forex tips --- from expert forexerr

Tip 1. Gamblers go to casino. All unproved, spontaneous actions in Forex trading — are a part of pure gambling.
Any attempt to trade without analysis and studying the market is equal to a game. Game is fun except when you are losing real money...

Tip 2. Never invest money into a real Forex account until you practice on a Forex Demo account!
Allow at least 2 month for demo trading. Consider this: 90% of beginners fail to succeed in the real money market only because of lack of knowledge, practice and discipline. Those remaining 10% of successful traders had been sharpening and shaping their skills on demo accounts for years before entering the real market.
A good demo account to start practicing with could be, for example,FXGame from Oanda.

Tip 3. Go with the trend!
Trend is your friend. Trade with the trend to maximize your chances to succeed. Trading against the trend won't "kill" a trader, but will definitely require more attention, nerves and sharp skills to rich trading goals.

Tip 4. Always take a look at the time frame bigger than the one you've chosen to trade in.
It gives the bigger picture of market price movements and so helps to clearly define the trend. For example, when trading in 15 minute time frame, take a look at 1 hour chart; trading hourly would require obtaining a picture of daily, weekly price movements.

If a trend is hard to spot — choose a bigger time frame. Up and down market patterns are always present. Always make sure you know the dominant trend, unless you are a scalper. Scalpers have no need to spend their time studying big trends, what's happening in the market here and now (during 5-10 minute time frame) should be of only importance to a Forex scalper.

Tip 5. Never risk more than 2-3% of the total trading account.
One important difference between a successful and an unsuccessful trader is that the first is able to survive under unfavorable conditions on the market, while an unsuccessful trader will blow up his account after 5-10 unprofitable trades in the row.

Even with the same trading system 2 traders can get opposite results in the long run. The difference will be again in money management approach. To introduce you to money management, let's get one fact: losing 50% of total account requires making 100% return from the rest of money just to restore the original balance.

Tip 6. Put emotions down. Trade calm.
Don't try to revenge after losing the trade. Don't be greedy by adding lots of positions when winning.
Overreaction blocks clear thinking and as a result will cost you money. Overtrading can shake your money management and dramatically increase trading risks.

Tip 7. Choose the time frame that is right for you.
Choosing wise means that you are comfortable and have time enough to analyze the market, place and close orders etc. Some people can't wait for hours for the price to make a move, they like action and therefore prefer smaller time frames. On the contrary, for others 10-15 minutes is a hustle to be able to make the right decision.

more tips for forex users

TIP 1 Read both the books by Mark Douglas which cover trading psychology BEFORE you read or do anything else. If you don’t, I’ll say I told you so when you hit a failure barrier and don’t know why.
				TIP 2 Stop loss policy - you MUST have one and practice, more practice and even more practice at sticking to it. It will not be easy but it is an essential discipline to profitable trading.
				TIP 3 Trading plan / system. Again, you MUST have one! Then you must practice sticking to it. Do not try and second guess or trade against your indicators - wait until they give you a concise signal before acting on it.
				TIP 4 TRADE WITH THE TREND. DO NOT trade against the hourly trend of the market unless you are VERY certain the market has turned. Check this by watching a long term moving average (say 80 SMA on 15 minute chart)
			TIP 5 Learn to sit on your hands and not trade! It’s better to wait for good quality trades than take a mediocre one and loose money. A day of no trades is better than a day with one loosing one. If you don’t like the market, just walk away. It will always be there later.
			TIP 6 Don’t set yourself false targets and expectations. Trading is not an EXACT science and if you do you will only become frustrated by your failure to meet them. Take what the market gives and be satisfied. Greed will kill you as a trader, both mentally and monetarily. .
		TIP 7 The market is rarely your friend in a trade that goes against you. Cut your losses quickly and accept them as an inherent part of trading. You will not be able to trade without some loosing positions. Manage them well!
	TIP 8 Try hard not to get out of profitable trades too early. Try operating a trailing stoploss of say 15 to 20 pips behind the trade (on 5 minute timeframe) and maximise your good trades by letting them run. Be patient!
		TIP 9 Ensure you fully understand how to generate and use pivot points and camarilla points on your trading platform. These are crucial decision points for daily trading and you will struggle without them.
		TIP 10 DO NOT overtrade your account. Read up on money management in trading to make sure you fully understand why this is important and develop a strategy which fits with your personal trading capital. NEVER risk wiping out your account because believe me, it can happen. I’ve done it twice myself!
		TIP 11 Learn about FIBONACCI levels and how to apply them to your charts.
		TIP 12 Keep your trading system simple. Do not have too much information on your trading screen. It is unnecessary and will only cause you to be confused and delay you making your trading decisions.
		TIP 13 Always think in terms of probabilities. Trading is all about thinking in probabilities NOT certainties. You can make all the “right” decisions and the trade still goes against you. This does not make it a “wrong” trade, just one of the many trades you will take which, through probability, are on the “loosing” side of your trading plan. Don’t expect not to have negative trades - they are a necessary part of the plan and cannot be avoided.
		TIP 14 Ensure that the candle is fully formed on the timeframe you are trading BEFORE you enter your trade. Trade what you see, not what you would like to see.

Forex turnover shoots up to $34 bn/day

LONDON, Oct. 24, 2007 (Thomson Financial delivered by Newstex) -- Major currencies were locked in narrow ranges against each other ahead of the keenly awaited US existing home sales figures this afternoon.

The data is predicted to come in weak and if expectations are proven correct the dollar could be in for a bumpy ride this afternoon as hopes of a US rate cut strengthen.

'Although consumption and employment data have been modestly positive so far this quarter, the Fed will be concerned that the housing market is still not showing signs of bottoming out,' UBS (NYSE:UBS) analysts said.

Economists polled by Thomson's IFR Markets said they are expecting an annual rate of 5.2 mln existing home sales in September, its lowest since November 2001.

And against this backdrop, the real economy may not prove impervious indefinitely, they added.

In the short term, each data representing a slowing US economy will likely weigh on the dollar but in the longer term the risk of a spillover effect on the global economy may well see the dollar gaining ground eventually.

