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Why Trade in Forex?

Forex trading has become very popular across the world these days with daily turnover touching nearly $4 trillion. This is an amount that dwarfs the turnover of the stock markets and the gold bullion markets, two of the several investment markets which are widely available to large fund managers. Forex is a word that is made up by combining two words foreign and exchange and these two words embody the essence of Forex trading. The national currencies of the countries of the world are linked with each other and their values are best reflected by their rates in terms of some standard currencies, most notably the USD, Euro, Pound, Sterling etc. The value of a currency does not remain static and keeps on fluctuating, as it is affected by many external and internal factors. Investors have to anticipate the movement of a currency in terms of other currencies and place their bets to make profits in Forex trading.

The reason why Forex trading has become so popular is because of the spread and reach of high speed internet in homes across the world. The internet has enabled many individual traders to trade in Forex and also to do it at any time of the day, as per their convenience. Unlike stock markets, you can invest in Forex 24X7 because of the fact that the world is divided into different time zones. Even if it is night time in your country, one or more financial markets of the world will be open and you can trade in different currencies at different times of the day.

Another advantage of Forex trading lies in the high leverage provided by the brokers to invest in currency markets. You can book a potential profit of […]

What is Meant by Forex Scalping Strategies

Forex trading has become a very popular mode of investment these days, surging ahead of stock markets in terms of total turnover. It provides a chance to an individual to book profits whenever there is a movement in the price of currency pairs. This is similar to investing in the economy of a country as the price of currency is often dictated by the shape and health of a country. There are many different strategies in earning a profit from currency markets and Scalping is just one of them. This is a technique of placing a bet and exiting from the trade as soon as it turns profitable without waiting in the hope of higher profits.

The Reason and Aim of Scalping

A scalper or the trader who follows the scalping technique will stay in a trade for only a few minutes or seconds as he/she has to book his/her profit and get out of the trade at the first instant the trade turns advantageous. The major aim of scalping is to allow a trader to make a few pips with every trade, giving him ample time to conduct many such trades in a day. Traders interested in scalping are called futures players. This means they are there to make small profits with little movements of currencies unlike traders that stay in a trade for long duration in the hopes of higher earnings.

Small Profits That Add Up Become a Decent Sum by the End of the Day

The major premise behind scalping is the belief that the first stage of movement in the price of a currency will take place but it is difficult to predict the movement of the currency after a brief period of time. […]

What are Forex Indicators?

It is very easy to be enamored by the potential of Forex markets and the idea that Forex trading can give you very attractive returns on investment. This is the reason why millions of people around the world get attracted to currency markets. However, despite the turnover of these markets touching nearly $5 trillion these days and thousands of investors making handsome profits with their investment, the currency markets remain volatile and spell doom for more than 90% investors. This is because currency trading cannot be done on one’s whims or emotions. You are investing not in a product but the economy of a particular nation when you invest in its currency. You have to learn to analyze the movements or the past trends to be able to make better predictions in the future.

If you are a novice, you are bound to feel overwhelmed by the charts and patterns of currency movements. You can find it literally chaotic and you are unable to take the right decision amidst the upward and downward movements of the currency pairs. This is where Forex indicators come handy. They are tools that are designed to help traders sail through the sea of Forex trading. The tools are similar to the compass and ruler that have been used by sailors to stay away from brutal storms.

You can make use of various Forex indicators to stay safe in Forex trading as you navigate through the chaotic currency movements. In your journey as a Forex trader, your aim is not just to make profits but also to safeguard the money in your trading account. Most of the Forex indicators available in the market or the internet are technical indicators that can […]

Understanding Swing Trading In Forex

Swing trading is a favorite style of trading for many Forex traders, especially among the beginners. It is a cycle of trading that lies somewhere between day trading and trend trading. In contrast to a day trader who holds the position for a few hours but never overnight, a swing trader holds the position for a few days, normally between 1 and 4 Days, while a trend trader would be one who holds a position for a relatively longer period.

