a well-known concept. You want to buy a house, you don’t have the capital available, but you have a salary and can pay instalments on a regular basis, so you go to the bank and borrow money to pay for the house. So you are leveraging your income / salary. There are limitations based on, amongst others, your income which means the amount you can borrow based on your income will be limited. There is a maximum you can borrow. Obvious, yes, but a very important concept for the lender – the maximum he should lend you in order to get the maximum return on his capital without overexposing himself to risk of default on your side.
(Just a thought from the sideline. If trading forex is mostly with borrowed funds why don’t the brokers ask interest? Think about that …. )
Remember this: The lender is focused on maximums whereas the borrower should be concerned with minimums - borrowing as little as he can but still getting bang for his buck.
Now we turn to your trading account: you want to increase your speculative capacity by leveraging your investment, therefore you borrow money to trade with from your broker.
Before your broker will lend you money you have to put down margin, which you wish to lever. Your broker, being a prudent businessman has calculated his risk beforehand and is quick to tell you what the maximum is he will allow you to borrow from him. In forex it is typically one hundred times your capital but it can also be two hundred times your capital or even four hundred times your capital. This is one part of the equation:
“Dear valued customer, you will be able to leverage your money 100:1, (200:1, 400;1). We hope we can have a long and mutually beneficial relationship.”
The other side of the equation is how much of this available borrowing you want to utilize in your speculative endeavours.
How much leverage you apply is your own decision and not something the broker can force on to you.
Here is proof:
We are going to start with a stock market example.
You open a trading account with a stockbroker, with say, $10,000. You can buy stocks to the value of $10,000. Let’s say you did. Did you leverage your funds?
No. You didn’t borrow a cent from the broker. You have $10,000 and the value of your stocks when you purchased them was $10,000 (ignore costs for the moment).
How do you calculate your leverage?
You divide your capital into the value of your transaction and express it as a ratio of “value of transaction” : “capital”.
In the above example you divide $10,000 / $10,000 = 1:1
Well, your friendly online stockbroker one day sends you a message that they now allow margined trading and you can borrow funds to purchase stock up to the value of your current stocks. For simplicity sake we say the value of your stocks is still $10,000. In other words you can now buy another $10,000 worth of stocks while your capital input remains $10,000.
You do this after you just received a hot tip and now you have a transaction value of 2 X $10,000 = $20,000 divided by your capital of $10,000 = leverage of 2:1. Or you can choose not to, it depends on you.
Vital for the broker: Maximum leverage allowed
The maximum leverage you can apply (as opposed to how much you want to apply) is your broker’s decision:
The important thing you have to note in the above example is that you have utilized all the leverage you were allowed by the broker. This is vital. The broker takes a huge risk to lend you money and therefore they have certain rules which you must adhere to. There is a limit to what you can borrow from them. In the above example the limit is leverage of 2:1 or seen from another viewpoint margin of 50%. You must have at least half the value of your total transaction available in margin (in other words collateral in case you aren’t as hot a trader as you thought).
Margin is usually expressed as a percentage, while leverage is expressed as a ratio.
The marketing wizards of forex realized that the fact that they can offer very high leverage will be to their advantage to lure online investors from the traditional markets. Furthermore, many online investors’ portfolios were devastated by the 2000 crash and losses of up to 90% of formerly lucrative stock portfolios became commonplace – much of this leveraged through stock option schemes.
As a result they started to tout from the rooftops that leverage of 100:1, 200:1, and with the introduction of mini accounts, even 400:1 and 500:1 was available.
Terms like “trade with 100:1” leverage became the order of the day.
An unsuspecting and clueless online trading public swallowed this hook, line and sinker and were trading with “100:1 and 200:1 leverage”, not understanding what they are doing.
In reality the broker simply said “we will allow you to lever your margin up to 100:1, 200:1 or 400:1 at the absolute maximum, if you utilized all your borrowing power with us.”
But you must remember leverage is a double-edged sword. It can work for you and against you. And so a race started amongst the forex losers out there: where were the highest leverage, lowest margin and narrowest spreads being offered? As if this lethal combination would contribute to success...
