Forex Signal Provider? Which One?

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 reviews 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 automate 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.

Forex Signals What to Look For

Forex signals and ascertaining how to construe and unravel them are deemed to be key factors in hitting it big in the forex market. These trading signals keep an eye in the behavior of the market through tracking the movement of the entire trade. The results of this constant monitoring will then be provided to hundreds and millions of traders all around the globe.

Forex signals are developed from different variables responsible for the behavior and movement of the trade. An arrangement of both technical analysis and certain indicators are the determinants used to know stop losses and other trends. These signals are also responsible in helping a trader discern when is the best time to enter the trade when it is under way and exit when it is about to fall off. In this manner, a trader manages to make smart money through the use of forex signals.

Forex Signals 101

The very concept of forex trading is to trade currency pairs with the currencies of other countries. Most forex signal providers offer signals for prominent pairs such as EUR USD as well as other lesser identified pairs. Whichever the case is, the very concept of these signals is to give traders a panoramic view as to when will be the best time to buy and sell currencies in the forex market. It may be a volatile trade, yet an excellent trader should know how to take advantage of these given signals to draw more profit in the bank. It’s just a matter of stumbling upon great resources to start with, make it a good starting point and find your way towards making it big in the course of the trade. A trader can also get hold of charts to have a better understanding of the forex market both external and internal.

What to look for

Forex signals when utilized to the fullest will definitely create more profits. However, there are array of considerations to look at prior to hitting it big in this trade. First, you need to have a reliable signal provider or software that will serve as your trading partner. This should be a system that offers real time data and charts with up to the minute information concerning the movement of the market from day in and out. Next, it should be a system that provides backup. Since most traders don’t have the luxury of time to monitor the trend, it is best to look for a reliable automated forex system that will work on your behalf 24/7. This system will act as your eye in the market and will only need ones input when the market is at a trader’s advantage. Lastly, look for a system or software that will make significant net profits and pips on your part. Since your primary goal is to make money and be successful in the trade, one should effectively use these indicators for their gain.

In a nutshell

Forex signals are produced by varying factors such as combination of indicators, moving averages, technical analysis, trends and the like. What is essential is that a trader should make comparisons of each of these indicators applicable to the kind of movement the forex market is in. However, the use of these signals should not in any way hamper a trader’s ability to learn more about the trade. Forex trade signals should only play as a guide and a trader should not completely rely on what it can do to ones profits. At the end of the day, every profit and gains still depends on how a trader handles his resources and advantages before going for the kill.

Forex Books-How to Choose the Right One

1. Let us begin with Trader Vic - Methods of a Wall Street Master, anyone who already scanned the page of this book will agree that the author is among those traders who write with a sense of investigation and this book acts as his medium to share his insight about all factors that deals with trading. Take note, I wrote 'everything' here since from the psychology aspect down to trend, to money management down to right time to trade; he was able to discuss these all with ease.
   
   
2. Another great Forex book is The Way of the Turtle which was written by Curtis Faith. The main plot is, while trying to visit the turtle farm, the legendary trader in the name of Richard Dennis started a bet with his trading partner who is Bill Eckhardt. The two both suggest that traders are not born instead they are made. In order to settle the bet, they ask the help of a lot of individuals that comes from all walks of life, the two trained them and after a span of two week, they were sent for a trade. The group which is called as the Turtles had earned an amazing amount of more than $100 million in just about a short span of four years.
   
   
3. There is also the book entitled as the Disciplined Trader Developing Winning Attitudes which was written by Mark Douglas. Among the Forex book this one will really give an impression that discipline is one critical factor in trading. Also, in order to mentally prepare you for the real deal, guidelines and advices are provided.
   
   
4. The Reminiscences of a Stock Operator by Lefevre Edwin is another good book you should not pass on buying. It was written in the year 1923, it is among the book which is currently acknowledge as masterpieces. Also, this is one of the most read books there is in the trading community. In case you already traded before then you can definitely associate yourself in every page that you read in this book.

Most of these Forex books are available online or you can even search for them at your local bookstore to save from the shipping cost. Just make sure to understand and no just scan every page that you are browsing. Comprehend the details and try to practice the guidelines especially when you are on the real arena of trading. Do not just rely on your intuition, rely on facts that these books may give.

Forex Books - 5 Books All Traders Should Read

While visiting a turtle farm, legendary trader Richard Dennis had a bet with his trading partner - Bill Eckhardt that traders didn't have to be born - they could be made. To settle the bet, they recruited a group of individuals from all walks of life, trained them for two weeks and sent them off to trade.

This group known as The Turtles earned more than $100 million in less than four years. In this book successful turtle Curtis Faith goes through the experiment in great depth. He explains why the Turtle Way worked and still works in today's markets and how to apply it.

2. Trader Vic - Methods of a Wall Street Master (Victor Sperandeo)

Victor Sperandeo is one of those traders who talks sense investing and here he shares his insight on everything to do with trading - from psychology, to trend following correctly, to money management. The ultimate Pro - bit biased I just love this book!

3. The Disciplined Trader Developing Winning Attitudes (Mark Douglas)

This book was the one that really rammed home to me how important discipline in trading is and how hard it is to achieve in terms of mindset no matter how well prepared you feel or how good your trading system is. To get you mentally prepared this book is fantastic.

4. What I Learned Losing a Million Dollars - (Jim Paul Brendan Moynihan)

This books focus is on losing and as it correctly states There are many different ways to make money but only a few ways to lose it. Part biography and part a lesson in money management - if you only thought money management was placing a stop you need this book. One of the most unique books you will ever read on trading.

5. Reminiscences of a Stock Operator (Lefevre Edwin)

Written in 1923 and an acknowledged masterpiece. Jack Schwager's new introduction explains why this account of Jesse Livermore, continues to be the most widely read book by the trading community. If you have ever traded you will associate yourself with every page and if you haven't - you soon will!

So there you have 5 of my personal favorite books and also books that compliment each other, to give you a bit of everything. True wisdom from traders who have walked the walk and know the game of trading and their experience and insight can help you to.

I hope you get as much pleasure from these forex books as I have over the years.