Choose the Currency Pair Carefully

To be successful in swing trading, an investor has to pick up a currency pair that moves a lot relative to each other. It has to be a popular currency pair too so as to ensure liquidity in trading.  The essence of swing trading is studying the financial charts and determining how currencies swing between the support levels and the resistance levels. The trader anticipates these swings and then rides on a swing for a few days as he/she knows it will last for a few days and will continue to move in particular direction. The trader knows that the currency will start on a swing in the reverse direction after it reaches its support or resistance level and then makes a profit with the swing in the opposite direction.  So the currency trader looks for swings and trades both long and short the currency pair.  To do this, you should choose charts like the weekly chart so as to ride on a slightly longer trading period (as compared to day trading).

Do Not Attempt Swing Trading When the Market Is Volatile

However, swing trading works favorably only during times when the currency rates are stable and not during the time when the […]

Understanding Forex Systems Risk Diversification

Trading in the Forex markets has become very popular all over the world because of its simplicity and convenience. The turnover in the Forex markets is increasing daily and it has now crossed the $ 5 trillion mark thus making the Forex market bigger than the stock and bullion markets. To make money in the Forex markets the investors need to focus upon a few pairs of currencies and their movements to book profits. Despite these facts, a large majority of the traders tend to lose money in the currency markets. In fact, people trading with the help of automated systems keep losing money despite having 60% winning chances. This is a result of poor money management as well as very little risk diversification. If you are investing in money markets, you should understand that you are there to make money, not to lose it.

You can make use of different strategies to diversify your portfolio and reduce your risk of losing money. This is where diversification comes handy. As a Forex trader you should not put all your eggs in a single basket. This is because if one strategy fails, you will not lose all your money. Currency market can be volatile at times and you cannot trade on the basis of your whims or emotions as one or two mistakes could lead to massive losses for you. You must diversify your portfolio in much the same manner that a person planning for his retirement does by investing in different financial products. This is one way of offsetting losses suffered in one particular scheme.

Randomness is a part of currency trading but you should prepare for any reverses if you employ multiple trading systems. This […]

Three Forex Day Trading Strategies

Day trading is a term that is reserved for Forex traders who book their profits and complete the transaction within the day. This is a strategy that is similar to investors buying stocks and selling them by the end of the day and not holding on to them for longer duration’s. Often there is little movement in the values of currencies in normal circumstances. However, because of the high leverage provided by the brokers, intra-day trading can be profitable even with little movements of currencies. Despite this fact, many of the investors who choose day trading are disappointed because of losses they accumulate in their trading account.

There are many different strategies that can be used by an investor who is interested in intra-day trading at the Forex markets. Out of these, three common ones that are also easy to understand and implement are described below.

Scalping

This is an intra-day technique that lasts a few minutes where the investor exits from a trade as soon as it turns profitable. This is a strategy that aims to give the investor small profits. With the slightest of movement of the price of a currency, an investor can book a profit and exit from the trade. Skimming allows traders to make small profits of 5-10 pips with every trade but they amount to a significant sum of money by the end of the day. Do make sure that you have a broker with small brokerage commissions otherwise you may lose money using this strategy as the brokerage commissions may exceed the profits made per trade (if your capital amount is small).

Momentum

This is another intra-day trading technique that is good for beginners who want to book their profits every day. […]

The Psychology of Forex Trading

Forex trading has, in the last few years, become a very popular mode of investment as it in some respects may be easier and possibly more profitable than stock markets due to the great volatility of the forex markets when compared to the sideward trending stock markets in the last few years.  Most newbie traders think that it is a cat and mouse game where they have to guess right all the time. Of course Forex trading is all about making profits with the relative movements of currencies in a pair but emotions and feelings play a strong part in this kind of trading with a vast majority of transactions done at the spur of the moment. This is why the psychology of the trader is considered so important in Forex trading.

