Forex Trading

By Paul Bryant

Forex trading can be defined as a trade in which the foreign currencies are being traded against each other, wherein buying of one currency and selling of another currency takes place simultaneously.

Here when one purchases any countrys currency then they have to do it with another countrys currency. This transaction which takes place between two countries with respect to their currency is the Foreign exchange transaction and the price the traders negotiate is the exchange rate.

It is being called the main pillar of all the international capital transactions worldwide put together. Forex trading has also acquired the status of being the largest markets in terms of trading volume with an estimated trading of $1.5 trillion USD worth of transactions occurring every single day.

This has made it the most sought after business of the present era. The profits too are huge, when compared to any other markets and are generated in a short span. Moreover slight currency movements leading to a good enough profit generation, has made it all the more profitable. This is probably the reason why Forex trading is favored over stock trading and other currency dealings of different financial organization by majority of the investors.

The trading throughout the world varies with respect to place and time and with respect to the daily working hours the market timings vary from place to place. Forex trading begins every Sunday at 7pm in the evening New York time, as the markets open for the week in Tokyo located in the easternmost part of the world. Next in line to open the markets is the Hong Kong and Singapore markets followed by the European markets. Last in line to follow is London and trading takes place throughout the world.

Currencies of the world are being traded in the Forex markets particularly for hedging and for certain speculative purposes as well. Reasons for trading foreign currencies are diverse and vary from one investor to another. No matter what type of investors they are, either corporate agencies or financial institutions or individual traders, they have surely all the good reasons for investing in Forex trade and the most obvious reason is that Forex trading is by far the best platform with huge profit potential.

Forex trading operates well in speculative markets. In just less than a decade Forex markets have grown tremendously and its present size is about 50 times that of all the other capital markets combined together. In Forex trading the most favored currencies till date are USD, EUR, JPY, GBP, CHF, CAD, and the AUD.

Even for the execution of a large buy and sell orders there is just no slippage of the market price in Forex trading. The traders are able to take the advantage of both upward as well as the downward trend, thereby increasing the market profit potential. This is probably the reason why the Forex trading is considered to be the most efficient markets in the world. - 23204

About the Author:

If you would like to find out more about trading the Forex currency market then go ahead and visit Forex Trading for all you to need to know to get going.

Learning Currency Trading (Part II)

By Ahmad Hassam

The most active traded crosses focus on the three non USD currencies (EUR, JPY and GBP). These crosses are known as the euro crosses, yen crosses and the sterling crosses. The most actively traded cross currency pairs are: EUR/CHF, EUR/GBP, EUR/JPY, GBP/JPY, AUD/JPY and NZD/JPY. Crosses enable currency traders to directly target trades to specific individual currencies to take advantage of news or events.

When you look up at the currency pairs, you may notice that the currencies are combined in a seemingly strange way. For instance, if sterling-yen (GBP/JPY) is a yen cross, why it is not being also referred to as yen-sterling (JPY/GBP)? The answer is that those quoting conventions were evolved over the years to reflect traditionally strong currencies versus traditionally weak currencies with the strong currency coming first.

The first currency in the pair is known as the base currency. It is the base currency that you are buying or selling when you buy or sell a currency pair. The second currency in the pair is known as the counter currency. So if you buy 100,000 EUR/JPY. You have just bought 100,000 Euros and sold the equivalent amount in Japanese Yen.

So you can say currency trading involves simultaneously buying and selling. This is the most important difference between currency trading and stock trading. In currency trading, going long means having bought a currency pair! When you are long, you are looking for the prices to go higher. It will make you a good profit if you sell at a higher price from that where you bought. You will make a loss if you are long and the price goes down.

Going short in currency trading means selling a currency pair! It means that you have sold the currency pair, meaning you have sold the base currency and bought the counter currency. When you anticipate the price of a currency pair going down, you go short in anticipation of the price going further down. This will make you a capital gain later when you exit your position. In currency trading going short is as common as going long. Unlike stock trading where you had to observe the up tick rule before you could go short. In currency trading there is no such rule.

