Learn Forex Trading

A forex trading forum is a popular place for beginners to go when they are just getting into forex trading. There are many internet forums and you can discuss any aspect of currency trading there. But should you trust the answers that you get? Are these online discussion sites really a valuable source of information, or just a drain on your time?

Forums began in the time of the Roman empire. At that time they were a physical space in the middle of the city a little like a market place but without a market. The men of the city would meet there to hear and debate matters of importance such as politics and the law.

Since then the word has come to mean any location or group in which discussion takes place and opinions can be aired. On the internet, it has gradually taken over from the term ‘bulletin board’ which was used for the old style of sites where members could post messages. The new format of forums is much easier to navigate and people can more easily get involved in discussions than they could on bulletin boards.

This means that it is very easy to either start or join in a discussion. If you have a question you can post it and you are almost certain to see replies. For some aspects of foreign exchange trading this can be very useful.

For example if you are thinking of investing money, time or both in a forex system, ebook, robot or training program, it can be very useful to check a forex trading forum for reviews and feeback from people who have already used the product that you are considering. Use the search facility to see if there is already a thread about the product and if not, start one by asking if anyone has experience of the product. Feedback from other users can help you decide whether something would be suitable for you or not.

It is best to find several different opinions before making up your mind. Remember that one person’s opinion is only one view and you might not agree with that person. They might have been looking for something different, or they might have had unusually good or bad luck with the product. If you find a lot of different opinions it is much more helpful. You can see what kind of person has a good experience with the product and what kind of person has a bad experience.

If you have questions about trading, a currency trading forum can be useful too. But again you need to think about who is replying to your question. You might not necessarily want to trust everybody.

Sometimes different users will disagree with each other because they have different ways of making money with FX. There are many different methods and when you get conflicting advice it can be confusing. So do not be distracted by all the people who will tell you that their way is best.

It is very easy to sound like an expert in a place where nobody knows you. All a person has to do is to make a lot of posts and sound experienced. In fact a high post count often just means that the person likes hanging out in the forum and does more talking than trading. Some users may never even have traded for real at all, but only used demo accounts.  Remember that you do not know who these people are. You should not automatically trust everybody’s opinion.

Finally, take care that you are not becoming an addict yourself. It is very easy to waste a lot of time following random discussions and chatting. Have a clear purpose when you enter a forex trading forum and leave when you have found what you were looking for.

Forex mini accounts are ideal for just about anybody who is starting out in forex trading. You would have to be very rich or very confident to start right out with a standard account if you are a retail trader (i.e. somebody trading on their own account from home). A mini account lets you get started without risking so much money and this makes it a very attractive option for most people.

Mini forex trading accounts generally allow you to trade with just one tenth of the normal lot size. This usually means 10,000 units of currency instead of 100,000.

Of course you do not have to have this much in your account. Currency trading works with leverage. If you are using 100 times leverage then you need $100 to control $10,000 in your mini account or $1,000 to control $100,000 for a standard account.

$100 or 100 units of other currency per trade is enough for most people to commit to a trade when they are starting out and that is why the mini trading account is so attractive.

The pip size is also usually smaller in a mini account. Pips are units in which you will measure your profits, losses and costs (the spread). Their dollar value can vary depending on the currency pair that you are trading, the lot size and other conventions of your broker, but a common standard pip size is $10 and mini pip size is $1.

Some brokers are now quoting prices to 5 decimal places which technically would make one pip 0.00001 of the quoted price, but we will continue to use the standard 4 decimal place pip for this example.

So if you have a standard forex account you can expect to put up $1,000 on each trade, be involved in trading lots of $100,000 and measure your profits in $10 units.

If you have a forex mini account you can expect to commit $100 on each trade, be involved in trading lots of $10,000 and measure your profits in $1 units.

Of course you can set stop losses so that you do not have to risk all of the money that is committed to the trade. But your losses will be measured in terms of pips so these too will be 10 times greater in the standard account.

