An Introduction to

FOREX TRADING

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Contents

Beginner Forex Currency Trading: What Is It All About?

FX Market Hours: Can You Trade Currency 24/7?
Margin Trading: Make More Money With Less
Foreign Exchange Markets: What You Need To Know
Day Trading Currency: 5 Tips For Making Money
Choosing A Forex Trading Broker
Reasons Why Currency Changes Value
Understanding the Limit Order in Forex Trades
Things To Know When Opening a Currency Trading Account
Opening Your Own Currency Trading Account

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Beginner Forex Currency Trading: What Is It All About?

For a beginner Forex currency trading may seem to be a whole new world but
in fact the basics are quite easy to learn. You just need to understand the buzz
words and trading terms and grasp a basic understanding of how the markets
work.
Making big money in a short time is what Forex currency trading is all about! It
is possible for investors to make a lot of money very fast because the rates of
exchange on the foreign market can rise and fall quickly. This means of course
that it is risky and there is also a chance of losing a lot, just like most things in
life that have the potential of big returns.
As you will know if you have ever exchanged currency for a vacation, the rates
are constantly changing. For example you may change $100 into another
currency planning to travel, and then find that you do not need it and change it
back. The rate will probably have changed in the meantime and you may even
have made a profit.
Forex traders deal in currencies hoping to make a profit all of the time, but
instead of changing money at the bank they use a broker. Most transactions
these days are handled online. In many ways it is not so different from stock
trading. There is the same potential to trade in margins where a small balance
held by your broker can control much larger deals.

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One difference from stock exchange trading is that Forex traders are not
limited to dealing in their own country. You can trade any two currencies
regardless of where you live. This also means that the market is international.
Because of time zone differences, it is open 24 hours a day from Monday
morning in Australia to Friday afternoon in New York.
Each currency is represented by 3 letters: USD for the US dollar, GBP for the
British pound, EUR for the Euro, JPY for the Japanese Yen, CHF for the Swiss
franc, CAD for the Canadian dollar, AUD for the Australian dollar etc. The
exchange rate between two currencies may be expressed like this: USD/CHF
1.14. This means that to buy one US dollar you will need 1.14 Swiss francs.
If you want to start out in Forex trading you will need to look for a broker or
investment management company that you trust. It is worth shopping around
and checking online forums for recommendations. Check out how long the
company has been in business and what your rights and liabilities will be. Read
all of the fine print.
You may also consider using a robot to do your trading for you. This is
automated Forex trading software that can trade 24 hours a day according to
rules that you set for it. There is usually a demo option so that you can test out
the whole system for a while before you let it trade with real money. There are
many Forex robots on the market and most of them come with full instructions
for beginner Forex currency trading.
Forex Market Hours: Can You Trade Currency 24/7?
The Forex market hours stretch from Monday morning in Sydney, Australia to
Friday afternoon in New York. During that time the market is open somewhere
around the globe at all hours of the day or night.
However it is not a 24/7 market because it does shut down on weekends. 24/5
would be more accurate.
If you need to know the exact times that the markets open and close, you have
to take time zones into consideration. It is very simple when expressed in UTC.
This is Universal Coordinated Time, formerly known as Greenwich Mean Time.
This is the standard (winter) time in Greenwich, London which is the point of
zero longitude on the globe.
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So, the normal Forex market hours are 22.00 Sunday UTC to 22.00 Friday UTC.
This is 10 pm in the UK in winter time.
New York is 5 hours behind the UK so the global Forex market opens and closes
at 5 pm Sunday/Friday in New York, 2 pm on the US west coast, 11 pm in
Germany, 8 am Monday/Saturday in Sydney.
Things get a little complicated when you start to try to take summer time
daylight saving into account. This makes one hour difference in countries that
observe it. But daylight saving operates in a different way in the southern
hemisphere countries such as Australia which have summer time from
September to March instead of March to September.
The hours of the different major national markets are as follows:
Sydney: 10 pm to 7 am UTC
Tokyo: 12 midnight to 9 am UTC
London: 8 am to 5 pm UTC
New York: 1 pm to 10 pm UTC
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Or we can express that in EST (Eastern US time):

