By ForexPros.com – The forex, or foreign exchange, market is a worldwide market for currency trading. It is decentralized and over-the-counter: when a tourist in Tokyo buys with yen U.S. dollars, he makes a transaction in the forex market – as does a multinational corporation when it converts millions of euros into sterling. As such, the market is the largest in the world, with a trading volume that results in great liquidity; it is also open 24 hours a day, except on weekends.

Many market participants only seek to exchange a foreign currency for their own, such as firms that need to pay salaries in different countries from those in which they sell products. But a large proportion of the market is made up of retail currency traders, who speculate on movements in exchange rates – in a similar manner to those who trade on movements of stock prices.

Fluctuations in exchange rates are triggered by global macroeconomic conditions and events, and traders’ expectations ahead of them, as well as actual monetary flows. The market is appealing to private investors since its volatility offers opportunities for profits (as well as losses, of course), while standard instruments exist to manage risk exposure. Another attraction is that forex brokers allow investors to leverage their trades with low margin requirements.

In the forex market, currencies are traded against one another in “pairs,” which are the quotations of the relative value of one unit of a currency, the “base,” against another currency, the “counter.” These are generally written by linking together the international 3-letter codes of the currencies, with the base at the beginning; for example, EUR/USD denotes the relation of the euro against the U.S. dollar.

As in any market, there is a difference between the buying and selling price in forex, known as the bid/offer spread. This is noted in terms of pips, the smallest price change that a given exchange rate can make – which is usually 1/100 of a percent. On major currency crosses, the difference between the price at which a market-maker will buy (“bid”) from a customer and the price at which a market maker will sell (“offer” or “ask”) is often between one and three pips.

The market is divided into levels of access: at the top is the inter-bank market, which is made up of the largest commercial banks and securities dealers; these groups often receive razor-sharp spreads. Smaller banks and large multinational corporations are next, followed by hedge funds and investment management firms. Retail traders, who are next, participate indirectly through brokers or banks, and constitute a growing segment of the market due to the relative ease with which the Internet enables them to trade.

About the Author

Fusion Media Ltd. was established in order to provide the best possible web portals, covering specific financial segments such as Forex, Futures Financial Spreads and CFD’s. With a strong grounding in the latest internet technology, Fusion Media has developed portals that provide the retail customer with a simple yet functionally rich online surfing environment. Fusion Media is especially proud of its multi-lingual network of sites.

By James Woolley – If you’re just developing an interest in forex trading and are now ready to open an account with a forex broker, you will know how hard it is to actually choose a forex broker. It can seem like an arduous task researching various different brokers, so why is this such a difficult decision to make?

Well the major problem you have is that there are endless different brokers to choose from. There are forex brokers operating in lots of different countries and you will find no shortage of companies if you do a quick search on your favourite search engine.

So you may be undecided about going with a large and respected company in a highly regulated country such as the UK or the US, for instance, or going with a company located and regulated in your own country if you don’t live in either of these two countries. Furthermore when you start researching these different brokers you will find that they are all slightly different. For instance some brokers will offer the MetaTrader 4 platform, for example, whilst others will have their own inhouse charting software. Similarly some brokers will offer very tight spreads on the major currency pairs, whilst others may offer less attractive spreads.

Each broker is different and will have their own unique selling points. The key is to look for a broker which offers the features that most appeal to you whether it’s tight spreads, advanced charting software, a free demo account or the ability to trade micro accounts, for example.

Once you’ve drawn up a shortlist of possible brokers, you will probably want to read customer reviews in order to find the best one. Now this is where it becomes really difficult because when you start reading customer reviews online, you will find that every single broker has some negative reviews. Indeed these reviews can put you off choosing a broker at all.

However you have to remember that a lot of these negative reviews will be due to the fact that the trader actually lost money. Furthermore even if this wasn’t the case, there will always be aspects of a particular company that people won’t like so don’t be too put off by a few negative comments. Unless there are widespread complaints all saying the same thing, you should try and ignore the occasional bad review and focus on some of the positive complaints in order to help you come to a decision.

As I say it can be a very difficult decision choosing a forex broker, but as long as you choose a well-established and fully regulated company that offers all the features you require, then it doesn’t have to be that difficult a decision.

About the Author

Click here for a full forex broker list and to read a complete Zecco Forex review.