'We believe subsequent risk liquidation and repatriation will prove supportive for the dollar and we therefore target the euro returning to 1.35 usd in three months,' UBS analysts said..

Elsewhere, the euro survived a mixed set of euro zone PMI data, showing the services sector holding up well but manufacturing continuing to suffer the effects of the credit crunch.

The euro zone 'flash' PMI index on manufacturing dropped to 51.5, its lowest level in over two years during October, though the services PMI rose above expectations to 55.6. Both, nevertheless, remain above the 50 level which marks expansion in the sector.

'A fairly neutral set of surveys, with the latest weakening in the manufacturing index not a major surprise in a context of soaring euro and softening global picture, while the more domestic-orientated service sector is holding well for now,' said Audrey Childe-Freeman at CIBC World Markets.

The weak manufacturing reading, however, will increase speculation that the European Central Bank will not be in a position to raise interest rates despite its recent hawkish rhetoric, particularly given the strong euro.

'(These surveys are) all consistent with a wait-and-see monetary policy approach,' Childe-Freeman said.

The yen, meanwhile, found some support amid rumours that Merrill Lynch (NYSE:MER) (OOTC:MERIZ) will add to the write-downs on investments exposed to sub-prime it has already announced for the third quarter.

The Australian dollar got a fillip from strong inflation data which led to rising expectations of a rate hike even as the country heads for general elections end November.

London 1219 GMT London 0823 GMT
US dollar
yen 114.35 unchanged 114.35
sfr 1.1745 down from 1.1748
Euro
usd 1.4230 up from 1.4224
stg 0.6949 up from 0.6945
yen 162.70 down from 162.71
sfr 1.6709 unchanged 1.6709
Sterling
usd 2.0470 down from 2.0476
yen 234.10 down from 234.32
sfr 2.4045 down from 2.4055
Australian dollar
usd 0.8990 up from 0.8973
stg 0.4405 up from 0.4380
yen 102.80 up from 102.66
sivakumar.sithraputhran@thomson.com
Copyright Thomson Financial News Limited 2007. All rights reserved.

The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News.

The first step to Forex Success

As the online Forex trading market becomes increasingly saturated and the choice of brokers becomes wider, the decision of which broker to run with becomes increasingly important for the trader. Although the majority of brokers provide the same basic trading platform, there can be a vast difference in what they offer their clients, both in terms of trading conditions as well as customer support. By simply visiting a company's homepage it may be hard to separate the second-rate firms from the professionals, therefore this article will examine the main parameters that should be taken into consideration before creating an account and depositing.

Account type

The decision of which type of account to open will most likely depend on the amount of capital you have to invest. Most brokerages offer two main account types: a "Mini" ($100-$200 minimum deposit) and a "standard" account ($1,000-$2,000 minimum deposit). Mini accounts are best suited to new or amateur traders looking to gain market experience and confidence with a smaller investment, and offer higher leverage, which you’ll need in order to make money with such a small amount of initial capital. "Standard" account holders can expect to enjoy a wider variety of leverage options, but will have to invest a greater sum of money for the privilege. Although not as commonly advertised, many brokers provide a premium service for large investors (perhaps $100,000 - $250,000+), including additional VIP services, such as a dedicated fund manager and tailor made conditions.

Common to nearly all online brokers is the offer of a demo account, which allows users to get a feel for the software and gain trading experience without the risk of market exposure. Such simulations are undoubtedly beneficial to potential clients wishing to test the waters, but caveat emptor: they are not always representative of real-market, real-platform conditions, despite claims of full functionality. Do not be afraid to question a brokerage on this matter - an honest, reliable broker will admit the downfalls of a demo account.

Software Considerations

The foreign currency market can move at a fast pace and will often require you to make quick decisions and executions, regardless of where you happen to be. Depending on your level and frequency of trading as well as travel habits, it may be wise to choose a brokerage that offers a web-based Java trading platform, which requires no download and enables you to trade from any location worldwide.

Payment Options

Look for brokers that allow you to pay with credit card, as this is the easiest option by far and does not involve the necessity of transferring funds from online e-account. Other payment options typically offered include wire transfer, which is equally as secure as credit card, but expect to wait a number of days for it to clear and to have access to your funds.

Support

Perhaps one of the most crucial considerations and one that may potentially have a significant effect on your trading success is the issue of customer support. Whether you are a first time forex amateur or a FX vet, having the support and advice of a reliable, dedicated customer service team is undoubtedly invaluable, so it would prudent to do your homework on this one. The only way to gauge the quality of a support team is to contact them and see how they deal with your inquiries: are they fast, do they give reliable technical and market advice; do you get the sense that they know the industry well enough to advise others, or are they simply good sales people? This might not be so easy to find out, but as the only point of contact between yourself and the brokerage, it is important to do so. As with any business, pre-sale service might be more satisfactory than post-sale, so again, try to judge whether or not you are being helped or simply pitched.

Platform, Tools & Analysis

In the present online market place it is rare to find a company which does not offer real-time tools such as charting and price updates, but predictably the quality and availability of such applications will vary from broker to broker. Ideally you should have access to a wide range of tools, enabling you to assess the market 24 hours a day, making your trading decisions accordingly, and in addition your broker should also provide you with daily market reports, prepared in-house by professional analysts. These reports should cover the basics: economic news relevant to the major currencies, technical movements and general commentary. The better known, more reputable analysts have their reports published on a number of the larger online forex portals and forums, which is an indication that their data is considered accurate and reliable, which in turn tells you a little more about the reliability of the brokerage itself.

As previously mentioned, many trading platforms offer the same basic functions, but not all brokers cover all areas of the forex market, so before committing make sure your chosen platform will let you trade the currency pairs you require.

