Why so Many Traders Fail at Forex

The old battlefields of the middle ages are not gone, they have merely changed form. Hundreds of years ago normal men would set out to build their empires by conquering lands through the force of arms. Today, normal men like you and i set out to build our financial empires by conquering markets throught the force of self. The blood soaked battlefields of yesterday have made way for the cash soaked commercial battlefields of today, with the large private armies of Family warlords making way for large pools of family capital. Just as armies were needed to shape empires of the past, so too is capital needed today in order to put modern commercial plans of conquest into action.

In there, lies the reason as to why many forex traders fail. They go into battle risking too many soldiers (capital) and without the knowledge of tactics needed to win the fight.

Lets look at that again. 1. They risk too much capital, 2. They do not understand Forex markets.

Many traders both successful and miserable have made these mistakes, the main reason for me writing this article is so you can learn this lesson here and do not have to make this mistake and lose money, or at the very least be cautious enough to minimise your losses.

No general will risk a majority of his men in a battle that he has no plan for and where he has no idea about his enemy. So my question to you is, why would you risk your capital in market conditions you know nothing about? Luckily two remedies exist for the forex general who finds himself in this situation.

1. Make it a rule to only risk 1% of your capital in any one trade. This is to minimise your losses.

2. Educate yourself so you can recognise your chance to strike but also recognise when it is neccessary to withdraw. Learn to read the conditions of the forex battlefield. Great generals of the past would spend years learning battlefield tactics, luckily we can achieve this in a couple of months.

So in summary only risk 1% of your capital in any trade, and educate yourself about how forex markets work.

Article Source: ArticlesBase.com - Why so Many Traders Fail at Forex

Forex Signal Provider? Which One?

So you decided to make full time leaving from foreign exchange market? Or you are going to supplement your income from here? You have set up yourself with proper broker available. I believe you spent hundred of hours in front of PC trying to put together all maths and physics involving currency market. Now you watching business news in the morning paper and following CNBC channel to be on the top with latest information from exchange market. You trading your demo account trying to figure out how to make it all work? So? Does it? No?

Face the fact that in currency market all is possible and there is no golden rule to follow. There are so many aspects to consider that you will need at least another head to set this puzzle together.

But do not worry there is a hope that can make it work.

Signal solutions for forex trading. People who traded forex for a long time and developed their own systems to enter and exit with profit strategies. They will share this knowledge with you for varieties of prices from usd49 to usd499 a month for those precious information. Problem is which one will suit you best. Are they scams? How do I know?

For medium advanced forex trader is almost impossible to choose proper forex signal system, which is not a scam, or at least not profitable. There is bulk of forex signals providers out there. They all offer their signal solution to trade currency with success.

Advice is that you will have to establish what type of trader are you? Do you want to trade quickly or maybe over the days or weeks? What losses can you manage and how much money you want to invest.

As long as you know al that it is a time to pick up signal trade provider.

Few things worth researching are: performance, service offered and rewievs of the signal. Search on forum for another users of the product you are interested in and ask for comment. Every profitable system should be up on collective2 with real track performance. Look for service offered. You will quickly find out that only few offer free trail-option to try signals before you pay. Demand performance evidence.

But while doing all that hard work choosing your automat forex signal system remember that you will have to totally follow it without exceptions to make most out of it. Any even small innovation may have dramatic results in your own gains.

Remember that your future profits will depend on your signal provider so calculate carefully and make smart decisions.

Article Source: ArticlesBase.com - Forex Signal Provider? Which One?

Course on Forex Trading

The term used to describe the trading of the currencies of the various countries of the world is called foreign exchange, forex or just FX. More than 1.5 trillion USD worth trade activities are conducted in the worlds largest forex market. The forex trade is not conducted by a central exchange unlike stock trading. Telephone or electronic networks are used to connect the two counterparts all over the world to make a trade. Moreover the forex market offers several advantages over equities trading.

Moneymaking or wealth creation is the main goal behind any trade. The opportunities in FX are boundless and it far exceeds the slim margins and picks of other markets like equity or share trading. Moreover the risk involved is also much less and to top it all forex trading can be conducted 24 hours a day. There are always buyers and sellers available, who make this trade more liquid and stable among all others. The banks too provide liquidity to investors, companies and institutions.

Just like any other financial instrument forex trading also involves a deep analysis about the fundamental and technical truths associated with the trade. Keeping in mind the general interest of traders looking forward to invest in forex, many forex trading courses are available. The main aim of this Forex Trading Course is to impart the necessary knowledge about the fundamental procedures and tips on better and professional trading policies.

