FOREX Training

FOREX Training

Knowledge is the key to successful FOREX trading. The knowledgeable trader has greater awareness of how the market moves and more chances of making profitable transactions. Without knowledge you are shooting in the dark. You may succeed on a few deals but the odds are that you are going to lose in the long run.

Thankfully there's lots of information available about the FOREX and how to trade. You can find hundreds of web sites with useful advice and there are just as many books about all aspects of FOREX trading. If self-learning is not your style, there are training courses available that guide you step-by-step through the intricacies of Foreign Exchange.

If you have the time and the inclination, you can find all the facts you need on the Internet or in your public library. The problem with Internet sources, however, is that the information is generally unstructured. You may find bits and pieces of useful data, but finding a source that presents it in a step-by-step fashion is more difficult.

Study courses, on the other hand, present their material in a logical and structured manner that aids in understanding FOREX trading. The investment involved in a FOREX course may well worth the time saved in seeking out similar information on your own. There are courses available for both beginners and intermediate traders.

The cost of a FOREX course varies from free to $1000 or more. As with most things, you get what you pay for. Free Internet courses may give you the basics needed to begin trading, but usually omit the in-depth training needed to analyze charts and plot trading strategies.

There are two basic types of study courses. You can attend a class with a group of people, or you can sign up for an online course that is taken over the Internet. Classes are available in most major cities. You can attend a class to learn the basics or sign up for more advanced courses if you are an experienced trader. The advantage of these courses is that you get personalized attention – any questions you have can be answered directly by the instructor. The disadvantage is that you must follow the class schedule – if you miss one class it can't be made up at a later time.

Seminars are also a possibility for learning about FOREX. Seminars are usually aimed at experienced traders, but if you know the basics you could benefit from a 1 or 2 day seminar. These are available in most major cities, and you could expect to see seminars offered every couple of months. They are usually conducted by well-known FOREX professionals who can offer new insights and strategies in FOREX trading.

If you prefer to study at your own pace you should investigate online FOREX courses. You can log on to a website any time of the day or night and go through the course material as you see fit. If you have any questions, you can usually communicate with an instructor by email. Responses could take anywhere from minutes to days.

A variation of online courses is CDROM courses. These are done on your computer, but you order the study materials from a company and they arrive by mail. There may be little after market service offered with CDROM learning materials. If you have questions you may not be able to contact an instructor for answers. However, each company has their own policy about this, so find out what their service provides before putting down your money.

Other types of home training include video lessons. These can be watched in the comfort of your living room and are similar to attending a FOREX training seminar.

The best kind of FOREX training can be with an individual trainer or mentor. This would be someone with many years of FOREX experience who can offer insights and strategies learned through the course of conducting thousands of transactions. FOREX mentors usually charge a lot of money – thousands of dollars is not unheard of. Whether the cost is worth it is up to the individual to decide. Working with a master trader can provide valuable insight into the psychology of FOREX trading.

Forex Trading Philosophy

FOREX Trading Philosophy

Many beginning FOREX traders are captivated by the allure of easy money. FOREX websites offer 'risk-free' trading, 'high returns' 'low investment' – these claims have a grain of truth in them, but the reality of FOREX is a bit more complex.

There are two common mistakes that many beginner traders make – trading without a strategy and letting emotions rule their decisions. After opening a FOREX account it may be tempting to dive right in and start trading. Watching the movements of EUR/USD for example, you may feel that you are letting an opportunity pass you by if you don't enter the market immediately. You buy and watch the market move against you. You panic and sell, only to see the market recover.

This kind of undisciplined approach to FOREX is guaranteed to lose you money. FOREX traders need to have a rational trading strategy and not allow emotions to rule their trading decisions.

To make rational trading decisions the FOREX trader must be well-educated in market movements. He must be able to apply technical studies to charts and plot out entry and exit points. He must take advantage of the various types of orders to minimize his risk and maximize his profit.

The first step in becoming a successful FOREX trader is to understand the market and the forces behind it. Who trades FOREX and why? Who is successful and why are they successful? This knowledge will allow you to identify successful trading strategies and use them as models for your own.

There are 5 major groups of investors who participate in FOREX – Governments, Banks, Corporations, Investment Funds, and traders. Each group has varying objectives, but the one thing that all the groups (except traders) have in common is external control. Every organization has rules and guidelines for trading currencies and can be held accountable for their trading decisions. Individual traders, on the other hand, are accountable only to themselves.