Forex Currency Trading Explained -- Fx Trading

FX or Forex, currency trading is the trading of one currency against another. In terms of trading volume, the currency exchange market is the world's largest market, with daily trading volumes in excess of $1.5 trillion US dollars. This is orders of magnitude larger than the bond or stock markets. The New York Stock Exchange, for example, has a daily trading volume of approximately $50 billion. Currencies are traded for hedging and speculative purposes. Various market participants such as individuals, corporations, and institutions trade forex for one or both reasons. Corporate treasurers, private individuals and investors have currency exposures during the the regular course of business. The FX Trade Platform is an ideal platform to hedge any such exposure. An investor, who has bought a European stock and expects the EUR exchange rate to decline, can hedge his currency exposure by selling the EUR against the USD. Currency markets are ideally suited for speculative trading. The foreign exchange market has a daily volume in excess of 1.5 trillion USD, which is 50 times the size of the transaction volume of all the equity markets taken together. This makes the foreign exchange market, by far, the most liquid and efficient financial market of the world. Thanks to its efficiency, there is little or no slippage of market price for the execution of even large buy and sell orders. Traders are able to take advantage of intra-day volatility thanks to the low spreads and enter positions for short time periods, such as minutes and hours. Unlike equity trading, where restrictions limit a trader's ability to profit from a market down turn, there are no such constraints on currency trading. Currency traders can take advantage of both up and down trends thus increasing their profit potential.The most commonly traded currencies are: USD, EUR, JPY, GBP, CHF, CAD and AUD.The most commonly traded currency pair is EUR/USD.Forex Symbol Guide Symbol Currency Pair Trading Terminology GBP/USD British Pound / US Dollar "Cable" EUR/USD Euro / US Dollar "Euro" USD/JPY US Dollar / Japanese Yen "Dollar Yen" USD/CHF US Dollar / Swiss Franc "Dollar Swiss", or "Swissy" USD/CAD US Dollar / Canadian Dollar "Dollar Canada" AUD/USD Australian Dollar / US Dollar "Aussie Dollar" EUR/GBP Euro / British Pound "Euro Sterling" EUR/JPY Euro / Japanese Yen "Euro Yen" EUR/CHF Euro / Swiss Franc "Euro Swiss" GBP/CHF British Pound / Swiss Franc "Sterling Swiss" GBP/JPY British Pound / Japanese Yen "Sterling Yen" CHF/JPY Swiss Franc / Japanese Yen "Swiss Yen" NZD/USD New Zealand Dollar / US Dollar "New Zealand Dollar" or "Kiwi" USD/ZAR US Dollar / South African Rand "Dollar Zar" or "South African Rand" GLD/USD Spot Gold "Gold" SLV/USD Spot Silver "Silver" CURRENCY PAIRSAll currencies are assigned an International Standards Organization (ISO) code abbreviation. In currency trading, these codes are often used to express which specific currencies make up a currency pair. For example, USD/JPY refers to two currencies: the US Dollar and the Japanese Yen. SPOT FOREX Spot foreign exchange is always traded as one currency in relation to another. So a trader who believes that the dollar will rise in relation to the Euro, would sell EUR/USD. That is, sell Euros and buy US dollars. The following is guide for quoting conventions: What does it mean to be "long" or "short" a currency?Being long means buying a currency. Being short means selling a currency. If a trader goes long USD/JPY, he or she buys US Dollars and sells Japanese Yen. Buying a currency is synonymous with taking a long position in that currency. A trader takes a long position in a currency if he or she believes it will appreciate in value.If a trader goes short USD/JPY, he or she sells US Dollars and buys Japanese Yen. Selling a currency is synonymous with shorting that currency. A trader would short a currency if he or she believes it will depreciate in value.CURRENCY TRADING: BUYING AND SELLING CURRENCIESAll Forex trades result in the buying of one currency and the selling of another (currency trading), simultaneously. Buying ("going long") the currency pair implies buying the first, base currency and selling an equivalent amount of the second, quote currency (to pay for the base currency). It is not necessary to own the quote currency prior to selling, as it is sold short. A trader buys a currency pair if he/she believes the base currency will go up relative to the quote currency, or equivalently that the corresponding exchange rate will go up. Selling ("going short") the currency pair implies selling the first, base currency, and buying the second, quote currency. A trader sells a currency pair if he/she believes the base currency will go down relative to the quote currency, or equivalently, that the quote currency will go up relative to the base currency. An open trade or position is one in which a trader has either bought or sold one currency pair and has not sold or bought back an adequate amount of that currency pair to effectively close the trade. When a trader has an open trade or position, he/she stands to profit or lose from fluctuations in the price of that currency pair.Forex is the backbone of all international capital transactions. Compared to the slim profit margins rendered in other areas of commercial banking, huge profits are generally produced in a matter of minutes form minor currency market movements. Some banks generate 60% of their profits from trading currency aggressively.Trading volume has been growing at a rate of 25% per year since the mid-1980s and therefore it is not difficult to accept the notion that the currency market is one of the world fastest growing industries. What used to require days to accomplish in Europe or Asia now oly takes a few minutes. Needless to say, technology has changed everything and millions of Dollars are moved from one currency into another every second of every day by major banks through computers and for the average investor, with the touch of a computer key.Foreign exchange is the backbone of all international capital transactions. Compared to the slim profit margins rendered in other areas of commercial banking, huge profits are generally produced in a matter of minutes from minor currency options market movements. Some banks generate up to 60% of their profits from trading currency aggressively. Transactions in foreign currencies take place when one country's currency is purchased (exchanged) with another country's currency. The price agreed upon or negotiated for the currency purchased is referred to as the foreign exchange rate. Major commercial banks in the money market centers throughout the world are responsible for the majority of foreign currencies bought and sold. Trading volume has been growing at a rate of 25% per year since the mid-1980s and therefore it is not difficult to accept the notion that the currency options is the world's fastest growing industry. What used to require days to accomplish in Europe or Asia now only takes a few minutes. Needless to say, technology has changed everything and millions of Dollars are moved from one currency into another every second of every day by major banks through computers and for the average investor, with the touch of a phone.FOREX BASICS - What's a PIP A "pip" is the smallest increment in any currency pair. In EUR/USD, a movement from .8951 to .8952 is one pip, so a pip is .0001. In USD/JPY, a movement from 130.45 to 130.46 is one pip, so a pip is .01. CALCULATING THE WORTH OF A PIP How much in dollars is this movement worth, for example, per 10,000 Euros in EUR/USD? How much is one pip worth per 10,000 Dollars in USD/JPY? We will refer to the size, in this case 10,000 units of the base currency, as the "Notional Amount". The formula for calculating a pip value is therefore: (one pip, with proper decimal placement / currency exchange rate) x (Notional Amount) Using USD/JPY as an example, this yields: (.01/130.46) x USD 10,000 = $0.77 or 77 cents per pip Using EUR/USD as an example, we have: (.0001/.8942) x EUR 10,000 = EUR 1.1183 But we want the pip value in USD, so we then must multiply EUR 1.1183 x (EUR/USD exchange rate): EUR 1.1183 x .8942 = $1.00 This is in fact a phenomenon you will see with any currency in which the currency is quoted first (such as EUR/USD or GBP/USD): the pip value is always $1.00 per 10,000 currency units. This is why pip (or "tick") values in currency futures, where the currency is quoted first, are always fixed. Approximate pip values for the major currencies are as follows, per 10,000 units of the base currency: USD/JPY: 1 pip = $.77 (i.e. a change from 130.45 to 130.46 is worth about $.77 per $10,000) EUR/USD: 1 pip = $1.00 (.8941 to .8942 is worth $1.00 per 10,000 Euros) GBP/USD: 1 pip = $1.00 (1.4765 to 1.4766 is worth $1.00 per 10,000 Pounds) USD/CHF: 1 pip = $.59 (1.6855 to 1.6866 is worth $.59 per $10,000)SpreadThe spread is the difference between the price that you can sell currency at ( Bid) and the price you can buy currency at ( Ask). The spread on majors is usually 3 pips under normal market conditions. Market HoursThe spot Forex market is unique to any other market in the world; trading 24-hours a day. Somewhere around the world a financial center is open for business and banks and other institutions exchange currencies every hour of the day and night, only stopping briefly on the weekend. Foreign exchange markets follow the sun around the world, giving traders the flexibility of determining their trading day and the ability to take advantage of global economic events.FOREX or The Foreign exchange rate market is an international market where various currency exchange transactions take place; this is in the shape of simultaneously buying one currency and selling another. The most commonly traded currencies are referred to as “Majors”; over 85% of daily transactions on Forex trading involve the Majors. These seven currencies are the US Currency (Dollar, USD), Japanese Yen (JPY), Euro (EUR), British Pound (GBP), Swiss Franc (CHF), Canadian Dollar (CAD) and Australian Dollar (AUD). The Forex system in operation today was established in the 1970s when free currency exchange rates were introduced, this period also saw the US Dollar overtake the British Pound as the benchmark currency. Prior to this and in particular during World War II, exchange rate remained more stable. Forex trading in simplest terms is the buying of one currency and the selling of another. Forex trading, also referred to, as “FX” is open to corporations, small businesses, commercial banks, investment funds and private individuals, it is the largest financial market in the world averaging a daily turnover of over $1 trillion dollars, making it a diverse and exciting market. It is a 24-hour market enabling it to accommodate constant changing world currency exchange rates . According to New York time, trading begins at 2.15pm on Sunday in Sydney and Singapore and progresses through to Tokyo at 7pm, London at 2am and reaches New York at 8am. This leaves investors free to respond to global political, economic and social events when they take place, day or night. Unlike trading on the stock market, the forex market is not conducted by a central exchange, but on the “interbank” market, which is thought of as an OTC (over the counter) market. Trading takes place directly between the two counterparts necessary to make a trade, whether over the telephone or on electronic networks all over the world. The main centres for trading are Sydney, Tokyo, London, Frankfurt and New York. This worldwide distribution of trading centres means that the forex market is a 24-hour market.

What Makes a Currency Trading Tutorial the Best One?

There are many factors that makes a currency trading tutorial the best one and while there are some critical that cannot be avoided, it is more of the value addedness that some of these tutorials might have that might put it above the rest. While there are hundreds of programs and tutorials out there to mention (and there is no space in this article to mention them all), this article will discuss about some of the features that these systems should have to make it not only effective, but a winner as well. Well on of them would be ease of use, because in the end of the day, the entire point of the tutorial is that it should make things easier for you, not confuse you with technical jargon and complicated methods.

A tutorial should be simple and to the point, and you should be able to read things in short points and be able to understand them within minutes. Some of the tutorials that are online are difficult to circumnavigate and understand, so avoid them at all costs. You can normally spot a well designed tutorial by the simple fact that you understand a whole lot within just a few minutes and it should start with the basics. You should have alot of control over the tutorial as well, meaning that you should be able to go back and forth to the points where you didn’t grasp at first and there should be some applications built into the tutorial that allow you to practice on some concepts in real time. Also, some of the better ones online employ the use of a virtual environment or even a game concept to make learning about Forex fun and easy.

