How to Trade Forex Online

Trading foreign exchange on the currency market, also called trading forex, can be a thrilling hobby and a great source of investment income. To put it into perspective, the securities market trades about $22.4 billion per day; the forex market trades about $5 trillion per day. You can make a lot of money without putting too much into your original investment, and predicting the direction of the market can be a real rush. You can trade forex online in multiple ways.

Steps

Part 1: Learning Forex Trading Basics

• 1
• The type of currency you are spending, or getting rid of, is the base currency. The currency that you are purchasing is called quote currency. In forex trading, you sell 1 type of currency to purchase another type.
• The exchange rate tells you how much you have to spend in quote currency to purchase base currency. For example, if you want to purchase some U.S. dollars using British pounds, you may see an exchange rate that looks like this: GBP/USD=1.589. This rate means that you'll spend 1.589 dollars for 1 British pound.
• A long position means that you want to buy the base currency and sell the quote currency. In our example above, you would want to sell U.S. dollars to purchase British pounds.
• A short position means that you want to buy quote currency and sell base currency. In other words, you would spend sell British pounds and purchase U.S. dollars.
• The bid price is the price at which your broker is willing to buy base currency in exchange for quote currency. The bid is the best price at which you are willing to sell your quote currency on the market.
• The ask price, or the offer price, is the price at which your broker will sell base currency in exchange for quote currency. The ask price is the best available price at which you are willing to buy from the market.
• A spread is the difference between the bid price and the ask price.^[1]
  
  
• 2
  Read a forex quote. You'll see 2 numbers on a forex quote: the bid price on the left and the ask price on the right.
• 3
  Decide what currency you want to buy and sell.
  • Make predictions about the economy. If you believe that the U.S. economy will continue to weaken, which is bad for the U.S. dollar, then you probably want to sell dollars in exchange for a currency from a country where the economy is strong.
  • Look at a country's trading position. If a country has many goods that are in demand, then the country will likely export many goods to make money. This trading advantage will boost the country's economy, thus boosting the value of its currency.
  • Consider politics. If a country is having an election, then the country's currency will appreciate if the winner of the election has a fiscally responsible agenda. Also, if the government of a country loosens regulations for economic growth, the currency is likely to increase in value.
  • Read economic reports. Reports on a country's GDP, for instance, or reports about other economic factors like employment and inflation, will have an effect on the value of the country's currency.^[2]
• 4
  Learn how to calculate profits.
  • A pip measures the change in value between 2 currencies. Usually, 1 pip equals 0.0001 of a change in value. For example, if your EUR/USD trade moves from 1.546 to 1.547, your currency value has increased by 1 pip.
  • Multiply the number of pips that your account has changed by the exchange rate. This calculation will tell you how much your account has increased or decreased in value.^[3]

•  

  Part 2: Opening an Online Forex Brokerage Account

• 1
  Research different brokerages. Take these factors into consideration when choosing your brokerage:
  • Look for someone who has been in the industry for 10 years or more. Experience indicates that the company knows what it's doing and knows how to take care of clients.
  • Check to see that the brokerage is regulated by a major oversight body. If your broker voluntarily submits to government oversight, then you can feel reassured about your broker's honesty and transparency. Some oversight bodies include:
    • United States: National Futures Association (NFA) and Commodity Futures Trading Commission (CFTC)
    • United Kingdom: Financial Services Authority (FSA)
    • Australia: Australian Securities and Investment Commission (ASIC)
    • Switzerland: Swiss Federal Banking Commission (SFBC)
    • Germany: Bundesanstalt für Finanzdienstleistungsaufsicht (BaFIN)
    • France: Autorité des Marchés Financiers (AMF)
  • See how many products the broker offers. If the broker also trades securities and commodities, for instance, then you know that the broker has a bigger client base and a wider business reach.
  • Read reviews but be careful. Sometimes, unscrupulous brokers will go into review sites and write reviews to boost their reputations. Reviews can give you a flavor for a broker, but you should always take them with a grain of salt.
  • Visit the broker's website. The website should look professional, and links should be active. If the website says something like "Coming Soon!" or otherwise looks unprofessional, then steer clear of that broker.
  • Check on transaction costs for each trade. You should also check to see how much your bank will charge to wire money into your forex account.
  • Focus on the essentials. You need good customer support, easy transactions and transparency. You should also gravitate toward brokers who have a good reputation.^[4]
• 2
  Request information about opening an account. You can open a personal account or you can choose a managed account. With a personal account, you can execute your own trades. With a managed account, your broker will execute trades for you.
• 3
  Fill out the appropriate paperwork. You can ask for the paperwork by mail or download it, usually in the form of a PDF file. Make sure to check the costs of transferring cash from your bank account into your brokerage account. The fees can cut into your profits.
• 4
  Activate your account. Usually, the broker will send you an email containing a link to activate your account. Click the link and follow the instructions to get started with trading.^[5]

