Beginner Forex Currency Trading

Basic Forex Currency Trading For Beginners

So you are a beginner and you want to learn how to trade currency on the foreign exchange market? The process of forex currency trading may appear very straight forward, however the beginner will require serious further study to be able to trade successfully. You should always take the time to carefully consider the basics before you get started.

In the beginning, forex currency traders will need to learn the basic concepts and terms that will help them in their currency trading process. This may seem a little confusing for the beginner but it’s really fairly simple. The beginner should also have a basic understanding of how to calculate a profit. The more familiar you are with the forex basics the easier it is for the beginner to get started in forex currency trading.

Currency Pairs: Every currency has a three letter abbreviation. The currency rates are always quoted in pairs and expressed as a five digit number. The first currency in the pair is the base currency and it is always equal to 1. The base currency is the currency you intend to purchase. The second currency in the pair is the counter currency and is the currency you intend to use to purchase the base currency. The price for the currency pair is expressed in terms of the counter currency. For example, if EUR/USD = 1.4100 then every 1 Euro is worth US $1.41.

Pips: currencies are traded on a price interest point (pip) system. The last digit in the currency pair represents one pip. For example if the GBP/USD rate moved from 1.6374 to 1.6375 this represents one pip movement. It also means that the GBP has appreciated by one point and the USD has depreciated by one point. Each currency has its own pip value. Similarly if the USD/JPY rate moved from 130.45 to 130.46 it has appreciated by one pip.

Pip Value: In any currency pair in which the USD is the counter currency, the currency pair has a pip value of $1 per every 10,000 currency units. Therefore for every 100,000 currency units one pip will equal $10.

Bid/Ask Price: The ‘bid’ price is shown at the left side of the quotation and is the price at which the trader can sell the base currency. The ‘ask’ price is shown at the right side of the quotation and is the price at which the trader can buy the base currency. For example EUR/USD is 1.4426/1.4428

Bid/Ask Spread: The spread is the difference between the bid and ask price for every currency pair. The lower the spread the lower the broker’s fees. Forex traders are subject to spreads when opening or closing trades in the buying position. In other words, you are always subject to a spread when you buy, regardless of whether you are opening or closing the trade. The narrowest spreads are quoted on the most liquid currency pairs, the majors.

Margin: The beginner needs to understand that forex currency trading is conducted on margin. This means that you only need to use a small cash deposit to trade a much larger amount of currency. The margin deposit is required as collateral to cover any losses that might be incurred. For example a broker might require only $1,000 in your trading account in order to trade a $100,000 trading position. In effect the broker loans you $99,000 for $1,000 in security.

Lot Sizes: Trading is done in lots, either standard lots or mini lots. A standard lot size is equivalent to 100,000 units of currency. Forex brokers offer leverage to trade lots, for example with 100:1 leverage (and when USD is the base currency in the pair) you will need $1,000 of margin deposit to trade one standard lot. A mini lot size is 10,000 units of currency, with 200:1 leverage you will need $50 to trade one lot.

Rollover: When a trader has an open position at 5.00pm EST it will automatically be rolled over to the next day resulting in your trading account to either earn daily interest or pay daily interest. This is determined by the ‘interest rate differential’ which is the difference between the short-term interest rates of the two economies comprised in the currency pair.

For example, a trader who buys GBP/USD would need to borrow the Dollars to buy the Pounds and will, thus pay interest on the USD and earn interest on the GBP. Hence if Britain’s interest rates are 5.0% and U.S. interest rates are 2.0%, you would earn interest at a net rate of 3.0% per year. If you initially sell GBP/USD you would have to pay interest at 3.0% per year.

Carry Trade: the purpose is to earn extra income from the daily interest payments when you hold on to a currency pair. Selection of the right currency pair is essential for this to work. You will need to buy the currency with the higher interest rate and sell the currency with the lower interest rate. However, unless there is a significant difference between the two interest rates, the net profit or loss will be marginal. While interest rates are set on an annual basis and trading positions are usually opened for short periods will significantly lower any gain or loss on interest rates.

Cross Currencies: currency pairs that do not involve the U.S. Dollar.

Long Position: occurs when a trader initially buys currency with the expectation that the currency will increase in price and then selling it later at a higher price.

Short Position: occurs when a trader initially sells currency with the expectation that the currency will decrease in price and then buying it back later at a cheaper price.

HOW TO TRADE CURRENCY
Illustrated below for the beginner is an example of how to calculate a profit in forex currency trading.

Say for example you believe that the Euro will appreciate in value against the US Dollar in the near future and the current exchange rate is EUR/USD = 1.4210. You then decide to buy 100,000 Euros (1 standard lot).