The real market can be quite a headache and tutorials need to be simple and fun, and they need to engage you, so I think this is really one of the secret formulas that allow for the newbie, greenhorn beginners to actually understand and get involved in the whole trading game within a few moments. While there is nothing wrong with the traditional approach, many practitioners feel that it sometimes is not enough to capture the imaginations of the new investor to something as dry and as technical as the Forex market. Trading also can be very fun (once you are making money), so it should reflect that to some degree and have some punishment ‘tools and systems’ built in the environment so that the end user will remember his mistake and will not repeat it again.

Of course, in all this, you need to be assured that the system you are using is designed either by experts on the market or by seasoned investors or financial institutions. Once these features are available and you find yourself with the right tutorial on your computer screen, then chances are that you have just come across, probably the best currency trading tutorial on the internet. So take the time to peruse the internet for the right one for you, instead of settling on one that is mediocre. After all, your success in the Forex market depends on it.

The Power of Small Consistent Returns

For most of us, 'safe investments' are limited to the rate of return that we can earn on our savings accounts or long-term deposits. The return would depend on the interest rate applicable in each country. At the time of writing, November 2007, the interest rate earned on a savings account in Australia is around 7% a year. That is a return of 0.57% a month. Despite this fact, many have preconceptions regarding the type of returns they can make from trading the financial markets.

A novice trader puts on a winning trade and gains between ten to fifty percent of his trading account. He forms a belief that, by trading, he can quickly become a millionaire. Indeed, if we assume a 20% return per month on a $10,000 trading account, we can expect $89,161 by the end of our first twelve months of trading. What if we assume an estimate of 50% return per month? We would have $1,297,463 by the end of the year. Of course, the problem with expectations like these is that they are unrealistic. Even most of those who claim to have made these types of returns have only done so in simulated environments, in trading competitions using game accounts, for example, where real money was not at risk.

It is possible to make these types of returns for a short while but I have not heard of anybody achieving such steep returns consistently year after year. After testing hundreds of trading systems and ideas I have come to believe that systems, which seem to promise exorbitant returns, turn out to be over-optimized for the period they have been tested on. Or even worse, they have flaws in their logic or assumptions.

Lately, I have been looking at the performance reports of trading firms in the USA. What would you say if I told you that the top trading firm over the last ten years only made an average return of 25% a year and the median trading firm made somewhere around 15% a year? Well, this is in fact what I am telling you.

A 20% and a 15% return a year is 'only' 1.877% and 1.171% return a month, respectively. I am sure that many novice traders and investors reading this article will have a mix of reactions towards these figures. Some might laugh and scoff at such 'paltry' returns, secretly believing that they can do a lot better than just 1.877% a month. Others may be surprised or even disappointed because their dreams of living rich will not come as quickly as they hoped.

Setting aside your initial reaction to these figures however, let us refocus on what these numbers actually mean in the real world. I would like to show you that these types of returns are very powerful. With time, these seemingly small, but consistent, gains will give you enormous profits in the future.

15% A YEAR RETURN ON A $10,000 ACCOUNT

Let us start with the assumption of having a $10,000 account, making at least 1.171% return a month, or 15% a year, trading the market. Based on these, the projections are:

1. $11,500 (15% growth) after 1 year.
2. $13,223 (32% growth) after 2 years.
3. $20,108 (101% growth) after 5 years.
4. $40,432 (304% growth) after 10 years.
5. $163,475 (1535% growth) after 20 years.
6. $660,960 (6510% growth) after 30 years.

25% A YEAR RETURN ON A $10,000 ACCOUNT

Let us now assume having a $10,000 account, making at least 1.877% a month, or 25% a year, trading the market Based on these, the projections are:

1. $12,500 (25% growth) after 1 year.
2. $15,625 (56% growth) after 2 years.
3. $30,519 (205% growth) after 5 years.
4. $93,140 (831% growth) after 10 years.
5. $867,512 (8575% growth) after 20 years.
6. $8,080,034 (80700% growth) after 30 years.

It is very important to note that not all fund managers make money. Returns of 15% or 25% a year belong only to those money managers who were consistently profitable. Furthermore, these types of returns are out-of-bounds for most investors. To invest in such schemes, most of the fund managers I have been looking into will deal with you only if you are a 'sophisticated' investor with a spare $500,000 minimum to invest. In fact, the highest earner only took on investors with a minimum of $25,000,000 US dollars to invest. (I will not mention any names here, however, you can do your own research by typing "commodity trading advisers" in your favorite search engine.)

I do not know about you but I certainly do not have 25 million dollars lying around, to hand over for someone else to manage. The dilemma, however, is that life is way too short for me to be satisfied with a 7% annual return either. I guess this is why you and I have taken the decision to trade and invest in the financial markets ourselves. At least there, we have full control and responsibility over the returns we get. It has its risks, but we can all avoid being reckless if we keep realistic expectations.

Protective Puts

Option overlays in the forex are a great way to control risk while taking advantage of the upside in trading. Options are a broad subject so I only intend on discussing one concept in this article and then will follow up with another article on a second overlay strategy. One of our trading systems at proftingWithForex.com uses option overlays, and you can follow along month by month to see how this strategy actually performs in real time. The two concepts I will talk about are very common and can be executed easily and without constant maintenance. Those are two things I like to look for in a system so I am not the one making all the mistakes for the first time and so I can have a life along with my forex trading. I will cover protective puts in this report and covered calls next.

PROTECTIVE PUTS

A put is an option with three components. The first is a contract. When you buy a put, you are buying the right to sell someone the underlying currency at a predetermined price for a predetermined period of time. You could buy a put today to sell a lot of the GBP/USD at $2.0000 any time between now and a date you choose in the future. If the currency pair falls to 1.9900, you can still sell it for 2.0000 and realize a profit. In fact, it doesn't matter how far the currency falls. If it is still within your time window, you can sell the currency for 2.0000 at will. The set price (2.0000) that you have selected for your contract is known as the strike price. The second component is time. Options are available in monthly increments. That means you can buy one that is good until next month or 12 months from now. The choice is up to you. Finally, options cost money. The price of an option is called the premium. The premium is higher the more valuable the options is. An option with a long time frame and a great strike price is more expensive than one with a very short time frame and a more speculative strike price. I think the best way to explain this is to use an example.

Example 1:

Let's assume that on January 22, 2007, you wanted to buy one contract of the GBP/USD. Let's assume it had a price of 1.9750. You are a prudent investor, and you want some protection from risk in the market so you buy a protective put that allows you to sell this contract at 1.9750 anytime before that contract expires. In this case, the contract would have expired a month later on the third Friday of February, the 16 th . That put will cost you the equivalent of 150 pips per contract. The pair subsequently dropped to 1.9502. In that case, the put will still be worth 248 pips because you can still sell the lot for 1.9750 (1.9750 — 1.9502 = 0.0248). That is exactly equal to the amount you would have lost on the contract you were long so they wash each other out. In fact, the only thing you are out is the 150 pips you paid to purchase the contract in the first place. You didn't have to set a stop because you were totally protected. Even though the contract value dropped significantly-more than the 150 pips you had planned for-you had a hedge that protected your capital.

Example 2:

The following month's trade, February to March, would have been another loss, but the March to April trade was a winner. For the March to April trade, you could have purchased the long position in the currency pair for 1.9372. You could have covered your position with a put at 1.9350 that would have cost you 120 pips, leaving you with some exposure between 1.9350 and 1.9372. However if you add those two positions, you had a level of total risk similar to what you had during the January to February trade. During the month, your long position rose significantly to 2.0027. That means you made 655 pips. What about your put? Well, there is no way you will want to sell this position for 1.9350 so you will just let the put expire worthless. That will reduce your gains by the amount you paid for the put so your new total is a net gain of 535 pips.

This strategy can appear to be slightly complicated at first, but it is worth learning more about it as it offers significant benefits. Institutional traders use option overlays, such as protective puts, all the time. It helps control risk and reduces total volatility in a portfolio. Here are a few more of the benefits, along with two of the cons, of this strategy.

Benefit #1-No stops

You do not need to set a stop on your long currency position. How many times have you been right in your direction but got stopped out on a whipsaw in the market? I am positive that this happens to most forex traders on a regular basis. With a protective put, you are in charge and can let the exchange rate drop to zero, if that were possible, without exceeding your maximum loss. By the way, this benefit is also true during announcements. You are now in control.

Benefit #2-Unlimited upside

Unlike many hedging strategies, this technique still allows for unlimited upside. Although gains are offset by the price of the put, gains can still be significant.