Its called squaring up if you have an open position and you want to close it. You need to buy or go long to square up if you are short. You need to sell or short to go flat if you are long. Having no position in the market is known as being square or flat. Selling high and buying low is the standard currency trading strategy just like in any other trading.

Profit and Loss is how traders measure success and failure. A clear understanding of how P&L works is especially critical to online margin trading. When you open an online currency trading account, you will need to pony up cash as collateral to support the margin requirements established by your broker.

Profit and Loss calculations are pretty straight forward. They are based on position size and the number of pips you make or lose. A pip is the smallest increment of price fluctuation in currency pairs. Most of the currency pairs are quoted up to four decimal places except those involving JPY; they are only quoted up to 2 decimal places. Suppose GBP/USD quote is 1.2963. If the price moves from 1.2963 to 1.2983, it has gone up by 20 pips (1.2983-1.2963). Pip is the increase or decrease in the fourth decimal digit. Pips are also referred to as points. - 23204

About the Author:

Mr. Ahmad Hassam is a Harvard University Graduate. He is interested in day trading stocks and currencies. Learn Currency Trading. First Trade Your Forex Demo Account!

How to Choose a Forex Robot

By Mike Ashford

I get at least 5 spam forex related emails in a day. Most have some amazing automated forex robot that will make me a lot of money in a hurry. The temptation is high to get the great forex robot, especially when it is only being offered to a few "special" forex traders.

Having fallen for such forex scams before, I am now more careful when searching for a reliable automated forex trading system. These are a few rules I use before I buy an automated forex robot.

1. Never trade before Back testing

When one looks at the results of some of the automated forex systems, one is tempted to immediately trade their real accounts. This might lead to heartache when one discovers that the automated system is not for them.

It is imperative that the forex trader finds out if a forex robot has worked before. It is not enough to read testimonials and listen to salesmen to confirm that an automated system actually works. The prudent forex trader needs to back test the results themselves so they can be confident that it actually works and also to know the inner workings of the automated system.

Other than back testing I also make an effort to forward test the system. Forward testing involves actually trading the system in a demo account with current market action. In this way I am able to find out the strengths and weaknesses of the automated system.

2. Customer Support

If a company selling a forex robot does not have customer support, I never touch it. I have bought forex systems that come with an eBook with the notion that the ebook will come with all the information I will ever need to trade the forex robot.

This is rarely the case and do not be surprised to find a forex instruction manual with poorly written English. Some forex robot vendors are in such a hurry to sell their forex robots, they never think about giving proper support for their product.

If a vendor can not take the time to give quality customer support, then it is very likely that they used the same amount of effort in creating the forex robot. If you have paid for a product, it is not too much to ask that your questions are answered so that you can use the product to the optimum level.

Over your forex trading journey, you are going to come across a new forex system every day. It is important for your profitability to ensure that your forex robot is not over optimized. Just concentrating on the win/loss ratio and the total profits of any forex robot is not encouraged. One should take the time to figure out if the forex system has positive expectancy and the system can also survive drawdown. Ignoring drawdown in an automated forex robot is a major cause of pain especially for new forex traders. Make sure that your forex robot is profitable during the good times and also conserves your trading capital during the bad times. - 23204

About the Author:

I know a way to make thousands a month thanks to forex robots. I found a site called forex robot advice but don't want to reveal their "secrets" here.

Money Management in Automated Forex Trading

By Mike Ashford

Automated forex trading can be profitable for even new forex traders. A good forex trader in addition tries to increase his chances of profitability by looking for forex trading robots that also include money management techniques.

A good forex trading robot should enable the forex trader to take profits, limit loses and even trail their stops. In other words, other than just being profitable, the automated forex system should also increase his trading exposure in winning periods and reduce trading exposure during losing periods.

Money management in automated forex trading is very crucial for the following reasons.

