Forex Market & Trading Learn The Core Basics Of Forex Investing
ONLINE INCOME SOURCES June 11, 2013 Authored by: Hanif Somani
Introduction
The forex market is the biggest financial market on the planet; it has spawned billionaires, countless millionaires and provides full time and passive income to many hundreds of people. The turnover on the market continues to grow year-on-year. Currency prices on the forex market are driven by complex interaction between buyers and sellers. However, you can make trading the forex market as simple or complex as you want. The 7 essentials of successful forex trading that I am going to discuss with you are: Lesson 1: Brokers; Lesson 2: Platform; Lesson 3: Risk Management; Lesson 4: Technicals and Fundamentals; Lesson 5: Trends;
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Lesson 6: Chart Patterns; Lesson 7: Forex Players.
Brokers
Forex brokers enable traders to participate in the forex market. It is important to identify and use a broker who will pass your trades straight to the market efficiently; your profitability is dependent on this fact amongst other factors. Some brokers also provide other services to help you make your trading profitable.To find out what to look for in a broker, please visit www.forextamed.com. P.S.: Trading the forex market can be a rewarding experience. It has the potential to give you freedom not only in terms of making you wealthy, but also in terms of the flexibility of time; you can trade at any time of the day from anywhere; all you need is a computer with internet access. For further details and a great start to forex trading, please visit Forex Tamed. This is an ebook I've written to explain Forex Market and
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Forex Trading. Trading platform
Trading platforms are computer applications on which traders observe currency price movements. The most common trading platform is called the MT4 which is currently being replaced with MT5. The MT4 platform is robust and flexible for currency trading. It can show price movements in 3 chart formats-the most common of which is the candlestick. Candlestick patterns can give useful information on price direction. In currency trading, predicting the future price movement of a currency pair is how traders make money - and also avoid losing money. There are hundreds of indicators available on the MT4 platform designed to give an indication of where price could be headed next. Traders can use a single indicator on their trading chart or more commonly, a combination of indicators for price prediction. 3
Some brokers customise their MT4 platforms and include extras such as real-time news feeds; curencies are influenced by economic news releases so keeping track of these as they are released is vital when trading currencies.
Some traders prefer to automate their trading using so called robots also known as Expert Advisor (EA). There are 2 types of EAs-fully automated and semi-automated. It is upto the trader to choose which one fits in with his or her trading style.The EAs are programmed specifically to run on MT4 platform. To get the most out of EAs on MT4, you need to run the MT4 on a server which runs continuously i.e. 24/7. Some brokers provide such servers free of charge as part of their service under certain conditions. MT4 platforms are available for the three main operating sytems: Windows, Apple OS and Linux. They are also able to run on smartphones. With an MT4 platform you can trade forex from anywhere as long as your device has internet access and an MT4 application. To find out more about Trading Platforms and other essentials for trading forex, please visit www.forextamed.com P.S.: Trading forex has the power to provide you with passive income which you can extend to full time income and possibly immense wealth. You must however always trade with caution so that 4
you remain in the game for long enough to thrive and make these profits.
Risk Management
In forex trading, losses are part of the game. Do not believe anyone who tells you that they never make a loss on forex tradingit just doesn't happen. Forex trading is just like any business venture you might undertake-there will be periods, from time to time, when you will make losses; forex trading is exactly the same. A successful business, like a successful forex trading business, will minimise and mitigate its losses, so that most importantly, it remains in business and will eventually make more profit than losses. Good risk management in forex trading is what will keep you trading for longer-it is meant to minimise your losses; with a good trading strategy also, your profits will be larger than your losses; you will therefore be profitable and will quickly accumulate great
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profits. Once you have found the right broker to trade with, it is time to plan your risk management; leverage (lots), probability of profitable trade, good stop-loss level, good take-profit level are all part of good risk management strategy. Even if you are able to execute an excellent profit strategy, you will fail as a trader if you don't also execute at least a good risk management strategy; you need both strategies, hand in hand, to survive and thrive in forex trading.
P.S.: You can easily trade forex from home; in fact from anywhere; all you need is a device with MT4 program and a good internet connection. This is what makes trading the forex market so attractive. You can learn more about risk management and other essentials of successful forex trading at www.forextamed.com Hope you found this mini-lesson useful. See you in the next one.