By George Koumandaris – Many new Foreign Exchange traders come into the market with false profit expectations. This leads to irresponsible trading, overtrading and generally places the trader in the wrong mind frame.

Let me start by saying that the best Hedge Funds in the world average around 20% gains per year. Yes, only 20% per year.

And we are talking about professionals with teams of analysts at their disposal and superior access to information.

Yet, the internet is full of strategies promising 100% and plus returns per year. No wonder that new traders dream of getting rich in a couple of months.

Thinking like this can kill an account. New Traders have to realize that any given strategy can only produce a specific expected rate of return. This expected return is established by forward testing your strategy for at least 6 months. From my experience even the best strategies do not exceed 15-25% return per year.

I have been using my strategy for years now. And I know that in negative months I lose around 50-100 pips but in positive months I gain around 150-250 pips.

This helps me not to overtrade as my profit expectations are in line with my strategy. If I was expecting 600 pips a month, and my strategy can only produce 200 pips a month then I will overtrade in order to gain the extra pips. But Instead of gaining more, I would suffer losses from overtrading.

Furthermore, expecting huge profits out of Forex can make you fall prey to scammers that promise you the world. Realistic expectations will serve as the best defense against scammers.

I apologize if I am bursting any bubbles here, but it is crucial to enter the world of Forex with realistic expectations. This will save you from heartache and ultimately make you a better trader.

About the Author

George Koumandaris, Senior Trader in TradeSignals.com. Has over 10 years experience of bonds and currencies trading. He was trading government and corporate bonds for a big bank as an institutional buy side trader. He has an M.B.A. specializing in Risk Management, Holds a Certificate in Risk Management from New York University (NYU) and certified by CySec and is licensed to Trade several Asset Classes within the EU.

By George Koumandaris – In Currency Trading there are a multitude of strategies that can be profitable. I don’t care which strategy you use but if you don’t overlay your strategy with the 5 points below then I believe that the probability of success will be really low.

1. Always Use Stop Losses

I cannot stress this enough. To be able to use stop losses you have to accept them as a cost of doing business. The same way a shopkeeper has to pay for rent or electricity, the trader has to pay for Stop losses. Usually new traders do not like to use Stop Losses because many times the price returns towards their initial entry and they end up being in the money. So in their mind, using a stop loss would only create an unnecessary red spot in their account. But you might find yourself in a scenario where the price does not return to your entry and your account gets wiped out.

Remember, trading is a marathon and not a sprint. You have to survive for a while until you learn how to trade. And the only way to survive is by using stop losses!

2. Multi-Timeframe Analysis

You might have a favorite time frame to trade. If you don’t then you should. Choose one so you learn the ins and outs of trading within that timeframe. But always look out on the next timeframe to make sure you are on the correct side of the trend and that you are not selling into bigger timeframe support or buying into bigger timeframe resistance. For example, I always trade on the 15 minute chart but always consult the 1H timeframe.

3. Keep it Simple but not too simple

Trading should be simple enough so that decision making is clear and not complicated but you should keep in mind that confluence is important as well. Confluence means that more than one indicators/price action characteristics support a trading decision. For example I might buy a pair if it bounces over its upward sloping trend line and also bouncing of a support level in addition to forming a rejection candle.

4. Learn the signal frequency of your method

You have to learn your method/strategy like the palm of your hand. I know how many signals my strategy usually generates throughout every trading session. And I know this, because I am ‘connected’ with my strategy. This means that I do not over trade. I trade the 2-3 signals a day my strategy generates and that’s it. If I start entering into more trades than what my strategy usually generates then I know I am overtrading. Over trading can kill an account, since every new trade brings new risk on the table. And as traders we hate risk!

5. Concentrate on the risk and not the profit

When you equate trading to risk management that’s when you will see your account grow. Trading is all about managing your risk. So cut your losses short. Winning trades are usually winning from the get-go. Be quick to protect your account. Personally I move my SL to entry as soon as a trade goes 15 pips in my favor. That’s a method that suits my strategy. You should protect your account as well with a method that suits your strategy.

About the Author

George Koumandaris, Senior Trader in TradeSignals.com. Has over 10 years experience of bonds and currencies trading. He was trading government and corporate bonds for a big bank as an institutional buy side trader. He has an M.B.A. specializing in Risk Management, Holds a Certificate in Risk Management from New York University (NYU) and certified by CySec and is licensed to Trade several Asset Classes within the EU.

