Start Forex Trade with Forex Basics

By Bart Icles

Foreign Exchange, Forex, or just plain FX are the names used to describe the trading of the currencies of the countries around the world. By far, the Forex Market is the largest trading market compared to stock or futures trading market and other investment portfolios. Majority of Forex trading is based on speculation done by individual and institutional speculators which is roughly about 85% of the market, with the remaining 15% of trading for goods and services. Forex trade transactions amount to more than USD 1 - 3 trillion on average in a daily basis.

The main purpose of the Forex market is to help facilitate the trade and investment of various investors of the world by providing the means to exchange one currency to another.

Forex market business is termed as an OTC (over the counter) market, and is facilitated by "interbank" marketing such as email, fax, or phone. For a trade to be consummated there has to be two parties directly involved by way of telephone or electronic networks. Forex Trading is not conducted by a central exchange, nor by one ruling central body but through the many trading centers spread across the world. These are in Sydney, Tokyo, London, Frankfurt, and New York. With a trading system so designed, the Forex market is able to operate non-stop in all days of the weeks except Sundays.

In essence, a currency trade is when there is the simultaneous buying and selling of one currency to another currency - usually for one that it is paired against. This currency combination is termed as a cross, e.g. the EURO/USD, or the GB/Japanese Yen. Currencies that are most commonly traded as known as the "majors" like the EURO/USD, USD/JPY, USD/CHF, and the GBP/USD. The USD is currently ranked as the top traded currency in the world, followed closely behind by the Euro, Japanese Yen, Pound Sterling, Swiss Franc, Australian dollar, Canadian dollar, Swedish Krona, and so on.

Some common yet important Forex trading terms to remember are the spreads and Pips. Spreads means the difference between the price of a currency that any trader can sell at (Bid) and the price a currency can be bought at (Ask). A Pip is the smallest increment by which a cross price changes. In Forex trading a trader may often encounter a 3 Pip spread when trading majors. This spread is seen when comparing the bid and ask price of a paired currency. An example would be: EUR/USD quote is with a bid price of 0. 9876 with an ask price of 0.9879 = USD 0.0003 or 3 pips. - 23200

About the Author:

Finding a good forex broker starts with a desire to learn and a drive to become a great trader. But learning online forex takes dedication and a good teacher. But once you learn how to trade and do so successfully your life will change and you have options and financial resources you never had before.

Day Trading The Forex Market

By Paul Bryant

Day trading the Forex market means to actively buy and sell currency pairs multiple times during a day. Quick wins can be made in Forex trading which makes it a very popular choice for fast traders. The majority of the currency pairs have up to 300 points traded on a daily basis and rise and fall throughout the day.

The Forex market can be unpredictable with big rises and falls coming virtually out of the blue. For this reason, it is important for anyone trading to fully understand what they are doing and construct a trading strategy that actively manages their risk.

Traders often get attracted to the day trading in order to earn huge amount of money within a short period of time. But making a profitable forex day trading is not an easy job. In many cases traders end up losing money while trying their hands in forex day trading. And this happens most when traders attempt to trade over the 1 minute to 5 minutes charts.

Although quick trades can result in a good amount of profit it is important to realise that many traders making money this way are trading on something that cannot be taught - instinct. You see, predictable trends tend to show over a longer period of time - maybe hours but more likely days or weeks. Therefore the shorter the time-frame of the trade, the more difficult it is to predict and winning move.

If you are engaging in risk management techniques then quite simply, the longer time period you use the safer your trades will be. However, longer periods can also make the process of making profit a more drawn-out affair so it really does depend on your circumstances.

Therefore, if you trade over a longer period of time then it is easier to make money with Forex, and more importantly - harder to lose money. Of course you still need to be very aware of what you are doing. Longer-term Forex trading will only be beneficial if you know and understand trends.

Making a simple trading system can also be profitable. It is quite hard to always pick out the highs and lows and therefore it would be far better to create a trend following uncomplicated system by following some basic technical indicators.

It cannot be underestimated how much timing comes in to in Forex day trading. Firstly you have to be patient and be prepared to wait for the exact moment to execute your trade. If you leave it too late or go in too early then you will reduce the amount of profit you make. A successful day trader is able to pinpoint the exact moments to enter and exit trades for maximum profitability.

If you are able to master the arts of timing, trend forecasting, and risk management then you will have the 3 core skills needed to become a successful Forex day trader. - 23200

About the Author:

If scalping the Forex market and making money from trading currency pairs online is something that attracts to you, we recommend you check out: Forex Day Trading

Kelly Ratio Explained

By Ahmad Hassam

How to develop a trading system, evaluate it and then apply it with real money. There are many factors to consider in a mechanical trading system.

For each trading system that we test, we need to not only know that the trading system is profitable but also whether it is profitable with limited equity swings. We should know does the trading system have excessive drawdown periods?

Three of the most important elements of mechanical trading systems are: 1) Rules for exiting at profit targets. 2) Rules for exiting at loss targets or how much loss is permissible and 3) Clear cut rules for entry and exit for each trade.

Does the trading system experience periods of time that result in significant losses that give back those gains when a string of multiple winners and substantial profits accrue? Do losses exceed gains more than what is tolerable in the long run?

John Kelly while working at AT&T Bell Labs had developed the formula in 1956 now known by his name. A money management tool used by system traders is the Kelly Formula or Ratio. Most traders do not know when to correctly add on a trading position.

