By Ian Armstrong

You can make an incredibly profitable living via Forex trading. A combination of low minimum entry requirements and margin leverage mean that small investors can do extremely well in these markets. However, despite the best opportunities, plenty of people still lose out trading on the foreign exchance markets.

There are a number of reasons this might happen. Here are six common ones that explain why many people who are new to Forex trading do poorly.

Unrealistic expectations - Many beginning traders read about the easy of entry and profit trading Forex and jump in before they”re ready. This is a fast way to lose everything. Forex trading, like any legitimate business opportunity, won”t make you rich fast. You”ll still have to do a lot of research and put in the work required for success. Even if you do everything right, you can”t expect everything you do to work out perfectly. It’’s important to know when to cut your losses and pay attention to what works.

Insufficient research - While it’’s easy to get into Forex trading, that doesn”t mean you can master it overnight. While experienced traders can make everything seem simple, the prediction of currency prices can be fairly complex. Small investors are at a disadvantage, too. That’’s because large financial institutions have many resources that aren”t available to the individual, including a staff that can analyze recent economic indicators. Be prepared to spend a lot of time learning before you make a profit.

Viewing Forex as gambling, not investment - Don”t think you can beat the system without doing some research. There’’s nothing to be gained by choosing currency trades on a hunch and relying on your luck. People who do this will pick a few winners, make profits in the short term, then lose everything when their luck runs out.

Failure to focus - Depending on the broker you choose, you might be able to pick from several dozen currencies. However, when you”re getting starting, stay small. Pick just a few of the most popular currencies to trade, like the Euro, US Dollar, or Yen. Focus on them exclusively, until you know what you”re doing. Remember that the more currencies you trade, the more work you”ll have to do to find trends. It’’s a lot better to know just a few currencies well than to have a lot of currencies you”re not educated about.

Failure to have a system - There are plenty of trading systems available, many free. Choose one that’’s right for you, based on the money you have available, your trading goals, and the way you work. Working without a system is no more effective than throwing darts at a chart on the wall.

Failure to stay with the system - It’’s not enough just to have a trading system. You have to stick with it, too - even when things aren”t going the way you”d like. While this is easier said than done, remember not to get greedy or chicken out. Follow your system and find the best exit and entry points. Ignoring them means you risk missing a big upswing, or getting stuck in a trade that’’s going south.

The best traders know that it’’s more important to know when to get out of a trade than to know when to get in.

About The Author

Ian Armstrong is an avid Forex enthusiast.

Some of the most popular trading systems have been objectively reviewed - based on actual performance - at http://www.forexshortcuts.com/trading-systems.php

By Justin Stewart

Despite the global significance of the forex market, there are no centrally cleared or unified markets designated for the majority of forex trading. Additionally, there is very little regulation involving cross-border rulings. Instead, one will find quite a variety of interconnected markets allowing the trading of different currency instruments.

This is due largely in part to the Over-the-Counter (OTC) fashion in which currency markets conduct the majority of their trading activities. The implication follows that there will be a variety of different prices (rates) rather than a single monetary entity, depending on which bank or “market maker” is conducting the trading.

Suffice it to say, the rates are kept fairly close so as to deter and eliminate the activities of the arbitrageurs — one who engages in the act of arbitrage. Arbitrage is defined by Dictionary.com as “In finance - the simultaneous purchase and sale of the same securities, commodities, or foreign exchange in different markets to profit from unequal prices.” Last year (2007) saw the Chicago Mercantile Exchange and Reuters engage in a joint venture called FxMarketSpace which is a centralized clearing mechanism used by the forex market.

There are four primary trading centers in the forex market:

1. Hong Kong

2. London

3. Singapore

4. Tokyo

But banks globally participate in the market, and currency trading continues throughout the day on a 24 a day basis (except on weekends) as a result. As the Asian trading ceases, the European market opens. Finally the North American market follows suit, and then the cycle starts all over again, creating the around-the-clock scenario.

The forex market provides the trader or brokers with little or no “inside information” and fluctuations in the exchange rates are normally the result of monetary flows, as well as the expectation (or speculation) in the directional changes of these monetary flows. Such changes can be caused by any (or a combination) of the following factors:

* Budget

* GDP (gross domestic product) growth

* Inflation

* Interest rates

* Large cross-border merger and acquisition transactions

* Trade deficits and surpluses

* Other macro-economic conditions

Active individuals in the forex market have access to any pertinent news about the market based on the fact that media information is released on scheduled dates on a publicly displayed basis. This becomes the only type of inside information that is ever available to participants in the forex market. However, due to fact that the banks are visually made aware of their customers” order flow, this gives the larger financial entities a decided advantage over the other market participants.

