forex for dummies

To be successful in the trading game, there are some rules you need to follow. By violating the rules, you will definitely on the losing side of the game. Regardless of all the trading books and newsletters that have cropped up, all of the market gurus are sharing and following the same trading rules. You can’t live without them if you want to succeed in your trading.So,please put in mind all these rules,and make it as your routine rules when to start trading. Here are the rules to successful trading, in random order, and they apply in all trading situations:

• Plan Your Trade And Trade Your Plan
• The Trend Is Your Friend
• Focus On Capital Preservation
• Know When To Cut Loss
• Take Profit When The Trade Is Good
• Be Emotionless
• Do Not Trade Based On A Tip From A Friend Or Broker
• When In Doubt, Stay Out
• Do Not Overtraded

Good luck in your trading...Happy trading! :-)

When playing a forex,a money management is very important.Money management is a way traders control their money flow: in or out of pockets... Yes, it's simply the knowledge and skills on managing a personal Forex account.There are several rules of good money management,one of that is by putting a small risk percentage of your total account.

Why is it so important?
The main idea of the whole trading process is to survive!
Survival first, and only then making money on top.

One should clearly understand, that Big traders first of all are skillful survivors. In addition, they usually have deep pockets,which means that under unfavorable conditions they are financially able to sustain big losses and continue trading.For the ordinary traders, the majority of us, the skills of surviving become a vital "must know" platform to keep trading accounts alive and, of course, to make good stable profits.
Let's take a look at the example that shows a difference between risking a small percentage of capital and risking a bigger one.In the worst case scenario of ten losing trades in a row the balance of trader's account will suffer this much. Below are the table of your money management as your guide.
source:freeforextips

Economic calendar is created by economists where they predict different economics figures and values according to previous months. It contains next data:
Date — Time — Currency — Data Released — Actual — Forecast — Previous

For example: If the forecast is better than the previous figure, then US dollar usually is going to strengthen against other currencies. But when news are due, traders have to check the actual data.

If to look at oil prices, a rising price will result in weakening of currencies for countries which depend on huge oil import, e.g. America, Japan

The example of econimic calendar can be found here

Step to read economic Calendar

Impact factor — suggests how much influence current economic data is expected to bring along.

It is important to know the time of High impact data release if you trade affected currency pair.During actual news release market becomes volatile. The strength of the volatility depends on the "factor of surprise" brought in the news."Factor of surprise" can be defined as a level of unexpectedness, where traders compare Forecast data to Actually released data.

Medium impact economic data should also be kept in mind in case the factor of surprise turns to be high. Low impact data most of the time do not shift Forex market significantly.

Column Previous in Forex Calendar — provides data from last release.

Column Forecast indicates numbers that economists are predicting and expecting for the upcoming release today.

Column Actual is updated only after the data is out. At the very second when data becomes available it is instantly compared against Forecast values, and depending on overall positiveness or negativeness of the news for the currency plus taking into consideration the factor of surprise, price dips or rises in a matter of seconds.

Economic News impact — increased market volatility — usually lasts for 1-3 minutes (highest volatility); next 5-10 minutes market experiences corrective/adaptive volatility, where price settles in summarizing new market shift.

Profitable trades!

source:.forex-fundamental-analysis

Fundamental analysis in Forex is a type of market analysis which involves studying of the economic situation of countries to trade currencies more effectively.

It gives information on how the big political and economical events influence currency market. According to this method, the analysis of economic indicators, social factors and government policy of a business cycle can forecast price movement and trends of the market. The fundamentals of any country, multinational industry or trading bloc lie in the combination of factors like social, political and economic influences.

Figures and statements given in speeches by important politicians and economists are known among the traders as economical announcements that have great impact on currency market moves. In particular, announcements related to United States economy and politics are the primary to keep an eye on.

Though, it is rather hard to stay aside from all these variable factors. So, the sphere of complicated and subtle market fundamental lets the explorer know and understand more details of a dynamic global market during the analyzing.

It is possible to predict the conditions of the economy but unlikely the market prices by using the fundamental analysis. You should have a certain plan of action concerning the ways of using the information as entry and exit spots in a certain strategy of trading. Forex fundamental analysis is a fundamental strategy of trading widely used by online trader of forex

A decent forex fundamental analysis includes a number of macroeconomic factors like economic growth rates, interest rates, inflation, unemployment level and others. The market supply and demand coming from political and social powers is the aim of fundamental analysis. The market supply and demand balance forms the currencies prices. The interest rates and the overall economy strength are the two key factors that influence the supply-demand balance. The overall health of the economy can be understood through a number of economic indicators like GDP.