By James Woolley – Forex trading is considered by many to be nothing more than gambling. After all whenever you take a position in a particular currency pair, you are essentially betting on the price to either go up or down by taking a long or short position. So is forex trading really just another form of gambling?

Well to the uneducated person or the inexperienced forex trader, it would appear to be very easy to arrive at this conclusion, particularly if you start watching the chart of any currency pair and observe how it moves in a seemingly random fashion.

However many large financial institutions around the world, and indeed individual traders, make consistent profits from trading forex markets, so you can be pretty sure that they’re not gambling away huge amounts of money every day at random.

There are of course many different ways you can give yourself an edge trading forex. The main way is of course through technical analysis. This is basically the study of charts and technical indicators to identify trading patterns and help you find potentially high probability trading positions.

They work so well because traders all over the world watch the same charts and the same technical indicators and see the same patterns repeating themselves over and over again. This allows them to take positions knowing that the price will most probably behave the same in this instance as before.

For example if the GBP/USD has found support at say 1.9600 three times before, and does so once more on this occasion, then many traders will have also noticed this and will be encouraged to take a long position, and in many ways it becomes a self-fulfilling prophecy.

Furthermore with the advancement of technology these days so many people can quickly and easily track any technical indicators they want thanks to the internet so technical analysis has become an even more valid way of trading forex.

So while it is true that on a very short-term basis, there is an element of randomness in the markets, if you look at the longer-term charts and use technical analysis to analyse the markets and make trading decisions, you can place the odds of winning firmly in your favour.

Therefore to answer the original question I would say that forex trading is definitely not another form of gambling because with a bit of education you can become an accomplished technical analyst and determine high probability trading positions where you win far more than you lose.

About the Author

James Woolley runs a blog where you can learn forex trading and read his Forex Trading Machine review.

By ForexPros.com – A Stop Loss order is placed to protect the trader from losing more money on a trade than they are willing to risk. A trader opens a position either long or short a trading vehicle. At the same time the smart trader will enter a Stop Loss order opposite the opening trade. If the first order was a buy, the Stop Loss will be a sell order for the same amount of units. This helps to keep emotion out of a trade or making it a hope trade. “I hope it quits losing me money soon” is a hope trade. Do Not Begin Trading without an order to protect your capital. Hope trades are for amateurs, and will cause only losses, be it in the stock market, the futures market or the Currency Market.

Although many traders do not use this method of trading, the traders that do use them are more likely to be winning traders in the long run. They have analyzed the trade and have a very good idea of how much risk they are willing to accept as part of the trade. If the trade goes against them, the Stop Loss will protect the capital and keep the loss at an acceptable level. Without an order in place, the trader has to manually get out of the position by putting in an order to close the position. This is where the good trader and the lucky trader part company. The good trader controls losses and the lucky trader just depends on being able to move when he is forced to move. This where the trade can turn into a hope trade and the trader lets emotion control the trade rather than logic. This is the easiest way to turn a small loss into a big loss. Do not be a fool and trade without Stop Loss orders.

Placing Stop Loss orders is an art form and there are considerations to be made. One is where to place it, perhaps at the level in which the trader first entered into the trade. Traders might prefer a trailing stop loss to protect a profitable trade. The trailing stop could be used as the trade makes money. Entering new orders and canceling the old order at the same time makes this a trailing stop. This can also be used as a way to further protect a profitable trade by closing up the current price level and the stop order price. Eventually the order will be triggered, but the profit may be greater than just getting out of the trade by feel. As with all trading, the idea is to use as little risk as possible and still give the trade some breathing room.

Stop Loss orders should be used at entry and then later to keep as much of the profit as possible. These are two very distinct and different uses of this valuable order. It means lower losses and more possible profit.

Remember that Forex Trading involves substantial risk as well as chance for substantial profit. Protect yourself with Stop Losses and other tools at your disposal, and trade wisely.

Forexpros.com

Disclaimer: FusionMedia or anyone involved with FusionMedia will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

About the Author

ForexPros is one of the largest forex portals online. Its network of sites serves tens of thousands of readers daily in 14 different languages. The English site is at http://www.forexpros.com.