Forex trading courses offer valuable information related to the impacts on global currencies, market risks, market trends etc. it not only benefits the new trader who wants to set foot on alien grounds, but also the existing investors who wish to brush up their tricks of the trade. All the aspects of the forex trading, using the latest software’s and tools are what the Forex Trading course material is comprised of. Step by step guidance on trade environments, technical analysis, risk management, trading rules, global markets, economic and market indication etc are provided along with the hands on practical guidance from the experienced tutors from all around the globe.

Many factors are to be considered before you make a decision to do Forex trading course. ‘Knowledge is power’ for all our daily diplomatic living. Knowledge on what we do and how we do, especially trading will not only enhance our business dealings but will also allow us to differentiate and track down market conditions. Managing our finance wisely will save us the fear and anxiety about our unpredictable and meek future. Forex trading courses often outline these basic business strategies in their course material.

Forex trading courses are available as online courses and also through printed books. Free tutorials and financial guidance is also provided by many web sites. Choosing a professional Forex Trading Course will provide you with details on

• The best time to trade specific currencies like Euro

• How to anticipate movements and trends in the global market

• Which pairs of currency to trade

• Best time to enter the forex market

• Market conditions and tips about efficient trading from experts

• Technical indicators

Overall a forex trading course should be a complete currency trading solution for all the queries regarding forex and its effective trading options.

Article Source: ArticlesBase.com - Course on Forex Trading

Trading Platforms

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ITS NOT THE SYSTEM

After more than 2 years of trading, I can tell you a story about forex system. Forex system is a way to trade to have higher chances of profit. Unfortunately not all forex system works. This is because its not the system that is not working. It is you.

What if I tell you that I have a system that consist of Moving Average only. The system can make profit and will minimize you loses or even give you a chance to break even during hard times.

You would be thirll to test it out only to find out that in the end you are losing money and you say the system is crap. The truth is if one person is making money using the exact same system yet you are losing money. So where do you think the fault is? Is it with the system or is it with yourself?

You can never gain profit in Forex until you figure out what is wrong with you. Most of the time when you are losing money you would blame it on the market, news, system etc but never on yourself. Until you figure out what you did wrong, any system no matter how good will fail in your hands. After you realize what you did wrong, then you can make money, seriously.

When you know what not to do, you can trade without any indicator. I myself is trading using only MA now. Took me a while to understand but once you see it, you no longer depending on any indicator. It is your judgement that counts.

I never know what I would learn the further I go in this world or Forex. Right now I am starting to understand why some traders trade without any indicator. The best indicator is in your brain. You just need to develope it. It will take some time. No hurry.

EUR USD in new uptrend

The EUR USD in my opinion is now established in a new minor uptrend. It appears that the US Dollar Index has topped out having made a marginal new high only to fail and come back under a support area. Indeed the weekly chart of the US Dollar looks quite bearish going forward.

So now we see in somewhat similar fashion the EUR USD having made what looks like a large double bottom with the first bottom area November 2008 and now the second bottom coming in the late February 2009 March 2009 time frame. This looks like a valid double bottom to me with a good amount of space between the retesting action and each retesting action showing good amount of price work and consolidation.

So we have the EUR USD now attempting to succeed off of this double bottom and establish a new uptrend. In the above chart we do see the long significant down trend line on the EUR USD which has a first touch in the July 2008 time period. Then the second touch was on the December 2008 period. This long green down trend line represents a long area of significant resistance and challenge for the EUR USD at this time.

I do expect that we should see the EUR USD attempt to once again test this down trend line and the behavior at that level will be KEY in determining if the EUR USD will continue longer sideways consolidation or begin the start of a much larger longer uptrend. The challenge area comes in roughly at the 1.3400 level. Also drawn in the EUR USD chart is a smaller blue uptrend line for near term uptrend support. Need to maintain this blue uptrend in the near term to allow for the shorter term uptrend to resolve into the downtrend line.

Long term support is seen at 1.25000 and near term support is seen at 1.2990

If I had to guess right now I would guess that the long down trend line will be able to hold price down again and push the EUR USD into a longer consolidation. But that is just a guess! For now we focus on the near term and upcoming challenges in the EUR USD.

G20 Reaches Agreement on Stimulus and Regulation

The G20 meeting in London has started off and after the morning meeting there seems to be various agreements and timetables for reform and stimulus. The tide has turned against Tax Havens and the concept of Banking Secrecy is on its way out if the new agreed regulations are put in place.