If you are successful and your fund grows, you may want to move up to trading greater sums. You can still do this in your mini account by trading more than one lot at a time. So if you want to trade a standard lot size you would just trade 10 mini lots. This has the advantage of still giving you the ability for fine control of your stops because your pip size is still just $1.

The standard account used to be all that was available before so many people had powerful home computers and high speed internet connections that made it possible for the ordinary person to trade from home. The forex mini account is a development that has opened up the market to people who have the technology but not the money for standard currency trading investment.

If you want to risk even less of your money, you could look at forex micro accounts which allow you to make even smaller trades. Be aware though that the spread is often a little high and you might find it difficult to profit with a micro account. It may be better to use a demo account until your confidence builds and then open a forex mini account for real trading.

Forex expert advisor reviews can be very valuable for anyone thinking of investing in the foreign exchange market. If you are thinking of buying a forex robot to do your trading for you, you should certainly look at the reviews of expert advisors or EAs which is the name generally given to currency trading robots that operate on the free software platform Metatrader 4.

Currency trading is not the easiest style of investment to learn for a beginner, especially as most people trade their accounts themselves from their home computers. It is not just a question of giving your money to the broker or investment company and hoping for good results.

If you are going to trade on the foreign exchange market without a robot, you need to be constantly analyzing all kinds of charts, graphs and technical information so that you have a chance of working out when the prices are likely to rise and fall. As you can imagine, it takes time, experience and a lot of testing to learn to do this, even assuming that you have the kind of brain that easily handles numbers and complex charts.

However, if you use a software program to trade for you, otherwise known as a forex robot or expert advisor, it will automatically make all the calculations and open and close trades according to its settings. It will operate according to a certain system but you still have control of the settings.

The most important things to look for when you are reading forex expert advisor reviews are the results that the average user is getting, and whether the robot is suitable for your level of experience and your trading style, if you have one.

If you are a beginner you may not want something that is very difficult to set up. On the other hand if an EA is getting very good results, it could be worth spending the time to master it. There is no point in paying good money for a robot that will not be successful, however easy it may be to use.

Always remember that foreign exchange trading is risky. Robots will do what they are told but the market trends will not always follow a predicted pattern. You may lose money even if past results have been good. You should only invest what you can afford to lose, even though there is huge potential to make money with forex trading.

Forex expert advisor reviews are great for picking up hints and tips about how to use the software as well as comparisons of the different robots that are available.

One of the most important things you can learn in any forex trading education is how to keep to your chosen system or systems in a consistent way.

Hopping from one thing to another will kill any chance you have of making profits, but we are all tempted from time to time. If you find it hard to keep to one trading system, here are some techniques that may help you to learn to be consistent.

1. Consider carefully before you decide to follow any system. One successful businessman has said that the secret of his success was thorough research before a decision, and then sticking to it like iron. You need to be sure that your system is profitable … not necessarily the very best. And you need to be comfortable with all the actions that it will require you to take, whether things are going well or badly.

2. If you have problems with self discipline in other areas of your life, use those to train yourself in the skill before you start live trading. Do not pick the thing that you have most trouble with, but something that you could fairly easily master. It might be getting up at the same time every day,

3. Allow yourself a small ‘fun’ budget or have a separate mini account for trades that look so tempting that you cannot pass them up even though they do not fit your criteria. You will almost certainly lose this money over a period of time, so be sure you can afford it. If not, avoid the temptation and track these trades on paper instead or use a demo account. Be sure to track them all because we have a tendency to remember the few that would have profited us and forget the majority that would have lost.

4. Do not discuss your trades or your system with anybody else. It is fine to ask around on forums before you have decided on your system, but do not be drawn into debate about the merits of a system after you start using it. You will quickly be swamped by negativity from people who want to believe that their own system is better. Equally, do not discuss it with non trading friends or family members. They will often be negative simply because they do not understand.

