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  1. Forex trading has gained extensive popularity in the contemporary world especially with the advent of online trading. Trading in currencies has become one of the lucrative ways of making money. Most individuals especially novice traders usually have several question about the market and in this article we are going to expound on some of frequently asked questions. What is the Forex Market? Forex market is a market where currencies are traded. It is the market where traders are able to buy and/or sell, exchange as well as speculate on various currencies. Foreign exchange market is the largest and the most liquid financial market in the world and is made up of central banks, hedge funds, banks, commercial companies, investment management firms, retails Forex brokers as well as investors across the globe. The Forex market rates usually fluctuate from time to time based on existing as well as anticipated macroeconomic conditions. Is Forex market different from other financial markets? Most people usually confuse Forex market with stock market but the truth is that they are different. For example, the Forex market is not governed by any central body like is the case for the stocks, options and futures markets. In the Forex market there are also no clearing houses for verifying trades and as such you do not have a panel to refer to in the event of a dispute. All parties in the Forex market trade based on credit agreements. In addition, there is literally no uptick rule in the Forex market as there is in the stock market and there are no limits on the size of your position in the market. How can I start trading in the market? Starting to trade in the Forex market is simple but you need to prepare adequately for the same. It is advisable that you start with a demo account to have a grip of the Forex market before opening a real account. Using a Demo account you will be able to gain experience on trading in currencies without the risk of losing your hard-earned cash. How do I make a choice in regard to the trading platforms? You need to do a thorough research on various trading platforms to choose the one that works best for you. A good platform should be able to meet your needs as well as priorities. Trading platforms in the Forex market are basically provided by brokers and so you have to make a sound and well calculated decision when you are choosing your broker. The brokers should provide good customer support around the clock as well as a user friendly trading platform. In addition, the Forex brokerage firm should have in-built market analysis to help traders trading in their platform to make appropriate and informed decisions. What is a pip? A pip stands for Percentage in Point and is in essence the smallest increment of a trade in the Forex market. The prices are usually quoted to the 4th decimal point and a change in the 4th decimal point is what is typically called the pip. This applies to all major currencies save for Japanese Yen. In conclusion, the Forex market is a very interesting yet challenging trading platform. It is such a large market such that there is no financial institution or group of investors that can misuse it because there is no single entity that can manage to gain significant control over trading in currencies. This means that the market provides the same opportunities for all investors irrespective of their social standing or background. It is indeed a free and fair market where individuals can making big money or lose in equal measures. It is a market that you have to trend carefully otherwise you may end up losing all your fortune within a short period of time.
  2. Leverage is a tool that can generate really interesting earnings for all those who make Forex trading. In other words, it's like a lens which amplifies positive or negative effects of changes in exchange rates. With the leverage, you can move amounts of money considerably higher than your actual investment, even exploiting the smallest pips movements. Forex leverage is an excellent tool to make good gains in the currency market. To succeed, you must always use great caution and thoroughly study the foreign exchange market.
  3. As a trader, to make money in the Forex market you have to clearly understand the basic principles that rule this financial market. Forex trading has grown drastically over the past few years and is now one of the most crucial elements in the global economy. The aspect that Forex market trades in currencies helps to regulate the value of the major currencies in the world. This financial market is the largest liquid market in the globe with a value of around $ 2 trillions being transacted at any given time. Forex market operates around the clock during business week to take care of various traders across the globe. Different countries have varying timelines and thus the need for this financial market to operate 24 hours per day. Forex market is not based in any permanent location but managed by different financial hubs which are New York, Singapore, Tokyo and London. Forex trading involves exchange of ‘base’ currency and ‘quote’ currency which is commonly known as a ‘trading pair’. Here, a trader uses base currency to buy quote currency with hope that base currency value will depreciate as the value of quote currency appreciates. As base and quote currencies rise and fall in the Forex market, correct predictions by a trader will translate to substantial profits. For instance, if a trader uses CAD (Canadian Dollar) as a base currency and USD (United States Dollar) as the quote currency then 1.10/1.00 implies that $ 1 buys 1.1 CAD. When he buys 11,000 CAD he will use $ 10,000. Assume that after his purchase the rate changes to 1.00/1.00 this means that $ 1 buys 1 CAD and by him converting his 11,000 CAD to USD, he will make a profit margin of $ 1,000. On the flip side, if the CAD appreciated or USD depreciated then it means he could have made a loss. Forex market is a free market and the value of the currencies is basically determined by buyers and sellers. It is worth mentioning that in every trade pair, USD has to be there either as a quote currency or a base currency. But how much a currency is worth is essentially the decision of Forex traders across the globe. Some of the parameters that affect currency’s overall value are national debt, monetary policies, country’s fiscal health and inflation. Thus, an overall economic health of a country determines the quality and value of its currency in the financial market. For instance, when European Union (EU) went through the Euro crisis, it translated to Euro dollar losing ground in comparison to USD. When a country experiences a high level of unemployment, high inflation rates and large trade deficit; its currency drops in value. This makes it more expensive to import goods and cheaper to export goods hurting the economy more. Forex traders take advantage of rise and fall of currencies to make profits. It is a business that involves high risks but also has high return on investments if you master the art of trading in the currencies. It is easier for an expert to make profits in Forex trading than a newbie because he has mastered the art of predicting the performance of various currencies against USD. In conclusion, it is worth mentioning that for any trader to perfect the art of Forex trading, they must take time to practice it using real money in real time. As the mantra goes, practice makes perfect. You must also learn to accept when losses when you lose a trade and gradually built up a trustworthy system that will enable you to trade successfully in the Forex market.