Spreads

Spreads are an important factor to consider before investment and will certainly require some shopping around in order to find the best offer to suit your trading habits. The spread is the difference between the price at which currency can be bought and the price at which it can be sold at any given point in time. FX brokers don't charge "commissions", so this difference is how they make their money; therefore, the lower the spread, the lower the commission, and unlike stocks, currencies are not traded through a central exchange, so the spread may differ from broker to broker. Spreads differ according to account type, with mini accounts offering spreads between 1.5-2 times higher than those offered for Standard accounts, which in turn are higher than those offered to large volume traders with VIP status.

"Fixed" spreads remain the same day or night, and despite market conditions, and although they are usually somewhat wider than the narrowest of variable spreads, they can be safer over the long term by providing a slightly higher level of predictability and a slightly lower level of risk. "Variable" spreads change according to market conditions (which may initially be attractive during a calm period, but once the market becomes busy, they are likely to widen considerably, meaning that the market will then have to move significantly in your favor before a profit is turned).

Leverage

Unless you intend to invest a six-figure sum of capital, the use of leverage will be essential in order to make decent profits in forex. Generally speaking, the sum of money made during a successful trade amounts to just fractions of a single cent per unit, so if you are buying lots worth just a few thousand dollars or less, your profits will be minimal. This is where leverage comes into play: in effect by "borrowing" your broker's funds temporarily you will be able to make larger trades, which, if all goes according to plan, will lead to larger profits. Obviously, this practice involves an inherent risk: if the market takes a turn for the worse you risk losing a substantial sum of money, depending on the amount of leverage taken. For this reason it is advisable to do some further reading on leverage and margins prior to using leverage, so that you are fully informed before exposing yourself to the open market. Under normal market conditions, some common currency pairs are generally less volatile, and may warrant a higher level of risk taking, while more exotic currencies may not be predictable enough and traders would be advised to use less leverage when getting involved with such pairs. Mini accounts provide the highest levels of leverage, with some brokers offering up to x 400.

Education

While practicing on a demo account may help you improve somewhat and trading with real money might teach you some hard-learned lessons, the best way to improve your trading ability and provide yourself with a solid knowledge base is to educate yourself. To this effect, more and more online brokers are offering trading courses or tutorials, ranging from free five minute "introductions to forex" to curricula covering the smallest of details and costing thousands of dollars. Well established educational centers, such as the Online Trading Academy (OTA), with years of technical training experience are your best bet, providing solid instruction that will not only teach you the basics of the market, but also the technical side of the business (advanced technical analysis, charting, chart reading, Fibonacci calculations etc.). Some brokerages produce their own courses in conjunction with such trading centers, such as the course offered by Forexyard.com. Without educating oneself, the vast majority of built in market tools offered by trading platforms will be wasted on the amateur forex trader.

In summary, there are numerous factors to consider before choosing the right online forex broker, all of which should be researched to ensure that your trading account and broker will allow you to get the most from your investment. You must be aware that some brokers do not have your best interests at heart, but do not despair, as there are many reputable and reliable companies eager and capable of providing a professional service. As part of your research, be sure to visit the many online trader forums, where you can discuss any of the issues raised in this article with other traders, many of whom will already have been through the process of choosing a broker and will be able to advise you from their own experiences.

forex risk

The Forex market behaves differently from other markets! The speed, volatility, and enormous size of the Forex market are unlike anything else in the financial world. Beware: the Forex market is uncontrollable - no single event, individual, or factor rules it. Enjoy trading in the perfect market! Just like any other speculative business, increased risk entails chances for a higher profit/loss.

Currency markets are highly speculative and volatile in nature. Any currency can become very expensive or very cheap in relation to any or all other currencies in a matter of days, hours, or sometimes, in minutes. This unpredictable nature of the currencies is what attracts an investor to trade and invest in the currency market.

But ask yourself, "How much am I ready to lose?" When you terminated, closed or exited your position, did you understand the risks and taken steps to avoid them? Let's look at some foreign exchange risk management issues that may come up in your day-to-day foreign exchange transactions.

• Unexpected corrections in currency exchange rates
• Wild variations in foreign exchange rates
• Volatile markets offering profit opportunities
• Lost payments
• Delayed confirmation of payments and receivables
• Divergence between bank drafts received and the contract price

These are areas that every trader should cover both BEFORE and DURING a trade.

Exit the Forex market at profit targets 
Take profit take orders, allow Forex traders to exit the Forex market at pre-determined profit targets. If you are short (sold) a currency pair, the system will only allow you to place a limit order below the current market price because this is the profit zone. Similarly, if you are long (bought) the currency pair, the system will only allow you to place a take profit order above the current market price. Take profit orders help create a disciplined trading methodology and make it possible for traders to walk away from the computer without continuously monitoring the market.

Control risk by capping losses 
Stop/loss orders allow traders to set an exit point for a losing trade. If you are short a currency pair, the stop/loss order should be placed above the current market price. If you are long the currency pair, the stop/loss order should be placed below the current market price. Stop/loss orders help traders control risk by capping losses. Stop/loss orders are counter-intuitive because you do not want them to be hit; however, you will be happy that you placed them! When logic dictates, you can control greed.

Where should I place my stop and take profit orders? 
As a general rule of thumb, traders should set stop/loss orders closer to the opening price than take profit orders. If this rule is followed, a trader needs to be right less than 50% of the time to be profitable. For example, a trader that uses a 30 pip stop/loss and 100-pip take profit orders, needs only to be right 1/3 of the time to make a profit. Where the trader places the stop and take profit will depend on how risk-adverse he is. Stop/loss orders should not be so tight that normal market volatility triggers the order. Similarly, take profit orders should reflect a realistic expectation of gains based on the market's trading activity and the length of time one wants to hold the position. In initially setting up and establishing the trade, the trader should look to change the stop loss and set it at a rate in the 'middle ground' where they are not overexposed to the trade, and at the same time, not too close to the market.

Trading foreign currencies is a demanding and potentially profitable opportunity for trained and experienced investors. However, before deciding to participate in the Forex market, you should soberly reflect on the desired result of your investment and your level of experience. Warning! Do not invest money you cannot afford to lose.

So, there is significant risk in any foreign exchange deal. Any transaction involving currencies involves risks including, but not limited to, the potential for changing political and/or economic conditions, that may substantially affect the price or liquidity of a currency.

