Forex Analysis: When to Trade

In any discussion of forex trading you will see discussion of the two main types of forex analysis. These are technical analysis, where trading is based on historical and mathematical factors such as price charts and indicators, and fundamental analysis, where traders pay more attention to economic factors such as financial and political news.

Which one of these will give you more successful forex trading signals? It is a difficult question and the answer is not agreed by all traders. If you look around the internet you will probably find more discussion of technical analysis but that is partly because there is more to get a grip on. Beginners are frequently advised to identify trends on price charts and then trade on the basis of those alone. This is one of the easiest ways to begin forex trading and it can be successful.

Fundamental analysis depends on knowledge and news of the constantly changing real world. This makes it more difficult to take into account if you are not in the habit of checking out the financial section of your newspaper. However, there is no doubt that ultimately it is the economic factors which cause major price movements. Advocates of fundamental analysis will argue that any evidence on charts is historical and not predictive. In other words, the charts tell you what happened 5 minutes ago but not what is coming next.

One thing is for certain. Major financial reports and other events of national or international importance can have a huge and sudden effect on currency prices. So even if you prefer the technical method of forex analysis, it is wise to keep an ear to the ground and avoid being trapped in a bad trade when the US government announces a change in interest rates and the dollar leaps or plummets by 50 pips or more.

It can be helpful to think of price movements in the forex market as having a kind of elasticity. They are constantly stretching out to certain limits and then moving back, not necessarily to their starting point but often less or more. The fundamental factors are what make the prices move but technical analysis can be used to predict how far they are likely to stretch and when they are likely to start to reverse.

So the bottom line is that the best way to profit from forex trading is to make use of the technical tools such as charts and indicators but at the same time, be aware of the fundamental factors that are the real driving force behind any trends. The successful forex trader will be comfortable with both types of forex analysis.

How Online FX Trading Works

Online FX trading, trading also known as forex, currency trading, or foreign exchange, is a speculative form of investment trading. A Means of making money by trading on the almost constant fluctuations in currency prices. If you are interested in trading currency online, it is very simple these days and can be done on your own computer from your home or office.

If you are not sure how you could make money from currency price changes, it is very simple to explain. You probably already know that different countries use different currencies and these have a value that changes. For example you may hear about the dollar strengthening, which means that the value of the dollar is rising compared with other currencies. The value of the dollar usually rises when the American economy is strong compared with other countries.

Currency prices are constantly changing, going up or down in response to news, economic reports or market activity. This means that a forex trader can deal in currency to make a profit, just a stock trader would do. You buy when a currency is rising and sell when it is falling, in just the same way.

The difference from stock trading is that currencies do not have an absolute value but are always priced relative to another currency. When you buy or sell, you are in fact always exchanging one currency for another. This means that you will always deal in a pair of currencies, which might be the euro and the US dollar. This pair is usually written EUR/USD and it has the highest trading volume of any forex pair.

Online FX trading uses leverage and margins to increase the value of trades. This means that you only need a small balance in your trading account to control very large sums. The most common leverage used by forex brokers is 100 times. This means that $100 in your account can control a position size of $10,000, or $1000 can control $100,000. As you can imagine, when you are dealing with these kinds of figures a small percentage change in the price can come out to a big profit or loss.

Because of the risk of loss, it is important to understand how and why currency prices change and to follow a good system which will give you clear signals on when to open and close a trade. Most of these systems rely on analyzing charts and mathematical indicators which you can access from inside most broker accounts.

Alternatively you may choose to use an automated forex trading system to trade for you. These are the forex robots which have become very popular over the past few years as they have become more and more accurate. There is still room for error and it is important to understand the settings of your robot thoroughly and test it in a demo account before you start online FX trading for real.

10 Things Every FX Trader Must Know to be Successful

A successful FX trader knows these 10 rules of foreign exchange trading. Print out this list and take these tips to heart, and you just might make it in the risky world of forex trading.

1. Drop the Get Rich Quick Mindset

Far too many people are drawn into currency trading because they think they can make quick and easy money. They start out right away with real money, take big risks, get wiped out in no time at all and start saying the whole thing was a scam. Get real! Forex is not a get rich quick scheme. Be prepared to work on the next 9 factors or get out now.

2. Seek Out Forex Training from Established Teachers

A successful FX trader never stops learning. You will want to read and watch pretty much everything that you can get your hands on at first.

3. Focus on Trading Disciplines, Not Systems

Newbies always want the best forex trading system, but it does not exist. There are many good systems but the market is constantly changing so first one and then another will come out on top. Pick one good system and stick with it as long as it continues to make you profits in the long term.

4. Frequent Forums for Support While You Learn

Family and friends may or may not be supportive but even if they are, there will be times when you need help from other forex traders. Find a good forex forum and visit often enough to know who is who. If you can find a mentor, that is great, but watch out for expensive coaching programs that often do not live up to the hype. Once you feel confident, be sure to help other newbies who are just getting started.

5. Discipline

Keeping to your trading plan requires discipline. If you can develop strong self discipline you have a very good chance of making money with forex trading. If not, you will almost certainly make a lot of bad decisions on the spur of the moment and lose your capital.

6. Patience

Depending on your system, you may sometimes have to wait a long while until the market comes up with a trading signal for you. Do not be tempted to make a side trade that does not fit your system.