Benefit #3-Lower portfolio volatility

The total portfolio has lower volatility because your downside is capped. Here is an additional example. I will assume that pricing and volatility has been reasonably constant, on average, during the last 10 years and that your strategy is to buy a long position on the GBP/USD and an at the money put with total portfolio leverage of 20:1. That would have returned 10 percent per year during that period. When you combine this advantage with some prudent analysis, it is entirely possible to see much better returns than this.

Con #1 — Cost of the put

The put will cost you 150 pips if you let it run until expiration each month-whether the market goes up or down. That price eats into your upside and creates a predetermined downside. Even if the market dropped less than 150 pips, the maximum loss will be the same.

Con #2 — Cost of trading

If you purchase a put, you will pay a commission. With commission prices falling all the time, this is usually nominal but it adds another pip worth of losses to each month's trading.

The most difficult thing for most investors to do is to protect their capital. You will hear successful individual investors often say that if you can effectively protect your capital, profits will take care of themselves. I agree with that sentiment and use protective puts to help give me an edge. At ProfitingWithForex.com we maintain a model portfolio in the trades section that uses option overlays to illustrate the concept in real time. Log in, and check it out to see what we are up to and what this looks like over time.

Exiting positions at a right time

The presented article covers one of the most important (in author's opinion) aspects of trading in general and Forex trading in particular — managing of orders and positions. This includes choosing entry points, making decisions about exit points, stop-loss and take-profit of the trader. I hope this article will help new traders, who just began to work with Forex, and also to experienced traders who trade regularly and regularly make or loose their money to the market.

When I started to trade Forex and made my first big losses and profits I began to notice when very important thing about the whole trading process. While the right time to enter a position was rarely a problem for myself (nearly 80% of all my open positions had gone into the "green" profit zone), the problem was hidden in the determining the right exit point for that position. Not only was it important to cut my risk on the potential losses with stop-loss orders, but to limit my greediness and take profit when I can take it and make it as high as I can. There are many known guidelines and ways to enter a right position at a right time — like major economic news releases, global world events, technical indicators combinations, etc. But while the entering into a position is optional and trade can decide to miss as many good/bad entry point moments as they wish, this is untrue if we talk about exiting a position. Margin trading makes it impossible to wait too long with an open position. More than that, every open position in a certain way limits trader's ability to trade.

Choosing the good exit points for positions could be an easy task if only the Forex market wasn't so chaotic and volatile. In my opinion (backed by my trading experience) exit orders for every position should be toggled constantly with time and as the new market data (technical and fundamental) appear.

Let's say, you took a short position on EUR/USD at 1.2563, at the time you are taking this position the support/resistance level is 1.2500/1.2620. You set your stop-loss order to 1.2625 and your take-profit order to 1.2505. So now, this position can be considered as an intraday or 2-3 days term position. This means that you must close it before it's "term" is over, or it will become a very unpredictable position (because market will differ greatly from what it was at the time you have entered this position). After the position is taken and initial exit orders are set, you need to follow the market events and technical indicators to adjust your exit orders. The most important rule is to tighten the loss/profit limit as time goes by. Usually if I take a middle term position (2-4 days) I try to lower the stop and target order by 10-25 pips every day. I also monitor global events, trying to lower my stop-losses when very important news can hurt my position. If the profit is already quite high, I try to move my stop-loss the entry point, making a sure-win position. The main idea here is to find an equilibrium point between greed and caution. But as your position gets older the profit should be more limited and losses cut. Also, trader should always remember that if the market began to act unexpectedly, they need to be even more cautious with exit order, even if the position is still showing profits.

Every trader has their own trading strategy and habits. I hope this article will make its readers think about such an important aspect of trading as the exit orders and this will only improve their trading results.

The Costs Of Trading

You may have relatives or friends who trade the markets. They could be trading shares, futures, options or forex. You may have heard of their exciting trading stories and perhaps this aroused your curiosity and you wondered whether you should trade too. One of the first questions you ask before you trade would be: what are the costs of trading.

The costs of trading depend on several factors, including the instrument and market you are trading. Most of the costs you pay are to your brokerage firm. They need to make a living in exchange for the services they provide.

Generally, you would expect to incur the following costs:

 Commissions

 Slippage

 Spread

 Platform Fees

 Expenses

Commissions

These costs are charged by brokers. The commission you pay is usually calculated as a percentage of the size of your trade. For example, if you are buying or selling $10,000 worth of shares, your broker may charge you 1% of that. They may also charge in tiers: for example, if you are buying or selling shares with a total market value of less than $10,000 then your broker may charge you $30. If it is under $20,000, they may charge you $50. Therefore, if you bought $5,000 worth of shares, you would still pay $30 commission. And if you bought $12,000 worth of shares you would still pay $50 commission.

Slippage

The price of a commodity is always moving as long as the market is open. Therefore, if the price of a share is quoted at $10 now, it does not mean that when you decide to buy, you will buy those shares at $10 each. When you put in your order and it gets filled, the market price may have already changed. If your order to buy the shares was filled at a price of $10.25, and you bought 100 shares, then your total slippage cost is: $25 (that is 100 shares * $0.25). If you had the same slippage when you sell, then the entire slippage costs for you getting in and out of the market would be $50 (that is $25 * 2 trades).

Spread

The spread is the difference between the bid to buy and offer to sell for the commodity. If the most eager buyer is willing to buy US Dollars for 0.7500 Australian Dollars each, but the most eager seller is only willing to sell them for 0.7510 Australian Dollars each, then there is a spread of 10 pips. These 10 pips are referred to as the spread. If you bought 100,000 USDs, the spread would cost you 100 Australian Dollars. (Pips are discussed further in the book: The Part-Time Currency Trader .)

Platform Fees

Some brokers charge you monthly for using their trading platforms.

Expenses

These costs include those associated to your trading education like buying books, trading software, data subscription and so forth.

Some people may 'brush' these costs aside as negligible costs of having fun, much like the coins they put in poker machines. However, if you want to look at trading as a business, you have to minimize them and make sure you are getting the most for every dollar you spend to ensure your long-term survival.

FOREX — Dealing With Your Losses

One of the most important rules of Forex trading is to keep your losses as small as you possibly can. With small Forex trading losses, you can stick it out longer than those times when the market moves against you, and be well positioned for when the trend turns around. The one proven method to keeping your losses small is to set your maximum loss before you even open a Forex trading position.

The maximum loss is the greatest amount of capital that you are comfortable losing on any one trade. With your maximum loss set as a small percentage of your Forex trading effort, a string of losses won't stop you from trading for any particular amount of time. Unlike the 95% of Forex traders out there who lose money because they haven't begun to use wise money management rules to their Forex trading system, you will be ok with this money management rule.

To use as an example, If I had a Forex trading float of $1000, and I began trading with $100 a trade, it would be reasonable for me to experience three losses in a row. This would reduce my Forex trading capital to $400. It would then be decided that they're going to bet $200 on the next trade because they think they have a higher chance of winning after having lost three times already.

If that trader did bet $100 dollars on the next trade because they thought they were going to win, their capital could be reduced to $250 dollars. The chances of making money now are practically nil because I would need to make 150% on the next trade just to break even. If the maximum loss had been determined, and stuck to, they would not be in this position.

In this case, the reason for failure was because the trader risked too much money, and didn't apply good money management to the play. Remember, the goal here is to keep our losses as small as possible while also making sure that we open a large enough position to capitalize on profits and minimize losses. With your money management rules in place, in your Forex trading system, you will always be able to do this.

Money Management Tips For Trading On The Forex

What is Money Management: describes strategies or methods a player uses to avoid losing their bankroll.

Money management in the foreign exchange currency market requires educating yourself in a variety of financial areas. First, a definition of the foreign exchange currency or forex market is called for. The forex market is simply the exchange of the currency of one country for the currency of another. The relative values of various currencies in the world change on a regular basis. Factors such as the stability of the economy of a country, the gross national product, the gross domestic product, inflation, interest rates, and such obvious factors as domestic security and foreign relations come into play. For instance, if a country has an unstable government, is expecting a military takeover, or is about to become involved in a war, then the country's currency may go down in relative value compared to the currency of other countries.

The Forex, or foreign currency exchange, is all about money. Money from all over the world is bought, sold and traded. On the Forex, anyone can buy and sell currency and with possibly come out ahead in the end. When dealing with the foreign currency exchange, it is possible to buy the currency of one country, sell it and make a profit. For example, a broker might buy a Japanese yen when the yen to dollar ratio increases, then sell the yens and buy back American dollars for a profit.

