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Forex this, forex that…

What with forex systems, methods, ebooks, forex alert systems et al it seems that everyone and their aunt is involved in the forex market one way or another.

The vendors of these various products make it all sound so easy and they seduce their prospective clients in to really believing this. But…

Please, please at least learn the basics of the forex market before buying any of these products and for heaven’s sake don’t open any accounts until you at least acquaint yourself with some basic concepts.

For example:

1) In the forex market, transactions are always handled in pairs.

You buy one currency and sell another one. The idea is to make a trade when you believe the currency you’re buying is going to go up in value compared to the one you’re selling. Then, if it turns out your prediction was correct, you do another trade in the reverse direction — selling the currency you originally bought and buying the one you sold — in order to reap the profits.

For example, let’s say the market reports this: GBP/EUR 1.2200. That means the cost of buying one British pound is 1.22 euros. If you believed that course was going to change, and the euro was going to become more valuable than the pound, you might sell 100,000 pounds, buy 100,000 euros, and wait. Then let’s say a few days later, the exchange rate fluctuates to this: EUR/GBP 1.3100. Sure enough, the euro is now worth 1.31 pounds, a profit of 0.11 per unit

2) Learn to interpret a basic price chart.

Every forex chart will be labeled with a currency pair: EUR/USD, USD/GBP, etc. Remember, all forex trading deals with different countries’ currency in relation to each other. The EUR/USD chart, for example, tells you how the euro and the U.S. dollar compare.

Along the bottom of the chart is the timeline — 15 minutes, an hour, a day, a week, or some other period. Going up the right-hand side are incremental amounts. For the EUR/USD chart, the amounts might be 1.2531 at the bottom, going up to 1.2561 at the top. And of course the middle of the chart shows what position the EUR/USD pair held at what time.

The forex chart is useful because it shows in graphic terms how a currency pair is doing. You can see at a glance whether a currency is getting stronger or weaker, and you can act accordingly. Choosing the time frame helps you see very minor trends (in a 15-minute period, say) or more long-term ones (over the course of several days, perhaps).

3) Make sure you get yourself a demo account before diving in with both feet.

A forex demo shows you how it works before you jump into it for real

Before airplane pilots actually fly on their own, they usually practice in simulators that re-create what flying will be like without any actual risk. Since currency trading is as dangerous financially as flying is physically, it makes sense that there would be a forex demo available, too.

A forex demo is a smart way for a new investor to start. Reading books and taking online courses can teach you the basics, but the best way to learn anything is to get some hands-on experience. However, with forex, hands-on experience could mean losing your shirt. So a demo gives you real-world training with no actual money being involved.

Usually, the demonstration comes courtesy of a brokerage or other financial Web site that has an interest in currying your favor. The plan is that once you’ve tested your skills in the demo, you’ll get into the real thing and take advantage of the paid services the demo provider has to offer — forex signals, managed accounts, automated trading, etc. The demo is like a free sample, offered in the hopes that you’ll enjoy it so much that you buy something, too.

For that reason, be should be highly suspicious of any Web site that wants to charge for a demo. Considering there are literally dozens of sites that offer free demonstrations, there is absolutely no reason that you should pay for it.

Diana is an experienced forex trader and has a very helpful blog that she invites everybody to check out. Soon there will be daily videos and a completely free Forex forecasting service - you’ll love it!

http://Forex-A1.blogspot.com

When trading forex, there are several order types that the retail trader can place in the market place to protect themselves from adverse market conditions and to capitalize on opportunities that the market often provide. We will start with the basic orders that should be available in any trading platform. For beginners, you should keep to the simple types until you get comfortable with your trading platform. Never force yourself to take any trade for the sake of playing with order types.

It can be said that all orders in the market place boils down to Buy or Sell orders. Remember that when trading currency pairs you are selling one currency and simultaneously buying another. Here are some of the common order types:

(1) Buy Order - Place this order when you anticipate that the market will rise. Often, you have to provide some parameters with your buy order. For instance, do you want to buy the currency pair at the price it is currently trading at, or do you have a particular price in mind? What if your order cannot be filled at the price you are specifying, what price range is comfortable to you? This is called slippage. For example, the GBP/USD is trading at 2.0190 and you anticipate that it will go up higher; you can place a buy order to buy at 2.0190. However, there is no guarantee that you will get in at that price, many brokers will require that you specify a slippage. Continuing with our example, suppose, you are comfortable buying as low as 2.0185 or at most at 2.0195, then you would specify a slippage of 5 pips. This is for your protection. Suppose just before your order becomes active, their is a news event, that makes GBP/USD to drop down 50 pips, are you still willing to buy? - maybe the trend has now changed downwards, your answer may be no. In addition, you must specify the time range when the order will be active. Your buy entry price should be dictated by your trading strategy or system.