Sydney: 5 pm to 2 am EST
Tokyo: 7 pm to 4 am EST
London: 3 am to 12 noon EST
New York: 8 am to 5 pm EST
You can see that these correspond to 24 hour cover.
However, this does not necessarily mean that trading will be good at all of
these times. Just after a major market opens, the prices can be very volatile
and unpredictable. Many traders will stay out of the Forex market for up to an
hour four times a day when the financial markets are waking up in these major
cities.
The US dollar is the most traded currency by a long way, involved in 2.5 times
as many trades as its nearest rival the euro. This means that events in the USA
have a greater impact on the financial markets than events in other countries.
The New York market tends to slow down around 3 pm local time (8 pm UTC)
and if you are involved in a US dollar pair, this can be a good time to stop
trading for the day.
So theoretically you can trade 24 hours a day from Sunday night to Friday
night. Automated software in the form of a Forex robot can even make this
physically possible. However, a cautious trader will choose his times and will
not be active during all of the Forex market hours.
Forex Margin Trading: Make More Money With Less
Forex margin trading is a way of applying leverage to increase the purchasing
power of your money. Leverage simply means using a small sum to control a
much larger sum. This is possible because it is unlikely that the value of a
currency will change by more than a certain percentage over a short time. So
you can place a few hundred dollars in your brokerage account to trade on the
margin - the amount that you think the price will fall. Your broker will in effect
lend you the balance.

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Trading on margins is also known in stock and futures trading, but because of
the special nature of currencies, you can get a lot more leverage in the Forex
market. Depending on your broker's terms, you may be able to control 50, 100
or even 200 times your account balance.
This can lead to big profits if you are successful, but it can also mean big losses
if not. In general, the more leverage you use, the more risky your trading is.
We can understand leverage and margins if we consider an example.
Imagine that the current rate on the British pound to US dollar Forex market is
shown as GBP/USD 1.7100. So to buy one British pound you would need $1.71.
If you expected the value of the dollar to rise against the pound you might
decide to sell enough pounds to buy $100,000. If your broker used lots of
$10,000 each, this would be 10 lots. Then you would sit back and wait for the
price to go up.
A few days later you might find that the price had moved to GBP/USD 1.6600.
Sure enough, the dollar has risen and the pound is now worth only $1.66. If
you sell your dollars now and buy back into pounds, you will have made a
profit of 2.9% less the spread. 2.9% of $100,000 is $2,900, so that would be an
excellent trade.
But most of us do not have $100,000 spare cash that we want to trade on the
currency exchange market. So here is where the principle of Forex margins
comes into play.
Since you are buying and selling different currencies at the same time, your
own money only has to cover any loss that you might make if the dollar falls
instead of rising. And you would put a stop loss into place to limit that loss, so
$1,000 might be all you needed to have in your account to make this $100,000
purchase. Your broker guarantees the other $99,000.
In fact many brokers now operate limited risk amounts where the account will
automatically close out the trade if whatever funds you have in your account
are lost. This prevents margin calls which can be disastrous for a trader
because they mean that you can lose more than you have. But with a Forex
limited risk account that is not a possibility. The broker's software that you use
to control your account will not let you lose more than your account balance.
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Using leverage in this way is so common in currency trading that you will soon
do it without even thinking about it. Still it is important to keep in mind the
risks. Lower leverage is always safer and you may never want to go to the
maximum Forex margin that your broker would allow.

Foreign Exchange Markets: What You Need To Know

The foreign exchange markets are situated all around the world. Currency
trading is a global activity. Every country in the world uses money and needs to
change that money into other currencies in order to trade or interact with
other nations.
Currency exchange happens at every level of society. As an individual, you may
have changed money when traveling on business or on vacation. Or maybe you
have sold something on eBay to somebody in another country. Their payment
comes in to your account in their own currency, and the bank or other
payment processor such as PayPal changes it for you. That is currency
exchange at the root level.
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Foreign exchange or Forex trading has a different purpose, however. When