By Warren Seah – When you were a kid, like all toddlers, you can’t possibly stand on your own and walk by yourself. Your parents would encourage you by giving you a helping hand and assist you by first stimulating your leg muscles. As your leg muscles grow accustomed to supporting your own weight, you will start the proper ritual of walking on your own. This is akin to having a forex paper trading account before going into live account.

Having a paper trading account is more than just handling virtual money only. It is actually an aid to put you through different tests to allow you to be ready for the live environment. Why do I say that? Normally a novice trader will just take for granted the virtual credit used in the paper account and that if one account is blown, he can replaced it with another at no extra cost.

The act of constantly blowing account and replacing it will only just be compounding the misconception that it is ok that if the account can be blown as long as it’s money one can afford to lose. In the long term, it will just only serve to hurt the trader’s trading experience, thinking that losing is part and parcel of trading.

Yes, losing is inevitable at some point of trading but not at the expense of the whole account. Taking calculated losses will be the smart thing to do, a loss that is well within forecasted by your own trading plan. It is like having a huge battalion of soldiers out there fighting but when the time comes for a retreat, the loss you take is tolerable and you can survive another day for another fight at the battlefield.

Starting off in paper trading allows you to train formulating a strategy to tackle the market. Formulating a strategy by itself will consist of assessing the market condition, decide on what kind of strategy is suitable, developing entry and exit plans.

Paper trading focuses on your discipline level to follow through your plan whatever takes place and control of your emotions. The ability to handle your money even if it is virtual money will greatly be tested. If the way you handle virtual money is too flippant, you may also guess that how you will handle your real money on the live account will be.

Paper trading allows you to explore the mistakes you have made and these are to serve as important lessons in preparation for live trading. A trader’s greatest weapon which is a trader’s mindset will be honed throughout forex paper trading and if equipped with the right tools, together you can your trading goals successfully.

About the Author

Warren Seah

“Introducing 11 Exit Strategies, What Every Disciplined Traders Need … Go Without It You Could End Up Being A PIP VICTIM Just Like Thousands Of Traders Out There.”

Download Your Manage Take Profit EA Now

By James Woolley – One of the most popular methods of trading when it comes to forex is to identify and trade overbought and oversold positions. However is this really the best way to trade the forex markets?

If you’ve been a trader for any period of time you will know that it is extremely difficult to catch the top or bottom of a market, and to do this on a consistent basis is even more difficult.

Even technical analysis experts struggle to pick out tops and bottoms of trading ranges on a regular basis, and although they may get lucky occasionally, there will be plenty of other times when they’ve entered a position too early or too late.

It’s important to note that a currency pair, or indeed any financial instrument can remain overbought or oversold for a very long time, and may become even more so. Just because certain technical indicators signal a probable high or low has been reached, does not necessarily mean that this is the case.

For example, there may be several indicators such as RSI, CCI and stochastics, for instance, indicating that the GBP/USD pair is currently overbought and therefore ripe for shorting, but there’s still no reason why it couldn’t go 200 points higher into even more overbought territory.

Furthermore this is the case whether you’re trading short term or long term. Yes it’s true that forex pairs do conform fairly well to technical analysis, but there are always exceptions (otherwise we would all be millionaires).

The problem with this method of trading is that you are always fighting the trend, which is why I personally prefer to use methods that follow the overall trend.

However, if you do want to trade overbought and oversold positions, you can still go with the trend to some extent by waiting for a solid confirmation that a reversal is taking place.

This will mean that you don’t catch all of a move but you will have added confidence in your trade that a true reversal is about to take place when you do enter a position.

For example you could use crossover indicators like EMAs, MACD and TRIX for confirmation.

Anyway the main point I want to get across is that trying to consistently find highs and lows is a difficult way of trading which is why you’re better off either using a trend-following method or waiting for added confirmation if you do want to trade this way.

About the Author

James Woolley runs a blog where you can learn forex trading and read his Forex Trading Machine review

By Warren Seah – Forex trading is a very profitable business but it can be also a very risky business that is if proper money management is not employed. If a forex trader don’t make proper use of stop loss placements and trailing stop loss or take profit levels, he will be taking on high risk which means that any trades may bring his equity account to the risk of ruin. These tools are very essential, and it is very difficult to make profit in Forex without making proper use of these tools.