(2) Sell Order - Place this order when you anticipate that the market will fall. Sell order have the same kinds of parameters we discussed under Buy Order.

(3) Market Order - You want to get in or out of the market at the current prevailing price. Execution is typically guaranteed, but price is not. A market order ensures that you will get into or out of the market.

(4) Limit Order - An instruction to execute an order if a market moves to a more favorable level (i.e. an instruction to buy if a market goes down to a specified level or to sell if a market goes up to a specified level. Execution is typically not guaranteed. Your broker will use their “best efforts” to get your order filled. This order can be used to enter or exit a position.

(5) Stop Order - An instruction to execute an order if a market moves to a less favorable level (i.e. an instruction to buy if a market goes down to a specified level, or to sell if a market goes up to a specified level. A Stop Order is often placed to put a cap on the potential loss on an existing position; which is why Stop Orders are sometimes called Stop-loss Orders. Never trade without placing a Stop-loss order. A trade you think has all the right ingredient for success may turn into a fat loss right before your eyes. Always protect yourself so that you can be alive to trade another day.

(6) Trailing Stop Order - A trailing stop order is similar to Stop Loss order. The only difference is that you are already in profit and you want to protect your profit. Trailing Stop Order then allows you to configure your stop order to continue to follow the price movement in real-time by specifying the distance in pips you would like your stop to move. For example, you have a long USD/JPY position, which you bought at 111.50 and you set a Stop Order to sell USD/JPY at 111.10, in case USD/JPY starts to fall. This Stop Order will close your position with a 40-pip loss if USD/JPY drops to 111.10. However, suppose USD/JPY moved up to
111.90. You can move your Stop Order to sell at 111.70 which will luck in a profit of 20 pips for you in case USD/JPY were to stop its upward movement.

(7) Good till Canceled Order (GTC) - As mentioned earlier, when you place an Order, you must specify for how long the Order is to be valid. The GTC Order is a very common type of Order; it remains valid, 24 hours a day, until you cancel it, or it is executed. It is the trader’s responsibility, not the dealers, to remember there is an open order.

(8) Day Orders - Day Orders are good until 23:00 CET time.

(9) Order Cancels Order (OCO) - Also known as One Cancels Other. After entering the market, a limit order to protect profits, and a stop-loss order to limit losses can be placed. When either the limit or the stop order is executed, it will cancel the other order automatically. For example, you sold EUR/USD at 1.2290, looking for a short-term move to 1.2260. However you decide that if EUR/USD moves above 1.2310 you want to cut your loss, therefore you put on a Limit Order to buy EUR/USD at 1.2260, and a Stop Order to buy EUR/USD at 1.2310 on an OCO basis. This order will close your position with a 30-pip profit if Limit Order is reached first or with a 20-pip loss if Stop Order is reached first. Once one of the orders is executed, the second order is automatically cancelled.

There are other types of Orders available to traders. However, keeping your trading simple is perhaps one of the best secrets of success in forex trading. Making money is what matters, not how complex your order structure is. A rule of thumb is that if you do not understand what the order you are placing really mean, do not place it. It can hurt you really badly.

Professor Sunmonu is a Professor Of Mathematics at York College. His forex trading blog can be found at http://www.FrxBank.com

A bar chart or candlestick chart shows a tremendous amount of information. It is a worthy study in and of itself. First of all, let us understand that an Open High Low Close bar chart bar contains exactly the same information as a Japanese style candlestick chart. Charts that limit or eliminate any portion of these 4 elements are not included in this discussion, and while they have their place, they are mostly useful as filters based upon the input of the OHLC bar or candlestick bar. For the sake of this article then, we will simply refer to these as a bar.

The bar we speak of here holds a lot of information. Of course there is price. It is the foundational element from which all other information is derived. I will attempt to deal with the found elements in their logical developmental sequence.

The first element is time. There are 2 main types of time reflected in bar charts: legitimate time, and arbitrary time. (And yes, I realize that time is not derived from price, but I digress) I label the time elements as legitimate to be those which have some external influence, such as the rotation of the planet. In other words, a day bar is a legitimate time framed bar, because the world sleeps every night… for the most part anyway. The markets reflect this action, and it has at very least strong correlation and at most, solid proof. You get my point, right?

Another type of legitimate time is quarterly, when yet again external factors affect price.

And we also have arbitrary time which are time frames like 5 minutes, 2 days, and the type of time frame that individual traders feel comfortable with, from which they feel they can see usable trends, patterns, etc. that result in winning trades. The fact is, these time frames are based upon conjecture mainly, and any patterns that show are arguably the result of intuitively, or accidentally, hitting upon a time frame that resonates with the natural volatility or trending inherent in the chosen market.