  4. Jenny, FOREX requires a lot more research and a lot more awareness of political events...this entails fundamental analysis which is also an integral part of Forex trading
  5. Talond which part dont you understand so that I can clarify!! It will be my pleasure to do that. Regards
  6. Fibonacci analysis has become an essential tool to the modern trader. Some traders may be skeptical regarding the unique and slightly abstract way Fibonacci retracements and extensions analyze the market but ultimately all a trader needs to be aware of is whether they are reliable and accurate. The principle use of Fibonacci retracements and extensions is to project strong lines of resistance and support for a security. Armed with these indications a trader can employ a basic but often successful trading technique by placing pending entries into the market. When deployed properly the Fibonacci retracements and extensions predict significant lines of support and resistance of any security being analyzed. The retracements and extensions are laid over the top of a candlestick chart and if done accurately the resistance and support can be clearly seen. The price of a security is likely to either rebound when it hits one of these lines or pass it and if it breaks the support or resistance it is likely to keep on going. This is valuable knowledge for a trader and with a basic technique large profits can be made by playing the market with this information.
  7. Forex market is one of the vibrant markets in the world and also one of the most challenging. Trading in currencies is a risky affair and not all investors can suit this market. If you are considering plunging into this market you need to possess the necessary skills to enable you trade successfully or be willing to master the art of trading in the Forex market. Before we delve into the reasons why succeeding in the Forex market is a daunting task, let us have a sneak preview of the Forex market. 1. The daily operations of the Forex Market are equivalent to $ 3.9 trillion 2. The market is highly liquid as a result of huge trading volumes 3. The market is geographically dispersed 4. Operates around the clock save for the weekends 5. There is an array of factors that affect currency exchange rates 6. Individuals from all facets of life can trade in the Forex market as long as they have what it takes to trade in currencies Making money in the Forex market is challenging and risky but can be done. In Forex market to make substantial profits, you buy a particular currency at a low value and then wait for it to appreciate so that you can sell it at a higher value. The risky part is when you buy that currency and instead of the value appreciating, it depreciates. This means that you are going to lose the money you had invested instead of earning returns on your investment. Why people fail in the Forex Market Lack of Proper Planning There is a common saying that failing to plan is planning to fail. This holds water in the Forex market because if you fail to plan your trading properly then your chances of succeeding are minimal. To avoid losses stop to hastily dive into Forex trading without proper planning. Take time and prepare and plan adequately for what lies ahead in the market before investing your time and money in the market. Poor Money and Risk Management Proper money and risk management is crucial to succeed in the highly volatile Forex market. Currency rates can swing in one direction in a moment and in the next moment they are swinging in another direction. Therefore, poor money and risk management will see you lose a lot of money in the market. It is of paramount importance that you limit your downside by using stop-loss points always and as well trade only when good trading opportunities arise. Other ways you can mitigate risks while trading in currencies is by utilizing a number of different indicators, placing stop-loss points at the closest resistance levels as well as utilizing trailing stop losses to lock in profits as well as limiting losses when the trade turns favorable. When you master the art of money and risk management you will significantly increase the rate of succeeding in the Forex market. Failure to Identify the Entry and Exit Points Properly Things that you should know as a trader when you are looking for entry points: When the market is Bullish then; 1. Trend lines should breakout upwards 2. RSI, MACD and Stochastic should have positive divergences 3. Strong (close support and weak) distant resistance 4. Bullish candlestick engulfing When the market is Bearish then; 1. Trend lines should breakout downwards 2. RSI, MACD and Stochastic should have negative divergences 3. Strong (close resistance and weak) distant support 4. Bearish candlestick engulfing It is a great idea to place exit points, take profits and stop losses, before placing your trade. The exit points should be located at strategic levels and should only be modified if there is major change in the market that will affect your trade. Some of the strategic levels where you can place exit points are; just before areas of strong support or resistance, just inside key trend lines or at key retracement levels. Though Forex trading is challenging if you perfect some of the things discussed above you can make good returns at the end of the day. You also need to exercise patience and ice-cold discipline while trading. Remember, Rome was not built in a day and you also need time to trade profitably in the Forex market.