Moreover, the leveraged nature of FX trading means that any market movement will have an equally proportional effect on your deposited funds. This may work against you as well as for you. The possibility exists that you could sustain a total loss of your initial margin funds and be required to deposit additional funds to maintain your position. If you fail to meet any margin call within the time prescribed, your position will be liquidated and you will be responsible for any resulting losses. 'Stop-loss' or 'limit' order strategies may lower an investor's exposure to risk.

Easy-Forex foreign exchange technology links around-the-clock to the world's foreign currency exchange trading floors to get the lowest foreign currency rates and to take every opportunity to make or settle a transaction.

Avoiding/lowering risk when trading Forex:
Trade like a technical analyst. Understanding the fundamentals behind an investment also requires understanding the technical analysis method. When your fundamental and technical signals point to the same direction, you have a good chance to have a successful trade, especially with good money management skills. Use simple support and resistance technical analysis, Fibonacci Retracement and reversal days. Be disciplined. Create a position and understand your reasons for having that position, and establish stop loss and profit taking levels. Discipline includes hitting your stops and not following the temptation to stay with a losing position that has gone through your stop/loss level. When you buy, buy high. When you sell, sell higher. Similarly, when you sell, sell low. When you buy, buy lower. Rule of thumb: In a bull market, be long or neutral - in a bear market, be short or neutral. If you forget this rule and trade against the trend, you will usually cause yourself to suffer psychological worries, and frequently, losses. And never add to a losing position. On Easy-Forex the trader can change their trade orders as many times as they wish free of charge, either as a stop loss or as a take profit. The trader can also close the trade manually without a stop loss or profit take order being hit. Many successful traders set their stop loss price beyond the rate at which they made the trade so that the worst that can happen is that they get stopped out and make a profit.

The Importance of FX Risk Management - from interne

The Importance of FX Risk Management

Many are afraid of being involved with forex trading because it is 'risky'. This appears to be a very common misnomer so here we will elaborate on the potential risks of forex trading, vs. the risks of other investments and business in general, as well as outlining risk/reward and risk management policies.

First of all, currency trading especially, is not so much about gaining and losing, picking entry and exit points, but risk management . But herein lies the problem: if you are NOT trading forex, you are still exposed to the risks in the currency market! Even if you are not an importer or exporter, and do only domestic business, whatever your investment, it is exposed to currency risk as your investment is denominated in some dollars which are likely to appreciate or depreciate. This may not be reflected as a loss in your bank account, but you will quickly notice it in the purchasing power of your dollars, the interest rate you are getting at the bank, as well as the health of the overall economy. Therefore, in a sense, it may also be considered risky not to trade forex.. because you have a static position in certain dollars, which may be severely depreciated very quickly, at which point you can do nothing but wait for them to return to value.

Consider that the US Dollar Index was once at 120, and is now at 85. Americans who have not been making 40% to 50% per year in the forex market (most likely buying Euros and selling their own US Dollars) are now exposed to high gas prices, increased commodity prices, skyrocketing real estate, and an overall shift which among other things, is destroying the middle class. It is no secret in the US that prices are increasing. However many brokers and economists are selling this to the public as profit, when in fact this is what is known as inflation. Now it costs in many places twice as much to purchase a home for your family as it did a few years ago. Wages and other income have not kept up with that price increase. This is the definition of inflation! Your dollars now can purchase less, they have less purchasing power than they did 3 or 4 years ago. So the fed says inflation is 3% a year, but really this is economic newspeak. Americans have become divided into two classes in the last few years: 1) those who are making more money than they ever dreamed of and 2) those who are struggling to make ends meet. This is transparent to previous social class structure, in other words, these 2 categories apply to the rich as well as the poor. There are for example, extremely wealthy people who are struggling to make their monthly payments because of rising financing costs, and because their investments are not doing so well. As well, there are poor people who have reaped in huge profits never seen before by investing in real estate and other high yield investments. So it is not isolated to specific demographics of people - we have become polarized economically, not politically. This was highly seen in the last Presidential election. Finally, the US economy is a benchmark for the rest of the world, for many complex factors not to be mentioned here (being the reserve currency of the world, the Petro Dollar, and being a leader in market based capitalism).

RISK MANAGEMENT OF A FOREX FUND

Trading forex comes down to risk management. If a forex trader takes a position in a currency, and sits on it for 3 months, while he may profit, he is exposed to the same kind of risk as if he were not trading. In other words, during that 3 month period, many things can happen to make that position open to risk. Utilizing stop losses, and actively trading, is in itself a risk management policy, rather than a strategy of knowing where the market will go. For a forex trader, the risk management side is inherently more important than guessing which direction the market will go.

It is those funds and forex traders, who are maxed to the hilt with high margins, with no stop losses, that expose their clients to the huge risks in the forex markets. Consider purchasing 100k EUR/USD at 1.2020 expecting a rise to 1.2100 (with a stop at 1.2000). If you are trading 100,000, you have taken a 100% cash position. If the EUR/USD goes as expected, you would make a profit of $800, or .8%. If it goes against you, you would lose $200, or .2%. So you are risking .2% to gain .8%. What many traders might do is take a 1,000k (1 million) position, which is 10:1 margin. This increases your P/L by 10 x - so that .2% loss is 2%, and the .8% gain is 8%. This is where risk comes into the forex market. So, it is not the forex market itself, or forex trading itself, that is risky, but rather, the risk management policy of forex dealers. Good dealers will first have a solid risk management policy, and second, develop a trading strategy.

Finally, during volatile times, or if a trader just wants to have a go at making 100 points, it is possible to take a less than 100% cash position, totally limiting the risk of loss. Using the example above, where you have 100,000 in your account, it is possible to trade 10k lots instead of 100k lots, putting you in a position of only 10% cash, or negative margin. This means the above trade loss goes from .2% to .02% - as well, your gains are also limited to .08% instead of .8%. However during certain volatile times trying to make a small profit may be better than exposing funds to potential losses.