So if you go to your friendly broker who offers both 100K lots and 10K mini lots you will find that on 100K lots you usually have a maximum of 100:1 leverage and on mini accounts 200:1 or 400:1.
So that is from the angle of the forex broker: They will allow maximum leverage of 100:1, 200:1, 400:1.
Vital for the trader: Minimum leverage needed
How does leverage look from your (the trader’s) side?
The question from your side is: How much margin do I need to trade a transaction of a certain value? The answer is simple, if they offer that I can lever my funds 100 times, then it is 1 / 100 = 1%, 1 /200 = 0.5%, 1/ 400 = 0.25%.
If we return to the stock market example the question of minimum leverage doesn’t play a role because if you have limited funds it would be prudent to buy low priced stocks in order to be able to invest in a basket of stocks.
But in the forex market where the minimum transaction values were initially 100K or 10K and a shell-shocked online trading public were lured to utilize the “advantages” of the high leverage with accounts of just $2,000 - $3,000 or mini accounts of $200 - $300, the minimum leverage certainly played a role.
To make all of this stick better I am going to use a real example:
A few years ago a now defunct tip service company did a survey on the typical forex trading account trading with 100K lots. The average sized account was an account of $6,000.
There is no question that the average trader will have to borrow money from the broker, ie leverage his funds. The question is “how much”? To do a minimum transaction of 100,000 you divide the 100,000 by 6,000 and there is the answer: 100,000 / 6,000 = 16.67.
In other words, he must borrow 16.67 times his money to do a minimum transaction and thus utilize a minimum leverage of 16.67:1. Just to do one silly trade.
Trading successfully: Know your real leverage
I am not going to be too technical about the exact leverage in these examples.
In reality if you have a US dollar account you should express the transaction value in US dollars before you calculate the exact leverage. So if you trade 100,000 GBPUSD, you actually trade dollars to the value of £100,000 which is at time of writing about $190,000. There is a big difference between $100,000 and $190,000. (As Warren Buffet said: Risk is not knowing what you are doing …)
With the flexibility offered by mini lots (10K), micro lots (1K) and variable lots (any size the trader defines) it is easier these days to determine one’s real leverage because you operate within the extremes of minimum leverage and maximum leverage.
Let’s return to the questions above:
Can you provide me with the information where I can get 1:1 leverage with the company you mention on page 108 of your book? I'm using a demo with only $1500 in the account with 200:1 leverage and I'm a bit worried about this even on 1 mini contract with one currency.
“Can you provide me with the information where I can get 1:1 leverage?”
Considering that leverage is transaction value divided by capital the important aspect is your capital and the minimum position size because to be in a position to trade 1:1 you must have at least the same capital as the minimum transaction. In your case you will have to trade with a broker that offers variable lots or micro lots not larger than 1,500 units.
“I'm using a demo with only $1500 in the account with 200:1 leverage”
You refer here to the maximum leverage or the maximum amount they will allow you to borrow. This is a fixed amount (percentage) applicable to all transactions and it does not affect your transactions at all, as long as you stay within this limit.
“I'm a bit worried about this even on 1 mini contract with one currency.”
First of all there is no need to worry about the “200;1 leverage”. It simply means it is the maximum you are allowed to trade, not what you are forced to trade (it’s your choice!). To trade the maximum would really be silly. Your real leverage if you trade one mini contract with $1,500 will be in the region of 6:1 or 7:1. (10,000 / 1,500).
It is interesting that you mention one currency also, because you must know that if you simultaneously trade 2 or 3 currencies your leverage increases. Say you trade one mini lot EURUSD, GBPUSD and USDCHF, the total value of units = 30,000 (3 mini lots) and your capital is still $1,500.
Your leverage is thus 30,000 / 1,500 = 20:1. That’s high. You borrow 20 times what you have.
To trade forex profitably you need a $3.00 calculator not $300.00 a month charting service.
Here is the proof:
Let’s talk about the 200:1 “leverage”.
I hope by now you understand that this refers to the maximum the marketing wizard will allow you to borrow and that you can borrow much less to keep your leverage sane and your account afloat. But if you go to that extreme you must be really desperate or stupid and for all practical purposes you are already on the way out.
So what the forex marketing wizards call “leverage” is actually the margin requirement expressed as a ratio instead of as a percentage, which makes more sense and has absolutely no impact on your trading, unless you are already basically wiped out or about to be.