Part 3: Starting Trading

1. 1
   Analyze the market. You can try several different methods:
   • Technical analysis: Technical analysis involves reviewing charts or historical data to predict how the currency will move based on past events. You can usually obtain charts from your broker or use a popular platform like Metatrader 4.
   • Fundamental analysis: This type of analysis involves looking at a country's economic fundamentals and using this information to influence your trading decisions.
   • Sentiment analysis: This kind of analysis is largely subjective. Essentially, you try to analyze the mood of the market to figure out if it's "bearish" or "bullish." While you can't always put your finger on market sentiment, you can often make a good guess that can influence your trades.^[6]
2. 2
   Determine your margin. Depending on your broker's policies, you can invest a little bit of money but still make big trades.
   • For example, if you want to trade 100,000 units at a margin of 1 percent, your broker will require you to put $1,000 cash in an account as security.
   • Your gains and losses will either add to the account or deduct from its value. For this reason, a good general rule is to invest only 2 percent of your cash in a particular currency pair.
3. 3
   Place your order. You can place different kinds of orders:
   • Market orders: With a market order, you instruct your broker to execute your buy/sell at the current market rate.
   • Limit orders: These orders instruct your broker to execute a trade at a specific price. For instance, you can buy currency when it reaches a certain price or sell currency if it lowers to a particular price.
   • Stop orders: A stop order is a choice to buy currency above the current market price (in anticipation that its value will increase) or to sell currency below the current market price to cut your losses.^[7]
4. 4
   Watch your profit and loss. Above all, don't get emotional. The forex market is volatile, and you will see a lot of ups and downs. What matters is to continue doing your research and sticking with your strategy. Eventually, you will see profits.

Article Source: http://www.wikihow.com/Trade-Forex-Online

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Can a change in Greek Prime Minister really affect the EURO?

A historic day in Europe beckons today as it will decided whether the Greek Prime Minister, George Papandreou, will remain in office.  Papandreou is facing a confidence vote over his handling of the bailout plan. Failure to endorse his position is in a sense opposition to Greece cooperating with the bailout plan, at least in the short-term. Failure to cooperate with the bailout plan will cast serious doubt on outside funding which would place Greece is a position where it has a very real chance of bankruptcy.
The question remains as to whether or not the full extent of the Greek crisis is already reflected in the value of the Euro vs. other cross currencies. If you are a fundamentalist that believes in market efficiency, then you make well believe that more bad news out of Greece cannot have a significant impact on the Euro. After all, how much worse can things get? If, however, you believe that markets are inefficient and over-react to such news, then considerable fluctuations in the Euro are possible.
We at FX Strategy prefer to wait for significant evidence either way before moving into or out of a position. Our position is that we believe that the issues in Europe will continue to put pressure on the Euro. See our Euro Video which focuses on both the USD/EURO and AUD/EUR for more information. Until a decision is made in Greece we will all watch from a far (i.e out of the market).

article source: http://www.fxstrategy.com/articles/fundamental-articles/can-change-greek-prime-minister-really-affect-euro-86.html

Using a FX trading platform to hedge

Big business often require a foreign exchange hedging strategy in order to maintain earnings should foreign exchange rates move against them. I say big business, as generally hedging strategies are limited to big business as they operate in many countries simultaneously. Often manufacturing and mining companies are those most at risk. In the case of manufacturing, an increases in the cost of production or a reduction in the terms of trade, due to foreign exchange fluctuations, could have a devastating effect if a business is not properly hedged. Similarly, a mining company sells output on the open market, often in the domestic purchaser’s currency. A reduction in the terms of trade can be catastrophic. Finance companies also closely watch foreign exchange fluctuations especially if funds are sourced in one currency and lent out in another as is often the case.
Historically, big business has used traditional FX brokers to place such hedging strategies. Brokers have been seen as the only alternative to placing large scale trades in liquid markets. However, more and more companies are now using forex trading platforms in order to hedge as transaction costs can be much lower and there is more control in each trade as there is no middle man broker who needs to be consulted when making trades. The turnaround has come because the biggest FX trading platforms now have enough liquidity to deal with the large scale hedging transactions that are required. In some circumstances, big business will use a mixture of brokers and trading platforms in order to fill a position.
We predict that the roll of a traditional broker will diminish over time as more and more volume is placed through the online trading platforms.

article source: http://www.fxstrategy.com/articles/fundamental-articles/using-fx-trading-platform-hedge-88.html

Taking Responsibility for Your Actions - the Forex Way

By: Christopher Lewis
It is something we try to teach our children, but when it comes to trading there are plenty of traders that are not willing to do just this. Taking responsibility for your actions is one of the most important things a trader can do, mainly because it leads to real and true introspection. The trader simply has to be able to be honest with themselves as to what happened in a trade if they are going to learn anything at all by their losses.

The whole point of learning to trade is to understand what works, what doesn’t, and be able to adjust to changing conditions in order to come out ahead in your trading account. It is nearly impossible to do any of these things if you are not honest with yourself, and what actually happened during a trade.

When I speak to traders, I will often hear things like, “The broker decided to do a stop loss hunt.” I hear this one often enough to recognize it for what it truly is: A flat-out denial of responsibility in taking the loss. The big thing with this person is that they feel the need to be right 100% of the time. This is a person that is setting themselves up for failure as the pressure will be far too great for them to feel they can function in an efficient manner.