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Technicals and Fundamentals
Knowing which way the price of a currency pair will go next is the key to successful forex trading-both for maximising profits and minimising losses. Forex traders use technicals and fundamentals in trying to predict which way the price in the currency pair they are trading will go next. Technicals are essentially concerned with support and resistance levels within which the currency pair price will be contained; this knowledge of price behaviour should give the traderideas about the price at which to place the trade, the price at which to place a stop-loss and the price at which to take-profit with high probability of success. Fundamentals on the other hand are what sets the tone for the price progression in currency pairs. For instance, if a central bank lowered interest rate then that would set the tone of weakening the currency of that country; leading to a relatively lower price in 7
that currency. Some traders only look at the technical picture on their charts to trade; some traders give more emphasis to the fundamental picture of the currency pair they are trading; and others look at both. To be a successful traders, you must follow majority of traders or more accurately the majority of money, since this is what moves the price in a currency pair in the forex market; imagine yourself as a wildebeest on the great plains of the African Savannah where avoiding being killed by a predator is a daily obsession; if you stayed with the herd and followed their direction you will be safe in numbers; if you strayed away from the herd you will either be isolated and killed by a big cat or dogs; or even be trampled upon by the herd itself. You can learn more about technicals and fundamentals in forex trading at www.forextamed.com P.S.: If you are tired of your daily grind to work for little money and unappreciative boss, forex trading has the potential to give you the financial freedom you need to quit your job; unlike people in employment who work to leisure, you on the other hand can leisure to work. P.S.S.: Always trade the forex market cautiously for maximum benefits.
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Trends
There is a very important saying in forex trading which is true all the time: "a trend is your friend". Taking the wildebeest example from the last lesson, if you as the wildebeest followed the direction of travel of majority of your fellow herd-the trend-then your chances of survival i.e.not being singled out for attack by a predator would be very high. Not only would you survive, you would continue to thrive if you followed the same strategy. The same can be said about you as the forex trader; if you invested your money in the direction of the majority of other investors money-the trend-then your investment would be safer; not only will you survive trading the forex market but you will end up thriving by making profits. Identifying trends is what a good trading strategy is all about. Just looking at a forex chart in different time frames should be able to give you the indication of where the price is headed. Once you have traded for a while, the experience of observing charts patterns should be able to tell you when a trend is likely to change; if the price was going down you should be able to 9
identify the "bottom" i.e. where a price reversal could take place and the price would then start heading up again. The opposite of a bottom is the "top": when the price going up would reverse and start heading back down. Some famous traders who have made a fortune out of forex trading owe their success to their abilities to identify these tops and bottoms. The advantage in doing this is the almost certainty of price direction and the maximum profit they could garner from such early trades. There are 3 types of trends: bull trend-where the price is going up; bear trend-where the price is going down; and the sideways/neutral trend-where the price is drifting sideways. For further discussion on trends, please visit www.forextamed.com P.S.: Get confident with forex trading and reap the rewards you deserve when you begin trading.Identify what works in forex trading; get prepared with the essential knowledge to give you the financial success.
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Chart Patterns
Over a course of 100 years, financial charts have been observed and recorded. They show chart patterns under different economic circumstances. Financial charts are essentially recording investment behaviour of traders under different economic circumstances. As creatures of habit, certain investment patterns follow certain economic news and circumstances; this is what creates specific patterns on charts which repeat itself from time to time; these are the patterns looked out for and exploited by certain traders. In effect, chart patterns give the thinking of the "herd" i.e. which direction it will be heading next; knowing this would make your trades successful. There are at least 10 popular chart patterns which are exploited by traders: Head and shoulders 11
Trend lines Cup and handle Double top and double bottom Triple top and triple bottom Broadening top Price channels Wedge pattern Triangle (technical analysis) Flag and pennant patterns You do not need to know all these before you start trading. As explained at www.forextamed.com, you can start trading successfully with just the basic information on forex markets. Over time, you will naturally begin to identify patterns as your trading skills advance. P.S.: The forex market is the biggest financial market on this planet-currently worth $4 trillion dollars. Just imagine the potential you have as a trader!
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Forex market players
These can be categorised into 4 divisions: Governments and central banks; International transactions; Speculation and expectation; Supply and demand. The forex market is the biggest financial market on the planet and currently stands at a turnover of 4 trillion dollars everyday. To survive and thrive in the forex market you must follow the herd i.e. the majority of the money as this is what will drive the price in your chosen currency pair(s). Governments and central banks can greatly influence the price of a currency pair through their fiscal and monetary policies respectively; this is the biggest influence on the price of a currency pair. Since global trade keeps on growing every year, bigger transactions in forex markets are carried out as importers need to buy the 13
currency of their suppliers overseas; this can influence the price of that currency pair. Forex traders such as professional traders at large financial institutions and retail traders (such as me and you) will buy or sell a particular currency pair according to where they expect the currency to head next; this money will again influence the price of a currency pair. Supply and demand of a currency pair will influence its price on the open market; Quantitative Easing (QE) measures such as the ones undertaken by the Federal Reserve (the Fed) recently will increase the supply of US dollars on the open market and therefdore lower its price. The forex market players are in turn influenced by economic data that comes out every day at specific times.
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