The standard practice is for the different currencies to be traded against one another. Each pair of currencies is normally designated as “XXX/YYY”, with the XXX or the YYY being the 3-digit ISO 4217 currency code (the ISO is the International Organization for Standardization). As an example, if you wanted to see how the Euro was priced in United States dollars, then you would look for the EUR/USD notation. Normally, the first one of the paired currencies is the base or stronger of the two, and the second is the weaker one based on where the monetary amounts stood on the market at the creation of the particular pairing of currencies.

About The Author

Justin Stewart has used software to automatically trade the forex market allowing him to earn a living without lifting a finger, even while he sleeps. You can use the same forex software to get the same results here: http://www.SleepingForexRiches.com

By Mary McArthur

Many people compare forex trading to gambling. Some who follow the random market theory support this. However some technical analysis experts would argue that technical analysis Forex techniques stack the odds in the favour of the trader. Sound risk management and money management are another ways of stacking the odds in the favour of the trader.

How much do the odds have to be in the favour of the trader for them to make money? Many people think that a trading success rate of 70% to 80% is required to make money. At 70% your gains would be $700 (assuming gains and losses of $100 per transactions) and losses would be $300 resulting in an overall gain of $400. Lets take a closer look at this assumption.

In Forex trading, when the price approaches strong resistance or support, the question is: will the price violate the barrier or bounce back from it? Good channel traders and support and resistance traders will tell you that in general there is a 70% chance of a bounce and only a 30% chance of a breakout. These are important statistics.

The other statistic is that when there is a false breakout (60% of the time) it will only go say 25 pips past the barrier and then be forced back. Knowing this statistic is another big advantage for traders. Most indicators or trading methods have these kinds of statistics.

The risk management tool that good traders use is the risk compared to reward ratio. Many will only enter trades that allow them to gain 200% of what they risk (their stop loss). This is a particularly powerful way of trading as they make $200 on successful deals and only lose $100 on positive deals. This means that if they had a 50% success transaction success rate, on 10 transactions, they would earn $ 1000 on successful transactions and only loose $500 on unsuccessful ones. A gain of $500 in spite of only having a 50% success rate. Much better than the $400 gain calculate above.
Just like card counters who make money from BlackJack you need to develop the skill of stacking the odds in your favour when Forex trading. This means knowing technical analysis very well and knowing the characteristics of the forex market very well.

BlackJack card counters also use money management to make money. When the packs are rich of high value cards they would progressively increase the value of their bets. They would bet very low or not participate when the odds are not favourable. This is one of the most neglected aspects of Forex trading and as a Forex trader you need to develop this skill.

Remember the trader above who achieved a 50% success rate and made money because a 200 to 100 return on risk ratio was used. Now imagine that only 1 lot was used for higher risk trades and 2 lots were used higher probability trades. The gains will now be $2 000 ($200 x 5 x 2) and the losses $ 500 ($100 x 5 x 1). A $ 2000 gain compared to $ 500 loss. Now we talking. Remember this is still at a 50% success rate. This $1500 gain at 50% accuracy compares well with the $400 gain at 70% accuracy.

The above is an introduction of how some traders do not let losses bother them as the have they odds stacked in their favour. Many trading firms (including ours) take their traders through a course of Casino game gambling odds to show them how easy it is to make money on the forex when you stack the odds in your favour.

About The Author

Learn from Mary McArthur who is a trader at http://www.forextradersupportservices.com Find out how to stack the trading odds in your favour by visiting http://www.expert4x.com Have a look at the Forex trading, Forex alert and Casino games based services which will stack the odds in your favour.

By Justin Stewart

When you”re unfamiliar with forex (the foreign exchange market), and you are thinking about engaging in currency trading, there will always be questions that you are going to have, especially if someone is trying to convince you that you should be involved in it. You should ask all the questions you can think of. The main problem is that it isn”t always easy to get honest and straight answers. Here are the most frequently asked questions about foreign exchange, and hopefully, the content will answer some of yours.

What is the best way to get started trading in the foreign exchange market? Opening an account with a Forex broker is the first step, and then funding the account is the second. Taking a course, or doing as much reading about Forex is a recommended course of action when you are just beginning.