Forex trading allows for a great degree of risk management not available in other capital markets. Margin, being able to buy or sell without limit, high liquidity (2.3 trillion traded daily), and a 24/6 market, give only the forex market to be so flexible regarding risk. In other words it is not possible to have such a sophisticated risk management policy in other markets.

• Buy OR sell (compared to stocks where you can not always go short)
• Always find a buyer or seller (the forex market is the only real liquid market in the world. It is impossible you want to trade and cannot find a buyer or seller)
• Use high margin, or trade conservatively
• Take opposite positions at the same time
• Take multiple positions (instead of selling EUR/USD, take multiple EUR positions against the crosses such as EUR/GBP, EUR/CHF, as a hedge against your first EUR/USD position)

The above factors are the real opportunities in the forex market, not the potential to make 100% that exist in other markets such as the stock market.

HOW STOP-LOSSES WORK

Whenever you take a forex position, you always have the ability to enter a stop-loss order. This means no matter what happens, if the position goes against you, you will exit at the pre defined stop loss order. If for example you purchase 100k of EUR/USD at 1.2050 expecting the EUR/USD to rise in value, and your stop is placed at 1.2020, you are guaranteed to be filled at your price (except in very volatile market conditions), even if the EUR/USD drops to 1.1700. Using stop losses can be a great addition to a risk management policy.

MARKET CONDITIONS

There are times in the forex market where the market is extremely volatile, such as when the Fed makes an interest rate announcement, or during the first few hours of major market openings, such as 9:00 am - 11:00 am New York Time.

RISK PROFILE

Every trader or investor in the forex market should have a solid risk profile. Your risk capital will determine the risk-profile of your account. For example, if you have 10,000 to invest, you can say that you are willing to risk 1,000 of that capital with the potential to gain another 10,000. This can be easily implemented by a fund manager, so your losses can be limited to 10% or 5% of invested capital. It is not impossible, but would be very reckless, for someone to lose 100% or even 50% of invested capital in less than a year. That means they are using high margins and purchasing more than the account's risk profile can handle. This is not only unprofessional, it is dangerous and bad for the client and the industry. Clients may have pre-arranged agreements with their forex dealer what is the risk profile of their capital. It may be that you are willing to take high-risks, but it should all be discussed and agreed upon before your account is traded.

RISKS OF NOT TRADING

Business itself carries a high degree of risk. Clients may not come to your shop. Payments may not go through. Factories have malfunctions. For those who claim forex trading is risky, as explained above it can be (with a reckless dealer). But consider the risks of not trading. Consider a scenario where the EU dissolves, and the Euro is no more. Every investor who is in the Euro (such as the common European and foreign investors alike) would have huge, nearly incalculable losses. Americans are subject to the same risk. With a seemingly unstable political environment, a current account deficit and government deficit spiraling out of control, it is quite possible to see the US dollar lose 80% of its value in a very short time frame.

In conclusion, there is an inherit risk in forex which exists in any capital market, but the risk is not in the market itself, but rather, in the risk management policy of the forex dealer, and in the structure of how the funds are traded. Before investing in the forex market discuss your risk profile with your funds manager, to make sure this is right for you, or if it can be adjusted to fit your risk profile.

* This article is meant to explain the risks of forex trading in more detail, it does not in any way suggest forex trading is risk - free. Also it is not the recommendation that anyone puts more money into forex trading than they can afford to lose. This gives dealers the flexibility to relax and trade as they want (vs. trying to make 1% per week or a certain performance benchmark). A typical investment in the forex market may comprise 10% to 20% of an investors portfolio

continued---

Scalping

A style of trading that involves frequent trading seeking small gains over a very short period of time. Trades can last from seconds to minutes.

Day Trading

A style of trading that involves multiple trades on an intra-day basis. Trades can last from minutes to hours.

Swing Trading

A style of trading that involves seeking to profit from short to medium term swings in trend. Trades can last from hours to days.

Carry Trading

A position whereby the trader attempts to profit from holding a currency with a higher interest rate and shorting a currency with a lower interest rate.

Position Trading

A style of trading that involves taking a longer term position that reflects a longer term outlook. Trades can last from weeks to months.

Discretionary Trading

A style of trading that involves the human decision making process for every trade.

Automated Trading

A style of trading that involves neither human decision making or involvement, but uses a pre-programmed strategy based on technical or fundamental analysis that automatically places trades via automated trade execution software.

EXAMPLE TRADE

Assume you have a trading account at a broker that requires a 1% margin deposit for every trade. The current quote for EUR/USD is 1.3225/28 and you want to place a market order to buy 1 standard lot of 100,000 Euros at 1.3228, for a total value of US$132,280 (100,000 * $1.3228). The broker requires you to deposit 1% of the total, or $1322.80 to open the trade. At the same time you place a take-profit order at 1.3278, 50 pips above your order price. In taking this trade you expect the Euro to strengthen against the U.S. dollar.

As you expected, the Euro strengthens against the U.S. dollar and you take your profit at 1.3278, closing out the trade. As each pip is worth US$10, your total profit for this trade is $500, for a total return of 38%.

Forex Tips

Always use Stop Loss Orders. If you don't use them, it will kill you financially. We recommend stops 30 pips above or below your entry price.

Don't loose more than 5%-10% of your total capital in each trade. Adjust your stop orders and leverage if needed.

Let the profits run, cut the losses. Instead of using Take Profit orders, it's better to use a "Trailing Stop". If your broker doesn't support it, you can do it manually. Set the stop price at 30 pips (or the amount that you have chosen) above/below the maximum/minimum price since your entry. You will have to adjust the stop level continuously, but you will get much better results.

Don't go against the trend. Go with the trend.

Capitalize well. Fund your account with enough money. For standard accounts, at least $5000 (for mini accounts $500).

It's less risky to don't let trades opened overnight.

What is Foreign Exchange?