you are trading on the foreign exchange markets you are not buying another
currency because you need it. You are buying it in the hope that it will rise in
value, so you can change it back and end up with more money than you started
out with.
Of course, it is risky. The price movement could go against you and then you
would end up with less money instead of more. So you will want to gather
plenty of information about currency trading before you start.
Forex trading began in the 1970s when the major currencies were deregulated
so that their values were no longer fixed. The banks and large investors quickly
saw the potential for making money from the changing prices.
The main Forex marketplaces are the big financial centers of the world. London
sees the highest activity with New York second and Tokyo third. Other major
players are Sydney, Zurich and Frankfurt.
Originally you had to be in one of those places to trade money, or at least have
a telephone connection with a broker who was there. It was very difficult for
somebody who was not on the spot to act fast enough to react to the sudden
fluctuations in price that can happen in the forex markets.
But modern advances in technology have changed all of that. Since the rise of
the internet it has been possible to trade on your own account from anywhere.
This means that it has become easier and easier for the little guy to get a piece
of the action.
While some people never think about foreign currency from one overseas trip
to the next, others are studying charts and financial information or even using
automated software in the form of Forex robots to make money from the
rising and falling prices with the aim of becoming financially free by trading on
the foreign exchange markets.
Day Trading Forex Currency: 5 Tips For Making Money
Day trading Forex currency is becoming a more and more popular way to make
money. Forex is the foreign exchange market where trillions of dollars worth
of currencies are exchanged worldwide every day. Money is made by
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exchanging one currency for another when you think that the values will
change, and then exchanging them back at a profit if this was successful. Day
trading systems involve opening and closing trades within the same day,
although many day traders work on a much shorter timescale of just a few
minutes.
Some people become involved in Forex day trading because they only have a
short time available to trade. One advantage of the Forex markets is that they
are open 24 hours Monday through Friday, so you can hold down a job and
trade in the evenings. Other traders become successful enough to do this full
time. The fast and furious atmosphere provides a big rush, and although it is
risky, there is the potential to make a lot of money very fast.
Of course you cannot just jump in and make tons of money. You will need to
know something about currency trading and have a profitable system that tells
you when to open a trade, when to close it and how much profit to aim for.
Here are our top 5 tips to help you make the most from day trading foreign
currency.
1. Choose your broker carefully.
Some brokers do not like day trading and will close your account if you make
money this way. Others are fine with it. Check this out before you open an
account to save yourself a lot of time and frustration.
2. Start with a demo account.
Most brokers will provide a free demo account and you should start
implementing your system with this. This will help you get to know the trading
platform thoroughly and understand how to the make the most of your system
before you ever risk any real money.
3. Plan your trading time.
You cannot be sure of having a trading opportunity right when you want it so it
is important to be prepared through all of your potential trading time. Arrange
not to be interrupted and minimize distractions by switching off your email and
phone. See what is happening in the market including major world news.
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Check whether any financial reports are due during your trading time. A report
being released when you did not expect it can lead to disaster!
4. Improve your analytical skills.
The fast moving world of day trading almost always relies on quick and
accurate interpretation of charts and financial data. You do not need to be a
math genius because most of the calculations are done by the software. You
just need to understand what you are seeing and make confident decisions
based on the data.
5. Stay level headed.
All Forex trading relies on maintaining calm judgment, without being swayed
by our hopes and fears. The fast pace of day trading makes this even more
important. You must be able to apply your system patiently and consistently
without being carried away by greed or panic.
Remember that day trading is risky and money can be lost as well as made. Be
sure you have your system tested and these tips fully mastered if you want to
make big money by day trading Forex currency.

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Choosing A Forex Trading Broker