Time is important for this reason. The resonant frequency of the chosen market reflects information that gives patterns and trends for winning trades. If you are seeing gaps up or down, many traders consider that to be a signal in and of itself. But consider the fact that this time frame, being arbitrary, may miss information and before making a trade, at least give a few longer time frames a chance to reveal other potential patterns that may be hidden in that shorter time frame. That is the first lesson of the bar.

The next lesson is based upon the 4 elements of the bar itself. If the Open and the Low are equal or close, and the Close and the High are equal or close, then you have simple analysis. Your TREND is up. The range between the Low and High represent VOLATILITY. And you can invert these values and easily see a downward trend and the relative volatility. This may sound like a “so what” scenario, but it isn’t. If you are an Elliott Wave enthusiast, the longest bars are likely to show up in a 3rd wave trending, or a sharp recovery wave. If the wave is short, your MOMENTUM is limited, and infers at least potentially, a weak VOLUME.

The tricky analysis comes when the trend is mixed. Open in the center of the bar reveals a much weaker trend, and you must decide what that is based upon how high or how low that is. Is it an Elliott wave of lesser magnitude? Is it a weakening of a trend? Is it a reversal? There are volumes written about many possible variations based upon the Japanese candlestick style charts, and while I don’t subscribe to every nuance of Japanese candlestick analysis, much of it is based upon the principles reflected here.

How far did the price retrace in that time frame? What is the length of the High to Low and the relative volatility of this bar. In my next article, I will deal in more detail with the situations where the trends are less clear and the Open and Close are not as easily analyzed in reference to the bar as a whole. Stay tuned.

Steven Cook is a private trader who has studied with the best traders in the business. His qualifications are his results. His motto is “A good life is the best revenge.” He is an American living in Thailand. He endorses Angel Bigol as an excellent forex trader and encourages you to open an account with Angel to enhance your trading experience. You can accomplish this at http://www.currencyforexblog.com

According to Comrade Napoleon, a chief character of “Animal Farm,” a famous Orwell satire, “all animals are equal, but some animals are more equal than other.”

This apt observation of Comrade Napoleon can be applied to the world of trading systems, including emini futures trading systems that are of our main interest here, although in a somewhat different form. Namely, it seems safe to say that “all trading systems are unequal, but some of them are more unequal than other.”

Translated, this means that trading systems are very different when it comes to their characteristics.

The less “unequal” of them, of better, more desirable properties, such as greater profitability, lower drawdowns, a better looking equity curve, tend to consist of more than one strategy. They are composite in nature and thus more complex than the systems that are more “unequal,” meaning of less desirable properties than those listed above. The systems in the latter category tend to be simple.

While the simple trading systems are easy to use from a purely operational point of view, they can be quite hard to handle mentally for their equity lines often are peppered with deep or, at the very best, protracted drawdowns. And nothing is more unpleasant, if not downright painful, in the life of a trader than a prolonged ever deepening drawdown that, as if to perfectly comply with notorious Murphy’s laws, ends right after we abandoned the system for good.

Can thus simple systems be of any value to the trader? The answer is: yes, they can if augmented with intelligently designed filters, that is, the conditions that select only the circumstances which are most likely to lead to a profitable trading outcome.

For the sake of example, let us consider some simple emini daytrading system. The most popular of such systems are breakout systems. For instance, the breakout of the first hour range of the daily trading session that starts at 9:30 A.M. EST is a good case in point. This is a simple system and not particularly appealing for it can lead to considerable drawdowns and its profitability, after slippage and commissions are taken into account, is marginal. Yet with appropriate filters things can be much improved.

A similar basic system of the same breakout variety has recently been turned by this author into a nicely profitable low drawdown system with extra strategies to boot generated by the indicators that were used to design its filters. Moreover, the entry of this system can be used as the entry for another, more complex, system once the conditions for the latter entry are partially met. This allows us to make the more complex system even more profitable, which is yet another way how the right use of simple systems can add value to our trading.

For more information about the high quality emini trading systems including the simplest emini system ever that can deliver quite a punch during volatile years such as 2008, George II, please see http://www.eminimethods.com/systems.html

Waldemar Puszkarz, Ph.D., is a web veteran with 15 years of web surfing under his belt. By training, he is a theoretical physicist, but his interests are much broader than science and include trading financial markets, sports betting, poker, and researching online business opportunities. He is also an avid book reader and sports afficionado. Currently he is making his living mostly as a day trader. He has been in the trading trenches for almost a decade during which he has traded a variety of financial instruments. He is the owner and webmaster of Eminimethods.com (http://www.eminimethods.com) which provides free common sense trading education and simple trading systems for e-mini and stock markets as well as reviews of honest online business opportunities in Meet HOBO section of his site.

