Forex Trading is mainly about trading in currencies. It is buying one currency at a lower exchange rate and sell it away at a higher exchange rate. In some cases, you can also trade with the higher currency to earn the difference. In this article you will learn Forex Trading as an introduction.

Forex trading, also known as FX, is considered the largest and perhaps the most liquid financial market in the world. There are many small-time investors and even big institutions are involved in FX. One report says that at least USD$4 trillion worth were traded in 2007 alone.

If you are wondering how it works, it’s very simple. It’s just like how we go to money changers to exchange different currencies. If there is one money changer that offers good rates, I can exchange for foreign dollars are lower cost. Then, I can go to another money changer that gives bad rates to local dollars. That’s where I exchange the foreign dollars to local dollars. The above scenario is very simplified, layman’s method of making money.

There are many reasons why Forex Trading is so popular among smaller investors. The following are some of the reasons.

- It has high leverage.
Forex has high leverage which allows an investor to maximize their returns.

- It has very limited liability.
If the margin requirements are dropping the open positions will be closed.

- Money invested in FX is extremely liquid.
You can enter, exit or withdraw profits at any time!

- Forex Trading is a trading that is 24 hours
Forex trades 24 hours a day so you can buy and sell anytime.

Before entering the market, many investors would want to find out more about FX by reading up some books. This is advisable so that you are more knowledgable and will also be able to react properly when there are fluctuations in the currencies.

There are investors who would hire a Forex Trading Coach to maximize their earnings in a short time, avoiding all the pitfalls plus minimizing trial & errors. This is also a good route to take up as investors are guided properly. Of course, there is an amount to pay for having a Forex Trading Coach. It is advisable to look for a qualified coach, or, attend their free seminars. If you are comfortable with the presentation, join the coaching program.

In conclusion, Forex Trading is a very good form of investment for small investors. There are reports of people who make $1000+ in just one week. This is not a pipe dream but achievable. All you need are proper guidance.

There is an old saying that a picture paints a thousand words.

My turn on this phrase is that a good video is often better than a book!!

Hopefully you are probably aware that it’s been scientifically proven in various prestigious studies (which I won’t go into detail here..) that a visual presentation can often be up to 3 times more effective than the written version.

And video is a very powerful presentation method, especially for forex trading…

But what about the myraid of forex trading videos out there - to be honest most are junk. So I’ve spent some time checking over a few of them so as to keep you informed with good content and not waste your valuable time!

Anyway, what I thought I would do was to direct you to a really good video that I’ve sourced for you…

This is an introduction to a charting style known as Candlestick, actually it’s more properly known as the Japanese Candelstick style.

I’ve always liked this chart type it because it’s so informative of the way the market has behaved and I’ve found that it is an incredibly good indicator of major turning points.

If you’re reading this post tell me what you think- leave a comment…

Here’s to your profitable success ……

First you need to understand what forex trading is. Forex is short for foreign exchange. Forex trading is the simultaneous exchange of one countries currency for another countries currency. By doing so at the right times, you can gain a profit. A forex trading education can teach you how to do this.

The first part of a forex trading education is to learn the market background. The foreign exchange market is always changing. With forex trading education, you will learn how to monitor these changes to be beneficial for you.

The next part of your forex trading education is to learn about risk control and risk management. You learn to control yourself and not over invest at the thrill of the chance of making money. You will also learn how to cut your losses (how to exit losing trades before your losses exceed your limits). You will always lose money when you first begin forex trading. This part of your forex trading education is absolutely crucial to whether you will make it big or end up in a hole.

Another important part of your forex trading education is to learn how to open and manage your forex trading account. Your forex trading education should first have you practice with a demo account. This way you learn the ropes by practicing forex trades with play money. There is no risk involved, but it is just as realistic as the real thing. Your forex trading education should also let you know when you are ready for the real thing. You should then, and only then, open up a live forex trading account.

There are many ways to get a forex trading education. The best place to get a forex trading education is online. There are many free websites available that let you open free demo accounts to practice your forex trading. There are also free seminars that are avaiable at random times. The best thing to do is to get some advice from someone who is a current forex trader. They can give you some down to earth insight on the subject of forex trading.