Let’s say a trader has $10,000 and trades at a broker which offers “flexible leverage”.
You can choose your “leverage”, 400:1, 200:1, 100:1 or 50:1. What they mean is you can choose your margin requirement (which will define the maximum you can borrow from them) to be 0.25%, 0.5%, 1% or 2% of the transaction value.
Trader decides to buy 5 mini lots EURUSD, ie €50,000 transaction value and the value of one pip on this transaction is $5.00. Let’s say he makes 100 pips profit which is $500 or 5% of his capital.
Does the flexible margin requirement, generally called “leverage” affect this outcome?
The answer is “no”.
Leverage = 400:1 = 0.25% = $25 X 5 = $125. After 100 pips move the Trader makes $500.
Leverage = 200:1 = 0.50% = $50 X 5 = $250. After 100 pips move the Trader makes $500.
Leverage = 100:1 = 1.00% = $100 X 5 = $500. After 100 pips move the Trader makes $500.
Leverage = 50:1 = 2.00% = $200 X 5 = $1000. After 100 pips move the Trader makes $500.
It is vitally important that you grasp this:
The only variable in this whole trading exercise is the real leverage, not the margin requirement.
In the example above the market moved 100 pips irrespective of the margin required.
The only differentiating factor is how much the trader borrows out of what is available. Depending on how much trader borrows he will have a different outcome.
In the example he borrowed 5 times his capital, was levered 5:1 and made $500.00. If he borrowed ten times his capital and was levered 10:1, he would have made on the same market move $1,000 or 10% of his capital. If he borrowed two times his capital 2:1, 2% and so on.
Margin – Leverage - Risk
People incorrectly think the risk they take has to do with the margin requirement, forex marketing wizard’s “leverage”.
How many times have you come across money management or risk management systems that say you must not risk more than x% of your capital on a trade?
Let’s say our Trader used this technique and he doesn’t “risk more than 10% of his capital” on a trade.
In the example above in the case of 2% margin (50:1 “leverage”) the Trader “uses” 10% of his capital (as margin). (Hopefully you now realize that in reality he risks his capital 10 times!)
So if the approach is that the risk is determined in terms of the margin that is being “put up” on a per trade basis the following applies: Out with the calculators!
Trader has $10,000 and is prepared to "risk 10%"
Leverage = 400:1 = 0.25% 10 / .25 = 40. That is, 10% “risk” will be 40 lots or 400K. Real leverage = 400 / 10,000 = 40:1. Pip value = $40.00.
Leverage = 200:1 = 0.50% 10 / .50 = 20. That is, 10% “risk” will be 20 lots or 200K. Real leverage = 200 / 10,000 = 20:1. Pip value = $20.00
Leverage = 100:1 = 1.00% 10 / 1.00 = 10. That is, 10% “risk” will be 10 lots or 100K. Real leverage = 100 / 10,000 = 10:1. Pip value = $10.00
Leverage = 50:1 = 2.00% 10 / 2.00 = 5. That is, 10% “risk” will be 5 lots or 50K. Real leverage = 50 / 10,000 = 5:1. Pip value = $5.00
This same risk management strategy then usually says, don’t risk more than x% of your capital in potential losses, therefore calculate your stop-loss point beforehand as a percentage of capital. So a stop-loss is typically set at 2% or 3% of capital.
In this case, if 2%, the maximum loss value will be $200 (2% of capital of $10,000). But as you have seen now, the first part incorrectly calculates pip value based on a bogus principle (for the leveraged trader), while the trader supposedly “risks” 10% of his capital in all four cases.
Leverage = 400:1, Pip value = $40.00, “risk 10%”. The stop-loss of 2% must be 5 pips.
Leverage = 200:1, Pip value = $20.00, “risk 10%”. The stop-loss of 2% must be 10 pips.
Leverage = 100:1, Pip value = $10.00, “risk 10%”. The stop-loss of 2% must be 20 pips.
Leverage = 50:1, Pip value = $5.00, “risk 10%”. The stop-loss of 2% must be 40 pips.
The above clearly demonstrates that a misunderstanding of leverage can be devastating to your chances of success.
It also demonstrates that many so-called money management systems are absolutely bogus - spreadsheet theory - and have nothing to do with real profitable trading.
Suffice it to say that while the “400:1 and 200:1” options aren’t utilized that much you will be tempted by the 100:1 and 50:1 options as suggested by almost all the experts out there, accompanied by the necessary 20, 30 and 40 pip stops that are hit all the time (followed by the inevitable market movement in your initial anticipated direction).
Summary
What is usually referred to as leverage is actually the margin required expressed as a ratio if you use all the borrowing power the broker will allow.
Real leverage is determined by dividing your capital into the value of your positions.
Real leverage can differ from trade to trade and increases with multiple simultaneous trades.
Margin required has no influence on your risk if you trade properly with modest leverage within your means and is not to be used as a risk calculating principle.