The Foreign Exchange market, also referred to as the "Forex" market, is the largest financial market in the world, with a daily average turnover of approximately US$1.2 trillion. Foreign Exchange is the simultaneous buying of one currency and selling of another. The world's currencies are on a floating exchange rate and are always traded in pairs, for example Euro/Dollar or Dollar/Yen.

Where is the central location of the Forex Market?

Forex Trading is not centralized on an exchange, as with the stock and futures markets. The Forex market is considered an Over the Counter (OTC) or 'Interbank' market, due to the fact that transactions are conducted between two counterparts over the telephone or via an electronic network.

Who are the participants in the Forex Market?

The Forex market is called an 'Interbank' market due to the fact that historically it has been dominated by banks, including central banks, commercial banks, and investment banks. However, the percentage of other market participants is rapidly growing, and now includes large multinational corporations, global money managers, registered dealers, international money brokers, futures and options traders, and private speculators.

when is the Forex market open for trading?

A true 24-hour market, Forex trading begins each day in Sydney, and moves around the globe as the business day begins in each financial center, first to Tokyo, then London, and New York. Unlike any other financial market, investors can respond to currency fluctuations caused by economic, social and political events at the time they occur - day or night.

Is Forex trading expensive?

No. Most online Forex brokers allow customers to execute margin trades at up to 100:1 leverage. This means that investors can execute trades of $100,000 with an initial margin requirement of $1000. However, it is important to remember that while this type of leverage allows investors to maximize their profit potential, the potential for loss is equally great. A more pragmatic margin trade for someone new to the Forex markets would be 20:1 but ultimately depends on the investor's appetite for risk.

What is Margin?

Margin is essentially collateral for a position. It allows traders to take on leveraged positions with a fraction of the equity necessary to fund the trade. In the equity markets, the usual margin allowed is 50% which means an investor has double the buying power. In the forex market leverage ranges from 1% to 2%, giving investors the high leverage needed to trade actively..

What does it mean have a 'long' or 'short' position?

In trading parlance, a long position is one in which a trader buys a currency at one price and aims to sell it later at a higher price. In this scenario, the investor benefits from a rising market. A short position is one in which the trader sells a currency in anticipation that it will depreciate. In this scenario, the investor benefits from a declining market. However, it is important to remember that every Forex position requires an investor to go long in one currency and short the other.

What about terms like "bid/ask", "spread"

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What about terms like "bid/ask", "spread", and "rollover"?
Please check our extensive Glossary for detailed definitions of all Forex related terms.
	What is the difference between an "intraday" and "overnight position"?
Intraday positions are all positions which are opened and closed anytime during normal trading. Overnight positions are positions that are still on at the end of normal trading hours, which are usually rolled over by your Forex broker (based on the currencies interest rate differentials) to the next day's price.

How are currency prices determined

Currency prices are affected by a variety of economic and political conditions, most importantly interest rates, inflation and political stability. Moreover, governments sometimes participate in the Forex market to influence the value of their currencies, either by flooding the market with their domestic currency in an attempt to lower the price, or conversely buying in order to raise the price. This is known as Central Bank intervention. Any of these factors, as well as large market orders, can cause high volatility in currency prices. However, the size and volume of the Forex market makes it impossible for any one entity to "drive" the market for any length of time.

How do I manage risk

The most common risk management tools in Forex trading are the limit order and the stop loss order. A limit order places restriction on the maximum price to be paid or the minimum price to be received. A stop loss order ensures a particular position is automatically liquidated at a predetermined price in order to limit potential losses should the market move against an investor's position. The liquidity of the Forex market ensures that limit order and stop loss orders can be easily executed.

What kind of forex trading strategy should I us

Currency traders make decisions using both technical factors and economic fundamentals. Technical traders use charts, trend lines, support and resistance levels, and numerous patterns and mathematical analyses to identify trading opportunities, whereas fundamentalists predict price movements by interpreting a wide variety of economic information, including news, government-issued indicators and reports, and even rumor. The most dramatic price movements however, occur when unexpected events happen. The event can range from a Central Bank raising domestic interest rates to the outcome of a political election or even an act of war. Nonetheless, more often it is the expectation of an event that drives the market rather than the event itself.

How often are trades made?

How often are trades made?
Market conditions dictate trading activity on any given day. As a reference, the average small to medium trader might trade as often as 10 times a day. Most importantly, because most Forex Brokers don't charge commission, traders can take positions as often as necessary without worrying about excessive transaction costs.
	How long are positions maintained?
Approximately 80% of all forex trades last seven days or less, while more than 40% last fewer than two days. As a general rule, a position is kept open until one of the following occurs: 1) realization of sufficient profits from a position; 2) the specified stop-loss is triggered; 3) another position that has a better potential appears and you need these funds.

What is a Limit order?

A limit order is an order with restrictions on the maximum price to be paid or the minimum price to be received. As an example, if the current price of USD/YEN is 117.00/05, then a limit order to buy USD would be at a price below 117.05. (ie 116.50).

What is a Stop Loss order?

A stop loss order is an order type whereby an open position is automatically liquidated at a specific price. Often used to minimize exposure to losses if the market moves against an investor's position. As an example, if an investor is long USD at 156.27, they might wish to put in a stop loss order for 155.49, which would limit losses should the dollar depreciate, possibly below 155.4

forex cycle

spreads bids and asks

Once you are comfortable with the concept of currency pairs, you are ready to consider the composition of a FOREX quote. These quotes are generally two-sided. The two sides of the quote are the bid and ask, which is can also be called the bid and offer. The bid is the price a seller is offering for a currency, the ask is the price a seller is willing to take for the currency. The difference between these two numbers is called a spread. Spreads are quoted in pips, which are the smallest unit of difference between the two currencies in the quote. If the quote between GBP/USD at a given moment is 1.5354/6, the bid is 1.5354 and the ask is 1.5356, which makes the spread equal 2 pips, the difference between the 4 and the 6. If the quote is 1.53545/6, then the spread is going to equal 1.5 pips.