Now that you know a little bit about forex trading it is time for you to go out and get a good forex trading education. Don’t rush into it and take your time. There is a lot of money involved with forex trading. It is best not to get ahead of yourself.

Jay Moncliff is the founder of http://www.forexreviews.info a blog focusing on the forex, resources and articles. This site provides detailed information on forex. For more info visit his site at:forex

Hi Guys

It’s hard to believe how quickly the weeks go in.

Welcome back!

As promised in the last Newsletter I am going to define some of the most common terms and discuss their importance for you.

I will split them up into basic forex terms and then I will discuss two types of trading which are commonly employed by most traders.

‘Pips’

These are the units that comprise a forex currency quote. For example the USD/CHF (dollar/swiss) is trading at 1.0250. This means that you would get 1.0250 Swiss Francs for every $1. Now say that the price is now 1.0265. This means that there is a difference of 15. This number is the pips i.e. ‘15 pips’.

What you may not know is that the pips per currency differ in how they are applied. For example JPY (Japanese Yen) are quoted against the USD as follows 103.75 or 103.60 - the pips in this case are to 2 decimal places whereas the CHF and most other major currencies are quoted to the 3rd and 4th decimal place.

A good place to see these ‘pips’ in action is your local bureau de change or your banks quoted currency rates for travellers’ checks etc.

‘Pairs’

Forex is quoted in pairs i.e. GBP/USD, that is pounds (often referred to as Cable or Stirling) against USD, that is £1 to $1 i.e. how many dollars to the pound. This is a bit of an anomaly which is historical but just bear with it for the present. You are probably more familiar with USD/JPY, USD/CHF, USD/CAD - now do you get the picture?

You can’t buy a currency unless you sell the one its ‘paired’ with!

‘Position’

A position is a purchase/sale of a currency pair at any one time that is currently open and is the net amount exposed to the market. This position would be ‘long’ dollars (bought) against ’short’ currency (sold), or vice versa.

‘Quotes’

A currency will always be quoted as a buy/sell price i.e. 1.0250/65. The price that is offered by the bank/broker can be a little confusing at first but remember it this way. The left price is the bank buys USD off the customer and the right side is to sell USD to the customer. So lets say that you deal i.e. buy and sell at these two prices - what is the net effect on your bank balance?

OK, lets assume you have $100,000 and there are no broker charges.

You sell $100,000 at 1.0250 (remember, that’s the price the bank buys the USD at) you get CHF 102,500

i.e. -$100,000 +CHF 102,500

You then sell CHF 102,500 i.e. buy back USD from the bank and they are buying at the rate 1.0265, this means that you have to ‘pay’ CHF 102,650 to get the $100,000 back or receive 102,500/102,650 x $100,000 = $99,854.

i.e.

-$100,000 +CHF 102,500
+$100,000 -CHF 102,650
_________ ______________
0 -CHF 150

This difference in this case a loss is CHF150 or $146 and represents the spread of the bank/broker - the cost to you or me. Spreads are usually no more than 5 pips but it is always best to get the buy/sell quote so as you can see the spread - remember the narrower the spread the cheaper the deal.

You should practice with rates and familiarize yourself with this concept - it is a vital first step in understanding forex. It is also not unusual for your broker to give you a buy price or a sell price - I have found that it’s best get both sides!

‘The majors’

This is shorthand for the major currencies traded. There are 7 of them, these are the USD ($), GBP (£), JPY, AUD (Australian dollar), CAD (Canadian dollar), CHF (Swiss franc) and the EUR (Euro). These 7 currencies make up the bulk of the $3 trillion dollars traded daily.

Now onto Trading Styles

Day Trading

Day trading is pretty self explanatory. This involves the trading of currencies daily and can involve the taking of one position or many positions depending on market conditions.

Rarely are trades held for longer than a day as there is an added cost to rolling over a position to the following day - I will go into this in more detail in a future Newsletter. This is usually the ’safer’ of the two types that I will be discussing today.

Scalping

This is an opportunistic form of trading and positions may be taken for a few minutes and then squared (liquidated). This type of trading usually requires a specialist broker as many brokers frown upon scalpers and terminate their accounts.

I hope you have found some of these forex definitions useful

Next week we will look in more detail at charts and chart patterns!

See You then!!