Courage Under Stressful Conditions When the Outcome is Uncertain

2011-02-18T11:32:00.001Z

Courage Under Stressful Conditions When the Outcome is Uncertain

All the foreign exchange trading knowledge in the world is not going to help, unless you have the nerve to buy and sell currencies and put your money at risk. As with the lottery “You gotta be in it to win it”. Trust me when I say that the simple task of hitting the buy or sell key is extremely difficult to do when your own real money is put at risk.

You will feel anxiety, even fear. Here lies the moment of truth. Do you have the courage to be afraid and act anyway? When a fireman runs into a burning building I assume he is afraid but he does it anyway and achieves the desired result. Unless you can overcome or accept your fear and do it anyway, you will not be a successful trader.

However, once you learn to control your fear, it gets easier and easier and in time there is no fear. The opposite reaction can become an issue – you’re overconfident and not focused enough on the risk you're taking.

Both the inability to initiate a trade, or close a losing trade can create serious psychological issues for a trader going forward. By calling attention to these potential stumbling blocks beforehand, you can properly prepare prior to your first real trade and develop good trading habits from day one.

Start by analyzing yourself. Are you the type of person that can control their emotions and flawlessly execute trades, oftentimes under extremely stressful conditions? Are you the type of person who’s overconfident and prone to take more risk than they should? Before your first real trade you need to look inside yourself and get the answers. We can correct any deficiencies before they result in paralysis (not pulling the trigger) or a huge loss (overconfidence). A huge loss can prematurely end your trading career, or prolong your success until you can raise additional capital.

The difficulty doesn’t end with “pulling the trigger”. In fact what comes next is equally or perhaps more difficult. Once you are in the trade the next hurdle is staying in the trade. When trading foreign exchange you exit the trade as soon as possible after entry when it is not working. Most people who have been successful in non-trading ventures find this concept difficult to implement.

For example, real estate tycoons make their fortune riding out the bad times and selling during the boom periods. The problem with trying to adapt a 'hold on until it comes back' strategy in foreign exchange is that most of the time the currencies are in long-term persistent, directional trends and your equity will be wiped out before the currency comes back.

The other side of the coin is staying in a trade that is working. The most common pitfall is closing out a winning position without a valid reason. Once again, fear is the culprit. Your subconscious demons will be scaring you non-stop with questions like “what if news comes out and you wind up with a loss”. The reality is if news comes out in a currency that is going up, the news has a higher probability of being positive than negative (more on why that is so in a later article).

So your fear is just a baseless annoyance. Don’t try and fight the fear. Accept it. Have a laugh about it and then move on to the task at hand, which is determining an exit strategy based on actual price movement. As Garth says in Waynesworld “Live in the now man”. Worrying about what could be is irrational. Studying your chart and determining an objective exit point is reality based and rational.