There are five major forex exchange markets in the world, New York, London, Frankfurt, Paris, Tokyo and Zurich. Forex trading occurs around the clock in various markets, Asian, European, and American. With different time zones, when Asian trading stops, European trading opens, and conversely when European trading stops, American trading opens, and when American trading stops, then it is time for Asian trading to begin again.

Most of the trading in the world occurs in the forex markets; smaller markets for trade in individual countries. Simply put forex trading is the simultaneous buying of one currency and selling of another. Over $1.4 trillion dollars, US of forex trading occurs daily and sometimes fortunes are made or lost in this market. The billionaire George Soros has made most of his money in forex trading. Successfully managing your money in forex trading requires an understanding of the bid/ask spread.

Simply put the bid ask spread is the difference between the price at which something is offered for sale and the price that it is actually purchased for. For instance, if the ask price is 100 dollars, and the bid is 102 dollars then the difference is two dollars, the spread. Many forex traders trade on margin. Trading on margin is buying and selling assets that are worth more than the money in your account. Since currency exchange rates on any given day are usually less than two percent, forex trading is done with a small margin. To use an example, with a one percent margin a trader can trade up to $250,000 even if he only has $5,000 in his account. This means the trade has leverage of 50 to one. This amount of leverage allows a trader to make good profits very quickly. Of course, with the chance of high profits also comes high risk.

Like many other speculative investments, a key part of money management for the forex trader is only using money that can be put at risk. It is wise to set aside a portion of your net worth and make that the only money you use in forex trading. While the chances of good profits are there, if you should have a problem and get wiped out, you'll only have a limited amount of money placed at risk. Also remember that the market is n constant motion. There are always trading opportunities. If a currency is becoming stronger or weaker in relation to other currencies there is always a chance for profit. For instance, if you believe that the Euro is gong to become weak compared to the US dollar then selling Euros is a good bet. If you believe that the dollar is going to become weaker than the yen, or the pound sterling, then selling dollars is wise. Staying current on the news and current events in the countries whose currency you hold is a smart move. Many people reach points where they can predict currency changes based on political or economic news in a given country. Remember though that forex trading is speculation, so be careful when managing your funds and only invest what you can afford to risk.

Please always make sure you check with the pros when dealing in this market unless you are doing this as a hobby and don't have a lot at stake in it. There are a lot of big boys playing here and they won't lose much sleep if you and thousands others lose their shirts...

The Sneaky Way To Managing Losses In Your Forex Trading

One of the cardinal rules of Forex trading is to keep your losses small. With small Forex trading losses, you can outlast those times the market moves against you, and be well positioned for when the trend turns around. The proven method to keeping your losses small is to set your maximum loss before you even open a Forex trading position. The maximum loss is the greatest amount of capital that you are comfortable losing on any one trade. With your maximum loss set as a small percentage of your Forex trading float, a string of losses won`t stop you from trading. Unlike the 95% of Forex traders out there who lose money because they haven`t applied good money management rules to their Forex trading system, you will be far down the road to success with this money management rule.

What happens if you don`t set a maximum loss? Let`s look at an example. If I had a Forex trading float of $1000, and I began trading with $100 a trade, it would be reasonable to experience three losses in a row. This would reduce my Forex trading capital to $700. What do you think those 95% of traders say at this time? They would reason, "Well, I`ve already had three losses in a row. So I`m really due for a win now."

They would decide they`re going to bet $300 on the next trade because they think they have a higher chance of winning.

If that trader did bet $300 dollars on the next trade because they thought they were going to win, their capital could be reduced to $400 dollars. Their chances of making money now are very slim. They would need to make 150% on their next trade just to break even. If they had set their maximum loss, and stuck to that decision, they would not be in this position.

Here`s a perfect illustration why most people lose money in the Forex trading market. Let`s start out with another $1,000 float, and begin our Forex trading with $250. After only three losses in a row, we`ve lost $750, and our capital has been reduced to $250. Effectively, we must make 300% return on the next trade and that will allow us to break even.

In both of these cases, the reason for failure was because the trader risked too much, and didn`t apply good money management. Remember, the goal here is to keep our losses as small as possible while also making sure that we open a large enough position to capitalize on profits. With your money management rules in place, in your Forex trading system, you will always be able to do this.

World Events and Wise Forex Trading

Forex trading has the great potential of becoming a profitable and fulfilling career that will let you have a lifestyle that few other lucrative activities in the world can offer to people from many roads in life and without asking any of those men and women for a diploma or some special certification.

But Forex trading is not easy; it may be simple to enter and place your first trade but becoming a profitable trader is a different thing. You will need to acquire the right knowledge and techniques in order to understand and know when to enter or leave a trade always fulfilling the main objective every trader must have; making money.

There are two kinds of analysis you can perform on the Forex markets. They are known as technical analysis and fundamental analysis. It is common that traders tend to divide themselves into "technical" and "fundamentalists". Each group devoting themselves to the main tools each kind of analysis gives them.

Technical forex traders base their trading on the analysis of the charts and the number of indicators derived from the plots of price oscillations and patterns. Meanwhile Fundamentalists traders base their trading mostly on the fundamental numbers and economical indicators of countries economies. Though, even if divided, both tendencies tend to complement each other to some degree.

In this article I will place myself on the "fundamentalists" side and focus on one of the situations every forex trader must be aware of and don't let the events involved affect his trading efforts.

This risky situation is that when unprecedented chaotic world events start to develop as the trading day goes on. The power of the media (tv, internet, printed) can magnify and sometimes it may even distort the events taking place and impacting the trading journey in a significant manner. The result of this magnification and rapid diffusion of the news about the series of unfavorable events taking place is an increased atmosphere of fear, confusion and uncertainty in the trading world. And fearful traders are not prone to make the best trading choices because they have given themselves to panic and emotional reactions instead of reasoned and intelligent decisions.

If you need to have more specific examples of these kind of events you can search a bit inside your memories and consider the impact of just a few types of unfavorable chaotic world events as the political upheavals or corporate scandals of companies as; Enron, WorldCom, or of people as the case of Martha Stewart trial, etc. There is also the example of the terrorist attacks on Sep 11 in New York, March 11 in Spain, etc. Also natural disasters: tsunamis, earthquakes, floods, freezes, droughts, hurricanes along with wars can cause great disruption in a trading journey.

In short, every forex trader should be totally sure that his method of trading has built-in safe guards (stops, limit orders) to prevent a major financial loss from his trading account in case any of the unfavorable events I mentioned above ever takes place. And being realistic, many of those events will surely happen in the future.

Forex Capital Markets And Foreign Exchange Transactions

Forex Capital Markets are foreign exchange markets where the currencies are been bought and sold continuously for profits. The capital markets of forex are present globally and transactions are non-stop in this forex cash market. Whether its Sydney or Tokyo, one would find aggressive forex dealers and brokers peering into their computer screens and on the telephone for minor changes that might affect this currency trade.

The forex trade is carried out for profits that can be gained by buying and selling of the currencies. Currencies are always bought and sold in pairs. Let us take an example to clarify the forex deal

A trader trades in Euros/ Us Dollars. (All figures are samples only) He purchases 10,000 Euros on Jan 1 when the EUR/USD rate is .9600. Then he sells these Euros at the market rate of 1.1800. On August 1. Therefore he gets 11,800 USD. Thereby making a cool forex transaction profit of USD 2200.

Since all currencies are bought and sold in pairs, one needs to decide the pair of currency that you would like to do your currency transactions in. In this example EUR is the base currency and the USD is called the quote or the counter currency. If you have bought Euros (simultaneously selling dollars), then you have based your decision on the fact that Euros may appreciate in the future. Therefore by selling Euros back into dollars you would be getting more dollars and thus making a profit.

If your assumption is that the US market is going to appreciate, then you would placing a SELL Euro/USD. Therefore you will sell Euros while (simultaneously buying USD). This USD may be sold at a later stage to book a profit.

Operating in the financial and forex trade, its important to understand that there are many factors, which affect the forex dealing. The business market conditions, the political scenario, threat of climatic disasters or impending farm output increase. All these factors play a crucial role in the forex markets.

Forex dealers trade on forex trading platform or a session. These are sophisticated software's, which provide the forex dealers with real time news and analysis on the currencies that they are dealing in. On this they execute buy and sell orders and well as stop order. Of course these are also linked to the forex margin account. Thus it gives the forex dealers ample leeway to make transactions with a small investment. The forex trade is competitive market where more credit worthy that the institution or the dealer, the better their source of information and quality of data is. Therefore this helps them to make better deals in the currency transactions and make better profits.