EUR 1.00 = USD 1.4210
100,000 x 1.4210
Your purchase of 100,000 Euros is US $142,100

At 100:1 leverage your required margin deposit is $1,421

Profit
Later on, as expected, the Euro appreciates by 75 pips to EUR/USD = 1.4285. You then decide to sell your Euros and exchange them back into US Dollars.

EUR 1.00 = USD 1.4285
100,000 x 1.4285

You will get: US $142,850

Your profit = ($142,850 – $142,100) = $750

When starting out with forex currency trading it’s a good idea to begin with some lower amounts until you have figured out exactly what you’re doing as it can be difficult for most beginners. You can always increase the amounts once you gain the experience and skills necessary to make larger trades successfully.

It is also beneficial to take some time to decide what currency pair or pairs you want to trade with. Generally no more than 2 to begin with to allow you ample opportunity to learn how the pairs actually relate to each other and ensure you are able to clearly identify the patterns that they follow. Beginners can increase to more pairs once they have a firm grasp of the basics of forex currency trading.

ForexMentor.com, the most trusted name in forex education is home to Peter Bain’s popular currency trading courses and mentorship program. Courses and services for beginners, development and advanced traders.

 

 

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Forex Currency Trading

Learn All About Forex Currency Trading.

Forex currency trading has rapidly gained popularity around the globe in the past decade as there are very little barriers to entry for the small investor to participate. With the help of forex currency trading resources available online, forex currency trading is something that anyone can do to earn money.

If you are new to forex currency trading, but not to stock investing, then this guide should help you to get a feel for the differences between trading on the foreign exchange market versus trading on the traditional Stock market. If you are new to investing in general, then this site can open your eyes to a world you never knew existed.

What Is Forex Currency Trading?

The term ‘Forex’ or ‘FX’ is short for ‘foreign exchange’. What is being exchanged on this market is not stocks or bonds, but currencies from around the world. In other words, the Forex market is the place where U.S. Dollars, Euros, Yen and other currencies are bought and sold.

It represents the largest financial market in the world by volume. Starting with the simplest example of currency exchange that most people are familiar with is that of exchanging one currency for another when travelling overseas.

Sometimes you get more for every dollar you exchange than other times. You will notice that foreign exchange rates never remain the same and are constantly changing. Fluctuations in exchange rates can enable you to earn sums of money in the forex market with forex currency trading.

The aim of a forex trader is to exchange one currency for another in the expectation that the currency you bought will increase in value compared to the one that you sold. Currencies are traded through a forex broker and the currencies are always quoted in pairs, for example (EUR/USD).

In any currency pair the base currency is the first one displayed and will be the one that is going up in value if the currency pair is going up, and if the currency pair is going down then the base currency is weakening.

The most widely traded currency pairs are known as the ‘majors’ due to their volume and liquidity in the market. They are (EUR/USD) (USD/JPY) (GBP/USD) (USD/CHF)

You will soon learn that it is normally cheaper to trade with these pairs. Currency that trades against the U.S. Dollar is the most popular because it is the most liquid and volatile. There are many different currency pairs to choose from however to get started with forex currency trading, you only need to concentrate on the majors.

Forex Market Explained
In the Forex market, currencies are exchanged through a floating exchange rate system. The Forex market has no central exchange and has no trading floor. It is considered as an ‘over-the-counter’ (OTC) market and is run electronically within a network of banks known as the interbank market. The Forex market runs continuously 24 hours a day from Sunday afternoon to Friday afternoon.

In the past, the Forex interbank market was not available to small investors and only the world’s largest banks were allowed to trade openly. Since the introduction of the internet, forex brokers have emerged to cater for the needs of almost any individual with the use of online forex currency trading platforms. The trading platform is where you will execute all of your trades with your broker with just a few clicks of the mouse.

Individual traders like you and I are known as “Retail Traders”, and must go through retail brokerage firms in order to buy and sell currencies on the foreign exchange market. Today, however, you can buy and sell currencies at the click of a button, in much the same way as you buy and sell stocks. Everything has been automated and linked up electronically. Exchanges in the Forex market happen instantaneously.

You should know up front that online retail trading by individuals (represented by online retail brokers) is still in its infancy. Prior to the Internet, and subsequent availability of real-time market data, it was virtually impossible for the average person to get involved in the foreign exchange market with any degree of success.

Commencing Forex Currency Trading
Although it is now easy to commence Forex currency trading, it can be quite risky and may not be suitable for all investors. Forex currency trading is not as straight-forward as trading stocks on the stock exchange. There are many, many variables to take into consideration when it comes to determining fluctuations in currency values.