5. Do not drink alcohol while you are trading. In fact, it is better not to even look at the markets when you have had a few beers. If you see a tempting trade that breaks your normal rules it will be much harder to resist when you are under the influence of alcohol.

So even though we all love the idea of working from home in our pajamas with a beer at one elbow and the cookie jar at the other, reality is that relaxing to this extent does not combine with successful forex trading. A mind that is even slightly fuzzed by alcohol will not be able to keep to a consistent trading plan.

An automated forex robot can help you out here. You can set it up to trade automatically for you, if you are not yet able to act consistently while you pursue your forex trading education.

There are two types of forex market analysis: fundamental analysis, which considers economic, social and political forces and how they influence the currency markets, and technical analysis which uses charts to identify trends and patterns in the movement of prices.

So which one is better? If you check out forums and websites you will find many traders strongly supporting one or the other. Those who like to rely on charts will tell you that the only way to make money with forex trading is to identify trends and jump onto them as early as possible.

At the same time the advocates of fundamental analysis will argue that it is the economic factors that drive the changes in currency prices and this is undoubtedly true, at least most of the time. From that position they will reason that any patterns you might find on a chart are nothing more than coincidental.

But logically this does not necessarily follow. Even though economic changes have a huge impact on the currency markets, it may still be possible to identify patterns in the way that the markets react after an announcement or in times when there are no major announcements.

If on the other hand you rely solely on your charts, you are likely to be caught out when a major financial event such as an interest rate change is suddenly announced. You were not paying attention to the financial news and left a trade open at the wrong moment. That could result in disaster.

So the bottom line is that there are economic events behind the larger scale rises and falls in the market, but there are also common patterns that can be identified in the short term. Finding these patterns and trends, while keeping one eye on the economic and political news, is the best way to predict future price movements. And predicting future price movements, of course, is the way to make money with forex trading.

Foreign exchange market movements are a little like elastic that can stretch in one way or another and then fall back, although not always to its starting position. The fundamentals are the forces that cause it to stretch. Technical analysis predicts how far it will go in each direction before reversing.

So when you want to profit from forex trading it is better not to allow your attention to become fixed on either one. You need to learn to balance the use of both types of forex market analysis to make consistent profits.

There is a wide choice of foreign currency trading software for the forex market. When you are just getting started with forex trading you will need to shop around to find the platform that will suit you best. But what types of program are available and what features should you look for?

Online brokerage accounts are always run through forex software. Your broker may either give you access to a platform that runs on their server or you may have something that runs on your own computer.

Brokers may have their own custom forex trading platform or they may use a generic platform which they can have tailored to their company. This should provide you with many features including a wide variety of charts, tools and analytical capabilities that can indicate changing patterns and trends in the price movements. There may also be a forex alert feature or a running commentary on the financial news.

In some cases you can customize your desktop view of the software. This is more useful than you may realize at first. It can save a lot of time to have your preferred settings or combination of tools and charts load automatically when you log in.

If you choose to use automated foreign currency trading software, otherwise known as a forex robot, this will need to connect to your brokerage account to make the trades. Most robots use the platform Metatrader 4.

If you are running a program yourself, be aware that this usually means that your computer must be switched on and connected to the internet at all times while you have open trades, stop losses or orders to open a trade at a certain point. If your internet connection is often broken by storms or other factors, or if your internet provider automatically cuts the connection any time there is no activity from your machine for more than a certain time, you will not be able to trade effectively unless your instructions have already been passed to your brokerage account and are stored there.

The software should be simple to access and use. Clear instructions plus an FAQ page or manual that you can go to for reference are essential. Beyond that there should be some kind of support, either live or by email, when you need more detailed help or cannot find the answer to your question in the documentation.

Forex trading is risky and you can make losses as well as gains. In this very fast moving market it is vital to have all of the information that you need at your fingertips, plus the power to make your selected trades fast. Automated foreign currency trading software can help you massively and you need the best that you can get your hands on.