Introduction To Fundamental Analysis

Forex traders almost always rely on analysis to make plan their trading strategies. There are two basic types of Forex analysis — technical and fundamental. This article will look at fundamental analysis and how it used in Forex trading.

Fundamental analysis refers to political and economic conditions that may affect currency prices. Forex traders using fundamental analysis rely on news reports to gather information about unemployment rates, economic policies, inflation, and growth rates.

Fundamental analysis is often used to get an overview of currency movements and to provide a broad picture of economic conditions affecting a specific currency. Most traders rely on technical analysis for plotting entry and exit points into the market and supplement their findings with fundamental analysis.

Currency prices on the Forex are affected by the forces of supply and demand, which in turn are affected by economic conditions. The two most important economic factors affecting supply and demand are interest rates and the strength of the economy. The strength of the economy is affected by the Gross Domestic Product (GDP), foreign investment and trade balance.

Indicators

Various indicators are released by government and academic sources. They are reliable measures of economic health and are followed by all sectors of the investment market. Indicators are usually released on a monthly basis but some are released weekly.

Two of the most important fundamental indicators are interest rates and international trade. Other indicators include the Consumer Price Index (CPI), Durable Goods Orders, Producer Price Index (PPI), Purchasing Manager's Index (PMI), and retail sales.

Interest Rates — can have either a strengthening or weakening effect on a particular currency. On the one hand, high interest rates attract foreign investment which will strengthen the local currency. On the other hand, stock market investors often react to interest rate increases by selling off their holdings in the belief that higher borrowing costs will adversely affect many companies. Stock investors may sell off their holdings causing a downturn in the stock market and the national economy.

Determining which of these two effects will predominate depends on many complex factors, but there is usually a consensus amongst economic observers of how particular interest rate changes will affect the economy and the price of a currency.

International Trade — Trade balance which shows a deficit (more imports than exports) is usually an unfavourable indicator. Deficit trade balances means that money is flowing out of the country to purchase foreign-made goods and this may have a devaluing effect on the currency. Usually, however, market expectations dictate whether a deficit trade balance is unfavourable or not. If a county habitually operates with a deficit trade balance this has already been factored into the price of its currency. Trade deficits will only affect currency prices when they are more than market expectations.

Other indicators include the CPI — a measurement of the cost of living, and the PPI — a measurement of the cost of producing goods. The GDP measures the value of all goods and services within a country, while the M2 Money Supply measures the total amount of all currency.

There are 28 major indicators used in the United States. Indicators have strong effects on financial markets so Forex traders should be aware of them when preparing strategies. Up-to-date information is available on many websites and many Forex brokers supply this information as part of their trading service.

What's Fibonacci Forex Trading?

Fibonacci forex trading is the basis of many forex trading systems used by a great number of professional forex brokers around the globe, and many billions of dollars are profitable traded every year based on these trading techniques.

Fibonacci was an Italian mathematician and he is best remembered by his world famous Fibonacci sequence, the definition of this sequence is that it's formed by a series of numbers where each number is the sum of the two preceding numbers; 1, 1, 2, 3, 5, 8, 13 ...But in the case of currency trading what is more important for the forex trader is the Fibonacci ratios derived from this sequence of numbers, i.e. .236, .50, .382, .618, etc.

These ratios are mathematical proportions prevalent in many places and structures in nature, as well as in many man made creations.

Forex trading can greatly benefit form this mathematical proportions due to the fact that the oscillations observed in forex charts, where prices are visibly changing in an oscillatory pattern, follow Fibonacci ratios very closely as indicators of resistance and support levels; maybe not to the last cent, but so close as to be really amazing.

Fibonacci price points, or levels, for any forex currency pair can be calculated in advance so that the trader will know when to enter or exit the market if the prediction given by the Fibonacci forex day trading system he uses fulfills its predictions.

Many people tries to make this analysis overly complicated scaring away many new forex traders that are just beginning to understand how the forex market works and how to make a profit in it. But this is not how it has to be. I can't say it's a simple concept but it is quite understandable for any trader once he or she has grasped the basics and has had some practice trading using Fibonacci levels along with other secondary indicators that will help to improve the accuracy of the entry and exit point for every particular trade.

Free chapters of a forex day trading system can be downloaded at http://www.1-forex.com in case you are interested in learning more about Fibonacci forex trading.

Mapping your Time Frame

It is useful to have a map and be able to see where the price is relative to previous market action. This way we can see how is the sentiment of traders and investors at any given moment, it also gives us a general idea of where the market is heading during the day. This information can help us decide which way to trade.

Pivot points, a technique developed by floor traders, help us see where the price is relative to previous market action.

As a definition, a pivot point is a turning point or condition. The same applies to the Forex market, the pivot point is a level in which the sentiment of the market changes from "bull" to "bear" or vice versa. If the market breaks this level up, then the sentiment is said to be a bull market and it is likely to continue its way up, on the other hand, if the market breaks this level down, then the sentiment is bear, and it is expected to continue its way down. Also at this level, the market is expected to have some kind of support/resistance, and if price can't break the pivot point, a possible bounce from it is plausible.

Pivot points work best on highly liquid markets, like the spot currency market, but they can also be used in other markets as well.

Pivot Points

In a few words, pivot point is a level in which the sentiment of traders and investors changes from bull to bear or vice versa.

Why PP work?

They work simply because many individual traders and investors use and trust them, as well as bank and institutional traders. It is known to every trader that the pivot point is an important measure of strength and weakness of any market.

Calculating pivot points

There are several ways to arrive to the Pivot point. The method we found to have the most accurate results is calculated by taking the average of the high, low and close of a previous period (or session).

Pivot point (PP) = (High + Low + Close) / 3

Take for instance the following EUR/USD information from the previous session:

Open: 1.2386
High: 1.2474
Low: 1.2376
Close: 1.2458

The PP would be,
PP = (1.2474 + 1.2376 + 1.2458) / 3 = 1.2439

What does this number tell us?

It simply tells us that if the market is trading above 1.2439, Bulls are winning the battle pushing the prices higher. And if the market is trading below this 1.2439 the bears are winning the battle pulling prices lower. On both cases this condition is likely to sustain until the next session.

Since the Forex market is a 24hr market (no close or open from day to day) there is a eternal battle on deciding at white time we should take the open, close, high and low from each session. From our point of view, the times that produce more accurate predictions is taking the open at 00:00 GMT and the close at 23:59 GMT.

Besides the calculation of the PP, there are other support and resistance levels that are calculated taking the PP as a reference.

Support 1 (S1) = (PP * 2) — H
Resistance 1 (R1) = (PP * 2) — L
Support 2 (S2) = PP — (R1 — S1)
Resistance 2 (R2) = PP + (R1 — S1)

Where, H is the High of the previous period and L is the low of the previous period

Continuing with the example above, PP = 1.2439

S1 = (1.2439 * 2) — 1.2474 = 1.2404
R1 = (1.2439 * 2) — 1.2376 = 1.2502
R2 = 1.2439 + (1.2636 — 1.2537) = 1.2537
S2 = 1.2439 — (1.2636 — 1.2537) = 1.2537

These levels are supposed to mark support and resistance levels for the current session.

On the example above, the PP was calculated using information of the previous session (previous day.) This way we could see possible intraday resistance and support levels. But it can also be calculated using the previous weekly or monthly data to determine such levels. By doing so we are able to see the sentiment over longer periods of time. Also we can see possible levels that might offer support and resistance throughout the week or month. Calculating the Pivot point in a weekly or monthly basis is mostly used by long term traders, but it can also be used by short time traders, it gives us a good idea about the longer term trend.

S1, S2, R1 AND R2...? An Objective Alternative

As already stated, the pivot point zone is a well-known technique and it works simply because many traders and investors use and trust it. But what about the other support and resistance zones (S1, S2, R1 and R2,) to forecast a support or resistance level with some mathematical formula is somehow subjective. It is hard to rely on them blindly just because the formula popped out that level. For this reason, we have created an alternative way to map our time frame, simpler but more objective and effective.

We calculate the pivot point as showed before. But our support and resistance levels are drawn in a different way. We take the previous session high and low, and draw those levels on today's chart. The same is done with the session before the previous session. So, we will have our PP and four more important levels drawn in our chart.

LOPS1, low of the previous session.
HOPS1, high of the previous session.
LOPS2, low of the session before the previous session.
HOPS2, high of the session before the previous session.
PP, pivot point.

These levels will tell us the strength of the market at any given moment. If the market is trading above the PP, then the market is considered in a possible uptrend. If the market is trading above HOPS1 or HOPS2, then the market is in an uptrend, and we only take long positions. If the market is trading below the PP then the market is considered in a possible downtrend. If the market is trading below LOPS1 or LOPS2, then the market is in a downtrend, and we should only consider short trades.