Forex trading is certainly not what it seems to be to an outsider. This is why the perception of an investor changes drastically after entering into a trade with his own real money. This is because, when a beginner tries his hands on a demo account, he/she is casual in his approach and it looks like it is very easy to make money. Contrast this to when his/her own money is a stake, the trader then becomes cautious and starts to think a lot if the transaction would be profitable or loss making. It is after the first live trade that the investor becomes fearful and indecisive as he/she does not know when to get out of the particular trade.

The psychology of Forex trading affects the decision making ability of the investor and their judgment. The two emotions that become dominant in such a scenario are greed and fear. Forex trading becomes disastrous […]

How to Make Money Trading Forex

The amount of liquidity on the Forex markets have become larger than even the stock markets of the world today, surpassing $5 trillion a day mark in turnover. But unlike stock markets, trading currencies has only become easy today with the availability of a Forex trading platform and high speed internet. You can trade in currencies 24X7 as the world is divided into many time zones allowing you to make money even at odd hours of the day by choosing what Forex currency pairs you wish to trade. Despite these new developments, more than 90% of investors lose money consistently in Forex markets. Here are some simple ways to maximize your chances of making profits in the Forex markets.

The basic principle behind Forex markets is to speculate in the prices of pairs of currencies. You buy a currency in anticipation of movement of its price in comparison to another currency. When this price changes takes place, you sell the currency to book your profit. It is your anticipation of movement of the price of a currency that allows you to make money. You do not buy a product or service when you trade in the currency market but you place your confidence in the currency of the economy of a country.

It is seen that investors are correct in predicting the movement of a pair of currency more than 50% of the time. Despite this fact, more than 90% of the investors lose money consistently. This is because traders lose big money when they lose while they book small profits when they are right in their trade. This implies that investors should control their emotions and cut their losses early. Cut the trade as soon […]

How to Identify Forex Trends and Make Money from it

Forex trading is all about speculating about the movements of pairs of currencies. However, investors who place their bets based upon emotions or hunch feelings are the ones who lament afterwards. Yes, the prices of a currency relative to another currency are dependent upon many factors and it is hard to predict the movement of a currency. However, if you know how to identify and interpret a trend, you have won half the battle as there is a high chance that prices for the currency pair may move again in the same manner as what happened in the past.  If you can identify a particular trend by following the movements of two currencies relative to each other, you can easily predict what is going to happen and earn a profit through your trades more consistently.

You will know the direction in which the pair of currencies will move if you have correctly identified a trend. If the trend is moving upwards implying the price of one of the currencies is increasing, buying the other one will allow you to book more profits. On the other hand, selling the other currency is the way to go if the currency price is going downwards. There are many different patterns that are made by the movements of the pairs of currencies. Even if it has been an uptrend, there can be a series of peaks and higher valleys giving you a clue as to what is going to happen in the next few days. Similarly, in a downtrend, you will encounter smaller peaks and valleys. In such a situation, it is better to sell off the currency pair after booking a profit.

Your goal as an investor is to […]

How to Control Your Emotions While Trading Currencies

There can be no dispute that Forex trading is increasing in popularity in all parts of the world. The easy manner in which a common man can start investing his money in foreign currencies (over the internet) has made it very popular. You can sit in the comfort of your home or office at any time of the day or night and do Forex trading. This fact has led millions of people to choose this platform as their mode of investment. Forex trading has very high income potential, as one can hope to start trading with as little as $100 and hope to book a profit of $10000. This is due to the fact that currency trading (unlike other forms of trading) allows for high leverage so enjoys high risk and high returns.

Despite the technology surrounding currency trading improving, nearly 95% of the traders lose money consistently and only a handful of investors are actually able to earn profits. This is because of the inability of the investors to have control over their emotions. Known as the psychology of trading, the emotions of fear, hope and greed dictate the decision making power of most investors and results in disaster if the investor is unable to control his emotions when trading. Only the smart and mature  traders, who are able to control their emotions, are able to make money from currency markets.

If fear is your dominant emotion, you will be inclined to close a trade even before you reach the stop loss mark. This implies that you are never able to earn more potential upside to a trade. This is because you are scared of losing and remain fearful all the time. Hopeful investors continue to […]