All You Need To Know To Trade Forex Profitably

Dear reader, in resent times, there has been misconceptions about the Forex market and that's why I'm here to clear the air.

What is traded on the Forex market? The answer is money.Forex trading is where the currency of one nation is traded for that of another.Therefore, Forex trading is always traded in pairs and the most commonly traded currency pairs are traded against the US Dollar (USD).

They are called "the majors".The major currency pairs are the Euro against the Dollar (EUR/USD); the British Pound against the Dollar (GBP/USD); the Dollar against the Japanese Yen (USD/JPY); and the Dollar against the Swiss Frank (USD/CHF).The notable commodity currency pairs traded are the Canadian Dollar (USD/CAD) and the Australian Dollar (AUD/USD).

Because there is no central exchange for the Forex market, these pairs and their crosses are traded over the telephone and online through a global network of banks, multinational corporations, importers and exporters, broker and currency traders.But if you really want to make it big in the Forex market, I will strongly advise that as a "beginner" in the business kindly get acquainted with one or two major currency pairs.Study them very well and make sure you understand their volatility period.

And to further simplify Forex trading, you could easily limit your trading to the two most liquid and widely traded pairs, the EUR/USD and the GBP/USD.This really starts to reduce demands on your time for trading activities without giving up good profit potential.

Traditionally, currency trading has been a 'professionals only market, available exclusively to banks and large institutions,however,because of the inventions of the new E-economy,online Forex trading firms are now able to offer trading accounts to 'retail' traders like you and I.Now almost anyone with a computer and an Internet connection can trade currencies just like the world's largest banks do.

ATTRIBUTES AND BENEFITS OF FOREX TRADING

In addition to the Forex attributes explained in the "Introduction to Forex trading" the Forex markets are indeed different from the stock markets in that their prices behavior is deferent with usually more abrupt price swings.This requires deferent trading methods than those typically used for stock in order to take full advantage of the profit potential that Forex has to offer while at the same time designing the right strategy to minimize risk.On the other hand, they are alike in that both Forex and stocks are markets that develop repeatable price behavior that present profit opportunities for those traders with good trading methods, sound money management principles and disciplined trading.

There are many benefits and advantages to trading Forex.Here are just few reasons why so many people are choosing this market as a business opportunity.

(1)LEVERAGE
In Forex trading, a small margin deposit can control a much larger total contract value.Leverage gives the trader the ability to make extraordinary profits and at the same time keep capital risk to a minimum.Some Forex firms offer 200 to 1 leverage, which means that a $50 dollar margin deposit would enable a trader to buy or sell $10,000 worth of currencies.Similarly, with $500 dollars, one could trade with $100,000 dollars and so on.Moreover, one must be careful when choosing leverage because due to experience and research, it is very clear that leverage is misunderstood and this misunderstanding is a root cause of Forex trading losses and the futile attempts to overcome these losses without addressing the root cause.

Because of the high leverage that Forex offers, Forex positions require a much smaller account size than stock trading similar sized positions as Forex margin requirements are much smaller than stock margin requirements.And so the reward can be much greater with Forex, but at the same time,the risk is much greater.But this can be dealt with effectively with good trading tactics and good money management rules that allow for maximizing profit potential and minimizing risk.

Now, let me explain in a lay man way that the deposit (money) you have in your Forex account with a broker is referred to as collateral (margin) for getting a loan (leverage) from the broker to trade any required amount of currencies.

(2)LIQUIDITY
Because the Forex market is so large, it is also extremely liquid.This means that with a click of a mouse you can instantaneously buy and sell at will.You are never 'stuck' in a trade.You can even set the online trading platform to automatically close your position at your desired profit level (limit order),and or close a trade if a trade is going against you (stop order).

(3)PROFIT IN BOTH 'RISING AND 'FALLING' MARKETS
On the stock markets, you can only make money if shares are rising, but in economic recession and falling 'bear' markets, there is little chance of making big money.Forex is different.One of the most exciting advantages of FX trading is the ability to generate profits whether a currency pair is 'up/bullish' or 'down/bearish'.A trader can profit by taking a 'long' position, (buying the currency pair at one price and selling it later at a higher price), or a 'short' position, (selling the currency pair and buying it back at a lower price).For example,if you think the US dollar will increase in value vs the Japanese Yen then you will buy Dollars and sell Yen (go long).If you think the Yen will increase in value against the Dollar then you will sell Dollars and buy Yen (go short).As long as the trader picks the right direction, a potential for profit always exists.

(4)24 HRS TRADING
From Sunday evening to Friday Afternoon EST the Forex market never sleeps.This is very desirable for those who want to trade on a part-time basis, because you can choose when you want to trade - morning, noon or night.

(5)FREE 'DEMO' ACCOUNTS, NEWS, CHARTS AND ANALYSIS
Most Online Forex firms offer free 'Demo' accounts to practice trading, along with breaking Forex news and charting services.These are very valuable resources for traders who would like to hone their trading skills with 'virtual' money before opening a live trading account.I will also want to advise the newbies in the Forex market to at least 'Demo trade' for 2 months uninterruptedly before going live trading because this will really help build up strong emotions in live trading.Also, demo trade with what you will fund your live account with.Take for instance, you wish to fund your live account with $500, then don't demo trade with more than $500.

You must also take the demo trade serious and maintain the account like a real like account.Apply all strategies on demo account before applying it on live account.

(6)'MINI' TRADING
One might think that getting started as a currency trader would cost a lot of money.The fact is it doesn't.Online Forex Firms/Brokers now offer 'mini' trading accounts with a minimum account deposit of only $200-$500 with no commission trading.This makes Forex much more accessible to the average individual, without large, start-up capital.But my personal perspective about the Forex market is that the more more money you have to trade with, the more you will enjoy trading Forex.

(7)BID AND ASK PRICE
Currency is traded in pairs as mentioned above;where one is Base and the other is Counter currency.The currencies have a two-sided quote, consisting "Bid" and "Ask" e.g. 2.0440/2.0443.The bid is always lower than the ask price.The bid is the price at which the dealer is willing to buy the base currency in exchange for the quoted currency.This means the Bid is the price at which you(as the trader)will sell i.e 2.0440.The Ask is the price at which the dealer will sell the base currency in exchange for the quoted currency.This means the Ask is the price at which you will buy.i.e 2.0443.

(8)PIPS..
Is the Percentage Interest Point and the last decimal point in a quoted price of any currency.The most common increment of currencies is known as the "pip".It is the smallest value change in a currency pair exchange rate.Example:the movement of GBP/USD of 1.7896 to 1.7897 signifies a pip movement.A positive or negative pip value is how you calculate your profit or loss.

HOW TO GET STARTED
After demo trading for a minimum of 2 months, what you need to put in place before trading Forex on a live account are: a PC, fast Internet connection, a Domiciliary Account with any bank.Fund your account based on your financial capacity.

Happy Trading!!!