G20 has so far agreed on:

• Fiscal stimulus $5 Trillion by the end of 2010.
  
• $500 Billion in additional funding for the IMF and $250 Billion for special drawing rights.
  
• IMF will be allowed to issue bonds
  
• A Tax Haven list will be published that do not comply with anti-secrecy requirements
  
• Creation of International Colleges for Regulation.
  
• Regulatory blueprint for stricter limits on hedge funds, caps on executive pay, credit rating agencies and bank’s risk taking.
  
• A common approach to toxic assets

The markets are reacting positively to the G20 agreements as there are concrete signs of a unified response from the leaders meeting in London.

Psychology of Trading?

Fundamental and technical factors are undeniably essential in determining foreign exchange dynamics. There are, however, two additional factors that are paramount to understanding short-term movements in the market. These are expectations and sentiment. They may sound similar, but remain distinct.

What is Forex ?

The Foreign Exchange market, also referred to as the "Forex" or "FX" market, is the largest financial market in the world, with a daily average turnover of well over US$1 trillion -- 30 times larger than the combined volume of all U.S. equity markets. Unlike other financial markets, the forex market has no physical location or central exchange. It is an over-the-counter market where buyers and sellers including banks, corporations, and private investors conduct business. A true 24-hour market, Forex trading begins each day in Sydney, and moves around the globe as the business day begins in each financial center, first to Tokyo, London, and New York.the unmatched liquidity and around-the-clock global activity make forex the ideal market for active traders.

Forex trading, what the hype is all about

Forex trading is all about making big money. Some investors have found it quite easy to make a large amount of money as the forex market changes daily. Forex, is the foreign exchange market. Online and offline you will find references to the forex market as FX as well. Forex trading takes place through a broker or a financial institution often where you are able to purchase other types of stocks, bonds and investments.When you are thinking about getting involved in the forex markets you should know you are sending money to be invested with other countries. This is done to prop up the investments of people involved in certain types of hedge funds, and in the markets overseas. The forex market could have your money invested in one market one day, and the next day your money is invested in another country. The daily changes are determined by your broker or financial institution. When reading your statements and learning more about your account, you will find that every type of currency has three letters that will represent that currency.For example, the United States dollars is USD, the Japanese yen is JPY, and the British pound sterling will read as GBP. You will also find that for every transaction on your account listing you will see information that looks like this: JPYzzz/GBPzzz. This means that you took your Japanese yen money and invested it into something in the British pound market. You will find many transactions from one currency to another if you have money that is scattered through out the forex markets.Forex markets trading by investment management firms are the companies you can trust with your money. You want to find a company that has been dealing with forex trading since the early seventies, and not someone just new on the block so you get the most for your hard earned money. It is important that you beware of companies that are popping up online, and often times from foreign countries that are stating they can get you involved in the forex markets and trading. Read the fine print, and know whom you are dealing with for the best possible protection.If you are interested in trading on the forex market, you will find limits for investing are different from company to company. Often times you will learn that you need a minimum of $250 or $500 while other companies will need $1000 or $10,000. The company you are dealing with will set limits in how much you need to open an account with their company. The scams that are online will tell you, that you only need a $1 or $5 to open an account, but you need to learn more about that company and where they are doing business before investing any money, this is for your own protection while dealing in forex trading and markets online.

FIA raids forex company, arrests CEO

* Two directors of company also arrested * Suspects used fraudulent commercial telegraphic transfers through banksAaj Kal ReportLAHORE: The Federal Investigation Agency (FIA) has raided a franchise of a foreign exchange company in Japan Centre and arrested the company’s chief executive officer and two directors (Dollar Inn). Under directions from FIA Punjab Director Muhammad Azam Joiya, FIA’s crime circle team conducted a raid in the supervision of deputy director crime circle. Sources said the agency had conducted the raid upon confessions by those who had been earlier arrested.The raid on the franchise resulted in arrests of Chief Executive Officer Shoaib Ahmad Butt and two directors, Waseem Ahmad and Zeeshan Aslam Butt. They have been charged of transferring more than Rs 2 billion to foreign countries illegally. FIA has also sealed the office and taken the record into custody. Fraudulent transfer: It is reported that the suspects used fraudulent commercial Telegraphic Transfer (TT) and hawala/hundi through different banks including Citibank Garden Town and Alfalah building branch and Dubai Islamic bank, Circular road branch. The team recovered documental record of the money sent abroad through illegal means revealing large amounts that were sent to China, Dubai, Singapore, Spain, Germany, Australia and Belgium while most of the money was transferred to Britain and United Arab Emirates through hawala/hundi.The officials have claimed to have found solid evidence and are also checking the accounts of suspects in other banks to know the amounts that have been transferred using these accounts. Investigators have told that false information was provided to banks for the transfer of these funds. The State Bank of Pakistan was also not informed about these transfers and most of the money was electronically transferred through mobile and Internet to keep the State Bank of Pakistan and Western Union uninformed of this illegal activity.The raiding party has also taken custody of a number of photocopies of identity cards of different people from the office that were misused. FIA will contact these people and verify the number and amount of money they have transferred themselves.