1. Preserving Capital

A forex trader who does not learn how to preserve trading capital is bound to lose it. Many forex robots only allow you to trade a system. Few are able to protect a traders capital even when they are in a drawdown. A good forex robot should be able to have trading parameters that allow the forex trader to preserve his capital when the market is not in tandem with the automated forex system.

2. Adequate Capital

Other than preserving your capital during slow forex trading periods, a good forex robot should also ensure that the trader has adequate capital to trade the system.

There is nothing worse than a forex trader entering a trade without adequate capital. It is like going to a fast food restaurant without the proper change to buy a burger. Sooner or later the under capitalized forex trader will probably lose any trading funds they might have in their account. A good automated forex system will alert you to this scenario.

3. Set Reasonable Goals

A good automated forex system will have money management techniques that will allow the forex trader set reasonable forex trading goals. Forex trading is a profitable endeavor but most traders give up when they do not achieve trading profit goals that were unrealistic.

A forex trading robot will allow the forex trader to have reasonable expectancy for their trading dependent on how much capital they have and also the performance of their robot.

4. Predetermine Loses

Many times a forex trader gets paralyzed when trying to exit a losing trade. It is common for the forex trader to exit winners too early but exiting loses is more difficult. Traders hold on to a losing position in the expectation that it will soon turn in their favor. My very first trades consisted of losing trades that were some 100 pips while my wins were in their teens.

A good forex robot will ensure that this does not happen and exit your trades at predetermined levels thus letting you conserve your trading capital. Letting the forex robot determine when you should exit a losing trade is probably one of the most important reasons to use automated forex software.

Good forex traders make it a habit to apply money management techniques especially when they are trading automated forex systems. I have realized that my best performing forex trading robots all have money management techniques built into them. Over time, even a mediocre forex robot becomes very profitable with good money management techniques. - 23204

About the Author:

I know a way to make thousands a month thanks to forex robots. I found a site called forex robot advice but don't want to reveal their "secrets" here.

How to Backtest Automated Forex Systems

By Mike Ashford

Automated forex systems are a great boon for forex traders. The ability to always be trading without the need of your presence is a great way to increase your profitability when trading forex. However, getting the wrong automated forex system to trade can cause major lose.

That is why it is important to backtest your automated forex system before you use your trading capital. However, you need to be able to do proper back testing for you to get the most out of your system.

1. Use Proper Forex Software for Backtesting

If you are going to risk thousands of dollars in forex trading, then you can afford getting proper forex back testing software. It is not enough to get software that is does basic testing. A forex trader needs to invest in forex software that is reliable and whose results can be verified. Get the proper forex trading tools and you may never need to worry about the viability of your forex trading system.

2. Get enough Forex Trading Data

The forex market is ever evolving and there is a need to test your automated forex strategy in different forex trading environments. There are a lot of forex data providers who provide such data for free. Your forex broker can also be a good source for such data.

Other than just the quantity of the data, make sure that your source also has quality data. If you test your automated forex system on quality and enough data, your chances of your back testing results being replicated are higher.

3. Do not Over-Optimize

Every time you change the parameters of your forex robot, you are likely to get unreliable results. Over optimizing or curve-fitting a forex system to give you better results on unrealistic parameters will give you a forex trading system that only works on paper but not in the real world.

Curve fitting normally occurs when the forex trader is using too many parameters. Try and keep the automated trading system as possible. If you create a simple forex robot and it shows profitable results on back testing, then it is more likely to work than a curve fitted forex system.

4. Adequately Test Your System

I have seen automated trading system that only work in one currency market. Most of the time such trading systems have been curve fitted. Before you trade your own funds in any forex robot, ensure that you have back tested the system on different time frames and also different currency markets.

The more time frames an automated forex system is profitable, the more likely it will work in a real environment. I have found that the best automated systems are the once that confirm that a trade is on in a higher time frame as well as in a lower time frame.

Take your time when back testing. Do not be lazy about it as it is crucial to making you a better forex trader. I never trade an automated forex system without back testing it thoroughly first. - 23204

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If you want to find out this "secret" and start making a nice income with forex, click here.