Success with forex currency trading requires application of money management skills. While Forex currency trading offers opportunity to make significant sums of money, more than half of Forex traders lose money. You should only trade with money you can afford to lose so only trade with real money when you gain enough confidence.

Before you can commence Forex currency trading you would need to find a regulated forex broker that offers a free demo account which allows you to access the online trading platform. This is an excellent way to learn how to use the platform without trading with real money. It is important to practice before you start trading with real money.

Unfortunately, there are unscrupulous companies out there who take advantage of this ‘learning curve’, and attempt to scam would-be retail traders. Forex opportunity scams are still prevalent. Therefore, it is imperative that you learn the basics of Forex before you get involved with any ‘advanced’ training courses, trading systems or online brokers…

 

Online currency trading: Get the best trading system and learn how to trade using our training guides.

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Forex Brokers

It Is Important To Find The Right Regulated Forex Broker

When selecting a forex broker it is important to do some research to find an efficient and reliable online broker. Care must be taken to avoid any dishonest and fraudulent brokers. A good forex broker must be regulated so choose a broker that has been approved by a government authority in a strong regulated country.

Forex Brokers
Countries such as the United States, United Kingdom, Canada and Australia have their own regulatory authorities that stipulate the regulations that forex brokers must abide by. In the United States regulated forex brokers are governed by the National Futures Association (NFA) and the Commodities Futures Trading Commission (CFTC). Ensure that you verify the registration of the forex broker before opening an account. You can visit the NFA’s website at www.nfa.futures.org to confirm the registration of the broker.

There are several important criteria to consider before registering with a forex broker. Competition between forex brokers is fierce so ensure you take advantage of that by shopping around for the best broker. Take the time to select the right broker for all of your needs so you will be able to use their experience to your benefit. It is beneficial to check their services and any optional extras they provide such as:

* Training material:  There are some Forex firms that help new traders in becoming more skilled in Forex trading by giving free demos, guidance, and helpful Forex news. Brokers can help you in developing trading strategies or in finding efficient trading systems. Aside from that, a good broker can also help you with fundamental and technical analysis of relevant data.

* Platform: Each broker has a different trading platform and most are provided for free. Does the platform contain charts, prices and news? You need to make sure that it has charting software with the ability to plot the indicators used in your trading strategies. Trial a few different platforms and find out which one is more comfortable for you to use. Check the reliability of the trading platform by opening a demo account first. An incorrect trading platform can cost you time and money.

* Guaranteed stop loss and limit orders.

* Minimum slippage. Slippage is the difference between your quoted price, and what your order is filled at. You can test the platform with your free demo account to determine how quickly the forex broker will execute your orders after you have pressed the buy or sell buttons. Look for automatic execution.

* Are there any minimums? This is something that tends to be set by the brokers themselves. Ask about their policies on minimum account balances or minimum trading contract sizes. You should always talk to the brokers in order to find someone that will fit your budget and needs. Knowing that you can reasonably afford the minimum is critical. If the minimum that you are told at first is not suitable, always feel free to look for a different broker who can fit all or your needs.

* How competitive are their fees? This is based on the spread width, (the difference between the buy and sell price) is it fixed or variable? Competitive fixed spreads are normally between 2 to 5 pips per currency pair, check whether mini accounts get charged more. The lower the fees the lower your trading costs will be. It’s less crucial for swing trading.

* How much leverage is provided? It is best not to use more than 100:1 leverage for a regular (100k) account and 200:1 leverage for a mini (10k) account. Firms offering much higher leverage may not be acting in your best interest.

* What are the forex broker’s policies on margin lending and interest payments on account balances, and do the margin requirements change under certain circumstances?

* Check for transparency of the transactions and make sure the forex brokers do not overcharge you.

* Does the brokerage firm have financial backing? In the event of financial collapse how secure will your funds be?

* Service: This should be high quality. You want the forex broker to have good 24-hour customer support and enough staff to provide you with prompt support that you need.

 

 

 

 

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Forex Pips Tutorial

Understanding Forex Pips

Pips and ‘pips values’ represent one of the most misunderstood concepts in Forex trading. Beginners, especially, often have trouble grasping the idea behind pips but, a solid understanding of pips is crucial to successful Forex investing.

Hopefully you’re already familiar with the concept of ‘basis points’. One basis point is equal to one-hundredth of one percent, and represents the smallest increment of change measured for any financial instrument. For example, with interest rates, if the rate rises from 9.50 percent to 9.51 percent, then it has risen by one basis point.