How much previous trading experience should I have?
You”re not required to have any trading experience in order to participate in trading in the Forex market. However, if you have prior experience in trading commodities, options, or stocks you do have an advantage over someone who has never engaged in these investment activities. An excellent and recommended way to learn and train for this kind of financial concept is to “paper trade.” This is a way to learn without the use of real money.

Are commissions high when you trade in the Forex market?
This just depends as most brokers offer fairly low commission rates. However, every broker is different and commission rates will vary, but overall, Forex brokers charge a lower commission than what stock brokers and investment houses do.

How can I limit my risks when it comes to Forex trading?
The first step is to educate yourself as to what Forex is, what is involved, and the basic operations of the Forex market. A solid education in this is tantamount to success and there are several good programs out there that will help you comprehend and understand how Forex works. Paper trading where you engage in Forex trades without using money is a great way to learn and practice trading skills. Sixty to ninety days of training is recommended. Another way to limit your risks are to get familiar with the concepts of certain risk managing tools like limit orders and stop loss orders.

What are the risks involved in trading Forex?
The risks are the same as playing the stock market — significant financial loss. It’’s an old rule of thumb, but you should only invest what you can afford to lose. Not only is the financial loss factor a great risk, but high levels of leverage can equate to a trader losing everything. The bottom line is to research the targeted currency or asset and plan your trading carefully so that losses are minimal.

What is the profit potential when trading Forex?
Considering the high amounts of leverage involved in Forex, profits could be unlimited. A standard account affords the trader a leverage factor of 100:1. This basically means that you can control 100,000 units of currency with a $1,000 investment. But don”t forget that you could also lose it all as well. With this amount of leverage, a positive move in the right direction can mean huge profits for the trader.

About The Author

Justin Stewart has used software to automatically trade the forex market allowing him to earn a living without lifting a finger, even while he sleeps. You can use the same forex software to get the same results here: http://www.SleepingForexRiches.com

By Justin Stewart

There are several factors that contribute to the forex market’’s uniqueness. These are:

* Extreme liquidity of the market
* Geographical dispersion
* Larger numbers of traders (and the variety of) in the market
* Length of trading hours (24 hours a day, except on weekends)
* Lower profit margins compared to other fixed income markets (profits can occasionally be higher based on trading volume)
* Trading volume amounts
* Variety of factors directly affecting exchange rates

The forex market is considered to be the epitome of ideal or perfect competition. Based on statistics compiled by the Bank for International Settlements (BIS), average daily trading for this time of year stands at $3.21 trillion in volume. This volume was broken down into four categories, namely:

1. $1.714 trillion in forex swaps - OTC derivatives with short-term interest rates
2. $1.005 trillion in spot transactions - using one currency to purchase another for purposes of immediate rather than future delivery
3. $362 billion in outright forwards - agreements established between two parties to purchase or sell assets for a pre-agreed upon price
4. $129 billion in estimated reporting gaps

The concept of forex traded futures contracts came into being in 1972 at the Chicago Mercantile Exchange, and has progressively grown into the viable segment of the forex exchange that they are today. According to the Wall Street Journal, futures now account for approximately 7% of the total volume traded on the forex exchange.

In the past, the most significant growth in forex trading volume occurred between April of 2005 and April of 2006, when the market witnessed a 38% increase in the volume of trading, which equated to a doubling since 2001. It has been theorized that there were two significant factors contributing to this growth. One was that the foreign exchange has grown in importance as an asset class, and the other was the increase in the amount of fund management assets, namely hedge funds and pension funds.

Additionally, the onset of trading currencies on the internet has also grown in popularity by virtue of the internet platforms which has made it easier for retail traders to become more involved in the “trading” industry as well as increasing the forex traffic factors. And this was just one of the different trade execution venues that have come into being, although it is probably the most significant.

According to the Wall Street Journal Europe, 73% of the entire trading volume is the direct result of the 10 most active traders in the forex market. The chart below lists these 10 traders, their country of origin, their ranking, and their percentage of volume:
Rank
Name
Volume
1
Deutsche Bank
19.30%
2
UBS AG
14.85%
3
Citi
9.00%
4
Royal Bank of Scotland
8.90%
5
Barclays Capital
8.80%
6
Bank of America
5.29%
7
HSBC
4.36%
8
Goldman Sachs
4.14%
9
JPMorgan
3.33%
10
Morgan Stanley
2.86%
Interestingly enough, eight of the 10 listed hail from either the United States or the United Kingdom. Naturally, the Swiss bank is also one of these 10.