This means that the trader who lacks rules and guidelines is playing a losing game. Large organizations and educated traders approach the FOREX with strategies, and if you hope to succeed as a FOREX trader you must play by the same rules.

Money Management

Money management is part and parcel of any trading strategy. Besides knowing which currencies to trade and recognizing entry and exit signals, the successful trader has to manage his resources and integrate money management into his trading plan. Position size, margin, recent profits and losses, and contingency plans all need to be considered before entering the market.

There are various strategies for approaching money management. Many of them rely on the calculation of core equity. Core equity is your starting balance minus the money used in open positions. If the starting balance is $10,000 and you have $1000 in open positions your core equity is $9000.

When entering a position try to limit risk to 1% to 3% of each trade. This means that if you are trading a standard FOREX lot of $100,000 you should limit your risk to $1000 to $3000 – preferably $1000. You do this by placing a stop loss order 100 pips (when 1 pip = $10) above or below your entry position.

As your core equity rises or falls you can adjust the dollar amount of your risk. With a starting balance of $10,000 and one open position your core equity is $9000. If you wish to add a second open position, your core equity would fall to $8000 and you should limit your risk to $900. Risk in a third position should be limited to $800.

By the same principal you can also raise your risk level as your core equity rises. If you have been trading successfully and made a $5000 profit, your core equity is now $15,000. You could raise your risk to $1500 per transaction. Alternatively, you could risk more from the profit than from the original starting balance. Some traders may risk up to 5% against their realized profits ($5,000 on a $100,000 lot) for greater profit potential.

Introduction to FOREX

Introduction to FOREX

The Foreign Exchange Market – better known as FOREX - is a world wide market for buying and selling currencies. It handles a huge volume of transactions 24 hours a day, 5 days a week. Daily exchanges are worth approximately $1.5 trillion (US dollars). In comparison, the United States Treasury Bond market averages $300 billion a day and American stock markets exchange about $100 billion a day.

The Foreign Exchange Market was established in 1971 with the abolishment of fixed currency exchanges. Currencies became valued at 'floating' rates determined by supply and demand. The FOREX grew steadily throughout the 1970's, but with the technological advances of the 80's FOREX grew from trading levels of $70 billion a day to the current level of $1.5 trillion.

The FOREX is made up of about 5000 trading institutions such as international banks, central government banks (such as the US Federal Reserve), and commercial companies and brokers for all types of foreign currency exchange. There is no centralized location of FOREX – major trading centers are located in New York, Tokyo, London, Hong Kong, Singapore, Paris, and Frankfurt, and all trading is by telephone or over the Internet. Businesses use the market to buy and sell products in other countries, but most of the activity on the FOREX is from currency traders who use it to generate profits from small movements in the market.

Even though there are many huge players in FOREX, it is accessible to the small investor thanks to recent changes in the regulations. Previously, there was a minimum transaction size and traders were required to meet strict financial requirements. With the advent of Internet trading, regulations have been changed to allow large interbank units to be broken down into smaller lots. Each lot is worth about $100,000 and is accessible to the individual investor through 'leverage' – loans extended for trading. Typically, lots can be controlled with a leverage of 100:1 meaning that US$1,000 will allow you to control a $100,000 currency exchange.

There are many advantages to trading in FOREX.

· Liquidity - Because of the size of the Foreign Exchange Market, investments are extremely liquid. International banks are continuously providing bid and ask offers and the high number of transactions each day means there is always a buyer or a seller for any currency.
· Accessibility – The market is open 24 hours a day, 5 days a week. The market opens Monday morning Australian time and closes Friday afternoon New York time. Trades can be done on the Internet from your home or office.
· Open Market – Currency fluctuations are usually caused by changes in national economies. News about these changes is accessible to everyone at the same time – there can be no 'insider trading' in FOREX.
· No commission – Brokers earn money by setting a 'spread' – the difference between what a currency can be bought at and what it can be sold at.

How does it work?

Currencies are always traded in pairs – the US dollar against the Japanese yen, or the English pound against the euro. Every transaction involves selling one currency and buying another, so if an investor believes the euro will gain against the dollar, he will sell dollars and buy euros.

The potential for profit exists because there is always movement between currencies. Even small changes can result in substantial profits because of the large amount of money involved in each transaction. At the same time, it can be a relatively safe market for the individual investor. There are safeguards built in to protect both the broker and the investor and a number of software tools exist to minimize loss.