The psychology behind this approach is simple. We know that for some reason the market stopped there from going higher/lower the previous session, or the session before that. We don't know the reason, and we don't need to know it. We only know the fact: the market reversed at that level. We also know that traders and investors have memories, they do remember that the price stopped there before, and the odds are that the market reverses from there again (maybe because the same reason, and maybe not) or at least find some support or resistance at these levels.

What is important about his approach is that support and resistance levels are measured objectively; they aren't just a level derived from a mathematical formula, the price reversed there before so these levels have a higher probability of being effective.

Our mapping method works on both market conditions, when trending and on sideways conditions. In a trending market, it helps us determine the strength of the trend and trade off important levels. On sideways markets it shows us possible reversal levels.

How we use our mapping method?

We at StraightForex (www.straightforex.com) use the mapping method in three different ways: as a trend identification (measure of the strength of the trend), a trading system using important levels with price behavior as a trading signal and to set the risk reward ratio (RR) of any given trade based on where the is the market relative to the previous session.

Forex Trading Indicators and the Ever Changing Market Conditions

Once you enter the Forex trading world you will immediately notice the need of using technical analysis in order to find trends when looking at the forex charts and also the importance of being aware of when they first develop so you can ride the trend until it ends. The foreign exchange market is a very strong trending market, lots of ups and downs in short periods of time, and it's, therefore, a place where technical analysis can be very effective.

But you should always remember that the indicators are only giving you a high probability behavior the markets may show when you are trading, but will never tell you the behavior of the currency prices with total certainty.

If you want to become a profitable forex trader you will need to use as many technical indicators as you can, or create a personalized trading strategy based on a combination of these indicators, to recognize with the best accuracy possible the trend. In other words, a professional forex trader will try to identify the major trend, the intermediate trend, and the short-term trend and then construct his trades in that direction based on how long their rules allow him to hold a position.

The forex markets are always changing, that's why you should always have an open criterion when using your technical indicators. Markets will be changing and different combinations of indicators may be required with time in order to have the most accurate, highest probability, prediction of future currency price behaviors.

If the action of the market shows your judgment to be correct, then you must consider staying with the market' and look for the maximum profit on each trade, according to your risk-to-reward/equity management rules. If you happen to be in a bad day and the market goes against you, the smart trader will take profits and get out of that trade. In a narrow market, when prices are not going anywhere, but move within a narrow range, there is no sense in trying to anticipate when the next big movement is going to be.

So, you must always be alert and open to use as many and as different indicators in order to stay tuned with the market and become a profitable trader at the end of the day.

How To Choose A FOREX Broker

Most investors who trade Forex stocks use a broker. A broker is an individual or a company, who buys and sells stocks according to the investor's wishes. Brokers earn money by collecting commissions or fees for their services.

You should check that a broker is registered as a Futures Commission Merchant (FCM) with the Commodity Futures Trading Commission (CFTC) as protection against fraud or abusive trade practices. A Forex broker also needs to be associated with a financial institution, such as a bank in order to provide funds for margin trading. Picking the right Forex broker for you will take some work on your part. There are brokers who charge a flat fee and some that charge commission. It may be a good idea to talk with friends and business associates about their brokers. You may get some good leads, and you're certain to hear who to stay away from. There is nothing like word of mouth advertising.

If you are thinking of investing online, you could choose several online brokers and contact their help desks. Seeing how quickly they respond to your questions could be key in how they will respond to their customers needs. If you don't get a speedy reply and a satisfactory answer to your question you certainly wouldn't want to trust them with your business. Just be aware that as in other types of businesses, pre sales service might be better than after sales service.

Before you choose an online broker get a copy of their online demo account. What features are included? Is the software reliable? Does it offer automatic trading? Are there extra software features that cost more?

Before setting up an account with a Forex broker you will need to do further investigation. How quickly will these brokers execute your buy/sell orders? What is their policy on slippage? What are the transaction fees? What is the spread, fixed or variable? What are the margin requirements and how are they calculated? Does the margin change with currency traded? Is it the same for mini accounts and standard accounts?

Don't forget to ask about minimum account balances and interest payments on account balances. Make sure that your funds will be insured.

Finding Reliable Forex Signals

You guys know how hard it's to find a reliable forex signals and most of the forex signals services are very expensive ranging from $199 to $500 per month. And worse of all, there's no guarantee of this.

To find a good service, you must make sure that you get their free trial before you really subscribe to the service. 1 to 2 weeks is good enough to prove that whether they are reliable or not.

You want to find a forex signals service just because you don't have time or you don't have a good skills in trading forex. I understand your felling and that's why I've created a blog for people who want to get the free forex signals.

But I have day job as well. I don't post forex signals every day but if you can catch some, you got your money into the bank! :)

By that, I wish you to have a good trading in forex world!

<< Back to Forex Articles List Trading Currency Through Online Forex Brokers

Access to foreign exchange (forex), the most extensive market on the planet, is generally through an intermediary known as a forex broker. Similar to a stock broker, these agents can also provide advice on forex trading strategies. This advice to clients often extends to technical analysis and research approaches designed to improve client forex trading performance.

Financial institutions are generally the most influential in the forex market through high-volume, large-value forex currency transactions. Historically, banks enjoyed monopolistic access to the forex markets, but through the Internet, any forex speculator can also enjoy 24 hour access to the market via a forex broker.

Secure web connections today allow many forex traders to work from home, where ready access to news and other technical advice informs decisions on what forex positions to take. Similar moves are being made by stock brokers, who are also moving out of banks and other traditional institutions.

Your needs in the market will influence your choice of forex broker. Online forex brokerage firms, known as houses, provide those new to the forex market with detailed research, advice and simulators to learn how to use their forex trading tools. The experienced online forex trader is catered to by other broking houses, with in-depth advice, but less focus on forex trading instruction based on the assumption that you are familiar with the forex market. To make an informed choice, it is advisable to trial several differing online forex broking houses and their trading tools to find the best fit for your needs.

Avoiding Forex-Related Frauds and Scams

A lot of people have been 'burnt' from scam operations on the Internet. Their sites may look so perfectly legitimate that you doubt whether they would have gone through all that trouble building a trading platform just to steal your money. Beware.

The first thing I look for is the geographical location of the broker. If I find that they are based in a country where the financial industry is, in my opinion, relatively unregulated and under-developed, I quickly forgo signing up. This is terrible news for honest brokers in those countries, but your job as a trader is to protect your capital. If you lose that, then you cannot trade. The onus is on them to convince you that they will do the right thing by you as an investor.

I started out with an Australian broker. Currently I am using an American one. I have not tried UK-based brokers but the British financial industry is one of the best. Companies that are based in countries such as Japan , Germany and France are probably just as good too, if their website speaks your language.

Notice any license numbers that they may have registered with regulatory bodies that act like government watchdogs who oversee the finance and investments industries. These are organisations that impose strict rules to safeguard your investment. Some of these rules may include the requirement that brokers segregate all customer funds from the operational funds of the business. Your money is required to be put in highly-reputable banks and the funds are only withdrawn from these accounts upon specific withdrawal requests.

Take note that there are some fake regulatory bodies being thrown around in cyber-space as well. Take a look at how long they have been operating for. Try and search out any reviews or comments made about them. See if you can find forums where traders have discussions about their brokers.

Below is a list of things to keep in mind to help you avoid being a victim of a scam:

Stay Away From Opportunities That Sound Too Good To Be True

There are people who may have just acquired a large amount of money just and recently are the same and are shopping around for safe investment vehicles. These may include retirees who have access to their retirement funds. It is understandable why retirees would be drawn to 'high-return, low-risk investments'. This is also what makes them very vulnerable. If you identify yourself to be one of these people, be careful. A lot of deceitful characters are after your money. Furthermore, only allocate a tiny amount of your money to trading until you can start growing it. Not all people can trade successfully, so it is a venture you should take on haphazardly. It is your life savings at risk.

Avoid Individuals Or Organizations Who Claim To Predict Or Guarantee Large Profits

Any form of trading is hard. Trading currencies is no different. Be wary of statements that make it sound easy. Statements like:

"Whether the market moves up or down, in the currency market you will make a profit";

"Make $1000 per week, every week";

"We are out-performing 90% of domestic investments";

"You'll make returns of 70% a year";

"Here is a no-risk strategy".

If they could make such returns, why would they even bother letting you know about it.