About The Author

Justin Stewart has used software to automatically trade the forex market allowing him to earn a living without lifting a finger, even while he sleeps. You can use the same forex software to get the same results here: http://www.SleepingForexRiches.com

By Corbin Newlyn

Forex charting plays a very vital role your tools to success in the foreign exchange market. To completely understand the constantly changing patterns of market rates, forex charting provides you with an overall snapshot, which will help you to do your trading in a effective manner. If you are unsure of the different benefits of forex charting, read on and get ready to be convinced.

Why is Forex Charting So Crucial?

Completing trades on the foreign exchange market place using forex charting is almost like playing on the highway, where things move very quickly and you have to catch the market action in the blink of an eye. If you are able to catch a financial trend it can bring new financial rewards whereas if you miss some of the key data points may leave you stranded.

Forex charting can be used in spite of your trading style or skill level. Forex charting allows you to get a bigger picture of where the market is heading, then enables you to anticipate various events that may bring some fairly large financial rewards.

Generally, the currency market on day by day basis, are unable to reveal the long range trends. But by using forex charting, you can see the changes in the recent market activity and allow you to make predictions for future currency movements. This will keep you one step ahead of the market trends, which may result in financial profits.

Characteristics of Forex Charting

The best feature of forex charting is that it is easy to use and it brings you the most recent real-time data. Nevertheless, the view is much bigger than the day to day movements of the market or even a certain stock. Forex charting mainly gives importance to observing the market, which really has the ultimate controlling influence over the performance of individual stocks.

This will assist you in seeing why even the best stocks sometime suffer from negative movements in a bear market. This type of charting software helps to map out the large amounts of historical data and provides the information in an arranged way to give you an overall view of what is happening now, what has happened in the past, and then hopefully what is in all probability going to happen in the near future.

The data that is charted also features analysis that is simplified to help you make the proper market timing determination. Forex charting provides a wealth of details and advice at your fingertips. The unbiased projects are predicated on numbers, hard facts and trends, which can then be translated at a later time for profit.

About The Author

Listen to Corbin Newlyn as he shares his insights as an expert author and an avid writer in the field of finance. If you would like to learn more go to http://www.fxpreferred.com/ and at http://www.fxpreferred.com/the-proper-way-of-reading-and-computing-for-a-forex-quote/

By Ian Armstrong

Just about any online Forex broker you pick will have a trading platform available to automatically calculate your profit and loss. However, it’’s important to understand the basic math that goes into this. That’’s a good way to make certain that your broker is honest, and it’’s a good skill to have. Calculating profit and loss is fairly simple. There are only two simple formulas to keep track of.

When the quote currency is USD (the second part of a currency pair), the formula you”ll need is: Profit = Price Change in Pips X Units Traded. If USD is the base currency (the first part of the currency pair), the right formula is: Profit = Price Change in Pips X Units Traded / Exit Price. Here are a few examples to help you better your understanding.

If the quote currency is USD, assuming that the broker requires a one percent margin, you”ll be able to trade a hundred thousand dollars for only a thousand. If you”re planning to trade EUR/USD (currently trading are about 1.2518/9), and you predict that the euro is going to rise in value against the dollar, you”ll execute a trade to buy euros, selling USD at the same time. If you”re buying, you”ll have to take the asking price (the second number in the quote).

If your calculations are correct, and the price rises, you then initiate a trade to sell your euros and buy US dollars. At this time, you”ll use the bid price, say: 1.2532. Since you were able to buy at 1.2519 and sell at 1.2532, you had a profit of seventeen pips, expressed as 0.0017. To convert that into real money, use the formula listed above: Profit = Price Change in Pips X Units Traded, or Profit = 0.0017 X 100,000 = $170.00

One easy rule to keep in mind is that when you”re trading a standard sized lot of a currency pair (like 100,000) in which USD is the quote currency, a pip is always ten dollars. That means that seventeen pips equals a hundred and seventy dollars.

Now, we”ll take a look at an example where the base currency is USD instead. When we decide to buy a hundred thousand units of USD/JPY at 117.22, and our calculations are correct, the price rises, and we”re able to sell at 117.35. This earns us thirteen pips.

To calculate our profit, make use of the second formula: Profit = Price Change in Pips X Units Traded / Exit Price, or Profit = .13 X 100,000 / 117.35 = $110.78. It’’s really very simple.

About The Author

Ian Armstrong is an avid Forex enthusiast.

Ian’’s top-rated forex broker (and platform) is reviewed at http://www.forexshortcuts.com/plat-easyforex.php