An account with a Forex trading broker is something that you must have when
you are beginning currency trading. You always have to have a way into the
market and your brokerage company will provide software so that you can
control your trades online. They will also give you leverage so that you can
trade on margins and control much larger sums that you have yourself.
There are several things to take into account when choosing a Forex broker.
Here are some of the most important points to consider.
1. Reliability
Finding a broker that you can trust is not as straightforward as you might think.
The Forex market operates worldwide and there is no global regulatory body,
so some brokers are unregulated. Check where their business is based and
what registrations and memberships they have. American brokers should be
registered with the Commodity Futures Trading Commission (CTFC) and/or the
National Futures Association (NFA). Other countries have other associations.
You can usually see if a broker has a big problem by checking Forex forums for
user feedback. However, be sure to get several views. Do not accept one
person's point of view as fact. That person may have personal or financial
reasons for praising or criticizing a broker.
2. Services provided
The Forex is a 24 hour market, five days a week. You will want your broker's
trading software to be live online all of this time (most are). You may also want
to check if they have 24 hour customer support Monday through Friday.
Check that they cover all of the major currency pairs, that is USD against EUR,
JPY, GBP, CHF, CAD, AUD. They should also offer at least some cross pairs of
the major currencies that is two of the other currencies not including the US
dollar.
All brokers will offer charts and technical analysis. Check that these meet your
needs. You will also want to check whether they offer instant execution of
orders at the displayed price without slippage.
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3. Charges
Forex trading brokers generally do not charge a fee or commission. Instead
they make money from the spread, which is the difference between the bid
and ask prices of a currency pair. Spread is usually in the range of 1-3 pips,
depending on the broker and the currency pair, but it can vary at times of
volatility.
The size of the spread can make a big difference to whether you make profits
in the long term. If you know which pairs you are likely to trade most often, the
spread on those pairs will be more important to you than others.
4. Minimum account and lot size
The minimum investment will be an important factor. Some brokers only offer
standard accounts where the minimum investment could be $10,000 or more.
Mini Forex trading accounts have a much lower minimum account balance,
often$250-$1,000. These are better for almost all beginners.
5. Leverage
Leverage is the factor that determines how much you can control with the
money that is in your account. You can often control a lot that is up to 100
times the money that you actually put in, with your broker covering the rest.
Some brokers offer even higher leverage but be aware that the higher the
leverage, the more you are risking on each trade.

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You can also look at a prospective broker's rollover percentages and other
policies. However, the above 5 points are the main factors to take into account
when selecting a Forex trading broker.
Reasons Why Currency Changes Value
Many factors affect the value of a currency. You cannot control these things
that affect currency change. However, you can learn to understand these
things in order to make a well-informed decision when buying or selling a
particular currency.
Currency, just like other products that are bought or sold, may be affected by
the fundamentals of economics and business cycles. The laws of supply and
demand are equally valid when talking about the value of currency, as they are
when we talk about the value of all goods.
When the supply of a certain currency is high, the price for that currency
crashes as holders of the currency to try to find ways to get rid of it. For
example, if everyone decides that he or she do not want to keep the U.S.
Dollar further and try to sell him or her, to do so they would probably have to
lower their price to find a buyer. In this case, there is more supply than
demand.
Other things that influences currency change is when the supply of currency is
low and there are more who want to buy it than there are available foreign
exchanges, the price of the currency as buyers compete for the currency. In
this case, there is more demand than the supply. Use the same equation; you
can do in relation to home sales in your area. If there are few homes available,
buyers will offer the full asking price and sometimes even higher bid price will
surely get the house.
You might wonder how a market can suddenly be flooded with a currency in
order to increase the offer and eventually drive the price of the currency
down. Well, governments and central banks take a role when they want to
affect the value of a currency.
Governments may also decide they want the value of its currency to rise, and
they have purchasing power to buy the currency and availability of its scarce
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foreign exchange. This will make the price of the rise thus, creating currency
change.
The government manipulation is not the only thing that can affect the value of
the currency economically. The impact of businesses and consumers as a
whole can drive currency values up and down.
The key is to know what type of market, each country faces and how this
market that affect the value of the currency. Remember that every currency
trade requires at least two countries: the one you are selling and the currency
that you are buying.
Understanding the Limit Order in Forex Trades
In FX trading, there are two types of conditional order -- stop loss and limit
order. These are called conditional because it could not be used unless a
specific event takes place.
Stop loss is a really well known statement that the risks related to trade
control. With a stop loss, you say to the broker, "If the price goes so far against
me, I want out." Hence, when you bought the foreign currency pair, you are
hoping for an increase in price, but when the price drops, you will not see your
total balance wiped out. Stop Loss will protect most of your capital.