If you want to make money from the forex market then you will need to know foreign exchange basics. You may have a good mathematical understanding of trends and charts but it is also important to understand the foundation on which the currency trading markets are based. If you do not, you could enter a trade at exactly the wrong time.

The forex market is heavily influenced by national and international news and current affairs. This especially relates to financial news but other major events can have an effect too. These may be expected or unexpected.

For example a disaster such as a major earthquake or terrorist attack is usually unpredictable but could affect currency values. There is not much you can do about this except always to be sure to use stop losses.

A more predictable event would be the announcement that the Olympic Games will be held in a certain country. This could strengthen confidence in that country’s economy and lead to a rise in the value of its currency. At the same time the other major contenders for the Games may suffer a fall in currency values. So it is important for a trader to know when an announcement like that is expected, and which countries are involved.

Similar situations are the financial reports that are released almost daily in many countries. Less regularly, but usually foreseeable, there will also be announcements about interest rates, inflation, gross domestic product and other matters of national economic importance.

Try to avoid trading on rumors. You might see news reports or hear other traders speculating that an announcement will go one way or the other. Do not trade on the basis that they are right. First because they still could be wrong, and second because if it is such a sure thing, the price has probably already changed to take into account the rumors and you will not gain much even if they are right.

Do not forget that you are always trading on two nation’s currencies, not just one. If your own country is one of them, you will have much easier access to financial reports for that currency and it is easy to forget to check on events in the second country. This is particularly true for Americans because dollar news tends to dominate the forex alerts anyway. It is even more true if you are trading the dollar against a minor currency. You may have to take positive steps to ensure that your information is not one-sided.

Even if you are just beginning as a forex trader, it is important to keep in mind these aspects of fundamental analysis for the forex market. Exiting the market before any major announcement is usually the best move for a beginner. As you become more experienced you may develop a system based on this type of forfundamental analysis, but it is important to become familiar with all of the foreign exchange basics first.

Electronic currency trading is simply a way of dealing in currency exchange online. You may have seen it described as foreign exchange, forex or fx trading. It is something that appeals to many people who are looking for a way to make money on the internet using their home computer.

Forex is a little like stock trading, although the market itself is very different. You have the same aim of buying something hoping the price will rise. But with forex you are always dealing with money so you can also make money from a falling price, by exchanging out of the falling currency into a steady or rising currency.

Imagine for example that you are trading on the currency pair EUR/USD. This is a common combination for beginners. The US dollar and euro are most traded currencies and there is a lot of information available to help you, so it is a good choice to start.

With this pair you can choose to either buy or sell euros. If you place a buy order, this is called ‘going long’. You would do this if you think the euro will strengthen or rise in value (or the dollar will fall).

If you place a sell order, that is ‘going short’. You would do this if you think the dollar will strengthen (or the euro will weaken).

Your aim is to make a profit by closing the trade when the price goes the way that you anticipated. Closing the trade would involve selling euros if you had gone long, or buying them if you had gone short.

Of course, there is a risk. The price could go the wrong way, and you could make a loss. So it is important to have good information and a profitable trading system.

You do not need a lot of money to get started with electronic currency trading. Many brokers will let you begin with a couple hundred dollars, although it is better if that is not all the money that you have in the world!

Forex trading involves margins. This means that you can place orders for a lot more money than you actually have. You do this through a broker who will guarantee the balance of the order. They know you will be closing the trade at some time and if one currency is falling, another is rising. Currency values are relative, so it is not possible for all currencies to crash in the way that all stocks can crash.

Currencies can be very volatile but you can use stop losses to ensure that you do not lose more than you are willing to risk. Some brokers operate limited risk accounts where they will automatically close your trade if you lose the balance of your account. This means you do not have the dreaded margin calls which can be so disastrous for stock traders.