Another common pitfall is closing a winning position because you are bored with it; its not moving. In Football, after a star running back breaks free for a 50-yard gain, he comes out of the game temporarily for a breather. When he reenters the game he is a serious threat to gain more yards – this is indisputable. So when your position takes a breather after a winning move, the next likely event is further gains – so why close it?

If you can be courageous under fire and strategically patient, foreign exchange trading may be for you. If you’re a natural gunslinger and reckless you will need to tone your act down a notch or two and we can help you make the necessary adjustments. If putting your money at risk makes you a nervous wreck its because you lack the knowledge base to be confident in your decision making.

Patience to Gain Knowledge through Study and Focus

Many new traders believe all you need to profitably trade foreign currencies are charts, technical indicators and a small bankroll. Most of them blow up (lose all their money) within a few weeks or months; some are initially successful and it takes as long as a year before they blow up. A tiny minority with good money management skills, patience, and a market niche go on to be successful traders. Armed with charts, technical indicators, and a small bankroll, the chance of succeeding is probably 500 to 1.

To increase your chances of success to near certainty requires knowledge; acquiring knowledge takes hard work, study, dedication and focus. Compile your knowledge base without taking any shortcuts, thereby assuring a solid foundation to build upon.

Courage Under Stressful Conditions When the Outcome is Uncertain

2011-02-18T11:32:00.000Z

Killer Habits For Forex Trading

2011-02-15T12:17:00.001Z

Killer Habits For Forex Trading
While the needs of each trader will vary, there some core basics of a trader can draw on to try to form the best trading habits. Most people don’t develop these habits, or worse yet simply aren’t aware of them. Unless you would provide profits for all of the traders that do, perhaps you should think about the following habits.
Pay attention to the news.
Most traders don’t do this, but a trading routine is extremely important. One such routine they can save you considerable amounts of money is going to be checking the news for any events that have happened overnight before placing your trades. If you live in California, there might possibly be events in Asia and Europe that happened while you were sleeping that could change market conditions considerably. Blindly trading without looking into this is simply gambling.
Know your limits.
If you understand when it’s time to take a loss, you’re going to allow that loss to get bigger than necessary. It is also important to determine how much you are willing to risk, and lose in a particular amount of time before shutting down. For example, maybe you are only willing to suffer a 5% drawdown. When he reaches 5% loss, maybe it’s time to go back to demo trading for a while until you get your “sea legs” back.
Be willing to be flat.
It’s true; traders can make money if they aren’t in the markets. The other side of that equation is that they won’t lose any either! A common and tragic mistake the traders make is to enter the markets because they feel its “been too long”. Not all trading situations are created equal. Because of this there are some days that simply make no sense to trade during. It is your job as a trader to recognize this.
Analyze, form an exit strategy, and stick to it.
A lot of traders enter a position only to struggle with it after the fact. Most of the time they simply don’t know what to do once they are involved. If you have an opinion after doing analysis on the currency pair, one of the worst things you can do is let other traders influence your behavior when managing the trade.
When you entered the trade, you should have several good reasons to do so, and have studied the possible scenarios that would have you exit the trade, be it for profit or loss. One of the most common mistakes the traders make in this realm is to hear something on the television, and close other trade in a panic. You simply must do your analysis and stick to it.
Always improve yourself.
As a trader you can never stop learning. It is your job to keep educating yourself, and improving your trading through that education. Never think that you have the markets completely figure out, as they will come back to bite you when you do. Just like any other highly technical profession, you’re going to need to keep your skills sharp.
If you follow these basic rules, you will find that you have formed some very good trading habits that will serve you well in the long run. If you can get into this routine, you will without a doubt stand head and shoulders above most traders out there.