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The limit order is similar but shows the opposite scenario. By using a limit
order, you say to the broker, "When the price comes to this particular level
that is enough, I will close here and take it." The limit order will be activated if
pre-arranged price is achieved, and the trade will be closed at that price.
Many traders are unwilling to use instructions that restrict when they start. It
seems counter intuitive. If the market goes your way, why would you need to
close the trade? Would not you want to hang as long as possible to the most
profit out of it?
The problem with this strategy is eventually the price will go, and often it does
so sooner rather than later. If you do not place a limit order, once you close
the trade, how will you recognize when it has gone as far as it is going? If you
wait too long, a sudden change could see your profits are eliminated.
Therefore, unless you have a method that is defined by very precise criteria to
tell you when to close a trade, you will probably be better if you use the limit
order. Where do you put them? Back testing system can be useful here. You
can check through the past months, years of Forex markets, that would trigger
a trade according to your system, and figure out exactly what would have been
the perfect setting for the limit order. Do not forget, of course, that past
performance is not always going to be repeated in the future. Testing in a
simulated demo account is also useful.
Generally, you limit to be further from your starting point than your stop loss,
even after the spread is considered. This will probably mean that you only have
to score a 50% success rate to be in surplus. Establishment limit the order of
twice the pips of stop loss, either before or after dispersal, may be suitable. On
the other hand, this depends on your system.
Working with limit orders, which is another valuable benefit as well. Once you
have both set stop loss and limit order, you will be able to get behind the
computer and get on with your day. You do not look at every little fluctuation
in price until either enabled.
This reduces tension and makes it more unlikely that you will not panic and
deviate from the original strategy. In using limit orders in Forex trading, you
can produce a happier, more profitable trader.
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Things To Know When Opening a Currency Trading Account

Forex trading has become an obsession for millions of people around the
world. Everyday its popularity increases and probably you yourself want to join
these traders whether on a full-time or part-time basis. In order to get the best
start in your career as a trader you need to find a good broker and open a
currency trading account. This process can take time. It's essential to find the
right broker for your level of experience and capital.
Types of Trading Accounts
* Demo
This type of service can introduce you to the exchange market. Brokers offer
this free version to aid beginners in the currency business in making their
investment choices on paper only first.
* Micro
Micro accounts are usually used by beginners who do not have large amounts
of capital. You can start with as little as $300.00, however, some don't have
stop-loss orders. Meaning you have to risk a huge percentage of your capital.
Not all brokers offer this option thus; you have to take time in finding someone
who will cater to your needs.
* Mini
Beginners in the currency exchange market usually use this type of account. It
allows you to start at the size of 10, 000 units instead of the standard
1,000,000 units. This will give you more flexibility in amount of risk. They can
give you the opportunity to set up your own stop-loss system. When you have
this in place, you will not loss too much money with small or large price
fluctuations.
* Managed/Premium
In this type of portfolio, a manager takes charge of your finances. If you have
this service, you will have the opportunity of modifying it according to your
specific needs. The minimum capital for this is $5000.00 and trading starts with

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100,000 units. This is recommended for individuals who can afford high capital
input and don't want to execute the trades themselves.
Opening Your Own Currency Trading Account
It is easy to get your own currency trading account. All you need to do is fill out
an online application form and submit it to the broker. Then, this will be
reviewed for approval. If everything goes right with your application, you will
be receiving an email for you to start activation procedures. Finally, you have
to deposit your capital.
You can use a credit card when depositing your capital. This is the fastest way
of funding your investment because it only takes a few minutes to transfer
your money. When doing transactions like this, you should be careful in giving
the information of your card. Make sure that the site that you are joining is not
fraud so that your personal information will be protected. A more secure way
of paying is through an electronic check.

We hope you enjoyed this introduction to Forex currency trading and it has
given you a good idea of what is involved.
So what should you do next?
A good idea if you are new is to work through the technical analysis school at
BabyPips.com. This is a free learning course online for learning the basics of
Forex and financial trading. You can start that by clicking here.
Or get your hands dirty quickly with our day trading Forex strategy Pipdaq. It
is suited for the complete newbie and seasoned traders alike. Click here for
information.
Thank you for reading and enjoy your trading journey!

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