Pips are the Forex market’s version of basis points. Let’s say that the exchange rate for the EUR/USD pair move from 1.4465 to 1.4468. This movement represents a shift of 3 Pips, and may be good or bad depending on which currency you are holding.

Here’s the catch, though. Notice that the shift took place on the 4th decimal, which is the ten-thousandths place, or 1/10,000 of a percentage point? You have a shift of one ten-thousandth instead of one one-hundredth.

The reason for this is that most currencies (with the exception of the Yen) are quoted out to four decimal places. This means you get to take advantage of even the most minute shifts as you trade on high volume.

In order to calculate Pips for the common, four decimal currency pairs, you must divide the value of 1 Pip by the exchange rate:

1 Pip = 1/10000th / exchange rate

Now, what happens when you are dealing with the Japanese Yen?  In this currency pair, we find an exception to the rule because the Yen is quote out only to the hundreds place, or 1/100.

For the USD/JPY pair (or vice versus), your formula would be:

1 Pip = 1/100th / exchange rate

Now that you know how to calculate Pips for any currency pair, you must look at what an actual Pip is worth to you in real dollar terms. This value is known as “pips value’. In order to do this, we must bring ‘lot size’ into the equation.

If you purchase a standard lot of 100,000 pairs of EUR/USD at 1.4465, your formula will be as follows:

Pip Value = (0.0001 /  1.4465) x 100,000 = 6.91

So, a pip at this exchange rate is worth 6.91 Euro. Don’t look for exact numbers here. What you need to pay attention to is the fact that ’6.91′ represents the average gain or loss per change in pips.

In other words, a fluctuation of 2 pip from 1.4465 to 1.4467 isn’t going to raise your profit or loss by a full Euro or more.  Try doing the calculation for a 2 pip rise, and you’ll see that your pips value goes up only to 6.192.

I recommend getting comfortable with these basic calculations first, and then moving on to the calculations of actual profit and loss, which will require you to factor in bid price and ask price.

Also, remember that your online broker usually calculates pip and pips values for you, and you don’t have to know how to do the math. It’s just good business to be able to do it yourself…

 

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Mini Forex Trading

Getting Started With Mini Forex Trading

 

Mini forex trading was created for new traders entering the forex market. This means new traders do not require a lot of money in order to be able to access this market and start placing trades. The Mini Account uses a different leverage calculation than a regular (100k) account. This means that instead of trading full-size currency lots (100,000 units), you’ll trade in lots that are just 1/10 the size (10,000 currency units), which in turn greatly reduces the amount of money you risk in each trade you enter.

In a Mini Account the smaller lot sizes have correspondingly smaller pip values. Pips in a Mini Account are worth, on average, $1 instead of the $8 to $10 value they have in a regular account. The Mini Forex account offers up to 200:1 leverage, this means that just a $50 margin deposit will allow you to trade lots worth roughly $10,000. The mini forex account is beneficial for new traders to improve their forex trading skills while being exposed to less financial risk on the market.

Success in the forex market and becoming a profitable trader depends on a lot of practice and experience. It is still essential to practice first with the demo trading software to enable you to get comfortable with the trading platform and to get a feel of the real market. Once you get an idea of what to expect in the forex market, it is wise that you should open a mini forex trading account. Now you are dealing with real money.

Although you might risk losing real money, a mini forex trading account only requires a small investment of money. You’ll be profiting less from a successful trade and also losing less if the trade goes bad . For example, while a 20-pip loss on a 100,000 USD/JPY position would be $200, the same loss on a 10,000 USD/JPY position in a Mini account would amount to only $20. Mini forex trading reduces the risk of your loss. You can always make another deposit if you lose. The key to mini forex trading is to enhance your skills until you are ready to trade with the big traders.

To start with a mini forex account, there are some characteristics you should know:

• Required minimum account deposit = $100 – $300 (this is known as margin)
• Recommended account deposit = $2,000
• Traded in 10,000-unit currency lots
• A default margin: set at 0.5% ($50 per mini-lot)
• Leverage up to 200:1

Mini forex trading has little disadvantages than a regular forex account. You will be enjoying all the benefits that full-size Forex account holders enjoy, this can work in your advantage. You will have access to the same trading software, charts, resources, and tools from your broker. Mini accounts are ideal for new Forex traders to develop a proper, disciplined forex trading strategy without the fear of losing money.