Learning To Trade Forex

2011-02-15T12:17:00.000Z

Learning To Trade Forex
While there is no one-size-fits-all plan to learn how to trade Forex, there are some basic things a potential trader can do to make the journey easier. While as a new trader you will hear over and over that you need to find an “edge”, the truth is that there are several tried and true methods that really aren’t a secret. The route you take in your education can help speed the process up if you look in the right places.
Read, and read a lot.
Reading all of the information about the Forex market is crucial. In fact, as you are on this site, you are already starting the first step of the process!Reading about the markets can tell you a lot about them, and most importantly, if they are for you. You will learn some of the common terms, pitfalls, strategies, rules, and traits of the markets. When you first start out, there will be what seems like infinite books, articles, websites, and even videos to watch. Do not get discouraged, as it is all part of the learning curve.A lot of newer traders get discouraged because there are so many conflicting opinions out there. But the truth is that you only need to pick up “a nugget here and there”, and before you know it – you will have ideas and the knowledge that suits you. It is alright if you don’t agree with everything you read in an article; take only want makes sense for you. There is no one-size-fits-all plan, as mentioned above.
Places to start trading Forex.
There are many places to start trading the foreign exchange markets. One such resource is the broker review on this site. You will find a listing and a review of several high-visibility Forex brokers from around the world.You should start out with a demo account, and all of the brokers on our list of reviews offer them. Using a “simulated trading account” allows a trader to start trading with the firm’s platform, and experience real market conditions without risking any of your hard-earned money. You absolutely should do this first, no matter how enthusiastic you might be about trading.In most instances, you can sign up for the demo account of a firm’s platform with just some very basic information like your name, address, email address, and possibly a phone number. You should be able to be online trading the demo version of a firm’s platform in a matter of a few minutes.
Keep reading, but use common sense.
As time goes on, you will find the sources of information seems limitless. One such common and popular websites to read about trading are the public forums that are available on the internet. While it might provide a sense of community to traders, and that sometimes there nuggets of information out there to be had on the forums, common sense should be used. There are a lot of “newbie” traders out there willing to give advice, while not being profitable. Forums can be helpful, but in small doses.
Trading Live
Once you have learned about the platform, have read some information about trading, and have made some demo profits, it’s time to trade live. At this point you will undoubtedly have learned that you never stop learning about trading. You will find it is either a part of your life or not. If you are still interested, deposit some money with the broker of your choice, and enjoy yourself.

Basic Currency Trading Strategies

2011-02-15T12:15:00.000Z

Basic Currency Trading Strategies
Forex trading strategies generally fall into a couple categories. This is because of the basic ideals driving the trade signals that the strategies produce. While they type of trading strategy you choose is an extremely personal thing, it should be comfortable and produce strong overall trading results.
One basic currency strategy is based on the differential of the interest rates two economies. This is a type of strategy that the fundamental trader tends to be attracted to. When trading the differential of two economies interest rates, it might work like this: The interest rate in Europe might happen to be 2.5%, while the interest rate and Japan might be 0.5%. Because of this, the trader would buy Euros and sell Japanese yen. The rationale is that money typically will flow to where it can be compounded faster. Since Europe has a higher interest rate in this example, it should follow that money should flow from Japan to places like Germany, Belgium, and the Netherlands. In this circumstance, the trader would go long the EUR/JPY pair.
Another type of Forex strategy is based upon the fundamentals of each country in the pair. While this is similar to the trading strategy mentioned above, it takes into account a much larger picture of an economy’s overall health. In essence, the trader would be buying the currency of the country that is more likely to raise interest rates sooner than the other. You would simply by this currency, and sell the one that belongs to the country that has almost no hope of raising interest rates. This particular type of fundamental trading tends to be a little bit tricky though, as there is no particular entry or exit point.
The most common type of trading strategy in the Forex market you will see are going to be systems that are based on technical analysis. In this genre, there are literally thousands of systems you can choose from. Most technical analysis based systems will incorporate one or more technical indicators, and price action. These systems can be as basic as using simple support and resistance lines along with candlestick analysis, to as complex as using four and five separate indicators.
In reality there is no “one-size-fits-all” answer to the question of what you should use. It’ll be through simple trial and error that you will find what works best for you. As you try different types of trading systems, make sure to keep diligent records so that you can quantify your returns with each type of trading system. This will help you in the long run learn how to become profitable, and what type of trading you should be doing.