Rupee shows no change versus dollar in the open market dealings

Rupee remained motionless versus greenback in the kerb today. The American dollar set off new day’s trading at Rs.81/00, did not show any change and was trading at the same price at close of markets on Friday.On the international desks, the dollar fell against the euro and the yen on speculation a government report will show the U.S. economy lost the most jobs since 2003, bolstering the case for the Federal Reserve to lower interest rates.The U.S. currency also declined versus the British pound as futures traders increased bets the Fed will cut borrowing costs by half a percentage point to 0.5 percent compared with a benchmark rate of 3 percent in the U.K. A Labor Department report today may also show the unemployment rate in the U.S. rose to a five-year high as the global economic downturn deepened.The dollar fell to $1.2753 per euro at 2:07 p.m. in Tokyo from $1.2715 late yesterday in New York. Against the pound, it declined to $1.5683 from $1.5627. The U.S. currency bought 97.53 yen from 97.75. The euro was little changed at 124.35 yen. The dollar may fall to $1.2830 versus the euro today, Ito said.

FX market and Money market

The last issue to be discussed in this brief walk is the non-difference between two markets that are the flip side of each other. We have already mentioned earlier that a swap rate is basically based on interest rate differentials. We have also explained in the previous paragraph the nature of a swap transaction. The investor who uses marks bought in the forward market to buy German bonds has another option. He can place his dollars on deposit and borrow from the bank the marks he needs.Hence, he will have a dollar deposit and a mark loan. Indeed, the interest between what he gets and what he pays is also expressed through the swap rate Therefore, both ways lead to the same result. The only advantage going though the foreign exchange market rather than through the money market is simplicity i.e. usually it is faster and easier to obtain an FX facility rather than obtaining a loan, even one based on a collaterilised deposit.

Swaps

A swap transaction (not to be confused with the swap rate) is a double-leg deal, in which one buys spot currency X selling currency Y and simultaneously sells forward currency X buying currency Y. Let us give an example to show the rational of such a transaction. Assume that an American investor has a future receipt in Dmarks. In addition, assume that he thinks that German bonds are presently a good investment. So he has dollar assets but does not hold cash in marks. In plain words he needs marks right now and cannot wait for the future receipt marks to come. One solution would be to sell dollars and buy marks in the spot market. However, suppose he does not wish in a foreign exchange adventure for he cannot forecast the exchange value of the future receipt. In this case he sells dollars against marks spot getting his marks and buying his bonds. Simultaneously he buys dollars forward against marks matching the value date of the receipt. Upon expiration of the forward period, the investor cashes the receipt, pays back the marks that he owes and gets his original dollars. Hence he has been able to overcome the time lag problem.

Foreign exchange rates

A foreign exchange rate is the parity between two currencies i.e. the amount of one currency needed to sell (or buy) in order to buy (or sell) one unit of the other currency. There are two ways to express such a rate. The most common (or international way) quotes the amount of any currency that corresponds to one U.S.Dollar. So when we see USD/DEM at 1.5000 this means that one dollar can be exchanged for 1.5 Dmarks. Among the major currencies it is only British sterling which is quoted the other way i.e. GBP/USD at 1.5500 means that one pound is exchanged for 1.55 dollars. The American way of quoting rates uses the opposite direction, that is it expresses the dollar amount that can be exchanged for one unit of foreign currency. So when we see for example the Dmark at 0.6625 this means that one mark can be exchanged for 0.6625 dollars (or the same at 66 1/4 cents). The term "cross rate" is usually used to express the parity between two nondollar currencies like DEM/SFR.