7. Tight Risk Management

Always apply stops and put strict limits on the amount of funds that you risk per trade. This can be as low as 1% or 2%, never more than 5%. Set your risk level and never increase it. If you start toward the top of the range, decrease your percentage risk as your funds increase by keeping your position size the same.

8. Maintain Emotional Control

You need to be able to stay calm and apply your plan even after a large loss, and never allow yourself to be motivated by greed or fear of loss.

9. Set Realistic Goals

It is important to track your profits and losses so that you can see how your system is performing, but do not become hooked on the idea of trying to make bigger and bigger profits. A profit of 5% to 10% per month is excellent. Any more and you are likely to be taking risks that could wipe out your whole fund.

10. Forget Thrills

When you start out, forex trading can be exciting. However, profitable currency trading soon becomes boring. If you are going to be a successful FX trader you must say goodbye to excitement and operate a low-risk strategy.

Forex Trading Robots: What Beginners Need to Know

Forex trading robots can cut your learning curve in half or more. Currency trading is a great way to make money for those who are skilled at it, but without robots (also known as automated trading systems) it takes a lot of study time to aquire the knowledge you need to profit.

Beginners who are starting out trying to trade for themselves have a lot to learn before they can consistently make money. Not only do they have to master what seems like a whole new language, but they have to get to grips with all kinds of charts and graphical indicators that help them to see when currency prices are taking a turn in a certain direction. In short, they have to learn how to predict the market.

On top of that, unless new traders are willing to tie up their money in a long term trade, they often feel they have to watch the markets at every waking moment and sometimes in their sleep too. Because of their global nature, the foreign exchange markets are open 24 hours a day from Monday to Friday. Experienced traders know the importance of scheduling their time so that they can have some kind of life away from the computer screen, but beginners can easily be sucked into the fast moving currency trading world until their health and family life start to suffer.

Automatic forex trading systems seem to offer a way around these problems. They will watch the market for you 24 hours a day; you just have to leave your computer connected. They will open and close trades automatically, according to their settings, which you can adjust to suit your own position size and risk comfort zone.

They do have some possible issues which you should be aware of before you start trading. First, they can take a while to set up. Do not assume that you will have your forex robot running perfectly within a few minutes of purchase. Software does not always run the same on every computer and there are quite a few variables that you will need to set for yourself. For example you need to open a broker account that is compatible with the software, and then hook up the two. Of course you will receive instructions on all of this but you cannot expect it to be instant. Do not give up, just contact the program’s support service if you run into an issue that you cannot solve alone.

Second, sadly even forex trading robots are not infallible. They do not exactly make mistakes, they always do what they are programmed to do, but they apply a predetermined system. Nobody has ever invented a system that works 100% of the time so you are bound to have some losing trades. This is true for every currency trader that ever existed, no matter how skilled. It should not be a problem if the system is profitable and if you know how to manage your funds.

The most important thing is not to risk too much on one trade. 2% to 5% is usually about right depending on the system that you are running. Most automated trading robots come with advice on the level of risk that is appropriate to their system. Keep on the cautious side, especially at first.

If you want to get into foreign currency trading in any form, you must understand that it is a risky business. It is possible to make a lot of money but it is possible to lose a lot of money too. Do not try to make too much too soon or you will probably fall on your face. But if you take this advice into account, then one of the best forex trading robots on the market could be a good choice for you.

Best FX Trading System – How to Choose

Forex traders are always looking for the most profitable forex or FX trading system. The truth is that no system is perfect and that is why there are so many of them out there. In fact, there are probably as many forex systems as there are traders. Even traders who buy a system to follow from the get go usually modify it to suit their own trading plan.

Here are three things to look out for in an FX trading system.

1. Strategies That Suit Your Trading Style.

The best forex systems will have a selection of different strategies that you can use in different market conditions. For example, long and short term trading strategies, or one strategy for a choppy market and another for a stable market. You need to check that they all (or most) suit the way that you want to trade.

One criterion here is the time that you have for trading. A day trading system may depend on you being online at certain hours or for a certain length of time each day. It may not suit you if you have a full time job. You would want instead a longer term trading strategy that you can set and forget.

2. High Rate Of Successful Trades.

The main reason why you want a high success rate (or rather, a low number of losing trades) is psychological. Some systems have a lower success rate but maintain profitability by winning a lot when they win or not losing so much when they lose. This is OK in theory, but in practice it can be very discouraging. You will frequently have 3 or 4 losses in a row, sometimes even more, or a period when you seem to be dropping more than you gain for quite some time. This can lead to losing faith in the system, which in turn leads to erratic trading, bad decisions and, of course, more losses. A high success rate can protect you from this and help you maintain the psychological edge that you need to be a successful forex trader.

3. Effective Training.

Most FX trading systems that are sold online come with training but this can vary in quality. You need to make sure that the training offered is step by step. Video is often the best way and this becoming more and more common. You can watch and see exactly what you need to do.

However, ideally you should also have the steps written down in an ebook. That way you can quickly refer back later when you need a reminder of something, without having to watch a whole video again.

If you pick out a good system according to these rules you will have no trouble trusting it. As we said earlier, having faith in your system will make it much easier for you to stick to it through thick and thin, giving you the best chance of making money with your FX trading system.

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