Another one I hear a lot is a variation of “Trichet came out and killed the trade.” I can assure you that the person that made the announcement wasn’t watching your position. Traders that get upset about this kind of event seem to suggest that the announcement was aimed directly at them, and not as a statement the central banker, politician, or whoever felt necessary to make. It is like anything else in life: things happen. Timing isn’t always going to work in your favor. Besides, the person who complains about this very thing thinks they are a trading genius when the announcement goes in their favor and they make large profits from it.

The main point is that you cannot fall into the “blame the other guy” trap I see so many others get involved with. It is a loser’s game that will only allow you to make the same mistakes over and over as you don’t look in the mirror for the answers to your losses. Also, I should mention that sometimes a loss is a fairly random thing. Sometimes, there is no real deep answer. The market ebbs and flows, and sometimes you are on the wrong side of it is all.

Either way, unless you are honest with analyzing yourself, you will never be able to analyze the market.

Want to learn more about Forex trading? Check out our Forex strategies articles for more Forex tips.

Christopher Lewis

Christopher Lewis has been trading Forex for several years. He writes about Forex for many online publications, including his own site, aptly named The Trader Guy.

article source: http://www.dailyforex.com/forex-articles/2011/09/Taking-Responsibility-for-Your-Actions-the-Forex-Way/8887

Forex Trading Can Be Simple (If You Let)

By: Christopher Lewis
One of the biggest issues that can rear its ugly head in the world of the newbie trader is over complication. In fact, making things much more difficult than necessary is a staple of every budding trader’s early career it seems.

The biggest catalyst for this is twofold. The first issue is a lack of self-confidence. This makes sense, because by being new to the trading world it is easy to feel that you know almost nothing. The average new trader is constantly looking for “hints”, “tips”, and “tricks” when it comes to trading. This is easily understandable as they will know little about currency trading. After all, sound trading decisions are the result of experience, and they will have very little of that. What many people don’t understand is that experience is often the result of bad decisions!

The lack of confidence will lead to system-hopping, and the constant switching of indicators and timeframes. The thing that is risky at this point is the trader very rarely understands how an indicator works. They just simply know that you “buy when this line crosses the other one”, or something like that. The understanding of the mathematics involved makes using these indicators more effective in theory, because at least the trader knows what they are seeing. Of course, at this point in time, they may have several indicators on their charts and this can lead to what is known as “paralysis by analysis”, which leads me to the other catalyst.

The other catalyst is simply a fear or losing money. Most traders go into the Forex markets looking to get rich, and not understanding that you can’t always win. Yes, they understand that a 100% win ratio is a bit much to ask for, but they don’t emotionally understand that. It is one thing to understand something from an intellectual level, and quite a different one to understand it from a gut level. Taking a loss isn’t fun, but it is something we all do.

The “paralysis by analysis” syndrome comes about because of this. There is a point in the new trader’s career that they will pile on the indicators in order to “read the markets.” They may start with a moving average, and add an M.A.C.D. indicator as time goes on. Perhaps they have attended a webinar that featured the trader using the ADX and Keltner Channels. At this point in time, they are starting to add the indicators to the chart, and not seeing the most important thing: where price is going!

With a ton of indicators, it isn’t easy to understand where to go. You could have three indicators saying sell, while another two are saying buy. It is at this point the trader understands how difficult this is getting for them. They have made it overly complicated, and now it is getting to be frustrating – and that can lead to really stupid trading decisions over time.

Hopefully, they reach the point where one day they look at a chart and say something like, “Wow, if I only had sold USD/CHF over the last few years. It has gone straight down over that time.” While there are pullbacks, the trader sees that in general, they could have made a fortune selling this pair over the last several years. This is where the idea of trading with the trend comes into play. There are traders out there that will only trade in the direction of the overall trend, and refuse to take set ups in the other direction. Of course, this takes a bit of patience when the pullbacks come – but it does work in the end. While there are many different ways to trade, those who choose this method simplify a lot of the decisions they are forced to make as they already know what direction they want to be in. Their entries may vary from trader to trader, but they all tend to sleep a little easier at night as well.

There are those who will debate the whole “the trend is up on the 15 minute, down on the hourly, but also up on the weekly timeframes.” Nonsense. Currency pairs only have one trend, and that is the major one. The rest is noise, and if you focus on that – you can avoid a lot of trouble. If you are trying to figure out the trend, simply look at a weekly chart and see if the market is going from lower left to upper right. If it is, you are in an uptrend. If it is going from the upper left to the lower right, you are in a downtrend. Anything that isn’t easily identified isn’t worth bothering with, as there are plenty of pairs to trade.

By approaching the markets in this manner, trading really can be as simple as you let it be.

Want to learn more about Forex trading? Check out our Forex strategies articles for more Forex tips.

Christopher Lewis

Christopher Lewis has been trading Forex for several years. He writes about Forex for many online publications, including his own site, aptly named The Trader Guy.

article source: http://www.dailyforex.com/forex-articles/2011/09/Trading-Can-Be-Simple/8738