  8. It is also good to Stick a note on your computer that will remind you to take small losses often and quickly - don't wait for the big losses.
  9. Warren Buffet says there are two rules in trading: Rule 1: Never lose money. Rule 2: Remember Rule
  10. The neckline is a resistance line, and if it breaks, a significant support line will usually emerge from the neckline. If there is a very heavy volume in the market, the neckline breaks, and there is a confirmation of a trend reversal. You can re-test the neckline using a retracement, but only if the support line is broken.
  11. The head and shoulders chart pattern is a pattern that falls into the class of bearish reversal chart patterns. Head and Shoulder chart patterns occurs at the top of a trend and is usually used as a determinant of a bearish reversal of the existing bullish price action. A head and shoulders Forex chart pattern is made up of: 1. Candlesticks that form a crest (the shoulder 1) 2. Second crest which is usually higher than the first one (the head) 3. Third crest which is not as high as the second, and may or may not be as high as the first crest (shoulder 2) Head and Shoulder chart patterns can be a bottoming formation after a downtrend or a topping formation after an uptrend. The bottoming pattern is a low price then followed by a retracement then a lower low, the head, and a retracement then a higher low which is the shoulder. On the flip side, a topping chart pattern is a high followed by retracement then a higher price high and finally a lower low. Head and shoulder chart pattern is complete when the trend line which connects the 2 highs, bottoming pattern, or 2 lows, the topping pattern, is broken. Application of Head and Shoulders Chart Patterns To be able to identify Head and Shoulders chart patterns, there are 3 crucial things: 1. Have an eye to see how the candlesticks line up 2. Have the ability to use the drawing tool of your Forex trading system to make the appropriate traces across the highs of the candlesticks 3. Draw a correct neckline, which is the landmark for the trade entry You should ensure that the head and shoulder have to fully form with the 2nd shoulder being almost complete before placing a Sell stop. The Sell stop should be placed about 5 pips below the neckline. When you are using Head and Shoulders chart patterns to trade in the Forex market you should know that the extent of the bearish reversal of the price action is equidistant to the distance between the neckline and the peak of the head. This is the profit point you should be eying. It is worth mentioning that the entry signal is usually reinforced when the price action is in an overbought region or is at a resistance level. It is very important that traders wait for the head and shoulder chart pattern to complete before they make a move. One should not assume that a pattern will develop, or become complete in the future. You should watch partial patterns keenly but you should not make any trades until the head and shoulder pattern breaks the neckline. The neckline is the landmark for the trade entry. On the other hand, for the inverse head and shoulder, you should wait for price movement above the neckline after the right shoulder to be formed. A trade can be initiated as the chart pattern completes. You should always plan your trade beforehand, jotting down the profit targets, variables that may change your revenue target, entry as well as stop points. Just like there are two sides of a coin, trading using head and shoulder chart patterns has its limitations. First and foremost the chart pattern is not perfect and as such can fail at times. This chart pattern is not always tradable. For instance, in the event that there is an extensive drop of one shoulder due to unpredictable even then there is a high likelihood that the price target will not be hit. Bearing in mind that you have to wait for the pattern to develop fully, it could mean waiting for longer periods which can affect your trading. In conclusion, though head and shoulder patterns can be subjective at times and take long to develop, the complete chart pattern provide entries, profit targets and stops making it easier to implement a trading strategy.