The spread is how brokers make their money. Wider spreads will result in a higher asking price and a lower bid price. The end result of this is that you will pay more when you buy and get less when you sell, making it more difficult to realize a profit. Brokers generally don’t earn the full spread, especially when they hedge client positions. The spread helps to compensate the brokerage for the risk it assumes from the time it starts a client trade to when the broker's net exposure is hedged (which could possibly be at a different price).

Spreads affect the return on your trading strategy in a big way. As a trader, your sole interest is buying low and selling high (like futures and commodities trading). Wider spreads means buying higher and having to sell lower. A half-pip lower spread doesn't necessarily sound like much, but it can easily mean the difference between a profitable trading strategy and one that isn’t.

The tighter the spread is the better things are going to be for you. But tight spreads are only meaningful when they are paired up with good execution. A good example of when this is not happening is when your screen shows a tight spread, but your trade is filled a few pips in the wrong direction, or is mysteriously rejected. Then it’s time to reconsider your broker.

forex tips (part1)

1. Pay attention to the market. Exit and enter trades based on market information. Don’t wait for a price you think the currency should hit when the market has changed direction on you.



2. There are times when, due to a lack of liquidity or excessive volatility, you should not trade at all. On a similar note, never trade when you are sick. You can’t count on yourself to be alert to the shifts of the markets, and make good decisions.



3. Trading systems that work in an up market may not work in a down market, and a system that works for trending markets, or for range bound markets may not work in other markets. Have a system for each type of market.



4. Up market and down market patterns are ALWAYS there, but you have to look for the dominant trends. Always select trades that move with the trends

Forex Tips(part 2)

1. During the blowout stage of the market, either up or down, the risk managers are usually issuing margin call position liquidation orders. They don't generally check the screen to see what’s overbought or oversold; they just keep issuing liquidation orders. Make sure you stay out of their way.



2. Trust your instincts. If something feels wrong about a trade, don’t make it. It’s better to be superstitious than to loose money.



3. Rumour is king. Buy when you hear the rumour, sell when you hear the news.



4. The first and last ticks are always the most expensive. Get in the market late, and out early. And never trade in the direction of a gap, either opening or closing.



5. When everyone else is in, it's time for you to get out. If a stock or currency is overbought, it’s time to exit your position.

Forex Tips(part3 )

1. Don’t worry about missing out on an opportunity to trade. There will always be another good one just around the corner. If the trade you are considering doesn’t meet all your entry signals but it seems to good to pass up, remember, you’re never going to run out of trades you can make.



2. Don’t get too confident. No one can predict the market with 100% accuracy. You need to always expect the unexpected. If you become uneasy, or the market becomes choppy, exit your trades.



3. Don't turn three losing trades in a row into six. When you’re off, turn off the screen, do something else. Often the best way to break a streak of consecutive loses is to not trade for a day.



4. But, don't stop trading when you’re on a winning streak.

Forex Tips(part 4)

1. Measure your success by the profit made in a day, not on a trade. It’s even better to measure it over two or three days. A successful trader’s goal is to make money, not to win on every trade.



2. Scalpers reduce the number of variables affecting market risk by being in a position only for a few seconds. Day traders reduce market risk by being in trades for minutes. If you convert a scalp or day trade into a position trade, you probably didn’t analyze the risks of the trade properly.



3. There is no secret to understanding the market. You can spend much of your valuable time and money looking for these kinds of secrets. It’s better to take the time to create a solid trading system, and realize that the secret to success is hard work.



4. Never ask for someone else's opinion, they probably didn’t do as much homework as you did anyways.



5. When the market is going up, say it out loud. When the market is going down, say that out loud too. You’ll be amazed at how hard it is to say what is going on right in front of you when you want it the market to be doing something else.

fOREX STATS TODAY (GCI TRADING .COM)

The euro depreciated vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.4190 level and was capped around the $1.4265 level. Technically, today’s intraday high and low were right around the 23.6% and 50% retracement of the move from $1.4015 to $1.4395. The common currency moved lower after U.S. financial giant Merrill Lynch wrote down US$ 7.9 billion from earnings on account of subprime mortgage problems and said the conditions remain “uncertain.” This reflects the troubled liquidity conditions faced by global financial firms this summer and to the extent that other U.S. financial institutions are forced to write down earnings, profits will be reduced in upcoming quarters and that will zap demand for U.S. assets and the U.S. dollar. Data released in the U.S. today saw September existing home sales off 8% m/m to 5.04 million annualized units, and were off 19% y/y. Continued dislocations in the U.S. housing sector could result in a rate cut by the FOMC on 31 October. In eurozone news, the EMU-13 manufacturing PMI survey fell to 51.5 in October from 53.2 in September while the services PMI survey improved 55.6. Also, it was reported that the eurozone August current account surplus was unchanged at €3.8 billion. Euro bids are cited around the US$ 1.4045 level.

¥/ CNY

The yen moved higher vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥114.10 level and was capped around the ¥114.95 level. Traders moved back into yen overnight as growing risk aversion reduced demand for higher yielding currencies. Data released in Japan overnight saw the September merchandise trade surplus rise a stronger-than-expected 62.7% y/y to a record ¥1.638 trillion. Notably, imports declined for the first time in more than 3.5 years. U.S. automakers complained overnight that the yen is being artificially devalued by the Japanese government. The Nikkei 225 stock index lost 0.56% to close at ¥16,358.39. Dollar bids are cited around the ¥113.85/ 112.60 levels. The euro weakened vis-à-vis the yen as the single currency tested bids around the ¥162.15 level and was capped around the ¥163.90 level. The British pound and Swiss franc came off vis-à-vis the yen as the crosses tested bids around the ¥233.40 and ¥97.05 levels, respectively. The Chinese yuan appreciated via-a-vis the U.S. dollar as the greenback closed at CNY 7.4930 in the over-the-counter market, down from CNY 7.5068. This represents the first time the pair has traded with a CNY 7.4 handle since the yuan was revalued in July 2005.

₤

The British pound weakened vis-à-vis the U.S. dollar today as cable tested bids around the US$ 2.0425 level and was capped around the $2.0515 level. Technically, today’s intraday low was right around the 76.4% retracement of the move from $2.0655 to $1.9650. Cable bids are cited around the US$ 2.0270 level.The euro came off vis-à-vis the British pound as the single currency tested bids around the ₤0.6935 level and was capped around the ₤0.6960 level.