The interest rates and international trade are the factors analyzed the most carefully. In order to create the forex trading strategy fundamentalist traders create models. The empirical data is gathered in these models for further forecasting the possible price trends and market behavior basing on the key economic indicators.

Any data making the country tick is considered as fundamental by forex traders. The fundamentals are the combination of certain plans, unpredictable behaviors and unforeseen events found out from the factors like interest rates and the policy of central bank and even natural disasters. That's why it's better to be aware of the affective contributors of all these factors than to all the fundamentals listed.

Not trading or standing aside is a position.
When in doubt , stay out. If you are not clear or cannot predict correctly where the market will move,don't trade. Saving present capital is and absolutely better choice than risking and losing money.

Learn to use protective stops. Respect them and don't move.
Hoping that market will turn in your direction is a very delusive hope. By moving a stop loss further a trader increases his chances to end up with much bigger loss.

"Keep it simple, stupid" — applies to indicators, signals and trading strategies.
If you get too much information,it will create a controversial picture of where to trade and when not to. To avoid lots of confusion create a simple but working method of trading forex.

Think about risk/reward before entering each trade.
How much money can you lose in this trade? How much can you gain? Now, make a decision if the trade is worth entering.

Never add positions to a losing trade. Do add positions when the trade has proven to be profitable.
Don't allow a couple of losing trades in a row become a snowball of losing trades. When it is obviously not a good day, turn the monitor off.Trying to get revenge can often make things worse.

Let your profits run.
Let your position be open for as long as the market wishes to reward you. Of course, for this traders need a good exit strategy, otherwise they risk to give all profits back.

Cut your losses short.
It's better to finish unprofitable trade quickly than wait for the situation to get worse. Don't put a stop loss too far, it's your money you risk.

Trade currency pairs in respect to their active market hours.
Learn about overlapping market hours: when two markets are open and highest volume of trades is conducted. For example, Australian and Japanese trading sessions are overlapped from 8pm to 1 am EST. At that time trader can successfully trade AUD/JPY currency pair.

That's all..and good luck!!

Forex market is a non-centralized market.Its mean that,in the forex market there is no common market place for traders and there is no ‘standard’ in the currency exchange price. Different Forex brokers will offer very different deals to their customers.

As an individual forex trader, you will totally depends on the broker to make a transaction in your trades, thus picking up the right broker is the most important part in forex trading.

You may wonder how does a faulty broker can cheat on your money as all investment call have to go thru your decisions.

here is some example:

Often a bad broker is not totally scams.

They are smart persons that trick money from traders that are not well-aware. These brokers, often known as retail market makers, will often encourage their clients to trade on margin and set stop loss orders, which allow the market makers to close out trades almost at will during busy markets at prices they have set. If the market maker does not offset the trader's position, the loss generated when a stop loss is triggered becomes the market maker's gain.

Trade prices are easily skewed one way or the other depending on the retail trader's position, which is known by the market maker.

Traders can be encouraged to take risky positions just before major economic announcements. If all else fails, the market maker can quote extreme prices (known as spiking) to trigger stop loss orders while the client is at work or asleep.

The vast majority of retail FX traders are not profitable. For those losing retail speculators, much of the funds they had on deposit will be, in some form or another, transferred to the market maker.

When an traders uses a margin account in trading a forex,they actually borrowing to increase the possible return on investment. Usually, many traders will use margin accounts when they want to invest in equities by using the leverage of borrowed money to control a larger position than the amount they'd otherwise by able to control with their own invested capital.

Traders interested in trading in the forex markets must first sign up with either a regular broker . Once an investor finds a proper broker, a margin account must be set up. A forex margin account is very similar to an equities margin account, the investor is taking a short-term loan from the broker. The loan is equal to the amount of leverage the investor is taking on.

Before the traders start to trade, they must pay a sum of deposit into their margin account. The amount that needs to be deposited depends on the margin percentage that is agreed between the traders and the broker upon registration or opening the account. For accounts that will be trading in 100,000 currency units or more, the margin percentage is usually either 1% or 2%. So, for an traders who wants to trade $100,000, a 1% margin would mean that $1,000 needs to be deposited into the account. The remaining 99% is provided by the broker. No interest is paid directly on this borrowed amount.However,if the traders does not close their position on the following day or before the delivery date, it will have to be rolled over.Forex brokey may charge the interest depending on the investor's position (long or short) and the short-term interest rates of the underlying currencies.

In a margin account, the broker uses the $1,000 as security. If the trader's position get worse and they losses approach $1,000, the broker may initiate a margin call. When this occurs, the broker will usually instruct the traders to either deposit more money into the account or to close out the position to limit the risk to both parties.