Be Wary Of Companies Who Downplay Investment Risks

Hold your wallet tight and zip up your purse when companies say that written risk disclosure agreements are routine formalities imposed by the government. Watch out for statements like:

"With a $10,000 deposit, the maximum you can lose is $200 to $250 per day";

" We promise to recover any losses you have ".

Be Wary Of Companies That Claim To Trade In The 'Interbank Market'

Do not believe it when some people say that they have access to the 'Interbank market' or that they can give you access to trade in that market because that's where bargain prices can be obtained. This is not true. The 'interbank market' is not a place, it is not a physical building. It is simply a loose network of currency transactions that are negotiated between big financial institutions and other large companies.

Ethnic Minorities Are Often Targeted

Ethnic newspapers and television 'infomercials' are sometimes used to attract Russian, Chinese and Indian minorities. Sometimes these ads offer so-called 'job opportunities for account executives to trade foreign currencies', whereby the recruited 'account executive' is expected to use his own money to trade currencies and would often times be encouraged to recruit members like their friends and family to do the same.

Seek Out The Company's Background

Check any information you receive to be sure that the company is who they claim to be. If at all possible, try and get the background of the people operating the company. Do not rely solely on oral statements and promises made by the company's employees.

If You Are In Doubt, It Is Not Worth Risking Your Money

If after trying to solicit information and at the end of it all, you are still in doubt about the credentials of a particular company, my suggestion is to start looking elsewhere.

You may find further information by contacting government 'watchdogs' because they keep up to date with trends and reports regarding scams and other fraudulent activities. Please check the resource section of this site for the information of organizations that regulate the securities industry, sorted by country. There is also a list of brokers that you may want to look at.

Forex Avenue: The Road to Riches

In my continuing quest to provide visitors of my site with a large amount of options to chose from when considering working from home I have done some research on Forex trading. I first learned of Forex trading while pursuing my MBA program. For those of you who have never heard of this, Forex trading is the exchange of foreign currency.

I know I would have never even know this was an option for making money had I not found out in class. Most of the really big corporations have departments of people that do this for a living because it can be very lucrative if done correctly. The best news I have learned about this process of exchanging currencies is that many of the websites that you can sign up with to do this offer free trial accounts to help you learn before you invest your money into trying it. You won't make any money in the trial accounts if you do well, it is just pretend money essentially but with the real market conditions. If you do well in the trial account you will know if this is something you want to try on your own.

Benefits to Forex trading are that is can be done 24/7 whereas the stock market is a business hours only exchange. It is 24/7 because it is done with countries around the world so clearly there are countries that are awake and working while we sleep. Another benefit is you are in control of the trading on your account. You do not need to hire a licensed broker to make your trades and charge you fees. Along those same lines, anyone who does any investing most likely knows that some funds require you to own then for a certain period of time or pay early withdrawal fees. You do not need to concern yourself with this either. One last benefit that I would like to point out is the fact that Forex is not really subject to the same kinds of swings in the market that stocks are subject to. Of course if you always buy and sell the same currencies then there will be market swings. But, because there are hundreds of currencies out there, there is always going to be something for you to make money on because while one currency is up in value another one is down and vice versa.

There are many resources available to someone interested in becoming involved in this type of training. The Federal Reserve Bank's website is just one example of the information available — http://www.ny.frb.org/markets/foreignex.html. Here is another article that you will find helpful in starting out in this field. http://www.forex.com/pdf/pro2.pdf . I have also included one of the sites that does offer a free lesson.

While there are many benefits to this type of training, as I mentioned above, there are certainly risks involved as well. There are risks with exchange rates, central banks in foreign countries, and risks involving interest rates and credit. Forex is quickly becoming a popular way to help diversify your investment portfolio. If you are good with understanding investing concepts and enjoy doing it this may be the home business opportunity for you. Just do your research and try to find one of the sites offering the free trial account to practice with and you are well on your way down the Road to Riches.

Forex Trading

So what is is Forex trading you may ask? Forex is the exchange you can buy and sell currencies. For example, you might buy British pounds (by exchanging them to the dollars you had), then, after pounds / dollar ratio goes up, you sell pounds and buy dollars again. At the end of this operation you are going to have more dollars, then you had at the beginning.

The Forex market has much higher liquidity, then the stock market, as much more money is being exchanged. Forex is spread between banks all over the planet and as a result it means 24 hour trading.

Unlike stocks, Forex trades are performed with high leverage, usually it is 100. It means that by investing $1000 you can control $100,000, and increase potential profits accordingly. Some brokers provide also so called mini-Forex, where the size of minimum deposit equals $100. It makes possible for individuals to enter this market easily.

The name convention. In Forex, the name of a "symbol" is composed of two parts — one for first currency, and another for the second currency. For example, the symbol usdjpy stands for US dollars (usd) to Japanese yen (jpy).

As with stocks, you can apply tools of the technical analysis to Forex charts. Trader's indexes can be optimized for Forex "symbols", allowing you to find winning strategy.

Example Forex transaction

Assume you have a trading account of $25,000 and you are trading with a 1% margin requirement. The current quote for EUR/USD is 1.3225/28 and you place a market order to buy 1 lot of 100,000 Euros at 1.3228, expecting the euro to rise against the dollar. At the same time you place a stop-loss order at 1.3178 representing a maximum loss of 2% of your account equity if the trade goes against you, 50 pips below your order price, and a limit order at 1.3378, 150 pips above your order price. For this trade, you are risking 50 pips to gain 150 pips, giving you a risk/reward ratio of 1 part risk to 3 parts reward. This means that you only need to be right one third of the time to remain profitable.

The notional value of this trade is $132,280 (100,000 * 1.3228). Your required margin deposit is 1% of the total, which is equal to $1322.80 ($132,280 * 0.01).

As you expected, the Euro strengthens against the dollar and your limit order is reached at 1.3378. The position is closed. Your total profit for this trade is $1500, each pip being worth $10.

Explosive Profits: 7 Reasons to Trade Forex

There are many money-making opportunities out there and we've been involved with quite a few, namely property marketing, web development, residential construction security, multi-level marketing businesses etc.

We've come to a few conclusions with the help of some well-known property coaches.

Often people with the income they desire don't have the time to enjoy it. Those that have time don't often have money. You don't have to sacrifice your life-style to earn an above-average income. If you focus on the for a few months you can make that dream a reality and create time and money to do what you REALLY want.

To earn a living money is given in exchange for a product or service rendered. It needs to be sold continuously otherwise your income stops abruptly unless it's a repeat type of product or service.

Money is a medium of exchange. There's no magical formula to possess it, you need to exchange something of value for it.

What if, you could have access to thousands of customers who are ready, willing and able to buy from you whenever you wanted? Wouldn't it be great to avoid any hassles like money collection problems (just had a delayed payment from my web business), keeping difficult customers happy (we all know what that's like), competition stealing your business without providing the same value etc.

All that is possible with . You can also trade from anywhere. Take your laptop with you, find an internet connection and away you go.

Another advantage is that you don't need experience to get started. Get a traditionally job involves accumulating specialized experience, having a well-polished resume and having the right contacts. With the right training course, you can get started straight away.

Here's 7 more reasons to trade :

1. It never closes. It's open around the clock, worldwide. Trading positions open at Monday 7am, New Zealand time and close 5pm New York time on Friday. During this time, you can enter or exit the market whenever you like. It's a continuous electronic currency exchange. This is great because you can trade whenever you have spare time.

2. Leverage. Standard $100 000 currency lots can be traded with as little as $1000. This is mainly because of the ease with which you can buy and sell, some brokers will leverage up to 200 times, so with $100 you can control a 200 000 unit currency position. It's the best use of trading capital around, even banks lending on property investments don't come close.

3. Accurately predict the outcomes. Currency prices generally repeat themselves in predictable cycles so you can see what the trends are. 'Technical Analysis' helps to see these trends and profit from them.

4. Low Transaction Cost. In other words, you mistakes won't cost you a fortune. Good brokers won' charge commissions to trade or maintain an account even if you have a mini account and trade small volumes.

5. Unlimited Earning Potential. has a daily trading volume of over 1.5 trillion, the largest financial market in the world. It dwarfs the equities market (50 billion daily) and the futures market (30 billion).

6. You can make money in any market conditions. Each market is one currency against another, so when you buy in one, you're selling in another so there's no bias towards either currency moving up or down. This means it's up to you to choose which currency to buy or sell with. Yu can make money going up or down.

7. Market transparency. This is an advantage in any business or trading environment. It means you can manage risk and execute orders within seconds. It's highly efficient and allows you to avoid unexpected 'surprises'.

I hope you're now convinced that is the best investment and income opportunity around.