The forex trading tip enclosed is all about increasing your profitability and there logical, easy to apply and work. So here are your 3 trading tips, to increase the profitability of your forex trading strategy.

1. Learn The 80 - 20 Rule

It’s a fact that in many areas of business work etc that 80% of your profits come from 20% of your efforts and it’s also true in forex trading.

Most traders over trade and trade for the sake of trading, they think that if their not trading they will miss a move or the more they trade the better and this is not true. What you need to do is:

Cut you’re trading dramatically and only focus on the high odds set ups. I know traders who trade less than once a month but earn triple digit profits. They know trading frequency has nothing to do with forex trading success and you should learn this to.

2. Don’t Diversify

Diversification is seen as a way to cut risk - that’s only true if you diversify into good high odds trades, but most traders think they should trade a spread of positions, take marginal trades but all that does is dilute profit potential.

Most forex trader’s accounts are so small they simply can’t diversify and have meaningful gains. No you need to concentrate on high odds trades and then use the next tip to milk them for all their worth.

3. Load up The Risk Reward

How many times do you read that you should only risk 2% per trade well for a small forex account of say $5,000 you wont make much doing that that’s $100!

No you need to risk up to 20% on the high odds set ups - if you don’t take a risk, you won’t make big gains, its as simple as that.

You are not being rash, you are taking a calculated risk based upon the odds and like a good card player, you are going to load up your trade.

The tips above are simple and mean that you have to see forex trading for what it is a high risk - high return odds based game, where you need to be patient, to wait for the right trades and when you see them - hit them hard.

Think about the above simple forex tips and you will see they make total sense.

They will help you enhance your forex trading strategy and enjoy forex trading success.

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According to Comrade Napoleon, a chief character of “Animal Farm,” a famous Orwell satire, “all animals are equal, but some animals are more equal than other.”

This apt observation of Comrade Napoleon can be applied to the world of trading systems, including emini futures trading systems that are of our main interest here, although in a somewhat different form. Namely, it seems safe to say that “all trading systems are unequal, but some of them are more unequal than other.”

Translated, this means that trading systems are very different when it comes to their characteristics.

The less “unequal” of them, of better, more desirable properties, such as greater profitability, lower drawdowns, a better looking equity curve, tend to consist of more than one strategy. They are composite in nature and thus more complex than the systems that are more “unequal,” meaning of less desirable properties than those listed above. The systems in the latter category tend to be simple.

While the simple trading systems are easy to use from a purely operational point of view, they can be quite hard to handle mentally for their equity lines often are peppered with deep or, at the very best, protracted drawdowns. And nothing is more unpleasant, if not downright painful, in the life of a trader than a prolonged ever deepening drawdown that, as if to perfectly comply with notorious Murphy’s laws, ends right after we abandoned the system for good.

Can thus simple systems be of any value to the trader? The answer is: yes, they can if augmented with intelligently designed filters, that is, the conditions that select only the circumstances which are most likely to lead to a profitable trading outcome.

For the sake of example, let us consider some simple emini daytrading system. The most popular of such systems are breakout systems. For instance, the breakout of the first hour range of the daily trading session that starts at 9:30 A.M. EST is a good case in point. This is a simple system and not particularly appealing for it can lead to considerable drawdowns and its profitability, after slippage and commissions are taken into account, is marginal. Yet with appropriate filters things can be much improved.

A similar basic system of the same breakout variety has recently been turned by this author into a nicely profitable low drawdown system with extra strategies to boot generated by the indicators that were used to design its filters. Moreover, the entry of this system can be used as the entry for another, more complex, system once the conditions for the latter entry are partially met. This allows us to make the more complex system even more profitable, which is yet another way how the right use of simple systems can add value to our trading.

For more information about the high quality emini trading systems including the simplest emini system ever that can deliver quite a punch during volatile years such as 2008, George II, please see http://www.eminimethods.com/systems.html

Waldemar Puszkarz, Ph.D., is a web veteran with 15 years of web surfing under his belt. By training, he is a theoretical physicist, but his interests are much broader than science and include trading financial markets, sports betting, poker, and researching online business opportunities. He is also an avid book reader and sports afficionado. Currently he is making his living mostly as a day trader. He has been in the trading trenches for almost a decade during which he has traded a variety of financial instruments. He is the owner and webmaster of Eminimethods.com (http://www.eminimethods.com) which provides free common sense trading education and simple trading systems for e-mini and stock markets as well as reviews of honest online business opportunities in Meet HOBO section of his site.