forex for dummies

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

Forex market exists where one currency is traded for another currency. Foreign Exchange Market or formally known as FOREX, is generally works as an international currency exchange market. Investors and speculators now allowed to trade any currencies from all around the world thru the Forex market.

Forex is a very unique type of trading where traders are buying and selling 'money' in the same time. All the trading in forex market are done in pairs, such as Euro/JPY, USD/CHF, CAD/USD,GBY/JPY,EUR/USD and so many more. Right now,forex can be considered as the world largest trading market where an average of $1.9 trillion trades is done on a daily basis. The turnover rates in FOREX are nearly 30 times larger than the total volume of equity trades in United States.

Forex is relative new to the publics nonetheless. Forex trading only made available to the publics in year 1998 where big sized inter-bank units are sliced into smaller pieces and offered to individual traders like you and me. Before that time, Forex is only a game for banks, multi national cooperation, and big currency dealers.Public do not have chance to trade on that time. Only those with large business size and strong financial background were permitted to trade foreign currencies.