It soon became popular with the gamblers who realized its potential as an optimal betting system in horse racing. It enabled gamblers to maximize the size of their bets on consecutive races.

Gamblers would use the Kelly Formula to determine how much to parlay winnings into the next bet. Kelly Formula is used by many traders to determine how much money to place on the next trade taking into account the historical performance of the trading system.

Kelly Formula is K=W-[(1-W)/R] where K is the Kelly Ratio percent value. W is the winning probability and it is the probability that any given trade that you make will return a positive amount. R is the Win/Loss Ratio. It is the total positive trade amounts divided by the total negative trade amount.

Suppose K is 25% then you can risk 25% of your account on each trade. Kelly Ratio tells you what you should ideally be willing to risk on each trade to maximize your total returns in terms of the percent of your total account.

Many traders argue that the Kelly Formula gives too high a figure. To be on the safe side you should half the ratio. If K is 25%, you should half it to 12.5%. It means you should not risk more than 12.5% of your account on a single trade.

Kelly Formula can help you in comparing two trading systems and deciding which one is better in the long run. You should look for a trading system that has the highest Kelly Ratio.

Back testing is used to evaluate a trading system and show the strength and weaknesses of each trading system. You can use the back testing results in the Kelly Formula.

So back testing combined with the Kelly Formula can help you achieve the highest trading profits with the lowest risks in most market conditions. - 23200

About the Author:

Mr. Ahmad Hassam is a Harvard University Graduate. He is interested in day trading stocks and forex. Know The Candlestick Patterns. Learn Forex Trading.

Forex Trading, Is It For You?

By Bart Icles

Before entering the rewarding yet unpredictable realm of forex trading, it is definitely plus if you have taken time to learn the basics of foreign current trading and understand the different types of approaches that you can take. There are so many ways to participate in the currency market and it is almost too easy to find yourself lost in its various jargons and changing trends. Just before you get daunted by this thought, it is worth mentioning that there are various strategies and systems that you can use to learn more about the basics and secrets of forex trading.

Going online and searching for forex trading resources is one way to familiarize yourself with the basics of forex trading. Information on different forex systems are also available on the web. Learning the basics and being familiar with different forex trading systems can help you a lot in determining which approach to take.

Forex trading is never easy but with forex trading systems, starting your career as an investor in this market can be less complicated and traumatic. The first steps you take as a trader would most likely determine your success or failure. It is therefore important that you are able to choose the right system to help you in your forex trading career. There are also seasoned traders who are willing to share with you some tips on which approaches are generally profitable. You can easily lookup forex trading websites and you will notice that most of the tips there are from seasoned forex investors.

If you are starting a forex trading career just to test the waters, better discontinue your efforts because forex trading was never meant for cutting teeth. Beginners can easily get their fingers burned since forex trading is of the high risk kind. Also, if you are not receptive to pressure, better not subject yourself to forex trading because you will have a lot of it on your shoulders once you have made a trader out of yourself.

Becoming a forex trader is never an easy goal. If you are thinking of becoming a trader, see to it that you have thought well about joining its profitable yet volatile environment. Evaluate yourself and try to determine if you are indeed cut out to handle the pressure before having success in this market. Forex trading does not have a get rich quick guarantee. Success in forex trading does not come overnight, so it pays to take the time to learn more about this market, understand its trends, and be familiar with the different strategies and systems. - 23200

About the Author:

Finding a good forex strategy builder starts with a desire to learn and a drive to become a great trader. Learning forex trading takes dedication and a good teacher. But once you learn how to trade and do so successfully your life will change and you have options and financial resources you never had before.

Your Forex Education

By Bart Icles

Some people associate forex education with going to a special school so that they can know more about forex tips and techniques. Little do they know that forex education does not require you to be in a forex school. There are indeed online forex schools where you can receive forex education but before you decide to enlist yourself one, it can be helpful learn some basic forex lessons by yourself and later compare what you know with what these forex schools teach.

To get you started in your forex education, it is important that you have key information on what the forex market is, as well as its nature. The forex market is where you can trade currencies. And unlike other trading markets, the forex market is virtually open 24 hours a day. It is therefore relatively convenient to participate in forex trading because you have the option to trade at practically any time of the day. If you are used to staying up late at night, you can do your trading while the rest of the town sleeps. Or if you are an early bird, you can start trading currencies just as everyone else's day starts.

It is also helpful to know that the different kinds of forex market environment. The over the counter forex market is known to be most popular, and by far the biggest, market in the world today. It can be valuable to spend part of your forex education on the over the counter market as this can become your major trading field. One of the things you need to learn about this kind of forex market is the varying conditions of the trading environment. These conditions, along with the attractiveness of the rates and prices and reputation of the different traders, you will be able to determine the kind of people that traders would prefer having deals with.

Another important factor that you should consider in your forex education is the kind of people involved in different transactions. It helps to play close attention to other traders because you will need to develop some degree of trust when trading with them. You also need to remember that no one rushes your progress in your pursuit of learning more about the forex market. Rushing yourself can only bring in problems in the long run.

In thinking about your forex education, always bring quality and quantity to a balance. There is no point in knowing a lot about the technicalities of forex trading when you do not understand their significance in the actual trading arena. In the same manner, knowing so much about so little things will only slow you down. - 23200

About the Author:

A forex system is powerful when coupled with a desire to learn and a drive to become a great trader. Learning a forex currency trading system takes dedication and a good teacher. But once you learn how to trade and do so successfully your life will change and you have options and financial resources you never had before.