What are stop loss orders?

It is a type of order which will automatically close a trade at a set level in order to prevent further losses. Often, it is used as a safety precaution and is most needed when a trader made a bad trade.

For instance, say you just bought the EUR/USD at 1.4000 because you expect the euro to appreciate and reach 1.4100 (+100 pips) in the short term. You want to protect yourself by placing a stop loss below 1.4000, say 1.3980, so that if the price does not go your way the trading platform can automatically close the order to prevent you from losing more than 20 pips.

Stop loss orders not only free the forex trader from the computer, it forces him to limit his losses prior to making the trade by way of money management.

While placing stop loss is one of the sound principles of money management, on the other hand, it may cause some trades to hit the stop loss, this is often called a stop out. This is one of the most cited reason why beginning traders are afraid to place stop loss. Another reason will be because of a broker’s (scammer in disguise) stop loss hunting activity (it is most important to stick with a regulated brokerage company)

Trading Insurance For Forex Traders

A stop out by the price hitting the stop loss will cost the forex trader money just like the cost of insurance, but the trader didn’t lose it all and he can regroup and relook at his trading performance at the end of trading day. Stop loss is like an insurance policy- property insurance insured the property and indemify for losses.

In the event that the house is damaged, the insurance company will indemify the losses and the money can be used to rebuilt the house and help the owner overcome emotional shock and financial troubles.

Ensuring a stop-loss is placed in every trade is the first step to proper money management. Putting a money management plan into place may create some additional costs in both time and money. But these costs can work to a trader’s advantage in the same way like paying for a monthly insurance premium cost can protect policy owner against catastrophe for a variety of situation in day to day life.

By implementing a stop-loss is like an insurance policy, a trader is protecting himself from the worst-case scenario, limiting his risk and ensuring that his equity account will not be completely devastated in the event of a catastrophic event that he has little or no control over. Basically, it means that he can come back to trade another day.

About the Author

Warren Seah

“Introducing 11 Exit Strategies, What Every Disciplined Traders Need … Go Without It You Could End Up Being A PIP VICTIM Just Like Thousands Of Traders Out There.”

Download Your Mt4 Stop EA Now

By James Woolley – I started trading forex a few years ago now after having previously traded the FTSE 100 index and specific shares. Just as in these other markets there is one big lesson to be learned from trading forex and that is as follows.

If you want to become a successful forex trader you have to learn to cut your losses early and let your winning trades run for as long as possible.

When I first started out I used to make a lot of mistakes, but it was all part of the learning experience and I’ve come out of it a consistently profitable trader.

The biggest mistake I made initially was not having any stop losses at all, so any relatively small losses I incurred used to mount up and become big losses.

It’s very easy to believe that you will ultimately be proved right and stick with a trade, which is what I did quite a lot initially, but this can be very expensive and to be honest I quickly learned that’s it’s best just to accept you were wrong, take a small loss, and move on to the next trade.

On the opposite side, when it comes to winners you should either have a set target price and profit you are looking to achieve and stick to it, or ideally you should let your profits run as long as possible.

Any target profit should be higher than the stop loss you are setting. For example, if your stop loss is 10 points away from the entry price, then your limit price should be more than 10 otherwise you will need a fairly high win ratio of 50% just to break even.

Make sure you stick to this target as it is very easy to see a profit and grab it before the price has reached your target price.

Another approach is to close part of your trade at the same number of points away from the entry price as the stop loss so you guarantee yourself a profit, and let the remaining portion run as long as possible to squeeze out as much profit as you can. You can move your stop loss to break even so this remaining portion left open doesn’t turn into a loss, and the worst that can happen is you break even.

Alternatively you could just let your profits run as long as possible and use technical indicators to decide when a trade has run it’s course. For example, if a trade goes into profit, you could move the stop loss to break even straight away and let it run.

All of these methods are used to some extent by all profitable traders, but the key lesson is to make full use of stop losses. You want to make your trading pot grow over time, and the best way of doing this is by cutting your losses early and letting your winners run. This way you don’t need a high percentage of your trades to be winning ones, you just need a small percentage of winning trades which are allowed to accumulate.

About the Author

James Woolley has been trading currencies for around five years. He also runs a blog where he reveals all his best forex tips and strategies