CHF

The Swiss franc appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the CHF 1.1710 level and was capped around the CHF 1.1775 level. September producer and import prices will be released on Friday. Dollar offers are cited around the CHF 1.1835/ 1.1910 levels. The euro and British pound came off vis-à-vis the Swiss franc as the crosses tested bids around the CHF 1.6690 and CHF 2.3990 levels, respectively.

A$/ NZ$

The Australian dollar appreciated vis-à-vis the U.S. dollar today as the Aussie tested offers around the US$ 0.9045 level and was supported around the $0.8935 level. The pair moved within 30 pips of establishing a new multi-decade high. Traders bought A$ on increased expectations that Reserve Bank of Australia will lift its official cash rate by 25bps to 6.75% at its 6 November rate-setting meeting. Q3 headline CPI was up 0.7% q/q, stronger-than-expected, and up 1.9% y/y. Other data released in Australia today saw October skilled vacancies off 0.9% m/m. Australian dollar bids are cited around the US$ 0.8745 level. The New Zealand dollar weakened vis-à-vis the U.S. dollar as kiwi tested bids around the US$ 0.7465 level and was capped around the $0.7600 figure. New Zealand dollar bids are cited around the US$ 0.7465 level.

C$

The Canadian dollar depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the C$ 0.9720 level and was supported around the C$ 0.9645 level. The loonie established a new multi-decade high yesterday. U.S. dollar offers are cited around the C$ 0.9860 level.

Technical Outlook at 1230 GMT (EDT + 0400)

(Bid Price) (Today’s Intraday Range)

EUR/ USD 1.4250 1.4266, 1.4188

USD/ JPY 114.26 114.95, 114.12

GBP/ USD 2.0487 2.0516, 2.0426

USD/ CHF 1.1729 1.1774, 1.1717

AUD/ USD 0.9007 0.9047, 0.8935

USD/CAD 0.9675 0.9721, 0.9643

NZD/USD 0.7532 0.7601, 0.7476

EUR/ JPY 162.83 163.89, 162.14

EUR/ GBP 0.6955 0.6960, 0.6936

EUR/ CHF 1.6715 1.6735, 1.6692

GBP/ JPY 234.15 235.70, 233.40

CHF/ JPY 97.43 97.59, 97.03

Support Resistance Support Resistance

L1. 1.3515 1.4200 114.55 116.55

L2. 1.3415 1.4270 112.55 117.85
L3. 1.3245 1.4365 111.60 119.35

GBP/ USD USD/ CHF

L1. 1.9915 2.0340 1.1800 1.1640

L2. 1.9805 2.0460 1.1740 1.1560

L3. 1.9530 2.0655 1.1650 1.1430

AUD/ USD USD/ CAD

L1. 0.8270 0.8765 0.9850 1.0340

L2. 0.8160 0.8850 0.9760 1.0485

L3. 0.7940 0.8990 0.9640 1.0550

NZD/ USD EUR/ JPY

L1. 0.6985 0.7545 157.25 161.70

L2. 0.6760 0.7630 154.50 164.45

L3. 0.6640 0.7730 149.25 168.95

EUR/ GBP EUR/ CHF

L1. 0.6855 0.7010 1.6400 1.6685

L2. 0.6790 0.7070 1.6325 1.6790

L3. 0.6705 0.7140 1.6240 1.6900

GBP/ JPY CHF/ JPY

L1. 228.15 235.20 95.90 99.55

L2. 226.80 238.95 94.50 100.25

L3. 221.05 239.60 92.20 101.85

SCHEDULE

Wednesday, 24 October 2007
all times GMT
(last release in parentheses)

0100 Australia October DEWR skilled vacancies (0.1% m/m)

0130 Australia Q3 consumer prices (1.2% q/q)

0130 Australia Q3 consumer prices (2.1% y/y)

0700 Eurozone European Central Bank member Gonzalez-Paramo speaks

0800 Eurozone August current account (€1.7 billion)

0800 Eurozone October PMI, manufacturing (53.2)

0800 Eurozone October PMI, services (54.2)

1100 US MBA mortgage applications

1400 US September existing home sales (5.50 million)

1400 US September existing home sales (-4.3%)

2000 NZ Reserve Bank of New Zealand official cash rate

2200 Italy European Central Bank official Draghi speaks

2350 Japan Net foreign equities investment

2350 Japan Net foreign bonds investment

2350 Japan September corporate services price index (1.0% y/y)

Thursday, 25 October 2007
all times GMT
(last release in parentheses)

0645 France October business confidence (110)

0800 Germany October Ifo, business climate (104.2)

0800 Germany October Ifo, current assessment (109.0)

0800 Germany October Ifo, expectations (98.7)

0830 UK September BBA house purchase loans

1230 US Weekly initial jobless claims

1230 US Continuing jobless claims

1230 US September durable goods orders (-4.9%)

1230 US September durable goods orders, ex-transportation (-1.8%)

1400 US September new home sales (795,000)

1400 US September new home sales (-8.3% m/m)

2330 Japan October Tokyo-area CPI (-0.2% y/y)

2330 Japan October Tokyo-area CPI, core (-0.3% y/y)

2330 Japan September nationwide CPI (-0.2% y/y)

2330 Japan September nationwide CPI, core (-0.1% y/y)\

2350 Japan September industrial production (3.5% m/m)

2350 Japan September industrial production (4.4% y/y)

Friday, 26 October 2007
all times GMT
(last release in parentheses)

0000 Australia August leading index (0.3%)

0610 Germany November GfK consumer confidence survey (6.8)

0715 CH September producer and import prices (0.3% m/m)

0715 CH September producer and import prices (2.7% y/y)

0800 Eurozone September M3 money supply (11.6% y/y)

1230 Canada October business conditions orders (6)

1400 US October University of Michigan consumer sentiment (82.0)