How to Trade Forex

How to Trade Forex

STEP 1:

The step 1 defines certain concepts and terms of Forex Trading-

Quotes are a vital part of the foreign exchange trading, as Forex trading is done in terms of quotes. Therefore, comprehending these quotes is the first important step.

Firstly, in a Forex quote, the currency listed first is known as the Base currency. For example, we have EUR/USD. Here, EUR is the Base currency.
Secondly, the base currency has always the value 1. In other words, the rate of other currency is calculated against 1 pt of the Base currency. For example, we have EUR/USD where EUR is the Base currency. Then 1 EUR = 1.2323 USD or the value of one currency against the other in the pair.
Thirdly, when dealing in terms of quotes, prices are expressed in terms of Pips. Pips can be defined as “percentage in points” and are mostly the fourth decimal point i.e. 1/100th of 1%.

Also used while trading through quotes, are two significant terms known as Bid and Ask. These two terms are responsible for making trading quote, a two-sided quote.
Bid can be defined as ''The price at which the base currency is sold concurrently buying the counter currency. Ask can be defined as “The price at which the base currency can be bought concurrently selling the counter currency''

STEP 2:

Step 2 illustrates the other key features of Forex trading which are namely, the leverage and the Margin. These two are immensely important in attracting the interest of the traders as they enhance the trading power of the investors.

The leverage is the ratio of the deposited amount to the amount that can be traded. Leverage enables the investors to deposit a small amount of money but still trade for a much larger amount. This way, investors can trade easily, utilizing less money to deal.

Margin, therefore, is the minimum amount required to be deposited before an investor starts trading. This can also be known as the initial amount with which the Forex trading account can be opened.

A detailed Example below illustrates exactly how Forex trading is done-
Supposing the current bid/ask price for EUR/USD is going by the rate of 1.5027/30, giving you the option to buy 1 euro with 1.5030 US dollars or sell 1 Euro for 1.5027 US dollars. Now, if you feel that the Euro is underrated against the US dollar, you would opt on buying Euros, selling your dollars at the same time. So you buy 100,000 euros by paying 150,300 dollars. You can then start analyzing the market, waiting for the exchange rates to rise.
As predicted, the rates begin to rise and then you decide a favorable rate at which you plan to sell your Euros to get a hefty profit. Supposing the Euro rises to 1.5090/93. Now, to realize your profits, you sell 100,000 euros at the current rate of 1.5090, and receive $150,900.
You bought 100k Euros at 1.5030, paying $150,300. You sold 100k Euros at 1.5090, receiving $150900. That's a difference of $600 or in other words, you successfully earned a profit of $600.
Return on Investment = $600

Always learn a lesson from the Forex Indicators, keep a watch, think long term and then take a step.

STEP 3:
MarketForex does e-trading using high end MarketForex softwares. Easily accessible and user friendly, they have a simple operating process. For instance, the currency pair to be bought or sold can simply be dealt with, by clicking on the sell or the buy key, placed in front of that currency.
After the deal to be done is selected, a quote is then displayed by the software, making it easier for the user to keep track of the records. Also, MarketForex software provides some attractive powerful features such as account details of the holder, like balance, leverage and margins, along with stop/limit orders.
The trader also has the option of selecting various other currency pairs for trading purposes. Before investing always analyse the forex market with various types of forex analysis.

What is Forex ?

The Foreign exchange (currency or forex or FX) market exists wherever one currency is traded for another. It is by far the largest financial market in the world, and includes trading between large banks, central banks, currency speculators, multinational corporations, governments, and other financial markets and institutions. The average daily trade in the global forex and related markets currently is over US$ 3 trillion.[1] Retail traders (individuals) are a small fraction of this market and may only participate indirectly through brokers or banks, and are subject to forex The foreign exchange market is unique because of* Its trading volumes,* The extreme liquidity of the market,* The large number of, and variety traders in the market,* Its geographical dispersion,* Its long trading hours: 24 hours a day (except on weekends),* The variety of factors that affect exchange rates.* The low margins of profit compared with other markets of fixed income (but profits can be high due to very large trading volumes)According to the BIS ( Bank of International settlement), average daily turnover in traditional foreign exchange markets is estimated at $3,210 billion. Daily averages in April for different years, in billions of US dollars, are presented on the chart below:This $3.21 trillion in global foreign exchange market "traditional" turnover was broken down as follows:* $1,005 billion in spot transactions* $362 billion in outright forwards* $1,714 billion in forex swaps* $129 billion estimated gaps in reportingIn addition to "traditional" turnover, $2.1 trillion was traded in derivatives.

Rules To Stop Losing Money

20 Rules To Stop Losing Money

1. Don't trust others opinions -It's your money at stake, not theirs. Do your own analysis, regardless of the information source.
2. Don't believe in a company - Trading is not investment. Remember the numbers and forget the press releases. Leave the American Dream to Peter Lynch.
3. Don't break your rules - You made them for tough situations, just like the one you're probably in right now.
4. Don't try to get even - Trading is never a game of catch-up. Every position must stand on its merits. Take your loss with composure, and take the next trade with absolute discipline.
5. Don't trade over your head - If your last name isn't Buffett or Cramer, don't trade like them. Concentrate on playing the game well, and don't worry about making money.
6. Don't seek the Holy Grail - There is no secret trading formula, other than solid risk management. So stop looking for it.
7. Don't forget your discipline - Learning the basics is easy. Most traders fail due to a lack of discipline, not a lack of knowledge.
8. Don't chase the crowd - Listen to the beat of your own drummer. By the time the crowd acts, you're probably too late…or too early.
9. Don't trade the obvious - The prettiest patterns set up the most painful losses. If it looks too good to be true, it probably is.
10. Don't ignore the warning signs - Big losses rarely come without warning. Don't wait for a lifeboat to abandon a sinking ship.
11. Don't count your chickens - Profits aren't booked until the trade is closed. The market gives and the market takes away with great fury.
12. Don't forget the plan - Remember the reasons you took the trade in the first place, and don't get blinded by volatility.
13. Don't have a paycheck mentality - You don't deserve anything for all of your hard work. The market only pays off when you're right, and your timing is really, really good.
14. Don't join a group - Trading is not a team sport. Avoid stock boards, chatrooms and financial TV. You want the truth, not blind support from others with your point of view.
15. Don't ignore your intuition - Respect the little voice that tells you what to do, and what to avoid. That's the voice of the winner trying to get into your thick head.
16. Don't hate losing - Expect to win and lose with great regularity. Expect the losing to teach you more about winning, than the winning itself.
17. Don't fall into the complexity trap - A well-trained eye is more effective than a stack of indicators. Common sense is more valuable than a backtested system.
18. Don't confuse execution with opportunity - Overpriced software won't help you trade like a pro. Pretty colors and flashing lights make you a faster trader, not a better one.
19. Don't project your personal life - Trading gives you the perfect opportunity to discover just how screwed up your life really is. Get your own house in order before playing the markets.
20. Don't think its entertainment - Trading should be boring most of the time, just like the real job you have right now