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1-Introduction to the Forex

Welcome to forex trading. I will start teaching you from the beginning and keep it simple.

The most popular currencies along with their symbols are shown below:

Symbol Country Currency Nickname
USD United States Dollar Buck
EUR Euro members Euro Fiber
JPY Japan Yen Yen
GBP Great Britain Pound Cable
CHF Switzerland Franc Swissy
CAD Canada Dollar Loonie
AUD Australia Dollar Aussie
NZD New Zealand Dollar Kiwi

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The Foreign Currency Exchange (or Forex, Spot market, or Cash Market) is a group of over 4500 world banks that are connected electronically.

It is different from the Stock Market because there is no centralized trading place. The Stock market trades $100 billion daily, the US Treasury Bond deals with $300 billion daily, but the Forex deals with $3 TRILLION daily! Because of this, it is much easier to get in and out of a trade.

The Forex open Sunday evening at 7pm EDT and closes Friday evening at 4PM EDT.

There are 3 sessions of trading:

  • Asia 7 PM EDT to 6 AM EDT
  • Europe 2 AM EDT to 11 AM EDT
  • United States 8 AM EDT to 5 PM EDT

To trade the Forex, you need to open an account with a Forex broker, fund the account, then place a trade. This is easy to do if you have Internet access. You will also need charting software so that you can analyze the market.

90% of traders fail, and only 10% of traders succeed. The reason why so many fail, is because they fail to get a good education. They fail to secure a good mentor. I have found some excellent mentors at Market Traders Institute.

They have kept things simple and logical. They have always been available for me to ask questions. When I set up a trade, I can go into a live chat, and ask their opinion. They do live analysis of the market 5 times a day to help me see where the currencies are going and how I should  be trading. They have always been patient with me.

I also have access to other traders that are learning in the MTI chatroom. I have made many friends in the chatroom and we help each other.

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Ponder GamesThis collection of multiple-choice questions brings hours of fun!

Just how extensive is your knowledge of the Foreign Currency Exchange (Forex) Vocabulary?

Are you willing to jump in and learn them as you go?

Are you familiar with:

  • Up trend
  • Pip
  • Support
  • Resistance
  • Leverage

Features of this game:

  • Multiple choice game
  • Keeps track of your score
  • Keeps track of your time
  • Shows your highest score
  • Shows your fastest time
  • Rewards you when you achieve 100%

Are you ready?… Then let’s begin.

Available at www.Amazon.com!

 

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Session

EUR/USD

GBP/USD

USD/CHF

USD/JPY

Tokyo

66

79

100

66

London

80

99

121

74

United States

67

78

101

60

You can see that the London session returns the most pips.

Day of the Week

EUR/USD

GBP/USD

USD/CHF

USD/JPY

Sunday

24

31

36

25

Monday

92

110

141

95

Tuesday

102

128

162

104

Wednesday

101

123

158

106

Thursday

83

98

121

77

Friday

80

96

117

72

These are the worse times to trade:

Fridays: Fridays are very unpredictable. This is a good day to trade if you want to lose all the profit you made during the rest of the week.

Sundays: There is very little movement on these days. Trade this day if you want to start off your week with NEGATIVE pips.

Holidays: Banks are closed which means very little volume for whatever country is having the holiday. Holidays are great to trade when you would rather lose your money than take a day off and enjoy the other finer things in life.

News Reports: No one really knows where the price will go when a news report comes out. You could lose a fortune trading during news releases if you don’t know what you’re doing. Price acts like a drunken monkey during these times and become unpredictable.

If you can’t trade the best times, try these suggestions:

  • Move to a better time zone. Move to London preferably. Sure you’d have to pack up and start a whole new life, but hey, at least you can trade right?
  • Trade at work (be sure you have some “real” work ready just in case your boss sneaks up behind you and asks what you’re working on). I also recommed you master the ALT-TAB key combination (if you use Windows) so you can quickly switch windows at a moment’s notice. This option can be the ultimate perk because your employer is basically paying you while you trade forex. Gettin’ paid while gettin’ paid if you know what I’m sayin’.
  • Become a swing or position trader. As a swing/position trader, you won’t have to constantly monitor the markets and you can check or look at them when you get off work.
  • Trade a different session even if it’s not the busiest one. If you can’t trade the London or U.S. session, then trade the Tokyo session.  However, you should be disciplined and trade it every day.  You will start to learn how it moves and can develop strategies that are specific to that session.
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    It is important to know the Daily Trading Range for each currency. Although this is just an average range for each currency, when the currency reaches this range it is likely to be exhausted and the trend will not continue.
    Continue reading

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    Long-term Traders will usually refer to daily and weekly charts. The weekly charts will establish the longer term perspective and assist in placing entries in the shorter term daily. Trades usually from a few weeks to many months, sometimes years.