  12. Failing to plan is planning to fail...lack of a trading plan can make a Forex trader fail to reach his goals in his trading. For a trader to break even and even make a substantial margin, he should have a proper and well crafted trading plan
  13. In the Forex market, there are particular Forex chart patterns that appear from time to time. These Forex chart patterns usually signify the mass psychology of the currency market. It is therefore of paramount importance to know how to identify these charts since this will save you significant time as well as effort in your trading. When you master the art of reading chart patterns in the Forex market, then you are at a better position to make big returns from your investments in the Forex market. Knowing how to analyze Forex chart patterns will literally take your trading career a quotient higher. It is worth mentioning that you should scrutinize the chart patterns in different time frames so as to add strength on the trading decision you will make. Forex chart patterns are very useful in helping traders to figure out when a break out is about to happen in the market. In addition, chart patterns can help in pointing out whether the existing trend will be maintained in the market or a change in trend is imminent. Whereas there is an array of Forex chart patterns, in this article we are going to discuss one of the most common chart patterns used in the market. These are the triangle chart patterns. These charts are commonly used in the Forex market because they give a relatively simple method for trading in currencies. Triangles Chart Patterns Triangle chart patterns can be ascending, descending or symmetric and are especially common on short term time frames. A symmetrical triangle pattern is formed when the lower and the upper trend lines representing the lows and the highs candlesticks, form higher lows and lower highs and then converges to form a triangle. The resultant slopes of the 2 trend lines are symmetrical. It is worth mentioning that in a symmetrical triangle chart pattern, the currency price can break out in either bearish or bullish direction; there is no bias towards the breakout direction. The descending triangles are usually formed when the horizontal lower trend line and upper trend line forming the downward slope converge. Unlike the symmetrical triangle which can either be bearish or bullish, a descending triangle is a bearish break out formation. This being the case the bearish price action in essence outperforms the bullish price action in the market. On the other hand, ascending triangle chart pattern is formed when the lower trend line that forms the upward slope and the triangle base converges. This chart patterns shows a bullish break out pattern where bullish price action outweighs bearish price action. Though chart patterns appear slightly different for trading purposes, there is very minimal difference. Triangle chart patterns usually occur when the prices of currencies converge with the highs and lows narrowing into a tighter and tighter price space. Application of Triangle Chart Patterns in the Forex Market Triangle chart patterns are easy to recognize on the Forex charts since they mostly take sometime to form before the price action breaks out in the market. This said, the best way to trade in the Forex market using triangle chart patterns is to trade the break outs. For advanced and highly experience Forex traders, they can trade the price action that falls within the boundaries of the triangle. This is risky and therefore not good for novice traders and traders with inadequate experience. However these traders can trade break outs and make good money from their trading. It is highly recommended that the novice traders first use demo trading platforms to sharpen and improve their trading skills using these chart patterns before trading on a real platform.
  14. You should only use risk capital that you can afford to lose.....
  15. As a trader continues to participate in the Forex market, he masters the art of employing various tools in his trading thus becoming a better trader. As a newbie, you should have genuine interest to learn the tools that you can employ to determine the entry and exit of individual trades. Some of the tools that will be beneficial to you are Moving Averages technical indicators. These are some of the popular indicators used by technical analysts in the Forex market to find trends in the market. Finding the Trend A majority of trades takes place on a short basis as compared to long term. Short term trading entails limiting the time frame that your capital investment is at risk. As a trader, you have to make a decision whether you want to be bearish or bullish on a given currency pair before entering a trade. To achieve this, you need a longer term snapshot to provide for you a useful road map to get to your destination. While you can make money through short term trading, it is easier to make more substantial amount of cash by trading in the direction of a major trend than trading against it. Therefore, before you consider a trade using any of the currency pair; it is of paramount importance to objectively identify the prevailing major trend in the market. After establishing the current major trend, you can then fine tune your entries and exits. The aim objective of doing this is to focus on short trades when the major trend is bearish and on long trades when the major trend is bullish. Trend Filtering One of the simplest and easiest strategies for trend filtering is applying moving average to a data set. Moving averages help a Forex trader to quickly visualize the current trend by observing whether the price action is below or above the moving average. If you use moving averages appropriately they will help you to focus on the best opportunities in the market for optimal benefits. Moving average as a trend following tool is effective in generating buy and sell signals. Moving average indicator smooths out volatility of price action, this enables Forex traders to clearly establish the direction of the trend in the market. By comparing moving averages indicator with price action, a trader can establish the trend of the market as well as predict where the currency price is likely to head to next. In an upward trend, the moving averages move in an upward direction while in a downward trend moving average tends to move in a general downward direction. When the market is moving in an upward trend, the price of the currencies is usually above the moving average. It is worth mentioning that when the price is above the moving average, then the trend will remain bullish. When the price closes below the moving average it indicates that the support that was being offered by the moving average has been broken and the upward trend has ended. On the hindsight, in a downward trend when the price closes above the moving average it shows that the support that was being offered by the technical indicator has been broken and the downward trend has come to a halt. Conclusion One of the ways to trade successfully in the Forex market is to develop the ability to spot opportunities and establishing how to take advantage of those opportunities for your advantage. Trading in the direction of the major trend in the market is one of the best ways of improving your odds of making good money in the financial market. Moving averages is just one of trend identification tools.
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