In Forex trading,stop loss is not a great tool or technique for many traders as it requires taking necessary losses, calculate risks and foresee price turns. However, such money management tool in hands of a knowledgeable trader becomes rather a powerful trading weapon than a tool of disappointment and painful losses. There are several method we can apply stop-loss when start trading

Simple equity Stop
According to this rule, a trader would place an order and based on a lot size would calculate amount of pips required to reach the limit of 2-3% of the total account balance (and a stop loss will be placed at that point).

Chart based Stop
There are many approaches to placing protective stops using a chart based stops: stops based on swings high / low, stops using trend lines, fibonacci related stops and so on.

Margin Stop
first, the trader should divide his account into several equal pieces to ensure that the whole capital will not be blown off in one shot.Supposing that a trader plans to spend 15 000 USD, it is suggested that the account opened with a broker "weights" between 1000 to 2000 USD.

In forex trading,some of the currencies tend to move in the same direction,and some of them may move in opposite direction. This is a powerful knowledge for those who trade more than one currency pair. It helps to hedge, diversify or double profitable positions.

Statistically measured by performance, currency pairs are given so called "correlation coefficients" from +1 to -1.

Correlation +1 means two currency pairs will move in the same direction 100% of the time. Meanwhile a correlation of -1 means they will move in the opposite direction 100% of the time.A correlation of zero means no relation between currency pairs exists.

Examples of same direction moving currency pairs are:

EUR/USD and GBP/USD
EUR/USD and NZD/USD
USD/CHF and USD/JPY
AUD/USD and GBP/USD
AUD/USD and EUR/USD

Inversely moving pairs are:

EUR/USD and USD/CHF
GBP/USD and USD/JPY
GBP/USD and USD/CHF
AUD/USD and USD/CAD
AUD/USD and USD/JPY

For what this information?

1. A very simple use is avoiding trades that cancel each other. For instance, knowing that EUR/USD and USD/CHF move inversely near-perfectly, there would be no point to go short on both positions as they eventually cancel each other (loss + profit).
2. When confident, a trader may double position size by placing same orders on parallel (moving in the same direction) currency pairs.
3. Another option would be to diversify risks in trade. For instance, AUD/USD and EUR/USD pairs have the correlation coefficient of about +0.70 which means that pairs are moving mostly in the same direction but not as perfect

Here are some of forex tips that i gather from various books and site :

Trading strategies that work well in an up-market may not work in a down-market.
systems that work well in a good trending market may not be applicable at all to a ranging market. The solution is either to have a system for each type of the market or make sure that one solid system will work well under all market conditions

Do not try to pick price tops and bottoms.
Searching for bargains is a good thing when you go shopping, but will put you in troubles if applied to Forex trading. Simply spot the trend and join it like other traders who are serious about trading do.

Always remind yourself that the first and the last market bars/ticks are the most expensive.
Delay entering the market on the first ticks and be out of the market early. On the open, never trade in the direction of a gap.

Never worry about missing out on a trading opportunity.
You are never going to run out of trades, so be firm and stick to your rules.

By using knowledge about currency correlation in Forex traders can easily avoid opening positions that cancel each other
Find out which currency pairs move simultaneously and which — in opposite direction.

Have your stop loss order in place
Put one on a decent distance, for example 100+ pips. Also do not use too tight stop orders as they will most likely be hit more often then you need to.

Spend less time trading Forex but make it quality time.
Trade only when you can be 100% focused

it is wrong to trade with the money that you cannot allow to lose.
Do not trade if you cannot afford to lose your money. Moreover, do not trade if you must make X amount of money per month to pay your bills in order to avoid financial trouble

Here are some more tips for the beginner...Please put in your mind before you start!

1. Spontaneous actions in Forex trading — are a part of pure gambling.
Any attempt to trade without analysis and studying the market is equal to a game or gambling.Do not try to trade without any analysis.

Tip 2. Never invest money into a real Forex account until you practice on a Forex Demo account!
You should first try using demo account,before try to trade into real one!!When you're feel comfortable,you can change to the real account.

Tip 3. Go with the trend!
Trend is your friend. Trade with the trend to maximize your chances to succeed. Trading against the trend won't "kill" a trader

Tip 4. Always take a look at the time frame bigger than the one you've chosen to trade in.
It gives the bigger picture of market price movements and so helps to clearly define the trend.

Tip 5. Never risk more than 2-3% of the total trading account.
One important difference between a successful and an unsuccessful trader is that the first is able to survive under unfavorable conditions on the market.

Tip 6. Put emotions down. Trade calm.
This is the most important thing.Don't be greedy by adding lots of positions when winning and if you loose,don't try to revenge after losing the trade.

Tip 7. Choose the time frame that is right for you.
Choosing wise means that you are comfortable and have time enough to analyze the market, place and close orders.

Hopefully some of these tips can help you..