    Advantages:

    • Don’t have to watch markets intraday
    • Fewer transactions means less paying of spreads

    Disadvantages:

    • Large swings which require large stops
    • Usually 1 or 2 good trades a year so patience is required
    • Bigger account needed to ride longer term swings
    • Frequent losing months

    Short-Term Traders use hourly time frames and hold trades for several hours to a week.

    Advantages:

    • More opportunities for trades
    • Less chance of losing months
    • Less reliance on one or two trades a year to make money

    Disadvantages

    • Transaction costs will be higher (more spreads to pay)
    • Overnight risk becomes a factor

    Intraday Traders  use minute charts such as 1-minute or 5-minute. Trades are held intraday and exited by market close.

    Advantages:

    • Lots of trading opportunities
    • Less chance of losing months
    • No overnight risk

    Disadvantages:

    • Transaction costs will be much higher (more spreads to pay)
    • Mentally more difficult due to frequency of trading
    • Profits are limited by needing to exit at the end of the day.

    Shorter time frames allows you to make better use of margin and have tighter stop losses. Larger time frames require a bigger account so you can handle the market swings without facing a margin call.

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    Would you like a tool to help you calculate the number of lots you should risk?

    The website, fxstreet.com, has some pretty good ones. Check this out.

    http://www.fxstreet.com/forex-tools/money-management-calculator/

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    Support and Resistance are not lines, but areas or zones. Mapping them is not a exact science, it is an art. Let me explain.

    Support and Resistance Zones

    When you find support and resistance, you look for areas that it touches several times. The more times it touches, the stronger the support or resistance.

    Support and Resistance Areas

    The red line shows one Support/Resistance area. This area was testing many times.

    Another way of showing Support and Resistance areas is to use Ichimoku clouds.

    Ichimoku Cloud - Shows Support and Resistance

    The dotted area is the cloud of support and resistance. After the candles broke through the cloud, they dropped rather nicely.

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    What is a pip?

    The most common increment of currencies is the Pip. If the EUR/USD moves from 1.2250 to 1.2251, that is ONE PIP. If the USD/JPY moves from 89.52 to 89.53 that is ONE PIP.

    The JPY currency pairs (like USD/JPY or EUR/JPY, etc) are shown with 2 numbers to the right of the decimal point, all other currencies are shown with 4 numbers to the right of the decimal point.

    Some brokers will show 3 or 5 digits to the right of the decimal position.  For example, the broker could show EUR/USD moving from 1.22500 to 1.22510, and it still is just ONE PIP.

    What is a lot?

    1 standard lot is $10 per pip. 1 mini lot is $1 per pip. $ micro lot is $.10 per pip.

    What is the spread?

    The broker lists a bid and an ask price for a currency. The difference between the bid and ask price is called the spread. This is how the broker makes his money, from the spread.

     When you buy a currency, you pay the ask price. For example, the EURUSD  bid price might be 1.3627 and the ask price might be 1.3630. Notice there is a 3 pip spread between the bid and ask price. You would buy at 1.3630. But you sell as the bid price, so you would sell at 1.3627. So if you went in and then sold right away, you would loose 3 pips. This is the brokers fee.

    Whether you win or loose, the broker always gets his pound of flesh (spread).

    What is leverage?

    You are probably wondering how a small investor like yourself can trade such large amounts of money. Think of your broker as a bank who basically fronts you $100,000 to buy currencies and all he asks from you is that you give him $1,000 as a good faith deposit, which he will hold you for but not necessarily keep. Sounds too good to be true? Well this is how forex trading using leverage works.

    For example, if the leverage is 100:1 (or 1% of position required), and you wanted to trade a position worth $100,000, you broker would set aside $1,000, or the “margin”. So if you have $5,000 they may allow you to trade up to $500,000 of Forex.

    What is margin call?

    In the event that money in your account falls below margin requirements (usable margin), your broker will close some or all open positions. This prevents your account from falling into a negative balance, even in a highly volatile, fast moving market.

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    Time Zone New York GMT
    Tokyo Open 7:00 pm 0:00
    Tokyo Close 4:00 am 9:00
    London Open 3:00 am 8:00
    London Close 12:00 pm 17:00
    New York Open 8:00 am 13:00
    New York Close 5:00 pm 22:00

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    Gold Trading GCC
    Gold Trading GCC
    2 Great trading tools
    Forex Smart Tools
    My Amazon store
    Click here to view some amazing books and videos on Amazon.

    This selection was handpicked by me.
    Checkout another website
    www.ForexMom.com
    This websites teaches you about the Foreign Currency Exchange.