Among the many types of technical analysis available to forex traders, the single most useful and popular are probably candlestick charts. These were originally developed in Japan during the 18th century by a prominent commodity trader who used them to chart the fluctuations in the price of rice. For this reason they are often known as Japanese candlestick charts, and many of the patterns that they form have Japanese names.

Simple line graphs plotting the price of a commodity at regular intervals in time had been used for centuries, but traders were in need of something that could plot more variables within a two dimensional graph. The bar chart showing the opening, high, low and closing prices of a commodity was useful and helped traders to predict future price movements in a more reliable way than line charts, but candlestick charts were even better.

They were introduced to the American stock market and from there to the worldwide financial markets by Charles Dow at the beginning of the 20th century. Dow was the founder of the Wall Street Journal and co-founder of the Dow Jones company.

Candlestick Formation

The chart is made up of a series of ‘candlesticks’ which typically have a chunky body with vertical lines stretching up from the top (the upper shadow or wick) and bottom (the lower shadow or wick). The different points measure the differential in prices over a certain period of time, which might be 5 minutes, 15 minutes or longer.

The top of the wick is the highest point reached during the time period and the lowest point of the lower wick is the low. The top and bottom of the body are the opening and closing prices. If price rose during the period the body will be white (or green or blue if colored). The bottom of the body marks the opening price and its top marks the close. If the price fell during the period the prices are the other way around and to show this at a glance the body will be black (or red if colored).

How To Use Candlestick Charts In Forex Trading

A chart showing 5 or 15 minute candles over a period of several hours can provide the forex trader with many patterns on which he can base a system for determining when a trend is developing. For example, when the candle body is white or green and higher than the preceding candles, it indicates that buyers are very bullish. When it is black or red and lower than the preceding candles, it indicates that buyers are very bearish.

Being able to see these implications at a glance is vital in the fast moving forex markets where trading decisions often need to be made in a split second. So candlestick charts are one of the most useful visual aids for any forex trader.

Yes, you read that right: if you want to learn forex trading, you have to be able to lose. Of course you have to go into every trade with the intention of making money, but some trades will inevitably go against you. How you handle that when it happens is one of the biggest factors in determining whether you will become a successful forex trader.

Everybody knows that it is vital not to let your emotions be in charge of your trading. However, even super cool traders who never make a stupid mistake (if there are any) are bound to lose sometimes because no system is 100% successful. Some trades will just go wrong.

Also, and this is harder to handle, all systems will sometimes go through bad patches where they drift into making a loss over several days or weeks. You can see this happening when you backtest a system. There are times when everything seems to go right and times when it is the opposite. When it happens in real life, you need to be prepared.

One way to prepare for a bad spell is to have an idea of the drawdown of your system. This is the amount by which your funds are likely to drop during a bad run. It depends on the percentage success rate of the system (the percentage of profitable trades), the average profit of those trades and the average loss of losing trades. Generally if you have backtested the system thoroughly you will have an idea of what the drawdown is likely to be. However, real life can always surprise us so it is best to set your position size so that your total funds cover the drawdown three or four times over.

When you begin forex trading it is very easy to be drawn in to committing too much money to each trade. You may start out with a very small account and use a lot of leverage to control position sizes that involve you in more risk than your fund balance can handle. This will inevitably lead to a crash. So even if you only have the tiniest possible micro account, figure out your drawdown and allow for it. If you don’t, your funds will be wiped out sooner or later in the routine ups and downs of your system and even if it was only a small amount, this is very discouraging.

So on the one hand you should protect your funds from bad times at all costs, but on the other hand you need to be a little detached from them too. Do not consider that money yours any more, consider it spent, just as if you had used it to buy a new car. You should only be trading with money that you can afford to lose, so if you cannot do this, you need to rethink how your trading is financed.

It is very important that you do not depend on this money. Never trade with the rent money. If you do, you will be under a lot of unnecessary stress while you are trading and that is likely to lead to mistakes. Ironically, the way to make more money when you learn forex trading is to plan for loss.