Another great feature of using a mini forex trading account is that there is no maximum trade volume and you are not limited to trading one lot. You are able to trade 10,000 units or even 200,000 units even if the standard size of a mini forex account is 10,000 units. This enables you to develop your skills, trading strategy and technique before slowly increasing the size of your trades. The ability to customize the size of the trade will allow you to have a better risk management of your money

The mini forex trading account is ideal for beginners or novices that are just starting to enter the world of forex trading.  Here, the risk is real and the money is real. With Mini Forex trading it is easier to develop the confidence needed to be a successful currency trader, without the anxiety and distractions that come with large profit and loss swings.

 

 

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Why Trade Foreign Currencies?

There Are Many Advantages Of Trading Foreign Currencies.

 

Foreign currency trading is a fabulous way to make our money work harder for us and grow more quickly. We can make money from the forex market if we learn the rules and play the game properly. Foreign currency trading is a fascinating pursuit that can be used by anyone. There are a lot of factors unique to the Forex market which make it a very exciting, fast-paced alternative to traditional investing:

Profit Potential: you can make money when the value of a currency is going up or down. For example, if you think the USD is rising in value you would simply buy USD and if you think the USD is falling in value you would simply sell USD.

* Lower Transaction Costs: There are no brokerage fees and no commissions. Forex brokers make a profit from the difference between the bid-ask price of a currency pair known as the spread.

* Trading Hours: The forex market runs continuously 24 hours a day from 5.00pm Sunday afternoon to 4.00pm Friday afternoon. Unlike the stock market you do not have to wait for opening times.

* Available to Anyone: Foreign currency trading can be done from anywhere in the world no matter where you are residing as long as you have internet connection.

* To Add to your Income on a Regular Basis: Foreign currency trading enables you to make money from the comfort of your own home working only a few hours a day or week on your computer.

* Low Start Up Costs: There are generally no minimum contract sizes to trade and you can open a forex account with as little as $250 to commence foreign currency trading.

* Liquidity: The forex market is the largest and most liquid in the world. This prevents market manipulation, it also ensures easily executable trading. Trading with consistent volume is paramount, traders can more easily enter or exit a position at a fair price.

* Leverage: Forex brokers can provide you with 100:1 leverage which is more than the leverage provided anywhere else. Your small deposit can control a much larger amount. For example a $500 margin deposit would enable you to trade $50,000 of currency. A word of caution, although leverage can increase your profits in successful trades, it can increase your losses in unsuccessful trades. It is wise to avoid very high leverage when trading foreign currencies.

* Protection: stop loss orders can be placed with your forex broker at a specific price that guarantees when you will exit your trade. Trading foreign currencies enables greater control of your losses.

* Free Practice Account: You can learn how to trade foreign currencies without risking your own money enabling you to gain experience before trading with real money.

* Trade Selection: You can focus your analysis on just a few currency pairs compared to the stock market where there are thousands of shares to choose from.

* Diversification: Foreign currency trading provides investors with an alternative to investing in the stock market and can be used to supplement their portfolio investments.

 

 

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Forex Training Course

Forex Training Is Critical To Your Success

In order to completely understand everything there is to know about currency trading it is absolutely necessary to consider taking some forex training courses. Education is vital if you want to succeed as a Forex trader. Forex training courses will enable you to gain priceless knowledge that you can use when you finally decide to enter the Forex market.

Taking a forex training course will give you the confidence to get more involved in this often challenging task but you need to conduct your research and check the background of the company or firm offering the training courses. A forex training course should provide you with quality forex education that produces real results in foreign currency trading. Some of these course can be completed over the internet right from your own home.

Thousands of people every year are interested to learn forex trading online. If you decide to be one of them, online forex training courses can teach traders worldwide how to become consistent profitable traders. A really good course should also walk you through a variety of trading examples, and show you how to perform ‘test trades’ yourself using a demo account with a reputable forex broker.

A forex training course can be beneficial to teach you the currency trading strategies and techniques used by successful traders. Since you’re going to pay for the forex training course, it should teach you everything you need to know about Forex trading which includes developing a trading system, using trend indicators, signal generators, flow charts, and many other things. The course should also teach you about the best trading software programs available in the market today.

Another thing you can do to help speed your learning process is to immerse yourself in the literature of the market. There are scores of books and magazines available on the subject both online and off. You can even find forex e-books available in the internet.

It can be quite hard to succeed without proper forex training and a lot of practice. If you attempt forex trading without the necessary skills and knowledge you can end up losing your hard earned money. By persevering and committing yourself to learning and developing the skills necessary to be a successful trader, your potential at making yourself a substantial amount of money sometime in the future are highly likely.

Forex Education - Forex Justice is perfect place to acquire forex education online. Online forex courses come in two flavors: free and pay.

 

 

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Forex Currency Converter

Live Forex Currency Converter