Bid and offer

Exchange rates in practice are quoted as two-way rates. Thus a dollar/mark quotation will read something like 1.5000/10. The bank or company which quotes this rate understands that it buys marks (selling dollars) at 1.5010 and sells marks (buying dollars at 1.5000). In other words it buys cheaper and sells dearer a given currency in exchange for the other one. Of course, the opposite is true for the person that asks for a quotation. The difference between the purchase and the sale rates is called "spread". Such spreads vary in size according to market volatility.

Rate direction and currency direction

One needs to keep very clear in mind the idea of market direction. First of all, in the foreign extern market it is a mistake to say that the market is going up or down. In the stock market one can use this expression as stocks either go up or go down. However, in the FX market a rate as we said defines the parity of two currencies, hence at any time one goes up , so the other goes down. Therefore we can talk about the dollar going up or down but not about the market doing so. Another issue that often confuses people (even traders and bankers) is the difference between a currency moving up and its rate going up. We have to explain this in more detail as any misunderstanding can lead to painful surprises when trading in the real market. For simplicity reasons let us forget for the time being the bid/offer spread. So let us suppose that dollar/mark moves from 1.5000 to 1.5010. In this case the rate goes up whereas the value of the mark goes down (simply because the value of the dollar goes up). In other words one needs more marks at 1.5010 to exchange for one dollar.

Basis points or pips

A foreign exchange rate usually consists of an integer part and 4 decimal points (or 2 decimal points when expressed per 100 units like e.g. dollar/yen). Thus the decimals are expressed either at 10th thousands or hundreds. Each such 0.0001 or 0.01 is called basis point or pip. E.g. a 50 pips change of 1.5000 is either 1.5050 or 1.4950.

Spot and forward rates

To some people these concepts are more easily understood as cash rates and futures. As a matter of fact we would not like to use the term "futures" here as this may lead to confusion with the typical futures contracts. Instead, let us use a more descriptive approach. A spot rate is the exchange rate which is valid for a transaction (purchase of currency A and sale of currency B) that must be concluded within the next two working days. Thus the value date (i.e. the day of actual delivery of currencies) of a transaction performed on a Monday is Wednesday. For Thursday it is Monday (weekend days are not counted). On the other hand, a forward transaction regards a deal which is concluded today and actual effect will take place on a fixed future date In the next paragraph we describe the relationship between a spot and a forward rate.

Interest rates, swap rates and forward rates

Many people, even in the financial sector think that a forward rate is an expectation or forecast of a future foreign exchange movement. This is a big mistake. Actually, a forward rate is nothing else but a mirror of the currently prevailing spot rate, allowing for the interest rate differential between the two currencies and the time period at the expiration of which the actual transaction will be concluded. So the spot rate is adjusted by the so called swap rate to give the forward rate. For the unsophisticated investor it is enough to say that the swap rate is there to compensate the low interest currency holder for the time period involved in a forward transaction. The best way to explain these strange sounding terms is an example. We shall keep the simplistic approach and will not get involved here with FX rate spreads and interes rate spreads. Suppose person X buys $ 100,000 against Dmarks from bank B at spot rate 1.5000 for value 30 days forward. Furthermore let us assume that the dollar interest rate for this period is 5% and for the mark 3%. This means that during these 30 days A will earn interest on the marks he keeps until delivery and B will earn interest on the dollars for the same reason. The forward rate must allow for the compensation of A so that on balance no party is better or worse off. Investor A will receive interest in marks= (150,000x3x30)/36,000 = 375. On the other hand bank B will receive interest in dollars = (100,000x5x30)/36,000 = 416.67. This dollar amount calculated by prevailing spot rate 1.5000 is equivalent to 625 marks. It is evident that bank B has to compensate investor A through the forward rate, i.e. A will pay a lower price for the dollars he is buying forward to equalise the difference of 250 marks. Through a formula we can reach the swap rate 0.0025 This is subtracted from 1.5000 and the forward rate 1.4975 prevails. Indeed, the investor will finally deliver 149,750 marks to receive 100,000 dollars.

The need for a forward market

The actual need for the existence of a foreign market is not speculation, although as we explain in another article (see Why get involved in the foreign exchange market) today there is no clear-cut line between hedging and speculating. However, there are a couple of characteristic categories of people who use the forward market in order to cover for time lags. The first group includes exporters and importers. As receipts and payments do not usually coincide timewise, these people buy forward the currency that they will have to pay and sell forward the currency that they will receive. In this way they overcome undesirable market fluctuations and take care of future cash flows. The second group consists of people who use the forward market to preserve the value and nature of their assets without speculating against future trends. These operators use both the spot and forward market through swaps, which are explained below.